Information and Communication Technologies




Pre Reading- Chapter 12

Read all of the chapter, but pay particular attention to the sections on the Internet, the World Wide Web, and databases.



Lecture Notes

Lecture Summary

·        Databases - they hold all your company records about your customers, your sales, your orders, and your employees.  If you lose those records, you lose an important part of your business (and in fact some businesses have been driven to bankruptcy by an inability to access fundamental records).

·        Application Software - computer programs that access and update those records such as point-of-sale software, or payroll programs. 

·        Telecommunications - channels like the Internet that move data from your customers and supplier to you.

·        Security – How do we protect all our records and customer information?


Major Points


Databases –

Storage of company records.  Common examples are personnel records, bill of materials, customer records.  The typical arrangement is a table:











2445 Main







3998 9th St.






Each column is called a FIELD and holds a kind of information we wish to gather on each customer: name, zip code, income, or such things as last purchase.


Each row is called a RECORD and represents information about a single customer, product, or employee.


Activity 1:  If you wished to keep information about your customers, what kinds of information would you keep?  Why?  What would a customer record look like?


Activity 2:  What information would you store about your employees?  What would an employee record look like?


Activity 3:  Accountants need to track costs of goods being sold (COGS) in order to know what profit the company is making and where it is making it (which products generate the most profit).  For a simple product like a computer, the Bill of Materials might look something like this:



CPU cost




Disk Drive


List Price

Model 100








Model 200









Which costs are the same for all models (fixed costs)?  Which costs vary with each model (marginal costs)?  Which model generates more profits for the company?


Activity 4:  The business you are planning produces a good or a service.  Create a table with a breakdown of Costs of Goods Sold for your product or service, with several models or levels of service.


Data Mining:

Once a collection of data has been created for a business, most information systems connect to the database to answer questions:


  • How many hours did Fred Smith work last week?
  • When will Julia Ramirez’ product be delivered?
  • How many of part #445 do we still have in inventory?
  • What product sold the best last week?


Asking questions of this kind is called a Query.  As databases grow larger, it is possible to ask more advanced questions.  Such questions are referred to as “data mining.”  Such questions may involve trends, or may involve correlations.  Here are several examples:


  • What are peak times for the use of our service over the course of a year?
  • Which products have sales affected most by weather?
  • What are the sales trends for blue jeans over the last five years?


Such questions have been asked in the past to reveal that peak beer sales in stores are on Friday afternoon, and as hurricanes approach, people stock up on strawberry Poptarts.


Activity 5:  Assume you have a database that shows you the purchasing history of all your customers over the last five years.  What are five questions you could ask that track trends or make correlations?



Information Collection

Information systems are designed to store or retrieve information.  In the past, that information was mostly in standard databases like the example above and was entered by clerks.  Now information can be collected in many more ways.  Here are a few that are having an impact on consumers and on employees alike:


Keyboard logging –

Software monitors every keystroke on a computer system so a supervisor knows what web sited you went to, when you were actually working, and how much time you devoted to every task.



While you want GPS to help you when you are lost, there are also GPS tracking devices that can tell your employer where you are at all times.  If you are a trucker, they can use it to determine how many more hours it will take you to get to your delivery site, and they can use it to determine if you are sacked out at a truck stop.  If you are a salesman, they can tell if you visited company X this afternoon or went golfing.



Radio Frequency Identification is replacing bar codes as a way of tracking products.  It is easier to scan than a bar code, and can be done from a distance.  But since these RFID tags an be put in individual products, they can also be tracked post-sales, so you could be scanned as you walked through a mall to see what you bought and what kind of customer you might be.



As you visit sites on the web, some sites will store a bit of information about you on your computer.  This bit of information is called a “cookie.”  It might say where you went on the web site, what you bought, and how long you looked at a particular item.  Then when you return to the site, it can read the cookie and make suggestions about ideal products for you.  Of course it can also track what advertisements would be most persuasive to you.


Activity 6

Which of these information collecting technologies were you already aware of?  How might you respond to them?


Communications Technologies

Communicating within a company:

Business systems typically link many computing devices together to share information.  For example, retail stores will have Point-of-Sale terminals that identify and record what was sold linked to servers that calculate things like discounts and taxes linked to databases that record customer information and inventory information (and possibly a personnel database to record sales for commissions).


POS ->  Sales server -> customer DB

§         inventory DB

§         personnel DB


These connections are made over a network.  If the network runs in the same store, it will be called a “local area network (LAN)”.  If the network needs to access information from a greater distance (like corporate headquarters), it will run over a “wide area network (WAN).” 


The links can be accomplished by wire (copper or coaxial), by optical fiber, or by wireless technologies (radio waves).


Activity 7:  Assume you run a manufacturing company.  Whenever an order comes in, what information might have to be communicated to various business systems in your company?


Communicating with suppliers:

Systems can also link to suppliers. In systems like “vendor managed Inventory,” when a product is sold in a store, the supplier of that product is automatically notified.  If the product runs below a certain level (“safety stock”), the vendor will automatically ship another quantity of the product to the store.  These links can be done directly from the store to each supplier, but more recently, these links are done over the Internet.


How the Internet Works:

As communication systems at a company grow, it is normal to purchase a “router.”  The primary function of a router is to direct messages onto the internet. It works by looking at the address on the message.  If the address is local, it ignores the message and lets it proceed to the local server or database.  If it is not local, it will put the message into an Internet packet, and send it off to the internet using an outside communications line.


The internet itself is a collection of lines and routers owned by a variety of Internet Service Providers.  Each time a message arrives at a router, its address is checked, and it is sent down any available line that gets it closer to its destination.  A message may take 5-10 hops down various lines before it reaches its destination.


Since the lines and routers of the Internet are shared by millions of users and billions of messages, costs are low for users, but there are some risks in some messages being read along the way.  To prevent the loss of private information, businesses typically encrypt messages before sending them out onto the Internet.


Communicating with customers:

These days many businesses communicate via email with customers.  Email messages are simply encoded packets that are sent over the Internet directly to the customer.  In 1995 a new way of presenting messages to customers was invented.  Called the World Wide Web, it is not a separate web at all, but simply a way of more attractively linking and presenting information sent over the Internet.


How the World Wide Web works:

Almost all computers sold today include a piece of software called a “web browser.”  This software takes information coming in from the internet and displays it attractively on your screen.  Encoded in the message are instructions to the browser to make some text larger, include a picture, link to other internet addresses, etc.  When a company wants to build a web site to show products, it adds these display codes to text, and sends the text to a public “web server.”  The address of the server is shared with customers, put in advertising, or linked to other web sites.


Business web sites can be passive or very active.  A passive site might just display information about your company, give a phone number to use if people wish to purchase something, or show pictures of your staff and products.  This is what most early web sites did.  More recently, businesses wish to make it possible for customers to buy the products they see on the web site.  These more active sites require that a business collect all the usual purchase information needed for a sale: customer name and address, credit card information, the product desired, best delivery method.  This requires that the web site have links back to company databases.


Activity 8:  Think back to the last product you ordered via the web.  What information did the web site ask for?  What company databases do you think it was accessing?  What business systems used that information?



As consumers we are aware of such security threats as identity theft, on-line fraud, and destruction via viruses.  For companies, security risks are greater.  First, they face both external threats (fraud, viruses, information theft), and internal threats (employees who wish to steal or damage company records).  They also face a range of damages from web site defacing and denial of service attacks, to critical damage such as “logic bombs” that can cripple a system, or security penetrations that may give competitors access to customer records or proprietary information.  As a consequence, most companies have employees dedicated to maintaining security of corporate information systems, and yet even so, they face continual problems.


Responses include “fire walls” (barriers between company systems and the internet), virus scans (software that checks email to see if viruses are embedded), password protections (limits of access to parts of the company records), audit trails (records kept on who accessed particular company information), and backup systems (records made and kept off-site in case databases are corrupted or destroyed).


Activity #9:  Make a list of the three worst ways a company’s information systems could be attacked.  How would you prevent each attack or minimize the damage from each attack?



Business Plan Application:

What records will you be keeping?  How will you use that information? Begin with the obvious – how will you identify your best customers, and your best selling products?  How will you know when a product has begun to reach the end of its life-cycle?  As a manager, it is your job to understand your business.  What records will you keep so that you can do your job?