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In today's digital 21st century, almost all businesses face intense competition

from competitors all around the globe. The rapid change of the global environ-

ment forces enterprises to seek suitable business strategies to sustain them in

the competitive marketplace. This leads enterprises to change their existing

ways of conducting and operating businesses, and transform themselves in a

way that will enable them to cope with the global challenges, compete globally

and eventually grow. The winners in this phenomenon are the companies that

implement their business operations in the most creative and innovative manner

possible. Needless to say, this is done through the incorporation of information

technology (IT) into the business strategies and goals.

In the past few years, IT has been recognized as an imperative factor that

drives companies toward global operations (Palvia, Palvia, & Whitworth, 2002).

Moreover former U.S. President Bill Clinton (2002) also stated in his address

at the University of California, Berkeley: "A world characterized not just by a

global economy, but by a global information society. When I took the oath of

office as president on January the 20th, 1993, there were only 50 sites on the

World Wide Web in '93. When I left office, there were over 350 million and

rising. Today they're probably somewhere around 500 million. There's never

been anything like it." It has evidently indicated that the globalization process

will not thrive without judicious exploitation of information technology. Conse-

quently the key words that emerge in performing innovative business opera-

tions are "globalization" and "information technology."

Globalization is not merely conducting businesses outside of home regions or

countries. It involves the coordination of business structure, functions, activi-

ties, units, and employees together with the incorporation of appropriate global

strategies. In order to implement the global strategy, efficient operation and

management of global information systems seem to be the imperative success

factor.

The fact that businesses are speculating on the significance of globalization is

not so much of an issue. However the global challenge has presented enter-

prises with new types of economic opportunities and threats. Accommodating

TEAM LinG - Live, Informative, Non-cost and Genuine !these opportunities and threats by means of operating the global information

systems dynamically to provide senior executives making decisions accurate

and prompt information is crucial for successful global business operations and

is at the heart of this book.

This book addresses the importance of information technology management

and issues in operating information systems in the global dynamic business en-

vironment. It embraces discussions of the global information technology theory,

frameworks and IT architecture, discovery of global knowledge management,

improvement of the global information systems development methodologies, and

applications of the latest technologies, such as mobile technology and web ser-

vices, in the global information systems development and operations.

The book is considered a collection of new ideas, the latest technology applica-

tions and experiences in the global information systems development and op-

erations. It will significantly contribute to the academic, research, and corpo-

rate business communities.

By surveying the literature in related fields, most discussions have been fo-

cused on the management issues in developing and implementing global infor-

mation systems. Nevertheless, there is a lack of apparent attention for applying

the latest information technologies to enhance the performance of global infor-

mation systems.

The book will document the technical and managerial aspects of global infor-

mation systems and provide insights into how the latest information technolo-

gies such as intelligent agents, dynamic decision support systems, and mobile

technology could be initiated and embedded to the global information systems.

The book will also address the architecture of an integrated supply chain in

global business operations; what process improvement is required to implement

global information systems; and how organizations handle knowledge gener-

ated from various information sources globally. The book is intended to convey

a high-level understanding of managing and applying the latest information tech-

nology for global information systems operation. In this book we are particu-

larly interested in exchanging concepts, new ideas, research results, experi-

ence, and other related issues that could contribute to the academic arena and

also benefit the corporate business community.

Organization of the Book

The systematic presentation of chapters gives readers an organized structure

of the material. It embodies research and experience reports from global re-

searchers. Although the book is not formally divided into parts, each group of

TEAM LinG - Live, Informative, Non-cost and Genuine !related chapters has a different focus on global information systems develop-

ment and operations. The book is organized into 13 chapters.

Chapter I defines the evolution and key indicators of the information society,

which is being triggered by the Information Wave in the last 25 years. Several

aspects of the information society will be reviewed and their developmental

path will be defined. The fast development of the "global economy" is based on

the information communication technology (ICT) supported by the information

society. Depending on the different levels of national ICT development, differ-

ent levels of complexity and influence are implied on the global economy. Hence

it is imperative to recognize various development phases, solutions, and internal

and external consequences of the information society. The key question ap-

pears to be whether the information society is a new tool of thought or a new

way of life.

Chapter II highlights the problem of inefficiency of classical business systems

in an era of dynamic changes of global business environment. By analyzing

business models on the conceptual level, it is proven that business structures in

classical business systems significantly influence the shaping and performing of

business processes. The author concludes that a single business system re-

engineering project is not the definitive answer. In the global business environ-

ment, changes are constant. The efficiency of business processes can be main-

tained and increased in the long term only by constant but effortless adaptation

of structures. This is possible by the introduction of the organizational structure

without hierarchy and the mechanism for dynamic adaptation of structures to

business processes. The model of "process organization" is described in the

chapter.

Chapter III discusses the risks related to the organizational transformation pro-

cess to globalization. This chapter aims at providing organizations that are con-

sidering the move to globalization with clear understanding of the entire trans-

formation process and all the prerequisites for a successful transition. A full

explanation of what is involved in the globalization process is at the start of the

chapter, followed by a comprehensive investigation of the key success factors

that may impact the process. Additionally the chapter discusses some of the

common problems that might face management and workers during the global-

ization process. It is intended to provide detailed global transformation informa-

tion to both managers and researchers for their use as the globalization guide-

lines.

Chapter IV presents how a medium-sized manufacturing organization trans-

formed itself from a manual to an IT-based document transacting business pro-

cess. This lesson in documents transaction helped the organization score large

gains in productivity, in cost cutting, and in evolving a sound performance mea-

surement system. However globalization also opened up opportunities and threats.

The old system had sufficient IT backing but it failed in motivating employees

vii

TEAM LinG - Live, Informative, Non-cost and Genuine !in adopting a global information challenge. In order to compete internationally

through differentiated products with high quality, this firm then reengineered its

manufacturing. Information from the market substituted quality as driver of

information transactions. The goal of the project was to web-enable the firm.

The IT project had to define business transactions as the unit, which would

define transactions in information in object language first and subsequently as

transactions in documents. Browser-enabled communication proved accept-

able to employees who had previous learning in information transactions.

Chapter V investigates one of the major hindrances to the utilization of rapid

evolution of information communication technology through global alliances,

cross-cultural issues. While technology renders the geographical boundaries

redundant, it aggrandizes the chasms in socio-cultural value systems of physi-

cally disparate alliance partners. This chapter first discusses the gamut of glo-

bal e-business alliances: the primary reasons for their need, their socio-cultural

perspective, and the various factors that influence such alliances. Secondly the

corresponding mitigating approaches to those negatively influencing factors are

suggested.

Chapter VI discusses concepts and characteristics of decision support methods

and demonstrates the gap between the decision maker and the decision support

systems techniques. It examines the experience of the government of Egypt in

building its information infrastructure to help develop the decision-making pro-

cess both at the government level as well as at the local public administration

level.

Chapter VII proposes a framework for making decisions dynamically in a glo-

bal organization. This framework enables data to be retrieved and analyzed

dynamically with the aid of technology. The chapter starts with the discussion

of various types of global organizations and departments within a global organi-

zation. It is followed by the investigation and identification of organizational

data and decisions that make up the global organization; it also examines the

different enabling technologies that can be applied for information retrieval.

Finally the chapter concludes with a discussion of the proposed framework for

making decisions dynamically in a global organization.

Chapter VIII is dedicated to the major managerial, organizational, and techno-

logical aspects of development of data warehouses in a global information envi-

ronment, when different external sources of information are available and po-

tentially may have value for decision support and managerial analysis. It sum-

marizes the major benefits that become available for businesses if they decide

to integrate information from external sources into their data warehouses. It

also introduces the overall organizational framework of development of data

warehouses that are based upon the information from different external

sources.

viii

TEAM LinG - Live, Informative, Non-cost and Genuine !Chapter IX explores the impact of web services in creating a paradigm shift in

the way businesses strive to globalize. This fundamental shift in the paradigm

of the globalization process occurs due to the fact that with web services, it is

not one single organization that starts dealing with its clients electronically but,

rather, a number of organizations (a cluster) with common needs and compli-

mentary services that start dealing with each other electronically. Web services

enable business applications to talk directly with each other without human

intervention, resulting in rapid interactions amongst businesses at a global level.

Chapter X discusses quantitative modeling to introduce and manage new infor-

mation technology successfully in global business operations. The mathemati-

cal models that involve conceptualization of the problem and its abstraction to a

quantitative framework are the mina discussion of the chapter. Furthermore

the dependent and the independent variables are identified and mathematical

relationships are established between them. Results, analysis, and recommen-

dations are discussed to conclude the chapter.

Chapter XI explores the concept of enterprise, or organizational mobility. The

authors examine how mobility in a business can provide a competitive advan-

tage and enhanced sustainability. Potential industry applications for mobile tech-

nology are discussed. The authors delve further by exploring the growth areas

of mobile technologies and outline key success factors for the stakeholders in

the mobile technology arena. The many opportunities mobile technology brings

to various businesses are assessed. Furthermore the impacts of mobile technol-

ogy on organizations and society are evaluated. The chapter concludes by out-

lining various competing mobile technologies available to the market both today

and in the future.

Chapter XII reviews the components of e-business from a procurement per-

spective in order to explore the key value propositions of e-business practices

in the global automotive industry. Using an exploratory case study of the auto-

motive industry, the key questions for identifying a true value proposition of e-

business are identified, including their e-procurement, e-catalog order process-

ing, e-auction, and e-capacity systems. It is undisputed that e-business will bring

at least some level of benefit to a vast majority of organizations, regardless of

size or industry. This chapter intends to be valuable for evaluating and imple-

menting a successful e-business strategy, structure, and solution.

Chapter XIII discusses how globalization in the publishing domain is achieved

through global information and communication systems. Global information sys-

tems (GIS) enable not only integration of applications within an organization but

also enable extensive connectivity between applications across varied platforms

and software domains both within and outside the organization. This timely

connectivity has created tremendous opportunities for the publishing industry

- increasingly dependent on split-second timing to report news - to integrate

TEAM LinG - Live, Informative, Non-cost and Genuine !its business processes as well as devise new and innovative ways of collecting,

assimilating, and disbursing information. This chapter is based on the experi-

ence of the lead author in one of Australia's largest publishing groups, John

Fairfax Holdings Ltd.

References

Clinton, B. (2002). Transcript of Bill Clinton at UC Berkeley, January 29, 2002.

Retrieved July 20, 2002, from http://www.berkeley.edu/news/features/

2002/clinton/clinton-transcript.html

Lan, Y. (2003). A framework for an organization's transition to globalization -

Investigation of IT issues. In S. Kamel (Ed.), Managing globally with

information technology (pp. 1-11). Hershey, PA: IRM Press.

Lan, Y. (2003). An investigation of GISM issues for successful management of

the globalization process. In S. Kamel (Ed.), Managing globally with

information technology (pp. 82-103). Hershey, PA: IRM Press.

Palvia, P.C., Palvia, S.C, & Whitworth, J.E. (2002). Global information tech-

nology management environment: Representative world issues. In P.C.

Palvia, S.C. Palvia, & E.M. Roche (Eds.), Global information technol-

ogy and electronic commerce: Issues for the new millennium (p. 2).

GA: Ivy League Publishing, Limited.

TEAM LinG - Live, Informative, Non-cost and Genuine !xi

%&'

The editor would like to acknowledge the help of all involved in the collation

and review process of the book, without whose support the project could

not have been satisfactorily completed. A further special note of thanks

goes also to all the staff at Idea Group Inc., whose contributions through-

out the whole process from inception of the initial idea to final publication

have been invaluable.

Thanks go to all those who provided constructive and comprehensive reviews.

Special thanks also go to the publishing team at Idea Group Inc., in particular to

Michele Rossi, who continuously prodded via e-mail for keeping the project on

schedule, and to Mehdi Khosrow-Pour, whose enthusiasm motivated me to ini-

tially accept his invitation for taking on this project.

In closing I wish to thank all of the authors for their insights and excellent

contributions to this book. I also want to thank all of the people who assisted me

in the reviewing process. Finally I would like to give my special thanks to my

wife Anna, my son Bruce, and my daughter Emily for their love and support to

enable me to complete this project.

Yi-chen Lan, PhD, MACS

Sydney, Australia

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Chapter I

The Taxonomy of

Information Societies

Andrew S. Targowski

Western Michigan University, USA

Abstract

This chapter introduces the taxonomy of 14 information societies from the

data society to the self-sustainable society: surviving members. Their

essence and role in civilization is characterized and their paradigms and

measurements are defined. The information society is considered as the

force of change and a question is raised: is it a new tool of thought or a new

way of life? The future trends of the information society are reviewed, and

in conclusion there is a hope that the information society will make

humankind more aware of its being.

Introduction

The purpose of this chapter is to define the evolution and key indicators of the

information society, which is being triggered by the information wave in the last

25 years. Several aspects of the information society will be reviewed, and their

developmental path will be defined. The fast development of the global economy,

TEAM LinG - Live, Informative, Non-cost and Genuine !2 Targowski

permission of Idea Group Inc. is prohibited.

which is based on info-communication technology (ICT), is supported by the

information society. Depending on the different levels of a given country's

development, the information society has different levels of complexity and

influence on the global economy and vice versa. Hence it is important to

recognize the information society's different phases of development and their

solutions and internal and external consequences. The question arises whether

the information society is a new tool of thought or a new way of life. The answer

to this question is provided by this chapter.

The Forces of Change

The "information society" is a fuzzy concept. It is considered the answer to the

problems created by the postindustrial modus operandi. In a modern economy

growth is owed to advances in info-communication technology. By the beginning

of the 21st century, the need for information handling and processing in world

societies is being shaped by the following trends:

1. Politics in the post-Cold War Era. A new world order may lead to the

formation of 1,000 countries and a highly decentralized "international

society." This physical disintegrational trend will require tools to integrate

these entities informationally. Eventually this new system of nations will be

based on a new info-communication infrastructure, which needs new info-

communication systems and services.

2. Democratization and peacemaking. Societies would like to be better

informed, therefore they need more communications based on free speech

and solutions, like the Internet.

3. Globalizing information. This is caused by the proliferation of ICT and is a

major driving force in the transnationalization of the world economy.

Estabrooks (1988) predicts that programmed capitalism in a computer-

mediated society will integrate all national markets and create one interna-

tional market.

4. The globalizing economy. A network of 50 global corporations now "rule

the world" because they apply the global information infrastructure. ICT is

at the core of the current process of economic globalization (Madon, 1997).

5. Population growth and health threats. In 2025 there will be about 9 billion

people, which will generate at least twice as many transactions as currently

processed today. This means more needs for the ICT capacity.

TEAM LinG - Live, Informative, Non-cost and Genuine !The Taxonomy of Information Societies 3

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6. Global environmental threats. If these threats are considered seriously,

then there is a need for planetary management and ecology. This new

management and ecology will require more monitoring info-communication

systems and services.

7. A new path for development. Since the gap between rich and poor nations

continues to widen, a world focused on people is being created. This

undertaking requires new concepts of human security, new models of

sustainable human development, new partnerships between state and

market, new patterns of national and global governance, and new forms of

international corporations (Boutros-Ghali, 1994). This trend requires more

education and research, which will necessitate the formation of "knowl-

edge" and "learning" societies (Marien, 1995).

As society, particularly the information society, becomes more interconnected,

we face a loss of boundaries, throwing into question the basic conceptual

distinctions we use to make sense of the world. As society becomes more

complex and takes on more variety and configurations, the capacity of existing

regulatory (governance) systems is being overwhelmed. A group of 14 Canadian

public servants offered the following new focus for how to govern in the

information society (Rossel, 1992):

• Information-based ways of organizing to include more players to innovate

and learn.

• Forging consensus.

• Strategic use of information to provide leadership in the continuing process

of learning.

For example, the Japanese information society's purpose is the transformation

of homo sapiens into homo intelligens in the spirit of globalism through

transparent networks and an open educational system. This purpose pretends

that anyone, anywhere, at anytime in Japan should be able to easily, quickly, and

inexpensively get any information. We see these premises treat the information

society as "computopia" and as a rebirth of technological synergism (Masuda,

1971). Perhaps we expect too much from the information society, which can

provide "computopian" platforms for info-communications but does not

necessarily mean that people will use them.

TEAM LinG - Live, Informative, Non-cost and Genuine !4 Targowski

permission of Idea Group Inc. is prohibited.

The Information Society: A New Tool

of Thought or a New Way of Life?

The impact of info-communication technology on individuals and organizations

has been analyzed under the rubric of the information society since the beginning

of the computer revolution in the 1960s (Masuda, 1971; Bell, 1973). It is a socio-

economic view of the impact of computers on society in general. The increasing

role of computer and network applications affect almost every facet of human

life. Sociologists and computer pioneers tried to rationalize the computer's role

in society.

The term "information society" was applied for the first time by Koyama in 1968

and subsequently by his compatriot Masuda in 1971 in his master plan of building

the Japanese information society. The "information society" evolved from such

slogans in the 1960s as computer-serviced society (Sackman, 1967) and in the

1970s as the age of cybernetics, information era (McLuhan, 1968), knowledge

society (Drucker, 1968), technotronic society (Brzezinski, 1971), computer

revolution, wired society (Martin, 1978), telematic society (Martin, 1981), post-

industrial society (Bell, 1973), and Gutenberg two (Godfred & Parkhill, 1979).

The "information society" was coined in order to intellectualize the change in

social behavior that transformed capitalism with "capital and material" into a

new political and social order based on "information."

In Eastern Europe, specifically Poland, these ideas were almost implemented in

1971-1974 under the form of a national information system whose purpose was

to transform a totalitarian society into an informed society (Targowski, 1991). A

similar project, though only a tool of central planning, was a subject of

experimentation in Chile. President Allende invited famous British cybernetician

Stanford Beer to apply his ideas of feedback to reduce planning complexity, but

the assassination of the president also killed the cybernetic society in South

America.

Pawlowska (1992) offers the following five characteristics of the information

society, which are agreed upon by most authors:

1. Information materialism - information as an economic good that can be

sold, bought, and possessed.

2. Widely applied information technology.

3. Integration of different types of information technology.

4. A national economy dominated by the information sector (information

economy).

5. Special status of knowledge.

TEAM LinG - Live, Informative, Non-cost and Genuine !The Taxonomy of Information Societies 5

permission of Idea Group Inc. is prohibited.

The information society, with its information economy, occurred as a result of

industrial evolution rather than resulting from the information revolution. Al-

though it is the same capitalistic society with the same values, the focus on

information increases human cognition and changes the future of mankind and

its environment, particularly its infrastructures, and perhaps brings along a

change in societal values. The information society requires that the human

process of cognition is no longer limited to reductionism, mechanism, and

analysis. The process in this new society can be more open, more expansive in

generating ideas and solutions channeled by a better focus (aims) and synthesis

of system thinking.

The strong development of media in the information society, particularly inter-

active ICT, facilitates the communication of one's message. It may lead toward

participative democracy, which should assure an equal access to power and the

right to decide one's fate. These are the new values that can be implemented in

the information society.

Sociologists perceive the information society as a dream society of idealistic

values and clean hands not involved in the "dirty" material economy. Is it

realistic to expect so much from the information society or even think that such

a society can exist? The answer is no. The post-industrial economy, also known

as the service or information economy, has been reduced by Daniel Bell (1973)

to the economy of the elite (lawyers, financiers, and researchers). Such an

economy cannot sustain the national economy in the long-term since it exports

"jobs" and disharmonizes the development of a mature economy.

A narrow interpretation of the information society as a culture based on

information materialism makes the concept of the information society more of an

unfulfilled, even misleading, premise and science fiction. However if the

information society is conceived as a tool of making more informed, knowledge-

able, and wise decisions, then such a society can pass a reality check and its

development should be supported. Such a society has the chance of becoming the

"conscious society" on the way to developing into the "wise society," driven not

only by information and knowledge but also by the wisdom of how to survive and

be satisfied.

If the information society applies electronic mail, telecommuting, electronic

commerce, and/or distance learning on a wide scale, then these technologies lead

to new ways of human behavior in civilization.

The politics of information should also be as important as "computer literacy."

We pay a lot of attention to applying computer tools, but do we scrutinize the

application systems' design and operations of the information society? This lack

of application design checks may lead to the abuse of social activities, and ICT

may become unwanted technology.

TEAM LinG - Live, Informative, Non-cost and Genuine !6 Targowski

permission of Idea Group Inc. is prohibited.

The Essence of the Information Society

The social framework of the information society defined by Bell (1979) is a new

integrated computer-telecomunication infrastructure that transmits structured

facts, ideas, judgments, or experimental results. Bell's view that technology is

the main agent of change has been questioned by several authors; for example,

John McCarthy (1979) argues that the new technology is not the main cause of

change in our society today. On the other hand Bell, perhaps, thinks the same

way when referring to Machulp (1962) and Porat's (1979) thesis that the

information society is defined by the proportion of information/knowledge

activities to material ones. If the latter activities are greater than the former, then

the information sector becomes the primary one (information products and

services) with another two deviated information sectors (public and private

bureaucracies). The three remaining sectors are: the private productive (produc-

ing goods), public productive (building roads, dams, and so on), and household

sectors.

Beninger (1986) hypothesizes that the information society is the answer to the

control crisis, caused by the Industrial Revolution. Hence he concludes that

"control" is the engine of the information society.

Where are the real roots of the information society? They are in the concept of

"information" rather than in "material control." Information is a process of

forming a new idea, concept, event, material, energy, product, service, and so on.

By forming some idea or description we inform it. This meaning is called "to

inform." Peters (1987) argues that with the decline of scholasticism and the rise

of empiricism around the 17th century (the rise of natural sciences), information

gradually came to refer to "the information of senses" (such formulations are

found in Bacon, Locke, Berkley, and others). Once information referred to the

defining of universals; nowadays it also describes the processing of particulars

(data, information, concept, knowledge, wisdom).

Instead of defining the information society by its dominant product, information,

we perceive the information society through its general structure of social and

economic relations.

An investigation of the general structure of social and economic relations must

lead to the analysis of civilization. Civilization is an info-material structure

developed by humans to effectively cope with themselves, nature, and their

creator. The mission of civilization is to improve human existence. The civiliza-

tion model (Figure 1) has the following components:

• Human entity - organized humans

• Culture - a value-driven process of developing patterns of human behavior

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• Infrastructure - technology-driven additive process of acquiring and

applying material means

A human entity in the political sense is a family, tribe, ethnos, people, proto-

nation, nation, international community, global society, and so forth. A society is

an organized human entity on the same territory in order:

• to support their own existence through the exchange of specialized services

and goods via infrastructures; and

• to develop the human race by the development of culture and infrastruc-

tures.

The role of a society in a civilization context must take into account the stage of

civilization development. The first civilizations (Mesopotamian, Egyptian, Minoan,

Indus) were societal civilizations that organized society. Based on this civilization

the next civilizations (Hellenic, Roman, Sinic, Japanese, Buddhist, Islamic,

Eastern, Western, Sub-Saharan, and Maghrebian in B.C. times) were organized

around cultural issues. Hence we can call them cultural civilizations. The third

generation of civilizations (Japanese, Buddhist, Sinic, Hindu, Islamic, Eastern,

Western, and African in A.D. times) are organized around the issues of

developing infrastructures, therefore we will name them the infrastructural

civilizations.

Figure 1. A model of civilization (The Targowski Model)

Technology-driven

additive process

Value-driven

continuum process

Entity

Infra-

structure

Culture

Civilization

Existence-driven

human community

TEAM LinG - Live, Informative, Non-cost and Genuine !8 Targowski

permission of Idea Group Inc. is prohibited.

Among civilization infrastructures, one can recognize the following configura-

tions:

1. Core infrastructure (authority I., economic I., military I.)

2. Foundational infrastructures (urban I., rural I., health I.)

3. Integrational infrastructures (transportation I., knowledge I., communica-

tion I., information I.)

Does the level of development in a society depend on the era in which the

civilization existed? Although all eight civilizations developed infrastructures,

each one put a different emphasis on a particular category of an infrastructure.

Most literature describes the societal development in Western civilization. In

fact, its emphasis is on the integrational infrastructure that is being developed for

the purpose of pursuing the culture of management, media, education, and

entertainment as well as strengthening the economic, military, and health

infrastructures. Of course societies from other civilizations have different

priorities.

The Western societies develop the integrational infrastructure not for the sake

of infrastructure but for the purpose of developing the aforementioned cultures.

In other words an information society emerges when a society's purpose and

primary means of solving problems are focused on information handling and

processing.

For example, the level of ICT advancement in both the United States and Singapore

are at a high level. However the proportion of information to material activities in the

U.S. is much higher than in Singapore, the hub for manufacturing American goods.

Does it mean that there is not an information society in Singapore? Singapore is an

automated state-city with some solutions that are not conceivable in the U.S. Are

both states at the level of an information society? Certainly not; these societies

require further differentiation. At this moment we may say that the U.S. enters the

"informed" society level while Singapore is at the level of "informative" society.

Alvin Toffler (1980) offered a very elegant concept of civilization development

through three waves of agriculture, industry, and information. However later Alvin

and Heidi Toffler (1994) became advocates of the "new civilization" because they

perceived the information wave as replacing the agricultural and industrial waves.

Is bread being replaced by Windows XP or a car by the Internet? It will not happen.

The next wave includes the previous ones as illustrated in Figure 2. The quality of

any information society depends on the quality of the previous societies. In other

words the information society is not autonomous, it is rather inclusive. The

relationships among these societies determine the quality of life in the information

society.

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Figure 2. The inclusiveness of civilization wave (The Targowski Model)

Information Wave

Industrial Wave

Agriculture Wave

The Types of the Information Society

The term "the information society" was good enough when it was first described

30 years ago. Nowadays the information society is being developed in several

mutations. The types of information society are:

The Data (Dossier) Society: A Big Brother Control

The Industrial Revolution made it possible to "process" materials such as coal,

metal, and textile at unprecedented volumes and speeds. Such acceleration of

material processing increased the demand for control of industrial operations.

For instance, the many problems of scheduling and coordinating in the early days

of the railroads resulted in missed connections or accidents. According to

Beniger (1986), the control revolution is a watershed transformation in capacities

of "information processing," as the Industrial Revolution was in material

processing.

The control revolution created punched cards machines in the 19th century and

computers in the 20th century. Almost the first 100 years of mediated informa-

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tion processing was involved in data processing for the purpose of accounting

and management. As the Industrial Revolution marked the discontinuity of

coupling energy, data processing played the same role by exploiting business

data/information. The emergence of information processing equipment, whether

punched cards or computers, led to the development of transaction processing

and later in the 1970s to on line transaction processing applications (OLTP).

With computers quickly becoming modus operandi of government and business,

a number of questions arose. How do they fit into the political landscape? How

are they designed and implemented? How are ethical and policy judgments

made? The dossier society defined by Laudon (1986) places computers in the

context of the Constitution.

The genius of American politics is its balance more in favor of individual freedom

and diversity than organizational demands for control and efficiency. Contempo-

rary ICT can radically alter the organization of power in the United States and

with it our traditional conceptions and experiences of individual freedom,

security, and privacy. The other side of the data society is a "dossier society."

According to Kenneth Laudon, from a technical point of view, the dossier society

is the integration of distinct files serving unique programs and policies into a more

or less permanent national database. It may lead to an aggregation of power in

the federal, state, and local government without precedent in peacetime America.

The dossier (data) society can expose the life of an individual to governmental

screening and composite analysis that can be analytically "right" but is not

reflective of the reality of the individual's life. Even if the analytical screening

is right, may the government penetrate the privacy of the individual? Do we not

have the right to shadow some of our citizens' lives?

Most Americans want a society where criminals are effectively brought to

justice. Most Americans want a society where government programs are

effectively and efficiently administered using, where necessary, advanced ICT.

Power is limited by segmental authority, segregation of information flows,

creation of multiple checkpoints, and encouragement of lengthy and slow

deliberation. These practical principles are at odds with the capabilities and

premises of contemporary ICT applications.

In 1984 Congress signaled a virtual retreat from the Privacy Act by passing the

Deficit Reduction Act of 1984, which contained provisions establishing a de

facto National Data Center capability. Congress required all states to participate

in file merging, matching, and linking programs to verify the eligibility of

beneficiaries in food stamps, Medicare, Aid to Families with Dependent Children

(AFDC), and a host of other "needs" and insurance-based programs. Involved

here is the systematic merging and linking of Social Security, medical, and

personal data with Internal Revenue and private employer data. These "match-

ing" and "linking" programs are "limited" to about 50 million Americans (Laudon

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1986). There are no technical barriers to extend them to corporations like Ford,

CitiBank, Coca-Cola, Kellogg, or the American Medical Association and other

professional interest groups. Then the dossier society will become a reality.

The Computer Society: A New Social Tool

In the 1960s the evolution of computer applications progressed from mathemati-

cal computation to information processing and even to real-time control. Com-

puters increasingly catalyze the growth of scientific information and human

control through computer-aided system development. By the end of the 1960s,

with the development of online terminals, computer access had been broadening

along with the idea of the computer-serviced society. The emergence of the

computer society was a result of social information systems. The trend of these

applications was charted through three stages: human information systems

(libraries), industrialized man-machine systems (factories), and man-machine

digital systems (online banking). The first stage corresponds to primitive and

underdeveloped societies, the second to the advent of machines operated

through controlled power, prominent through the first Industrial Revolution, and

the third to the progressive computerization of advanced industrialized societies

since World War II. The computer society was then projected as a possible new

utopia, destined for oblivion or success in proportion to man's capability to chart

and control his own evolution (Sackman, 1967).

From today's point of view the computer society is mostly preoccupied with the

issue of how to apply computers. This issue was particularly popular in the United

States in the 1980s with the advent of personal computers. This issue is still

popular in developing and less developed nations that are at the early stage of

computer literacy.

The Informative Society: A Way of Processing Information

A composition of the data-dossier society, industrial society, and computer

society features create the informative society. The informative society trans-

forms the way business, government, and citizens work. It is helping organiza-

tions get leaner, smarter, and closer to the customer. Those who seize the

opportunities inherent in this revolution are capturing important competitive

advantages. Those who lag behind are forced to scramble breathlessly in the

race to catch up.

The informative society is the result of the merged data and computer societies

based upon advanced software such as on line analytical processing. OLAP

software such as data warehousing and mining transforms OLAP into value-

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added information. In the mid-1990s data warehousing became one of the

buzzwords of the ICT industry. However it was invented by real companies to

make use of vast volumes of databases. From 1965-1999 almost every aspect of

data processing had been automated in the name of efficiency. With the

increased power of ICT more complex systems could be implemented. For

example, from simple bookkeeping applications, the banking industry moved to

ubiquitous automated teller machines (ATM), which can provide a good base for

customer behavior analysis and further the development of relation banking.

In the 1990s IBM evaluated how to move from a computer-based business to

managing a business based on information. This led to the concept of data mining

in order to extract a new value of information in the business context. The

solution to this quest is data warehousing software, which is a single, complete,

and consistent store of data from internal and external sources delivered to end-

users who can process data into information in the business context (Devlin

1997).

Informative systems was defined by Zuboff (1988) in her popular book In The

Age of The Smart Machine. The Smart Machine is applied to transform the

nature of work and can provide negative (alienation) and positive (empower-

ment) results. However that same technology may "informate," empowering

ordinary working people with a broad knowledge of the production/service

process, making them capable of critical judgment about production/service. The

author argues that systems should be informated rather than automated.

The informative society is a community of developers and users who understand

what data/information to process in order to achieve added value in decision-

making, either at the personal or organizational level. This elite community, which

is no longer in the computer society, struggles with the issue of how to apply

Windows XP or a scanner. Members of the informative society are better

informed than members of the previous societies, since they use meaningful

information in a given context instead of merely applying data to decision-

making.

The Networked Society: A New Social Superconnectivity

In the networked society, home computers are as common as the telephone.

These electronic appliances link people to people, shrinking time and distance

barriers among them and nearly eliminating those barriers between people and

information. In its simplest form the networked society is a place where thoughts

are exchanged easily and democratically and intellect affords more personal

power than a pleasing appearance does. In The Network Nation Hiltz and

Turoff (1993) write: "The Network Nation or Society is a collection of commu-

nities with overlapping networks for actual and potential communication and

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exchange. We will become the Network Nation, exchanging vast amounts of

both information and social communications with colleagues, friends, and

'strangers' who are spread out all over the nation and share similar interests,

Ultimately, as communication satellites and international packet-switching net-

works reach out to other cities and villages around the world, these social

networks, facilitated by computer-mediated communications, will become inter-

national; we will become a 'global village' whose boundaries are demarcated

only by the political decisions of those governments that choose not to become

part of an international communication."

The networked infrastructure can be utilized to substitute for the use of limited

physical resources. In the 21st century we will probably see:

• Increased scale and distinction of community-oriented networks for

academia, government, business, politics, social aspects, and other pur-

poses.

• A variety of virtual educational institutions.

• "Networked" organizations with flatter, more consolidated, and connected

structures of firms, and changes in the nature of work ("End of Job").

• The integration of ICT resulting in "superconnectivity" for all those users

with an access to networks.

The network society applies ICT to produce a culture and systems supporting

service-material base. Analyzing the potential for conflict among new informa-

tion and communications opportunities, one can identify five major areas in which

public policy issues are likely to arise [1]:

1. Equitable access to information and communications opportunities.

2. Security and the survivability of the network infrastructure.

3. Interoperability of the network infrastructure.

4. Modernization and technological development of the network infrastructure.

5. Jurisdiction in formulating and implementing national information policy.

The network society operates in a cyberspace, which is a new social space,

shaping networks into "networlds," the global matrix of minds stipulated by

interconnected computer networks. Komito (1998) perceives the following

categories of the networked society: moral, normative, and proximate commu-

nities. These communities are generated by the networked society, which

becomes a foraging society of flexible communities.

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Network diffusion modifies the operation and outcomes of trade (e-commerce),

production (computer integrated manufacturing), experience (end user com-

puting), power (e-republic), and culture (icons). Castells (1996) argues that

presence or absence in the network society and the dynamics of each network

vis-a-vis others are critical sources of domination and change in our society; a

society that is characterized by the preeminence of social structure over social

action. In other words the power of flows takes precedence over the flows of

power.

The Mass Media Society: Provided Consciousness

The term mass media means communication by the media such as television,

radio, newspapers, and books. The most distinguished characteristic of mass

media communication is that it is mostly one-way. To attract as large an audience

as possible, the media are addressed to the largest number of people, very often

at the lowest denominator.

Since the advent of television, mass media created the mass media society, which

is stimulated by the media as informers, interpreters, persuaders, entertainers.

The mass media democratic society is strongly influenced by the media that

becomes the fourth power, after the executive, legislative, and judicial branches

of governance.

Today in developed nations electronic voting and opinion-registering technolo-

gies make a two-way flow of what was once a one-way pipeline, with

information no longer going just from the top down, from lawmakers to people,

but now also from the bottom up, from the people back to the lawmakers. A new

political system is emerging as the mass media society enters the electronic

republic status (Grossman 1995).

America is turning to an electronic republic, a democratic system that is vastly

increasing the people's day-to-day influence on the decisions of the state. This

transformation is triggered by the remarkable convergence of television, tele-

phone, satellites, cable, and personal computers. The electronic mass society is

heading from participative democracy toward direct democracy, a form that

originated in the fifth century B.C. in small, self-contained Greece. At the

beginning of the 21st century, in democratic nations, the electronic mass media

society is transforming an isolated citizen into an electronic citizen who feels that

his/her vote may have some meaning in pursuing the common good.

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The Virtual Society: Anyone, Anywhere, Anytime

The virtual society is a community that operates in cyberspace, generated by

computer networks, software, e-files, and interactive dialogues among the

participants. The virtual society's members interact among themselves without

physical presence and interact with organizations that are digital. Virtual

corporations, communities (for example, WELL in San Francisco), shops,

schools, and agencies broaden and intensify the social and business interactions

of the virtual society. Agres, Edberg, and Igbaria (1998) argue that the "virtual"

empowers an individual who can easily interact within the digital environment.

The individual can be electronically present in more digital places than he/she

could manage to be in the same range of physical localities. The virtual society's

members are better communicated and informed. Virtual cyberspace may

enhance job performance and training, improve product design, assist surgeons,

and create interactive forms of entertainment. But it will be years before that

becomes a reality, if it ever happens at all.

The Communicated Society: Familiarity of Events and Facts

The application and dissemination of omnipotent ICT may transform the United

States, Western Europe, and Japan into a "technopoly," which has sovereignty

over social institutions and national life and becomes self-justifying, self-

perpetuating, and omnipresent. Postman (1992) traces the historical movement

of technology from a support system for a culture's traditions to competing with

them, and, finally, to creating a totalitarian order with no use for tradition at all.

However, with strong insistence on the value of free speech, ICT may make

citizens better informed. Of course to do so, the communicated society should

pass the stages of mass media, networks, and virtual societies.

The Informed Society: Awarded Members

The informed society is formed when the informative and communicated

societies achieved the status of mature entities. The informed society's members

are characterized by a good level of awareness and sense of what is going on in

the society and the economy. The members of such a society can make wise

decisions based on their own judgment, which is supported by data mining

technologies as well as networked and enterprise-wide systems and services.

This society is a computerized society at the level of social sophistication and

finesse.

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The Robotized Society: Automated Judgment

The robotized society is composed of robots, even thinking robots. These robots'

behavior is based on the rules of artificial intelligence. Robots may not be the best

of musicians, but they can be used for testing instruments as if they are

manufacturers. If we are to use robots on a wide scale, and if technological

advances toward the "thinking" computer continue, it will become necessary to

lay down guidelines governing where and how they are used. Isaac Asimov

proposes Three Laws of Robotics:

1. A robot may not injure a human being or, through inaction, allow a human

being to come to harm.

2. A robot must obey the orders given to it by human beings except where such

orders would conflict with the first law.

3. A robot must protect its own existence as long as such protection does not

conflict with the first or second laws.

Robots in the real word do not look a bit like some of the robots we have grown

used to in films and stories. But they are still extraordinary devices and far

cleverer than machines of earlier times Asimov (1985). The robots do not pay

taxes and therefore on a broad range of applications they may cause unemploy-

ment and a demand for highly skillful workers. On the other hand if they are

applied in very complex systems and prove to be highly reliable, then their

applications can be useful and recommended.

The Knowledge Society: Understanding Members

In Post-Capitalistic Society, Peter Drucker (1993) describes how every few

hundred years a sharp transformation has taken place and greatly affected

society - its worldview, its basic values, its business and economics, and its

social and political structure. According to Drucker, we are right in the middle

of another time of radical change, from the age of capitalism and the nation-state

to a knowledge society and a society of organizations. The primary resource in

the post-capitalistic society will be knowledge and the leading social groups will

be "knowledge workers." The industries that moved into the center of the

economy from 1958 to 1998 have as their business the production and distribution

of knowledge and information rather than the production and distribution of

things. Microsoft's market value exceeds the market value of three big carmakers,

General Motors, Ford, and Chrysler. Why? Microsoft employs only 50,000

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workers, but they produce $400,000 per capita per year. Their knowledge is so

costly. The super-rich of old capitalism were the 19th-century steel barons like

Andrew Carnegie, robber barons like Jay Gould, oil barons like John Rockefeller,

and transportation barons like Cornelius Vanderbilt. The super-rich of the

knowledge society are computer makers (Steve Wozniak, Steve Jobs), software

makers (Bill Gates), systems developers (Ross Perot), and others.

Knowledge becomes an economic resource and a tool of genuine innovations

that provide a competitive advantage in business. Knowledge is a set of rules,

laws and their systems that communicate by information handling and process-

ing. The major driver of the development of a knowledge society is a demand for

innovations in the marketplace and lifelong learning, which require permanently

improving work conditions and demand higher productivity and effectiveness.

The knowledge society applies tools needed for problem solving. Among these

tools one can mention high-speed computers, information retrieval services, and

networks of talent groups.

The Learning Society: Developing Members

The development of the knowledge society requires constant discovery, assimi-

lation, and organization of knowledge. These processes constitute learning

activities, which at the beginning of the 21st century requires skillfully swimming

in the ocean of information, artfully using information-rich sources, and using a

supportive learning environment to self-pace and self-structure users' own

programs of learning. The learning society gets its major input from higher

education and provides its output to employers (MacFarlane, 1998).

The learning society is created not only by higher education institutions but also

by "learning organizations" in business, industry, government, and nonprofit

units. "Learning organizations" overcome learning disabilities to clearly under-

stand threats and recognize new opportunities. Not only is the learning organi-

zation a new source of competitive advantage, it also offers a marvelously

empowering approach to work, one that promises that, as Archimedes put it,

"with a lever long enough ... single-handed I can move the world" (Senge, 1990).

The paradigm of the learning society is understanding, and its purpose is to

strengthen human planning and behavior in complex environments, such as the

modern global economy, steered by the new world order and often unclear to

many people.

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The Global Open Society: Justice for Whole Planet

As a result of learning, people and their governments who promote a global

economy may try to create a formal, global, and open society. The global

economy is based on free movement of goods, services, capital, and ideas. The

globalization of financial markets means that the movement of exchange rates,

interest rates, and stock prices in various countries are intimately intercon-

nected. Global integration has brought the benefits of the international division

of labor, economies of scale, and the rapid spread of innovations from one

country to another. However the global economy is the global capitalistic system,

which is not without problems as Soros (1998) writes in his quest for the global

open society.

The organization of the global open society is needed because such a society

must regulate deficiencies in the global capitalistic system. Among these

deficiencies, Soros lists the following: the uneven distribution of benefits, the

instability of the financial system, the threat of global monopolies and oligopolies,

the ambiguous role of the state, and the question of values and social cohesion.

Since global markets reduce everything to commodities, we can have a market

economy but we cannot have a market society. Globalization increases the

demands on the state to provide social nets while reducing its ability to do so. This

sows seeds of social conflict. This may lead to a new wave of protectionism and

the breakdown of the capitalistic system, as happened in the 1930s.To prevent

the next breakdown of the capitalistic system, one must organize the global open

society, which is governed by the rule of law: respect for human rights, respect

for diversity, respect for minorities and minority opinions, division of power, and

a market economy. Of course the global open society is a society organized

around information and by networks. This society requires many alliances

(including virtual) that will establish a code for international patterns of expected

behavior. Such alliances will apply information and computerized networks to

disseminate and enforce these standards. Some such alliances are the World

Trade Organization, North Atlantic Treaty Organisation (NATO), and the World

Tribunal. Unfortunately the United Nations is an organization designed only for

peace keeping not for planet management. This global society should be open.

According to its promoter, George Soros, this means that it should be based on

democratic principles and global justice for all habitants and their natural

surroundings.

The Self-Sustainable Society: Surviving Members

The death triangle of mankind composed of the expected bombs in population

(2050), ecology (2050), and resource depletion (2300), is two generations away

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from the generation of 2000 anno domini. The next 50 years (2000-2050) are

crucial for the survival of mankind. If we look back into the last 50 years, we

see that this period passed quickly and produced positive results never known in

world history. It also created the threat "to be or not to be" for humans on Earth.

The next 50 years is just a period of two generations. If we miss these

generations, we also will miss the opportunity to educate these generations, and

we will be overwhelmed by the complexity of the coming crisis and probable

failure of human civilization. Although people, cultures, and nations have done

this for centuries, the death triangle of mankind has never been so close to us.

A new society with new politics should be defined in the first part of the 21st

century and implemented in 2025-2050 of the same century. Otherwise mankind

may disappear from the Earth. The targets for the 21st century can be defined

as follow:

• To achieve sustainable and diversified culture.

• To achieve mass consumption of green products from regenerative food

and fiber systems through biodiversity (Dalhberg, 1993).

• To achieve these targets through the development of the nonmaterial

society (value-driven) and self-sustainable society (survival-oriented).

The modern scourges of Western civilization, such as youth suicide, drug abuse,

and crime, are usually explained in personal, social, and economic terms:

unemployment, poverty, child abuse, family breakdown, and so on. However the

author suggests that these trends are to certain degree independent of such

factors. These curses are rather caused by a failure to provide a sense of

meaning, belonging, and purpose in our lives, as well as a framework of values.

People need to have something to believe in and live for, to feel they are a part

of a community, a valued member of society, and to have a sense of spiritual

fulfillment - that is, a sense of relatedness and connectedness to the world and

the universe in which they exist.

The self-sustainable society should be the next step in social development. It

should provide an orientation on values (for example, family), norms and

attitudes, and the spiritual life. In other words we have to reinvent culture in such

a way that it will be sustainable. Moller (1993) argues for the need to emphasize

an input from different cultures in order to amalgamate a single concept for all

of us. This transformation can be achieved if the learning and global open

societies form a mature mankind.

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The Monitoring Society: Limited Communication

If we will not secure feeding and caring for the 10 billion people who are likely

to be alive within a couple generations, then we have to secure the minimal means

of social communication. It can be organized through the application of satellites

or by primitive monitoring by the sound of tam-tam drums. Such an environment

will be managed by the monitoring society, which will be very limited in

technology and other resources. It may be the beginning of the end of mankind.

IS Type Paradigm Purpose Main Information

Solution

Measures

Per 1,000 population

Data (Dossier) Measurement Reduction Mechanization and

Automation, Off-line

systems

Number of data entry

personnel

Computer Measurement Reduction Automation and How

to compute? Off-line

systems

Number of computers

Mass Media News Dissemination Printing Number of newspapers

and Number of TV sets

Networked Connection Exchange Internet, Intranet

Networked enterprise

Number of Internet

Users, Number of

Intranet servers

Virtual Electronic

presence

Exchange and

Opinion

Internet, Intranet

Virtual enterprise

systems

Number of bulletin

board systems (national

and organizational)

Informative Optimization Decision-

making

What to process?

Data mining Online

systems Application

Portfolio

Number of OLAP

software per

organization, % of GDP

spent on IM, % of I-

workers in the labor

force

Communicate Familiarity Planning Networking

Online systems

Networked enterprise

Number of Internet

users, Number of

telephones, Number of

TV sets and Number of

newspapers, % of GDP

spent on telecomm.

Knowledge Rules Understanding Research, education

Information retrieval

Number of scientists

Number of professors,

Number of students

Robotized Rules Decision-

making

Automation of

judgment

Number of expert

systems

Informed Awareness Decision-

making

Data mining

Networking

Enterprise-wide

systems

Number of OLAP

software, and Mass

Media and Network

Indexes, Free press

Learning Understanding Planning and

acting

Computer-aided

instruction,

Information retrieval

Digital library

Number of published

books, Number of

digital books and

scientific documents

Global Justice Operations Virtual government

Global systems

Number of applied

virtual global agencies

Self-sustainable Optimization Survival Green economy

Ecological systems

Amount of energy from

renewable sources

Monitoring Warning Survival Satellites or tam-tam

drums

Number of served

people

Table 1. The paradigms and measurements of information societies

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The Paradigms and Measurements

The issue of how to measure the information society preoccupies the research

of several authors. Measurements of the information economy were offered by

the previously mentioned authors, Machulp (1962) and Porat (1979). Hudson and

Leung (1988) applied Porat's method to measure the information society of

Texas. The Jahoda Index (Ito, 1981) applied by Japan's Research Institute of

Telecommunications and Economics (RITE) has 10 components, which do not

even include such words as computers, software, or networks. The index is

almost 20 years old and does not reflect the ICT and IM solutions that are fruits

of the information age and telecommunications age. About five years later, the

Japanese Information Processing and Development Center offered the JIPIDEC

Index. This index applies to such categories as hardware, software, and

transmission.

Do these measurements define the information society (Dordick & Wang,

1993)? To answer this question, a new set of measuring indexes has been

offered in Table 1. These measurements are from the citizen's (user's) point of

view and explore how ICT penetrates the population and what type of paradigm,

purpose, and main solutions are provided by each type of information society.

Of course the information society can be perceived at different levels of the

population. The most popular level is a nation; however, one can analyze the

information society at the level of a region or city as well as at the level of an

organization. In other words in the same nation there can operate different types

of information societies, as well as in the same, large organization.

The Developmental Paths of Information Societies:

Future Trends

The developmental paths of information societies are presented in Figure 3. The

model is self-explanatory with the exception of the expert society. The main idea

of the model is based on the prerequisites required in order to move to the next

developmental stage. For example, the informed society can launch its opera-

tions if its members pass through the stage of the informative and communicated

societies. The application of artificial intelligence may help in many areas of

civilization; however, it requires advanced knowledge among developers and

limited skills among operators of expert systems. Therefore, too many applica-

tions of robot systems may lead backward to the computer society, where the

main challenge is how to apply the system. On the other hand some limited

applications of expert systems in technological environments that are too

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complex may help the informative and learning societies in their operations and

developments.

Conclusion

1. The study of the information society types should influence the methodol-

ogy of application systems design, since each type will have its own

requirements that are appropriate for a given level of the society's

information maturity.

2. As nations build their presence in the global economy, they need a national

information policy to allocate and coordinate organizational responsibilities.

This policy should include direct governmental involvement in developing

an information infrastructure similar to urban and rural infrastructures.

Some indirect incentives for the development and modernization of the

information infrastructure should be provided too. A regulatory environ-

ment should be established to provide more conducive decisions on the

modernization of the information infrastructure.

3. The information societies emerge as a neutral tool of social development.

It does not support any politics, either liberal or conservative. They close the loop

of man-to-information and information-to-man. Their mission is the present and

future of humankind equipped with the ability and tools of information and

Figure 3. The path of information's development (The Targowski Model)

Data Society

Computer Society

Mass Media Society

Networked Society

Informed Society

Learning Society

Informative Society

Robotized Society

Monitoring Society

Learning Society

Knowledge Society

Self-sustainable

Society

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communication processing and handling. This may lead to more aware social

decisions and actions. Nowadays knowledge, learning and consciousness is at

the mercy of ICT tools that well or poorly control the development of civilization.

This civilization's current mood is based on the importance of a sense of being.

References

Agres, C., Edberg, D., & Magid, I. (1998). Transformation to virtual societies:

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Endnotes

Adapted from U.S. Congress, Office of Technology Assessment, Critical

Connections: Communication for the Future, OTA-CIT-407, Washington,

D.C.: Government Printing Office, January 1990.

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Chapter II

Organizational

Structure Without

Hierarchy in a Dynamic

Global Business

Environment

Toma Kern

University of Maribor, Slovenia

Abstract

The chapter deals with the inefficiency of classical business systems in a

dynamic global business environment. The main reasons for inefficiency

are complicated processes, which are limited and influenced by inadequate

classical business structures. But in new circumstances business structures

must be designed according to process needs. Classical business systems

should be urgently renewed to survive. Furthermore the author concludes

that a single business system re-engineering project is not the definitive

answer. In the global business environment, changes are constant. The

efficiency of business processes can be maintained and increased in the

long term only by constant but effortless adaptation of structures. This is

possible by the introduction of the organizational structure without hierarchy

and the mechanism for dynamic adaptation of structures to business

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processes. The model of "process organization," which includes those

elements, is described in this chapter.

Introduction

The contribution summarizes the research that deals with the problem of

inefficiency of classical business systems in an era of dynamic changes of global

business environment. By analyzing business models on the conceptual level, it

is proven that business structures (structures of business objects) in classical

business systems significantly influence the shaping and performing of business

processes. However, from the organizational efficiency point of view, it must be

vice versa: the performing of the process should determine and shape business

structures. Business systems should be designed from the process point of view

and supported by adequate information systems, which are at the same time the

enabler for efficient business processes. There is also no doubt that only mangers

and employees with eligible knowledge and skills can improve the organization

(Ferjan, Vukovi , & Kern, 2004). Only they can run renewed processes

successfully, so it is necessary to build process-dependent human resources

systems.

It is obvious that inefficient business systems should be urgently renewed, if they

are intended to survive in the dynamic global business environment. It is also true

that all business structure changes, informational changes, and human recourse

changes should be based on modernized business processes. But in globalization

circumstances it is also true that changes are constant.That means that a

renewed business system can be efficient only until the business environment

imposes new requirements, implying the alteration of processes and the need for

the reconstruction of the structures, information system, and human resource

system.

That means that businesses system reengineering project is not the definitive

answer. In the dynamic global business environment, it is necessary to set up a

"mechanism" enabling constant, fast, and efficient adaptation of business

systems to the changing processes.

Background of the Research

One of the characteristics of the global business environment (which is caused

by great dynamics of changes of clients' demands) are smaller batches of

products (or services) of the same sort. At the same time the assortment extends,

and therefore more and more small batches need to be produced. This means the

change of continual production (or service) processes into intermittent processes

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with less and less repetitions (Kern, 1998). Customers also demand shorter

delivery times and last-minute changes. At the same time stakeholders expect

larger profit, which demands cutting operating costs (that is, costs of work,

equipment, stocks).

Such crossing demands cause organizational difficulties and lessen efficiency

and, consequently, the competitiveness of the business system. Managers

therefore face a demanding problem, which is being intensified. They are trying

to achieve the competitive advantage by investing into equipment and technologi-

cal development. However the great dynamics of changes in the environment

and their radicalism often lessen or even nullify the effect of these efforts. There

are many known cases of longer production times (and hereby costs) despite the

automation of processes after introducing the expensive information technology

(IT). The reason is the performing of additional activities that do not add value

to the business system (preparation, waiting, finishing work, and transference of

documentation and material among individuals). Plenty of time (energy, re-

sources, and money) is spent on the adjustment of sequent or simultaneous

activities and their mastery. The analysis shows that the majority of superfluous

work is done due to the demands of the existent structures in the business system,

which were formed in completely different circumstances from the present

ones. It is shown that there was no such organizational gap in the time of shaping

of business processes; the dysfunction between structures and processes

appeared when processes were changing and structures did not manage to adapt

to them. The experience has also shown that improving of the performing of

individual activities usually does not contribute much to the increase of efficiency

of the business system as a whole (Keen & Knapp, 1996; Kern, 1998).

Figure 1. Model of a classical business system in a stable environment. It

shows the efficient performing of the main business process because the

organizational structure is formed according with process needs.

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In the described circumstances it is often shown that the main reserve the

company still has is in changing the manner of work and relationships in the

business system, therefore the change of organization. However companies

have bad experience with various "reorganizations." These "achievements"

were in the past a synonym for the change of the organizational structure, thus

especially for the change of the executive staff competence and for reducing

staff. The results were often even negative as the broken organizational

structure, increase of formalization, and interruptions of existent communica-

tions even more complicated the processes performing (Kern, 2004).

The new-days answer is so called "process approaches to reengineering."

Several variants have been developed and described in the last years (Keen &

Knapp, 1996; Kern, 1998). The best-known and the most controversial perhaps

is "business process reengineering" (BPR) (Hammer, 1996). All approaches are

based on the same paradigm: increasing the efficiency of processes' performing

by introducing process teams and generalists (Srica, 1997), simplifying complex

processes, eliminating superfluous activities, standardizing activities, and per-

forming adequately in shaping support (Keen & Knapp, 1996).

Business process improvement increases the efficiency of the redeveloped

process. This is proved by many actual examples (Hammer, 1996). However the

improvement by itself does not increase the business system efficiency in the

long term. The reengineering demands elimination of the existent organizational

structures and therefore the coordination problem of several intermingled

processes arises. This causes the establishment of a new organizational struc-

ture, which again becomes inadequate in the next cycle of changes in the

environment and consequential changes of processes (Kern, 1998).

Figure 2. Model of a business system in a turbulent environment. It shows

the inefficient performing of the transforming process after the change of

the process, to which the organizational structure did not adapt.

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Definition of Research Area

The success of the business system can be measured by many criteria. The

business system functions on the basis of intermingled processes that are carried

out in it. One of the measurable criteria of success is efficiency, which is defined

as the ratio between the outputs we get from the system after the performed

process and inputs in the process. The business system is understood as "the

whole of mutually linked business occurrences which enable business processes

and they more or less influence each other." The business process is, regarding

the general definition of process, defined as "dynamic sequence of dependant

occurrences in the business system." The term "occurrence in a business

system" is used for everything that can be perceived in the business system of

business environment, irrespective of whether it is manifested in the physical

sense or not (Kern, 1998), and it can be modeled by business objects. The

business objects represent the copy of the occurrence from the real world into

the model. The necessary (although not also sufficient) condition for the efficiency

of processes is their natural and free flow from the entrance into the system to their

exit. This means that the processes must not be limited with inadequate character-

istics of business objects or inadequate relations among them.

Figure 3. Model of a redesigned process, which is performed by tree

process teams and an individual - a generalist

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Among all modeled objects we must choose those that are similar regarding the

chosen characteristics and unite them into aggregated objects. The term

"aggregated object" indicates a construction that does not exist in the real world

and is introduced into the model to understand business systems and business

system processes. Among individual objects of aggregated object we can

identify relations we will observe and transform them into the structure of an

individual aggregated object. The individual aggregated object therefore repre-

sents the structure of chosen business objects.

Regarding the problem description and the abovementioned starting points, the

research question is the following: We maintain that in the business system it is

possible to shape and perform efficient business processes that will fulfill defined

demands of clients. This is possible despite limitations represented by the

availability of business objects. However this is possible only under the condition

that relations among business objects are not considered. Newly shaped

processes formed in such way can influence back on business objects, and

especially significantly influence their relations (thus the structure of an indi-

vidual aggregated object). The process organization is defined in this manner,

where the aggregated object structure becomes a business process function and

no more vice-versa! The existence of process organization needs assured

dynamic and efficient adjustment of business system structures to changing

processes, which can be accomplished by "the organizational structure without

hierarchy."

Possible Solution: Forming the

Organizational Structures Without

Hierarchy

The objective of the business redesign is the shaping of such organizational

structure that will not obstruct dynamic process changes and at the same time

will enable the mastery of intermingled processes and resources. For this

purpose business objects in the business system are classified into three

aggregated objects. The aggregated objects are selected according to the

common characteristics of objects forming these aggregated objects. The

chosen aggregated objects are: resources, activities, and messages. The re-

search limits itself to discussion of the aggregated object "resources," which is

comprised of "human resources," machines and devices, material, and so forth.

If we focus on the class of "human resources" and human resources structure,

we actually observe the complexity of the organizational structure. This is

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(according to Mitzenberg) the most important standpoint of the organization.

Human resources are the most general resources; we can attribute to them very

heterogeneous characteristics, and at the same time it is hard to define their

behavior. Therefore the model can be relatively simply generalized and applied

also to other resource classes, and even more generally to all business system

objects.

A human being, who is discussed with all his characteristics, takes part in the

process as a whole individuum and is the basic element of the organizational

structure. Problems arise when human resources are grouped on higher levels.

From the very beginning structures were formed according to the needs of

processes that were taking place in business systems when creating the system.

Later on they did not adjust adequately to changes. The gap between the existing

structures of business objects and the adequate structures (for the needs of as-

is processes) is the main reason for inefficient processes.

The necessary condition for the performing of each process is the mastering of

the process and business objects that are needed for the performing. The

required business process outputs can be achieved in various ways; therefore a

process with the same objective can have various versions. The selection of the

required objects, which can be substantially different regarding the chosen

process version, is followed by the identification of available objects in the

business system (especially available resources). The identified resources of an

individual kind need to be defined according to their quantity and quality. The next

step is assignment of the adequate (but available) resources to activities in the

framework of processes and their time and quantitative allocation. The proce-

dure must be performed before the beginning of each process that is newly

implemented in the business system. The procedure is relatively complex and

demands considerable inputs. This consequently lessens the efficiency of the

business system as a whole. The problem becomes acute because there are

several processes taking place in the business system at the same time and they

differ among each other regarding the number of repetitions. In this case it is

necessary to consider the actual and the planned assignment (or occupation) of

all resources in all activities. The structure adjustment procedure described

above is under these conditions in the classical business systems practically

unattainable in the real time. In classically formed business systems this is the

main reason for structuring and grouping. The process preparation is transferred

to a lower level in such a manner, and there is no need for the whole system

coordination. This enables the process preparation in the real time, however, on

the account of lesser efficiency (the sum of individual parts optimums is not equal

to the optimum of the whole). Therefore the organizational paradox arises: the

existing structuring manner is not acceptable from the standpoint of business

systems' efficiency; however, business systems in general cannot function

without proper structuring.

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The solution of the problem "of business objects adjusting structures to the needs

of processes" is not in canceling structures in the business system and then

creating new ones, which would again become inadequate in short time. The

solution of the problem and the consequential increase of a system's flexibility

is in structuring business objects on different bases. Business objects in the

reengineered business system are structured exclusively on the basis of their

characteristics, which are relevant from the standpoint of processes going on in

the business system. This way a business object can belong to any number of

classes, depending on the characteristics it has.

There is no hierarchy in the suggested model as we know it in the classical

organization models. However all resources, and consequently all classes, to

which resources belong are on the same organizational level. The business

system organizational structure is basically hereby absolutely flat. The relation-

ships in such a system are absolutely multilateral. However hierarchy does not

exist, only in those time intervals when there is no process going on in the business

system and business objects are passive. When a process is going on in the

business system, certain business objects become active and relationships

among them are established. In the next interval these relations can be totally

different. After ending the process, business objects break the relations with

other business objects, which were needed in the time of the performing of the

process.

However it is not enough only to structure resources on the basis of character-

istics needed for the performing of activities in the basic transforming process.

To make the dynamic adjustment of structures possible, the definition of special

characteristics or special competence of human resources is also needed. Those

special characteristics enable and allow the organization of other resources and

their management.

These characteristics classify human resources into three main classes:

• Basic human resources, in the framework of the reengineered process,

take part in an individual work or sequence of activities, which add value

to the process.

• Process owners can be a human resource with characteristics that enable

him to understand the process and at the same time with competence that

permit him to shape and perform the process. The process owner has no

control over the resources performing the process until it actually takes

place. The process owner has the characteristics and competence that

enable him to shape the new process version, creating a process team,

launching the process, monitoring, and finishing the process.

• Resource owners are grouped according to their characteristics and

competence over the resources. They are competent for each resource

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group (resource class). That means each is competent for managing and

coordinating the characteristics of resources, which are in a certain class,

and therefore he is not a functional leader and not hierarchically superior

to resources. An individual resource owner can be competent for any

number of classes of basic resources.

Interactions among these classes of resources are the basis of the reengineered

business system and enable changing business object structures, which theoreti-

cally don't have permanent structures.

Dynamic Adaptation of the Structure

Without Hierarchy to Changing

Processes

The processes in the model are defined as the usage of business objects in an

observed time interval. The application of a business object signifies that it is not

"passive" anymore and becomes "active." When the business object is in the

Figure 4. Schematic figure of resources and their classifications into

classes according to the characteristics of resources

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passive interval, we can say that it is in a certain state, and when the business

object becomes active, this means that it is being transferred from one state to

another. Therefore the process can be modeled as the sequence of changes of

business-object states in time.

The business objects of the same main class are always in a certain mutual

relation - they form a structure. It is possible to define for any process such a

business object structure that the process efficiency will be maximal. As

processes change during time, the optimal business object structures are

different in different time intervals. Therefore it is true that business object

structures depend on the use of business objects and have to adapt to processes

continuously. On the other side we cannot use too much time for adaptation due

to searching common efficiency, for this would significantly lessen the efficiency

of the system as a whole!

The mechanism, which enables efficient adjustment of business system struc-

tures to changing processes, is built on tree bases: repository, where all business

Figure 5. Main classes of human resources and their placing into the

described model

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objects and process models are stored, meta process, by which new processes

and proper structures are formed in the real time, and time schedule, for

assigning and allocating resources.

Business System Repository

The repository is defined as a unique collection of meta data, data, object

descriptions, business models, algorithms, rules, conditions, instructions, and so

forth (Jacobson, Ericson, & Jacobson, 1995; Sheer, 1999; Taylor, 1995). The

process models are classified in the repository according to the expected output

(a product or a service). The same business objects can appear in any number

of processes; however, each object is defined in the repository only once:

• The repository is available to process owners, resource owners and basic

resources through the appropriate information technology (Kern, 1995).

• Process owners identify the existing processes and all process versions

using models in the repository. They can also form models, complement,

and update them.

• Resource owners can, by comparing the available and the needed resource

characteristics, which are written in the repository, suggest the assignment

of resources to individual processes and their allocation to individual

activities. Resource owners can assign characteristics to resources and

change them, and in this way they update the repository.

• Basic human resources receive messages through the repository regarding

the belonging to the process team and the performing of the assigned

activities in individual time intervals. The basic resources inform the

repository about the level of completion of the assigned activities and

hereby update data on their availability.

Meta-Process

It is necessary to define a new process for accomplishing simultaneous adapta-

tion of business object structures to the changes of processes. It is called "meta-

process." The meta-process describes securing the required business objects

that enable the shaping and performing of any process in a process-oriented

business system.

• The meta-process starts by receiving a message (stimulus) from the

environment or the system itself, which contains a demand for a product or

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a service. The message is sent by a customer and received by the process

owner in the system (step one).

• The very first activity in the meta-process is the identification of all process

versions, which can provide the demanded product or service. Models of

all process versions that are possible in the discussed business process are

stored in the repository. The process owner selects the appropriate process

versions and classifies them according to the level of their suitability (step

two).

• The calculation of resources is carried out in the repository, and it adjusts

to the available resources. The calculation result is the suggestion of one

process version, which is the most appropriate regarding the system

limitations (step three). The list of available resources with proper charac-

teristics is suggested.

• Resource owner confirms or rejects the proposal for the resource assign-

ment from the class he is assigned to (step four).

• The process owner gains the necessary resources and forms a process team

without hierarchy. The process team comprises all resources needed for

the process performing. The process owner can also be a part of the team

if the selected process version demands it and the process owner has proper

characteristics (step five).

• The process team exists as long there is the need for it, until the process is

finished. When the process is finished, the process team is dissolved.

The most complicated case of meta-process is described above. In practice the

meta-process can be fundamentally simplified for those processes, which are

carried out in the system continually or their repetitions accurately anticipated.

This enables dynamic changing of the organizational structure in the process-

oriented business system.

Resource Assignment and Allocation Scheduling

In the proposed model there are no limitations of process performing due to

unsuitable structures; however, the availability of individual business objects

(especially human resources) in a certain time interval remains an important

limitation. The dynamic adaptation of structures is based on leveling the resource

availability with known characteristics in a time interval and the needs for certain

resource characteristics in the same time interval. For the performing of the

observed process, the resource availability has to be higher or equal to the needs

in each time interval. This condition has to be met in all processes in the system

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and in all the resources taking part in processes. The condition to achieve

dynamic adaptation of structures is the introduction of resource assignment and

allocation system and time schedule of the performing of all processes in the

system.

Certain conditions have to be fulfilled for this (as described in step three in

meta-process):

• Repository with process models must be updated;

• System for setting process performing priorities must be arranged;

• Data on the degree of active process realization must be updated; and

• Scheduling has to be implemented simultaneously for all active and planned

business system processes in real time.

We can describe scheduling and resource leveling only conditionally. The

essential difference between the classical scheduling and the described way of

scheduling is that in the suggested model we deal with resource classes and not

directly with resources. Therefore we schedule the resource characteristics and

resources as objects, and this essentially increases system's flexibility. This is

true for all types of resources (human resources, machines and devices,

materials). Another difference is the option of several process versions, which

result in the same outputs, and choosing that one for which we have available

resources with proper characteristics.

Model of the organizational structure without hierarchy enables adjusting

structures to changing business processes, and it also has some additional

advantages:

• It enables the mastery of the business system in the situation of big resource

fluctuation;

• It enables the mastery of the necessary and available resource character-

istics in the business system;

• It stimulates resource generalization as it enables promotion only over

increasing belonging to several resource classes;

• It enables a high degree of business system self-control; and

• It enables simple business system adjustment when business system grows.

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Conclusions and Future Trends

We can conclude that business system efficiency can be improved by adjusting

structures to business processes. But in a dynamic global business environment

with the great dynamics of changes, the efficiency can be maintained and

increased in the long term by the introduction of the organizational structure

without hierarchy and the mechanism for dynamic adaptation of structures to

business processes, therefore by establishing a "process organization."

The condition for the successful introducing of the model into practice is an

appropriate process order. The paradox, that we are introducing an even stricter

order than it is in the classical hierarchical organization into the process

organization, which is based on independence and innovations, is only apparent!

The prescribed behavior of resources is demanded outward, as the communica-

Figure 6. Model of the organizational structure without hierarchy and

mechanism for structure adaptation to the needs of processes

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tion intensity is greater than in the classical hierarchical organizational structure.

Inward (for example, inside the process team) freedom is higher than in the

classical organization. Rules are defined on the system level for all participants

and observing them lessens the level of system entropy. This signifies that the

system anarchy is lower and this is the necessary condition for a higher level of

democracy and consequently higher level of individual freedom.

All this can be achieved in the dynamic global business environment. Such an

environment is sometimes defined with the term "urban chaos." The suggested

model enables business system efficiency in chaotic circumstances.

References

Ferjan, M., Vukovi , G., & Kern, T. (2004). Influential factors of employee

careers in Slovenia. Journal of Economics, 52(1), 91-107.

Hammer, M. (1996). Beyond reengineering: How the process-centered

organization is changing our work and lives. London: Haperr Colins

Business.

Jacobson, I., Ericson, M., & Jacobson, A. (1995). The object advantage

business process reengineering with object technology. Greenwich:

Addison-Wesley.

Keen, P.G.W., & Knapp, E.M. (1996). Every manager's guide to business

processes. Harvard Business School Press.

Kern, T. (1995). Development of structured flowchart technique for business

process re-engineering. In H. Becva (Ed.), Strategic management and its

support by information systems (pp. 43-49).

Kern, T. (1998). The process organization: Designing of the structure of the

business systems based on renewed business processes. Doctoral

dissertation, University of Maribor.

Kern, T. (2004). Participation of employees in business process improve-

ment projects. Econ'04: (Selected research papers). Vol. 11. Ostrava:

Technical University. Faculty of Economics, 194-201.

Scheer, W.A. (1999). Aris - business process modeling (3rd ed.). Springer

Publishing.

Srica, V. (1997). Inventivni manager. Croman & MEP Consult.

Taylor, A.D. (1995). Business engineering with object technology. New

York: John Wiley & Sons.

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Chapter III

The Organizational

Transformation Process

to Globalization

Magdy K. Serour

University of Technology, Sydney, Australia

Abstract

The topic of globalization is increasingly attracting the attention of

software engineers, system researchers, and, most interestingly, business

practitioners. In recent years there has been a perceptible increase in

demand from business companies, services, and non-profit organizations

and even from government bodies around the world to adopt and utilize

Internet-based technologies in order to transform their traditional business/

service activities into an electronic business environment. Such a

transformation empowers organizations to expand their business processes

beyond their local borders and move the entire business from localization

to globalization. This chapter introduces and investigates the entire

organizational transformation process to globalization. It starts with

emphasizing the necessity of moving local businesses' practices to a global

market with the highlight of the major driving forces for globalization.

Furthermore this chapter examines a number of vital issues that may

strongly impact the final outcomes of the entire transformation process.

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These issues include main obstacles, resistance to change, and risk factors

associated with the transformation process. Moreover this chapter proposes

a conceptual framework with the objective of providing a good

comprehension of the involved factors in transformation with their

relationships. The last section of this chapter focuses on examining and

exploring the foremost transformation maturity stages, readiness, adoption,

diffusion, and retrospective.

Introduction

For the past decade, globalization has been a universal and popular topic in a wide

range of academic teaching and research and also of some organizational

experimentation. In today's economical environment, the word "globalization"

became one of the most attention-grabbing and frequently used terms and

recently engrossed a great deal of consideration not only from business sectors

but also from governmental institutions, academia, and even non-profit organiza-

tions around the globe. From a purely business perspective, globalization is

necessary for organizations to gain a competitive edge and to take advantages

of the new ever-growing Internet global market.

Globalization occurs when business companies decide to expand their business

practices and processes beyond their national or local boundaries and take part

in the emerging global economy. As a result, organizations will present them-

selves in foreign markets whether physically and/or virtually to target and reach

global customers and compete internationally. Hence globalization is the name

that has been given to the social, economic, and political processes that have

produced the characteristic conditions of contemporary existence. This percep-

tion has made it possible to begin to imagine the world as a single, global space

linked by a wide array of technological, economic, social, and cultural forces

(Appadurai, 1996).

So globalization can be defined as the integration of the world's culture,

economy, and infrastructure through transnational investment, rapid proliferation

of communication and information technologies, and the impacts of free-market

forces on local, regional, and national economies (Cvetkovich & Kellner, 1997).

From a business perspective, globalization is the process of internationalization

of business practices and existence to reach a global market with almost no

limitations. From past experience, it has been confirmed that this kind of

transformation process is difficult, costly, and risky simply because it involves a

number of imperative issues that must be well-planned and managed for a

successful result. Some of these issues include product/service adaptation for

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the new global market with a wide diversity of cultures, the adoption and diffusion

of new technologies and innovations coupled with the necessary culture change,

and the essential resources needed for the transformation.

Therefore the organizational transformation process to globalization implies a

number of problems, commonly including investigating the new global markets,

complying with different international legislations and laws, adopting and utilizing

new technologies, and managing and mitigating the natural resistance to the

necessary human and organizational culture change. Hence globalization, as a

new business approach, requires a new way of thinking, understanding the new

users' requirements, and comprehending the new market environment. Global-

ization arrived on the e-world scene with a number of new concepts, such as

denationalization and virtual organizations that required a totally new way of

planning and conducting business. It also arrived with strong emphasis on a

number of the existing effective concepts, such as customer satisfaction, cost

reduction, and product quality improvement and gave them more prevalence and

prominence.

In summary the organizational transformation process to globalization is a

serious and risky procedure that may impact on the entire organization. There-

fore it must be well understood, planned, and managed for fruitful results and that

is, indeed, the focus of this chapter.

In general this chapter aims to provide organizations that are considering the

move to globalization with clear understanding of the entire transformation

process and all the prerequisites for a successful transition. It starts with a full

explanation of what is involved in the process followed by a comprehensive

investigation of the key success factors that may impact on the process. Also this

chapter discusses some of the common problems that might face management

and workers during the process. We hope that both managers and researchers

can find this chapter helpful and useful for their intended projects and use it as

a transformation guideline.

The Necessity of Globalization

Moving to a new working environment such as globalization is considered a major

organizational change. The process of the transformation to globalization is a

mission with many problems. It has been proven to be a risky, costly, painful, and

unpredictable exercise. It is a major and difficult task to achieve because it has

to deal with both organizational and human culture change. The question facing

us now is, do we need the transformation?

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Organizations that are willing to adopt a new business approach and/or introduce

a new technology to their current environment must have a very strong and good

reason(s) as to why they need to change their existing work culture. While

innovation requires creativity, it also involves a great deal of hard work

(Humphrey, 2000). Organizational changes should be introduced to answer some

needs and/or to solve business problem(s).

Consequently all people behind the transformation - adopters, senior manage-

ment, and decision makers - have to know not only "what" but also "why" they

need to go through the transformation process and, hence, they must have a

compelling and persuasive reason(s) to be able to "sell" the project to everyone

involved. People need to know "why" they have to change their way of doing

things in order to be supportive and enthusiastic to the change. They need to not

only realize the necessity and the importance of the change but also the benefits

and value of sharing that change with their organization.

Sultan and Chan (2000) declare that, over the last 20 years, many of the changes

in organizations have been predominantly driven by two factors: globalization and

technology. Hence moving businesses to global markets have increasingly

played a critical role in shaping and influencing the success of companies in many

industries.

It is increasingly clear that the move to globalization and adopting the Internet and

e-business technologies is the ultimate way to cope with the rapidly changing

business needs. Traditional localized organizations started realizing the great

benefits that others in the industry were gaining by shifting their business

activities to a global environment.

In addition adopting new business approaches and technologies has a significant

contribution in market position and business revenue. Business has only two

basic functions, marketing and innovation that produce results; all the rest are

cost (Drucker, 1974). Today and more than ever before, a strong market position

must be based on an organization's market and technical competence (Humphrey,

2000).

Driving Forces for Globalization

Globalization as a revolutionary business approach has emerged as a direct result

of many driving forces that interact with each other and establish an integrated

impact on the development of global business activities. Undoubtedly the

emergence of new communications and information technologies has signifi-

cantly reduced the existing physical, social and political barriers that may limit

business firms to exchange and trade at a global scale. These technologies have

accelerated the process of cultural, social, and environmental change toward the

new ways of thinking of trading and competing globally. Information technology

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improves the organizational ability to conduct and manage business at multiple

locations across the globe (Robertson, 1992). The rapid development and

utilization of the international network (Internet) and associated technologies

have increased the speed of information transformation among countries in the

world that economizes the cost and time to transmit the information of the

international trade transactions.

Besides the huge advances in technology, international trade legislations and

regulations can form a strong obstacle for organizations to move to globalization

by expanding and trading in different countries. Fortunately many countries

around the world have realized the importance of globalization and its positive

role in enhancing the country's economic conditions. According to a United

Nations survey (United Nations, 2004) during the last decade, more than 150

countries have made a large number of serious changes in their law and

legislations that govern international trade. Some of these changes involved

liberalizing a country's foreign investment regulations to make it easier for

foreign companies to enter their markets. These changes have also resulted in

a considerable reduction in international tariff rates and investment parries.

Additionally, many countries have also removed or at least reduced the financial

restrictions to foreign direct investment (Jin-young, 2002).

In addition to all the above, there are many other driving forces that may

contribute to the development of globalization, including a desire by people to

take advantage of the opportunities provided by interactions with other societies

through global trades, the continuous improvements in communication and

transportation technologies, global economic growth, pressure for quality im-

provement and cost reduction, and declining international trade barriers. Buchanan

and Huczynski (1997) conclude that factors such as customer requirements,

trade barriers, competition, emerging markets, environmental concerns, political

pressures, and technology can form strong driving forces that may influence

organizations to undergo serious changes such as the transformation to global-

ization.

Moving to Globalization is Problematic

Despite the fact that the transformation to globalization has become one of the

dominant forces in the e-world today, there is still a large number of organizations

that have never considered, let alone completed, the transformation. For them

the adoption of the Internet, e-commerce, and web technologies implies a

number of problems, commonly including adoption and diffusion of new tech-

nologies and resistance to the necessary organizational culture change (Henderson-

Sellers & Serour, 2000).

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Therefore the main transformation problems can be categorized further into two

main streams. The first relates to the effect and the impact of the various key

success factors, including human, organizational, technological, environmental,

business, and contextual factors. The second relates to the planning and

management of the entire transformation process. Experience shows that

improper planning and poor management are among the major reasons contrib-

uting to the transformation's failures.

Risks Associated with Transformation

Due to the fact that the process of transforming organizations to global markets

involves a considerable amount of research, investment, and organizational and

human culture change, it must have some risks associated with both the required

culture change and the technology itself with the uncertainties of the competitive

marketplace.

New technologies such as Internet, web services, and mobile computing are

considered the foremost facilitating power and driving force for globalization. As

a result, one of the most challenging issues is the possible risk involved in

mismanaging people's change during the introduction of new technologies.

Therefore management must do everything in their capacity not only to fully

understand the associated risks involved but also plan to eliminate or mitigate

those risks. Furthermore Humphrey (2000) has stated that high technology is

always risky and the search for a technical solution confronting business

problems always faces the highest risks of all. He also stated that behind any

successful project, there are invariably a few key technical decisions that can

make the difference between success and failure. Two-thirds of all new product

development funds are spent on failures (Humphrey, 1997).

Main Obstacles for Moving to Globalization

With every introduction of any new business approach and/or adopting new

technologies, there will always be a number of obstacles that prevent or reduce

the chance of pursuing the implementation of the new approach (moving to

globalization in this context) and/or the adoption of such new technologies. These

obstacles could be related to, and/or be initiated by, any number of organizational

internal and/or external factors. External factors may include the different

international political, economic, and legal systems and, also, the existence of

different cultures such as social culture, languages, and religion.

Some examples of the internal factors are inflexible organizational culture,

hierarchical organizational structure, lack of management commitment and

support, human resistance to change, and insufficient resources needed for the

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transformation. Some examples of the external factors are commitment to

external environment critical changes and constraints of regulatory, government,

and political issues. For a successful organizational move to global markets,

champions and supporters behind the move should not only identify all possible

obstacles but also work hard to defeat them or at least mitigate them to eliminate

and/or minimize their negative impact on the whole process.

Some other obstacles are:

• No compelling reasons for the transformation.

• People's resistance to change and adopting new technologies.

• The conflict of interest between stakeholders - mismanagement of expec-

tations.

• Commitment to critical environmental changes (for example, Y2K, Euro

conversion).

• Lack of globalization awareness, knowledge, education and expertise.

• The ambiguity and uncertainty of the final achievements.

• Organizations are not realizing the benefits of moving to global markets.

• Heavy investment in existing systems.

• The necessity of organizational and personal culture changes.

• Time, cost of training, and tools required to diffuse and master the new

technologies.

• The lack of well-defined transformation guidelines to assist organizations

in planning and managing their move to globalization.

• Lack of commitment.

• Lack of expertise on new technologies.

• Misunderstanding the organizational culture change.

• Misunderstanding the different human cultures in global markets.

• Changes in organization's environment such as merging or restructuring.

The Need for Transformation Guidelines

While it is clear that the transformation to globalization has been highly

successful for many companies, there are still a large number of organizations

that have not yet transformed. This is a reflection of the traditional bell shaped

adoption curve in which 50% of companies are "followers," or "laggards," in the

adoption of any new business approach and/or new technology.

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Despite the above fact, there is no doubt that there is a great number of

organizations that are interested in moving to the globalization era but do not

know "what" is involved, "why and how" to do it, "where" to begin, and "what"

is the first step. And how long will it take? Therefore these organizations are in

a desperate need of guidelines to answer their questions and lead them through

the entire transformation process. It is well known, as derived from some

industrial projects, that the organizational transforming process to globalization

is not a "big bang" exercise; rather, it is a long, costly, risky, and extremely

difficult exercise. No organization can expect to move from a local to a global

business environment without high investments, productivity reduction, and the

challenge of critical risk factors.

Senior and middle management find it hard to proceed when there is (still) very

little guidance available from real-world experience. Despite the fact that the

advantages of globalization have been accepted by the mainstream of the

business industry, the process of transforming organizations to a global environ-

ment is considered a paradigm shift that requires not only the willingness and

commitment from everyone within the organizations, but also the understanding,

realization, and readiness for major culture changes. There is a need for

guidelines to get organizations from their traditional business environment to one

in which globalization paradigm is dominant.

Therefore the process of the organizational transformation to globalization needs

to be well organized, planned, phased, and very well managed. Also it can't be

ad hoc or chaotic; instead, it must be very well engineered. Thus in the context

of moving business organizations to a totally global business environment,

following transformation guidelines specifically constructed to assist them in

planning and managing their move may enhance the process of managing

people's natural resistance to change and increase the chance of a successful

adoption and diffusion of e-commerce and internet technologies. Zakaria and

Yusof (2001) emphasize the significance of following transformation guidelines

by arguing that a successful organizational transformation is a result of thorough

strategic planning, proper implementation, and cooperation by all groups, to-

gether with high commitment and minimal resistance.

The paramount guidance that could be offered would be a means by which the

technology insertion (such as Internet, e-commerce, and web services) would be

accomplished. In other words, a process needs to be used and followed to support

the transformation to global markets and also support the adoption and diffusion

of new technologies. While some companies have successfully moved to

globalization, the process they followed has never been written down, published,

or otherwise disseminated. It is likely that the transformation processes followed

have been ad hoc and are unlikely to ever be formalized.

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The Transformation Conceptual

Framework

Here we propose a conceptual framework for the transformation process with

the intention of providing a good understanding of the involved components and

their relationships.

A conceptual framework is a graphical and descriptive presentation of the

process at hand. It illustrates all involved components, giving each a descriptive

name, and explores their supposed relationships (Miles & Huberman, 1984). It

is usually constructed to assist managers in defining their process focus and

boundaries as it:

• Explains the main dimensions to be studied.

• Illustrates the key factors.

• Shows the presumed relationships between factors.

Figure 1 represents a graphical and descriptive conceptual framework for the

process of the organizational transformation to globalization in order to define the

scope, the boundaries, and the main objectives of the process. It shows six

double-lined rectangles representing the main groups of factors that may

influence the transformation process and must, consequently, be well planned

and managed for a successful mission. These groups are:

• Human factors.

• Organizational factors.

• Technological factors.

• Environmental factors.

• Business and IT strategic factors.

• Contextual factors.

There are two groups of factors, human and organizational, that lie inside the

organization's boundary, and we call them the "intra-organizational" factors

(represented by lined-shaded rectangles). The other four groups of factors,

technological, business, environmental, and contextual, lie outside the organiza-

tional boundary, and we call them the "extra-organizational" factors (repre-

sented by shaded rectangles). Also, this framework specifies the relationships,

or the interactions, between all the different framework components. The

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framework assumes some relationships between the transformation endeavor

and all other components, as indicated by the arrows. These relationships are

purely logical, such as the impact of human and organizational factors on the

process.

The following section lists the major intra- and extra-organizational factors that

may influence the transformation process to globalization.

Human Factors

• Human culture and the necessary culture change.

• Existence of transformation champions.

• Involvement of customers in the transformation process.

• Misunderstanding the critical requirement for different human culture in

globalization.

• Appropriate communications channels between the organization and its

customers.

• Appropriate communications among distributed organization's teams.

• Workflow and groupware (employees effectively working in teams).

• Need for high-quality and accepted products by global customers.

• Flexibility of work culture to change in order to master the new business

approach.

Figure 1. Transformation conceptual framework

Technological

Factors

Environmental

Factors

Business & IT strategic

Factors

Impact

Impact Impact

Contextual

Factors

Impact

The Organizational Transformation

(Readiness, Adoption, Diffusion, Retrospective)

Organizational Factors

Human Factors

Change Impact

Impact Change

Technological

Factors

Environmental

Factors

Business & IT strategic

Factors

Impact

Impact Impact

Contextual

Factors

Impact

The Organizational Transformation

(Readiness, Adoption, Diffusion, Retrospective)

Organizational Factors

Human Factors

Change Impact

Impact Change

Human Factors

Organizational Factors

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Organizational Factors

• Management commitment for the new business approach.

• Delivering products and services on-time and within budget to global

customers.

• Willingness and capability of carrying out organizational change.

• Flattened organizational structure.

• Flexibility of organizational culture.

• The existence of internal research and development policy to support and

promote the organizational move to a new technology.

• Technological awareness and its adoption.

• Resource availability includes budget and people.

• Demands on management performance.

Environmental Factors

• Critical external changes such as GST, Euro conversion, and the Y2K

problem.

• Tough competition because of new market dynamics.

• Business acquisitions such as takeovers or mergers with other businesses.

• Changes in regulatory forces such as government legislations.

• Result of investigations in regard to globalization.

• Influence of globalization success stories.

Technological Factors

• Necessity of new technologies, including Internet, e-commerce, web

services, and mobile computing.

• Availability of technology elements.

• Accessibility.

• Complexity.

• Trialability.

• Compatibility with organizational environment.

• Suitability to business requirements.

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• Maintainability.

• Affordability.

• Capability (an enabler of other technologies being used, such as the

Internet, intranet, and extranet).

Business Factors

• Corporate objectives and strategic plans.

• Business expansion.

• Growth in business.

• Business continuity.

• Reengineering of existing business processes to achieve radical improve-

ments.

• Cost effectiveness.

• Moving to distributed systems environment or enterprise-wide computing.

• Adoption of the Internet/intranet-based operational environment.

Contextual Factors

Contextual factors represent any other related factors that are not listed in the

above groups, but they may influence the transformation process including:

• Global market competition.

• Global cultural requirements.

• Global multilingual markets.

• Global time zones.

• Virtual existence.

• E-commerce and multi currency.

• E-commerce and human behavior with credit cards transactions.

The Transformation Process

This section focuses mainly on the theory and practice of the entire process of

moving organizations from localization to globalization. The major objective of

this section is to provide organizations with a complete understanding of the

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major stages of the transformation process lifecycle. Such an understanding can

guide organizations in planning and managing their move to globalization and

effectively competing globally.

In general going through an organizational change and/or adopting new technolo-

gies must add a tangible value to the organization that is undertaking it. The

organizational move to globalization is the process of turning new ideas and

concepts into creative and useable methods and techniques that assist organiza-

tions in expanding their marketplaces and extending their customer base around

the entire world.

In order for business organizations to solve the problem of ever-changing

business requirements, meeting the ever-increasing customer demands and

expectations and enhancing the way they do business, they need to change their

existing way of thinking to be able to achieve the most appropriate solution for

the problem(s) at hand and/or work out a better way to do things. To cope with

today's global e-market and to gain competitive advantage, organizations need

to look for new and better ways to do their business and also more effectively

to stay ahead of their competitors.

To do so, they need to plan to adopt and utilize new technologies or innovations

that may enable them to achieve their goals. First organizations need to

understand their existing culture and work out the required changes to become

familiar and comfortable with the new environment to which they are aiming to

move. Once they have succeeded with the shift to the new environment, they will

be able to adopt and utilize the new technologies much more effectively. Also,

with the achievement of culture change, they will be able to enhance the way

they do things and implement these new changes in the most appropriate way.

So the transformation process can be thought of as a road map between the

organizational current and desired states as shown in Figure 2. Organizations that

are aiming to move their traditional local business practices to a global business

environment must comprehend and be fully aware of the different maturity states

of their process.

Figure 2. Transformation process, the road map between the organizational

current and the desired states

Traditional

Business

Environment

Global

Business

Environment

Current State Desired State

The Transformation

Process

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Bridging the Gap Between Current and

Desired States

From a different perspective, the transformation process can also be viewed as

a road bridging the gap between where the organization currently is in terms of

business practices and where they are intended to be as illustrated in Figure 3.

As demonstrated in Figure 3, the transformation process aims, through its four

major stages, to move organizations from their current common practice

environment to their desired and hoped best-practice environment. Often efforts

and resources needed to adopt new technologies, such as the Internet and Web

services, to close the organization's practice gap are difficult and costly.

Additionally and as shown in Figure 3, during the process of transformation, cost,

resources, time, and effort will rise considerably and, at the same time,

productivity will drop as people are more overloaded and busy learning the new

ways. The entire process can be long, unpredictable, risky, and burdened with

troubles due to the necessary culture change and the serious decisions to be

made. All people who are involved in the transformation need to understand their

current intra-organizational culture and perform the required changes in order to

adopt and optimize the use of new approaches to conduct their new business

processes (Serour & Henderson-Sellers, 2002).

Once organizations have completed their transformation successfully, cost,

resources, time and effort will continue to drop and productivity and revenue will

escalate rapidly. At that time, the organization's desired state becomes their

current state. The transformation process will continue to achieve further

improvement and optimization and ensure people are kept up-to-date with the

Figure 3. Transformation process bridges the gap between current and

desired practice states

The Transformation

Process

Current

State

Desired

State

Readiness

Adoption

Diffusion

Retrospective

Desired state becomes Current state

Cost

Resources Time

Efforts The Transformation

Process

Current

State

Desired

State

Readiness

Adoption

Diffusion

Retrospective

Desired state becomes Current state

Cost

Resources Time

Efforts

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newly adopted technologies. Once organizations have arrived at their new

business environment, keeping up to date with the newly adopted technology

becomes a separate yet important issue.

Transformation Maturity Stages

(Readiness, Adoption, Diffusion and Retrospective (RADaR))

To illustrate the extent and the scope of the entire transformation process, we

state that the complete process of transformation may go through a life cycle of

four maturity stages: Readiness, Adoption, Diffusion, and Retrospective

(RADaR). These stages are focusing on different aspects of the whole process

and aiming to achieve different goals. In other words RADaR has four different

stages that represent the four different transformation maturity states that

organizations may go through in an iterative and incremental manner in order to

move their business practices to global markets. The following section will briefly

introduce these major stages followed by a detailed description of each stage.

• Readiness: Focuses on transitioning both management and development

teams to a totally global business environment and achieving the necessary

culture changes.

• Adoption: Focuses on assessing, evaluating and acquiring the appropriate

and needed technology elements, such as Web services and e-commerce,

middleware, databases, and so forth to a developing organization's new

software systems.

• Diffusion: Focuses on enforcing the principles and conceptions of global-

ization, deploying and spreading out the adopted technology elements. Also

this stage aims to stop people from getting back to their old ways and habits

to perform business processes.

• Retrospective: focuses on assessing and evaluating the transformation

achievements and finding any defects for corrections. It also aims to define

any possibilities for further improvements, enhancements, and optimizations.

The process of transformation starts with the first crucial and important stage

(Readiness) that focuses on getting the organization ready for the new

paradigm. This stage involves a number of activities aimed at making the

organization familiar and comfortable with the new business and technology

environment before any attempt to implement and disseminate the new technol-

ogy is made. This initial attainment becomes the pre-condition for organizations

to successfully complete the rest of their transformation process to accomplish

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what they have planned for moving to global markets and adopting and diffusing

new technologies.

The subsequent stages (Adoption and Diffusion) focus on the acceptance and

dissemination of global technology products such as Web services and e-

commerce. Through the final stage of the process (Retrospective), organiza-

tions will be able to assess the whole situation retrospectively and draw attention

to any area for improvement, keeping the entire organization updated with the

Table 1. The organizational transformation maturity stages

Figure 4. The organizational transformation to globalization

Evaluation and continuous improvement

Keeping up-to-date with new technologies

RETROSPECTIVE

(Post-conditions)

Deploying the adopted technologies in practice

Stop people from going back to old habits

DIFFUSION

(Technology Dissemination)

Technology assessment, selection and

implementation. Education and training on

new technologies

ADOPTION

(Technology Acceptance)

Moving organizations to a global environment

with culture change and eliminating obstacles

READINESS

(Pre-conditions)

Main Activities

Transformation

Maturity stages

Evaluation and continuous improvement

Keeping up-to-date with new technologies

RETROSPECTIVE

(Post-conditions)

Deploying the adopted technologies in practice

Stop people from going back to old habits

DIFFUSION

(Technology Dissemination)

Technology assessment, selection and

implementation. Education and training on

new technologies

ADOPTION

(Technology Acceptance)

Moving organizations to a global environment

with culture change and eliminating obstacles

READINESS

(Pre-conditions)

Main Activities

Transformation

Maturity stages

Readiness

(Moving to Global

Environment)

Technology

Adoption

(Internet, Web services,

e-Commerce etc.)

Technology

Diffusion

(Utilizing

adopted

technologies)

Culture

Change

Adopted

Technology

Deployed

Technology

Improvements

Compelling Reason(s)

For Transformation

Retrospective

(Improvement and

Update)

Readiness

(Moving to Global

Environment)

Technology

Adoption

(Internet, Web services,

e-Commerce etc.)

Technology

Diffusion

(Utilizing

adopted

technologies)

Culture

Change

Adopted

Technology

Deployed

Technology

Improvements

Compelling Reason(s)

For Transformation

Retrospective

(Improvement and

Update)

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adopted technology. Table 1 shows our perception of the entire transformation

process with its four maturity stages.

It is worth noting here that within each stage - and sometimes between stages

- there is a degree of iterative, incremental, and parallelism. In other words the

activities and tasks within each stage can be carried out and achieved in an

iterative, incremental, and parallel manner that provide organizations with more

flexibility and process control. Figure 4 illustrates these four major stages with

their contracts.

Readiness Stage

Readiness, as the first stage of the transformation process, focuses on getting the

organization familiar with the new business environment and carrying out the

associated changes as the precondition for the adoption and diffusion of new

technologies. It is mainly related to the required organizational and human culture

changes in order to obtain and maintain people's acceptance and senior

management support and commitment. It deals with all IT professionals in terms

of changing their culture and their way of thinking about business practices. It

intends to gain people's high morals and willingness to positively participate in the

transformation process.

The main activities considered necessary to be carried out during this stage to

prepare the organization to move to a global business environment are:

• Identify and understand the compelling reasons for the transformation.

• Understand and assess the current organization state (local state).

• Understand and assess the desired organization state (global state).

• Analyze the major key success factors for the transformation.

• Realize the required organizational and human culture change.

• Obtain and maintain management and customer support and commitment.

• Provide management, workers, and software developers with formal and

adequate introduction to globalization with all associated issues and also

provide them with appropriate education and training.

• Identify the obstacles and barriers for the transformation.

• Sell to everyone the transformation project with its associated changes.

• Construct a transformation plan and secure the required resources.

• Conduct a comprehensive cost-benefit analysis and possible financial risk

analysis involved in transformation.

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The pre-conditions for this stage are the existence and the full understanding of

the organization's compelling reason for moving to globalization and the official

approval from senior management as a commitment to start the process.

During this stage, management and information technology (IT) teams will carry

out a number of activities in order to define and assess their current and desired

states. They start first with assessing the current organization's state in terms

of available resources and its IT capabilities. Then it is necessary to assess the

desired state requirements in order to determine and estimate the required

resources to carry out the transformation. Further assessment activities are

focused on assessing people in terms of their skills, knowledge, and willingness.

Beside these assessing activities, there are other activities, including gaining

management support, defeating people's resistance to change, providing the

appropriate education and training, and increasing the awareness of any required

new technologies.

The major post-condition of this stage is changing the organization's and the

individual's culture to be able to adopt to their new business environment and

utilize the required new technologies. Other important deliverables from this

stage include, but not are limited to, maintaining full senior and mid-management

support, minimizing people's fear, uncertainty, and resistance to change, allocat-

ing all required resources, including people, and full analysis studies of the risk

factors involved, as well as the various key success factors that can influence

the entire transformation process.

Adoption Stage

The adoption stage usually starts when the previous stage (readiness) is almost

complete, with the release of its deliverables that become the pre-conditions for

this stage. The major activities of this stage are concerned with determining,

choosing, evaluating, and purchasing the technology products that are required

for managing the new business processes. No doubt IT plays a vital role not only

during the transformation process to globalization but also to manage and

conduct the new business processes. Information technology in general is often

seen by management as an essential means to advance and compete in the global

market. There should be a desire on the part of the organization, particularly its

senior management, to adopt new ways of doing things.

In the context of corporate business enabled by IT, as Hammer and Champy

(1994) have so concisely highlighted, IT can be a creative cause for new business

processes rather than merely supporting existing business processes. Adopting

a new technology can be used not only to simply automate what we do, but to do

totally new things to dramatically improve what we do currently (for example,

moving business practices to globalization). Choosing the appropriate technology

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products will assist the organization to feel confident in moving to a new business

environment. In addition IT teams within organizations must select the most

appropriate and flexible technology products that can be, if needed, tailored or

customized to suit the organization's new environment and to fulfill its business

and customer needs.

An organization's perception of technology deals with the way organizations

usually select, value, and assess the new technology to be adopted. It must add

value and help the organization solve its business problems and achieve its

objectives. Technology is no value of its own; it has to be effectively integrated

within the organization to increase its competitive edge (Zahn, 1995).

The main activities that are considered necessary to be carried out during this

stage of adopting new technologies are:

• Identifying the appropriate and required technology products.

• Choosing the most proper and appropriate vendors.

• Professionally evaluating the selected products.

• Recommending the most suitable products with justifications.

• Acquiring the recommended products.

• Providing adequate education and training on the selected products.

Another important activity of this stage is providing the technical individuals with

the adequate and appropriate education and full hands-on training to enhance

their knowledge and skills, in order to efficiently and comfortably use and master

the new technology tools such as creating and marinating the organizational Web

site. Different training methods and techniques should be used to train people to

accordingly satisfy their needs (Goldberg & Rubin, 1995). For example, in-house

training and education should be conducted at the early stage of transformation

to introduce the new technology to people.

From real-life projects experience, introducing an innovation or a new technology

to people in their own environment for the first time has a positive impact on

people's acceptance and increases the chance of their continuation. After

passing the hard stage of gaining the people's acceptance and commitment,

outside training sessions and e-learning can be more advantageous where people

can be trained in a different environment, away from their daily business

interruptions.

Special consideration should be given to selecting the most appropriate training

company for the importance of their crucial role in accomplishing a successful

transformation. The organization should assess and evaluate the training com-

pany on every possible aspect and characteristic, including experience, profes-

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sionalism, reputation, reliability, accountability, availability, suitability, and their

ongoing support even after completion of the training courses.

Diffusion Stage

The diffusion stage mainly focuses on the deployment, spreading out, and

enforcing of the new business practices and adopted technology across the entire

organization. This stage usually starts when the previous stage (adoption) is

almost complete. The major preconditions for the diffusion stage are acquiring

and installing the adopted technology tools and techniques.

Before starting this stage people should be enthusiastic, feeling comfortable with

the new business practices, reengineered business processes, and Internet

technologies. Also they have received all the required and adequate professional

education and training to enhance and upgrade their knowledge and skills to

confidently think and work in the new global e-business way. At this point, the

organization should be ready to embark on its first transformation pilot project for

a particular product(s), area, or type of service. Further special training sessions,

such as just-in-time, can be conducted during this stage to handhold employees

and software the developers as they embark on their first project. The major

activities of this stage are concerned with enforcing the new way of thinking and

working in the global market environment.

During this stage, the transformation champion and the in-house support teams

will be working together closely with everyone involved to offer any support at

any time. These teams will be observing people as they are going through the first

increment of the entire transformation process to report any difficulties or

problems they might experience and plan to resolve them very quickly. For

example, if these teams realized that they selected an inappropriate tool or

technology, they may iterate back to the adoption stage to take an appropriate

action to resolve the issue. The main activities considered necessary to be

carried out during this stage are:

• Carefully selecting the first transformation project (first increment) as a

start to get everyone familiar with the new business culture. This project

must be important enough to gain management attention, and simple enough

to implement so as to enhance people's self-confidence and enthusiasm.

• Providing full training and mentoring, such as Just-In-Time, for software

application developers, system users, and customer service teams.

• Monitoring and supporting people during their first increment of the

transformation process.

• Taking any appropriate decisions and/or actions when needed.

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• Encouraging and rewarding people for doing good work.

• Observing and documenting everything for evaluation and further improve-

ment.

• Reporting progress and any other issues to management.

Retrospective Stage

In general retrospective (occasionally referred to as post-project review) is a

formal review of any process or project that occurs at the end of that project so

as to answer the following questions:

• Did we achieve what we set out to do?

• If not, where did we go wrong? And what should be done?

• If yes, what is next? How can we repeat what we have done again?

• What are the lessons learned and experience gained?

• Can we identify areas for improvements?

Retrospective (Kerth, 2001) is the final stage of the transformation process; it

focuses on reviewing and examining the whole process to report the achieve-

ments against the original plans and also to answer the above questions. During

this stage the organization should reward the people who were behind the

transformation, such as the transition champions and in-house support teams, as

a way of encouragement and appreciation.

Senior management should also announce and launch the new business changes

in a formal manner in order to emphasis their importance and to highlight the

achievement and their dedication to the new way of global e-business practices.

A special celebration event organized by senior management inviting everyone

within the organization, including customers, can be an effective way of getting

the management message through loud and clear to everyone involved.

In summary the major activities of this stage are concerned with examining the

whole process to identify and report the following:

• A collective understanding of what happened and why.

• All successful actions and steps to be repeated next time.

• Lessons learned and what to do differently next time.

• Any problems and/or difficulties encountered during the process.

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• Any lack of enthusiasm and/or self-confidence within individuals.

• All possible opportunities for further improvement.

• Acknowledgment and appreciation of accomplishments.

• Rewards for all champions involved with the transformation.

• Plans to announce and celebrate the completion of the transformation

process to globalization.

• Beyond retrospective (continuous improvement).

• After carrying out the retrospective stage and arriving at the organization's

desired state (global state), this desired state then becomes the organization's

current state. By examining and analyzing the recommendation and the

action list produced during the retrospective stage, the organization will be

able to plan for perfection and further improvement. With a successful

transformation to globalization the organization will feel confident and be

capable of assessing and adopting new business opportunities that benefit

the entire organization as a result of competing globally.

Summary

This chapter introduced the process of the organizational transformation to

globalization and e-business environment along with related concepts, stages,

and activities. The main goal of this chapter was to provide a broad understanding

regarding the entire transformation process that can assist the reader in

comprehending the effect of various factors such as human and organizational

factors in details. This chapter discussed and covered the following transition

concerns:

• What do we mean by the organizational transformation process to global-

ization?

• What and how can various factors influence the success of the whole

transformation process?

• What are the main obstacles for the transition to globalization (ethical and

technological)?

• How can we defeat these obstacles?

• What is the ultimate way to plan and manage the transformation process?

• How can we measure the outcomes or the end result of the entire process

(evaluation and lessons learned)?

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References

Appadurai, A. (1996). Modernity at large: Cultural dimensions of globaliza-

tion, Public Worlds, Vol. 1. Minneapolis: University of Minnesota Press.

Buchanan & Hucynski (1997). Organizational behaviour: An introductory

text. London: Prentice Hall.

Cvetkovich, A., & Kellner, D. (1997). Introduction: Thinking global and local. In

A. Cvetkovich & D. Kellner (Eds.), Articulating the global and the

local: Globalization and cultural studies. Boulder, CO: Westview.

Drucker, P. (1974). Management, tasks, responsibilities, practice. New

York: Harper & Row.

Goldberg, A., & Rubin, K.S. (1995). Succeeding with objects: Decision

frameworks for project management. Addison Wesley.

Hammer, M., & Champy, J. (1994). Reengineering the corporation: A

manifesto for business revolution. London: Nicholas Brealey Publishing.

Henderson-Sellers, B., & Serour, M.K. (2000). Creating a process for transitioning

to object technology. Proceedings of the Seventh Asia-Pacific Software

Engineering Conference (APSEC 2000), (pp. 436-440).

Humphrey, W.S. (1997). Managing technical people-innovation, teamwork,

and the software process (6th ed.). Addison Wesley Longman.

Humphrey, W.S. (2000). Introduction to the team software process. Addison

Wesley Longman.

Kerth, N.L. (2001). Project retrospectives: A handbook for team revise.

New York: Dorest House.

Miles, M.B., & Huberman, A.M. (1984). Qualitative data analysis: A

sourcebook of new methods. Newbury Park, CA: Sage Publications.

Robertson, R. (1992). Social theory and global culture. London: Sage.

Serour, M.K., & Henderson-Sellers, B. (2002). The role of organisational

culture on the adoption and diffusion of software engineering process: An

empirical study. Proceedings of the Adoption and Diffusion of IT in an

Environment of Critical Changes, IFIP TG8.6, (pp. 76-88).

Sultan, F., & Chan, L. (2000). The adoption of new technology: The case of

object-oriented computing software companies. IEEE Transactions on

Engineering Management, 47(1), 106-126.

United Nations. (2004). U.N. report. Retrieved on February 16, 2004, from

http://www.un.org/esa/global.htm

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permission of Idea Group Inc. is prohibited.

Zahn, E. (1995). Gegenstand und zweck des technologiemanagements in:

Handbuch technologiemanagements. Stuttgart, Germany: Schaffer-

Poeschel.

Zakaria, N., & Yusof, S. (2001). The Role of human and organisational culture

in the context of technological change. IEEE Software, 83-87.

TEAM LinG - Live, Informative, Non-cost and Genuine !66 Banerjee

permission of Idea Group Inc. is prohibited.

Chapter IV

Transition from

Manual to IT-Based

Documents Transacting

Business Process:

Performance Measurements

System as the Key

Parthasarathi Banerjee

NISTADS, India

Abstract

A medium manufacturing firm had since beginning organized itself around

quality-driven transactions in information documents. This learning in

documents transaction helped it in scoring large gains in productivity, in

cost-cutting, and in evolving a sound performance measurement system.

This set the norms of work. However globalization opened up opportunities

and threats. The old system had sufficient information technology (IT)

backing but it failed in motivating employees adopting a global information

challenge. In order to compete internationally through differentiated

products with high quality, this firm then reengineered its manufacturing.

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Market information substituted quality as driver of information transactions.

The goal of the project was to Web-enable the firm. The IT project had to

define business transactions as the unit, which would define transactions

in information in object language first and subsequently as transactions in

documents. Changes were then brought at three levels: the first, essential

level was based on business transactions among employees supporting the

information system, which in turn generated business documents. Essential-

level business transactions formed as a second level cared for the nuclei of

business processes and could also constitute a new performance

measurement system. Browser-enabled communication proved acceptable

to employees who had previous learning in information transactions. The

firm gained immensely through this novel mode of IT application.

Background

Liberalization and globalization have sent a message to entrepreneurs that

opportunities for creating new business have opened up. There have been

contrasting views saying that threats to business increased along with globaliza-

tion. However for creating new business particularly in the form of a small

venture, globalization offered distinct new dimensions in countries such as India.

Threats exist for the old and established business. In consumer products new

business such as in zip fasteners, which we will discuss now, opportunities came

along by way of first opening the vision to a global competitive market and,

second, by exposing an entrepreneur not so much as to resources but to business

and technological opportunities. This is a story about three entrepreneurs who

floated together, in the early years of globalization of Indian economy, a new

small venture to manufacture zip fasteners. This narration testifies how with

technological learning and adoption of information technology as well as contem-

porary management a newly created enterprise could be made a globally

competitive entity. The hero, Mr. V, of this narration is one of the three

entrepreneurs.

Mr. V understood that "learning before doing" was an effective and attractive

mode compared to the "learning by doing." In the transformation of the small

organization from a domestic-centered orientation to a globally looking IT-based

medium-sized knowledge organization with globally distributed manufacturing

facility in about a decade, information-learning proved to be a boon. Previous

learning in information handling during the initial years when the enterprise was

new and small was not IT-based. However knowledge on using information

proved to be context-independent, and this knowledge helped the transition. This

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knowledge could not have become effective unless new and novel performance

measures, based on contemporary understanding of performances in a knowl-

edge setting, affected an incentive system, as it were, to induce the employees

of this organization to bring previously learned fundamentals into the new IT

setting. The new performance measurement, known as "motivational" measure-

ment, was a system to induce and affect emotionally the people whom it was

measuring. The system employed a principle called TASK through an informa-

tion system (IS), designed to foster communication-based business transaction.

This information systems-based management thus achieved three things: first, it

utilized previous information learning based on documents transaction; second,

it employed a motivational performance measurement system; and third, this

motivational disposition was brought forth with the direct use of an IS designed

on communication based business transaction as per the DEMO (Dynamic

Essential Modeling of Organizations) model. Perhaps the ease of transition was

facilitated further by the fact that the innovator of new organization was none

other than the owner-entrepreneur, Mr. V, who shared with two other owners

having similar dispensation the leadership of the passage of their privately held

now medium-sized firm.

Background of the Firm

Close to the capital city of India, three entrepreneurs, two of whom had studied

engineering together in a premier institution, launched the firm "G" to manufac-

ture zip fasteners and components back in 1991. One of these three, Mr. V, while

employed as an engineer with a large packaging firm close by, had invented a

novel method of packaging that the firm could make into a very successful

innovation. Mr. V was always restless with new ideas, and yet he has the rare

combination of a matching meticulous care to the details of the system he is laying

out. Novel idea, when matched with detailed systematization, often meets

success. This spirited innovator organized the new unit by calling the two other

partners. With their little capital and scarce knowledge of the exact method

engineering of manufacturing zip fasteners, it was an uphill task. Technological

manufacturing of zip was established, and there was no scope for novelty.

However the organizational aspects and method engineering of the business

process were altogether new to them. Novelty was there in the mode of this

designing of an organization and its business processes. In an otherwise

technologically mundane business, these entrepreneurs set up a knowledge

organization whose key principle was management and learning of information.

This was novel because knowledge organizations are common only in the

technologically advanced areas while this business was on a backward technol-

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ogy, set up as a small unit with little capital, and the locally available human

resources were largely illiterate. Novelty and the success of this enterprise are

attributable to information-based learning, knowledge communicating, and mo-

tivated IT-based business transactions. In short its novelty has been in its

organization.

The firm G has now two factories, one of which is in the Middle East, and more

than 20 branch offices. In 1995 it had only one factory and six branch offices.

Its gross turnover increased by more than five-fold during 1990-1995, and during

1995-2000 gross turnovers more than tripled (Table 1). The number of employ-

ees, however, did not progress in similar fashion. In fact while output was

steadily rising, the number of employees not only failed to rise but also dropped

significantly in three years. Worker productivity has been rising all these years.

The number of employees had to rise again, however, in 1998-1999 when a new

factory in the Middle East was set up.

We will, however, discuss changes in the domestic manufacturing set-up alone.

Capital intensity of its manufacturing rose continuously. Most significantly upon

which as a start-up, it has remained critically dependent. However cost saving

played a significant part, and so also did the rising worker productivity. capacity

utilization of these machineries, too, rose to reach near-cent percent utilization.

Capacity utilization helped G in enlarging the internal accrual of funds This cost

Table 1. Manufacturing profile of G

Item 1991 1994 1996 1998

Gross turnover, Rs.

Million, (approx.

Rs. 45= U.S. $1)

16.3 65.2 92.4 210.2

Total value of

machinery, Rs.

Million

4.5 19.5 263.2 352.6

Total employees 142 295 270 290

Total salary bill, Rs.

Million

0.4 8.2 22.1 34.6

Energy

consumption, Rs.

Million

0.4 19.6 31.3 56.8

Cost of marketing,

Rs. Million

1.5 8.9 13.6 17.5

Cost of

communication, Rs.

Million

0.1 0.4 0.8 2.5

Capacity utilization,

72.5 81.8 98.2 99

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saving has been affected through several measures (Table 2). Total input-

inventory holding cost and the total finished holding cost have failed to rise in

proportion to the turnover. Inventory has risen only marginally. Considering the

impossibility of introducing a just-in-time system by a small enterprise located in

a place where public information infrastructure is virtually absent, the achieve-

ment in G has been remarkable. Moreover costs were also saved by reducing the

value of material rejection and by minimizing the necessary movements of pre-

processed output (per unit of output) inside the factory as well as by optimizing

the movement necessary for an output to reach the customer through carefully

located branch offices. Cost of energy, too, did not rise in proportion to the

growth in turnover.

Resources are critical. Initial capital was partly from the entrepreneurs' personal

savings and was partly secured through a term loan from a development bank.

A term loan is costly. In order to expand the business, these entrepreneurs

decided such costs should be minimized. This alone would give them enough

internal accrual. The stock market in India is poorly developed, and the prospect

of raising capital through either an initial public offer (IPO) or through venture

funding was simply zero. In fact the firm G since its inception has largely built

upon internal accrual. It has used both internal accrual and term loan for new

projects while for most others, such as for creating new markets, it has employed

both cost saving and internal accrual (Table 3). The most important resource is,

however, the people. Getting the right people on low wages was impossible, and

in order to have internal accrual, G could not offer market-best salary or could

not create jobs that only graduate engineers could do. G had to start recruiting

fresh hands, not many of whom even had the right kind of education. Nearly 90

percent of their total staff has remained wage-earning workers, with the rest

distributed between marketing and administration. However in recent years

Table 2. Cost aspects of G

Item 1991 1994 1996 1998

Total variable cost,

Rs. Million, (approx.

Rs. 45 = U.S. $1)

9.6 36.1 37.2 56.6

Total input-

inventory holding

cost, Rs. Million

1.8 0.6 3.7 3.8

Total finished output

holding cost, Rs.

Million

0.8 1.4 3.1 3.5

Total value of

material rejection,

Rs. Million

2.1 3.9 3.3 2.1

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percentages of total employees as wage-earning workers have come down and

staff engaged in marketing has gone up, though not significantly. The innovative

entrepreneur, Mr. V, quickly had to devise a production set-up that could

simultaneously act as learning benches to these workers. Table 4 indicates the

level of qualifications of the employees. Educational level at entry was in general

so poor that Mr. V devised several schemes for OJT (on the job training), multi-

skilling, design skill, repair and maintenance (RM) skill, and, above all, informa-

tion-handling skill.

Learning to Undertake Information

Transactions

Dynamic competence of an enterprise depends on both the skill base and the

deployment dynamics of the skill base (Banerjee, 2003). In fact dynamics of

deployment, which takes care of multi-tasking and multi-skilling, increases the

competence significantly. The percentage of production workforce that have

Table 3. Sourcing of funds at G

Table 4. Percentage of employees of G with educational background

Source Capital

machinery

New

projects

Development &

Creating new

marketing

Commissioning

R & D

Internal

accrual

Yes Yes Yes Yes Yes

Sale of land,

assets, other

income

Yes

Increasing

equity base

Yes

Term loan Yes Yes

Short-term

borrowal

Yes

Financial

management

Yes

Cost saving Yes Yes Yes

Department Degree in

engineering/above

Diploma in

ITI certificates

(equivalent to

technicians'

certificate)

Less than

ITI

certificate

Design 10 30 30 30

Manufacturing 1 5 20 74

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been working on the same or very similar work stations continuously for the last

two years was 94, for the last five years was 85, and for more than the last eight

years was only 30. As a practice nearly half of the workforce switched over to

new workstations in about six years. This took care of multi-skilling. About 10

percent of the workforce was deployed in multi-tasking. Most significantly, up

to five percent of the workforce remained in general diverted for new products

or new projects. Deployment dynamics takes a new dimension when skilled

workers are redeployed from production to the repair and maintenance (RM) and

vice-versa (Fischer, Jungeblut, & Rommermann, 1997). In fact about 50 percent

of RM jobs are taken care of by workers right on the shop floor. However, in

contrast to the Toyota system (Spear & Bowen, 1999) deployment of skilled

workers from RM to marketing never took place, partly because marketing of zip

fasteners does not involve the level of skill required in automobiles. Workers

skilled on the shop floor often get promoted first to the RM department and hence

to the design department As a result the skill component in design, fed by both

considerations of manufacturability and production-maintenance, has remained

very high, although the level of formally qualified graduate engineers in designing

remained low. The firm G could not afford to hire engineers in hordes. Experience

in manufacturing coupled with introduction to formal aspects of engineering and of

the marketing enriched immensely the competence of G in launching of the "best"

and "internationally competitive" own-designed range of products.

About 5 percent of the total employees are in design, of whom 20 percent have

design experience of more than 10 years and about 50 percent have design

experience of about five years. In fact G encouraged workers designing small

inventions right on the shop floor by putting up a system of award and recognition.

Qualification-wise only 10 percent of designers have degrees in engineering

while about 60 percent have only licentiate (lower than a diploma, which is lower

than a degree) or lower exposures. Capital expenditure and man-days spent in

design have been fluctuating, increasing in the year prior to launch of a new

product. About 10 percent of investment in capital machineries remains ear-

marked for design, including software required. Mr. V, when asked to rank the

importance he attaches to the goals of design, forthrightly suggested customer

demand as first, reliability as second, ergonomy as third, and minimal consump-

tion of resources as fourth, disregarding such other values as considerations on

competitors' products, features on incremental design, and so forth. However

this department studies intensively products on offer by competitors and passes

on this information to the manufacturing. The firm G could not naturally create

its own R&D department. Instead, it has tied up with a nearby premier

engineering research institution for both long-term and short-term designs, which

require sophisticated theoretical inputs.

Mr. V, looking after the manufacturing (the other two entrepreneurial partners

look after finance and marketing, respectively), sought to overcome the initial

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poor quality of human resources by emphasizing training the employees in

manufacturing skill. Training intensity leapfrogged in some years; for example,

while in 1995 one in three employees received training other than OJT, in 1996

this number exactly doubled. It doubled once again in 1998 before the firm G

went in for its Middle East capacity. Mr. V ranked as most important training in

the area of existing skill while ranking of next importance training in a related skill

and of least importance training in a futuristic skill. However few of the workers

from traditional background of craftspersonship suddenly appeared to Mr. V as

repositories of skills, the much valued craft skills, and initially these workers

joined in prototyping, to be joined in later by other trainees. Craft skill was taken

up as a policy, an area where G must develop its own competency. Mr. V set

aside funds for compensating expenses incurred by an employee in getting

training in her own choice area from an outside agency. He encouraged

experimentation by providing them with additional tool kits and with the guaran-

tee that failures were not to be penalized, and he targeted communication skill

as one of the most important policy goals in training. Employees mostly shared

common mother tongue, however, there was little in common between them to

share on conceptual or theoretical planes - employees had very diverse levels

of skills in manufacturing. Mr. V clearly spelled out the importance of "manu-

facturing intelligence," a term he uses to connote an intelligence shared together

through multiple modes of communications on ideas and skills in manufacturing

competence. A close friend to Mr. V and also a consultant to G, who is a

professor in statistical quality control, became a regular visitor, advising Mr. V

on using varieties of visual tokens as symbols of information about quality,

progress of job, problems, and so forth. The workbenches turned out to be

festooned galleries transacting between them business transaction tokens.

Information Transaction with Market

However manufacturing intelligence could not be gathered only through setting

up a detailed system of transaction in information (or its tokens) on the job

progress. Business information transactions, Mr. V soon understood, ought to

involve several tiers, first between marketing and manufacturing (Hausman &

Montgomery, 1993), then between several processes in manufacturing, and

between the past data and current performance referring to the goals, and on

relative performance of an employee. In short information connectivity appears

supreme, followed by linking sources of and accessibility to information. Market

information came by deputing employees from the shop floor to trade fairs and

exhibitions. The marketing team, however, was considered as the most important

source, followed by the dealers' information, then that from the vendors/

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suppliers. Manufacturing information proper came by prototyping; customizing

new product for specific customer need, which was followed later by mass

marketing of the same; undertaking reverse engineering and generating test-data

on certain products from competitors; and distributing information generated in

R&D funded by G and undertaken by others and also while commissioning pilot

plants/work-lines. Moreover close information transactional interfacing be-

tween manufacturing and the RM and the design enriched the information

intensity of what Mr. V thought was manufacturing intelligence. Facilitation of

such transactions happened through first setting up data bases on RM and on

servicing and second through detailing manuals on both technical-servicing and

the RM. documentation of routine production done later. In the early years

business transactions of the employees were largely oral (about 90 percent).

Over the years communication progressed through written, then more visual

toward more symbolic or database. By 1998 at least one-fourth of the commu-

nication was based on the last mode through computer terminals and another

quarter on the third mode.

It was crucial for firm G to locate its strategic competence. Once identified such

competencies could be hastened up to secure strategic gains over the competi-

tors (Varadarajan & Clark, 1994). The zip market in India is highly skewed. A

large multinational corporation dominates both the global and the domestic

market, and its products, though costlier compared to the run-of-the-mill

products, have a very high quality. As a result its brand name is invincible. Firm

G does not have a brand presence. Its resources are scarce and could not be

channeled for creating a brand. On the other side of the spectrum, there are many

domestic producers that offer unbranded inferior products at a much lower price.

Moreover the domestic zip market is extremely differentiated because few

consumers buy zips directly. Consumers depend on small retail tailors or small

producers for products with zips stitched in. The number of such small shops runs

in hundred of thousands. Demand for quality in the domestic market is not

articulated enough. Price-quality considerations often disfavor quality. A com-

petence in productive aspects alone, while it would allow it to mass produce at

lower cost and compete with the lower-end bulk domestic producers, also would

disallow the firm G to establish its future brand in the international market in

competition with the leading multinational. However if G's competence is

secured in quality and consequently in reliability as well as in diversity of products

and in its ability to reach any parts of the globe, G would surely overcome the

syndrome of a domestically entrenched sweat shop. Opportunities surely existed

for G in the latter direction.

The choice to G was clear. Mr. V did not want to set up a sweatshop for making

money. He thought that G should compete in quality with the dominant multina-

tional. However, with small production set up, there was no scale economy and

initially, during the period of learning, productivity too was rather low, resulting

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in higher cost of the end products. The nature of the market demanded setting

up a large marketing team, but that was beyond the means. Developing

franchisees, too, required large working funds. Mr. V therefore decided to put

emphasis first on meeting and even surpassing the quality of the dominant

international brand. He knew that his marketing thrust and his advertisement

expenditure would not be able to establish their own brand in the immediate

future. Quality as the engine should determine the production set-up and inter-

alias the human resources performances measurement as well improvement

practices (Figure 1). Productivity would remain a secondary outcome of this

process. In the early years of G a quality department was set up. It established

simultaneously quality circles through project teams, initiated rewards and

recognition schemes, and began saving immediately. Savings through quality

ensured substantial gains for a few years following 1994. Employees learned

keeping and maintaining, also storing in a database the data on virtually each

process step and stage in the manufacturing first, and then later on adding

marketing as well.

Information as Key

Information appeared as the key to this direction of competency. Mr. V had by

1995 read literature on business process, its reengineering, and on IS. Now

enlightened by his statistician friend and consultant, he realized that what he was

trying to achieve, namely competence through manufacturing intelligence, was

riveted to not locating or even recording information but rather in enhancing both

information intensity and information transacting business processes and tasks.

In reality the complex processes of information transfer that he had already set

up by 1995 were the germination of business processes. Information transfer-

ence across marketing, work stations in manufacturing, RM, design, commis-

sioned R&D, servicing and quality were in germinal form, structuring process

interfaces between these departmentalized entities. In other words regular

information transactions had by then already bridged these extant sub-processes,

Figure 1. Quality as driver in business improvement

Performance Measurement System

Quality Goal As

Driver

Information

Transaction

Improvement

Practices

Documents As Production Organization

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creating the first embryonic notion of an integrated business driven by variable

and multifarious informational transactions. Recognition of this embryonic

phasewas urgently needed. Moreover Mr. V understood that such transactions

were indeed being carried through the active agency of the employees of G. Mr.

V, as narrated above, began implementing quickly a set of incentives that would

recognize and facilitate these informational business transactions. Databases

were set up. Incentives and even promotions were related with excellence in

skills and in information communication. All this made information transaction

the life force of G.

Agenda for Transformation

By the end of 1995 the board of G took a decisive step. It was decided that export

should be the thrust area. Existing position in domestic market should be growing

at the pace it has been growing, namely about 20 percent per annum. Share of

export was nearly zero in 1994 but had an astronomical rise by more than 100

percent in 1995 (the growth appeared large because of the small volume of

export in 1994). However the experience of 1995 proved strong. Moreover the

export market had clients who procured in bulk, thereby reducing per-unit cost

of marketing. In fact, as observed earlier, because of the fragmentation in the

domestic market, per-unit cost of marketing in the domestic market was high.

Further, lack of bulk order from this market prevented G from achieving scale

economy and forced it to often run in batch mode. Export market, in contrast,

opened up the possibility of scale economy, which in turn offered drastic cost

reduction per unit and opened the possibility of opening up lines of manufacturing.

This market was highly quality conscious, thus offering the needed challenge that

Mr. V was looking for. Exporting offered several advantages: it paid prices for

quality; cash earning was much higher, improving the cash flow; bulk orders

provided volume and hence provided opportunity for building up a brand; and the

market was structured, implying cost-to-market was low. Above all, because of

higher competition in quality products, this market, while difficult to enter, was

full of potential opportunities. Designing a new product with higher reliability and

higher quality would establish now a higher assurance of acceptance. Moreover

Mr. V's practice of customizing a product prior to launching the same for the

mass market had better prospects because an international customer for bulk

volume would be readily welcoming a customized, better-quality, newly designed

product. The craft skill of G, assiduously inculcated amongst its workforce by

Mr. V, now came in very handy. Prototyping and customization with craft skill

put in designing imbued the export entrant G with a distinct competitive

advantage over other long-standing international large manufacturers. The

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board of G understood when Mr. V explained that integration of business process

at the enterprise level would remain amiss if G were to limit itself to the domestic

market alone. Board of G decided that the next few years they would retain their

domestic market while putting all their efforts in expanding share of export.

Toward this, since now investments in quality and in business process would

possibly reap cash and higher dividend, they decided to first set up a computer-

ized browser-based information system for marketing. This would provide them

with the much-needed access to the international market. Marketing would be

responsive to the customers' queries and expectations on quality, and the entire

information system would interface with the manual information documents

transactions system through Mr. V's office.

Documents Transaction as the Base

Both Mr. V and his statistician friend/consultant were aware of concepts used

in understanding a business as a documents transaction system (van Reijswoud,

Mulder, & Dietz, 1999; Winograd, 1988). Information as the driver of the

business gets transacted across roles played by individual members of an

organization. Such information transactions take place through documents. With

this belief and with knowledge of statistical quality control, it may be recalled, Mr.

V and his friend together set up the production workstations, which were highly

dependent on communications of information stored in several media. Each such

workstation acted as a generator and receptor of information. Documents were

not necessarily in the form of a physical missive but were frames containing a

scripted or coherent bunch of information communicable in several modes. By

1995 Mr. V had set up the most detailed document transaction system. They did

not have a single computer before 1994. Excepting a handful including Mr. V,

employees had no knowledge of transacting information through computer. All

the documents were information-intensive, often based on manual recording and

oral or written or even coded documents used to be transferred across the

production set-up, driving, as it were, the production. This document-driven

production was slow initially, and the personnel took time to learn transacting

information as the driver of the production and as the controller ensuring the

quality of the output (Porter & Millar, 1985). However while internally among the

groups of workstations the information document transaction could set up a set

of business processes, it was failing in meeting the ultimate criterion. Customer

satisfaction as the defining boundary to a business process integrated at the

level of enterprise was still amiss. The domestic market being unorganized, G's

marketing team was unable to locate the type customer, information from

whom ought to have been driving the internal information document transaction

system.

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There were two more hurdles. Employees who were happily transacting

business information verbally or in other physical modes began feeling discom-

fitures with the evolving demands of databased or non-physical modes of

transactions, especially those relating them transactionally to the unknown and

not as-of-yet experienced domains of global customers. The second hurdle was

that to the management, in particular to Mr. V, it was appearing that while

information-driven processes at G appeared to be better than its domestic sweat-

shop competitors, this level of information intensity was not perhaps sufficient to

enable G as an international brand offering competition to the reigning multina-

tional. Option to G was to reorder its human resources system with new

incentives and new knowledge-driven focus in order to overcome the first hurdle

and to hire an international consultant for benchmarking its processes. An

international consultant alone can offer international benchmarking data. The

first option was costly but achievable, but the second option would cost G very

dearly, and G finances did not permit it.

Regionally Benchmarking Manufacturing Intelligence

An opportunity came by around 1995-1996. A management research institute

from the same city had at that time launched a research project on the

manufacturing competence of industries in that region, with one of the research

goals as creating a benchmark among firms belonging to different sectors of

industry sharing the same location on indicators of manufacturing competence.

Mr. V, understood the implication of the study and gladly agreed to cooperate

Firm

Enterprise

informatiz

ation

External

informati

connectiv

ity

Employee

accessing

external

informati

Information

employed for

competition

Design skill

employed for

competition

Strategic

use of

advanced

design

Quality

maintaina

bility

Skill-

shopfloor-

integrat io

G 0.5 0.5 0.15 0.5 0.4 0.6 1 0.02

1 0.125 0.25 0.0025 NA 0.3 0 0.3 NA

2 0.5 NA 0.5 NA NA 0 1 0.18

3 0.125 0.5 NA NA 0.1 0 NA NA

4 NA NA 0.01 0.5 0.3 NA 1 0.01

5 1 1 0.2 0.25 0.5 NA NA NA

6 0.25 NA NA 1 0.2 0 1 0.02

7 0.25 0.5 0.0125 0.5 NA 11 NA 0.03

8 NA 0.25 0.025 0.5 0.1 0.2 1 0.03

9 0.5 0.5 NA 0.5 0.4 0 0.5 0.12

10 NA 0.5 NA 0.5 0.2 0.3 0.5 0.01

Table 5. Indicators of competence: Firm G in comparison

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with the research team. He thought that in lieu of international benchmark data,

G could now be compared with other firms that were either units of multinationals

or were globally marketing their products. The result of this research survey was

revealing. In almost all the relevant indicators of competence, G was either at the

top or close to it. Table 5 compares eight indicators of G with 10 other firms from

the same region manufacturing various other products such as automobile,

machine tools, haulage, and so forth. Values of three indicators in connection

with employment of databases, computers, and information as such in symbolic

mode have been compared, as have indicators on application of information for

competition, design skill employed for competition, strategic use of advanced design,

the integration between skill-shop floor and the RM, and maintenance of quality.

Indicator on enterprise informatization indicates whether a firm maintains in-

house databases, maintains enterprise-wide IS, and whether it has undertaken

business process reengineering. G had a value above the mean (the distribution

of values having standard deviation at 0.3 for 53 firms) and only one firm had a

value higher than G. Similarly the next indicator on external information

connectivity based on a firm's use of EDI, Web site, and multimedia internal to

the organization shows that G is once again above the mean (with standard

deviation of 0.2 for 53 firms). Indicator on employee accessing external

information is based on percentage of employees accessing or using databases,

on the firm's use of commercial data base search (such as on a patent), and on

the firm's use of commercial engineering databases. Here again G maintained

its above-average competency. Another indicator that measures the use of

information for competitive advantage is based on a firm's use of reverse

engineering and on the firm's data generation on competitors, however, shows

G has a value a little lower than the mean (for 53 firms). Three other indicators

on aspects of manufacturing competence capture use of design skill for

competition, strategic use of advanced design, and the integration between shop

floor, RM, and the general skill pool. In all these three indicators, G maintained

a value rather high in comparison to the mean (of 53 firms). The last indicator

in Table 5 is about firm's competence in maintaining its quality profile; it is based

on whether the RM employees impart the OJT, whether the firm has a policy in

place on ensuring quality, and whether employees routinely generate and record

data on quality. G maintains the highest value here.

By 1996's end G had access to the benchmark and to the general states of affairs

regarding indicators of manufacturing competence in the region. This data

revealed to Mr. V that much was to be done. In preparation to becoming global,

Mr. V had already launched in 1996 preparations on several databases. These

were on engineering, manufacturing, inventory, and market. G began using in

1996, again as preparatory to be global, Internet, paging, and mobile telephony.

Its cost of communications, which was Rs. 0.4 million (approx. U.S. $0.1 million)

in 1994-1995 shot up to nearly double that to a figure of 0.75 million (approx. U.S.

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$0.18 million) in 1995/96. This increased to above Rs. 2.5 million (U.S $0.62

million) by 1998-1999. In 1996 G went in for purchasing software for the first

time; it had earlier in use software developed for custom use. The work for LAN

was launched end of 1996. The idea on the Web site was not yet moot. Mr. V,

looking at the comparative statistics and having attended, along with several

other entrepreneurs/managers, several brain-storming workshops organized by

the research institute, realized that the earlier strategy of quality-driven informa-

tion transactions in G could unfortunately encompass the manufacturing proper

alone - the integration of manufacturing and marketing through information

transacting businesses remained unattained. Moreover it was now apparent to

him that while previous modes of transactions and training and other human

resources aspects were well-suited to an environment having little symbolic

computerized information, now, with computerization of information transac-

tions, all this needed drastic overhaul. It was indicative enough that a strategic

change was necessary.

Performance Measurement System

Aspects of measuring and motivating human resources in the forthcoming

changed situation were showing signs of strain. The previous harmony between

Mr. V and his employees, that had grown together with the growth of G

somewhat organically, now began showing signs of displeasure if not of rupture.

The previous system, with its emphases on craft skill, verbal transactions,

performance measurement by each for oneself, and on collectively sharing the

comparative performance profile, enjoyed bonhomie. Measurement of perfor-

mance did not drive outcomes inconsistent with the intentions of the system

(Austin, Larkey, & Royo, 1998). The earlier system was simple because

measurement of performance of an individual was possible as jobs were broken

into tasks being performed by an individual; then any measured output could be

attributed causally to the actions undertaken by an individual or a group and

measured data could be used evaluatively, implying that evaluation would lead to

emergence of a set of desired norms. The last, namely evaluability, is important.

A performance measurement must, even if not intended, set up a norm. Norms

that get set up display incentives for certain kinds of jobs and tasks and

employees would be directed to undertaking those jobs and tasks, even though

the measurement was intended for evaluating the efficacy of some other existing

norms. These later norms are the written rules in the codebooks whereas the

measurement system institutes another norm unwittingly. The system would be

considered dysfunctional.

With the new emerging situation, the previously existing separation between

individual jobs and tasks began disappearing, giving way to a situation where

many employees shared a single outcome and, conversely, in many outcomes

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there emerged the contribution from a single employee. An individual began

appearing as a set of roles. Consequently measuring the productivity of a single

individual in the previous mode appeared more and more difficult. Further, as a

result of this role, mixing attributability of the measurement system too suffered;

it was also difficult to attribute causally what factor or which individual was

responsible for the outcome. Finally the previous system of measurement,

through its evaluability, had set up a set of norms, which the employees had been

happily consenting to. Now, with new types of jobs, new modes of information

transactions seeping in - it became difficult to locate a standards of perfor-

mance against which the rest could be benchmarked. This was evident in the

research institute's reporting. In the previous system owing to bonhomie,

employees "willingly" cooperated in generating and sharing data on performance

whereas in the newly emerging situation, with the happy senses lost, it was

"irrational" to "require that workers engage in a behavior that is fundamentally

irrational on a self-interested individual basis" (Austin et al., op cit:7). Mr. V

could see that workers desired a different system. The firm G in his vision

continued to be in manufacturing, and he was designing strategies for acquiring

the manufacturing intelligence. In all this employees had to willingly participate

to transform G into a knowledge organization. A measurement system and a new

norm, which could institute motivation in the employees, was what Mr. V was

now looking for.

Manufacturing Marketing Interface

This affair seemed even more complicated because now the manufacturing had

to be integrated with the marketing, and if a business process reengineering were

to be undertaken in order to drive manufacturing through the market-provided

information, the cocooned complacence existing till that date in manufacturing

would be lost for good. The previous strategy was similar to the Japanese style

emphasizing cost reduction while increasing or at least ensuring quality (quality

as the driver). Its priorities were cost, quality, dependability, short-term flexibil-

ity, and continuous innovation (Hausman & Montgomery, 1993). The market

demanded price, quality, availability, variety, and features. Mr. V was looking

after manufacturing and another director was looking after the marketing.

Quality-driven cost reduction as the business model served several goals: less

working capital, less outgo on borrowing, profit-making though competitive cost-

based pricing, incremental innovation through quality maintenance, and product

variety through initially customizing. Integration between marketing and manu-

facturing was fracture-less.

However, if the market were to drive production and if market were to set up

units of business transactions in information with such a desirable seamless

interface that the two departments appeared as one, the previous strategy of

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cost-cutting and so forth would be given up. Consequently hero workers - the

role models who saved costs, who incrementally innovated and who targeted

manufacturing as the outpost - would now have to listen to customers'

information, design accordingly, and need not look at cost saving alone. G could,

in the international market, now have the opportunity to look beyond cost while

pricing, and its profit avenues seemed now different. The international custom-

ers would look for more information about the dependability and reliability of not

the product alone but more about the manufacturing. Their gaze inside manufac-

turing and their demanding of alternate manufacturing scenarios turned upside

down both the interface bridging marketing-manufacturing and the human

relations system. Mr. V hoped that computerized information-based business

transactions would offer the needed strategic solution because he was confident

that previous learning in information handling would direct the new learning.

Process of Change

The board of G, consisting of the three entrepreneur directors, met for days,

consulted the statistician, and looked closely into existing literature on modern

management. It was decided that G should set a few business goals: to export

a minimum of one-third of turnover by three years while maintaining the current

growth rate in turnover; to set up another plant primarily for export in the Middle

East by two years; to not increase existing employee strength - in other words,

to increase proportionately employee productivity; to enhance quality, reliability,

and increase product varieties by minimum three-fold in the coming three years;

and to achieve all this by maximum internal accrual of resources and minimal

borrowal from term-lending institutions. Overall G hoped by 1999-2000 be in a

position to commence establishing its brand name. These were rather tough

business goals. Mr. V did not have immediate answers to the means he wanted

to employ; he had inklings, though. He thought about strategic choices between

technology as driver, quality as driver, or people as driver. He had already

consulted several strategic change management literatures; in particular he

referred to the MIT framework (Scott-Morton, 1991) and the Fujitsu framework

(Yetton, Johnson, & Craig, 1994). Change management in a small and medium

enterprise located in a developing country (Chang & Powell, 1998), Mr. V

understood, had its own peculiarities. Both the MIT and the Fujitsu framework

had referred to large corporations with very rich technological and other

resources base and located in an advanced technology competition milieu, and

these corporations were operating in advanced technology products. G did not

have any of these. MIT-Fujitsu frameworks compared differences in sequences

and in the choice of the driving element out of strategy, structure, technology,

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management processes, and individuals and their roles. However, for a small and

young business such as G, structure of business, its management processes, and

business strategy as a separate element could not be considered meaningful. In

fact business structure of G was only evolving and taking shape along with an

inseparable management process. Mr. V identified only three aspects, namely,

technology, quality, and people. Quality had been the driver and in a certain sense

had been also the management process of G. Technology that G had been using

was based on information transaction as the principle, albeit without using IT as

its instrumentality.

Strategic Change Through IT

Roger and Elvin (1999) differentiated between four modes of strategic deploy-

ment of IT. A change management may need IT to initiate, facilitate, support, or

bring in unplanned changes from the market. The intervention process in their

scheme was formed by the context, the outcome, the business content, and the

IT content. Mr. V had been facilitating changes in G through business transac-

tions of information in a manner that was slowly appropriating IT in order to

become an IT-based IS. The firm G thus did not require IT to initiate change. IT

as the channel of bringing in market led to unexpected transformations inside G

that were not suited for G. The choice was between the two: IT as facilitator or

as support. The board as a set of business goals had decided the outcome of the

change already. Mr. V's thoughts thus hovered around the context (internal and

external) of G and the business content of the change - he thought these two,

namely context and business content, should decide IT content. The external

context was globalization and international competition. The internal context was

set by employee knowledge in business transaction of information and growing

dissent, or at least disenchantment, with the prevailing performance measure-

ment system, which was now setting business norms at cross purpose with the

business goals of G. Business content had been set by goal of export, changing

from quality as driver to customer as driver with the constraint that employee

productivity would have to rise significantly. Reflecting back on his own

approach, Mr. V could see that he had begun using IT as the support for the past

year. G had a rising communication cost doubling, every year; it had launched

LAN; 70 percent of its employees had been referring to internal databases at

some point; there were several computer terminals; and in the preceding two

years G first customized software and then purchased more software for its

inventory. IT had begun supporting change. However, G required a radical

strategic change. Mr. V therefore thought of IT as a facilitator of strategic change.

Looking back Mr. V realized what had been his achievement in setting up a

document-based information transaction system as the source of improvements

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in the business (Figure 1) had with its success become a source of inertia (Tripsas

& Gavetti, 2000). Capabilities of its personnel as captured through its perfor-

mance measurement system, in particular the coordination patterns and the

norms as how best to achieve business coordination, had after its initial success

acquired dead weight. If at this phase IT continued to be brought in, as G had been

inducting computers over nearly two years since 1994-1995, this deadweight

inertia would set up in documents transactions and the corresponding measure-

ment system would get stabilized. IT, he was afraid, instead of bringing about

changes radically and strategically, would support only continuous changes - a

mode in which any inertial system keeps changing. To facilitate change he was

looking for a radical reversal. Mr. V thought about reversing the sequence of

business transformation. A business organization, he believed, should behave

like an organic being who gets transformed as it continues its living. A business

while transacting business should receive the fillip to change from within the

mode of transacting that business. Here ideas came from several sources, and

it was not apparent to him either, although the shape that this new sequence

slowly took up can be schematically presented as in Figure 2.

His ideas on change and business process designing were very similar to the

DEMO (van Reijswoud et al., 1999). The core of business, its essential function,

is business transaction through which the business content takes up shape. This

essential level (Figure 3) is supported through information transaction. G

acquired informational competence through learning to undertake such informa-

tional transactions. The information level gets captured for structural reasons

of the business in the form of documented structure, created through

documentation.

Figure 2. Transformation in reverse sequence

Documented Structure

Documentation

Informational Competence

Informational Learning

Business Content

Business Transaction

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Business Transaction as Unit of Business Process

Mr. V faced an excessive load. However putting a very hard-working team close

to Mr. V, could effect some modest changes in both the nature of the documents

and in their process set-up, keeping in mind that changes in the manual

documents were to be minimal and work schedules did not suffer a setback. G

had by then several databases in use through several computer terminals. A

number of inventory documents were created, stored, retrieved, and even

destroyed as computerized documents. However many documentations on the

shop floor or in liaising with design, RM, and the marketing or administration were

in hard copies; in manufacturing many documents were tokens carrying informa-

tion on quality and other details. The first important aspect of the change was

thus how to minimize the turbulence created by reversing the sequence described

above. So far documents had carried the cued information, and documents thus

structured the information-based business transaction. In the present mode, if

business transactions have to constitute dynamically the documents, entirely new

sets of documents would be demanded, created, stored, and so forth. Meetings

and exposures of the employees to this new mode largely solved changing over

the problem. Mr. V and his close team understood that active human agency,

when willing, could adopt to any innovation in no time. However employees

sensed a trouble - the new system implied a radical change in the performance

measurement system. Resistance formed soon. We will get back to this aspect

soon. Turbulence could be kept to the minimum through acquiring, finally, the

concurrence of all. The board thought that because of both scarcity of capital and

rising demand on investment owing to export orientation, the marketing set-up

should launch the browser-based system immediately and initially through a

service provider. After about a year, this same should be based on its own server,

which even later, around 1998-1999, should include the production set-up

documents transaction system. The board was expecting a steady rise in export

given their quality, which often was better than the dominant international brand,

and this rising export would solve the cash-flow problem. With good cash,

Figure 3. Level, goal and activities of changes in G

Level Goal Activities

Essential level Coordination by

business transaction

Transaction types,

actors, results

Information level Change information

processors

Information sent,

received, derived

Documentation level Automate document

movements

Production, storage,

transportation,

destruction of

documents

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expanding the production set-up could raise production quantity. Resource

accrual thus made would enable an enterprise-wide IS by 1999. Prior to that ERP

modules could be purchased and deployed.

A few Indian firms were selling ERP on the Internet, where a firm could buy one

or two modules at a time. Mr. V was hesitant in procuring ERP; he understood

ERP as a structured set of documents transacting system. He was on the move

to dismantle priority of documents in structuring a business. Documents trans-

action must be final outcome, and with process changes in the business, the

respective documents transaction system, too, should be required to be restruc-

tured. There was a perceived contrast in the change management philosophy.

The other two members of the board were, however, for ERP initially since they

had seen ERP improving performances in other regional firms. As a compromise,

a first set of modules was bought for the inventory. Inventory documentation of

G was already using customized software. Even after customizing the newly

bought module to G's need, this new documents structure caused a series of

problems. Quickly, seeing the turmoil in the production, the board sat together

and discontinued further introduction of ERP modules, empowering Mr. V alone

in this entire matter of change management.

Designing IS and Documents on Transactions

The project of Mr. V's turned out to be a business process reengineering. The

customer, in lieu of quality parameters, was now the sender of information. This

information, considered the business content, had to be established through

reciprocating business transactions inside G. Such a transaction is composed of

three phases: ordering, in which two role-actors agree on executing a future

action; executing, in which the task gets executed; and, resultant, the roles

negotiate a concurrence on the acceptability of the outcome. This transaction

therefore is based on communication. Each transaction re/constitutes the

business relations in the visible social space of G and, hence, a transaction

fundamentally re/constitutes the business process. The same transaction in the

object world of IS re/constitutes the "facts" of IS transactions. This fact of

concurrence in a transaction necessarily can coordinate the business through re/

constituting both business-processes based on social transactions and the

information transaction processes based in the world of IS. The former of these

two referring to re/constitution of business processes takes place at the essential

level (Figure 3). The latter refers to each role-actor as an information processor,

taking place at the information level in object language. This philosophy, as

adopted by Mr. V, then constitutes each time a new customer demand arrives,

the fundamental business transactions at the social level of job/task coordination,

and, thereby, business process too gets reengineered. The driver of changes in

coordination that are in the business process is now the customer.

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A change in the social-level business transaction reorders and reconfigures each

information processor, which at the social level is a role-actor and at the

information level is captured in object language (Figure 4).

A change is reflected in the information content and the relational aspect of any

information transaction. Employees of G were used to information handling but

in a non-symbolic mode. Previously changes in information transactions were

visible in changes in tokens or cues, for example. However the object language

level changes in information are abstract and invisible. This change was

significant, and employees reacted to the new situation. However, previous

learning helped them in getting over this transition quickly to abstract reality.

Employees soon responded by adopting abstract informational learning. In this

new mode each role is an information processor who sends, receives, stores,

processes, and derives (new conclusions). This is how the new IS takes shape

through being driven by the essential level-business process transactions. Once

this IS identifies an information packet, the same is compared to its existing

system of documents and, if required, some old documents are destroyed, some

created, some stored or dispatched. This document level appears as the final

outcome of changes in the business transactions/processes. Changes in docu-

mentation, which previously were the driver, are now the driven final resultant.

An ERP module could now be harmonized with this documentation.

Reengineering and Productivity

Mr. V continued on this project for about two years, until about 1999. A local

software firm developed software for this. Customization took place through

regular interactions between the team close to Mr. V. This team had experience

in customization of software, which helped it set with greater clarity the required

Figure 4. Organizational transformation at threee levels

New Business

Transaction

New IS

New

Documentation

Change

Coordination

Redesign IS Processors

Automate by IT

OIQ Business

Transaction

Old IS

Old Documentation

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parameters. Expenditure on this software was at an affordable level. G by then

had through a server its own Web site, and its marketing team greatly benefited

from interactions with prospective customers through this site. Branch offices

of G began communicating through e-mail, which before around 1996 was the

privilege of select top few. This site did not afford, however, any capability to

transact in e-commerce. Electronic inquiries were replied to electronically and

pursued after through physically. Market information from such electronic and

physical sources then entered the IS of G. Immediately thereafter, in 1998, all the

terminals through the LAN were browser-connected. Market information could

be sent directly to or accessed by the batches of production employees, the

design employees, the finance, and so forth. Hardware purchases, primarily of

computer terminals, did not cost much. In manufacturing, where several batches

were now replacing the previous single line, each batch was given access

through a terminal. Similarly RM and design, too, were provided with several

terminals, and all such terminal got connected through an enhanced version of the

previously existing LAN. This physical hardware platform did not cost much

because hardware prices were down. Total cost was well within G's budget. The

customized software, costing nearly as much as that of the entire hardware, had

integrated within itself the earlier customized software on inventory. Next, Mr.

V thought around early 1999, should be interfacing this new IS with the ERP

module bought earlier. Interfacing with such ERP modules, it was thought, would

take the employee productivity level much higher. It may be noted that during this

nearly two-year period of changing over to the new business-transaction driven

IS and finally the documents system, raising productivity (which was the

business goal) took a back seat. However, with the new IS documents being

created through changes in business process, constitutive transactions were

conveyed through the changes in information processor status. Such documents

reflecting both business transactions and information transactions could now be

dovetailed to the ERP modularized documents transactions system, the latter

holding the prospect of much greater productivity. Once this is achieved, Mr. V

would ensure both a changed G and the business goal of higher productivity.

Soon share of export in the total turnover increased, and by 1999 nearly one-third

of production went in for the international market. The production system now

switched over from manual to an IT-based documents transaction system.

Increased workload on the production employees and demands of transition from

pure manual to browser-interfaced documents transaction added some new

dimensions to the business process and its performance measurement system.

Workers were nervous because they treaded on uncertain ground. Mr. V could

understand that G was to be made into a knowledge organization. Employees

were exposed to not just an information system based on computer but to a new

business process with novel features of performance measurement. Without the

latter business process transactions, defining IS first and documentation there-

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after would fail. The essential level, it may be recalled, re/defines each business

transaction corresponding to the arrival of information from the market. Each

such transaction taking place between either members from the same group of

employees or across different groups of employees defines the constituent

fundamental of a new business content. Performance of an employee is

inextricably interdependent, dependent on concurrence and communicative

performance. A tangible outcome, which can be measured, is the joint effort of

several. Both measurability and attributability have changed; the old direct

measurement based on the old documentation thus failed. The evaluability, which

judges the "normative adequacy" of the measured output, failed, too.

Performance Measurement as Key to Reengineering

Most importantly, with groups of employees working on batch products and

employees defining on their own the desired types, the quality and quantities of

the output - in short, employees defining on their own both business content and

the respective business processes, the corresponding information to be trans-

acted in relevant documentations - this all demanded that, first, Mr. V become

only a facilitator and cease being an observer-monitor, and second, the employ-

ees get motivated to work. Motivation assumed most importance. The work was

in knowledge since new batch products were getting designed frequently. Work

involves not simply knowing and abiding by "rules" or "routines;" instead, work

involves a "talent," a "skill," and "knowledge differentials" (abbreviated as

'TASK' by Austin & Larkey, 2002). A talent refers to creative aspects and to

the innate knowledge that, when supported by skills such as in machining or in

numerical machine designing, gets the shape of new products of quality.

However, a work involves a transaction and a concurrence, implying that the two

persons in transactions must continue to maintain a knowledge differential.

Homogeneity in skills or knowledge would imply going back to a Taylorized line

production. Mr. V had to grasp these three dimensions of measurement rather

quickly. He and the team closest to him racked their brains and suddenly realized

that the key to measurement was at the essential level coordination of business

transactions.

The transaction can take place only when knowledge differentials exist, the

talent shapes its content, and the concurrence between the two roles in a

transaction following the "assumed" completion of the task can take place

through skills. Thus a transaction can convey fundamental information on new

mode of measurement. However they also realized that they were going to

measure a role performance and not an individual's performance. Conversely

several roles might take up a single role by a single individual. Therefore, with

essential-level measurement, role performances could be measured. Further

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norms of performance would now be set by satisfying the customer and not as

previously, by sticking to quality imperatives. Given this understanding, Mr. V

and the close team called in the software developer in late 1998. It was around

the time the DEMO-type software was nearing its completion. A next project

was launched. This project would take up a set of information from the essential

level, which so far had not been considered for defining the roles of information

processors (and, consequently, the resultant documents). This new set would be

based on measuring TASK. This TASK-based information would get routinely

declared or announced through the terminals attached to the role-groups in the

batches - employees would thus be provided information regularly on one's

own performance, on one's achievement as well as what remains to be

undertaken, and, finally, on the normative performance by any norm-setting role-

actor(s). This was a process performance measurement system (PPMS) based

on workflow system (Kueng & Krahn, 1999).

Immediately upon launching this measurement system, Mr. V and this team held

general body meetings with the employees, explaining the changes conceived.

This announcement appeared as a great relief as well as holding great expecta-

tions that it would not take long to become an ideal solution, as it were. The

acrimony that was looming gave way to a new level of cooperative working. The

development phase of software on PPMS regularly involved a mass of employ-

ees, who participated and suggested several alterations and improvement.

However, in 1999, a preliminary version only could be implemented. Mr. V,

however, did not take long to adapt to his new role as the facilitator of business

transaction and of role performances. The year 1999 proved to be a watershed

in the history of G.

Challenges to the Organization

Business process changes happened primarily in the manufacturing and the

interfaces of manufacturing with marketing. Mr. V's foresight, deep under-

standing, and exposure to current literature of management helped him and,

through him, the team in manufacturing the insight into new and novel manner of

defining business transactions based business content. However the two other

directors and the departments reporting to them, namely, branch offices,

marketing, finance, administration, and public relations, were still following work

methods pertaining to the old order. They had not yet identified the three levels:

essential, information, and documents. They were following IT-based docu-

ments transfer. These departments, too, bought computers, and after 1999 some,

such as finance, bought the relevant ERP modules too. However these comput-

ers continued following old documentation system until as late as 1999. This

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appeared as unpromising results in 2000, reflecting the mismatch that occurred

in the year 1999. Business at G could not develop its business content in full

through its novel customer-driven manufacturing set up alone. The board

realized business was integration.

Ironically and contrary to ordinary experience, manufacturing had reengineered

itself first while finance and marketing lagged behind. Mr. V and the board

quickly realized these shortcomings. Entrepreneurial coordination was needed,

and the first task was to identify the essential levels in those business processes

under the control of the other two directors. The question was raised and again

by Mr. V about the observable variables that were not just physical and tangible.

Key to understanding transaction remained with this observable. Second was to

identify what could constitute the motivation or the system of incentives. Third,

what had been described as TASK (talent, skill and knowledge differentials)

- that is, individual exploration, and initiative in creating new opportunities and

solving them in lieu of one's abiding by a plan of work - whether the TASK of

manufacturing should now be the backbone of IT-based documents transacting

business processes in all other departments. Could the same principle hold in

finance and administration, and above all in marketing? This recognition would

result into a reconfiguration of the information system, resulting in more of end-

user computing. Would the other directors and their senior colleagues in

marketing and finance devolve most authority down the line? Would they like to

empower as much, and would they now assume the roles of coordinators and

facilitators? Mr. V had already taken up the role of information coordinator in the

manufacturing. Both motivational measurement and informational measurement

systems were provided room in the scheme of things proposed by Mr. V.

However he did not propose a system identical to manufacturing. Integration of

business at G should imply that sub-processes in the previously existing depart-

mental modes retain certain uniqueness and not retain any isolation. Differentials

maintained through talents, skills learned in those sub-processes hitherto, should

prove as asset. Integration should target keeping such differentials as were

integrable through dynamic interfaces. Some solutions were conceived in early

2000.

References

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mance measurement: Theory and practice, 2 Vols. Cambridge: Cam-

bridge University.

Banerjee, P. (2003). Resource dependence and core competence: Insights from

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Kueng, P., & Krahn, A.J.W. (1999). Building a process performance measure-

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technology and oganizational transformation. Oxford: Oxford Univer-

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Spear, S., & Bowen, H.K. (1999). Decoding the DNA of the Toyota production

system. Harvard Business Review, 96-106.

Tripsas, M., & Gavetti, G. (2000). Capabilities, cognition, and inertia: Evidence

from digital imaging. Strategic Management Journal, 21, 1147-1161.

Van Reijswoud, V.E., Mulder, H.B.F., & Dietz, J.L.G. (1999). Communicative

action-based business process and information systems modeling with

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Varadarajan, P., & Clark, T. (1994). Delineating the scope of corporate,

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Winograd, T. (1988). A language/action perspective on the design of coopera-

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Chapter V

Global E-Business

Alliances:

The Socio-Cultural Perspective,

Influence, and Mitigation

Bhuvan Unhelkar

University of Western Sydney, Australia

Abstract

With increasing ability to interact globally through the electronic medium,

businesses are able to tap into newer business opportunities externally as

well as capitalize internally on pools of resources and talents spread across

the globe. However one of the major hindrances to the utilisation of these

opportunities and talents through global alliances is cross-cultural issues.

While technology renders the geographical boundaries redundant, it

aggrandizes the chasms in socio-cultural value systems of physically

disparate alliance partners. This chapter discusses the gamut of global e-

business alliance: the primary reasons for their needs, their socio-cultural

perspective, and the various factors that influence such alliances. Finally

the corresponding mitigating approaches to those negatively influencing

factors are suggested.

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Introduction

Electronic commerce requires sound business alliances. This is because elec-

tronic business can reach far and wide, transgressing geo-political boundaries

instantaneously. In order to succeed in a global electronic business, it is essential

to create alliances that are not merely of the electronic world but also based

around the physical world. This is so because however easy it might be to form

an electronic link between two businesses, there are numerous non-technical

factors, such as social, political, cultural (Laudon & Laudon, 2002), and legal, that

influence the outcome of global e-business alliances. In fact it is the balance

between these non-technical factors that usually determines the success or

failure of a global e-business alliance, as the technical factors are a "given" for

these alliances. Understanding the socio-cultural perspective resulting from the

non-technical factors is at the heart of e-business alliances in this communication

age (Unhelkar, 2003a). However while globalization continues to promote

organizations to ascend their technological capabilities, when it comes to physical

(non-technical) alliances, as already mentioned, organizations stumble across

relatively unexpected challenges in terms of cultural and sociological issues

(Unhelkar, 2003c). Increasing competitive pressures make it imperative that

companies develop new capabilities in providing timely goods and services,

improve internal management of their businesses, and decrease costs. These

requirements are better served by strategic alliances that bring together dispar-

ate skills, capabilities, resources, and environments. Interestingly the electronic

world not only creates the need for this synergy but also facilitates bringing these

skills together, which would otherwise not have been possible in mere physical

alliances. Despite their potential benefits, the majority of alliances do not survive

even in the early periods. According to some statistics 55 percent of alliances fall

apart within three years; only 23 percent of them can barely cover the costs of

forming those alliances in the first place. One of the major reasons for this failure

appears to be the inability of the organizations to accommodate differing cultures

(Grambs & Zerbib, 2000) These cultural differences are not merely socio-

cultural but also related to corporate cultures and political cultures (Laudon &

Laudon, 2002; Unhelkar, 2003c). Thus for an effective globalization process, it

is crucial that a fine balance between electronic expansion and creation of

physical alliances with global trading partners is achieved.

The fact that the socio-cultural issues are now gaining importance in the e-

business world is not surprising. This is because these "soft" issues usually

follow the successful handling of technological and methodological issues within

any process (Unhelkar, 2003b). Therefore, in the context of processes for

globalization and related global information system (GIS) issues, programming

for Web sites (technology) and modeling within the context of software

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engineering (methodology) are challenges surpassed by cultural and social

issues. This chapter considers the major reasons and issues in setting up global

alliances in the electronic world, the factors that influence such alliances, and

what can be done to ameliorate the cultural problems that hamper growth and

prosperity of these alliances.

Reason for Global E-Business Alliances

As mentioned earlier, when organizations form wider electronic alliances it

becomes imperative for them to also consider the issues related to physical

alliances. This is especially true when the e-business alliance is global, spanning

across geo-political borders wherein technological capabilities to interact with

each other need to be supported by the physical capability to service clients and

business partners. A global alliance effectively builds on the possibilities offered

by two companies that are able to electronically communicate and that have

value to offer to each other. Usually the underlying principle for electronic

business alliances that also require physical alliance capabilities is that each

member of the business alliance has something to offer that is complimentary to

the other across geo-political borders. It usually turns out that one organization

is a technically savvy global aspirant that is trying to reach across the borders.

However, due to numerous factors such as social, cultural, legal, and political, the

organization is unable to transcend its borders. This is when the electronic

commerce world facilitates formation of these alliances, as it is easier to

communicate electronically across boundaries than it is to do so physically.

However the central point expounded in this chapter is that such alliances,

although electronically (technologically) easily conceivable, require a corre-

sponding understanding of the physical alliances for them to succeed. Therefore

whenever such alliances are formed, it is imperative that stakeholders and

players in these partnering organizations quickly understand and establish

working relationships that transgress the socio-cultural borders so evident in

physical alliances. If employees and managers can effectively adopt different

cultures, the companies benefit a lot from those cultures (Gupta, 2000). In fact,

there are a number of benefits accorded to the electronic business alliances with

a physical component in them that continues to promote the creation and

sustenance of these alliances. Some of the major advantages resulting from

global e-business alliances are as listed below (but not limited only to this list).

• Knowledge capitalization

• Knowledge sharing

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• Market expansion

• Customer service enhancement

• Risk apportionment

• Outsourcing

• Legal and tax advantages

We undertake a more detailed discussion of these reasons with an aim of creating

a good background understanding of the causes of these alliances. Thereafter

we proceed to discuss the issues arising out of these alliances and the approach

to mitigate them.

Knowledge Capitalization

When two organizations from different regions come together, they invariably

bring rich knowledge and know-how in terms of products and services offered.

Collaborations between people belonging to these organizations, reinforced by

information flow, makes it possible for them to share knowledge, thereby

enhancing the overall pool of expertise in the organization. This can lead to

benefits such as faster innovation of new products, reduced duplication of

efforts, savings in research and development costs, and enhanced employee

satisfaction. Being able to share and build a richer set of knowledge is one of the

major advantages of global alliances. Electronic technology facilitates these

alliances, but the physical interaction between people is what eventually brings

the knowledge to fruition.

Knowledge Sharing

In addition to creating new pools of knowledge, global e-business alliances also

enable sharing of knowledge. On the social front this is amply evident in fighting

crime as well as fighting the modern-day scourge of terrorism. This is because

in this age of communication, it is sharing of knowledge that takes even higher

precedence than the existence and capitalization of such knowledge. In terms of

e-business alliances, sharing of knowledge in the domains of processes, designs,

engineering models, customer data, analytical techniques, and so on form

substantial reasons for creation of such alliances.

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Market Expansion

Market expansion has been considered one of the basic reasons for formation

of business alliances. Business alliances between two or more organizations

enable the partnering organizations to have access to each other's customers,

suppliers, and the general markets where the organizations have been conducting

business activities. It is understandable, then, that formation of a business

alliance requires creation of local know-how amongst all participating busi-

nesses. It is equally understandable that for some partnering businesses that are

coming for a different "geo-political" climate, the social and cultural aspect of

the local know-how may itself be too idiosyncratic to be relevant outside the

particular local market. For example, a computer chip manufacturer in Japan

wanting to sell its products through alliance partners in Australia would want to

understand the cultural and social nuances of the Australia-New Zealand region

before embarking on the market expansion journey. Another common example

is of a bank in Hong Kong wanting to expand its markets in the U.S.A. It will have

to adopt to the socio-cultural value systems of the American market, which may

be dramatically different from, say, the Gulf market, in terms of lending policies

and value systems. Despite the challenges of differing cultures, however,

businesses eventually find that through formation of alliances they are able to sell

in a market that they had no access to earlier. Thus while alliances enable

businesses to sell in a foreign market, they also make it almost obligatory to

understand and leverage the cultural nuances of those markets. Leveraging

different cultures is not just a business advantage, it is also a business imperative

(Teitler, 1999). Companies that develop best practices for managing culture

capital find they are able to expand and supplement their e-business with physical

growth. Without such best practices, however, they face the situation similar to

the case study discussed by Unhelkar (2003c), wherein an Indian chemical

manufacturing company rushes into its expansion in Australia and finds the going

tough precisely due to lack of consideration to these socio-cultural factors.

Customer Service Enhancement

While a sale across borders may happen easily using electronic commerce, it is

not always easy to service the same customer across boundaries. In many post-

sale scenarios, as commonly experienced by customers buying cars and grocer-

ies, even local customer care is often uneven at best, let alone customer care

across global markets. Global markets increase the risk of customer dissatisfac-

tion or even customer churn. "Customer service is often seen as a necessary

evil," says Raul Katz, a vice president with Booz-Allen & Hamilton. Good

managers realize that in their business, customer service is one vital element in

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holding onto premium customers in the face of competition. An example of

enhanced customer service through alliances is IBM, which set up alliances with

61 software companies in 2001, up from its 50 alliances in 2000. The expectation

of IBM, through these global alliances, was that it will add up to $2 billion in new

revenues in 2001. Mike Gilpin, vice president and research leader of Giga

Information Group, says about this increasing number of partnerships that it

"allows IBM to solve a wider percentage of their customers' problems." Bryce

(2001) adds: "They can grow Global Services, do more outsourcing deals and

provide more strategic assistance to clients." This is because IBM's alliance

partners are available to provide service for products that may have been sold

across boundaries, in another country or region where IBM itself may not have

had a physical presence. Thus while e-business provides a single unified face to

the customer because of global alliances, personalised and even peculiar needs

of customers can be satisfied by the local know-how, expertise, and physical

presence of alliance partners. This not only results in a wider customer base but

also higher-volume growth from the same customers.

Risk Apportionment

Global e-business alliances are extremely helpful in spreading the risks to

businesses arising, amongst other things, primarily from political instabilities.

Global alliances provide excellent opportunities for strategic management of

risks in businesses when they are operating out of unsure political climates. This,

of course, requires that the issue of response to changing political circumstances

in different cultures is properly considered and integrated in the global response

strategies of the business alliances that operate in global markets. In order for

the management of a company to keep track of all the changing technological,

economic, political-legal, and socio-cultural trends around the world, it is

essential that they shift from a vertically organised, top-down type of organiza-

tion to a more horizontally managed, interactive organization (Nuese, Cornell, &

Park, 1998). Horizontal structures are flexible, enable ordinary employees to

play crucial roles by interacting amongst themselves, and enable spreading of

risks due to vacillating external (in this context political) factors. Alliances with

local players have a distinct advantage over traditional multinational company

structures in this respect. For example, to gain access to China while ensuring

a positive relationship with the often-restrictive Chinese government, Maytag

Corporation formed a joint venture with the Chinese appliance maker RSD

(Adler, 2001).

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Outsourcing

Although criticised in the current (year 2004) politically charged climates of

Australia and the U.S.A., outsourcing plays a significant cause for business

alliances, enabling alliance partners to capitalize on the unevenly distributed

pools of skills and resources across the globe. By making it feasible for

organizations to outsource certain routine work, typically to another country,

there is potential for significant savings as well as the ability to provide service

around the clock (due to time differences around the world). This is invaluable,

for example, in providing 24x7 call centres, which are themselves made possible

through the electronic and communication medium. However outsourcing usu-

ally comes with its own limitations in terms of social communication problems,

understanding what is meant within the contractual terms, and understanding the

requirements and agreement on what constitutes a quality deliverable. Further-

more when strategic work is outsourced (as compared with routine work), it

brings even greater challenges of the need to understand the direct and implied

meanings behind all types of communications. These are the situations where

excellence in business processes, use of industry-standard modeling tools and

techniques by partnering organizations, and improving the overall communica-

tions between outsourcing partners can play a crucial role in the success of such

alliances. (For greater details on application of software processes in success of

outsourcing projects, see Unhelkar, 2003d.)

Legal and Tax Advantages

Global alliances facilitate companies to research, produce, and sell legally by

taking advantage of the local rules and regulations of the governments of the

environments where they operate. For example, stem cell research may be

considered unacceptable, unethical, or even illegal in some regions, but may well

be acceptable in others. Alliances, especially at the global level, are able to take

advantage of the regulations spread across the globe, in order to achieve their

goals. Alliances in the educational sector are common, and there are popular

examples of legal and tax advantages being used effectively in running global

educational institutions.

The Cultural Context

Having thus discussed the creative causes or reasons why businesses enter

global e-business alliances, we now create an understanding of the cultural

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context under which these global e-business alliances can be studied. Studying

the cultural context provides robust theoretical background to this chapter.

Indeed Hofstede (1980) has given tremendous importance to culture as an

environmental factor influencing all types of business alliances.

Defining Culture

In order to understand the influence of culture on electronic business alliances

and the possible hurdles cultural issues may pose to businesses in terms of their

socio-cultural disparities, it would be appropriate to base the discussion on

defining and studying "culture," understanding the differences in cultures, and

learning how to overcome these differences in a creative and positive way. To

achieve this purpose, let us first consider the word "culture" itself. What do we

mean when we talk about culture? At an informal level it appears to be the ethos

exuded by a group of people. Practically it is the way members of an entire

society live their lives - the way they eat, dress, live, and even die.

On a more formal level, according to an anthropological definition (Devereaus

& Johansen, 1994), culture is an integrated system of learned behavior patterns

that is characteristic of the members of a society. Culture refers to the total way

of life - the underlying patterns of thinking, feeling, and acting - of particular

groups of people. It is learned, not inherited, and transmitted from generation to

generation primarily through conditioned learning. Another definition, by Hall

and Hall (1989, p. 179) is: "Culture is 'a system for creating, sending, storing and

processing information.'" These definitions themselves seem to indicate that

whenever different cultures try to intersect, there are bound to be differences.

Therefore it does not come as a surprise that global alliances face cultural

disparities as one of their major challenges.

High-Context versus Low-Context Cultures

Devereaus and Johansen (1994) further provide an excellent analysis of the

chasms that exist between different types of cultures. According to them, in

general, cultures can be classified as "high context" versus "low context"

cultures. These groupings may also be considered by us as "Eastern" versus

"Western" cultures, respectively, although Eastern-most countries like Australia

or New Zealand may be considered "Western" with respect to this discussion.

The high-context Eastern or oriental cultures are based on the value system of

"who you are" rather than the low-context cultural values of "what you do." This

fundamental difference in the value systems tends to drive these cultures. These

major differences between the Western and the oriental value systems still

persist and provide the basis of most cultural differences between organizations

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forming alliances. And when global alliances are formed between these cultur-

ally different organizations in a hurry, these organizations tend to drift apart with

time, based on these fundamental differences. This is not to say that there aren't

other differences such as religious, wealth, political, and related allegiances.

However the "context-based" differentiation is most prominent when global

alliances are formed.

Categories of Global Alliance Issues

Let us extend our understanding of the fundamental differences in the cultural

systems to global alliances. The entire range of global alliance issues can be

classified into three major categories: creation, operation, and exiting (folding of

the alliance). These categories of issues have their own nuances, and each of

them is capable of being influenced by technical and social aspects of the

alliances in varying intensity. The categories of alliance issues and the technical

and social influence on those categories is shown in Figure 2.

Figure 1. High-context versus low-context cultural value systems (based on

Devereaus & Johansen, 1994)

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Formation

The formation stage of the alliance is the initial setting up of the alliance that is

primarily based on technology. In fact, as discussed at the beginning of this

chapter, technology (notably communications technology) is the true and cre-

ative cause of global alliances. While the business world always had global

alliances in the past, it is these modern-day alliances that are trying to use as

much technology as they can to communicate and process information. How-

ever, as argued by Hammer and Champy (1994) during their "Business Process

Re-engineering" revolution, information (and now communications) technology

is not merely providing the tools to automate and run global businesses, it is

actually a cause for those businesses.

More specifically, the technologies that come into play during the formation

stages of a global business alliance are the ones that facilitate communication

between software applications belonging to the participating organizations. Thus

the middleware technologies of distributed computing object model (DCOM) and

common object request broker architecture (CORBA) can come into play at this

stage. However these technologies have been good with globalizing organiza-

tions so long as their interactions were within the organization itself. This can be

called intra-organizational collaboration facilitated through DCOM and CORBA.

When it comes to inter-organizational collaborations, the technology that facili-

tates the communications is that of Web services. When organizations with

different cultural backgrounds (note the earlier discussion on high-context

versus low-context cultures) undergo alliance "formation," they may need all of

these communication technologies, resulting in a composite model of technology,

as discussed by Chaturvedi and Unhelkar (2003).

Figure 2. Technology and sociology influences in the formation, operation,

and folding of global alliances

Formation Operation Folding

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Operation

Once the alliances have been formed and businesses start operating under the

terms of mutual agreement as well as under the constraints and facilities

provided by the technologies, then the socio-cultural issues start taking more

prominence than in the formation stage. During operation of an alliance, there are

a range of non-technical issues that start creating major influence as well as

stress on the global alliances. These non-technical factors span the primary

socio-cultural issues as well as political and legal issues. In fact non-technical

issues tend to be confusing and chaotic even in their influence on the global

business alliances; this is primarily because they are difficult to identify and

isolate in the formation stage of the alliance, and by the time the alliance reaches

the operation stage, it is usually too late to fix these issues properly. Furthermore

there are a number of these non-technical issues that feed into each other as the

global alliance evolves. For example, the political climate of a region is bound to

influence the legal aspect of the alliance, and that, in turn, the social climate

amongst the members of the alliance. In addition to this chaotic influence of non-

technical factors on the alliance, the physical time and distance take their toll on

the way the alliance operates, resulting in an impact on the financial viability of

the alliance as well as the compatibility of the member organizations of the

alliance. As this chapter gets written, there exists a certain lacunae in the global

electronic alliance literature in terms of robust financial models for such

alliances. The lessons from the dot-com era suggest that lack of well-researched

financial models lead to weaknesses in globalization attempts and have a great

potential in bringing the downfall of globally aligned businesses. Finally, during

this operation stage of the alliances, individual skills as well as their adaptability

to different cultures plays a significant role in the success or failure of these

alliances.

Exiting

Just as formation and operation of a global alliance requires consideration of

socio-cultural factors, similarly exiting out of a global alliance also requires

detailed consideration to numerous "social" or non-technical factors as follows:

• Internal to the business itself including its employees, its operations and

finances

• Influence on the business partners of the alliance

• External to the customer and suppliers who may not be part of the alliance

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• External to the environment in which the alliance existed, including govern-

mental factors

The act of exiting out of a global alliance may itself be forced due to social (non-

technical) factors, although technical incapability or incompetence can also be

one of the reasons for closure of a business alliance. It should be noted that an

exit out of an alliance need not be necessarily negative in nature. For example,

if an alliance partner has diversified in various other areas of products and

services that are not congruent with the alliance goals, but which are rewarding

to the individual business, then that business may decide to exit out of the alliance.

At other times exits may be forced due to legal and governmental factors.

However, in all such cases, it is imperative to ensure that the exit is not sudden,

unplanned, and deleterious to the alliance members. The only way to achieve a

successful exit is to ensure that such possibilities are planned for and incorpo-

rated in the agreements that are reached during the formation stage itself. Not

only does this help if the exiting is required but, in fact, it may also help obviate

an unnecessary exit. This may happen because all members of the alliance are

fully aware, right from the outset, the effects the exits will have on them.

Therefore a member of the alliance cannot "surprise" its member partners or

cannot "hold them to ransom" by threatening an exit whose effects may be

unknown. Graceful exit from an electronic alliance is facilitated only when its

possibility is incorporated in the formation stage of the alliance.

Cultural Issues: Influence and

Mitigation in Electronic Alliances

Growing Cultural Significance

Standalone computing, even today, does not require interaction amongst individu-

als. It is self-sufficient and primarily focuses on automation of tasks. However

as computing machines are networked, enabling interaction amongst team

members, social issues related to computing start emerging. A team is an

organized entity that is managed by rules; hence networked computing maintains

a "controlled" sociological perspective. However once an entire enterprise is

networked, and especially in the global context, the challenge in terms of

sociological aspects of computing escalates, bringing the traits of teams and

individuals within the teams to the fore. Finally, when an entire industry is

networked, perhaps through technologies such as Web services, leaving a single

business thread running through the entire industry (also known as Advait

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Enterprise) the socio-cultural impact is immense. Numerous physical and

technical alliances are likely to take place when a group of organizations reach

the "Advait" level of inter-networked computing.

When such a stage of inter-networked computing is reached, the dependence of

businesses on each other through formation of alliances across geographical and

cultural borders is massive. It is crucial that such alliances start off by ensuring

that they do not imply an imposition of one organizational culture over another.

Rather it should create a new culture that brings together the best elements of

each one (Brooks, 1998). This is what is known as "synergy" and is something

we sorely need in order to successfully handle the cultural differences in global

alliances. However synergy is usually lacking in global alliances because these

alliances are often viewed solely from a financial perspective, leaving the human

resource issue as something to be dealt with later and hopefully without a great

deal of effort. And whenever change is imminent as a result of alliances, it is

usually assumed that the smaller, weaker company is the one that has the

obligation to change. Errors like these are commonplace, resulting in failure to

achieve even the basic aim of financial success. While creation of synergy

between global partners with different contextual background is expensive and

time consuming, it is still vital that this issue is addressed right from the beginning

of an alliance. The end result is far more valuable in terms of not only financial

rewards but also employee satisfaction, broadening of cultural viewpoints, and

a deeper and perhaps longer-time sustainable alliance. We now consider some

of the major reasons for cultural disparities in global alliances and what can be

done to ameliorate them.

Figure 3. Increasing impact of computing on individuals, teams,

organizations and clusters (large industrial clusters also known as Advait)

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Communications Gap

While electronic communication has never been easier, a very basic cultural

hurdle can occur in social communication. Communication between a parent

company and its foreign subsidiaries can be hampered by diverse language,

culture heritage, and physical distance (Segil, 1999). A growing and popular

example is that of a service alliance being set up between an Australian company

and Chinese company. Although few Australians would be able to converse in

a Chinese language, there are increasing numbers of Chinese who are able to

converse in English comfortably. This leaves English as the default language for

business alliances between Chinese and Australian businesses. While this

situation is certainly going to facilitate the communications between the alliance

partners, it is essential that the "foreign-ness" of English language used by the

Chinese counterparts should be considered extremely sensitively by the Austra-

lian members of this alliance. It is obvious that there are some major differences

in the nuances of expressions from these two different cultures. The Australian

culture is predominantly "low context," wherein what "you do" is important. This

requires people from these cultures to express themselves well, and, occasion-

ally as hard, as they can. The Chinese culture is context-based and depends on

the pedigree of the person, to a certain extent. Therefore a person with Chinese

cultural background, despite conversing in English, is bound to show the restraint

expected of him or her in similar conversations within the Chinese context. It is

recommended that special efforts be made before and after formal meetings to

search for thoughts that might otherwise not have been expressed, and meanings

should be clarified by spelling them out rather than taking them for granted. As

this chapter gets written, this author is personally experiencing the situation

described here as he delivers a course in object-oriented software engineering

to a group of students belonging to Nanjing University of Chinese Medicine

(NUCM), in Nanjing China. Despite the ease of electronic alliance and commu-

nication, ensuring that a "quality service" is delivered to the "clients'" numerous

perceptions and adjustments are required. Furthermore written communications

between alliance partners must receive special attention; it is easy to unintention-

ally offend by virtue of subtle language inflections that are misunderstood. E-

mails are most notorious in this regard, and more so when they come from a

different cultural background. Thus the key point in handling the communications

gap is to ensure nothing is assumed and that every small bit of information is

spelled out in detail. This effort will be well spent in ensuring that the intended

meaning is actually conveyed and that the communication gap is bridged as much

as possible and as early as possible during the formation stages of the alliance

itself.

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Individual: Corporate Goal Alignment

Individuals work to their own personal goals. Organizations have their own goals.

When these two are in sync, a synergy develops. When they are out of sync, or

at times decidedly opposing each other, there is loss of energy and friction

(Unhelkar, 1998). While this is true of a single organization, this alignment factor

between individual and organization takes higher significance when global

alliances are concerned. First, it is important for the alliance to have an entity

that people (employees and customers) can identify with. This requires the

alliance to create an image of a unified entity with its purpose and goals stated

prominently and reiterated on numerous appropriate occasions. Since various

members of the alliance may not be physically in touch with each other, creating,

displaying, and understanding the goals of the alliance is a major exercise in itself.

This misalignment of individual-corporate goals within the alliance members can

destroy a global e-business alliance in its early stages, especially if it is coupled

with the previously discussed factor of communications gap. Therefore it is vital

that the business managers of such alliances ensure that there is a sustained

effort put in in aligning individuals with corporate goals within all alliance

partners.

Corporate Mistrust

Since the primary purpose of alliances is to make money, it does not come as a

surprise that alliance partners tend to eye each other skeptically in the beginning.

Given the communication gaps that exist between people in similar cultures, let

along varied ones, this scepticism can quickly build up to paranoid proportions,

resulting in a break of alliance. Thus corporate mistrust is a serious problem that,

unfortunately, is further exacerbated by managers from both countries who have

achieved their success by nurturing a tough, critical business image. Of course

it is important that each party to an alliance protect its own assets, intellectual

property, reputation, customer base, and so forth. But it is equally important to

appreciate that only a mutual win-win relationship can succeed and endure.

Hence each party should enter a relationship with a certain amount of trust in its

partner and with an attitude that the partner's success is just as important as its

own (Brooks, 1998). Cross-checking references and getting third-party recom-

mendations on business alliances, as well as checking each other's corporate

history, are some good ways of reducing corporate mistrusts.

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Social Incompatibility

Socio-cultural incompatibility results when two companies with different social

environments, as well as disparate financial backing, try to get together into a

cross-border alliance. While "going global" seems to be a strategic move, social

incompatibilities existing between different countries and their cultures can

cause problems in the functioning of these global entities. For example, the

American socio-cultural context can be quite different from the German work

culture and ethos. An alliance casually put together to capitalize on the German

engineering skills and American markets can degenerate into an ugly fracas if

the differences in social and cultural contexts are not spelled out and studied prior

to the alliance formation. While the American focus may be on the financial

aspect of the alliance, it is possible that the German focus is on building a strong

foundation for the alliance or perhaps creating a knowledge base.

In yet another not-uncommon example, an alliance almost collapsed because the

two organizations had disparate staff policies due to different social background

of the participating organizations. One organization gave half-day Fridays in the

summer; the other didn't. One gave staff a day off on election day; the other

didn't. At first there was grumbling, but both organizations came together

frequently, giving everyone a chance to air their feelings. These meetings let

people come to terms with their differences and remain productive.

Failure to address differences and disparate values or operations can quickly

lead to the demise of an otherwise strong strategic alliance. The key to beating

the odds is to assess and monitor partner compatibility up front and at every step

of the way, constantly highlighting differences and creating solutions (Gupta,

2000). Studying social incompatibilities indicate that people with multicultural

background and upbringing have a much broader view of the world (Unhelkar,

2002) and therefore also of the business world. These are the people better

equipped to handle the inevitable social incompatibilities resulting from business

alliances as they are able to adopt and adapt to differing social environments

relatively easily.

Dissimilar Management Styles

Dissimilar management styles can cause culture conflict, too. One leader may

be forward thinking while the other is of the old school of management thinking,

relying on hierarchical management style. Constantine (1995) provides interest-

ing discussion on these differing management styles and their impact on software

projects - a scenario most certainly applicable in a global alliance undertaken

for an outsourced software project. A common result of these differing

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management styles is also often seen in Scott Adam's cartoon character Dilbert.

For example, Dilbert is often shown as a staff member who is left with no

working space at all. However if one organization has a flattened hierarchy and

an open seating plan and another one doesn't, and if people and managers from

these organizations have to work together, they are bound to have different

perceptions of the entire alliance exercise. If handled properly, exposure to

different approaches to management can be liberating and enlightening. The

important thing is to be sure staff members have a chance to discuss their feelings

and work through solutions together.

Conclusion

The modern electronic business world is highly competitive and fast. To be able

to survive and prosper in such a business world, there is need for organizations

to expand their vision and their reach way beyond their traditional or home turf.

While forming electronic alliances between organizations is not that difficult,

forming corresponding physical strategic alliances is equally important, if not

more, to service the electronic alliance. However each physical alliance,

especially across geo-political boundary, is fraught with socio-cultural issues that

influence such alliances. This chapter highlighted and discussed the need for

such physical alliances, the cross-cultural issues that arise in such alliances, and

what can be done to understand and improve the socio-cultural chasms that exist

between disparate cultures of the participating organizations. Transcending

cultural boundaries requires not only awareness and understanding but also the

ability to adapt to, and leverage, the different cultures. The end result is an e-

business alliance that is well supported in its endeavour to globalize an organi-

zation through corresponding physical alliances between two or many organiza-

tions.

Acknowledgments

The author wishes to acknowledge the support of the University of Western

Sydney, notably MIRAG: Mobile Internet Research and Applications Group,

part of AeIMS research group.

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providing new possibilities in customer relationship management. Proceed-

ings of IITC Conference, Sri Lanka.

Unhelkar, B., & Elliott, R. (2003, November 23-24) The role of Web services in

e-business and globalization. Proceedings of We-B Conference with

Edith Cowan University, Perth, Australia.

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Chapter VI

Using DSS for Global

Competitiveness:

An Effective Information-Based

Decision Making Process

in Public Administration

Sherif Kamel

The American University in Cairo, Egypt

Ahmed Zyada

Middlesex University-Regional IT Institute, Cairo, Egypt

Abstract

With a changing global environment driven by the innovative evolutions of

information and communication technology, organizations are setting their

priorities to cater to a global marketplace. In that respect, they are focusing

on adding value propositions to different data and information elements

gathered to help know more about customers and various environments

where products and services are manufactured and traded. Therefore

organizations continuously need to increase their business intelligence by

monitoring systems that analyze information and develop indicators coupled

with support mechanisms to decision makers to handle semi-structured and

un-structured problems characterized by varying alternatives and

parameters to understand the problem spectrum and help develop alternative

solutions. This chapter discusses concepts and characteristics of decision

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support methods and demonstrates the gap between the decision maker and

the decision support systems techniques demonstrating the experience of

the government of Egypt in building its information infrastructure to help

develop the decision-making process both at the government level and the

local public administration level.

Background

Organizations continuously need to increase their business intelligence by

monitoring systems that analyze information and developing indicators that are

coupled with support mechanisms to decision makers to handle various types of

decision problems characterized by varying alternatives and parameters to

understand the problem spectrum and help develop alternative solutions. The

objective is always to remain competitive and adapt to local and global organi-

zational and market changes. Decision support systems (DSS), commercially

called business intelligence (BI) solutions, represent powerful tools capable of

enhancing the capabilities of managers in facing challenges, especially at times

of continuous change. It helps improving decisions by providing accurate and

relevant information and also supports in saving time. It also helps build a

knowledge repository that can help understand the marketplace and compete

more effectively. Business intelligence, which has a broader concept than data

warehousing, is an essential component of the overall strategy of different

organizations in a world much affected by globalization and where culture,

change, competition, and technology represent influential forces in driving the

decision-making process. It is important to note that data warehousing increases

the decision-maker capabilities in a passive way due to its dependences on

historical data; however, business intelligence helps in projecting the future to be

able to set the appropriate tactical and strategic plans in a more active way and

hence realize organizational objectives. Business intelligence definitely brings

competitive advantages to the organization in the time of globalization. Its

importance is in the forward and future projection of the needs of the organiza-

tion. Strategies of the future nowadays represent the platform to decide the

actions of today, and business intelligence helps to do that. Therefore the more

it is used in strategy development, the more likely it can survive, grow, and

compete.

Little (1970) defines decision support systems as a model-based set of proce-

dures for processing data and judgments to assist a manager in his decision-

making processes. He argues that to be successful, such a system must be

simple, robust, easy to control, adaptive, complete on important issues, and easy

to communicate with. Early definitions of DSS identified it as a system intended

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to support managerial decision makers in semi-structured and un-structured

decision situations acting as tools to decision makers to extend their capabilities

but not to replace their judgment. The human interface in the decision support

formula is invaluable and an integral complementing element to the computer-

based outcome. DSS are computer-based applications that operate interactively

online and preferably would have graphical output capabilities. As for business

intelligence tools, which are DSS for the business context, they were introduced

to overcome the problems raised from disintegrated information clusters coming

from different sources. Business intelligence tools add value to corporate

information through sophisticated analytical processing and rapid delivery and

presentation of accurate information to executives, managers, analysts, and

other knowledge workers. Its data sources vary both internally (data-ware-

house, data mart, transaction processing applications, and expert staff opinions

and recommendations) and externally (market research and survey data). The

developments and the historical path are demonstrated in Figure 1. It is important

to note that while business intelligence is more deployed in business organiza-

tions, decision support systems are more available in government organizations

and public administration.

Decision Support Systems

Organizations are increasingly in search of effective vehicles that can help them

increase their benefits of stored data within the organization and transform such

Figure 1. Development of management support systems

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data into information and knowledge. There is always a need to explore the

marketplace, the competition, and the economic environment among other

constituencies in the community and to possess the mechanism and the internal

business intelligence that can transform the knowledge of the society into inputs

that can help formulate the organization's strategy. Such knowledge affects the

business and organizational decision-making process at all levels. It also contrib-

utes to the organizational knowledge that is compiled from both internal and

external sources. From day-to-day business tasks to the major strategic issues

such as taxation policy and long-term business planning, information is required

that is timely, accurate, and effective for the overall business decision process.

In that respect decision support systems help decision makers generate alterna-

tives and choose among the optimal course of action that can help attain the

business goals (Kamel, 1998). The role of information experts and human

interface will remain invaluable to assess the variable in the marketplace that can

affect the performance of the organization.

DSS applications are designed, delivered, and institutionalized in different

sectors and industries such as the health sector, tourism, petroleum, banking, and

agriculture, among others. The usefulness of such applications varies in solving

problems. They are not all equal in solving problems or in supporting decision-

making processes where some of them are more intelligent than others in terms

of quality and response time, which brings the concept of intelligent density,

which is a scale for these systems to solve problems or to support decisions. The

intelligent density concept; therefore, provides the decision maker with a ranking

mechanism so whenever he/she has a problem or needs a support, then there is

a need to select a tool based on the most intelligent capacities available. Such

capacities also change and adapt from time to time according to the case in hand;

that is, it could be viewed as a one-time system with many variables to be adjusted

and adapted.

Some other definitions include Simon (1977), who mentions that managerial

decision making is synonymous with the whole process of management; Little

(1970), who claims that it is a model-based set of procedures for processing data

and judgments to assist a manager in his decision making; and Keen (1980), who

claims that DSS apply to situations where a final system can be developed only

through an adaptive process of learning and evolution (Turban & Aronson,

2001). The decision-making process is also bound to the changes in the

marketplace, and that is why it usually goes through the design, development,

implementation, and institutionalization phases with continuous adaptation. Un-

less such adaptation takes place, more problems occur because of dissatisfaction

of the decision maker, who attempts to reach a process that can help him make

the most optimal decision. The institutionalization process is a continuous process

that allows for regular changes to fit the environment, whether internal or

external. The problem identification process also includes and is complemented

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by the problem classification and decomposition. It is important to note that the

nature of the problem could vary from totally structured to semi-structured to

unstructured. This actually defines and forces the information system model to be

used to handle the problem and the challenge faced by the decision maker. In the

problem decomposition phase many problems and issues could be divided into sub

problems. In that respect, there are three phases of the decision-making process.

Phase I - Intelligence Phase

This phase is concerned with gathering information from different sources and

being aware of occasions when a decision is required, routinely collecting

knowledge relevant to the business area, and classifying and storing it. The

intelligence phase focuses on the identification of organizational goals and

objectives related to an issue of concern, such as inventory management and

determining whether they are being met. The intelligence phase relies on

extensive quality information. Information about the market, competition, and

potential new products, services, and elements affecting the decision making

process are essential for survival and growth.

Phase II - Design Phase

This phase handles the full understanding of the problem and is concerned with

designing, developing, and analyzing various solutions. The feasibility of possible

solutions and a model of the problem is built and tested. This can be implemented

by accessing information, generating business models, and using communication

mechanisms to readily share and consolidate results and identify the best

solution. Comparative analysis reports and mapping between different scenarios

is essential. Moreover simulation models enable the decision maker to experi-

ment, to try different scenarios to determine the most feasible solutions affecting

different decisions and business processes.

Phase III - Choice Phase

This phase reflects the selection among the different alternatives. Numerous

feedback and alternatives are being discussed, and it is up to the decision maker

with his support aids to aim for the optimal solution. It is important to note that

some problems have one clear solution agreeable to all involved, but it is often

the case that a lot of allowable solutions exist, and the choice or selection are not

quite easy. This phase, supported by modern presentation tools, help the entire

team to choose the solution.

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Decision Support Systems

Characteristics and Capabilities

It is important to mention that decision support systems characteristics and

capabilities include: (a) providing support to several interdependent and/or

sequential decisions, (b) supporting a variety of decision-making processes and

styles, (c) adapting over time where the decision maker should be reactive, able

to confront changing conditions quickly, and able to adapt the DSS to meet these

changes, (d) supporting various managerial levels, ranging from top executives

to line managers, and (e) supporting individuals as well as groups with less

structured problems.

Decision Support System Application

Decision support systems application, mainly targeting senior executives and

chief executive officers, could be composed of the following subsystems (a) data

management subsystem, which includes a database that contains relevant data

for the case analyzed and is managed by a software (database management

system) that could be connected with the corporate data warehouse; (b) model

management subsystems, which are a software package that includes financial,

statistical, and other quantitative models that provide the system's analytical

capabilities and appropriate software management as well as modeling language

for building custom models; (c) knowledge-based subsystem that provides

expertise in solving complex unstructured and semi-structured problems through

the use of expert or other intelligent systems; (d) user interface including all

communication between a user and the DSS software through graphical user

interfaces; and (e) users who are different including managers, decision makers,

knowledge workers, business analysts, and staff.

Decision Support Systems Classification

Pending the nature of information and knowledge required, decision support

systems could be identified and classified as follows: (a) text-oriented DSS, (b)

database-oriented DSS, and (c) model-oriented-DSS. With respect to text-

oriented DSS, information (including data and knowledge) is often stored in a

textual format and accessed by decision makers. A text-oriented DSS supports

decision makers by electronically keeping track of textually represented infor-

mation that could have a bearing on decisions. It allows documents to be

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electronically created, revised, and viewed as needed. Information and commu-

nication technology such as Web-based, document imaging, hypertext, and

intelligent agents can be incorporated into text-oriented DSS applications. With

respect to database-oriented DSS, the database organization plays a major role

in the DSS structure. Early generations of database-oriented DSS mainly used

the relational database configuration. The information handled by relational

databases tended to be huge, descriptive, and rigidly structured. A database-

oriented DSS features strong report generation and query capabilities. With

respect to spreadsheet-oriented DSS, a spreadsheet represents a modeling

language that allows the user to write models for analysis. Such models not only

create, view, and modify descriptive knowledge but also instruct the system to

execute its self-contained instructions and is effective support for end user-

developed DSS such as Excel and Lotus.

Based on the theoretical overview, following is the experience of a developing

nation, Egypt, in developing its national information infrastructure and the

utilization of decision support systems in attempting to solve its socio-economic

problems as well as render the business community more aware and sensible to

the massive support, accurate, timely, and relevant information could introduce

to the business sector and help it compete globally.

Building Egypt's Information Society

Egypt is home to more than 70 million people and growing at an estimated rate

of 1.9% (www.mcit.gov.eg). Egypt is one of the largest economies in the Middle

East. The nation's current economic growth rate stands at 3.1% annually with

an inflation rate of 6% (www.economic.idsc.gov.eg). It is undergoing privatization

and liberalization of a number of its major economic sectors. Although the

population is settled on only 4% of its land, which extends to around 1 million

square kilometers, infrastructure development and extension reaches all 26

different provinces. Infrastructure is growing in two directions, horizontally to

provide the basic needs of the society and vertically to keep pace with the

developments taking place worldwide in different sectors, including information

and communication technology. Egypt has a large service sector mainly built

around tourism and transportation. Its major exports are human resource

capacities, petroleum products, cotton, and leather products; its major imports

are food, machinery, and vehicles. Agriculture accounts for nearly 16% of the

gross domestic product, industry 35%, and services 49% (www.mcit.egov.eg).

Information technology has been identified by the government of Egypt since the

mid 1980s as a potential player and a platform for growth.

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In 2001, the information technology market was valued at 849 million U.S. dollars

with an annual growth rate of 16.3% and by 2004, the value of the market is

expected to reach 1.315 billion U.S. dollars with a compounded average growth

rate (CAGR) of 16.1% from 1998 (American Chamber of Commerce in Egypt,

2002). It is important to note that although information technology came to Egypt

in the early 1960s, it was only in September 1999 that it was featured extensively

on the agenda when the government of Egypt took a major step toward the

deployment of information and communication technology for socio-economic

development following the earlier steps and projects that had started since the

mid 1980s. In that respect, the ministry of communications and information

technology were established. Moreover a three-year national ICT plan was

formulated that addressed the following issues: upgrading the current telecom-

munications infrastructure to build an effective and accountable infrastructure

that can provide Egypt and the Middle East and North Africa region with reliable,

effective, and affordable telecommunications services; creating a legislative

environment conducive to encouraging local and foreign investors to operate in

the ICT field; creating local demand for the ICT industry to motivate local and

foreign investors; targeting international markets by creating an ICT industry

capable of competing globally and transforming the sector into an export-led

industry in order to capture a greater share of the global market; developing

qualified human resources to develop and employ cutting-edge information and

communication technologies; and attracting foreign investment through global

alliances (www.mcit.gov.eg). The plans developed and the resources allocated

were capitalizing on an earlier effort that was put together since 1985 and had

resulted in the establishment of the Cabinet Information and Decision Support

Center (IDSC), which introduced to both the public and private sector for the first

time the concepts of using computer-based decision support systems for

business and socio-economic purposes.

Decision Support Systems in Egypt

Decision support systems, since their inception in the 1970s, have been differ-

ently defined and conceptualized by vendors, researchers, and academic com-

mentators. However there has been general agreement that decision support

systems are computer-based systems that help decision-makers confront ill-

structured problems through direct interaction with data and analytical models.

Some of the classic DSS texts show that the focus of research and application

of decision support systems has to a large extent been on individual managers and

on organizational decision processes, largely for the private sector. Thus DSS

are mainly represented as providing a set of opportunities directed toward

improving the effectiveness and productivity of managers and professionals,

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boosting the organization's competitive edge, and rationalizing the decision

making process within an organizational context. They aim at realizing the desire

for accurate, timely, and relevant information to help individual managers in

organizations deal with an increasingly turbulent economic environment and the

growing pressures of competition. Much less emphasis has been given to the

application of DSS in three particular areas: (a) their use with groups (although

group decision support systems nevertheless represent a significant domain of

research and application); (b) their use in the public sector; and (c) their use to

support socioeconomic development.

In many ways, Egypt is a typical developing country. It faces the common

problems of developing countries such as heavy foreign debt, a balance of

payments deficit, a high illiteracy rate, poor technological infrastructure, lack of

financial resources, and high unemployment. It has been striving to implement a

nation-wide strategy to support the realization of its targeted socioeconomic

development program to deal with these problems. Over the last decade Egypt

has managed to restructure many of its sectors and has improved the position of

its economy and is striving to complete the economic reform program, although

sometimes being hindered by internal economic deterrents as well as by external

effects that affect the growth of the economy at large.

In the mid 1980s, the government of Egypt adopted a far-reaching supply-push

strategy for the introduction, implementation, and institutionalization of large

information and decision support systems intended to improve strategic decision

making at the Cabinet level with respect to socioeconomic development. The

strategy had to be tailor-made to the decision-making needs of the Cabinet of

Egypt, which addresses a variety of socio-economic development issues. These

issues include public sector reform, administrative reform, debt management,

and privatization. The nature of these issues makes them adaptive to the

environment and liable to continuous changes taking place locally, regionally, and

globally. Before decision support systems were implemented, the following

characteristics were identified within Cabinet decision making: (a) it was data

rich but information poor; (b) information systems and management specialists

were isolated from the decision makers; and (c) computer systems were not

viewed as tools that could support decision making. Moreover, the focus of

improvements was more on technical issues rather than on decision outcomes.

Despite these undoubted obstacles a project was initiated to support Cabinet-

level decision making through state-of-the-art information technology tools and

techniques (Kamel, 1996, 1998). In 1985, the Cabinet of Egypt established the

Information and Decision Support Center (IDSC), whose mission is to provide

information and decision support services to the Cabinet for socioeconomic

development. The objectives of IDSC included: (a) developing information and

decision support systems for the Cabinet and top policy makers in Egypt; (b)

supporting the establishment of decision support systems/centers in different

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ministries and making more efficient and effective use of available information

resources; (c) initiating, encouraging, and supporting informatics projects that

could accelerate managerial and technological development of Egyptian minis-

tries, sectors, and governorates; and (d) participating in international co-

operation activities in the areas of information and decision support.

The Cabinet's IDSC activities accommodate four different domains: (a) The

Cabinet for which IDSC provides information, decision support, crisis manage-

ment support, modeling, and analysis of various high priority issues and multi-

sectors information and database developments; (b) the economic sectors for

which IDSC provides assistance in the development of decision support systems/

centers, advice, and consultancy in the area of information and decision support

services, sectors' database development, and project financing and support; (3)

the economy for which IDSC provides assistance in policy formulation and

drafting, as well as support for legislative reform and human and technical

infrastructure development; and (4) the national information and technological

infrastructure for which IDSC provides opportunities and facilities for technol-

ogy transfer to Egypt as well as to other developing countries through the

establishment of generic DSS models for socioeconomic development. Follow-

ing are four different decision support cases that were managed and analyzed by

the Cabinet of Egypt Information and Decision Support Center and set the pace

for other cases that deployed advanced information systems in developing

scenarios for socio-economic challenges.

Decision Support Cases

a. DSS for Strategic Issues: DSS-Based Debt Management System

During the 1990s, economic rebuilding efforts required Egypt to accumulate a

foreign debt of about 33 billion U.S. dollars covered in 5,000 loans. These loans

needed to be monitored for debt service payments, term re-negotiations, interest

rate levels, and payment management and scheduling. The magnitude of the debt

burden led the reform of the debt management program to become a priority

issue at Cabinet level. Hence IDSC initiated, developed, and implemented a debt

management system aimed at the rationalization of debt utilization and at debt

reduction and rescheduling. The system was developed to provide a manage-

ment tool to support and facilitate the registration, monitoring, control, and

analysis of Egypt's debts.

Over a period of 18 months a national comprehensive database, located in the

Central Bank of Egypt, was developed by IDSC's technical staff. The database

included details of government debts and payments, linked to a debt payments

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transaction processing system. The database was provided with decision support

system capabilities, enabling the implications of different debt management

scenarios to be tested. Throughout the development phase a number of technical

and cultural problems came up that caused delays and frustration, including

hardware requirements, software availability, and processing of operations.

Cultural issues included the fact that most of the software was developed and

interfaced in English, which represented a problem for many Egyptian users. The

impacts of the system, using decision support tools and generators, was the

successful negotiation of debt rescheduling with 14 countries. Negotiation was

smoothly managed through the provision of grounded information support that

was made available via the DSS. Moreover loans have been viewed ever since

as part of a comprehensive, integrated, and dynamic portfolio rather than being

managed on an isolated case-by-case basis.

b. DSS for Strategic Issues: Customs Reform Program DSS

Through one of its reform programs the Cabinet of Egypt was about to impose

a new set of customs tariffs, largely for imported goods, which were intended to

reduce the burden on low-income groups, increase the revenue of the govern-

ment, and create a homogeneous and consistent tariff structure. Anticipation of

the tariff changes caused stagnation in the business sector for four months. As

a result, multi-sectors conflicts arose between six different ministries. Hence

some form of decision support system was needed to resolve the conflict and to

support imposition of the new tariffs.

Therefore a team consisting of Ministry of Finance and IDSC personnel was

formed to interact with the different parties, get feedback, and generate different

scenarios to be assessed. A computerized DSS was developed, as a result of

which the various inter-ministerial conflicts were resolved within a four-week

period. Moreover a tariff structure was formulated, based on the various

scenarios and alternatives that were generated by the decision-support system.

The government endorsed the new tariff model, which was also accepted by the

business sector.

c. Sectoral DSS: Ministry of Electricity DSS

The increasing cost of government subsidy to electricity generation in Egypt

were continuously enlarging the country's balance of payments deficit and

adding to public sector debt. To help address this issue, IDSC developed a

decision support system for the Ministry of Electricity that was intended to: (a)

assess the impact of tariff changes on different income groups, (b) provide

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statistical data on power and energy generation, (c) provide statistical data on the

distribution and consumption of electricity, and (d) assist decision making about

the pricing and management of loans within the electricity sector.

A joint team was formed from IDSC and Ministry of Electricity staff. While the

ministry staff collected data from different sources, IDSC staff focused on issue

structuring, systems and human resource development, and, more importantly,

on managing the process of developing and delivering the decision support

system. During the implementation process, drought emerged in the sources of

the river Nile, causing a dramatic drop in the hydroelectric power generated by

the Aswan dam and necessitating the provision of 5 million U.S. dollars to fund

the rapid construction of three power-generating stations. As a result, the

Ministry of Water Resources was drawn into contributing to the project, since

it became a stakeholder in the decision-support system design process. At this

stage the project team therefore incorporated a third group from the Ministry of

Water Resources to cover the issues relating to hydroelectric power. In part the

recognition of the ministry as a key stakeholder in electricity generation and its

inclusion in energy decision making was one of the main outcomes of the DSS

design and implementation process. The DSS also led to decisions about a new

electricity tariff after assessment of the possible alternatives generated by the

decision support model and the evaluation of their impacts on different income

groups. The case showed that design and implementation processes are insepa-

rable and evolutionary throughout the entire information systems lifecycle.

d. Information Infrastructure Build-Up: Governorates' Decision

Support Centers

Once IDSC realized the vital role of information in decision making and in socio-

economic development, it adopted a supply-push strategy to improve administra-

tive effectiveness at the provinces level through the use of information and

decision support tools and techniques. The project aimed to rationalize the

decision making process of the governors through the use of state-of-the-art

information technology. The project adopted its supply-push strategy through the

implementation of two parallel policies: the development of an infrastructure for

informatics and decision support systems, and the development of human

capabilities in the areas of information, computers, and communications. To

fulfill this strategy, IDSC developed a comprehensive information base for the

governorates through the establishment, in each governorate, of a governorate

information and decision support center (GIDSC) to introduce and diffuse

information technology and to re-envision the role of the governorates in

development planning. The impact of GIDSCs was reflected in the number of

information and decision support cases delivered and in the diffusion of informa-

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tion technology knowledge and use at the governorate level. Moreover the work

of the GIDSCs led to the introduction and implementation of a new law for local

administration - representing a direct result of the project - that allowed

decentralization of decision making authority and power to the governors. It is

important to note that the GIDSCs had a direct impact on the structure of decision

making at the governorate level (Kamel, 1996).

Managing the Process from Design to

Institutionalization

The experience of managing the development, design, and implementation of

decision-support systems such as those described above can be generalized as

a set of steps and procedures for future use of decision support systems in similar

cases. IDSC adopted a two-phased approach for the implementation and

institutionalization of its issue-based decision support systems projects (El Sherif

& El Sawy, 1988). The first phase (implementation) was concerned with the

realization of decision support systems and includes a particular focus on model

building. The second phase (institutionalization) was concerned with embedding

the DSS into their organizational contexts and includes a particular focus on

management. The implementation phase was typically divided into three parts:

(a) the identification of policy needs and the full mobilization of human and

technical resources to achieve effective response and support, (b) the identifi-

cation of decision areas and information requirements, thus translating the

planned policy support into specific issues of concern for the recipient organiza-

tion; and (c) the formulation of projects with specific goals and dedicated human

and technical resources for each potential area of policy and/or decision support.

DSS project teams were selected to provide fast response and a focus on results

and action. They were two-tier teams comprising government bureaucrats and

professional technocrats able to deal with bureaucracy and IT professionals

competent to handle state-of-the-art information and decision support technolo-

gies. These two-tier teams were hybrids that represented one of the key success

factors in bridging the application gap between systems builders and applications

users (Kamel, 2001).

The institutionalization phase covered IDSC's experience with designing, devel-

oping and implementing decision support systems for development planning

purposes. This experience suggested that managing institutionalization is as

important as model building and that institutionalization is a complementary and

integrated process that accompanies systems development, design, and imple-

mentation. It comprises six components as shown in Table 1.

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The use of decision support systems in development planning led to the

identification of a number of challenges related to strategic public sector decision

making, decision-support systems, and the implementation and institutionaliza-

tion of rational management approaches. It is important to identify and deal with

these challenges effectively to be able to deploy such advanced information

systems in a way to render the organization more competitive both locally and

internationally within a global environment that is consistently and continuously

changing. Table 2 demonstrates such challenges.

Lessons Learned

Based on the implementation of more than 500 projects targeted at the develop-

ment and diffusion of decision-support systems in Egypt for development

planning, the following set of lessons learned can be summarized and could be

Table 1. Institutionalization phases

Phase Actions Taken

Adaptation Various modifications needed to fit the contextual

and cultural characteristics of the application

environment, such as making use of available

Arabized software and designing and developing

tools and utilities to support and facilitate the use of

Arabic-interface software.

Diffusion Spreading the use of decision-support systems and

developing the information technology infrastructure

across all organizational levels.

Adoption Personalized use of information technology tools and

techniques by decision makers as well as their

support staff.

Monitoring and

Tracking

Addressing critical issues, assumptions, priorities,

and information and decision requirements, and

tracking changes in technology and its potential input

to the decision-making process.

Value

Assessment

Reviewing the contribution of decision support

systems to public sector strategic decision making in

Egypt in terms of tangible and intangible benefits

such as: improved decision making at the Cabinet

and governorate levels and more efficient use of

available resources.

Evaluation Appraising, analyzing, and validating value-added

benefits of decision support systems developed for

socio-economic development planning.

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used as possible models for similar implementations in similar settings in

developing nations and in public administration environments. The lessons are:

• Structuring of socioeconomic decision-related issues is an integral part of

the design and implementation of decision support systems dealing with

national development planning.

• Providing decision support systems requires much time and effort in

building and integrating databases from multiple data sources and sectors.

Table 2. Implementation challenges

Strategic Public Sector Decision Making Decision Support Systems

Development

Efficient and effective use of scarce

resources

Factors determining implementation

of socio-economic development

planning

Ill-structured nature of strategic

decision making processes

Turbulent and dynamic environment

within which decisions have to be

made

Crisis management mode of

operation for many strategic

decisions in the public sector

Strategic decision making is usually

a group effort rather than an

individual one

Need for conflict resolution in

strategic decision making, given the

major issues and stakeholders

involved

Formulation, development, and

implementation of policy reform

programs

Managing the development

of multiple information and

decision support systems

Institutionalization of such

systems within their

application contexts

Development of usable

decision-support systems

interfaces

Availability of decision

support systems tools and

generators relevant to

different sectors and

applications

Practical Implementation and Institutionalization of DSS

Resistance to change

Lack of timely, adequate information about user needs

Lack of user involvement

User language problems

Lack of top management support

Lack of continuous communication from users

Difficulty of problem definition

Difficulty of responding to user needs

Inadequacy of model evaluation

Poor documentation

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• Developing a decision-support system to address one socio-economic issue

might affect other issues that should be put into consideration during the

design phase to save time and effort and avoid duplication of activities.

• Providing decision-support systems for development planning is often

urgent and critical; hence the design should allow for a crisis management

mode of operation.

• Providing crisis management teams with managerial and technical support

capabilities is essential.

• Depending on timely, effective and accurate information is essential for

effective decision-support systems.

• Implementing successful decision-support systems are necessary but not a

sufficient condition for successful institutionalization of DSS.

• Integrating implementation and institutionalizations processes of decision-

support systems is vital.

• Implementing successful decision-support systems requires top manage-

ment support; institutionalizing successfully the process requires broader

organizational support.

• Evaluating and assessing decision-support systems is a vital ongoing

process to provide a real-time response to changes occurring in the

environment.

• Conducting continuous multi-level capacity development plans is crucial for

the successful adoption, adaptation, and diffusion of decision-support

systems within organizations.

References

American Chamber of Commerce in Egypt. (2002). Information technology in

Egypt (Business Studies and Analysis Center).

Economic News Letter. (2004). Newsletter. Retrieved January 24, 2004, from

www.economic.idsc.gov.eg

El Sherif, H., & El Sawy. O. (1988). Issue-based decision support systems for

the cabinet of Egypt. MIS Quarterly, 12.

Kamel, S. (1996, May 19-22). Decision support systems for strategic decision

making. Proceedings of the 7th International Conference of the

Information Resources Management Association, Washington D.C.

TEAM LinG - Live, Informative, Non-cost and Genuine !Using DSS for Global Competitiveness 129

permission of Idea Group Inc. is prohibited.

Kamel, S. (1998). Decision support systems and strategic public sector

decision making in Egypt in information systems for public sector

management. Working paper series, Institute for Development Policy and

Management, University of Manchester.

Kamel, S. (2001). Using DSS for crisis management, annals of cases on

information technology applications and management in organization

(Vol. 3). Hershey, PA: Idea Group Publishing.

Keen, P.G.W. (1980). Decision support systems: A research perspective.

Working paper, Sloan School of Management.

Little, J.D.C. (1970). Models and managers: The concept of a decision calculus.

Management Science, 16(8), B466-485.

Ministry of Communications and Information Technology. (2004). Report.

Retrieved January 28, 2004, from www.mcit.gov.eg

Simon, H.A. (1977). The new science of management decision (revised ed.).

Prentice Hall.

Turban, E., & Aronson, J.E. (2001). Decision support systems and intelligent

systems (6th ed.). Upper Saddle River, NJ: Prentice Hall.

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Chapter VII

A Proposed

Framework for

Making Decisions

Dynamically in a

Global Organisation

Sokkien Leeane Chhai

University of Western Sydney, Australia

Yi-chen Lan

University of Western Sydney, Australia

Abstract

A proposed framework for making decisions dynamically in a global

organisation has been developed. This framework enables data to be

retrieved and analysed dynamically with the aid of technology. This

chapter starts with the discussion of various types of global organisational

and departments within a global organisation. It is followed by the

investigation and identification of organisational data and decisions that

make up the global organisation; it also examines the different enabling

technologies that can be applied for information retrieval. The chapter

concludes with a proposed framework for making decisions dynamically in

a global organisation.

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Introduction

Organisational structures and strategies are the key elements used to differen-

tiate the different types of global organisations. These organisational structures

and strategies determine the control formations and the way that organisations

make their decisions. A "global" organisation is known as a centralised hub

where foreign subsidiaries are tightly controlled by the headquarters (Bartlett &

Ghoshal, 1989). Global organisations are emerging as huge global information

systems with a multitude of subsidiaries located around the globe. This informa-

tion system contains critical data that needs to be categorised and organised, thus

decisions can be dynamically and accurately made by management.

One of the major barriers that global organisations face today is a way to utilise

data and information from their information systems to the best of their

advantage. The departments and data located in global organisations are very

similar to other types of organisations; the major difference here is the type of

decisions that the global organisations make in regard to competitive advantage.

With these huge global information systems, global organisations require a

mechanism or framework that allows the data in the information systems to be

retrieved and analysed dynamically. A framework for making decisions

dynamically in a global organisation has been proposed as the main objective

of this study. This framework consists of three layers: data, technology, and

decision.

In conclusion an example using intelligent agents and data mining is discussed.

This example illustrates how the framework can be applied using the agent-

based technology.

Literature Review

Global Organisation Structures

The type of strategy the organisation uses defines the organisation. Organisational

strategy is defined by Hill (2003) as the actions that managers take to achieve

the organisation's goals. These strategies have a direct affect on the way

organisations make their decisions and distribute their information. Generally,

there are four types of global models or strategies (Bartlett & Ghoshal, 1989;

Karimi & Konsynski, 1991):

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1. Multinational organisation model (multinational strategy)

2. International organisation model (international strategy)

3. Global organisation model (global strategy)

4. Transnational organisation model (transnational strategy)

These four organisational models or strategies determine how the organisations

carry out their business activities and operations.

The multinational organisational model is said to be a "decentralised federation"

(Bartlett & Ghoshal, 1989). A "decentralised federation" means that each of the

organisation's foreign units is permitted to modify the product and or service to

suit their national conditions (Hill, 2003). In a decentralised federation the

responsibilities, assets, and decision-making are widely spread. Thus the

organisation treats its foreign national units as part of its "international portfolio."

The subsidiaries in the multinational structure are fairly independent, although

the headquarters maintains the financial controls on the subsidiary. The subsid-

iary must also report to the headquarters.

The international organisation model is said to be a "co-ordinated federation"

(Bartlett & Ghoshal, 1989). A "co-ordinated federation" transfers knowledge

and technology to their foreign subsidiaries that are less advanced in the market.

These subsidiaries are able to adapt to their market and adopt different strategies

(Karimi & Konsynski, 1991). Under the co-ordinated federation the subsidiaries

are dependant on the parent company for new products, services, processes, and

ideas, although some responsibilities, resources, and decisions are decentralised.

This dependence allows headquarters to have more coordination and control

over their subsidiaries. The subsidiaries are considered an integral part of the

central domestic operations.

The global organisation model is said to be a "centralised hub" (Bartlett &

Ghoshal, 1989). In this model the organisation focuses on marketing a standardised

product worldwide (Hill, 2003). This "centralised" structure allows the head-

quarters to tightly control the foreign subsidiaries. These subsidiaries are limited

to the sales and services of the product. Their main role is to implement the

policies and procedures developed by the headquarters. The headquarters

considers their subsidiaries as a channel to a unified global market.

Transnational organisation model is said to be an "integrated network" (Bartlett

& Ghoshal, 1989). In this integrated network the subsidiaries are viewed as a

valuable source of information, ideas, and skills, which can benefit the organisation.

The organisation is able to coordinate the foreign subsidiaries as well as give

these subsidiaries the ability to respond to their foreign interests and preferences.

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Decision Making in Global Organisations

Decision making in general is a complex process; it is even more complex in

global organisations where the organisation's subsidiaries are spread across

geographical regions. Depending upon the strategy that an organisation adopts,

the division of decision making is different.

The decision making in multinational organisation is widely spread across the

subsidiaries. Generally the strategic decisions are decentralised and the head-

quarters only have a simple form of financial control on the subsidiaries. The

subsidiaries have the control of modifying products and services to suit their

national needs.

In international organisations the decision-making is decentralised only to a

certain extent; the subsidiaries are dependent on the parent company for ideas,

processes, products, information, and services. These subsidiaries, however, are

able to adapt to their local environment and make their own strategic choice with

the guide from the headquarters.

Global organisations, however, have tight central control of their decisions,

resources, and information (Karimi & Konsynski, 1991). Since global organisations

have such tight controls over their subsidiaries, senior management usually

performs decision-making. Subsidiaries are considered as a "channel," or way

to deliver the goods and or services. Therefore subsidiaries do not have the ability

to modify the product and or service.

In a transnational organisation the decision-making process is supported by a

complex process of coordination and cooperation in an environment of shared

decision-making (Karimi & Konsynski, 1991). This is due to the way these

organisations treat their subsidiaries, a source of valuable information and ideas.

Information Systems and Decision Support for Global Organisations

There are various forms of information systems; these include: transaction

processing systems, management information systems, executive information

systems, global information systems, decision support systems, and knowledge-

based systems. Within these information systems lies the data that is needed for

decision making. Table 1 is a summary of the types of information systems,

taking note that it is not possible to list all the types of information systems that

are in use.

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Using Artificial Intelligence to Support Decision Making

The use of artificial intelligence (AI) to support decision making is a relatively

new field, although expert- and knowledge-based systems have been designed

based on AI principles. Table 2 summarises three types of AI technologies that

can be applied to the decision-making process.

Table 1. Comparison of information and decision support systems

Name Characteristics

Transaction

Processing System

(TPS)

- Collects and stores data about transactions.

- Data editing, data correction, and data manipulation.

- Elementary day-to-day activities of an organisation.

- Provides summarised data for decision-making.

Management

Information Systems

(MIS)

- Provides information to organisation's managers.

- Provides standardised or predefined reports.

- Generates information on performance, coordination,

background information of organisation.

- Extracts and summarise data from TPS.

Executive

Information Systems

(EIS)

- Computerised information system.

- Provides easy access to information from different

sources.

- Provides organisational performance data, internal

communication, and environment scanning.

- Designed for individual use.

- Displays data in an interactive way.

Global Information

Systems

- Data communication network that crosses national

boundaries.

- Accesses data and process data across these

boundaries.

- Able to link up with foreign subsidiaries' information

systems.

Decision Support

Systems (DSS)

- Interactive, computer-based information system.

- Offers information and data and analysis models to

assist in decision making.

- Used for the support of structured and ill-structured

decisions.

- Produces reports.

- Conducts decision analysis and obtains responses to

queries.

Knowledge Based

Systems (KBS) or

Expert Systems

- Supports and automates decision making in an area

where experts are better suited to provide answers.

- Constructs conclusions or answers based on the

information it receives.

- Uses rules to determine conclusions.

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Dynamic Decision Making

According to Busemeyer (1999) dynamic decision making is defined by three

common characteristics:

1. Series of actions taken over time to achieve an overall goal,

2. Actions are interdependent, since later decisions depend on these actions,

and

3. Environmental changes are spontaneous and/or a result of earlier actions.

The literature in this field is mostly divided into two parts (Park, Kim, Yi, Jun, &

Moon, 1996). First the researchers conduct rigorously controlled experiments to

construct rigid computational models of dynamic decision making and second

they research the concerns of dynamic decision-making in real world problems.

Park et al. (1996) have proposed a framework for dynamic decision making in

the real world at macro level based on the cognitive theory of problem solving.

Their research is based on conducting three experiments using simulated

management games to examine the relationship between the strategy used to

search the dual problem spaces (this consists of a model space and a decision

space) and the resulting dynamic decision being made.

Table 2. Three types of AI technologies for decision-making process

Name Characteristic

Case-Based

Reasoning

(CBR)

- Based on the idea of locating past cases that are

similar to the current case.

- Decision support technique.

- Provides knowledge on the case.

Intelligent

Agents (IA)

- Autonomous, goal-directed computerised process

that can be used to perform background work.

- Qualities include: reactivity, proactiveness, and

social ability.

- Ability to sort and filter data.

Neural

Networks

- Also called connectionists networks, systems that are

interconnected artificial neurons.

- Information system that can recognise the objects

and different patterns based on the examples that

have been used to guide it.

- Built assuming that no explicit knowledge exists,

using a mathematical technique.

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Furthermore the study determines the amount of inferences made in the model

space and how the performance is affected when making dynamic decisions in

pairs or alone. Literature in this area is diverse. There are many articles on

dynamic decision making theories and models (Roe, Busemeyer, & Townsend,

1999).

Global Organisation Departments, Data,

and Decisions

General Global Organisation Departments

Global organisations are made up of a variety of different departments that work

together to ensure that all data and information is up to date. It is often hard to

synchronise data and information due to time zones, language barriers, and the

geographical locations. It is important to remember that global organisations

have a highly "centralised" nature, in that all decisions are made at the

headquarters and foreign subsidiaries only carry out and implement the proce-

dures and policies set out by the headquarters.

Generally speaking, it is impossible to list all the different types of departments

in a global organisation since each organisation is involved in a particular type of

field. This framework focuses on the general departments that can be found in

any organisation, including global organisations. According to Daft (2001) there

are four departmental groupings that can be applied to the organisational

structure; these are: functional grouping, divisional grouping, multi-focused

grouping, and horizontal grouping. For this study the global organisation depart-

ments will be in the functional grouping form (Figure 1).

Figure 1. General departments in a global organisation

Global Organisation

Management

Finance

Accounting

Human

Resources Production

Purchasing

Procurement

Sales Marketing

Research

Development

Information

Technology

Business

Development

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The management department here is in a global text, that is, in a true global

organisation the management department oversees the subsidiaries on behalf of

the headquarters.

General Global Organisation Department Data

The following descriptions of data for each department are very general; it is not

possible to list all data types found in each department, so the following types of

data are just a general list. It also good to note that the data types can belong to

more than one department.

1. Data in the management department consist of subsidiary, region, country,

financial performance, financial budget, corporate resource, stakeholder,

corporate image, audit, meetings, corporate strategies, legislation, policy,

standards, guidelines, security, insurance, and international laws.

2. Finance and accounting data consist of account, asset, liabilities, funds,

financial performance, payroll, invoice, receipt, vendor, customer, and

subsidiary information.

3. Data in the human resources department consist of employee, compensa-

tion benefits, contractor, incentives, job, policy, union/industrial relations,

training, and development information.

4. Production data consist of product, production, storage, raw material,

machinery, packaging, labelling, policy, and standards.

5. Data in the procurement and purchasing department consist of import, raw

materials, purchase product, and vendors.

6. Sales department data consist of product, service, customer, region, retail

store, policy and standards, and inventory.

7. Data in the marketing department comprise products, services, promotion,

market, survey, competition, customer, economic trends, industry trends,

policy, strategies, and guidelines.

8. Information technology (IT) department data consist of system, software,

network, architecture, policy, standards, guidelines, strategic IT plan,

business continuity plan, disaster recovery plan, technology resources,

security, and infrastructure.

9. Data in the research and development department consist of new products,

new services, ideas, global standards, resources, and subsidiaries.

10. Data in the business development department consist of business strate-

gies, investment strategies, market research, financial performance, inter-

national laws, legislation, policy, standards, and guidelines.

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Types of Decisions Made by Global Organisations

Decision making is fundamental in any organisation; the decision making in global

organisations is more complex. This is because global organisations are more

competitive in nature; this "competitiveness" affects the way managers make

decisions and how they evaluate new opportunities (Leontiades, 2001).

As a result of this new competitive behaviour, this section deals with the types

of decisions that are made that can enable the global organisation to gain a

competitive edge against its rivals. The decisions listed below are categorised in

accordance with the business functions and can exist in any organisation;

however, the main focus of these decisions is based on global organisations.

Finance and Accounting Department

In global organisations the finance and accounting department plays a major role

in the monetary sense, as it literally pulls the financial strings. To gain a

competitive advantage, the global company should take into account the whole

organisation's financial status, including its subsidiaries.

The decisions vary from being common decisions that are found in any

organisation, such as decisions regarding the financial budget, procurement of

goods, and so on. There are other decisions that can enable the organisation to

gain a competitive advantage. These decisions may be identified by some

questions such as "do we posses the necessary funds to start up a new

subsidiary?" and "what is the exchange/interest rates of country x?" and "do

these exchange/interest rates affect our production sales?" and "what are the

subsidiaries' performance for the financial year" and so on.

Furthermore, the financial and accounting department relies heavily on the

control of management and the headquarters. The department's major respon-

sibility to global decision-making is to forecast the organisational profitability,

that is, to transform the income statements of the organisation into decision-

useful information and to link this information with business and investment

strategies.

Human Resources Department

Competitively speaking, the types of decisions that could be made concern the

recruitment of employees and creating and developing the policies, guidelines,

and procedures.

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The decisions include "what procedures and guidelines must this subsidiary have,

depending upon the main business operations that are assigned to the subsidiary,"

"reducing the number of employees on a global scale," "hiring of local managers

or overseas managers to manage subsidiaries," "decision to keep or to move

executives and managers to different subsidiaries," and so on. These decisions

are made with the headquarters' support. The department should find the best

person to fit the position; it must develop procedures and guidelines, and this is

imperative since the organisation relies on these employees to carry out the

everyday tasks of the organisation. Thus it is a competitive advantage for the

organisation to streamline its employees and procedures.

Production Department

To enable the organisation to compete globally, this department (which is under

the control of the headquarters and management) must develop standardised

products that can be sold anywhere, although this may not always be the case,

since products can vary depending upon the requirements of that particular

market. Since the headquarters controls the subsidiaries in global organisations,

subsidiaries have little or no say in the way they produce the product; they must

follow the guidelines and procedures set out by the headquarters.

The decisions that are likely to give the global organisation a competitive

advantage may include "the decision to produce the products at a lower cost,"

"deciding what subsidiary would best develop the product for a cost-effective

price," "the level of products to produce," "strategically placing production

plants in certain areas," and so on.

These decisions are also based on the tax, legislation, laws, currency, and

political issues of the country the subsidiary resides in (Ball, Wendell, McCulloch,

Frantz, Geringer, & Minor, 2002).

Procurement and Purchasing Department

Here competitive advantage is apparent. The decisions that this department

makes can have an overall effect on the way the organisation succeeds. The

types of decisions that this department can make include "deciding where to buy

raw materials," "reducing the supply chain," "whether or not it will benefit the

organisation to make links with suppliers," "allocating appropriate procedures

and guidelines to procured goods," "whether it is viable to purchase raw material

in country x, when country y (the subsidiary that needs the raw material) is

located on a different continent," "minimise logistics and distribution delay," and

so on.

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Sales Department

The main purpose of the sales department is to sell goods and/or services to the

consumer. There is a close relationship between the sales and marketing

department. This department also deals with the management of customer

relationships.

The decisions made in this department are very common in any organisation,

which include "whether or not it is worthwhile to incorporate a customer

relationship management system," "deciding what particular group (demo-

graphic) of customers that the product is aimed for," "deciding upon the cost of

services and products, specials, sales, and so forth," "deciding if it is necessary

to set up call centres or help lines for customers," "types of sales strategy to

various markets," and so on.

Marketing Department

The marketing department plays an important role in securing competitive

advantage as it develops the strategies to "market" or "advertise" the organisation.

The types of decisions that can be made by the marketing department include

"when to conduct in-depth market analysis," "whether or not the alliance with

other companies to promote the organisation's products and services can aid the

organisation," "what type of marketing strategy should be used for different

demographics, including country and culture," and so on.

Management Department

This department is responsible for the overall operation of the organisation; to

gain a competitive advantage the management department should be able to

coordinate and streamline its functions and subsidiaries together.

The decisions involved in this department may include "is it viable to invest

subsidiaries in country x?" and "what strategy is the best approach for the

production of goods?" and "what procedures and policies must each department

implement?" and "deciding on the management structure and personnel for a

subsidiary" and "deciding upon the level of control that each subsidiary has."

There are many more decisions that the management department carries out, but

these decisions are everyday type decisions, or, in other words, decisions that are

very common in any organisation.

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Information Technology Department

The information technology department's main purpose is to create, implement,

and maintain the networks, software, and system architecture of the organisation.

This department works closely together with the management department to

align the business processes with IT.

There are many decisions that are made within this department. Competitive

advantage can be in the form of the organisation's network (speed, quality,

durability).

The types of decisions that can be made in this department include "deciding

upon the network structure for a subsidiary," "type of system architecture and

IT infrastructure," "whether to store data externally or to have a local copy and

mirror sites," "type of technology to be used (hardware and software)," "what

types of data exchange and data interchange platforms to use," "strategies or

methods to operate global IT infrastructure," "types of network standards and

policies," and so on.

Research and Development Department

The decisions made by the research and development department are a crucial

part of "staying competitive" and/or gaining a competitive advantage. The main

purpose of this department is to research and develop new innovative products

and/or services.

The types of decisions being made by this department may include decisions such

as "deciding on the amount of funding and manpower that is needed," "strategies

to detect market trends," "type of product, idea, service will be researched and

developed next," and "cost-effective strategy".

The research and development department needs to work closely with the

marketing and production departments. It is imperative that this department does

an in-depth analysis to discover the changing needs of the consumer; as these

needs change, so to does the product.

Business Development Department

The purpose of this department is to research and define the business strategies

that can be applied in acquiring new subsidiaries, new business opportunities,

and, most importantly, who the organisation has an alliance with or merges with.

Creating a "global presence" is crucial for competitive advantage, thus this

department must conduct a thorough investment analysis to decide whether or

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not the appropriate investment will lead the organisation to have a global

presence and a competitive advantage.

The types of decisions that can be made include "is country x suitable for opening

a subsidiary?" and "is it to our advantage to have an alliance with company x?"

and "deciding on the appropriate strategy to acquire a business opportunity" and

so on.

Ranking the Different Types of Data

Data found in global organisations are usually stored in some sort of database,

whether it is a combination of relational databases, transaction databases, or

object-oriented databases. In relation to our research focus, once the data has

been gathered from the global organisation's databases via some technological

mechanism there is a need to sort and filter the data that has been gathered to

aid top management's decision making.

As mentioned earlier, a way to retrieve data and information from huge

databases is using data mining. Basically data mining can be defined as

extracting or mining knowledge from large amounts of data (Han & Kamber,

2001), and/or is a process of nontrivial extraction of potentially useful information

that was previously unknown (Chen, Han, & Yu, 1996).

When decision makers query their databases, huge amounts of data can be

retrieved, and if this retrieval of data is relatively extensive, there must be a

mechanism that sorts the relevant data from the data that has been retrieved.

With the use of data mining one can specify the exact query using SQL-like

statements but written in a data mining query language. A data mining querying

language enables the data mining system to support ad hoc and interactive data

mining to assist in flexible and effective knowledge discovery (Han & Kamber,

2001).

Furthermore, there is also another factor in data mining - text-based databases.

A text-based database is a large collection of documents from multiple sources

such as articles, news, books, and research papers (Han & Kamber, 2001). As

global organisations contain huge amounts of documents that contain semi-

structured data, the text-based database can be considered a goldmine of

potential knowledge. This knowledge is potentially useful for the research and

development departments in the global organisation.

Another possible way to gather information from text-oriented documents is with

the use of XML (Extensible Mark-up Language). XML can be used to convert

text-oriented documents into standardised interface to allow for the reorganisation

of information; the XML documents can then be transferred to a database.

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Data Ranking and Filtering

The data mining process filters out noisy data as well as dealing with the

integration, selection, and transformation of data.

With huge amounts of data being sourced from the global information systems'

databases, it is imperative to filter and rank this retrieved data. The ranking

process depends on the type of decisions being made. An example would be the

decision made to evaluate the investment of foreign subsidiaries. The retrieved

data may include financial data (such as expenditure description, expenditure

amount, expenditure date, financial budget amount, and financial budget date)

from the finance and accounts department, and research data from the business

development department. Although the decision was put through by the business

development department, the ranking of data here would be the financial data and

then the business development data.

A Proposed Framework for Making Decisions

Dynamically in a Global Organisation

As mentioned in the literature review, a "global" organisation can be seen as a

"centralised hub" where foreign subsidiaries are tightly controlled by the

headquarters. As information and data are constantly being updated from the

foreign subsidiaries, top management needs a way to make decisions dynami-

cally with the most current information.

The previous section described the departments, data, and types of decisions that

could be made by global organisations. This section aims to describe a proposed

framework for making decisions dynamically in a global organisation.

The framework consists of three layers (Figure 2).

Figure 2. A framework for dynamic decision making in global organisations

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The data layer consists of data that is contained within the global organisation's

information systems. The technology layer is the underlying technology that is

used to gather and rank the data. The decision layer activates the technology

layer by invoking the underlying technology.

Data Layer

The data layer is the underlying global information systems; this layer contains

numerous databases. The global information systems will generally have a

centralised database, but with foreign subsidiaries maintaining and controlling

their own local databases, the centralised database is constantly being updated

from various foreign subsidiaries. The type of data in the departments of a global

organisation has been covered in the previous section.

Technology Layer

The technology layer is the underlying technology that is being used to unearth

the data that the decision requires. There are many types of technology that can

support decision making, such as decision support systems, executive informa-

tion systems, management information systems, and knowledge or expert

systems. This technology can also include intelligent agents, neural networks,

and case-based reasoning. The purpose of the technology layer is to gather the

data and information from the global information system's database. It then

invokes data mining to clean, integrate, select, and transform the data into useful

information and or patterns via a visualisation technique.

The technology layer will invoke data mining algorithms when the data has been

gathered. Data mining will enable the data that has been gathered to be cleaned,

filtered, and integrated before sending the information back to the decision

maker.

Decision Layer

The decision layer is the first layer of this framework as it is the one that invokes

the underlying technology in the technology layer to gather and analyse the data.

The type of decisions that a global organisation can make has been discussed in

the previous section.

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An Example of the Proposed Framework with the Use of

Data Mining and Intelligent Agents

This example aims to display the way the proposed framework will work. It uses

intelligent agents to source and/or gather the relevant data from the global

information systems. As mentioned in the literature review, intelligent agents are

an autonomous, goal-directed computerised process that can be used in a

computer system or network to perform background work while other processes

run in the foreground (Alter, 1999b). Figure 3 depicts the flow of actions

occurring after a decision has been entered.

The steps are:

1. A decision is being sent to the technology layer.

2. Technology layer invokes the underlying technology, in this case intelligent

agents.

3. Intelligent agents then gather the data from the global information system.

4. The intelligent agent then uses data mining to clean, integrate, select, and

transform data.

5. Data mining mechanism then sends the results back to the intelligent agent.

6. The intelligent agent then communicates with the technology layer to send

information back to the decision maker.

7. Data and information are sent to decision maker.

Figure 3. Using intelligent agents and data mining

Data Layer

Technology

Layer

Decision Layer

1. 7. Analysed data sent to decisionmaker

3. 3.

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Conclusion

Global organisations are emerging as huge global information systems. These

information systems contain data and information that may be critical in decision-

making. In this study, the global organisation has been broken down into three

components, namely, departments, data, and decisions. A framework for making

decisions dynamically in global organisations has been developed. This frame-

work incorporates three layers, data, technology, and decision layer.

References

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M.S. (2002). International business the challenge of global competi-

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Hill, C.W.L. (2003). Global strategy, global business (2nd ed). New York:

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Laudon, K.C., & Laudon, J.P. (2000). Management of information systems

(6th ed.). Upper Saddle River, NJ: Prentice Hall.

Leontiades, J.C. (2001). Managing the global enterprise competing in the

information age. Harlow, UK: Pearson Education Limited.

Luger, G.F. (2002). Artificial intelligence: Structures and strategies for

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McNurlin, B.C., Ralph, H., & Sprague, J. (2002). Decision support systems and

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Nemati, H.R., Steiger, D.M., Iyer, L.S., & Herschel, R.T. (2002). Knowledge

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Two Crows Corporation. (1999). Introduction to data mining. Potomac, MD:

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Chapter VIII

Decision Support and

Data Warehousing:

Challenges of a Global

Information Environment

Alexander Anisimov

Ural State Technical University, Russia

Abstract

This chapter is dedicated to the major managerial, organizational and

technological aspects of development of data warehouses in a global

information environment, when different external sources of information

are available and potentially may have value for decision support and

managerial analysis. It summarizes the major benefits that become available

for businesses if they decide to integrate information from external sources

into their data warehouses. It also introduces the overall organizational

framework of development of data warehouses that are based upon the

information from different external sources. Furthermore the author hopes

that understanding of the framework introduced will not only inform

practitioners (both information technology (IT) specialists and managers

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in different spheres of business) of new possible approaches to design of

decision support systems but also assist in the improvement of approaches

to decision-making procedures.

Introduction

Data warehouses play an important role in the automation of managerial analysis

and in decision support. The main purpose of this technology is to accumulate and

organize information in order to make it useful for analysts and decision makers.

Usually technical specialists and managers are concerned with the development

of data warehouses that are based on information from operational information

systems located within the organization. However any business is influenced by

external factors and oriented to the external business environment. Hence

information about the surrounding world and economic conditions may some-

times be more important for creative analysis and decision making than internal

information. That is why the presence of valuable information in different

external sources and its potential value for decision making make it necessary

to integrate external information into corporate information flows, thus making

data warehouses more valuable to analysts and managers.

On the one hand development of data warehouses that contain information from

external sources is a non-trivial task that may appear to be an expensive exercise

in terms of both financial and non-financial resources. On the other hand

selection of adequate strategies for the usage of information from external

sources may determine the overall efficiency of a business and its competitive

power in our age of global information systems and rapidly changing business

conditions.

The main objective of this chapter is to describe the major potential benefits that

may arise for decision makers as well as the major challenges that systems

integrators and managers will face if they decide to follow the strategy of

integrating into the global information environment.

Background: The Nature of Data

Warehousing

Corporate decision support tools and management information systems are

commonly oriented around the accumulation of information from scattered

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sources and their further processing. Data warehouses usually are used for

amalgamation of information from different storages (like operational data

stores and transactional information systems) and their preparation for further

processing that usually involves flexible reporting, online analytical processing,

data mining and other similar approaches. Such functionality is achieved through

use of so-called "multidimensional data bases" - data structures that organize

information into virtual "data cubes." Managerial analysis and decision making

are supported either through application of specific mathematical tools (such as

data mining) or through providing a means of flexible data manipulation (such as

online analytical processing).

Development of such data warehouses has become possible due to the wide use

of information systems in the support of different routine business operations

(such as accounting information systems, MRP, CRM, PDM, and so forth). In

other words the introduction of data warehouses usually represents a natural

continuation of development of operational information systems introduced into

major business spheres.

Initially the development and maintenance of data warehouses that accumulate

heterogeneous information was a difficult task for developers, system analysts,

and field managers because of the following major reasons:

• Absence of standards and unified approaches to information storage as

well as procedures for its processing (information about the same or closely

related business phenomena may be processed asynchronously in different

local databases);

• Absence of unified approaches to identification and naming of different

business processes and phenomena across organizations (the same busi-

ness phenomena may have different identifications); and

• Absence of unified hierarchical classifications of the existing business

phenomena (identifiers of different business phenomena in different opera-

tional systems may be grouped and classified in accordance with different

rules).

The significance of these difficulties and importance of data warehousing

development for business stimulated the concentration of the attention and

efforts of many specialists on this subject. Over the course of time significant

experience was accumulated in the field of organization and running of such

information systems, and a relatively independent discipline was even estab-

lished (data warehousing) that formalized and systematized all the major

problems, procedures, and solutions that are specific to this field (see, for

example, Gray & Watson, 1997; Inmon, Imhoff, & Sausa, 2001; Reinschmidt &

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Francoise, 2000). Establishment and common acceptance of this discipline are

illustrated by the fact that, for example, Microsoft Corporation not only has

separate software products that more or less successfully implement data

warehousing concepts (for example, analysis services) but also has a separate

specialists certification program (see, for example, Nolan & Huguelet, 2000)

together with certification programs in software development, database admin-

istration, and other fields.

Besides this, the evolution of data warehousing technology was influenced by the

use of integrated enterprise-wide information systems that provide a single

platform for all the major spheres of business responsibility within a company

(sales, procurement, production, human resources, finances, and so forth).

Comprehension of data warehousing as a distinguished discipline and its succes-

sive development allowed the achievement of the major goals that are important

in any sphere of IT management:

• Render the overall development process more controllable and clear in

spite of all the technical and organizational difficulties;

• Discover and predict the major difficulties that may potentially hamper the

development of data warehouses; and

• Estimate the consumption of required resources at different stages of a

data warehouse development project.

As a result, the introduction of data warehouses has almost become "just

another" type of software development project that requires specific more or

less well-known tools, skills, and approaches to software design and project

management.

Integration of Data Warehouses into a

Global Information Environment:

The Major Perpsectives

The next step in the development of information technologies primarily discussed

in this chapter - globalization of the information environment - has provided

significant potential for further development of decision support systems and

opened new horizons for them. It has presented new opportunities for deeper and

more flexible managerial analysis as well as for making more well-grounded and

sound decisions and consequently gaining new competitive advantages.

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Certain specialists and researchers describe in their works some aspects of

integration of information from different external sources in order to make data

warehouses more useful and valuable for decision making:

• Inmon (2002) outlines the major technical difficulties related to dealing with

external information sources (totally undisciplined and unstructured data,

unpredictability of external information sources' behavior, and some oth-

ers) as well as certain software engineering solutions

• Certain difficulties specific to particular situations are described in several

scientific works. A good example of such research work is presented by

Galhardas, Florescu, Shasha, Simon, and Saita (2001). They describe a

situation when it was necessary to integrate unstructured library informa-

tion from a particular external information source into a data warehouse

(difficulties and solutions).

In our opinion systematic usage of external information sources for corporate

data warehousing should not only be regarded as a technical issue with data

warehousing technology, but it should also be interpreted as part of an overall

managerial and technological strategy. This would, on the one hand, require

policymakers' support at different organizational levels and, on the other hand,

have significant potential for development of competitive advantages and growth

of the market value of a business.

That is why systematic integration of information from external sources and

possibility to achieve significant results (improvement of decision making

through advanced decision support) should be supported by a consistent meth-

odology that describes the initial development process as well as the ongoing

support of all the elements of such data warehouses. Such methodology should

be focused on major opportunities, tasks, and approaches to dealing with the

typical problems that may occur during the development process. In particular

it should be based upon comprehensive analysis of the following aspects:

• Opportunities that become available for analysts and managers whose

decisions are supported by the data warehouses in which information from

external sources is imparted - the major possible advantages should be

clearly presented to both decision makers (data warehouses' potential

users) and system integrators in order to make the process of development

more oriented to management information needs.

• Situations in which there is integration of information from external sources

and corresponding organizational and technical challenges - different

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types of information sources should be classified in order to clearly

differentiate the major possible organizational and technical strategies that

should be applied in each particular case.

• Major approaches (technological issues and organizational methodologies)

to dealing with the difficulties that are typical for integration of information

from the external sources - different technological solutions and organiza-

tional methods should be described with regard to the major challenges

connected with the external sources of information that is important for

decision making.

Consistent provision of these three elements of the methodology should lead to

one benefiting from the availability of numerous external information sources

and being able to systematically deal with the major problems that are typical with

integration of these sources into corporate data warehouses loading processes.

Opportunities Provided by External Information Sources

In most cases the potential of data warehouses and external information flows

significantly depend on many subjective factors, such as:

• Decision-making culture and approaches to decision making that are

typical to a particular organization;

• Nature of the business; and

• Analytical skills of the decision makers who use (or potentially may use)

data warehouses and OLAP tools.

However, in our opinion it is necessary to outline the major, relatively universal,

potential opportunities that may be provided for managers who want to conduct

a deeper managerial analysis and make more well-grounded decisions. The

major opportunities that become more available for managers and analysts who

use such information systems for managerial analysis and decision making are

the following:

• Ability to compare their business characteristics with the behavior of

competitors and other entities (suppliers, consumers, and so forth);

• Ability to analyze dependencies between business performance and mac-

roeconomic indicators (like inflation, level of unemployment, and so forth);

and

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• Ability to use more up-to-date external information for analysis and

decision making (prices of production factors, and so forth).

Detailed analysis of major types of external information is presented in Table 1.

Such a summary of external information sources' possible applications may be

practically used (at least initially) as guidance for field managers and decision

makers. In particular it should help them to determine and demonstrate what

business problems require the development of such "advanced" data ware-

houses.

Table 1. External information sources and their possible use

Information Its Possible Use Possible Spheres of

Decision Making

Macroeconomic

indicators (GDP, etc.)

Estimation and analysis of

possible fluctuations in

consumption of goods and

supply of production factors.

Financial indicators (rates

of exchange, inflation,

etc.)

Estimation and analysis of

possible competition in

international markets and

competition with foreign

competitors in domestic

markets

Economic indicators that

characterize the behavior

of customers and target

markets

Social indicators

(structure of the

population in particular

regions, its dynamics)

Estimation and analysis of

future sales and incomes

Economic indicators that

characterize the behavior

of suppliers and service

providers

Estimation and analysis of

future expenses (costs of the

goods to be produced)

Performance indicators of

competing companies

and partners

(profitability, sales

volumes, assets turnover,

and others)

Analysis of a market situation.

Development of key

performance indicators for a

company.

Estimation and analysis of

future sales and incomes.

Indicators that

characterize the behavior

of adjacent markets

(substitute goods,

compliment goods, sales

volumes, profitability,

etc.)

Analysis of the development of

new products and positioning

of the existing ones.

Estimation and analysis of

future sales and incomes.

Marketing,

budgeting,

production planning.

Strategic planning

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Integration of Data Warehouses into a

Global Information Environment:

The Major Challenges

The availability of the opportunities described will completely depend on the

availability, quality, and organization of the information in the external sources as

well as on the organization's ability to complete complicated projects and its

commitment to flexible and well-grounded decision making. That is why such a

company will have to adopt new organizational approaches as well as new

software engineering solutions and technologies that could provide a solid base

for efficient and adequate accumulation of information from scattered sources

in a global information environment for its further integration into corporate

decision support systems. The problem of development of data warehouses in a

global information environment has much in common with the development of

data warehouses within the scope of corporate information systems (we have

already mentioned those difficulties and tasks). But on the whole it significantly

differs from the implementation of data warehouses that use information from

local databases:

• External information environment and data in it (data sources, data formats,

access interfaces) may change significantly, and these changes may be

made without taking into account how they influence the behavior of the

entities that consume this information.

• Information collected from external environment practically cannot be

improved and adjusted in accordance with the needs of organizations that

consume (or potentially may consume) it.

• Technologies of storage and presentation of data in an external information

environment may be numerous, and some of these technologies may be

unavailable for the organization that wants to include external information

into corporate data warehouses.

That is why development of analytical tools and integration of information flows

from a global information environment into corporate analytical information

systems will require new approaches, skills, and technologies. Particularly

development of analytical tools and decision support systems that use external

information sources will require dealing with both organizational and technologi-

cal difficulties.

The most important objective of this chapter is to analyze the major challenges

that analysts, managers and developers will face if they decide to integrate

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information flows from a global information environment into corporate data

warehouses and decision support systems.

Our approach is based on the classification of external information sources,

which is done by taking into account their major characteristics.

Figure 1 presents the classification of the major types of information sources with

regard to two of their characteristics:

1. Level of information sources instability - characterizes the probability of

more or less significant changes in external information sources. This level

may vary from absolutely stable (when information sources change very

seldom) to highly unstable (when the structure of information, its logical

structure, data formats, structure of information sources, and storage

technologies change often).

2. Level of disorder in information sources - demonstrates how structured

and formalized the information in external sources is and whether it is

acceptable for automated processing (data transformation) and feeding

into highly structured data storages (like data warehouses) or not.

This level may vary from absolutely formalized presentation of information (for

example, in table format) to absolutely informal presentation (for example, in

textual form that requires either human involvement or artificial intelligence tools

for formalization and further data transformation).

We have used three-point scales for the analysis of both these characteristics in

order to simplify this model and make it more understandable. For further

reference we shall use the phrase "information source of type #.#" (where #.#

Figure 1. Classification of the major types of external information

sources

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is an identifier of information sources disorder and instability levels in accor-

dance with a Figure 1) to identify different types of external information sources.

For example, "information sources of type 1.1." corresponds to information

sources with low level of instability and low level of disorder (lower left corner

of the diagram).

Such classification is crucially important for the analysis of external information

sources in the event of their integration into corporate data flows because the

possible instability of external information sources and informal (or insufficiently

formal and consistent) presentation of data in them make such data sources

different from the sources residing within a company. In our opinion the

estimation and analysis of external information sources' characteristics should

be made every time when a company decides to use such sources in its data

warehousing process.

The information sources that are characterized by a low level of instability and

a low level of disorder may be consistently and relatively easily used for

corporate data warehousing and decision-making support, whereas sources that

are characterized by a high level of instability and disorder can hardly be

integrated into a corporate data warehousing process. In any case project

managers and data warehouse developers will have to use specific techniques

and methodologies. The difference is that the closer a particular information

source is to the sector 3.3, the more risky and resourceful the integration of this

source into a data warehouse will be and the more consistent management will

need to be for implementation and support of such information flows.

Both these characteristics significantly influence usage of external information

sources for systematic support of managerial analysis and decision making.

Hereinafter we analyze two major aspects of risks and difficulties connected

with use of external information sources: technological challenges and organiza-

tional challenges.

Technological Challenges

One of the most important technical issues connected with the systematic dealing

with external information sources is that data in these sources may be presented

in different formats. It usually assumes that data sources are characterized by:

1. Presence of mixed and unstructured textual and numeric data

2. Possible simultaneous use of different approaches to presentation of the

same (or similar) information

3. Absence of relatively clear rules that could describe the structure of data

(for example, use of natural forms of data presentation).

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In order to handle such information efficiently and feed data warehouses

correctly, it will be necessary to understand the rules in accordance with which

data are organized and develop corresponding data transformation tools. More-

over it may be necessary to implement an analytical model that could formalize

raw information for further processing. As a result of this, the business that

decided to use data from external information sources will need to significantly

progress the major elements of the software development process:

1. Use advanced techniques of system analysis;

2. Employ mathematical tools for analysis of unstructured data; and

3. Develop software modules that implement complicated algorithms for data

analysis and extraction.

These techniques and approaches may be unknown to the company's IT

specialists and as a result significant expenses may be required for:

• attraction of external specialists and development companies;

• acquisition of new software (reusable modules, libraries, and components);

• training of company's IT-specialists;

• attraction of new employees (programmers, system analysts).

Practically every company will have to handle the problem of unstructured

information in external sources. But actual expenses and the possibility of

eventually using the data from external sources will completely depend on the

characteristics of the external sources, which we have already discussed in the

previous subchapter (levels of information sources instability and irregularity in

data structure).

In one situation a business may try to use external data sources that are highly

structured (for example, when numeric information is presented in formalized

tables) and stable (when rules of presentation of this information remain

unchanged). In this case integration of information flows from external sources

into corporate data warehousing environment will practically come to implemen-

tation of new data transformation modules that may be quite similar to some other

data transformation modules that have already been developed by the company's

specialists (especially if a business has certain experience with transition from

legacy systems).

In another situation a business may try to involve external data sources that are

not structured, and the manner of data presentation changes from time to time.

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Implementation of data transformation tools may be very complicated and time

consuming both for system analysts and for software developers. Transforma-

tion of data from such external sources may even become a separate business

process if this information is crucial for decision making. (This is mostly an

organizational issue. We discuss it in the following subchapter.)

Another important technical issue is that access to data in the external sources

may require development and maintenance of various interfaces that are not

typical for information systems currently used within a company. In most cases

software developers may have to deal with different Internet protocols with

which they are unacquainted. The major difficulties with this aspect will be

practically the same as the ones that we have discussed with regard to dealing

with data formats: implementation may require additional educational efforts,

purchasing of additional software and hiring of additional specialists. But the

difficulties in this case will probably not be so significant, as data access

interfaces are relatively universal and practically always remain unchanged due

to one major reason: transitions to alternative operating systems and other

fundamental changes in information systems infrastructure are usually much

more expensive than changes in data presentation formats.

Organizational Challenges

Organizational difficulties connected with integration of information from exter-

nal sources into a corporate data warehousing process are probably more

important and challenging than the technological ones. Situations that may

require special attention of managers and specific organizational techniques may

be faced at different stages of the data warehouse lifecycle and at different

organizational levels. Major challenges may arise in the following situations (data

warehouse life cycle stages):

• Initiation of data warehouse development or initiation of integration of

information from external sources into existing data warehouses;

• Development of new data warehouses and data marts or improvement

(extension) of currently used ones; and

• Current use of data warehouses that contain constantly updated informa-

tion from external sources.

A situation of data warehouse improvement initiation when a company may

decide to use (or not to use) information from external sources presents two

major organizational issues:

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1. It may be necessary to organize monitoring of different information

sources' availability and their assessment regarding objective business

analysis requirements in order to provide the basis for further initiation of

the external information sources' practical use.

2. It is also necessary to organize qualified selection that fit the needs of

managers and decision makers, from a variety of available external

information sources.

The quality of the results of such information requirements analysis and

monitoring of external sources significantly depends on the commitment of field

managers and experts. That is why this activity should be motivated and

supported especially accurately.

At the stage of development or improvement of data warehouses, one of the

major organizational challenges will be to organize the collaborative work of field

specialists and system analysts in order to formalize criteria and algorithms for

extraction of information from external data sources. It is crucially important to

find and motivate analysts for such work because the tasks to be handled in the

system analysis process are usually non-trivial, based mostly on field experience

and intuition and require a creative approach. Special attention should be paid to

the hiring of new specialists and attraction of external software developers,

system integrators and consulting companies that specialize in particular rela-

tively narrow fields of software development and business analysis (like, for

example, automated analysis of natural languages).

Besides that, as we have already mentioned, at the end of this stage the

organization may have to organize a separate business process for the support

of data transformation processes. Such a business process may be necessary for

ongoing support (adjustment) of data transformation tools. It should include

monitoring of the overall correctness and adequacy of data transformation

algorithms, correction of data analysis algorithms, and redesign of software

modules that implement these algorithms.

Another important issue at this stage of data warehouse lifecycle is to set a clear

policy regarding quality of information added to the data warehouses from

external sources. In particular all the field analysts and decision makers involved

should clearly understand that certain assumptions have been made during the

data transformation modules development process, and for this reason the

presentation of the information inside the data warehouse may not always be

correct. The major risks of information mishandling and its inadequate transfor-

mation and presentation should be identified and potential users should be

informed about them.

At the stage of current use of data warehouses that contain constantly updated

information from external sources, one of the major challenges is to prevent the

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possible negative influence of changes in the external information environment

on current business operations. It may be the disappearance of the information

sources currently used in the corporate data warehousing processes and/or changes

in these sources. In particular organizations should have special plans of actions in

such situations (preferably a separate plan for every external source used):

1. All the analysts, decision makers and stakeholders should be timely notified

about the changes that took place; and

2. Unexpected changes in the external information environment (and conse-

quently changes in the information stored in the data warehouse) may

require urgent reorganization of analytical and decision-making procedures

in order to preserve the company's overall manageability.

Almost all the organizational issues described also comply with the model we

have introduced in Figure 1. The information sources of type 3.3 (and partially

adjacent ones) will require a more consistent management and attention to

support information flows. In particular if a business uses external information

sources that suffer from lack of stability and formalization of data presentation,

it should develop and introduce clear organizational rules: determine procedures,

assign responsibility, identify resources to be used in different situations, or even

reorganize certain business processes. For external information sources of type

1.1 such special procedures and organizational techniques may be implemented

only partially and cannot be regarded separately.

Future Trends

So far we have discussed the major theoretical and practical concepts related to

data warehousing in a global information environment that form the background

for productive work in this sphere. But the problems of such development should

not be considered only as a set of local technological and organizational

difficulties and corresponding techniques that can help to deal with such

difficulties (like the ones we have discussed in the previous subchapters). It also

has significant perspectives at higher organizational levels.

Further considerable improvement of decision support procedures through

integration of different information sources and storages in a global information

environment will require significant advancement of the overall corporate

decision-making culture and encouragement of thinking in terms of global

information environment. Such culture should be based upon:

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• Educational background of both IT specialists and field experts involved in

decision-making procedures (here we mean mostly higher education as a

base of overall management and software development culture).

• Permanent support of orientation to involvement of additional information

sources into corporate data warehouses in order to make the decision-

making environment more efficient and useful for managers and specialists

at different levels.

Both these aspects require significant resources (both financial and human);

additional education may be expensive and support of corporate culture will

consume managers' time and other resources. But only in this case will the

competitive advantages of use of external information sources be achieved and

allow a business to perform better than its competitors. Development of

methodology for support of such culture should be a subject for a separate

research in the future, when we get enough practical experience in implemen-

tation of data warehouses that use information from external sources.

Another prospective aspect of the problem discussed in this chapter that is worth

mentioning is of a global nature. The importance of flexible automated informa-

tion processing and integration of information flows from a global information

environment into corporate information systems (especially analytical and

decision support systems like data warehouses) should enforce the development

of a certain culture of presentation of data in a global information environment.

Formation of such a culture may become apparent in the form of a certain

commonly accepted agreement (or a set of agreements) - sets of rules that

reflect the best practices of data presentation in a global information environ-

ment. Such best practices should be developed with respect to the major

considerations and rules (some of which are contradictory) that are presented in

Table 2.

One of the simplest illustrative examples of such an agreement is to restrict usage

of graphical file formats (like GIF or JPEG) for presentation of potentially

valuable textual and numeric information that is available in a global information

environment. The importance of such an agreement for automated data process-

ing (and therefore for support of data warehouses feeding processes) results

from the fact that the analysis of graphical data is much more difficult (from the

software development point of view) than the analysis of data presented using,

for example, XML and/or HTML format or stored in relational or other similar

databases.

Another more "advanced" example of such commonly accepted agreement

about data presentation and structuring is a family of RSS standards (see, for

example, Obasanjo (2003) and Nottingham (2002) for further reference). It is a

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widely accepted standard for presentation of semi-structured data on the World

Wide Web that helps to automatically fetch information from the Internet and

process it in accordance with the users' requirements.

In the future, development and wide acceptance of such culture (and corre-

sponding agreements) will probably become possible when the overall informa-

tion environment becomes mature enough. In particular, such maturity may be

connected with:

• Appearance of a sufficient number of companies that extensively use

external information sources in important business processes (like decision

support) and that consequently may influence the overall business environ-

• Future development of technologies for presentation of data in a global

information environment;

• Increased competition between companies that make available different

data in a global information environment.

Conclusion

We have discussed the major issues any business will have to deal with if

managers and stakeholders decide to improve the overall decision-making

Table 2. Factors that may influence acceptance of agreements on presentation

of data in a global information environment

Factors that restrict acceptance of

information presentation agreements

Factors that stimulate acceptance of

information presentation agreements

1. Entities that make their

information available in a

global information

environment present their data

in a way that best meets their

needs and is less expensive (in

their opinion)

2. Information sources owners

cannot coordinate all the

changes in the rules and forms

of presentation of data in a

global information

environment with the

consumers of this information

1. Use of commonly accepted

rules may attract additional

users

2. Use of commonly accepted

rules produces a positive

image for the business and

potentially may be a part of

a corporate PR policy

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process through usage of external information sources for feeding corporate

data warehouses. One of the most important aspects is that the concept

presented in this chapter describes both organizational and technical aspects

related to such integration. These aspects have almost equal significance and,

moreover, in situations when external information sources are characterized by

a high level of instability and contain highly unstructured data, organizational

issues may be even more important than the technical ones.

It is quite difficult to formalize procedures, criteria, and requirements for the

process of such integration due to the same reasons that are typical to "ordinary"

data warehouses. But at the same time additional difficulties are unavoidable

because such "globally integrated" data warehouses significantly differ from the

ones that are based only upon data sources located within the company's

information systems (like ERP, MRP, CRM, and others).

This chapter provides an overview of the major theoretical concepts and

practical issues related to data warehousing in a global information environment.

It provides a comprehensive understanding of factors that are important for the

use of external information sources, starting from the description of an external

information source's role in corporate data warehouses and its importance for

decision support to the analysis of major managerial challenges that are

unavoidable in industrial practice at different levels of management and at

different perspectives. The importance of such complex understanding is based

upon the fact that support of decision making by flexible presentation of

appropriate external information is vital for overall integration of businesses into

a global information environment and the establishment of a connection between

business goals (especially the needs of managers, analysts, and decision makers)

and information systems development. That is why the concepts and overall

vision presented in this chapter should help field managers and information

systems developers to prepare themselves and their companies for work in new

conditions.

References

Galhardas, H., Florescu, D., Shasha, D., Simon, E., & Saita, C.A. (2001).

Improving data cleaning quality using a data lineage facility. Proceedings

of Design and Management of Data Warehouses (DMDW'01),

Interlaken, Switzerland

Gray, P., & Watson, J. (1997). Decision support in the data warehouse.

Englewood Cliffs, NJ: Prentice Hall.

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permission of Idea Group Inc. is prohibited.

Inmon, W. (2002). Building the data warehouse (3rd ed.). New York: John

Wiley & Sons.

Inmon, W., Imhoff, C., & Sausa, R. (2001). Corporate information factory.

New York: John Wiley & Sons.

Nolan, S., & Huguelet, T. (2000). Microsoft SQL server 7.0 data warehousing

training kit. Redmond, WA: Microsoft Press.

Nottingham, M. (2002). RSS tutorial for content publishers and Webmasters.

Retrieved December 10, 2003, from http://www.mnot.net/rss/tutorial/

Obasanjo, D. (2003). Building a desktop news aggregator. Retrieved December

10, 2003, from http://msdn.microsoft.com/library/default.asp?url=/li-

brary/en-us/dnexxml/html/xml02172003.asp

Reinschmidt, J., & Francoise, A. (2000). Business intelligence certification

guide. Retrieved December 10, 2003, from http://www.redbooks.ibm.com/

redbooks/pdfs/sg245747.pdf

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Chapter IX

Web Services and Their

Impact in Creating a

Paradigm Shift in the

Process of Globalization

Bhuvan Unhelkar

University of Western Sydney, Australia

Abstract

This chapter explores the impact of Web services in creating a paradigm

shift in the way businesses strive to globalize. This fundamental shift in the

paradigm of the globalization process occurs due to the fact that with Web

services, it is not one single organization that starts dealing with its clients

electronically but, rather, a number of organizations (a cluster) with

common needs and complimentary services to offer that start dealing with

each other electronically. Web services enable business applications to

talk directly with each other without human intervention, resulting in rapid

interactions among businesses at a global level. This opens up doors to the

interesting phenomena of a group, or "cluster," of businesses globalising

simultaneously, as studied in this chapter.

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Introduction

Many information and communication technology (ICT) industry observers

believe that web services technologies herald the next major wave in online

computing and electronic business resulting in communication and integration of

application services across varied technical chasms of operating systems,

networks, databases, and security protocols. In fact increasing experience with

web services indicates that they bring an altogether different dimension to the

terms "e-business and globalization" (Unhelkar, 2003b). The impact of Internet

and web services (WS) bring about a noticeable paradigm shift in terms of what

is meant by a global business, how the business relates to other businesses, and

how it manages its own internal processes that might themselves be geographi-

cally spread out. Most importantly, though, for this discussion is the manner in

which an existing business transforms itself into such a global business - in other

words the process of e-transformation or globalization. The Web has enabled

businesses to explore hitherto unknown frontiers, a view also corroborated by

Deshpande, Murugesan, and Hansen (2001), who correctly assert:

"With the advent of the World Wide Web, 'computing' has transcended the

traditional computer science, information systems and software engineering

in the sense that these three fields were strictly within the domain of a

computing professional whereas the Web reaches the 'world.'"

Web services ascend even this "traditional" understanding of the Web and make

it imperative upon both technologists and business people to re-interpret the

terms "Web" and "globalization." This is so because web services enable

business organizations to transcend the "enterprise divide" that exists both

between and inside organizations. In fact web services appear to hold the key to

erasing international computing boundaries and have left the door wide open to

globalisation and automation of tasks (Unhelkar & Elliott, 2003).

This chapter discusses in detail the specific impact of web services on the nature

of, as well as the approach to, electronic globalisation of businesses. It delves in

detail as to how web services have brought about a change in the way a business

globalizes itself. Electronic transformation of an individual business is relatively

well understood and has been studied by various authors, including Lan and

Khandelwal (2003). Furthermore, frameworks for such e-transformation exist

and have been published by various thinkers and practitioners in this field (see

Dowding, 2001; Ginige, Murugesan, & Kazanis, 2001). However all of these

frameworks are currently focused on the transformation of a single organization.

Web services provide the ability for a cluster or a group of organizations to e-

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transform simultaneously. It is this cluster-based e-transformation that creates

the paradigm shift and is the mainstay of this chapter.

This chapter starts with a simple example of how web services differ philosophi-

cally from the standard web applications. This is followed by a discussion of the

various ways in which businesses have been utilizing the Internet. This under-

standing is essential in clarifying how the business world has arrived at

collaborations with each other. Collaborations form the backbone of business

clusters. We then briefly define and discuss the technical aspect of web service

technologies, leading up to the discussion on how the process of e-transformation

has become fundamentally different due to web services as compared with the

normal e-transformation process. The shift in the transformation process from

the standard business to business and B2C models of a single organization to

transformation of a group of collaborating organizations is made evident. Finally

a high-level road map of cluster-based globalization is offered.

Web Services: Business Interpretation

In order to understand the differing perspective between the needs for and the

process of electronic transformation of a single business versus that of a cluster

of businesses, it is first important to clarify what web services entail and how they

differ from web applications. The understanding of this difference will lead to

further understanding in terms of the effect web services have on electronic

transformation of businesses. We can study this difference through an example.

Consider, as shown in the example in Figure 1, an individual traveller attempting

to automatically calculate airfare, car rentals, hotel tariffs and so forth across the

globe and in various denominations. This will require the various providers of

Figure 1. The need for various businesses to collaborate with each other in

order to satisfy the requirements of a single requirement (or a single

business process)

Personal Smart Client

Application

(e.g., Excel Spreadsheet)

Personal

Travel Itinerary

UDDI

Airline

Schedule & Booking

Map

Weather

Hotel

Availability & Booking

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these services - who are themselves geographically and temporally in wide and

varied zones - to have their application services coordinate, translate, interact,

and resolve the queries on a wider and complex scale. The ability of large number

of applications belonging to different organizations and operating in different

technical and operational environment interacting with each other is facilitated

by web services. In this example, there is a need for the airline and hotel

companies to interact with each other on a much broader scale electronically, in

order to satisfy the demands of the individual. This interaction, however, is not

through persons or departments within these organizations but, rather, through

software applications that are web service-enabled. This leads to the client's

"Personal Smart Client Application" to electronically deal with the applications

of the various service providers in resolving the demands of the individual client.

As compared with this electronic application-to-application interaction, normal

web applications would require the client to access the web sites of each of the

service providers manually and compile her own travel itinerary, make bookings,

and consider various alternatives in arriving at the choices of car and hotel

rentals. Web services make all of this happen automatically!

Furthermore, if we consider the possibility of the customer side itself being made

up of a large number of businesses, we come to understand the enormous

possibilities for clusters or groups of businesses to make use of the electronic

medium to conduct their businesses. In fact this has the potential to lead to

restructuring of entire industries rather than merely individual businesses.

Industries such as banking, insurance, financial, health care, government bodies,

shipping companies, airlines, and telecommunications providers are bound to

undergo radical changes in the way they provide information, conduct e-

commerce, organize themselves internally, and collaborate among each other.

Therefore it is quite appropriate to go beyond considerations of reengineering of

business processes and move towards what may be known as industrial process

reengineering (IPR). Eventually, the impact of web services may lead to not only

changing the face of business but also the redistribution of revenue and market

share within entire industries.

The stakes are very high. However the risks are worth taking for the risks

commensurate with the rewards that the business world as a whole is likely to

gain. Loosely defined business clusters, interacting dynamically with each other,

are bound to create vast business opportunities, far greater and improved

services, and a truly open world market. This may, at certain points within the

electronic transformations, require intervention from industrial bodies and even

government as during this globalization process, smaller organizations may tend

to lose out due to lack of awareness of the transformation process. Not being a

part of a cluster or a collaborative group of businesses that are transforming

electronically may lead to closing down of a business in the new paradigm. To

obviate these possibilities, it is important to study how a cluster or group of

organizations undergoes electronic transformations, as is being done here.

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Business Utilization of the Web

While the term e-commerce has been used in a sweeping way to encompass all

aspects of electronic business, there are subtle as well as significant differences

between the implied meanings behind usage of various terminologies. This

meaning is congruent with the way business has utilized the Internet (Unhelkar,

2003b). Figure 2 shows the ways in which business use the net and the evolving

levels of this usage.

Informative Business

The very first era of Internet utilisation was primarily focused on information

provision and sharing. This informative aspect of the Internet (e-information) is

the most basic, most common and therefore the widest usage of the Internet by

the business as shown as the base layer in the triangle in Figure 2. This usage

encompasses all the provisions of the informative aspect of the business to the

world. At a very basic level, it is scanning the company's product brochures and

putting them up on the Internet, resulting in what has been known as the

Brochureware. This usage also included putting up the basic company contact

details like phone, fax, and physical address (equivalent of a business card on the

web). Thus this use of the Internet by business is primarily for branding its

products or services, and communicates in one direction only. Because of this,

informative sites have minimal security requirements and need minimal mainte-

nance. Given the primarily uni-directional mode of electronic communication in

this form of Internet usage, there was hardly any need for collaboration between

businesses. Therefore this form of usage required minimal attention in terms of

Figure 2. Increasing levels of utilization of the Web by businesses leading

up to collaborative usage (based on Unhelkar, 2003b)

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electronic transformation of businesses. Globalization was limited to availability

of information rather than conducting business transactions, resulting in a large

number of businesses in this layer.

Transactive Business

The informative usage of the Internet by businesses was rapidly followed by the

transactive usage, commonly referred to as e-commerce and shown in the

second layer of the triangle in Figure 2. This "Transactionware" included two or

more parties (businesses) involved in conducting a transaction (that is, trading

with each other) through electronic data interchange (EDI). Although e-

commerce is a term used to refer to anything and everything related to the

Internet, it actually means this transactive usage of the Internet by the business.

This involves ability to send and receive messages and thereby conduct business

transactions by communicating with the business behind the web interface.

These transactions can be broadly categorised into two:

• Simple transactions that deal with inquiries, making of bookings/reserva-

tions, and posting feedback.

• Financial transactions that involve a third party (such as a bank or Visa

card) that facilitate sale and purchase of a commodity (enable commerce).

In both cases, the transactions can be B2B (business to business) or B2C

(business to customer). While this transactive aspect of the business would

usually start with B2C, almost all global organizations would be involved in B2B

transactions. It should be noted here how the evolution of the Internet usage by

businesses from informationware to transactionware requires cooperation be-

tween two or more parties. This lays the foundation for what we are discussing

in this chapter - the issues to be considered when businesses are collaborating

with each other over the Internet. However, before businesses evolved to a stage

where they could fully and openly collaborate with each other, they also

discovered that there is more to the Internet than merely dealing with external

businesses.

Operative Business

Ensuing from the growing commercial usage of the Internet was the understand-

ing that businesses could also put up their own internal operational aspect on the

Internet. As shown in the third layer of the triangle in Figure 2, this came to be

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known as operative usage of the Internet. It included handling of not only the

informative and transactive capabilities, but also the management of internal

operations of the business such as inventory, payroll, HR and the like. This results

in not only increased internal interactions of the employees with the business but

also B2B interactions of the business with external entities that deal with

organizing the internal processes (for example, an external accounting firm

dealing with the general ledge and accounting entrees of the business under

consideration). Thus due to traversal of a business' internal processes with its

customers, suppliers, and other businesses, there is a large component of B2B

transactions in operative businesses. In addition to impacting B2B transactions,

because of the ability of the business to shift all its operations on the Internet, this

usage of the Internet by businesses usually has a component of business-to-

government (for example, taxation) in it. Thus when all the operational aspects

of the business are moved on to the Internet, the business can be called e-

business. When organizations evolve from informative and e-commerce sites

through to e-businesses, they discover that this transformation is fraught with

challenges arising due to existing legacy applications and data within the

organization and setting up of business alliances and standards between various

external parties. Therefore many strategic planners of e-businesses have

recognised the benefits of undertaking a complete redesign of their Internet

business strategies and have implemented a more holistic approach to their

operative business. Reaching from e-information to e-commerce to e-business

is leading the organization toward a collaborative environment. However it is still

not a fully collaborative environment, as it deals specifically with known internal

and external parties. So what is open collaborative environment in electronic

business? We consider that next.

Collaborative Business

The top layer of the Internet usage triangle, shown in Figure 2, is where numerous

businesses started collaborating with each other simultaneously using the

electronic medium. Thus when a cluster or group of businesses start interacting

with each other openly and without pre-determined business partners, it results

in the collaborative type of usage of the Internet by businesses. During this use

of the Internet, businesses realised that it is much more advantageous to

collaborate with a large number and cross-section of businesses that may be

spread far and wide geographically but that may have complementary business

offerings than to merely conduct electronic commerce and handle internal

business operations on the Web. What ensued is creation of open portals and

electronic marketplaces (for example, eBay). It is this collaborative usage of the

Internet by businesses that has found significant impetus by the advent of web

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services and is of primary interest in this discussion. This usage is further

discussed after a brief mention of the effect of mobility on these various layers

of business usage shown in Figure 2.

Mobile Business

Mobility influences all aspects of Internet usage. For example, together with the

GPS (Global Positioning System), the Internet virtually frees the customer

from time and place dependence. The boundary between the traditional

Internet-based systems and mobile applications is already blurred. The result

is that mobile technology permeates all four aspects of the triangle discussed

in Figure 2.

Mobility influences the informative aspect of the triangle when information is

posted to mobile devices by the business.

When transactions (of both types - simple and financial) are carried out over

the net by using mobile gadgets, it is m-commerce. This includes trading on the

mobile devices.

When all business aspects are handled over the net using mobile devices, it is m-

business. Examples of m-business include managing car breakdown services

using on-board mobile gadgets or tracking couriers.

Mobility adds a unique dimension to the globalization process and is in itself a

separate paradigm. However it is part of a substantial discussion that needs to

be addressed separately from the current discussion. It will suffice to mention

here that mobility makes connectivity totally independent of space. While the

standard Internet communication makes business-to-business relationships in-

dependent of time and physical space, still a local physical connectivity is

required. Mobility, however, transcends even that requirement of physical

connectivity. Indeed that is the direction in which the entire business world is

moving and therefore worth mentioning here for potential discussion on clusters

of wireless business. Currently, though, we delve deeper into the collaborative

usage of the Internet.

Collaborative Usage of the Internet by

Businesses

Collaborative usage, as shown on the top-most part of the triangle in Figure 2,

builds on top of all previous layers. Thus, informative, transactive, and operative

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usage of the Internet is all imbibed in the collaborative usage, or c-commerce.

In addition, collaborative usage leads a group of businesses to not only conduct

business transactions with each other and thereby provide support to each other

in electronic transactions but also create a veneer of competition amongst these

businesses underneath the electronic layer. (See Kock, Davison, Wazlawick, &

Ocker, 2001 for further thoughts). This judicious combination of support as well

competition makes it imperative for the cluster of businesses to extend itself

much wider, globally reaching out to its customers and suppliers in search of new

avenues of services, including finding totally new combinations of services and

products that could not have been offered without such collaborations.

However these collaborations need support at technical (Liu, Song, & Liu, 2001)

as well as business level (Morris, 2002). Web services technologies have made

this possible because web services enable many applications from many

businesses to conduct business with each other without the need for human

intervention. However, when it comes to collaborations, businesses are still

coming to grips with the need to share resources, identify business values, and

improve their comfort levels in terms of security and privacy. Thus while the

technology itself is rapidly maturing, it has created a paradigm shift in the way

businesses consider their strategies for transition to electronic business. Despite

the challenges, however, it is becoming obvious to businesses that it is much more

advantageous to collaborate with each other than merely going global on their

own. Collaborative commerce enables collaborative relationships between a

network of organizations enabling them to buy and sell their products and

services electronically, thereby making these transactions cheaper as well as

reaching a wide range of market. As Fairchild & Peterson (2003) discuss, the

presence of c-commerce indicates a network of firms with similar collaborative

natures with established collaborative business platform and strategies. Despite

its understandable slowness in catching up, it is this collaborative nature of

Internet usage that is bound to provide maximum advantages to businesses both

in terms of globalization and in managing their own internal processes effec-

tively. Having thus underscored the significance of collaborative business, let us

now briefly consider the technologies that enable this collaboration to happen.

Web Services and Global Business

Emerging Technologies

What are web services? How have they evolved to the stage where they are, and

what were the precursor technologies that lead to web services? Until now, most

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electronic business depended on a customer at the other end using an electronic

facility to conduct business. Even when two businesses were interacting with

each other, it was the people within the businesses that were using the

applications, perhaps on the Internet, in order to interact with each other. Thus

the preliminary web applications used the same concepts as normal application

developments and, as such, relied heavily on the concepts of object-oriented or,

in its more sophisticated form, component-based software development as

shown in Figure 3. Objects and components had their own small-time effect on

global information systems as they facilitated reuse of components developed by

"third parties." This led to interactions among software applications on a

dedicated basis, and the technologies such as Distributed Component Object

Model (DCOM), Common Object Request Broker Architecture (CORBA), and

Remote Method Invocation (RMI) came into play. Thus distributed computing

increased the pace of interaction among information systems, leading to further

globalization of businesses as shown in Figure 3.

Component technologies and distributed computing has now evolved into web

services and Internet technologies, as shown in Figure 3. As compared with

distributed computing, where the platform for distribution was a dedicated one

with web services, the exchange of information and data is primarily through

document-based XML that can be easily exchanged between software applica-

tions on a wide variety of platforms (for detailed discussion on comparison of

these technologies, see Chaturvedi & Unhelkar, 2003). Since web services

provide a standardized way by which applications can communicate across

networks, regardless of their size or the computing platform on which they are

Figure 3. Evolution to technologies from the fundamentals of Object-

orientation, distributed computing through to the Internet technologies

including web services

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executing at either end of the interaction, there is a genuine independence

achieved by businesses in interacting and collaborating with each other. This is

not only a different paradigm in terms of how businesses relate to each other but

ensures a paradigm shift in terms of transformation of business to e-businesses.

The underlying theme of business interactions has shifted to A-2-A, or an

application-to-application business relationship, opening up the doors to automa-

tion of business decisions, business processes, and sharing of business tasks -

in fact, an unlimited array of opportunities in the realms of electronic business.

As Sanjiv, Cantara, and Shetty (2003) state:

"Web services will ease partner-to-partner interaction, make application

integration easier, create new business opportunities, give businesses more

and better choices, give enterprises competitive advantages over rivals and

improve efficiency in trusted environments."

With standardization and automation of business transactions, changes particu-

larly in data-reliant professions such as banking, government statistical bodies,

shipping companies, airlines, telecommunications providers, and the financial

industry are apparent. With such high stakes, the manoeuvring of industry

competitors such as IBM, BEA, Microsoft, and Oracle to reach a favourable

position in the market can now be seen (Unhelkar & Elliott, 2003).

Core Elements of Web Services

IBM defines web services as "self-contained, modular applications that can be

described, published, located, and invoked over a network, generally the Web.

The web services architecture is the logical evolution of components geared

towards the architecture, design, implementation, and deployment of e-business

solutions" (Gottschalk, 2000). Kirtland (2001) gives the Microsoft viewpoint: "a

web service is a programmable application logic accessible using standard

Internet protocols. Web services combine the best aspects of component-based

development and the Web". While other companies, including Sun Microsystems,

have their own definitions, what is commonly agreed upon is that web services

are applications designed and built around component-based software, that they

are self-describing and can be invoked using standard Internet protocols.

Technically web services technologies can be broken down simply into three

major and easily recognisable areas, as shown in Figure 4.

More specifically, these layers are: the XML/SOAP protocol and packaging

layer; the WSDL definition layer; and the UDDI discovery layer. The XML/

SOAP provides the basic means of transferring document-based information

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and data across the Internet. The WSDL helps define the meaning behind the

services, and the UDDI layer helps publish and locate services. While not so

comprehensive, many similar attempts to provide similar framework have

existed in the past, including the DCOM, CORBA, and RMI solutions discussed

earlier. While those middleware components promised a lot, they were marred

by the lack of "open" technologies. With web services, though, the promise is of

open connectivity. While still struggling with the lack of proper industry-wide

regulation at the current stage, the web service technologies have far more

potential and far more to offer to businesses. This difference in the fundamentals

of web services technologies and what they have to offer can be understood by

studying their technology meta-model further.

A Web Service Meta-Model

The technologies of web services mentioned in the previous section can be

summarised into a meta-model that represents the various major elements of

web services and how they relate to each other. Such a meta-model is shown in

Figure 5. This meta-model, based on the work done by Monday (2003), makes

it easier to understand the web services technologies from a business or usage

perspective and thereby form the basis of understanding the shifting paradigm in

the globalization process. In Figure 5 we see three major components of web

services and their relationships:

Figure 4. The major technology areas involved with the current application

of web services (Unhelkar, 2003b)

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The service shown in Figure 5 is a type of application, stereotyped as a

<<service>> that is being offered by the business that has the capability to do so.

The "service layer" defines the programmatic interface for other applications to

interact with the web service, usually in the form of an XML file. As is obvious,

businesses that aspire to operate globally will have to ascertain the types of

services they want to offer, handle the business models for such services, and

eventually seek ways to publish their services onto a common directory.

Such business will register their service with a <<directory>> provider such as

UDDI. This is also known as the "discovery layer" and is designed to provide a

standardised way in which web services can be centrally registered, located,

published, and controlled. This is shown by the directory class in Figure 5. The

existence of a directory is a major discerning factor between what would be a

normal Web application and a web services-based application. The challenges

in terms of standardizing the contents and ensuring their availability are not yet

fully handled but are issues that impact the way in which a cluster of organiza-

tions may decide to globalize their operations.

Location and consumption of a service by a <<client>> is another major

difference in the way web services operate. Here, through web services, the

clients (such as, say, a bank or a travel agency) have the freedom to put together

various offerings as may be available through the directories to provide their own

customer wide variety of choices. The array of permutations and combinations

that <<client>> can obtain through use of web services makes the process of

globalization a different phenomena than the normal web applications. Following

on from location is consumption of the service, which would again require

technological standards and capabilities that are provided at a fundamental level

by web services.

Figure 5. A static web services meta-model (class diagram; based

on Monday, 2003)

Publishes who can

Authorize Cards;

Who can Provide

Flight Schedules

A Business

Process; Another

Web Service

Examples: Credit

Card Authorization

Flight Availabilities

Publish

Communicate

Search & Locate

Service