1

CHAP TER

Information Systems in Global

Business Today

Learning Objectives
After reading this chapter, you will be able to answer the following questions:
1-1 How are information systems transforming business, and why are they so
essential for running and managing a business today?
1-2 What is an information system? How does it work? What are its
management, organization, and technology components? Why are
complementary assets essential for ensuring that information systems
provide genuine value for organizations?
1-3 What academic disciplines are used to study information systems, and how
does each contribute to an understanding of information systems?

MyLab MIS™
Visit mymislab.com for simulations, tutorials, and end-of-chapter problems.

CHAPTER CASES
Rugby Football Union Tries Big Data
The Mobile Pocket Office
Digital Transformation of Healthcare at Singapore’s JurongHealth Services
Are Farms Becoming Digital Firms?

VIDEO CASES
Business in the Cloud: Facebook and eBay Data Centers
UPS Global Operations with the DIAD
Instructional Video:
Tour IBM’s Raleigh Data Center

30
 Rugby Football Union Tries Big Data

I
n 1871, twenty-one English clubs decided that their sport, officially called
rugby union but commonly referred to simply as rugby, needed an admin-
istrative body. The clubs formed The Rugby Football Union (RFU), which
today manages the English national team (England Rugby) in partnership
with Premier Rugby Limited. Responsible for the promotion of rugby at all
levels, the RFU organizes the Six Nations Championship, the unofficial north-
ern hemisphere championship featuring teams from England, Scotland, Wales,
Italy, Ireland, and France, and the Heineken Cup, its club-level counterpart.
Owned by its member clubs, the RFU’s mission is to maximize profits from
international ticket sales and vending
so that it can support the more than
60,000 volunteers who organize
matches and seminars, help secure
loans and insurance policies, fund-
raise, write grant proposals, provide
medical advice and support, and per-
form the clerical duties that keep the
lower-level clubs operating.
To succeed in this complicated
mission, the RFU entered into a five-
year deal with IBM to capture and
analyze Big Data that will be useful
to both fans, and later—it is hoped—
the players themselves. The system
is called TryTracker. In rugby, a try,
worth five points, is the highest scor-
ing opportunity. Teams get posses-
sion of the ball through a scrum, a ©Michal Sanca/Shutterstock
contest for the ball where eight players bind together and push against eight
players from the other team. The outcome determines who can control the
ball. To score a try, a team must break through the opposition’s defenses,
move into their in-goal area, and “ground” the ball. This is done in one of
two ways. A player can either hold the ball in one or both hands or arms and
then touch it to the ground in the in-goal area, or exert downward pressure
on a ball already on the ground using one or both hands or arms or the upper
front of the body (from the neck to the waistline).
The IBM TryTracker does not just track tries, however. It uses predictive
analytics to track three categories of data: keys to the game, momentum, and
key players. TryTracker uses over 8,000 measures of performance. Tradi-
tional rugby statistics on team and individual performance as well as live

31
32 Part One Organizations, Management, and the Networked Enterprise

text commentary complement the TryTracker data. The keys to the game
are determined ahead of a specific contest by analyzing a historical database
of past matchups between a pair. For example, in 2015 England’s key was
to average at least 3.2 meters per carry in the forwards; attempt an off load
from 10 percent of opposition tackles; and make more than 66 percent of total
line-breaks in the match. Fans can use their mobile devices to keep track of
how their favorite team is faring, concentrating on game elements that will
increase its winning chances. Key players for each team are selected after the
game by comparing a single score compiled using different criteria for each
position. Goal scoring is currently excluded so as not to overvalue kickers and
undervalue players who contribute to creating scoring opportunities.
Like the IBM SlamTracker used at the Grand Slam tennis tournaments,
the goal of TryTracker is to provide data visualization and real-time statis-
tics to draw in fans. To compete with more popular sports such as Premier
League football, the RFU hopes that enhanced communication will increase
fan engagement. In 2015, IBM TryTracker was an ever-present fixture of Eng-
landRugby.com’s extensive match coverage. As their understanding of game
mechanics and emotional investment in what their team needs to do in order
to prevail grows, casual fans will become dedicated fans who return again
and again. Beyond marketing strategy, the long-term potential of predictive
analysis is that it may provide tactical insights to players and coaches that will
improve match play and thus the overall product offered to fans.
In 2016 IBM has deployed the same predictive analytics technology to the
Australian New South Wales Waratahs Rugby team with an emphasis on pre-
dicting player injuries based on their general health, and performance data on
the field generated from GPS sensors that players wear.

Sources: IBM, “Building a Solid Foundation for Big Data Analytics,” IBM Systems Thought
Leadership Paper, 2016; IBM, “IBM Predictive Analytics Reduces Player Injury and Opti-
mises Team Performance for NSW Waratahs Rugby Team,” IBM.com, accessed November
14, 2016; IBM, “3 Ways Big Data and Analytics Will Change Sports,” by Preetam Kumar, IBM
Analytics, ibmbigdatahub.com, December 17, 2015; Simon Creasey, “Rugby Football Union
Uses IBM Predictive Analytics For Six Nations,” ComputerWeekly.com, 2016; “About Us,”
rfu.com, accessed December, 14, 2015; “TryTracker: Rugby Data Analysis,” Telegraph,
November 19, 2015; Oliver Pickup, “How Does TryTracker Work,” Telegraph, November 19,
2015; Simon Creasey, “Rugby Football Union Uses IBM Predictive Analytics for Six Nations,”
ComputerWeek, September 2015; “IBM Rugby Insight Summer 2015,” MSN.com/sports, Sep-
tember 3, 2015; “Live England vs. Scotland with IBM TryTracker,” www.englandrugby.
com, March 15, 2015; “IBM TryTracker Confirms Performance,” www.englandrugby.com/
ibmtrytracker/, November 29, 2014; IBM UK, “IBM TryTracker Rugby Insight: QBE Interna-
tionals 2014 England vs. Australia,” IBM Rugby Insight, November 27, 2014; Oliver Pickup,
“IBM TryTracker: How Does It Work?” Telegraph, October 31, 2013.

T he challenges facing the RFU demonstrate why information systems are so

essential today. The RFU is classified as a “Friendly Society,” somewhere
between a true company and a charity. It receives both government support
and corporate sponsorship money. But it must maximize revenues from ticket
sales, hospitality and catering, television rights, and its travel company in order
to support both grassroots and elite rugby in England.
 Chapter 1 Information Systems in Global Business Today 33

The chapter-opening diagram calls attention to important points raised by

this case and this chapter. The RFU entered into a strategic partnership with
IBM to educate and engage fans. Using the data collected by sports data com-
pany Opta and the analytics developed by IBM, it may also be able to improve
coaching and game performance as an additional way of cultivating custom-
ers. IBM is also helping the RFU to develop a customer relationship manage-
ment (CRM) system integrated with its Web site.
Here are some questions to think about: What role does technology play
in the RFU’s success as the administrative head of rugby union in England?
Assess the contributions which these systems make to the future of RFU.

1-1 How are information systems transforming

global business, and why are they so essential
for running and managing a business today?
It’s not business as usual in the global economy anymore. Information sys-
tems and technologies are transforming the global business environment. In
2015, global firms and governments spent about €3.4 trillion on information
systems hardware, software, and telecommunications equipment. In addition,
they spent another €544 billion on business and management consulting and
services—much of which involves redesigning firms’ business operations to
take advantage of these new technologies (Gartner, 2016; IDC 2016; Shumsky,
2016). In fact, most of the business value of IT investment derives from these
organizational, management, and cultural changes inside firms (Saunders and
Brynjolfsson, 2016). It is not simply the technology that is changing. Figure 1.1
shows that between 2005 and 2015, global investment in information technology
34 Part One Organizations, Management, and the Networked Enterprise

consisting of hardware, software, and communications equipment grew from

€2.43 trillion to €3.18 trillion and is expected to expand to €3.55 trillion by 2020.
While America and Europe account for an estimated 70 percent of this invest-
ment, 30 percent is occurring in Asia Pacific, Latin America, the Middle East
and North Africa, and Eastern Europe. (Accelerance, 2016; IDC, 2016).
As managers, most of you will work for firms that are intensively using
information systems and making large investments in information technol-
ogy. You will certainly want to know how to invest this money wisely. If you
make wise choices, your firm can outperform competitors. If you make poor
choices, you will be wasting valuable capital. This book is dedicated to help-
ing you make wise decisions about information technology and information
systems.

How Information Systems Are Transforming Business

You can see the results of this large-scale spending around you every day
by observing how people conduct business. Changes in technology and
new, innovative business models have transformed social life and busi-
ness practices. Some 2.8 billion people worldwide have smartphones (50
percent of the world’s population), and an estimated 1.26 billion use their
smartphones for Internet access. More than 1 billion people use tablet
computers, about 15 percent of the global population. In developing and
emerging countries, phones and tablets are the primary means of access to
the Internet (Pew Research, 2016; eMarketer, 2015). An estimated 2.34 bil-
lion people now use social networks, with Facebook accounting for 1.7 bil-
lion people alone. Messaging services like WhatsApp, Facebook Messenger,
and Twitter collectively have over 2 billion monthly users. Smartphones,

FIGURE 1. 1 INFORMATION TECHNOLOGY CAPITAL INVESTMENT

€4.00

€3.75
Investment (trllions)

€3.50

€3.25

€3.00

€2.75

€2.50
2020201920182017201620
Global investment in information technology has expanded by 30 percent in the period 2005 to 2015.
IT investment now accounts for an estimated 20 percent of all capital investment.
Source: World Economic Outlook, International Monetary Fund, October 2016; industry sources; author estimates.
 Chapter 1 Information Systems in Global Business Today 35

social networking, texting, e-mailing, and webinars have all become essen-
tial tools of business because that’s where your customers, suppliers, and
colleagues can be found (eMarketer, 2016a).
By June 2015, more than 150 million businesses worldwide had dot-com
Internet sites registered (Curtis, 2015). In 2016 1.62 billion Internet users will
purchase online, generating $1.9 billion in sales. Half of these sales will be
from mobile devices. While still only 8 percent of total retail global sales,
online commerce is growing at 6 percent annually, three times the growth
of traditional offline retail (eMarketer, 2016a). In 2015, FedEx moved about
11.5 million packages daily in 220 countries and territories around the world,
mostly overnight, and the United Parcel Service (UPS) moved more than
18 million packages daily. Businesses are using information technology to
sense and respond to rapidly changing customer demand, reduce inventories
to the lowest possible levels, and achieve higher levels of operational effi-
ciency. Supply chains have become more fast-paced, with companies of all
sizes depending on just-in-time inventory to reduce their overhead costs and
get to market faster.
In comparison with the 2.7 billion people who read a print newspaper,
online newspapers are read by one billion people, growing at 10 percent annu-
ally, far faster than print newspapers (WPT, 2016; Conaghan, 2015). An esti-
mated 1.7 billion people watch videos and feature films online, 100 million
post to a blog everyday, and 250 million read a blog, creating an explosion of
new writers and new forms of customer feedback that did not exist five years
ago. Social networking site Facebook attracted more than 1.7 billion monthly
visitors worldwide. Nearly all of the Fortune 2000 global firms now have Face-
book pages, Twitter accounts, and Tumblr sites.
Global e-commerce and Internet advertising continue to expand. Google’s
online ad revenues surpassed €80 billion in 2016, and Internet advertising con-
tinues to grow at more than 20 percent a year, reaching more than €194 billion
in revenues in 2016 (eMarketer, 2016c). That’s about one-third of all advertising
in the world.
These changes in information technology and systems, consumer behavior,
and commerce have spurred the annual growth of digital information to over
5 exabytes every few days, roughly equivalent to all the libraries in existence
(Pappas, 2016). A recent study concluded that the value of information flow-
ing between countries has grown 45 times since 2005, and the value of this
information now exceeds the value of goods and finance exchanged (McKen-
zie, 2016).

What’s New in Management Information Systems

Plenty. In fact, there’s a whole new world of doing business using new tech-
nologies for managing and organizing. What makes the MIS field the most
exciting area of study in schools of business is the continuous change in tech-
nology, management, and business processes. Five changes are of paramount
importance.

IT Innovations. A continuing stream of information technology innovations is

transforming the traditional business world. Examples include the emergence
of cloud computing, the growth of a mobile digital business platform based on
smartphones and tablet computers, big data, business analytics, and the use
of social networks by managers to achieve business objectives. Most of these
36 Part One Organizations, Management, and the Networked Enterprise

changes have occurred in the past few years. These innovations are enabling
entrepreneurs and innovative traditional firms to create new products and
services, develop new business models, and transform the day-to-day conduct
of business. In the process, some old businesses, even industries, are being
destroyed while new businesses are springing up.

New Business Models. For instance, the emergence of online video ser-
vices like Netflix for streaming, Apple iTunes, Amazon, and many others for
downloading video has forever changed how premium video is distributed
and even created. Netflix in 2016 attracted more than 75 million subscribers
worldwide to what it calls the “Internet TV” revolution. Netflix has moved
into premium TV show production with 30 original shows such as House of
Cards and Orange Is the New Black, challenging cable and broadcast produc-
ers of TV shows, and potentially disrupting cable network dominance of TV
show production. Apple’s iTunes now accounts for 67 percent of movie and
TV show downloads and has struck deals with major Hollywood studios for
recent movies and TV shows. A growing trickle of viewers are unplugging
from cable and using only the Internet for entertainment.

E-commerce Expanding. E-commerce generated about $600 billion in

revenues in 2016 and is estimated to grow to nearly $900 billion by 2020.
E-commerce is changing how firms design, produce, and deliver their prod-
ucts and services. E-commerce has reinvented itself again, disrupting the
traditional marketing and advertising industry and putting major media and
content firms in jeopardy. Facebook and other social networking sites such
as YouTube, Twitter, and Tumblr along with Netflix, Apple Beats music ser-
vice, and many other media firms exemplify the new face of e-commerce in
the twenty-first century. They sell services. When we think of e-commerce,
we tend to think of selling physical products. While this iconic vision of
e-commerce is still very powerful and the fastest-growing form of retail in
the United States, growing up alongside is a whole new value stream based
on selling services, not goods. It’s a services model of e-commerce. Growth
in social commerce is spurred by powerful growth of the mobile platform:
80 percent of Facebook’s users access the service from mobile phones and
tablets. Information systems and technologies are the foundation of this new
services-based e-commerce. Mobile e-commerce hit $130 billion in 2016 and
is growing at more than 30 percent a year.

Management Changes. The management of business firms has changed: With

new mobile smartphones, high-speed wireless Wi-Fi networks, and tablets,
remote salespeople on the road are only seconds away from their managers’
questions and oversight. Business is going mobile, along with consumers. Man-
agers on the move are in direct, continuous contact with their employees. The
growth of enterprise-wide information systems with extraordinarily rich data
means that managers no longer operate in a fog of confusion but instead have
online, nearly instant access to the really important information they need for
accurate and timely decisions. In addition to their public uses on the web, wikis
and blogs are becoming important corporate tools for communication, collabo-
ration, and information sharing.

Changes in Firms and Organizations. Compared to industrial organizations

of the previous century, new fast-growing twenty-first-century business firms
put less emphasis on hierarchy and structure and more emphasis on employees
 Chapter 1 Information Systems in Global Business Today 37

INTERACTIVE SESSION: MANAGEMENT

The Mobile Pocket Office
Can you run your company out of your pocket? members go outside to the customer's vehicle and
Perhaps not entirely, but there are many business enter the repair order on an iPad on the spot.
functions today that can be performed using an SKF is a global engineering company headquar-
iPhone, iPad, or Android mobile handheld device. tered in Gothenburg, Sweden, with 140 manufac-
The smartphone has been called the “Swiss Army turing sites in 32 countries and 48,500 employees
knife of the digital age.” A flick of the finger turns it worldwide. SKF produces bearings, seals, lubrication
into a web browser, a telephone, a camera, a music systems, and services used in more than 40 indus-
or video player, an e-mail and messaging machine, tries, including mining, transportation, and manu-
and, increasingly, a gateway into corporate systems. facturing. SKF has developed more than 30 custom
New software applications for document sharing, col- iPhone and iPad applications for streamlining work-
laboration, sales, order processing, inventory man- flows and accessing critical corporate data from any-
agement, and production monitoring make these where in the world.
devices even more versatile business tools. Mobile For example, a virtual reality app uses the iPhone
pocket offices that fit into a purse or coat pocket are or iPad camera to identify a factory machine and
helping to run companies large and small. produce a 3-D overlay of the SKF parts it contains.
Sonic Automotive is one of the largest automo- A sensor-driven app called Shaft Align is used by SKF
tive retailers in the United States with more than service teams and customers in the field. Shaft Align
100 dealerships in 14 states. Every year Sonic sells connects via wireless Bluetooth sensors to a piece of
250,000 new and used cars from approximately 25 machinery such as a motor-driven fan to ensure that
different automotive brands, and it also sells auto the drive shaft is running in proper alignment. If not,
parts and maintenance, warranty, collision, and vehi- the app generates step-by-step instructions and a 3-D
cle financing services. Sonic Automotive managers rendering to show how to manually align the motor.
and employees do much of their work on the iPhone Then it checks the work and produces a report.
and iPad. A mobile app called MOST enables factory opera-
Sonic developed several custom iPhone and iPad tors to monitor some SKF factory production lines.
applications to speed up sales and service. Virtual MOST links to the back-end systems running the
Lot, a dealer inventory app, lets sales associates machinery and provides operators with key pieces of
quickly search for vehicles held in inventory by all data. Operators using this mobile app are able to use
Sonic dealerships. They have immediate access to secure instant messaging to communicate with man-
vehicle information, pricing, trade-in values, interest agers and each other, update maintenance logs, and
rates, special promotions, financing, and what com- track products in real time as they move through the
petitors are charging for identical vehicles. The asso- factory line.
ciates can quickly find the best selection for each SKF's Shelf mobile app allows sales engineers and
customer and often offer far more choices than the customers to access on demand more than 5,000
competition. Dealers are not limited to selling only pieces of product literature, catalogs, product speci-
their own inventory. fications, and interactive marketing materials. Sales
A mobile app called the Sonic Inventory Manage- teams can use Shelf to create custom “shelves” to
ment System (SIMS) has speeded up and simplified organize, annotate, and share materials with custom-
trade-in appraisals and pricing. Sonic staff use their ers right from their iPhones or iPads. The iPhone,
iPhones or iPads to take photos of a car, input the iPad, and Shelf app save company sales engineers
vehicle identification number (VIN) and mileage, as much as 25 minutes per day on processes and
and note any issues. The data are transmitted to cor- paperwork, freeing them up to spend more time
porate headquarters, which can quickly appraise the in the field supporting customers. This increase in
car. A Service Pad app simplifies the steps in repair productivity is equivalent to putting 200 more sales
and warranty work. In the past, customers with cars engineers in the field.
requiring repairs had to go inside the dealership and SKF auditors perform about 60 audits per year,
sit at a desk with a Sonic staff member who wrote and each audit used to take more than a month to
up the repair order by hand. Now the Sonic staff complete. With the SKF Data Collect app, auditors
38 Part One Organizations, Management, and the Networked Enterprise

are able to use their iPads to collect data and present Sources: “Sonic Automotive: Driving Growth with iPhone and iPad”
and “Driving Innovation in the Factory and in the Field with iOS,”
customers with detailed reports instantly.
iPhone in Business, www.apple.com, accessed March 31, 2016;
SKF Seals offers specifications and information www.skf.com, accessed March 31, 2016; www.sonicautomotive.com,
about SKF's machined and injection-molded seals accessed March 31, 2016; and “Why the Mobile Pocket Office Is Good
and plastic parts, while the Seal Select app helps For Business,” ITBusinesEdge.com, accessed March 6, 2015.

users select seals and accessories using several dif-

ferent input parameters to find the right solution for
their needs.

CASE STUDY QUESTIONS

1. What kinds of applications are described here? 4. One company deploying iPhones has said, “The
What business functions do they support? How do iPhone is not a game changer, it's an industry
they improve operational efficiency and decision changer. It changes the way that you can interact
making? with your customers” and “with your suppliers.”
2. Identify the problems that businesses in this case Discuss the implications of this statement.
study solved by using mobile digital devices.
3. What kinds of businesses are most likely to benefit
from equipping their employees with mobile digi-
tal devices such as iPhones and iPads?

taking on multiple roles and tasks and collaborating with others on a team.
They put greater emphasis on competency and skills rather than position in the
hierarchy. They emphasize higher speed and more accurate decision making
based on data and analysis. They are more aware of changes in technology, con-
sumer attitudes, and culture. They use social media to enter into conversations
with consumers and demonstrate a greater willingness to listen to consumers,
in part because they have no choice. They show better understanding of the
importance of information technology in creating and managing business firms
and other organizations. To the extent organizations and business firms demon-
strate these characteristics, they are twenty-first-century digital firms.

Whether it’s attending an

online meeting, checking
orders, working with files
iPhone and iPad Applications and documents, or
for Business obtaining business intelli-
gence, Apple's iPhone
1. Salesforce1 and iPad offer unlimited
2. Cisco WebEx Meetings possibilities for business
3. SAP Business One users. A stunning multi-
4. iWork touch display, full Internet
5. Evernote browsing, and capabilities
6. Adobe Acrobat Reader for messaging, video and
7. Oracle Business Intelli- audio transmission, and
gence Mobile document management
8. Dropbox make each an all-purpose
platform for mobile
computing.
© STANCA SANDA/Alamy Stock Photo