Why This Fifth Edition, Now?

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2 Why This Fifth Edition, Now? The past 12 months have been one of the most exciting years for MIS in memory. You probably know about Apple s icloud, Lion, and new software versions for the ipad and iphone. You may not know, as yet, about Microsoft s new office product called Office 365, or the importance of Google s investing one-third of its cash in the purchase of Motorola Mobility. You probably do not know about other exciting developments in the infrastructure that supports Facebook and Twitter, or about the ridiculously low prices for leasing computer servers in what is termed the cloud: less than one penny for an hour. One statistic that is easily understood is this: On November, 29, 2010, Amazon.com customers ordered 13.7 million items, worldwide, an average of 158 items per second. This performance required not only information systems, but also business managers and processes that were tightly and effectively integrated into those systems. These developments, and dozens of others, mean that this text needs to be published in a new edition, each year. Some of the major changes in this year s edition (the fifth) are shown in Table 1. The rapid pace of technology change that necessitates these changes is part of what makes this subject so fascinating. Read on to learn more! Table 1 Changes in the Fifth Edition Chapter or Part Change Chapter or Part Change Parts 1 & 2 Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Replaced FlexTime with GearUp. Revised definition of MIS to focus on strategy. Refined definition of data and clarified data/information distinction. New Amazon.com case. Restructured for clarity and relevance in New criteria for collaboration success. Demonstrated how to use Office 365/Lync. New dogfooding case. Revised strategy focus to fit revised definition of MIS. ipad development dilemma for GearUp. Mobile IS; reemergence of client/server. ios and Lion. New Apple of Your i case. Dynamo, Bigtable, Cassandra. NoSQL case. New discussion of why the cloud is inevitable (for most) and SaaS, PaaS, and IaaS. Microsoft s cloud problem case. Chapter 7 Chapter 8 Chapter 9 Chapter 10 Chapter 11 Chapter 12 International Dimension New process orientation. Introduction of structured versus dynamic process types. Discussion of process quality and role of IS in improving process quality. Complete rewrite to modernize (after 1 year, modernize!). New discussions of SMIS, SMIS and organizational strategy, hyper-social organizations. New analogy in New guided discussion of a BI reporting solution to GearUp s Chapter 5 problem. Rewritten to update and improve terminology. New discussion of process quality and impact of cloud servers on development by Shortened to make room for new content in other chapters. New ipad development case. Rewritten to clean up terminology problems and to modernize. Removed discussion of digital signatures and digital certificates to make space. New security case. GearUp goes international. 2

3 158 CHAPTER 4 Hardware and Software Fundamentals Collaboration Exercise 4 With a team of your fellow students, develop an answer to the following questions. Use Google Docs, Google +, Windows Live SkyDrive, SharePoint, Office 365, or some other collaboration tool to conduct your meetings. Suppose you manage the sales and marketing department at a company that generates $100 million in sales say, a manufacturer of fireplace inserts and related equipment. Assume you just started the job and that at the end of your second day the corporate operations officer (COO) sticks her head into your office and announces, I m in a rush and have to go, but I wanted to let you know that I put $80,000 in the budget for computers for your department next year. Is that OK? Unfortunately, I ve got to know by the day after tomorrow. Thanks. How do you respond? You have 2 days to decide. If you agree to the $80,000 and it turns out to be insufficient, then sometime next year your department will lack computing resources and you ll have a management problem. If that happens, you may have to spend over your budget. You know that cost control is important to your new employer, so you dread overspending. However, if you ask for more than $80,000, you need to justify why you need it. You will need to document the computer equipment and software your department needs, explain why you need it, and estimate how much it will cost. Given the short time frame, and given that as a new employee you probably have already scheduled the next 2 days full of meetings, you will need to delegate at least part of this problem to someone. You might delegate it to a computer salesperson, but that is akin to inviting the fox to babysit the chickens. Or, you could delegate it to some of your employees, but as a new employee you do not yet know who has the capability to answer this question. You could also ask the IS department at your organization to help you. In any case, whether you find the time to answer this question yourself, assign it to your employees, or ask for help from the IS department, you will need knowledge of computer hardware and software capabilities and costs in order to assess the quality of the answer you have. To respond to this request, assume you have been given the following list of data about the department and its information needs: You will upgrade all of your department s computers to Windows 7 and Office 2010 in the next year. Your company has negotiated a site license for these products, and the IS department allocates that license cost to each computer. For your department, you will pay $100 for each computer that uses Office 2010 and another $75 for each computer that uses Windows 7. You are not required nor allowed to buy any software for new computers. If the computer comes with software, that software will be destroyed by the IS department s standard installation process. You have identified three classes of computer users in your department. The main memory, RAM, and disk storage requirements for each class of user are shown in Figure This figure shows the specifications of existing computers as well as the hardware requirements for each class after the upgrade. Figure 4-20 shows the job titles of employees in your department, the number of employees of each type, the class of computer they require, and whether they use a desktop or a laptop. (You are a new employee, do not yet have a computer, and can specify your own requirements.) A computer can be reassigned to other employees as long as the computer meets the minimum processing requirements. A laptop can substitute for a desktop if a display, keyboard, and mouse are purchased to go with it. The IS department assesses each computer an annual $1,200 fee for network, server, and other overhead costs. Assume that telesales personnel will grow by 10 percent in the next year but there will be no other changes in the number of personnel in your department. Ten of the existing class B computers have a maximum main memory of 1GB. The rest of the class B computers have a maximum main memory of 512MB. All of the existing class C computers have a maximum main memory of 4GB. a. Given this data, is $80,000 enough? If not, how much money should be allocated in your department? b. Explain how you will meet the computer needs of the employees in your department. Assume you are required to buy new computers and equipment from Dell, HP, or Lenovo. Class of Computer A Current Hardware Specification (Main Memory, Processor, Disk) 256MB, 0.5GHz, 30GB Hardware Required After Upgrade (Main Memory, Processor, Disk) 1GB, 1GHz, 80GB Figure 4-19 Hardware Specifications for Three Classes of Computers B 512MB, 1GHz, 80GB 2GB, 2GHz, 150GB C 1GB, 2GHz, 2 125GB 4GB, 2GHz dual, 2 250GB

4 Case Study Job Title Number of Employees Computer System Required Computer Type Figure 4-20 Department Employees and Computer Requirements Product manager 8 B Laptop Telesales 12 A Desktop Department administrator Marketing communications manager 2 A Desktop 4 B Laptop Marketing analyst 4 C (desktop) B (laptop) Both, a desktop and laptop for each analyst Marketing programs manager You 6 B Desktop 1?????? c. Describe how you will modify and reallocate existing computers (e.g., upgrading an existing class B computer and assigning it to an employee who next year needs a class A computer). You may wish to develop the spreadsheet in Application Exercise 4 1 on page 493 to facilitate your analysis. Case Study 4 The Apple of Your i A quick glance at Apple s stock history in Figure 4-21 will tell you that Apple, Inc., is a very successful company. You might be surprised to learn, however, just how successful. In roughly 3 years, Apple has tripled its market capitalization (the number of outstanding shares times the stock price) to more than $300 billion, making Apple the second largest public company in the world (Exxon Mobil is the largest). To put that number in perspective, Microsoft for years the market capitalization leader of software companies has a market $400 $350 Apple Closing Stock Price Figure 4-21 Growth in Apple Stock Price Source: Yahoo! Finance. $300 $250 $200 $150 $100 $50 $0 9/7/1984 9/7/1985 9/7/1986 9/7/1987 9/7/1988 9/7/1989 9/7/1990 9/7/1991 9/7/1992 9/7/1993 9/7/1994 9/7/1995 9/7/1996 9/7/1997 9/7/1998 9/7/1999 9/7/2000 9/7/2001 9/7/2002 9/7/2003 9/7/2004 9/7/2005 9/7/2006 9/7/2007 9/7/2008 9/7/2009 9/7/2010

5 160 CHAPTER 4 Hardware and Software Fundamentals capitalization of $212.5 billion, and Google has a market capitalization of $ billion. 6 In late June 2011, numerous market analysts were predicting that the $332 stock would increase another $100 within 6 months. In fact, within a month, it was trading over $400. Apple has been so successful that the Nasdaq stock exchange concluded that it was overinfluential in the computation of the Nasdaq-100 Index and reduced Apple s weight in that index from 20 to 12 percent. That s success! Alas, it wasn t always that way. Early Success and Downfall At the dawn of the personal computer age, in the early 1980s, Apple pioneered well-engineered home computers and innovative interfaces with its Apple II PC for the home and its Macintosh computer for students and knowledge workers. At one point, Apple owned more than 20 percent of the PC market, competing against many other PC vendors, most of which are no longer relevant (or in business). However, Apple lost its way. In 1985, Steve Jobs, Apple s chief innovator lost a fight with the Apple board and was forced out. He founded another PC company, NeXT, which developed and sold a groundbreaking PC product that was too groundbreaking to sell well in that era. Meanwhile, Apple employed a succession of CEOs, starting with John Sculley, who was hired away from Pepsi-Cola where he d enjoyed considerable success. Sculley s knowledge and experience did not transfer well to the PC business, however, and the company went downhill so fast that CNBC named him the 14th worst American CEO of all time. 7 Two other CEOs followed in Sculley s footsteps. During this period, Apple made numerous mistakes, among them not rewarding innovative engineering, creating too many products for too many market segments, and losing the respect of the retail computer stores. Apple s market PC share plummeted. Steve Jobs, Second Verse In 1996, Apple bought Jobs NeXT Computing and gained technology that became the foundation of Mac OS X, today s Macintosh operating system. The true asset it acquired, however, was Steve Jobs. Even he, however, couldn t create an overnight miracle. It is exceedingly difficult to regain lost market share and even more difficult to regain the respect of the retail channel that had come to view Apple s products with disdain. Even by 2011, Apple s market PC market share was in the range of 10 to 12 percent, down from a high of 20 percent in the 1980s. In response to these problems, Apple broke away from the PC and created new markets with its ipod, iphone, and ipad. It also countered retailer problems by opening its own stores. In the process, it pioneered the sale of music and applications over the Internet. ipod, iphone, and ipad devices are a marvel of creativity and engineering. They exude not only ease of use, but also now/wow/fun coolness. By selling hot music for the ipod, Apple established a connection with a dynamic segment of the market that was willing to spend lots of money on bright, shiny objects. The ability to turn the iphone on its side to rotate images probably sold more iphones than anything else. With the ipad, portable devices became readable, and the market responded by awarding Apple a 44 percent (and growing) share of the mobile market. 8 All of this success propelled Apple s stores not only beyond vanilla retailers like Best Buy, but also beyond the lofty heights of Tiffany & Co. In 2011, Apple stores were grossing more than $4,000 per square foot, compared to $3,000 for Tiffany and a mere $880 for Best Buy. As of 2011, Apple operates over 300 such retail outlets and has welcomed over 1 billion customer visits. 9 Apple encourages customer visits and loyalty with its open and inviting sales floor, its Genius Bar help desk, and its incredibly well-trained and disciplined sales force. Salespeople, who are not commissioned, are taught to be consultants who help customers solve problems. Even some vocabulary is standardized. When an employee cannot solve a customer s problem, the word unfortunately is to be avoided; employees are taught to use the phrase as it turns out, instead. 10 Try that on your next exam! Apple has sold 15 billion songs through its itunes online store, 130 million books through its ibookstore, and a mere 14 billion applications through its App Store, the latter in less than 3 years. Apple is now the number one PC software channel and the only place a customer 6 accessed and date as of June 27, Portfolio s Worst CEOs of All Time, CNBC.com. Available at (accessed July 2011). 8 Apple presentation at the Apple Worldwide Developers Conference, June 6, Carl Howe, Apple Reboots Retail with Connected Experiences, Yankee Group, March 23, Available at ResearchDocument.do?id=56472 (accessed July 2011). 10 Yukari Iwatani Kane and Ian Sherr, Secret s from Apple s Genius Bar: Full Loyalty, No Negativity, Wall Street Journal, June 15, Available at (accessed June 2011).

6 Case Study can buy the Mac X Lion, which sells for $30 instead of the $130 for the earlier OS X that sold through the software channel. 11 To encourage the development of iphone and ipad apps, Apple shares its revenue with application developers. That would be $2.5 billion paid to developers in less than 3 years! Developers responded by creating 445,000 ios applications, and an army of developers are at work building thousands more while you read this. By the way, if you want to build an ios application, what s the first thing you need to do? Buy a Macintosh. Apple closed its development to any other development method. Adobe Flash? No way. Apple claims that Flash has too many bugs, and perhaps so. Thus, Flash developers are excluded. Microsoft Silverlight? Nope. Microsoft developers are out in the cold, too. The non- Apple development community was furious, and Apple s response was, in essence, Fine, we ll pay our $2.5 billion to someone else. The bottom line? Every sales success feeds every other sales success. Hot music fed the ipod. The ipod fed itunes and created a growing customer base that was ripe for the iphone. Sales of the iphone fed the stores, whose success fed the developer community, which fed more applications, which fed the iphone and set the stage for the ipad, which fed the App Store, which enabled the $30 price on the OS X Lion, which led to more loyal customers, and, of course, to more developers. No wonder some shareholders want Steve Ballmer to resign as CEO over at Microsoft! 12 Questions 1. Which of Porter s four competitive strategies does Apple engage in? Explain. 2. What do you think are the three most important factors in Apple s incredible success? Justify your answer. 3. Steve Jobs passed away in the Fall of Until his death, he had been the heart and soul of Apple s innovation. Today, 35,000 Apple employees continue onward in his absence. A huge question to many investors is whether the company can be successful without him. What is your opinion? What role did he play? How can Apple respond to his loss? Would you be willing to invest in Apple without his leadership? Why or why not? 4. Microsoft took an early lead in the development of slate devices (like the ipad), and it had the world s leading operating system and applications for over 20 years. Provide five reasons why Microsoft was not able to achieve the same success that Apple has. Most industry analysts would agree that the skills and abilities of Microsoft s 88,000 employees are as good, on average, as Apple s. 5. Considering your answers to the four questions above, if you had a spare $5,000 in your portfolio and wanted to buy an equity stock with it, would you buy AAPL (Apple)? Why or why not? 11 Apple presentation at the Apple Worldwide Developers Conference, June 6, Sharon Pian Chan, Steve Ballmer Pre-Announces 2011 Earnings for Microsoft, Seattle Times, June 30, Available at (accessed July 2011).

7 Chapter 5 Introduction to Database Processing Kelly Summers, CEO of GearUp, assigned Drew Mills and Addison Lee the task of finding ways to reduce operational costs. Drew and Addison know that one source of inefficiency is order cancellations that happen when suppliers don t ship the inventory they say they will. Even though Drew and Addison know this is a problem, they don t know how big of a problem, and they can t convince Kelly on the basis of a hunch. Accordingly, Drew and Addison set up a meeting with Lucas Massey, the director of GearUp s IT department, to request a report that they need. This looks like trouble! The two of you at once, I mean. Lucas is only partly kidding as he looks at the two of them. Oh, come on, Lucas, you can handle us just fine, Drew responds as he sits down. Besides, if you have trouble, it s sitting right over there, he says, nodding at Addison. OK, here s the deal, Addison doesn t have patience for this small talk. We re trying to get our operational costs down and we know some vendors are causing us a ton of extra expense. For example, Drew jumps in, we know that General Sports routinely tells us they have inventory they don t have. So what happens? Lucas knows the answer, but he wants to hear how Drew or Addison understands it. We have to cancel any of the customer orders that depended on that inventory, which I think you know... Drew s in mid-sentence when Addison finishes his thought. 162