Chapter 8

Introduction to Information Technology
Turban, Rainer and Potter

Chapter 8 Interorganizational and Global Information Systems
CHAPTER 8
INTERORGANIZATIONAL
AND GLOBAL
INFORMATION SYSTEMS
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
Chapter Overview
Electronic Data
Interorganizational Global Inerchange and
Information Information Electronic Funds
Systems Systems Transfer
• Response to • Who Needs Global • EDI and IOS
Business Systems? • EFT and IOS
Pressures • Benefits of Global IS
• Types of • Issues in Electronic
Interorganizational Global Trading
systems • Global E-Commerce
Implementing
Extranets IOS
• Components • Security
and Structure • Ethical and Social
• Types Issues
• Benefits • Planning
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
ATION?
HOW TO EFFECTIVELY MANAGE THE INFORM
HOW TO DO IT AT COMPETITIVE PRICES?
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 Harper’s global business
maintains the company’s 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
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
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
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
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
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
Benefits of
Effective communication at a reasonable cost
Effective collaboration with groupware
software, Group DSS, extranets, and
teleconferencing devices
Organizations access each other’s databases
and frequently work on the same projects
while their members are in different locations
Issues in Electronic
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
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

(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

(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)
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 company’s back-end processing systems
Order-delivery Cycle
With and Without EDI
Without EDI
Start P.O. delivery

Accounting Mailroom Sales
Specifier
Mailroom Order confirmation
Bill delivery Accounting
Purchasing
Shipping Shipping
Receiving Receiving
Buyer Seller
With EDI
Standardized PO EDI transmissions Computer Generates
PO Form Automatic order Standardized P.O. Form
confirmation PO
Start • Approval
ice
• Prices
rep ash
t
vo
• Availability Instant data to :
or
Fl
In
•Sales
Automatic billing •Manufacturing
Specifier •Engineering
Receiving Shipping
Buyer Seller
Benefits of EDI
Benefits How the Benefit is Achieved?
Speed, volume  EDI enables companies to send and receive
large amounts of routine transaction
information quickly around the globe in a
paperless environment
 Sales and other information is delivered to
manufacturers, shippers, and warehouse
almost in real time
 Once EDI documents are received ,they are
automatically forwarded to the appropriate
department for processing
Accuracy  There are very few errors in the transformed
data as a result of computer-to-computer data
transfer. Information is also consistent
Benefits of EDI (continued …)

Benefits How to Benefit is Achieved?
Collaboration  Companies can access partners databases to
retrieve and store standard transactions
Commitment  EDI fosters true (and strategic) partnership
relationships, since it involves a commitment to
a long-term investment and the refinement of
the system over time
Profit  The time for collecting payments can be
shortened by several weeks, benefiting the
recipients of payments
Cost saving  EDI creates a complete paperless transfer
processing environment, saving money and
increasing efficiency
 EDI enables a just-in-time environment, which
means lower (or no) inventories for
manufacturers
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)
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?
TradeNet (Singapore)
Trader (5) Trader prints a form
(1) Trader fills up for Customs clearance
Inward declaration (trader may inquire status
form on the terminal. of declaration at any time).
(6) Port Authority
retrieves data Port Authority
TDB Tradenet required for
delivery of cargo.
(2) TDB retrieves and

approves Inward (3) TradeNet Customers
declaration (It is an automatically
import permit). forwards
approved (4) Customers retrieves
Inward and approves Inward
declaration to declaration (It is a
Customers customs permit).
Extranet
A network that links business partners to one
another over the Internet by providing access to
certain areas of each other’s corporate intranets
Components Structure
Servers Company A
Extranet
Company B
TCP/IP Intranet Internet
corporate data, e-mail,
protocols orders, customer data,
Intranet
inventory, documents
E-mail Internet Internet
Internet Other users
Web browsers Corporate customers, suppliers,
employees contractors, distributors,
as the Internet travelling or at home government
Types of Extranet
A company and its dealers, customers, or
suppliers
centered around one company
An industry’s 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
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
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
What’s 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
What’s 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

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Introduction to Information Technology

Turban, Rainer and Potter

Global information system - EDI

Global Information System

Global Electronic Commerce

Global Electronic Commerce

Global Electronic Commerce

Electronic Data Interchange (EDI)

Start P.O. delivery

Benefits of EDI (continued …)

Electronic Funds Transfer (EFT)

(2) TDB retrieves and

Benefits of Extranets (continues …)

What’s in IT for Me?

What’s in IT for Me?(continued …)

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