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 INTRODUCTION TO BUSINESS INFORMATION SYSTEMS
Pearson is the world’s leading learning company. Our education business combines 150 years of experience in
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INTRODUCTION TO BUSINESS
Pearson Custom works for educators. We partner with you to build course-specific materials, designed to
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process of selecting or creating the custom resources to meet your goals.
INFORMATION SYSTEMS
To get in touch, email custom@pearson.com.au.
Swinburne University
Compiled by Catherine Moore and Nelson Vargas

Swinburne University

A CUSTOM EDITION

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 CONTENTS vii

What Are the Advantages and Disadvantages of Outsourcing? 166

Outsourcing Information Systems 167
International Outsourcing 168
What Are Popular Outsourcing Alternatives? 168
What Are the Risks of Outsourcing? 169
(B) Outsourcing 173
Cloud Computing 173
What Is Cloud Computing? 174
Managing the Cloud 177
Advanced Cloud Applications 180
Green Computing 185

Chapter 9 Business Intelligence 187

Introduction 187
(A) Data, Information and Databases 187
What Is the Purpose of a Database? 187
What Is a Database? 188
Relationships Between Rows? 189
What Is a Database Management System? 192
Creating the Database and its Structures 192
Processing the Database 193
Administering the Database 193
How Do Database Applications Make Databases More Useful? 194
Traditional Forms, Queries, Reports and Applications 195
Thin-Client Forms, Queries, Reports and Applications 196
Multi-user Processing 199
(B) Business Intelligence for Decision-Making 202
Relational Database Design 202
Associations 203
Entity-Relationship Diagramming 205
The Relational Model 205
Normalization 206

Chapter 10 Global Issues—Ethics, Privacy and Security 208

Introduction 208
(A) Ethics and Privacy 208
IS Ethics 208
Information Privacy 208
Intellectual Property 213
The Need for a Code of Ethical Conduct 215
(B) Security 218
What Is Your Role in IS Security? 218
Strong Passwords 218
Password Etiquette 219
What Is the Goal of Information Systems Security? 219
The IT/IS Security Threat/Loss Scenario 219
What Are the Sources of Threats? 220
What Types of Security Loss Exist? 220
Goal of Information Systems Security 223
How Big Is the Computer Security Problem? 224
How Should You Respond to Security Threats? 226

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viii CONTENTS

How Should Organisations Respond to Security Threats? 227

How Can Technical Safeguards Protect Against Security Threats? 228
Identification and Authentication 229
Encryption 229
Firewalls 231
Malware Protection 231
Design for Secure Applications 232
How Can Data Safeguards Protect Against Security Threats? 233
How Can Human Safeguards Protect Against Security Threats? 233
Human Safeguards for Employees 233
Account Administration 235
Security Monitoring 237
How Should Organisations Respond to Security Incidents? 239

Chapter 11 Strategic Initiatives 242

Introduction 242
(A) Supply Chain Management and Customer Relationship Management 242
Preview 242
Supply Chain Management 244
What Is a Supply Chain? 244
Business-to-Business Electronic Commerce: Exchanging Data in Supply
Networks 245
Managing Complex Supply Networks 247
Benefits of Effectively Managing Supply Chains 247
Optimizing the Supply Chain Through Supply Chain Management 249
Developing an SCM Strategy 251
Supply Chain Planning 252
Supply Chain Execution 253
Supply Chain Visibility and Analytics 256
Customer Relationship Management 256
Developing a CRM Strategy 260
Architecture of a CRM System 261
Ethical Concerns with CRM 268
(B) Enterprise Resource Planning 270
How Do Information Systems Vary by Scope? 270
Personal Information Systems 271
Workgroup Information Systems 271
Enterprise Information Systems 271
Inter-Enterprise Information Systems 272
How Do Enterprise Systems Solve the Problems of
Departmental Silos? 272
How Do Information Silos Arise? 272
What Are the Problems with Information Silos? 272
How Do Organisations Solve the Problems of Information Silos? 274
An Enterprise System for Patient Discharge 275
Enterprise Resource Planning (ERP) 275
Enterprise Application Integration (EAI) 276
What Are the Challenges when Implementing and Upgrading
Enterprise Systems? 277
How Do Inter-Enterprise Information Systems Solve the Problems of
Enterprise Silos? 278

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 CONTENTS ix

Appendix Composing 281

Think as a Writer 281
Think About the Process of Communication 281
Think About Your Audience 281
Think About Your Credibility 281
Read and View with a Critical Eye 282
Become a Critical Reader 282
Become a Critical Viewer 282
Plan Your Writing 283
Establish Goals and Find a Topic 283
Write a Working Thesis 284
Write a Draft 284
Determine Your Organisation 284
Compose a Draft 285
Compose Paragraphs 285
Focus Your Paragraphs 285
Write Effective Beginning and Ending Paragraphs 285
Revise, Edit and Proofread 286
Evaluate Your Draft 286
Learn Strategies for Rewriting 286
Edit for Specific Goals 287
Proofread Carefully 287
Write in Academic Genres 287
Write an Observation 287
Write a Case Study 288
Write a Lab Report 290
Write an Essay Exam 291

Index 292

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Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017 – 9781488618833 – Valacich/Introduction to Business Information Systems
Welcome to Introduction to Business
Information Systems!
1
INTRODUCTION
Why study an introduction to business information systems anyway? Organisational capability and
capacity to survive in a global competitive environment have become paramount—being success-
ful within an industry means we have to be cognizant of business tools, theoretical frameworks and
supporting information systems. Sounds boring? Actually, no. Look around you in your lecture
theatre: all of you intend to work in business of some type after you graduate. That’s a lot of
people, just here. As future professionals, you will be expected to know how to conceptually use
tools and systems to achieve complex outcomes. This skill is part of your higher education. Not
all people have this opportunity. In this study you will be given time to develop and/or enhance
detailed understandings of the broad application of information systems within organisations.

A GAP IN UNDERSTANDING BUSINESS INFORMATION

SYSTEMS
Managers and business owners must acknowledge that their appreciation of technological capabili-
ties over time can become ‘blunt’, resulting simply from a lack of understanding of how future and
contemporary information systems can be used strategically for competitive advantage within a
market place. An analogy: if the pencil is blunt, you most likely need to sharpen it.

FIGURE 1.1

1
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2 CHAPTER 1 • WELCOME TO INTRODUCTION TO BUSINESS INFORMATION SYSTEMS!

With the fast-moving pace of technological developments and the consequent new and
constant upgrading of software applications, apps, cloud computing and the like, businesses
often find themselves lagging behind these technology trends. This is okay, and not really that
big a problem in the short term. However, businesses do need to take stock of their technology
and information systems alignment for long term viability. For example, with the current roll-out
of the national broadband network (NBN), there is no point having ‘Puffing Billy’ running on
a fast train track: the old steam train can only go as fast as it can go, regardless of the track. In
other words, systems and information systems only run as efficiently as the business processes
they support. If a business process consists of noisy work and therefore is not overly effective in
the long term, plugging it into the NBN will not change it per se.
Traditionally, business people and technology people have struggled to align themselves in
working towards a unified strategy (i.e. one strategy of which a shared common understanding is
achieved across an organisation). This, looking in from the outside, appears strange, particularly
when we would like to believe people working for a company are on the same page. This is often
not the case. In addition, there can be competing priorities within a company itself. For example,
how much would a company put towards its annual budget to improve its information system
capability? Many companies would not be able to answer the question readily, nor could they
answer the question from a strategic viewpoint. To further this line of inquiry: how many compa-
nies align their internal information systems across their own functional areas?
What do we mean by functional areas? Examples include departments in: marketing, sales,
accounts, operations, and human resources. It is very usual to find within the one company that
several of its functional areas have developed separate information systems, each departmen-
tal information system having evolved from particular information and reporting needs of each
respective functional area. It is highly likely to find several disparate spreadsheets across func-
tional areas, each containing similar information such as customer details. The problem here is
each has been developed independently and often without transparency across the organisation.
This is not effective practice and leads to data integrity problems.

WHAT DO WE MEAN BY DATA INTEGRITY PROBLEMS?

If business decision-making is based on the data and information a company holds, then the
decisions made are only as good as the data and information itself. It is not hard to find problems
within an organisation’s data and information repositories, particularly if its data is spread out
over multiple functional areas. Why? Because what is often observed and found by systems
analysts is that similar information is recorded in several places, across several different files
and locations within the one company. A simple example of a data integrity problem is when
a customer updates his or her details with a company that has multiple departments operating
their own information systems as described above. How many times does the task of updating
a customer’s details have to happen across the various functional areas? Once, or many times,
and, if many times, who knows how many times? Is this a major concern? Perhaps not for one
customer’s details, but what if for many hundreds or thousands of customers? Would a scenario
such as this one affect a company’s bottom line? What about other information captured in the
daily course of doing business? What we begin to see are similar systemic problems with data
across an organisation, building to a head that in all likelihood will cause problems in report-
ing and miss-inform executive decision-making. For example, it is very difficult as a manager
steering the organisation with the goal of remaining competitive when you can’t rely on or ‘trust’
your company’s reporting.

YOUR SKILLS AND LITERACIES—ALIGNING TO A

PROFESSIONAL OUTCOME?
One day you will be working for yourself or for a company. Either way, you will need to under-
stand when and how your business tools require sharpening. There is no point giving way to a
technological fad or emerging trend when you haven’t considered the impact on your business
venture. The impact needs to fit squarely in alignment with business goals (i.e. reaching
objectives and benefiting from them). Technology is what ‘systems’ run on. Therefore, some
familiarity with technology components is required, but the main focus of this study is to gain an

Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017 – 9781488618833 – Valacich/Introduction to Business Information Systems
 CHAPTER 1 • WELCOME TO INTRODUCTION TO BUSINESS INFORMATION SYSTEMS! 3

FIGURE 1.2

appreciation for the information systems supporting people in their day-to-day business opera-
tions and management of core activities, through to strategic decision-making by executives.
Business has leap-frogged in recent years from a primarily static desk-based operation to
one of a mobile, any place, any time proposition for both company and workers.
Conceptualising, or being creative about how business processes might be achieved more
effectively, as opposed to how they are done, is another of the outcomes of your study in this
unit. For example, businesses can often become very efficient at performing a systemised task
many thousands of times; however, the question needs to be asked: how effective is the outcome
of all this busy work for the business? Is the task merely ‘noisy work’ that doesn’t overly benefit
the business or their clients?

WHAT DO WE MEAN BY INFORMATION SYSTEMS?

Information systems, in our context, means focusing study on the importance of data, informa-
tion, knowledge, and business intelligence capabilities and, most importantly, how these are
used and shared to create a competitive advantage for business while avoiding busy and noisy
work, and being able to concentrate resource and system development into reaching new markets
and new product opportunities.
The idea and understanding of competitive advantage within business contexts has taken on
a higher relevance, often morphing from competition in the next suburb to competition with a
previously unknown internationally based company—consequence of the advent of the Internet.
This is particularly true for companies with an immersion of business practices that are heavily
reliant on technologies supporting business capabilities such as e-commerce, e-business and,
more recently, m-commerce.

Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017 – 9781488618833 – Valacich/Introduction to Business Information Systems
4 CHAPTER 1 • WELCOME TO INTRODUCTION TO BUSINESS INFORMATION SYSTEMS!

A system, therefore, is a means of achieving ‘something’. A system is how you might go

about performing a set of tasks in order to achieve a goal—a desired outcome based on your
tasks. For example, if I was setting out to write a paper, first I would consider the topic, then
research the topic, and develop and hone my response (what excited me, what surprised me,
what I either agreed or disagreed with and, importantly, why). Then I would write a conclusion.
In effect that list of tasks forms my basic ‘system’ for writing a paper. However, if we move into
business-type applications, the list of activities might not be as easy to identify without having
an understanding of information systems too. For example, if I wanted to sell online, what
‘system’ or set of activities would I need to perform, and perform effectively, to actually sell
and retain my customers? As part of this system, I would want to make a profit so, again, what
system/s would I need? How do I know which is best for my goal of building a loyal customer
base? Apart from the physical system of selling, what information needs to pass in and around
the associated tasks? For example, how do I know we have products in stock to sell? How would
the customer know we had product in stock? Answer: Information systems!

WHAT DOES AN INFORMATION SYSTEM LOOK LIKE?

An information system can take many forms. The basics however include people, processes, and
technologies. A system, or rather an information system, provides a capability of capturing data,
storing, manipulating, aggregating, reporting (i.e. generating information for the business) and
contributing to the development of business intelligence capabilities. Quite often we see spread-
sheets developed to not only capture data, but to manipulate and provide general reporting and
visual aids such as charts and graphs. These are developed in part to assist managers and execu-
tives in their decision-making requirements.

FIGURE 1.3

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 CHAPTER 1 • WELCOME TO INTRODUCTION TO BUSINESS INFORMATION SYSTEMS! 5

We often hear that knowledge is power, and that we live in the knowledge/information age.
Yes, we do. A consequence of the information age is the mandatory nature of people and busi-
nesses having to interface with technologies such as mobile devices, computers and the like. In
this context, challenges presenting to businesses include deciding which technology, when to
use a technology and when not to.

FIGURE 1.4

Advancements in technological capabilities are happening every couple of months. If a

business is considering an innovative move in how its information systems are supporting its
business or value chain activities (e.g. logistics, sales, and manufacturing), which tools should
it use? And, critically, how do (or will) these tools support business information requirements?

ARE YOU READY TO BE DESIGNERS OF THE NEXT

GENERATION OF INFORMATION SYSTEMS?
Being creative and being able to conceptualise innovative use of technology tools for infor-
mation systems development will be part of the next wave of generating sustained competitive
advantage for businesses. During the course of this study you will be familiarised with several
real-world examples, illustrating innovative use of powerful technology and information systems
(such as supply chain management information systems, customer relationship information
systems, and enterprise resource planning information systems).
What’s next? Based on the ever-expanding capabilities of technologies, and the clear and
consistent move to cloud-based technologies, we are seeing many services once supported by
departments within companies being outsourced; for example, software and servers.

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6 CHAPTER 1 • WELCOME TO INTRODUCTION TO BUSINESS INFORMATION SYSTEMS!

As you study these areas, consider the impact on not only large corporate companies, but
also small to medium enterprise.
Remember, as a business professional you are flying blind if you are not at least familiar
with concepts, terms, capacities and capabilities/affordances of information systems.

UNDERSTANDING YOUR STUDY WEEK …

Each Week: What’s next?
(six hours of independent study time—aka homework):
After your weekly lecture, tutorial/lab session you should:
■ Read back through the notes you took during the lecture. As you do, can you see any
connections between the lecture and the tutorial? Make further notes for yourself and
write questions if ideas and connections seem unclear or unusual, or even jot down new
ideas as they form in your mind. Become aware of your surroundings (i.e. as you go about
your daily tasks and routines, what information systems are likely to be operating in the
background supporting the activities you want to achieve? They are often now ubiquitous,
but are there nonetheless).
■ Are you able to see any connection between the learning objectives provided for each week
and the content from both the lecture and tutorial? If you can see connections, take notes
about this (i.e. what are the connections? Can you identify examples in your own day-to-
day activities?). If you cannot see connections, take notes about this too and ask yourself,
regardless of your answer, ‘Why?’ Remember, there is no right or wrong answer here, only
the pursuit of clarity and ultimately understanding. Can you state in two or three sentences
your reflection on each week’s learning content? Be prepared to discuss your reflections
(conclusions) in class or with your lecturer or tutor.
■ Feel free to bring your developing notes and questions along to each week’s tutorial for
further class discussion.
■ Prepare for the next week’s lecture by reading your text chapter for that week. Again, while
you do this take notes as described above. Bring along any questions to your lecture or
tutorial and ask them!
■ Start thinking about business and innovation. What ideas start to come to mind for you?
What types of applications (not apps), scenarios, or futuristic (perhaps bordering on the
fantastic) business information systems development can you see?

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Competing in the Information Age 2
INTRODUCTION
We are citizens of the Information Age, and have been for some time. Businesses with the
capacity to advance and adapt their business methods with new technologies have presented
challenges to their competitors and their industries as a whole. Businesses with the capability
and capacity to embrace the powerful attributes of the Information Age aligned with core busi-
ness processes and goals have risen to the fore. Examples include Internet start-ups Google,
Amazon and Facebook, and Australian local business enterprise Kogan. These companies all
have in common a sophisticated conceptualisation of information systems and the power of
encapsulating technologies for the creation of competition in their respective market places.
This chapter explores two key topics:
1. information systems in business, and
2. competitive advantage in context of information systems.

(A) IS in Business
In this section we view information systems (IS) in the business world first by developing an
appreciation of the history of IS. This is important grounding, providing a perspective on which
to build and attach your current knowledge of IS and its capacity for enhancing business. A re-
curring theme throughout this study is that of globalisation, and organisations conducting busi-
ness in transnational and international contexts. This chapter will also consider the accessibility
of technologies and introduce to you the term ‘digital divide’. As you become familiar with this
term, consider the implications from a business perspective of developing opportunities and
markets in other countries—are there limitations? Running a business requires some knowl-
edge of the information technology ‘IT megatrends’ that influence, either directly or indirectly,
business processes now and into the future. Consider why this might be important for you to be
cognizant of.

Managing in the Digital World:

Apple

Apple is one of the largest, most profitable technology

companies in world. Each year, Apple sells hundreds of
millions of its popular iMacs, MacBooks, iPods, iPads,
and iPhones. Apple’s products—and the technology that
supports them—have influenced the way people behave
and interact. Think how waiting in line at the grocery store
or waiting for the next train is more productive, or at least
no longer tedious, when you get to check your inbox or
play a round of Angry Birds (Figure 2.1). Now remember
how insecure you felt the last time you left your smart-
phone sitting on your living room sofa. Whichever way you
look at it, the Apple craze is certainly here to stay, with
people camping out for days to get their hands on the lat-
est Apple gadgets. FIGURE 2.1
Over the course of its history, Apple had its ups Smartphones have taken the dreadfulness out of waiting.
and downs, with Steve Wozniak and Steve Jobs, the Source: Diego Cervo/Fotolia.

7
Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017 – 9781488618833 – Valacich/Introduction to Business Information Systems
8 CHAPTER 2 • COMPETING IN THE INFORMATION AGE

company’s founders, leaving Apple in the 1980s. After salient concerns are warranted regarding issues of privacy
Steve Jobs’ return to Apple in 1997, Apple has had an im- and information property—that is, who has access to what
pressive run of successful products, including the iMac, and how private information is being used. Certainly, there
the PowerBook, the iPod, and iTunes. Building on its suc- are potential risks associated with being an active partici-
cess with the iPod, Apple introduced the iPhone in 2007 pant in the digital world, so the next time you purchase an
and, shortly thereafter, the “App Store,” revolutionizing the app, think about how much you reveal about yourself with
way we purchase and use applications on mobile devices. the swipe of your finger.
The era of iPhones continued as successive updates to After reading this chapter, you will be able to answer the
the iPhone line were introduced year after year, each gar- following:
nering wider adoption than the last. In 2010, Apple intro- 1. Given the pace at which technology is converging
duced the revolutionary iPad, touted as a “third-category” (e.g., phones, music players, cameras, and so on), what
device between smartphones and laptop personal com- do you think is next in the post-PC era?
puters (PCs). Clearly, innovations fueled by Apple have
2. How have Apple’s products influenced the way we
changed the lives of many people all over the world, and
work and socialize?
have contributed to the move into the post-PC era.
Because of this wild success, Apple has managed to 3. What are the ethical concerns associated with storing
become not only a hardware vendor, but also a keeper of and analyzing user data?
people’s (often private) information. As it is being stored in Based on:
Apple Inc. (2014, May 2). In Wikipedia, The Free Encyclopedia. Retrieved
the cloud, personal information can easily be (ab)used to May 7, 2014, from http://en.wikipedia.org/w/index.php?title=Apple_Inc.&
predict future behavior, potential trends, music tastes, and oldid=606715547.
more. Connected as we may be to the rest of the world,

INFORMATION SYSTEMS TODAY

Today, computers—the core components of information systems (IS)—are ubiquitous: Be it
e-book readers, laptop computers, digital cameras, smartphones, etc., you name it; computers are
all around us, whether you see them or not. Companies such as FedEx and UPS use information
systems to route trucks and track packages. Retailers such as Walgreens and Walmart use informa-
tion systems for everything from optimizing supply chains to recording purchases and analyzing
customer tastes and preferences. Cities use information systems for adaptive traffic control systems
or variable speed limits. Cars use computers for everything from ignition control to airbags to dis-
tance control and park assist systems; in fact, U.S. automaker Ford now considers itself a technol-
ogy company, pioneering, for example, applications that allow accessing smartphone apps from an
in-dash touchscreen. Alternatively, just look around your school or place of work. At your school,
you register for classes online; use e-mail, Twitter, or Facebook to communicate with fellow stu-
dents and your instructors; access e-books from your library; and complete or submit assignments
on online learning platforms such as BlackBoard, Moodle, or Sakai. At work, you may use a PC
for e-mail and many other tasks. Your paychecks are probably generated by computer and automat-
ically deposited in your banking account via high-speed networks. Even in your spare time, infor-
mation technology is ubiquitous: You use social networking sites like Facebook to stay connected
with your friends and family, you watch videos on YouTube, you upload pictures taken with your
cell phone or digital camera to picture-sharing sites like Flickr, and you use your smartphone for
playing games, sending e-mails, or even reading books. Chances are that each year you see more
information technology than you did the year before, and this technology is a more fundamental
and important part of your social, learning, and work life than ever before.
Over the past decades, the advent of powerful, relatively inexpensive, easy-to-use computers
has had a major impact on business. When you stop and think about it, it is easy to see why infor-
mation technology is important. Increasing global competitiveness has forced companies to find
ways to be better and to do things less expensively. The answer for many firms continues to be to
use information systems to do things better, faster, and cheaper. Using global telecommunications
networks, companies can more easily integrate their operations to access new markets for their
products and services as well as access a large pool of talented labor in countries with lower wages.
Clearly, we are living in a digital world. Given the proliferation of new form factors, such as
tablets or smartphones, some even argue that we are living in the post-PC era, where wireless,
mobile devices allow for novel ways of interacting with information systems. In fact, already in

Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017 – 9781488618833 – Valacich/Introduction to Business Information Systems
 CHAPTER 2 • COMPETING IN THE INFORMATION AGE 9

FIGURE 2.2
Post-PC devices are increasingly
being used in various business
settings.
Source: Minerva Studio/Fotolia.

2011, the majority of Apple’s revenues came from “post-PC devices,” and in the last quarter of
2011, Apple sold more iPads than HP (traditionally one of the world’s leading PC makers) sold
PCs. With Apple’s introduction of the latest iPads in late 2013, this trend is likely to continue;
analysts estimate 285 million name-brand tablets worldwide. Forrester research predicts that
by 2016, one in every three U.S. adults will own a tablet, be it Apple’s iPad; a tablet manufac-
tured by electronics manufacturers such as Samsung, ASUS, or Motorola; or a tablet designed
by the online bookseller Amazon.com (Kindle) or Barnes & Noble (Nook). Initially created as
consumer devices, tablets have already made their way into various business settings, including
warehouses, showrooms, airplane cockpits, and hospitals (Figure 2.2).
Yet, desktop PCs and laptops are unlikely to go away. Rather, devices with newer form fac-
tors will work in tandem with older form factors to provide truly ubiquitous experiences, and the
changes we’ve seen so far will give rise to future developments, including wearable computers, aug-
mented reality devices, or surface computers (Epps, Gownder, Golvin, Bodine, & Corbett, 2011).
Changes in technology have enabled new ways of working and socializing; whereas tra-
ditionally, people were bound to a stationary PC to do essential tasks, they can now perform
such tasks from almost anywhere they have a cell phone signal. At the same time, workdays
traditionally had a clear beginning and a clear end—from when you power your computer on to
when you turn it off at night. Today, many tasks (especially more casual tasks such as reading or
sending e-mails) can be done at any time, often in small chunks in between other tasks, such as
when waiting in line at the supermarket cashier.
Computing has changed from an activity primarily focused on automating work to encompass
various social and casual activities. Devices such as smartphones or tablets, paired with mobile
broadband networks, allow for instant-on computing experiences, whenever and wherever; advances
in cloud computing (think Gmail, Office Online, or DropBox) allow for accessing e-mails, files,
notes, and the like from different devices, further enhancing portability and mobility.
In effect, we are in a virtuous cycle (or in a vicious cycle, considering the creep of work
life into people’s leisure time, and the increasing fixation on being permanently “on call”), where
changes in technology enable social changes, and social changes shape technological changes.
For example, communication, social networking, and online investing almost necessitate mobility
and connectivity, as people have grown accustomed to checking e-mails, posting status updates, or
checking on real-time stock quotes while on the go. In addition, the boundaries between work and
leisure time are blurring, so that employees increasingly demand devices that can support both,
often bringing their own devices into the workplace. In fact, a study conducted by research firm
Forrester in 2011 found that 54 percent of online consumers in the United States and 70 percent of
iPad owners believe that technology helps them to optimize both work and personal life.
In 1959, Peter Drucker predicted that information and information technology (IT) would be-
come increasingly important, and at that point, over half a century ago, he coined the term knowl-
edge worker. Knowledge workers are typically professionals who are relatively well educated and
who create, modify, and/or synthesize knowledge as a fundamental part of their jobs.

Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017 – 9781488618833 – Valacich/Introduction to Business Information Systems
10 CHAPTER 2 • COMPETING IN THE INFORMATION AGE

FIGURE 2.3 Information

In the knowledge society,
information has become as
important as—and many feel more
important than—land, labor, and
capital resources.

Items of Value in the

Knowledge Society

Land Capital

Labor

Drucker’s predictions about knowledge workers were accurate. As he predicted, they are gener-
ally paid better than their prior agricultural and industrial counterparts; they rely on and are empow-
ered by formal education, yet they often also possess valuable real-world skills; they are continually
learning how to do their jobs better; they have much better career opportunities and far more bar-
gaining power than workers ever had before; they make up about a quarter of the workforce in the
United States and in other developed nations; and their numbers are rising quickly.
Drucker also predicted that, with the growth in the number of knowledge workers and with
their rise in importance and leadership, a knowledge society would emerge. He reasoned that,
given the importance of education and learning to knowledge workers and the firms that need
them, education would become the cornerstone of the knowledge society. Possessing knowl-
edge, he argued, would be as important as possessing land, labor, or capital (if not more so)
(Figure 2.3). Indeed, research shows that people equipped to prosper in the knowledge society,
such as those with a college education, earn far more on average than people without a college
education, and that gap is increasing. In fact, the most recent data from the American Commu-
nity Survey (2012 data) reinforce the value of a college education: Median earnings for workers
18 and over with a bachelor’s degree were US$49,157 a year, while those for workers with a
high school diploma were US$27,024. Median earnings for workers with a graduate or profes-
sional degree were US$65,164, and of those without a high school diploma US$19,404. These
data suggest that a bachelor’s degree is worth about US$1 million in additional lifetime earnings
compared to a worker with only a high school diploma. Additionally, getting a college degree
will qualify you for many jobs that would not be available to you otherwise and will distinguish
you from other job candidates. Finally, a college degree is often a requirement to qualify for
career advancement and promotion opportunities once you do get that job.
People generally agree that Drucker was accurate about knowledge workers and the evo-
lution of society. While people have settled on Drucker’s term “knowledge worker,” there are
many alternatives to the term “knowledge society.” Others have referred to this phenomenon as
the knowledge economy, new economy, the digital society, the network era, the Internet era, and
other names. We simply refer to this as the digital world. All these ideas have in common the
premise that information and related technologies and systems have become very important to
us and that knowledge workers are vital.
Similarly, many “traditional” occupations now increasingly use information technologies—
from the UPS package delivery person using global positioning system (GPS) technology to plan
the best route to deliver parcels, to the farmer in Iowa who uses precision agriculture to plan the
use of fertilizers to increase crop yield. In essence, (almost) every organization can now be con-
sidered an e-business. Like the term “e-commerce,” “e-business” refers to the use of information

Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2017 – 9781488618833 – Valacich/Introduction to Business Information Systems
Exploring the Variety of Random
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