548 Making Key Strategic Decisions
materials. Lastly, some companies use EDI to transmit their invoices and then
to receive the subsequent payments. While industries use different versions of
EDI in different ways, their goals are always the same: minimize the processing
time and lower inventory costs and overhead expenses. An industry organization
in Washington, D.C., developed and maintains a standard format that dictates
how all transactions are sent, ensuring that all companies that wish to imple-
ment EDI can be assured that all vendors’ and customers’ computers will un-
derstand each others’ transactions, without requiring any custom programming.
EDI, while still used quite extensively, has been eclipsed by electronic com-
merce, which will be discussed later in this chapter.
The 1990s has also seen the advent of virtual organizations. Virtual orga-
nizations are formed when companies join together to create products or en-
terprises that they could not have created individually. In most cases,
information technology allows companies to create these partnerships and
share information as if they were one company. Using communications and
groupware products like Lotus Notes, the partners can share information with
each other about their individual progress to ensure the best possible success.
This will be discussed further in the section on IT strategy.
DATABASE
The following scenario depicts what information systems looked like prior to
the use of database management systems. Imagine a physical office in which
each person has his or her own file cabinet. The information in the file cabinets
belongs to the people whose desks are closest to them. They decide what infor-
mation will be in their file cabinets and how it will be organized. For example,
sales might refer to gross sales in one worker ’s cabinet and net sales in an-
other ’s. Yet, the discrepancy would be unimportant, because there was actually
very little sharing of data.
Database management systems assume that information is a corporate
asset to be shared by all workers in the enterprise. Database technology, there-
fore, allows a company to have one integrated location for the storage of all
company data. These systems create a standard vocabulary, or data dictionary,
by which all references are consistent (e.g., sales always means net sales). They
also enable each user to have her own individual view of the data as if the in-
formation were still in the file cabinet next to her desk. Users need not concern
themselves with the physical location or physical order of the data either. Data-
base management systems are capable of presenting the data as necessary. In
fact, with distributed databases, the data does not even have to reside in the
same location or computer. It can be spread around the world if necessary.
Database systems are sufficiently intelligent and can find the data and process
it as if it were located directly on the user ’s personal computer.
Most of the software that was developed in the earlier years relied on data
structures called f lat files. While some companies utilized database technolog y