CONTENTS: CASE STUDIES
CASE STUDY 1

Midsouth Chamber of Commerce (A): The Role of the Operating Manager in
Information Systems

CASE STUDY I-1

IMT Custom Machine Company, Inc.: Selection of an Information Technology
Platform

CASE STUDY I-2

VoIP2.biz, Inc.: Deciding on the Next Steps for a VoIP Supplier

CASE STUDY I-3

The VoIP Adoption at Butler University

CASE STUDY I-4

Supporting Mobile Health Clinics: The Children’s Health Fund of New York City

CASE STUDY I-5

Data Governance at InsuraCorp

CASE STUDY I-6

H.H. Gregg’s Appliances, Inc.: Deciding on a New Information Technology

Platform

CASE STUDY I-7

Midsouth Chamber of Commerce (B): Cleaning Up an Information Systems
Debacle

CASE STUDY II-1

Vendor-Managed Inventory at NIBCO

CASE STUDY II-2

Real-Time Business Intelligence at Continental Airlines

CASE STUDY II-3

Norfolk Southern Railway: The Business Intelligence Journey

CASE STUDY II-4

Mining Data to Increase State Tax Revenues in California

CASE STUDY II-5

The Cliptomania™ Web Store: An E-Tailing Start-up Survival Story

CASE STUDY II-6

Rock Island Chocolate Company, Inc.: Building a Social Networking Strategy



CASE STUDY III-1

Managing a Systems Development Project at Consumer and Industrial
Products, Inc.

CASE STUDY III-2

A Make-or-Buy Decision at Baxter Manufacturing Company

CASE STUDY III-3

ERP Purchase Decision at Benton Manufacturing Company, Inc.

CASE STUDY III-4

The Kuali Financial System: An Open-Source Project

CASE STUDY III-5

NIBCO’s “Big Bang”: An SAP Implementation

CASE STUDY III-6

BAT Taiwan: Implementing SAP for a Strategic Transition

CASE STUDY III-7

A Troubled Project at Modern Materials, Inc.


CASE STUDY III-8

Purchasing and Implementing a Student Management System at Jefferson
County School System

CASE STUDY IV-1

The Clarion School for Boys, Inc.– Milwaukee Division: Making Information
Systems Investments

CASE STUDY IV-2

FastTrack IT Integration for the Sallie Mae Merger

CASE STUDY IV-3

IT Infrastructure Outsourcing at Schaeffer (A): The Outsourcing Decision

CASE STUDY IV-4

IT Infrastructure Outsourcing at Schaeffer (B): Managing the Contract

CASE STUDY IV-5

Systems Support for a New Baxter Manufacturing Company Plant in Mexico

CASE STUDY IV-6

The Challenges of Local System Design for Multinationals: The MaxFli Sales

Force Automation System at BAT

CASE STUDY IV-7

Meridian Hospital Systems, Inc.: Deciding Which IT Company to Join

CASE STUDY IV-8

Mary Morrison’s Ethical Issue


Seventh Edition

Managing Information
Technology
Carol V. Brown
Howe School of Technology Management,
Stevens Institute of Technology
Daniel W. DeHayes
Kelley School of Business,
Indiana University
Jeffrey A. Hoffer
School of Business Administration,
The University of Dayton
E. Wainright Martin
Kelley School of Business,
Indiana University
William C. Perkins
Kelley School of Business,
Indiana University


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printed in initial caps or all caps.
Library of Congress Cataloging-in-Publication Data
Managing information technology / Carol V. Brown . . . [et al.]. — 7th ed.
p. cm.
Includes bibliographical references and index.
ISBN-13: 978-0-13-214632-6 (alk. paper)
ISBN-10: 0-13-214632-0 (alk. paper)
1. Management information systems. I. Brown, Carol V. (Carol Vanderbilt), 1945T58.6.M3568 2012
658.4'038011—dc22
2010048598
10 9 8 7 6 5 4 3 2 1

ISBN 10:
0-13-214632-0
ISBN 13: 978-0-13-214632-6


BRIEF CONTENTS
Chapter 1


Managing IT in a Digital World

PART I Information Technology
Chapter 2
Chapter 3
Chapter 4

1

17

Computer Systems 19
Telecommunications and Networking
The Data Resource 95

60

PART II Applying Information Technology
Chapter 5
Chapter 6
Chapter 7

Enterprise Systems 189
Managerial Support Systems
E-Business Systems 253

187

223


PART III Acquiring Information Systems 327
Chapter 8
Chapter 9
Chapter 10
Chapter 11

Basic Systems Concepts and Tools 329
Methodologies for Custom Software Development 361
Methodologies for Purchased Software Packages 390
IT Project Management 410

PART IV The Information Management System
Chapter 12
Chapter 13
Chapter 14
Chapter 15

517

Planning Information Systems Resources 519
Leading the Information Systems Function 536
Information Security 561
Social, Ethical, and Legal Issues 575

Glossary 668
Index 691

iii



This page intentionally left blank


CONTENTS
Preface xvii

Chapter 1 Managing IT in a Digital World

1

Recent Information Technology Trends

2

Computer Hardware: Faster, Cheaper, Mobile

2

Computer Software: Integrated, Downloadable, Social 2
Computer Networks: High Bandwidth, Wireless, Cloudy

New Ways to Compete 4
New Ways to Work 5
Managing IT in Organizations
Managing IT Resources
IT Leadership Roles

4


5

5

7

The Topics and Organization of This Textbook

8

Review Questions 9 • Discussion Questions 9 •
Bibliography 9
̈ CASE STUDY 1 Midsouth Chamber of Commerce (A): The Role of the
Operating Manager in Information Systems 10

PART I Information Technology
Chapter 2 Computer Systems

17

19

Basic Components of Computer Systems

20

Underlying Structure 20
Input/Output

20


Computer Memory 21
Arithmetic/Logical Unit
Computer Files
Control Unit

23

23

25

The Stored-Program Concept 25
Types of Computer Systems 28
Microcomputers

29

Midrange Systems

30

Mainframe Computers
Supercomputers

33

34

Key Types of Software 34

Applications Software 36
An Example of an Application Product
Personal Productivity Software

Support Software

37

38

41

The Operating System
Language Translators

41
43
v


vi

Contents

Third Generation Languages

43

Fourth Generation Languages
Markup Languages


46

48

Object-Oriented Programming 49
Languages for Developing Web Applications
Database Management Systems
CASE Tools

51

52

54

Communications Interface Software
Utility Programs

54

54

The Changing Nature of Software 55
The Information Technology Industry 55
Review Questions 56 • Discussion Questions 57 •
Bibliography 58

Chapter 3 Telecommunications and Networking
The Need for Networking


61

Sharing of Technology Resources
Sharing of Data

60
61

61

Distributed Data Processing and Client/Server Systems
Enhanced Communications

62

62

Marketing Outreach 62

An Overview of Telecommunications and Networking 62
Key Elements of Telecommunications and Networking 63
Analog and Digital Signals

63

Speed of Transmission 64
Types of Transmission Lines
Transmission Media


65

65

Topology of Networks
Types of Networks

72

Network Protocols

86

70

The Exploding Role of Telecommunications and Networking 88
Online Operations
Connectivity

88

89

Electronic Data Interchange and Electronic Commerce

89

Marketing 89

The Telecommunications Industry


90

Review Questions 92 • Discussion Questions 92 •
Bibliography 93

Chapter 4 The Data Resource

95

Why Manage Data? 96
Technical Aspects of Managing the Data Resource
The Data Model and Metadata
Data Modeling 98
Database Programming 100

97

97


Contents

Managerial Issues in Managing Data
Principles in Managing Data

101

101


The Data Management Process

106

Data Management Policies 110
Review Questions 114 • Discussion Questions 114 •
Bibliography 114
̈ CASE STUDY I-1 IMT Custom Machine Company, Inc.: Selection
of an Information Technology Platform 116
̈ CASE STUDY I-2 VoIP2.biz, Inc.: Deciding on the Next Steps for
a VoIP Supplier 128
̈ CASE STUDY I-3 The VoIP Adoption at Butler University 144
̈ CASE STUDY I-4 Supporting Mobile Health Clinics: The Children’s Health
Fund of New York City 157
̈ CASE STUDY I-5 Data Governance at InsuraCorp 166
̈ CASE STUDY I-6 HH Gregg: Deciding on a New Information Technology
Platform 170
̈ CASE STUDY I-7 Midsouth Chamber of Commerce (B): Cleaning up an
Information Systems Debacle 177

PART II Applying Information Technology
Chapter 5 Enterprise Systems

189

Application Areas

189

Critical Concepts


187

191

Batch Processing versus Online Processing 191
Functional Information Systems
Vertical Integration of Systems
Distributed Systems

192

Client/Server Systems
Virtualization

192
192

193

194

Service-Oriented Architecture and Web
Services 194

Transaction Processing Systems
Payroll System

196


196

Order Entry System

196

Enterprise Resource Planning Systems

198

An Example ERP System: SAP ERP 199

Data Warehousing 201
Customer Relationship Management
Systems 204
Office Automation 206
Videoconferencing
Electronic Mail

207

208

Groupware and Collaboration 209
An Example Groupware System: Lotus Notes

210

vii



viii

Contents

Intranets and Portals 213
Factory Automation 215
Engineering Systems

216

Manufacturing Administration 216
Factory Operations
Robotics

217

217

Supply Chain Management Systems

217

Review Questions 219 • Discussion Questions 220 •
Bibliography 220

Chapter 6 Managerial Support Systems

223


Decision Support Systems 223
Data Mining 224
Group Support Systems 228
Geographic Information Systems

229

Business Adopts Geographic Technologies
What’s Behind Geographic Technologies

230

231

Issues for Information Systems Organizations

232

Executive Information Systems/Business
Intelligence Systems 234
Knowledge Management Systems 237
Two Recent KMS Initiatives within a Pharmaceutical Firm
KMS Success

240

Artificial Intelligence 241
Expert Systems 241
Obtaining an Expert System 242
Examples of Expert Systems


242

Neural Networks 244
Virtual Reality 245
Review Questions 250 • Discussion Questions 250 •
Bibliography 251

Chapter 7 E-Business Systems

253

Brief History of the Internet
E-Business Technologies

254
254

Legal and Regulatory Environment

257

Strategic E-Business Opportunities (and Threats)
B2B Applications 260
B2C Applications 263
Two Dot-Com Retailers

264

Two Traditional Catalog Retailers

Two Traditional Store Retailers
Summary: B2C Retailing 268

266

267

259

239


Contents

Dot-Com Intermediaries

269

Summary: Successful Online Intermediary Models

273

Special Issue: What Makes a Good Web Site for
Consumers 273
Special Issue: What Makes a Good B2C Social
Media Platform 275
Review Questions 276 • Discussion Questions 276 •
Bibliography 277
̈ CASE STUDY II-1 Vendor-Managed Inventory at NIBCO


279

̈ CASE STUDY II-2 Real-Time Business Intelligence at Continental
Airlines 284
̈ CASE STUDY II-3 Norfolk Southern Railway: The Business Intelligence
Journey 294
̈ CASE STUDY II-4 Mining Data To Increase State Tax Revenues
in California 300
̈ CASE STUDY II-5 The CliptomaniaTM Web Store

308

̈ CASE STUDY II-6 Rock Island Chocolate Company, Inc.: Building a Social
Networking Strategy 321

PART III Acquiring Information Systems 327
Chapter 8 Basic Systems Concepts and Tools
The Systems View
What Is a System?

329

329
330

Seven Key System Elements
Organizations as Systems

330


334

Systems Analysis and Design 335

Business Processes

336

Identifying Business Processes

336

Business Process Redesign 336

Processes and Techniques to Develop Information
Systems 339
The Information Systems Development Life Cycle

339

Structured Techniques for Life-Cycle Development

340

Procedural-Oriented Techniques

341

Techniques for the As-Is Model 343
Techniques for the Logical To-Be Model 344

Techniques for Documenting the Physical To-Be
System 348
Object-Oriented Techniques

351

Core Object-Oriented Concepts

351

Summary of Processes and Techniques to Develop
Information Systems 353

ix


x

Contents

Information Systems Controls to Minimize Business Risks
Types of Control Mechanisms

355

Controls in the Definition and Construction Phases

355

Controls in the Implementation Phase 357

Review Questions 358 • Discussion Questions 359 •
Bibliography 359

Chapter 9 Methodologies for Custom Software Development

361

Systems Development Life Cycle Methodology

361

The SDLC Steps

362

Initiating New Systems Projects
Definition Phase

363

363

Construction Phase

365

Implementation Phase

366


The SDLC Project Team

370

Managing an SDLC Project

371

SDLC Advantages and Disadvantages

Prototyping Methodology
The Prototyping Steps

371

373
373

The Prototyping Project Team 375
Managing a Prototyping Project

375

Prototyping Advantages and Disadvantages
Prototyping Within an SDLC Process

Newer Approaches

375


376

377

Rapid Application Development (RAD)
Agile Methodologies

377

378

Managing Software Projects Using Outsourced Staff 381

Supporting User Application Development (UAD)

382

Advantages and Disadvantages of User-Developed
Applications 382
Assessing the Risks from UAD

384

Guidelines for User Developers 385
Review Questions 387 • Discussion Questions 387 •
Bibliography 388

Chapter 10 Methodologies for Purchased Software Packages
The Make-or-Buy Decision 391
Purchasing Methodology 391

The Purchasing Steps

392

Project Team for Purchasing Packages
Managing a Purchased System Project

400
401

Purchasing Advantages and Disadvantages

Special Case: Enterprise System Packages
Open Source Software 405

402

403

390

354


Contents

New Purchasing Option: Application Service Providers
(ASPs) 406
Review Questions 408 • Discussion Questions 408 •
Bibliography 409


Chapter 11 IT Project Management

410

IT Portfolio Management 411
Project Management Roles 412
Project Manager 412
Project Sponsor and Champion Roles

413

Project Initiation 415
Project Planning 416
Scheduling
Budgeting
Staffing

416
417

418

Planning Documents

420

Project Execution and Control 420
Managing Project Risks


423

Managing Business Change

424

Project Closing 426
Special Issue: Managing Complex IT Projects
Special Issue: Managing Virtual Teams 427

427

Review Questions 430 • Discussion Questions 430 •
Bibliography 431
̈ CASE STUDY III-1 Managing a Systems Development Project at Consumer
and Industrial Products, Inc. 432
̈ CASE STUDY III-2 A Make-or-Buy Decision at Baxter Manufacturing
Company 442
̈ CASE STUDY III-3 ERP Purchase Decision at Benton Manufacturing
Company, Inc. 449
̈ CASE STUDY III-4 The Kuali Financial System: An Open-Source
Project 455
̈ CASE STUDY III-5 NIBCO’s “Big Bang”: An SAP Implementation

468

̈ CASE STUDY III-6 BAT Taiwan: Implementing SAP for a Strategic
Transition 484
̈ CASE STUDY III-7 A Troubled Project at Modern Materials, Inc.


498

̈ CASE STUDY III-8 Purchasing and Implementing a Student Management
System at Jefferson County School System 506

PART IV The Information Management System
Chapter 12 Planning Information Systems Resources

519

Benefits of Information Resources Planning 519
Creating a Context for IS Resource Decisions
Aligning IS and Business Goals

520

520

517

xi


xii

Contents

Balancing the Trade-offs Between Standardization and Agility
Obtaining IT Capital Investment Approvals


520

The Information Resources Planning Process 520
Assessing The Current Information Resources 521
Measuring IS Use and Attitudes

521

Reviewing the IS Organizational Mission 522
Assessing Performance versus Goals

523

Creating an Information Vision 524
Designing the IT Architecture 524
Formulating the Strategic IS Plan 526
The Strategic IS Planning Process

526

Tools for Identifying IT Strategic Opportunities

527

Formulating Operational IS Plans 532
Guidelines for Effective IS Planning 532
Review Questions 534 • Discussion Questions 534 •
Bibliography 534

Chapter 13 Leading the Information Systems Function


536

IS Organization Responsibilities and
Governance 537
Managing IT Service Delivery 539
Chargeback Systems

539

Service Level Agreements (SLAs)

541

IT Service Management with ITIL

542

Supporting Computer Users

543

Strategies for User Computing 543
Support Services

544

Control Policies and Procedures
Supporting Telecommuters


Managing IT Applications

546

546

548

An Applications Portfolio Approach 548
Metrics for IT Applications Management

549

Managing IT Human Resources 549
Managing the Business/IT Relationship 553
Measuring Overall IS Performance 554
Special Issue: IS Management in Global Organizations
Special Issue: Managing IT Outsourcing 556
Review Questions 558 • Discussion Questions 559 •
Bibliography 559

Chapter 14 Information Security

561

Computer Crime 561
The Chief Security Officer Role

565


554

520


Contents

Risk Management for Information Security 565
Compliance with Laws and Regulations 567
Sarbanes-Oxley (SOX)

567

Gramm-Leach-Bliley Act of 1999 (GBLA)

569

Health Insurance Portability and Accountability Act (HIPAA)
The PATRIOT Act

569

Organizational Polices for Information Security
Planning for Business Continuity 571
Electronic Records Management (ERM) 571

569

Review Questions 573 • Discussion Questions 574 •
Bibliography 574


Chapter 15 Social, Ethical, and Legal Issues

575

The Legal Environment 575
Ethics Frameworks 576
Identifying Ethical Problems
Analyzing Ethical Problems

576
577

Social Issues 578
Privacy 579
Privacy Problems

579

E-Commerce Privacy Concerns

580

Workplace Privacy 581
Ethics of Invasion of Privacy 582
Laws on Privacy 582

Identity Theft 583
Impact of Identity Theft 584
Laws on Identity Theft 585


Intellectual Property Rights

585

Software Piracy 586
Copyright Protection
Patent Protection

586

586

Digital Entertainment Piracy 587
Internet File Sharing

587

Ethical Questions

589

Other Social Issues

589

Access to the Technology

589


Freedom of Speech 590
Hazards of Inaccuracy 590
Impact on Workers

The Future

590

591

Review Questions 591 • Discussion Questions 592 •
Bibliography 592

569

xiii


xiv

Contents
̈ CASE STUDY IV-1 The Clarion School for Boys, Inc.—Milwaukee Division:
Making Information Systems Investments 594
̈ CASE STUDY IV-2 FastTrack IT Integration for the Sallie
Mae Merger 611
̈ CASE STUDY IV-3 IT Infrastructure Outsourcing at Schaeffer (A):
The Outsourcing Decision 628
̈ CASE STUDY IV-4 IT Infrastructure Outsourcing at Schaeffer (B):
Managing the Contract 634
̈ CASE STUDY IV-5 Systems Support for a New Baxter Manufacturing

Company Plant in Mexico 642
̈ CASE STUDY IV-6 The Challenges of Local System Design for
Multinationals: The MaxFli Sales Force Automation
System at BAT 647
̈ CASE STUDY IV-7 Meridian Hospital Systems, Inc.: Deciding Which IT
Company to Join 660
̈ CASE STUDY IV-8 Mary Morrison’s Ethical Issue

Glossary 668
Index 691

666


CONTENTS: CASE STUDIES
Case Study 1
Case Study I-1
Case Study I-2
Case Study I-3
Case Study I-4
Case Study I-5
Case Study I-6
Case Study I-7
Case Study II-1
Case Study II-2
Case Study II-3
Case Study II-4
Case Study II-5
Case Study II-6
Case Study III-1

Case Study III-2
Case Study III-3
Case Study III-4
Case Study III-5
Case Study III-6
Case Study III-7
Case Study III-8
Case Study IV-1
Case Study IV-2
Case Study IV-3
Case Study IV-4
Case Study IV-5
Case Study IV-6
Case Study IV-7
Case Study IV-8

Midsouth Chamber of Commerce (A): The Role of the Operating
Manager in Information Systems 10
IMT Custom Machine Company, Inc.: Selection of an Information
Technology Platform 116
VoIP2.biz, Inc.: Deciding on the Next Steps for a VoIP Supplier 128
The VoIP Adoption at Butler University 144
Supporting Mobile Health Clinics: The Children’s Health Fund
of New York City 157
Data Governance at InsuraCorp 166
HH Gregg: Deciding on a New Information Technology
Platform 170
Midsouth Chamber of Commerce (B): Cleaning Up an Information
Systems Debacle 177
Vendor-Managed Inventory at NIBCO 279

Real-Time Business Intelligence at Continental Airlines 284
Norfolk Southern Railway: The Business Intelligence Journey 294
Mining Data to Increase State Tax Revenues in California 300
The Cliptomania™ Web Store 308
Rock Island Chocolate Company, Inc.: Building a Social Networking
Strategy 321
Managing a Systems Development Project at Consumer and
Industrial Products, Inc. 432
A Make-or-Buy Decision at Baxter Manufacturing Company 442
ERP Purchase Decision at Benton Manufacturing Company, Inc. 449
The Kuali Financial System: An Open-Source Project 455
NIBCO’s “Big Bang”: An SAP Implementation 468
BAT Taiwan: Implementing SAP for a Strategic Transition 484
A Troubled Project at Modern Materials, Inc. 498
Purchasing and Implementing a Student Management System at
Jefferson County School System 506
The Clarion School for Boys, Inc.—Milwaukee Division: Making
Information Systems Investments 594
FastTrack IT Integration for the Sallie Mae Merger 611
IT Infrastructure Outsourcing at Schaeffer (A):
The Outsourcing Decision 628
IT Infrastructure Outsourcing at Schaeffer (B):
Managing the Contract 634
Systems Support for a New Baxter Manufacturing Company Plant
in Mexico 642
The Challenges of Local System Design for Multinationals:
The MaxFli Sales Force Automation System at BAT 647
Meridian Hospital Systems, Inc.: Deciding Which IT
Company to Join 660
Mary Morrison’s Ethical Issue 666

xv


This page intentionally left blank


PREFACE
Today’s private and public organizations are increasingly dependent on information technologies
for achieving their strategic and operational objectives. Over the past decade alone, enterprise
systems have been expanded to provide secure, electronic linkages with suppliers and customers,
and the Internet has become a mainstream channel for communications and business transactions. As a result, decision making about information technology resources has also become even
more visible as the roles and accountabilities of the IS function have become important not only
operationally but also strategically.
The overall objectives and targeted audience for this edition remain the same as for the prior
sixth edition: to provide comprehensive coverage of IS management practices and technology trends
for advanced students and managers. Earlier editions of this textbook have been used for courses in
MBA, MS in IS, and executive education programs, as well as in advanced undergraduate courses.
We believe that our approach of providing both up-to-date chapter content and full-length case
studies, written by the same authors, results in a unique set of materials for educators to customize
for students seeking careers as business managers, IS managers, or IS specialists.

NEW TO THIS EDITION
• All 15 chapters in this edition have been revised to reflect up-to-date technology trends and
state-of-the-art IS management practices.
• The total number of chapters has been reduced from 17 to 15 to better match the semester
schedules of many of our textbook adopters.
• Overall topical coverage has been retained, but we have reduced some presentations of the
content as follows:
• Chapter 2 (Computer Systems) includes content from separate chapters on computer
hardware and computer software in the sixth edition.

• The content from Chapter 13 of the sixth edition has now been incorporated into two
chapters in the seventh edition: The discussion of key characteristics of user-developed
applications appears in Chapter 9 (Methodologies for Custom Software Development)
and the discussion of support and control mechanisms for end-user computing appears
in Chapter 13 (Leading the Information Systems Function).
• The in-depth case studies in this edition include five completely new case studies and six
that have been significantly revised.

THE CHAPTER CONTENT
Following an introductory chapter that sets the stage for learning about IS management roles and
technology trends, the textbook chapters are presented in four parts:
Part I—Information Technology provides background knowledge about major information technology components: hardware and software, networks, and data. Depending
on the targeted audience, these chapters may be assigned as background readings as a
kind of “level-setting” for students from different educational and work backgrounds
and experiences.
Part II—Applying Information Technology introduces in detail the capabilities of three
categories of software applications: enterprise systems, managerial support systems, and
e-business systems.
Part III—Acquiring Information Systems prepares the reader for leading and participating in projects to design or select, implement, and support the utilization of software
xvii


xviii Preface

applications—including methodologies for custom-developed systems and purchased
software packages, as well as IT project management.
Part IV—The Information Management System provides knowledge about effectively
planning IS resources for the business, leading IS units responsible for provisioning these
resources, and best practices for addressing information security, as well as larger social,
legal, and ethical issues related to information technologies.


THE TEACHING CASES
To demonstrate real-world IS management challenges, this textbook also includes a set of six to
eight full-length case studies for each of the four parts of the textbook. These full-length case
studies are based on research by academic authors with access to Fortune 500 companies,
midsized companies, and some not-for-profit or government organizations. Some of the
company names are camouflaged, but many are not.
The 30 case studies in this seventh edition provide rich descriptions of both successful
and problematic real-world situations so that students can learn about the challenges of
implementing new information systems, the capabilities of different types of software
applications—including those that leverage the Internet, the difficulties encountered when
managing IS projects with different levels of complexity, and approaches to effectively
address systems integration and other technology leadership challenges—from both IS
manager and non-IS manager perspectives. The five completely new case studies in the
seventh edition address these specific topics:
•
•
•
•
•

implementing technologies to support mobile clinics (Case Study I-4)
deciding on a new enterprise-level IT platform (Case Study I-6)
developing a business intelligence capability (Case Study II-3)
mining data to increase government tax revenues (Case Study II-4)
exploring the potential organizational benefits of social media (Case Study II-6)

Several other case studies have also been significantly revised to take into account new technical
or managerial developments.


THE SUPPLEMENT PACKAGE: WWW.PEARSONHIGHERED.COM/BROWN
A comprehensive and flexible technology support package is available to enhance the teaching
and learning experience. All instructor and student supplements are available on the text’s Web
site. See www.pearsonhighered.com/brown. The Web site also includes a large number of “old
favorite” case studies from earlier editions.

Instructor Resource Center
The following Instructor Resources are available on the secure faculty section of the Brown
Web site:
• Instructor’s Manual The Instructor’s Manual includes syllabi for several courses (both
undergraduate and master’s level) that have used this book. It also includes lecture notes on
each chapter, answers to the review and discussion questions at the end of each chapter,
and teaching notes on the case studies that have been prepared by the authors.
• Test Item File and TestGen Software The Test Item File includes multiple-choice and
True/False questions for each chapter in this textbook. The Test Item File is available in
Microsoft Word and for use with the computerized Prentice Hall TestGen, as well as
WebCT and Blackboard-ready conversions. TestGen is a comprehensive suite of tools for
testing and assessment. Screen wizards and full technical support are available to
instructors to help them create and distribute tests to their students, either by printing and
distributing through traditional methods or by online delivery.


Preface

• PowerPoint Slides The PowerPoint slides that have been developed for this edition
emphasize the key concepts in the text, include many of the figures in the text, and provide
some Web links to enhance student learning. Faculty instructors can customize these
presentations by adding their own slides and links to Web resources and/or by editing the
existing ones.
• The Image Library is a collection of the text art organized by chapter. This collection

includes all of the figures, tables, and screenshots (as permission allows) from the book.
These images can be used to enhance class lectures and PowerPoint slides.

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ACKNOWLEDGMENTS
Our thanks go to our professional colleagues who have used one or more editions of this
textbook and have provided valuable feedback to us directly, or responded to review requests by
our publisher, since the first edition in 1991. The list is too long to provide here, but we hope that
all of you will accept our collective, anonymous Thank You!
Special thanks also go to academic colleagues (mostly current and prior Indiana University
faculty and students) who have coauthored content for specific chapters that can still be found in
this edition: Susan A. Brown, Dong-Gil Ko, Lisa Murphy, Jay Newquist, Madhu Rao, Blaize
Reich, Andrew Urbaczewski, Ramesh Venkataraman, and Dwight Worker. The following
individuals have also collaborated with us on case study research or coauthored the case studies that
appear in this book: Ron Anderson-Lehman, S. Balaji, Greg Clancy, Tony Easterlin, Jane
Fedorowicz, Janis L. Gogan, Dale Goodhue, Vijay Khatri, Scott A. Kincaid, Nicholas Lockwood,
Stephen R. Nelson, Kevin Ryan, John Sacco, Rebecca Scholer, Mohan Tatikonda, Iris Vessey,
Hugh Watson, Taylor Wells, Bradley Wheeler, Michael Williams, and Barbara Wixom.
We have also benefited from several sources of support for our research that have led to the
development of case studies for this textbook—including the IM Affiliates program at the Kelley
School of Business at Indiana University, the EDS Corporation, British American Tobacco,
SAP-America, Teradata Corporation, the Center for Information Systems Research at MIT’s
Sloan School of Management, and the Society for Information Management (SIM). Our deep
appreciation goes out to the reviewers of the sixth edition, who helped make the seventh edition
better: T.C. Bradley, III, Indiana University; Chiang-Nan Chao, St. John’s University; Abbas
Foroughi, University of Southern Indiana; Richard Gram, Worcester Polytechnic Institute;

Georgia Miller, Indiana University-Purdue University at Columbus; Ezra Rhein, Brooklyn
College; Robin Starnes, Texas A&M University; Manouchehr Tabatabaei, Georgia Southern
University; Nolan J. Taylor, Indiana University; and Patricia White, Troy University.
Finally, each author extends their gratitude to the other four for their intellect, professionalism,
and longtime interest in providing quality instructional materials for today’s and tomorrow’s
business managers and IS leaders.
Carol V. Brown
Daniel W. DeHayes
Jeffrey A. Hoffer
E. Wainright Martin
William C. Perkins
October 2010

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CHAPTER

1

Managing IT in a
Digital World
The utilization of information technology (IT) has become pervasive. Businesses not only have information systems
(IS) that connect frontline employees with back-office accounting and production systems but also compete with
dot-com (Internet only) companies via Web-based stores and online customer service channels. Travelers can access
high-speed wireless networks from public transportation, airports, and even in-flight airplanes to keep them
productive. Work teams may never meet face-to-face and regularly use meeting software and video conferencing.

Workers may choose a BlackBerry, iPhone, or other smartphone to access office e-mail anytime, anywhere. And
today’s schoolchildren find resources via Internet searches rather than card catalogs in school libraries.
Today’s consumers also live in what has been called an increasingly “flat world” in which IT linkages across
emerging, developing, and developed economies help to “level” the economic playing field (Friedman, 2005).
Citizens across the globe may have access to world news online. Geographical positioning systems not only help
travelers find the best route to their destination but can also facilitate the identification of a nearby retail store or
restaurant.
The designing and management of computer hardware, software, and networks to enable this pervasive
digital world is the work of IT professionals. However, all business managers, not just IT managers, are
responsible for wisely investing in and effectively utilizing these information technologies for the benefit of their
organizations. By the year 2000, more than half of capital expenditures by businesses in developed countries were
for IT purchases.
The primary objective of this textbook is to increase your knowledge about IT management so that as a
manager you can effectively invest in and utilize new and already in-place information technologies. In the
following chapters we will describe
•
•
•
•

technologies available today and emerging technology trends,
software applications to support business operations and business intelligence,
“best practices” for acquiring and implementing new systems, and
planning and managing an IS department’s resources.

The objective of this first textbook chapter is to set the stage for the remaining 14 chapters and the full-length case
studies that follow.
We use the term information technology (IT) as computer technology (hardware and software) for
processing and storing information, as well as communications technology (voice and data networks) for
transmitting information.

We use the term information systems (IS) department to refer to the organizational unit or department
that has the primary responsibility for managing IT.

1


2

Chapter 1 • Managing IT in a Digital World

Next, we briefly describe some recent IT trends that have led
to (1) new ways for businesses to compete and (2) new ways
for employees to accomplish their work. Then we briefly
introduce the key IT management responsibilities in today’s
organizations and the types of IT assets that need to be
managed in collaboration with business leaders. The chapter
ends with a brief summary of the topics that will be covered
in the remaining Parts I–IV of this textbook.

RECENT INFORMATION TECHNOLOGY
TRENDS
As a personal user of various computer and communication
devices, you are probably already aware of some of the
innovations in computer systems and networks that have
been introduced by IT vendors over the past decade. This
fast-paced technological change makes it difficult to
accurately predict the IT products and services that will be
“winners” tomorrow—and significant mispredictions about
technologies have been common in the past (see the box
“Mispredictions by IT Industry Leaders”). However, it

seems safe to predict that computer and communication devices will continue to touch almost every aspect of our lives.
In Part I of this textbook, we will discuss in detail the
key concepts underlying today’s computer systems (hardware and software) and network technologies. For now, let
us briefly consider some of the technology developments
that have already led to pervasive computing in the first
decades of this twenty-first century.
Computer Hardware: Faster, Cheaper, Mobile
Computer-on-a-chip (microcomputer) technology was available as early as the 1970s, and the introduction of the first
IBM Personal Computer (PC) in 1981 was the beginning of
desktop computing. Today, desktop and portable computers

produced by manufacturers around the world have become
commodity products with processing power that is equivalent to an organization’s entire computing center of the
1960s. The typical computer for individuals to use today has
graphical icons, point-and-click and/or touch screen navigation, and preloaded software to access the Internet—all at a
cheaper price than what the same features would have cost
12 months earlier, with better computer virus protection.
Because of their portability and wireless capabilities, lightweight laptop and notebook computers are replacing larger
desktop machines in offices today. They can be carried into
meetings, taken on business trips, and used at home to
remotely connect to office systems.
Smaller, handheld devices have also continued to improve in functionality and have become indispensable tools
to access e-mail and other applications inside and outside of
the office, on the factory floor, as well as in hospital corridors. In mid-2007, Apple Computer began selling a new
smartphone (iPhone) with touch screen navigation and
scrolling, and simplified calling from an address book,
e-mail and text messaging, visual voice mail, video playing,
and Web browsing via Wi-Fi connectivity. Since then, other
IT vendors have been developing smartphones with similar
features, and Apple has introduced a lightweight notebook

computer (the iPad) with a similar interface.
Computer Software: Integrated,
Downloadable, Social
By the early 1990s, Microsoft Corporation’s Windows software had become the standard operating system for the vast
majority of microcomputers being used as desktop and
portable computer “clients.” By the end of the 1990s,
Microsoft’s Office suite (i.e., word processing, spreadsheet,
database, slideshow presentation, and e-mail software sold
in a single bundle) as well as its Web browser (Internet

Mispredictions by IT Industry Leaders
This “telephone” has too many shortcomings to be seriously considered as a means of communication.
The device is inherently of no value to us.
—Western Union internal memo, 1876

I think there is a world market for maybe five computers.
—Thomas Watson, Chairman of IBM, 1943

But what [is a microchip] good for?
Engineer at the Advanced Computing Systems Division of IBM, 1968

There is no reason anyone would want a computer in their home.
—Ken Olson, President, Chairman, and Founder of Digital Equipment Corp., 1977

640K ought to be enough for anybody.
—Attributed to Bill Gates, Chairman of Microsoft, 1981
[Based on Kappelman, 2001; Jones, 2003]