Chapter 1

Foundations of Information Systems in Business

Instructor: Mark Onte, BSIT, MIS

What is an Information System?

An information system can be any organized combination of people, hardware, software, communications networks, and data resources that stores and retrieves, transforms, and disseminates information in an organization. People have relied on information systems to communicate with each other using a variety of physical devices (hardware), information processing instructions and procedures (software), communications channels (networks), and stored data (data resources)since the dawn of civilization.

Why study Information Systems and Information Technology? (benefits of IT in business)

Thats the same way of asking why anyone should study accounting, finance, operations management, marketing, human resource management, or any other major business functions. 1. Vital to success. Information systems and technologies are a vital component of successful businesses and organizations. 2. Used extensively in business administration and management. IS constitutes an essential field of study in these areas. 3. Fosters growth in business. Information technologies, including Internet-based information systems, are vital in expanding role in business.

Why study Information Systems and Information Technology? (benefits of IT in business)

3. Improves business effectiveness and efficiency. IT helps all kinds of businesses improve the efficiency and effectiveness of their business processes, managerial decision making, and workgroup collaboration, thus strengthening their competitive positions in a rapidly changing marketplace. 4. Necessary to be competitive. Information technologies and systems have become a necessary ingredient for business success in todays dynamic global environment.

Information Technologies vs. Information Systems

The terms information systems and information technology are sometimes used interchangeably, they are two distinct concepts. As defined above, the term information system describes all of the components and resources necessary to deliver its information and functions to the organization. In contrast, the term information technology refers to the various hardware components necessary for the system to operate. In theory, an information system could use simple hardware components such as pencil and paper or file folders to capture and store its data.

Information Systems
For our purposes, we will concentrate on computer-based information systems and their use of the following information technologies: 1. Computer hardware technologies, including microcomputers, midsize servers, and large mainframe systems and the input, output, and storage devices that support them. 2. Computer software technologies, including operating system software, Web browsers, software productivity suites, and software for business applications like customer relationship management and supply chain management.

Information Systems
3. Telecommunications network technologies, including the telecommunications media, processors, and software needed to provide wire-based and wireless access and support for the Internet and private Internet-based networks such as intranets and extranets. 4. Data resource management technologies, including database management system software for the development, access, and maintenance of the databases of an organization.

What Should Business Professionals Know?

An IS Framework for Business Professionals

The field of information systems encompasses many complex technologies, abstract behavioral concepts, and specialized applications in countless business and non-business areas. As a manager or business professional you do not have to absorb all of this knowledge. These are the following five areas of IS knowledge: 1. Foundation Concepts Fundamental behavioral, technical, business, and managerial concepts about the components and roles of information systems. Examples include basic information system concepts derived from general systems theory, or competitive strategy concepts used to develop business applications of information technology for competitive advantage.

An IS Framework for Business Professionals

2. Information Technologies Major concepts, developments, and management issues in information technologythat is, hardware, software, networks, data management, and many Internet-based technologies. 3. Business Applications The major uses of information systems for the operations, management, and competitive advantage of a business. Thus supporting areas of business like marketing, manufacturing, and accounting. Cross-functional enterprise applications like customer relationship management focuses on electronic commerce applications that most companies are using to buy and sell products on the Internet. Information systems and technologies to support decision making in business.

An IS Framework for Business Professionals

4. Development Processes How business professionals and information specialist plan, develop, and implement information systems to meet business opportunities. 5. Management Challenges The challenges of effectively and ethically managing information technology at the end user, enterprise, and global levels of a business.

The Fundamental Roles of IS in Business

The Fundamental Roles of IS in Business

There are three fundamental reasons for all business applications of information technology. They are found in the three vital roles that information systems can perform for a business enterprise. Support of its business processes and operations. Support of decision making by its employees and managers. Support of its strategies for competitive advantage.

Examples of The Major Roles of IS

Support Business Processes As a consumer, you regularly encounter information systems that support the business processes and operations at the many retail stores where you shop. For example, most retail stores now use computersbased information systems to help them record customer purchases, keep track of inventory, pay employees, buy new merchandise, and evaluate sales trends. Store operations would grind to a halt without the support of such information systems.

Examples of The Major Roles of IS

Support Decision Making Information systems also help store managers and other business professionals make better decisions. For example, decisions on what lines of merchandise need to be added or discontinued, or on what kind of investment they require, are typically made after an analysis provided by computer-based information systems. This not only supports the decision making of store managers, buyers, and others, but also helps them look for ways to gain an advantage over other retailers in the competition for customers.

Examples of The Major Roles of IS

Support Competitive Advantage Gaining a strategic advantage over competitors requires innovative application of information technologies. For example, store management might make a decision to install touch-screen kiosks in all of their stores, with links to their ecommerce website for online shopping. This might attract new customers and build customer loyalty because of the ease of shopping and buying merchandise provided by such information systems. Thus, strategic information systems can help provide products and services that give a business a comparative advantage over its competitors.

Trends in Information Systems

What is E-Business?
Using Internet technologies to empower Business processes Electronic commerce Collaboration within a company Collaboration with customers, suppliers, and other business stakeholders In essence, an online exchange of value

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How E-Business is Being Used

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E-Business Use
Reengineering Internal business processes Enterprise collaboration systems Support communications, coordination and coordination among teams and work groups Electronic commerce Buying, selling, marketing, and servicing of products and services over networks

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Assignment
Give an example of a company using E-Business. Describe how they do E-business. Research on: Operation Support Systems Management Support Systems Describe each system.

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Types of Information Systems

Operations Support Systems Efficiently process business transactions Control industrial processes Support communication and collaboration Update corporate databases Management Support Systems Provide information as reports and displays Give direct computer support to managers during decision-making

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Purposes of Information Systems

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Operations Support Systems

What do they do? Efficiently process business transactions Control industrial processes Support communications and collaboration Update corporate databases

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Types of Operations Support Systems

Transaction Processing Systems Record and process business transactions Examples: sales processing, inventory systems, accounting systems Process Control Systems Monitor and control physical processes Example: using sensors to monitor chemical processes in a petroleum refinery Enterprise Collaboration Systems Enhance team and workgroup communication Examples: email, video conferencing

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Two Ways to Process Transactions

Batch Processing Accumulate transactions over time and process periodically Example: a bank processes all checks received in a batch at night

Online Processing Process transactions immediately Example: a bank processes an ATM withdrawal immediately

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Management Support Systems

What do they do? Provide information and support for effective decision making by managers Management information systems Decision support systems Executive information systems

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Types of Management Support Systems

Management Information Systems (MIS) Reports and displays Example: daily sales analysis reports Decision Support Systems (DSS) Interactive and ad hoc support Example: a what-if analysis to determine where to spend advertising dollars Executive Information Systems (EIS) Critical information for executives and managers Example: easy access to actions of competitors

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Other Information Systems

Expert Systems Provide expert advice Example: credit application advisor Knowledge Management Systems Support creation, organization, and dissemination of business knowledge throughout company Example: intranet access to best business practices

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Other Information Systems

Strategic Information Systems Help get a strategic advantage over customer Examples: shipment tracking, e-commerce Web systems Functional Business Systems Focus on operational and managerial applications of basic business functions Examples: accounting, finance, or marketing

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Measuring IT Success
Efficiency Minimize cost, time, and use of information resources Effectiveness Support business strategies Enable business processes Enhance organizational structure and culture Increase customer and business value

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Developing IS Solutions

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Challenges and Ethics of IT

Application of IT Customer relationship management Human resources management Business intelligence systems Potential Harm Infringements on privacy Inaccurate information Collusion A secret agreement, especially for fraudulent or treacherous purposes. A secret understanding between two or more persons to gain something illegal.
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Challenges and Ethics of IT

Potential Risks Consumer boycotts Work stoppages Government intervention Possible Responses Codes of ethics Incentives Certification

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Ethical Responsibilities
What uses of IT might be considered improper or harmful to other individuals or society? What is the proper business use of the Internet or a companys IT resources? How can you protect yourself from computer crime?

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The IS Function
The IS function is A major functional area of business

An important contributor to operational efficiency, employee productivity, morale, customer service and satisfaction
A major source of information and support for decision making A vital ingredient in developing competitive products and services in the global marketplace A dynamic and challenging career opportunity A key component of todays networked business
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System Concepts: A Foundation

System concepts help us understand Technology: hardware, software, data management, telecommunications networks Applications: to support inter-connected information systems

Development: developing ways to use information technology includes designing the basic components of information systems
Management: emphasizes the quality, strategic business value, and security of an organizations information systems
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What is a System?
A system is

A set of interrelated components

With a clearly defined boundary Working together To achieve a common set of objectives By accepting inputs and producing outputs

In an organized transformation process

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Basic Functions of a System

Input Capturing and assembling elements that enter the system to be processed Processing Transformation process that converts input into output Output Transferring transformed elements to their ultimate destination

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Cybernetic System
All systems have input, processing, and output A cybernetic system, a self-monitoring, selfregulating system, adds feedback and control: Feedback is data about the performance of a system Control involves monitoring and evaluating feedback to determine whether a system is moving toward the achievement of its goal

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A Business as a System

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Other System Characteristics

If a system is one of the components of a larger system, it is a subsystem The larger system is an environment Several systems may share the same environment Some may be connected via a shared boundary, or interface

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Components of an IS

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Information System Resources

People Resources Specialists End users Hardware Resources Machines Media Software Resources Programs Procedures
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Information System Resources

Data Resources Product descriptions, customer records, employee files, inventory databases Network Resources Communications media, communications processors, network access and control software Information Resources Management reports and business documents using text and graphics displays, audio responses, and paper forms
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Data Versus Information

Data are raw facts about physical phenomena or business transactions Information is data that has been converted into meaningful and useful context for end users Examples: Sales data is names, quantities, and dollar amounts Sales information is amount of sales by product type, sales territory, or salesperson

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DATA AND INFORMATION

Raw data from a supermarket checkout counter can be processed and organized to produce meaningful information, such as the total unit sales of dish detergent or the total sales revenue from dish detergent for a specific store or sales territory.

IS Activities
Input of data resources Data entry activities Processing of data into information Calculations, comparisons, sorting, and so on Output of information products Messages, reports, forms, graphic images Storage of data resources Data elements and databases Control of system performance Monitoring and evaluating feedback
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Recognizing Information Systems

Business professionals should be able to look at an information system and identify The people, hardware, software, data, and network resources they use

The type of information products they produce

The way they perform input, processing, output, storage, and control activities

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Case Study 1
MIS Book(Laudon), p.22 UPS COMPETES GLOBALLY WITH INFORMATION TECHNOLOGY