CHAPTER 8 INTERORGANIZATIONAL AND GLOBAL INFORMATION SYSTEMS

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CHAPTER 8INTERORGANIZATIONALAND
GLOBALINFORMATION SYSTEMS
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Learning Objectives

• Describe the role, benefits and structure of
  interorganizational systems
• Distinguish between interorganizational and
  global information systems
• Describe EDI and compare a traditional EDI with
  an Internet-base EDI
• Define extranets and explain their
  infrastructure, types and benefits
• Describe planning and other issues related to
  interorganizational and global systems

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Chapter Overview
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Case The Harper Group Collaborates With
Honda in International Trade

• The Problem

• highly competitive environment where hundreds of
  freight moving companies in the United States and
  abroad operate
• large amounts of information flow among several
  trading partners and support services

HOW TO EFFECTIVELY MANAGE THE INFORMATION? HOW TO
DO IT AT COMPETITIVE PRICES?
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Case (continued)

• The Solution

• Use information technology that links the
  computers of involved organizations, resulting in
  a paperless flow of routine information

• The Results

• allows cheaper, faster, and more reliable
  information to flow among all business partners
• supports Harpers global business
• maintains the companys position as the second
  largest trading facilitator in the United States
• operates the company with thin profit margins
• adopted an intranet for improving the internal
  operations in 1997

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Case (continued)

• What have we learned from this case??

• Global information system - EDI
• enables efficient flow of large amounts of
  transactional information among several business
  partners around the globe
• keeps current customers
• attracts new customers

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Interorganizational Information Systems (IOS)

• Objective
• efficient processing of transactions, such as
  transmitting orders, bills, and payments
• Major Characteristics
• determine customer-supplier relationship in
  advance
• built around privately or publicly accessible
  networks
• employ value-added networks (VANs) when use
  telecommunications companies for communication
• use the Internet with either an electronic data
  interchange (EDI), with extranets, or with
  EDI/Internet

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IOS (continued )

• IOS Response to Business Pressures
• reduce the costs of routine business transactions
• improve the quality of the information flow by
  reducing or eliminating errors
• compress cycle time in the fulfilment of business
  transactions, regardless of geographical distance
• eliminate paper processing and its associated
  inefficiencies and costs
• make the transfer and processing of information
  easy for users

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IOS (continued )

• Types of Interorganizational Systems
• Global systems - information systems connecting
  two or more companies in two or more countries
• Electronic data interchange (EDI) - the
  electronic movement of standard business
  documents between business partners
• Electronic funds transfer (EFT) - the transfer of
  money using telecommunication networks
• Extranets - link the intranets of business
  partners
• Shared databases - databases that can be shared
  by trading partners, often used to reduce time in
  communicating information between parties as well
  as arranging cooperative activities
• Integrated messaging - delivery of electronic
  mail and fax documents through a single
  transmission system that can combine electronic
  mail and electronic business documents

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Global Information System

• Global Information System
• connect companies located in two or more
  countries
• Who Uses Global Systems?
• Multinational Companies
• companies that operate in several countries
• International Companies
• companies that do business with other companies
  in different countries
• Virtual Global Corporations
• joint ventures whose partners are form different
  countries

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Benefits ofGlobal Information System

• Effective communication at a reasonable cost
• Effective collaboration with groupware software,
  Group DSS, extranets, and teleconferencing
  devices
• Organizations access each others databases and
  frequently work on the same projects while their
  members are in different locations

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Issues in ElectronicGlobal Information System

• Cultural Differences
• many different aspects ranging from legal and
  ethical issues to what information is considered
  offensive
• localization - use different names, colors,
  sizes, and packaging for overseas products and
  services
• Economic and Legal Differences
• differ considerably in their economical and legal
  environments
• Transfer of Data Across International Borders
• cross-border data transfer - several countries
  impose strict laws to control the flow of
  corporate data across their borders to protect
  the privacy of their citizens

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Global Electronic Commerce

• Access to larger markets, the possibility of
  saving on taxes, and the flexibility to employ
  workers and manufacture products anywhere using a
  world telecommuting workforce
• Benefits
• the Internet and the extranets resulted in an
  inexpensive and flexible infrastructure
• can do business anytime and from anywhere
• can do it rapidly at a reasonable cost

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Global Electronic Commerce (continued )

• Barriers
• Legal barriers
• jurisdiction issues, export/import regulations
  and compliance contacts
• Intellectual property (enforcement of ), privacy,
  and content issues
• Cryptography (encryption), security,
  authentication procedures, and notarized
  documents
• Cross-border transactions, as described earlier
• Consumer protection (e.g. liability for wrong
  transactions)
• Market access barriers
• building a telecommunications infrastructure
  capable of accommodating all users and all types
  of data is a necessity

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Global Electronic Commerce (continued )

• Barriers
• Financial barriers
• including taxation, customs and electronic
  payment systems, different currencies
• Others
• need to match buyers and sellers across
  international borders and establish trust between
  them
• existence of cultural diversity
• lack of sufficient international agreements
• deciding on the collection of sales and other
  taxes
• compliance with diversified export/import
  regulations and fees
• need for language translation (the Web page,
  transactions)

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Electronic Data Interchange (EDI)

• Elements of EDI
• Data formatting standards
• to shorten the length of the messages, reducing
  long distance telephone charges and eliminating
  data entry errors
• EDI translators
• conversion of data into standard format
• Private line (VANs) versus the Internet
• VANs-based EDI - expensive, high security and
  capacity, incompatible hardware and software of
  the telecommunication companies
• Internet-based EDI - less security and capacity
  as compare to VAN-based EDI, but cheaper
  requires coordination and integration with the
  companys back-end processing systems

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Order-delivery CycleWith and Without EDI
Without EDI
With EDI
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Benefits of EDI
Benefits
How the Benefit is Achieved?
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Benefits of EDI (continued )
Benefits
How to Benefit is Achieved?
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EDI Applications

• Manufacturing - to communicate with suppliers,
  customers, and other business partners
• Retailing - to streamline deliveries of goods
  from the suppliers to the stores and reduce
  inventories
• Global trade - to shorten the elapse time by 70
  or more and to reduce administrative expenses by
  30
• Service Industry - used EDI and its companion,
  electronic funds transfer, for a long time
• Large trading networks - provide efficient and
  effective trading environments (e.g. TradeNet)

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Electronic Funds Transfer (EFT)

• transfer of money to and from financial
  institutions using telecommunication networks
• used as an IOS, a global system, and a
  communication system among organizations and to
  individuals
• fast - reduces delays associated with sending
  hard-copy documents and it eliminates returned
  checks
• security issues - how can a business ensure that
  a hacker is not bilking corporate accounts by
  electronically transferring funds to his account,
  or that competitive snoops are not gaining a
  complete picture of corporate financial assets?

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TradeNet (Singapore)
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Extranet

• A network that links business partners to one
  another over the Internet by providing access to
  certain areas of each others corporate intranets

• Components
• Servers
• TCP/IP protocols
• E-mail
• Web browsers as the Internet

• Structure

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Types of Extranet

• A company and its dealers, customers, or
  suppliers
• centered around one company
• An industrys extranet (Trading Network)
• teamed up and created by the major players in an
  industry (e.g. the automotive industry)
• Joint ventures and other business partnerships
• used as a vehicle for communications and
  collaboration among several companies partnering
  in a joint venture

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Benefits of Extranets (continues )

• Fewer help-desk employees are needed
• Improved quality
• Lower communications and travel costs
• Lower administrative and other overhead costs
• Faster processes and information flow
• Reductions in paperwork and delivery of accurate
  information in a timely manner
• Improved order entry and customer service
• Better communication

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Implementing Interorganizational Information
System

• Security
• protection mechanisms firewalls and VPNs
• Ethical and Societal Issues
• takes a great risk for its trade secrets, the
  privacy of the employees and the controlling of
  some processes
• Planning
• complex IT planning when involving several
  organizations
• several IT planning teams should be created and
  supported by e-mail, extranets,and groupware

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Whats in IT for Me?

• For Accounting
• procedures in multinational corporations and
  issues in taxation include data collection and
  transfer and auditing
• For Finance
• EDI and EFT have been the pioneering systems for
  over 20 years now global financial services and
  trading
• For Human Resource Management
• recruitment, HR development and training in a
  local and multinational corporations can be
  improved by using IT

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Whats in IT for Me?(continued )

• For Marketing
• marketing and sales in global markets can be
  enhanced by appropriate information systems
• For Production/Operations Management
• the logistics systems can be greatly improved by
  using IOSs
• For Non-Business
• everyone will encounter interorganizational
  systems in almost any organization, public or
  private