Jan Stallaert

Research Commentary: Introducing a Third Dimension in Information Systems Design--The Case for Incentive Alignment

Prior research has generated considerable knowledge on information systems design from software engineering and user-acceptance perspectives. As organizational processes are increasingly embedded within information systems, one of the key considerations of many business processes--organizational incentives--should become an important dimension of any information systems design and evaluation, which we categorize as the third dimension: incentive alignment. Incentive issues have become important in many IS areas, including distributed decision support systems (DSS), knowledge management, and e-business supply chain coordination. In this paper we outline why incentives are important in each of these areas and specify requirements for designing incentive-aligned information systems. We identify and define important unresolved problems along the incentive-alignment dimension of information systems and present a research agenda to address them.

The adoption and design methodologies of component-based enterprise systems

One of the major investments of information technologies in large companies in the past decade has been the enterprise system. Although the enterprise system has the advantages of managing and integrating almost all of the business processes in the whole company, there have been strong criticisms that the enterprise system often imposes its own logic or business process on a company and lacks flexibility and adaptability in todays dynamic business environment. The goal of this paper is to outline a new approach in enterprise system development. We analyse the factors that affect the adoption of enterprise systems. Market and business changes, and advances in information technologies call for a more flexible, open, and scalable enterprise architecture. We describe the process that Dell Computer Corporation took in adopting its component-based enterprise system architecture. The Dell example has demonstrated the importance of fit between business information systems and fundamental organizational dimensions of the company including strategy, business environment, and organizational structure. We also discuss the design methodologies for component-based enterprise system design. We take a coordination perspective, both at the software level and the organizational level, in addressing the design methodologies for component-based enterprise system development.

Decentralized Mechanism Design for Supply Chain Organizations Using an Auction Market

Traditional development of large-scale information systems is based on centralized information processing and decision making. With increasing competition, shorter product life-cycle, and growing uncertainties in the marketplace, centralized systems are inadequate in processing information that grows at an explosive rate and are unable to make quick responses to real-world situations. Introducing a decentralized information system in an organization is a challenging task. It is often intertwined with other organizational processes. The goal of this research is to outline a new approach in developing a supply chain information system with a decentralized decision making process. Particularly, we study the incentive structure in the decentralized organization and design a market-based coordination system that is incentive aligned, i.e., it gives the participants the incentives to act in a manner that is beneficial to the overall system. We also prove that the system monotonically improves the overall organizational performance and is goal congruent.

A Web-based financial trading system

A new electronic financial market is fast emerging. Connected by highspeed networks, buyers and sellers are gathering in virtual marketplaces and revolutionizing the way business is conducted. The financial services industry, among the most innovative and aggressive in its use of IT, has created an entirely new online brokerage industry in just a few years. The principal functions of financial markets are to bring buyers and sellers together and to provide a price discovery mechanism for the assets being traded. The authors describe their financial bundle trading system (FBTS), a Web-based continuous electronic market that traders can use to execute bundle orders. With a bundle order, a trader can order a combination of stocks or assets. FBTS is in an experimental stage and is being extensively used for research at the University of Texas at Austin. Rapid advances in IT and growing competition are causing fundamental changes in the worlds financial services industry. Because the FBTS is based on distributed objects, it has significant advantages over systems built with CGI scripts.

The Internet and the future of financial markets

nologies, particularly the Internet, have profoundly changed the dynamics of financial markets. More people are trading online through the Web instead of using full-service brokerages. According to Jupiter Communications, the

Solving the combinatorial double auction problem

415 billion online brokerage assets in 1998 will grow by more than sevenfold to

A Market Design for Grid Computing

3 trillion in 2003 [4]. Investors Combining new technology with established financial market mechanisms. can now trade stocks, access real-time market information, and conduct investment research in ways they could not dream of just a decade ago. However, if we look at the overall process of trading in financial markets (see Figure 1), which includes order entry by investors, order verification and routing by brokerage firms, and, finally, execution and settlement through various markets, online trading has only replaced telephones with the Web and provided a universal interface for individual investors to participate in the financial markets. It has not necessarily improved the overall efficiency level of the market. Beginning several years ago, the U.S. financial markets have been experiencing a profound change that goes far beyond online trading. It is not an exaggerated claim to describe the ongoing development as a fundamental revolution [2]. Recently, we have witnessed the Nasdaqs acquisition of the American Stock Exchange, the phenomenal growth of the Electronic Communications Networks (ECNs), and the introduction of after-hours trading. Looking at all the changes, ECNs have been among the most significant. ECNs are electronic trading systems that can automatically match buy and sell orders without the intermedi

Design of a financial portal

Abstract This paper studies the solution of several types of combinatorial (double) auctions. Such auctions have recently been used in business-to-business trading in a centralized marketplace, or in multi-agent coordination systems in artificial intelligence. When the goods are indivisible, solving the winner determination problem (WDP) is an integer programming problem and NP-hard in its general form. We show that a general combinatorial double auction can be reduced to a combinatorial single-sided auction, which is a multi-dimensional knapsack problem. Next, we compare the performance of several solution approaches for this type of problem. We contrast the branch-and-bound method with the intelligent search method proposed separately in three well-referenced papers. We found that theoretically the LP relaxation bounds always dominate the bounds used in the specialized intelligent searches. We also found empirically that the performance of this branch-and-bound method is superior to the specialized search methods that have been proposed for this class of problems.

The complementary class of generalized flow cover inequalities

Grid computing uses software to integrate computing resources, such as CPU cycles, storage, network bandwidth, and even applications, across a distributed and heterogeneous set of networked computers. It is now widely deployed by organizations and provides seamless temporary processing-capacity expansion to handle peak-period demand on e-commerce servers, distributed gaming, and content storage and distribution. We develop a market-based resource-allocation model that adds an economic layer to the current approach of treating resource allocation as primarily a scheduling issue. We design a value-elicitation and allocation scheme that provides the economic incentives for buyers and sellers of computing resources to exchange assets. We formulate the problem as a combinatorial call auction and present a portfolio of three solution approaches that trade off economic properties, such as allocative efficiency, incentive compatibility, and fairness in allocation, with computational efficiency. The first of these is an efficient solution that maximizes social welfare and yields incentive-compatible Vickrey-Clarke-Groves prices, but requires solving multiple instances of an NP-hard problem. For markets where having a commodity price is critical, we show how the addition of fairness constraints to the efficient model can somewhat reduce the computational burden and yet preserve incentive compatibility. Finally, for markets that require real-time fast solution techniques, we propose a time-sensitive fair Grid (tsfGRID) heuristic that relaxes the maximal allocation requirement of the welfare-maximizing fair solution. Its solution is not guaranteed to be incentive-compatible, but the heuristic is designed to be fast, maintain fairness in allocations, and yield commodity prices. Notably, while incentive compatibility is not guaranteed by tsfGRID, computational results comparing it with the efficient solution technique indicate that there are no significant differences in the expected-revenue and operational-allocative characteristics.

Introducing a Third Dimension in Information Systems Design: The Case for Incentive Alignment

from new entrants like E*Trade that offer lower transaction costs [1, 9]. Financial markets themselves are in a transformation with electronic communications networks, or ECNs, the quasi-stock exchanges that electronically collect, display, and automatically execute customer orders already accounting for 30% of all Nasdaq trading volume, with several ECNs announcing plans to become full-fledged exchanges to compete with both Nasdaq and the NYSE. Amidst all this, one thing is certain: market survivors will have to adapt to the changing environment and find ways to offer valuable services to their customers. Successful companies of the future will not simply reengineer today’s processes using new technologies, but rather will rethink and revolutionize their whole businesses to capitalize on new developments. In this article, we outline a model for the future of financial institutions. In our model, a competitive financial institution of the future will use market research to develop proprietary indices that focus on individual and small-business customer needs. The institution will then use the Internet to provide its customers with proprietary financial instruments on these indices, including a tool for selecting customized optimal portfolios, and a bundle trading mechanism [4, 5] to help establish and rebalance portfolios as needed. The business model we propose resembles that of an Internet portal (see Figure 1), much like an AOL of the financial services industry. Exclusive access to an integrated set of proprietary products and services as well as links to partners that offer complementary financial services and access to any other financial products available through the Internet will help establish a potentially large customer base. The right selection of indices and the right technology to help investors build and rebalance their portfolios will form the basis for a successful financial portal and a competitive financial institution. This strategy is particularly appropriate for existing financial institutions and mutual fund families with established resources, and will help them transform themselves to compete successfully in the new financial environment. Design of a