How do information systems affect organization? To answer this question, we need to examine and quickly summarize a large body of research and theory.Economic Theories Economics is the study of allocating scarce resources in markets populated by thousands of competing firms. It is also the study of national global economics. Microecomics focuses on individual firm provides several models to describe the impact of information technology on organizations.
Microeconomic Model: Model of the firm that views information technology as a factor of production that can be freely substituted for capital and labor.
Transaction cost theory: Economic theory that states that firms exist because they can conduct marketplace transactions internally more cheaply than they can with external firms in the marketplace.
Agent theory: Economic theory that views the firm as a nexus of contracts among self-interested individuals rather than a unified, profit-maximizing entity.
Behavioral Theories:Decision and Control Theory: Behavioral theory stating that the function of the organization is to make decision under conditions of uncertainty and risk and that Organizations centralize decision making and create a hierarchy of decision making to reduce uncertainty and to ensure survival.
Sociological theory: Behavioral theory stating that organizations develop Hierarchical bureaucratic structures and standard operating procedures to cope in unstable environments and that organizations cannot change routines when environments change.
Postindustry theory: Behavioral theory stating that the transformation of advanced industrial countries into postindustrial societies creates flatter organizations dominated by knowledge workers where decision making is more decentralized.
Cultural theory: Behavioral theory stating that information technology must fit into an organization's culture or the technology will not be adopted.
Political theory: Behavioral theory that describes information systems as the outcome of political subgroups for influence over the policies, procedures, and resources of the organization.
How the Web Potentially Affects Organizations
With more than 50 million Web pages developed by over 50,000 organizations around the globe, the World Wide Web is beginning to have an important impact on the relationships between firms and external entities, and even on the organizations of business process inside the firm.
The World Wide Web alters the accessibility, storage, and distribution of information and knowledge for organization. The Web has the following capabilities.
o It enlarges the potential to access information for all market and organizational participants: Nearly any information can be available anywhere at anytime.
o It enlarges the scope, depth, and range of information and knowledge storage, with so many contributors to what constitutes a global encyclopedia, just about any extant knowledge or information is available.
o It knows the cost and raises the quality of information and knowledge distribution; business interactive multimedia applications on the Web enhance the attention span of vendors, customers, and employees.
Organizational Resistance to Change
Because information systems potentially change an organization's structure, culture, politics, and work, there is often considerable resistance to them when they are introduced. Microeconomic theories have no explanation for organizational resistance to change. In general, behavioral theories are superior for describing this phenomenon. Because of the difficulties of introducing new information systems, experienced systems observers approach social change through systems very cautiously. Briefly,
o Organizations do not innovate unless there is a substantial environmental change. Organizations adopt innovations only when necessary.
o Substantial forces resisting change are rooted in the organization’s structures, values, and interest groups.
o Organizational innovation is difficult and complex to achieve. It involves more than simply purchasing technology. To reap the benefits of technology, innovations must be utilized and managed properly. This, in turn, requires changes in the values, norms, and interest-group alignments of the organization.
o The function of leaders is to take advantage of external circumstances to solidify their power. Leaders must use external opportunities to tilt the internal conflict in an organization in their favor and toward the successful development of their own agendas.
Implications for the Design and Understanding of Information Systems
You can develop a checklist of factors to consider in your plans when envisioning, designing, building, or managing information systems. In our experience, the following are the central organizational factors in rough rank order of importance:
o The environment in which the organizations must function.
o The structure of the organization: hierarchy, specialization, standard operating procedures.
o The culture and politics of the organization.
o The type of organization.
o The extent of support and understanding of top management
o The level of organization at which the system resides.
o The principal interest groups affected by the system
o The kinds of tasks, decisions, and business process that the information system is designed to assist.
o The sentiments and attitudes of workers in the organization who will be using the information systems.
o The history of the organization: past investments in information technology, existing skills, important programs, and human resources.