FIT9123

Introduction to Business
Information Systems
Seminar 1:
Fundamentals of Business
Information Systems
Learning Objectives & Useful Readings

Learning objectives
- To help learners understand the meaning of information
- To help learners appreciate the significance of BIS
- To help learners understand the key components of BIS

Key Readings
– DeLone, W. H., & McLean, E. R. (1992). Information systems
success: The quest for the dependent variable. Information
systems research, 3(1), 60-95.
– Piccoli, G. (2008). Information systems for managers: text
and cases. John Wiley & Sons, Inc. Chapters 1-2, pp.1-9, 21-
40
Seminar Outline
• Information
– Definition
– Relation with data and knowledge
– Three pressing issues
– Economics
– Implications

• Business information systems (BIS)

– Definition
– Components
– Systemic effect
Information
• Information is created:
– through analysing/processing data
– which must make sense to information
consumers
• Processing can be done in TWO WAYS:
– manually using human intelligence
– IT-enabled IS
(manual/IS)
• So, Information is the Output of processed data
that carries a Meaning for information consumers
• Unlike data, information can therefore be
interpreted by individuals for making decisions
Data
▪ Data are
– raw facts
– often observed and recorded
▪ Data represent values of qualitative or quantitative variables (e.g. name, ID, deposit,
frequency of customer purchase, customer loyalty, user satisfaction)
▪ Data are collected through:
– observations (e.g. lecture attendance subjective: low, high, without recording)
– recordings (e.g. data collected from Moodle access)
▪ Data on their own (i.e. when unprocessed) have NO MEANING
▪ Data serve as inputs to information

▪ Examples of data:
▪ Yes, Yes, No, Yes, No, Yes, No, Yes
▪ 42, 63, 96, 74, 56, 86
▪ 111192, 111234
▪ None of the above data sets have any meaning until they are
(Data) (Information)
given:
– a CONTEXT (e.g. student performance in this unit)
– And/or PROCESSED into a useable form that can be
understood by the information consumers (e.g. % of
students who received HD)
Data characteristics

▪ FIVE Characteristics of Data

– Relevance (what data to collect?)
• Unrelated data are NOT needed, wastage of investment, cause information overload
– Frequency (how often to collect data?)
• E.g. weather models require hourly data on temperature, air pressure, humidity, location
– Timeliness (when to collect data?)
• e.g. share price
– Accuracy (i.e. precision)
• E.g. speed camera malfunction triggers issuing fines, VICROAD may invite law suite from citizens
– Privacy (protection from unauthorised access/use)
• Outsourced company employees cannot access financial, health related data

▪ DATA IS NOT FREE (Costs of Data)

– Costs involved in collecting data and ensuring data quality through addressing five characteristics
– Is the value generated from data (through processing) enough to justify its collection (e.g.
communication value with customers justify collection of name, email, phone)
Knowledge
▪ Knowledge
Level of understanding
increases
– Produces INSIGHTS
– Helps improve understanding
relationship between pieces of
information
▪ Using the previous example of information:
– A Marketing Manager could use this
information to decide whether or not to
redesign Internet Banking web site
– When demographics data are collected,
the marketing manager may understand
which age group of customers are
dissatisfied with web site
(customers over 65 years – senior citizens
with web site color choice, sound effects
for hearing disability) and based on
further interviews with them find out
why they are dissatisfied - KNOWLEDGE
Relationship among data, information and knowledge

▪ Information and knowledge

are used by managers to
make decisions
▪ Level of understanding
improves as managers gain
knowledge (RICH INSIGHTS)
based on processing of data
through BIS
Data, Information, Knowledge: Example 1
• Data that have been processed within a context to give it an understandable
meaning
• OR
• Data that have been processed into a form that gives it meaning

Raw Data No, Yes, No, No, No, Yes, No, Yes, No, No

Context: Commonwealth Bank Internet

banking
Responses to the market research question – “Are
Context you satisfied with Commonwealth Bank internet
banking?”

Processing Processing: Calculation of %

Information Satisfied: 30% (3 Yes)

Dissatisfied: 70% (7 No)

Why? Low satisfaction -> Knowledge seeking: Is low satisfaction due to: a) sampling problems (e.g. biased
sampling, small sample size), b) errors in data collection?
Three pressing issues with data/information & IS
• Issue 1:
– Information overload
(Infobesity)
– (Much of the collected data may
be unnecessary, NOT RELEVANT)
– It refers to the difficulty of
understanding an issue and
effectively making decisions when
one has too much information
about that issue

Youtube video on information overload:

https://www.youtube.com/watch?v=RLbYEkDW1tI
 Three pressing issues with data/information & IS

▪ Issue 2:
– Large investments in IS/IT are
made (fat IT budget) but still
timely and relevant
information is often not
produced for management
decision making

▪ Issue 3:
– Sometimes, business
managers make decisions
driven by power and politics
rather than information
generated by BIS every organisation is like a political entity, like army generals
senior managers aggressively play power games and they need
information
The Economics of Information

• Information has the following SIX interesting characteristics

(Piccoli, 2008):
– Information (including information based products) has
relatively high production costs
– Information has negligible replication costs
– Information has little distribution costs
– Information has sunk costs
– Information and carrier of information are different
– Information is not consumed by use
The Economics of Information …

• Characteristic 1: Information has relatively high production costs

– The initial (1st) copy of an information intensive product (e.g. software like MS-
Office, e-book, video games) is generally quite expensive because:
• It requires considerable amount of effort, time & money
• An army of software developers is employed by Microsoft to produce MS-Office
– That is, the cost of production is QUITE HIGH
• Characteristic 2: Information has negligible replication costs
– When comes to replication, this is where information goods drastically differ from
physical goods
– Consider MS-Word:
• it is made up of millions of lines of code
• written by a very large army of Microsoft programmers over the years
– However, producing the second and subsequent copies of MS-Word is essentially
NEGLIGIBLE as it simply takes a few megabytes on a CD or hard disk space
 The Economics of Information …
• Characteristic 3: Information has little distribution costs
– As with the replication costs, the distribution costs (Over the
Internet) associated with information goods are also very low
– Distribution costs are the costs associated with DELIVERING
information goods to the consumers so that they can use
them
– It does not include MARKETING COSTS (which can be
significant)
– Information goods are therefore characterised by:
• high production costs
• and low replication costs
• and low distribution costs
• Characteristic 4: Information has sunk costs
– Those expenses that a company has incurred to create a
product which cannot be recuperated (recovered) are
termed sunk costs
– Information goods generally have high level of sunk costs
– Hence, good marketing is needed to create a demand for
them
The Economics of Information …
• Characteristic 5: Information and carrier of information are different
– Often a CD or USB is used to hold a copy of the information product (e.g.
software)
– However, CD or USB by itself is the carrier of the information product, and not
the information by itself
– Likewise, when a DVD movie is rented from a local vide store, we access the
movie experience
– This difference between carriers (e.g. CD, DVD) and information products (e.g.
Software, books), is to be recognised because the economics (e.g. price
dynamics) of the carrier differ from that of the information product
• Characteristic 6: Information is not consumed by use
– The most intriguing nature of information is that it can be reused multiple times
(without depreciation of value)
– Physical goods (e.g. an apple) are consumed once
– Conversely, information goods are not consumed by use
– This characteristic is the heart of widespread online music sharing
The Economics of Information: Implications
• Implication 1: Information is customisable
– Information products can be modified with much ease as opposed to
physical goods (e.g. a car, house)

• Implication 2: Information is often time valued

– Sometimes, the value of information is tied to the users’ ability to access and
use it, when NEEDED
– Share price information is an example

• Implication 3: Information products can achieve significant profits

– Those firms which produce successful information products can enjoy vast
profits due to very low replication and distribution costs (despite having high
production costs)
– E.g. Two cash cows of Microsoft are : Microsoft Windows O/S and MS-Office
productivity tools
Seminar Outline
• Information
– Definition
– Relation with data and knowledge
– Three pressing issues
– Economics
– Implications

• Business information systems (BIS)

– Definition
– Components
– Systemic effect
 BIS definition

▪ According to Int. J. of BIS (IJBIS), BIS is defined as:

“Systems integrating IT, people, and business. BIS bring business functions
and information modules together for establishing effective communication
channels which are useful for:
- making timely and accurate decisions
and in turn contribute to organisational productivity and competitiveness.”
▪ http://www.inderscience.com/jhome.php?jcode=IJBIS
Four Components of BIS

▪ According to Piccoli (2008), BIS has 4

fundamentals components (grouped into 2 sub-
systems) that must Work Together to deliver the Social Technical
information processing functionalities that an
organisation requires to address its information
needs
Structure Technology
▪ Technical sub-system (does not contain human
elements)
– Technology (IT)
– Process
▪ Social sub-system (represents the human element Interactions
of IS)
– People
– Structure
▪ As BIS impact business functions, business
managers would need to have a solid People Process
understanding of the interactions of these 4
component
Four Components of BIS: Technology (IT)

▪ IT is a technical component of IS and is defined as a

collection of:

– Hardware (e.g. computer, cell phone)

– Software (e.g. Microsoft Office, Windows)
– Telecommunication equipment (e.g. Router, Fibre
optic cables
▪ The IT component is a cornerstone of any modern IS

▪ However, the way IT is designed can either:

– enable actions of users
– or constrain actions of users (e.g. ERP systems in US
cannot be easily used in China)
Four Components of BIS: Process
▪ The process component of IS is defined as the series of steps
necessary to complete a business activity (e.g. hotel check-in,
credit approval)
▪ Processes can be formal or informal
▪ Gaps between formal and informal process is due to the fact that:
– while the details of many business processes are articulated
in organisational manuals, they are in fact enacted by people
who may seek short-cuts (bypass certain steps for
convenience, time savings)
▪ This potential discrepancy between the business processes as
designed by organisations and the manner in which they are
actually enacted may facilitate BIS failure from user perspective
 Four Components of BIS: People
▪ The people component of BIS refers to those individuals or groups
who are directly involved in BIS
▪ These individuals (whether they are stakeholders, end-users,
managers, or IT professionals) have their:
– own set of skills, attitudes, and personal agendas that
determine what they are able to do and what they will
eventually decide to do
▪ A genuine understanding of the people involved, their skills,
interests, and motivations is necessary when designing and
implementing a new IT-based IS
▪ BIS may be under-utilised (and may even be sabotaged) when some
groups are not happy with the systems
Four Components of BIS: Structure
▪ Organisational structure component refers to:
– Organisational design (e.g. Hierarchy,
decentralised, loose coupling)
– Reporting mechanisms (functional, matrix)

▪ Understanding structure component is crucial

because:
– Introduction of IT systems may bring
changes in organisational structures
– Some people may lose authority
– Hence, user resistance is likely to occur
– Incentive systems/trainings are to be
developed to minimise resistance
 Systemic Effects

▪ All 4 components of IT-enabled IS do not work

in isolation, but INTERACT with one another
▪ This Interaction is noted by the arrows shown in
diagram
▪ This notion of interdependence of the
components is called systemic effects (Piccoli,
2008)
▪ This means that changes made in one
component (e.g. The introduction of a new
software application, a process redesign, a new
organisation chart, turnover among employees)
affect all other components of an IS
Summary

• Today, we have discussed:

– Data, information, knowledge and economics of information
– Components of BIS

• Seminar 2 focuses on:

– Business information systems: Impact and Changes, and Social
Media

Thank you very much for your kind attention

 References
• Baltzan, P., Phillips, A., Lynch, K., and Blakey, P. (2010). Business driven information systems (Australian and New Zealand Edition).
McGraw-Hill Australia Pty Ltd. Chapter 1.
• Davis, G. B. (2000). Information systems conceptual foundations: looking backward and forward. In Organizational and social
perspectives on information technology (pp. 61-82). Springer US.
• DeLone, W. H., & McLean, E. R. (1992). Information systems success: The quest for the dependent variable. Information systems
research, 3(1), 60-95.
• Delone, W. H., & McLean, E. R. (2003). The DeLone and McLean model of information systems success: a ten-year update. Journal of
management information systems, 19(4), 9-30.
• Huff, S. L., & Munro, M. C. (1985). Information technology assessment and adoption: a field study. MIS quarterly, 327-340.
• Ilhan, N. and Rahim, M.M., 2017. Benefits of e-procurement systems implementation: Experience of an Australian municipal council.
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803-838.
• Piccoli, G. (2008). Information systems for managers: Text and cases. John Wiley & Sons, Inc. Chapters 1-2, pp.1-9, 21-40
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