Chapter

1
Foundations of
Information Systems in Business

McGraw-Hill/Irwin

Copyright 2008, The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives
1. Understand the concept of a system and how it
relates to information systems
2. Explain why knowledge of information
systems is important for business professionals

Identify five areas of information systems

knowledge needed

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Learning Objectives
3. Give examples to illustrate how business
applications of information systems can
support a firms

Business processes
Managerial decision making
Strategies for competitive advantage

4. Provide examples of information systems from

your experiences with business organizations
in the real world

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Learning Objectives
5. Identify challenges that a business manager
might face in managing the successful, ethical
development and
use of information technology
6. Provide examples of the components
of real world information systems
7. Become familiar with the myriad of career
opportunities in information systems

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Foundation Concepts
Why study information systems and information
technology?
Vital component of successful businesses
Helps businesses expand and compete
Improves efficiency and effectiveness of
business processes
Facilitates managerial decision making and
workgroup collaboration

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Case 1: Heidelberg, Honeywell, Eaton

Smart services, smart products
Using information technology to monitor,
intervene, assist

Machines relay information via the Internet

and wireless systems
Optimized performance
Minimized maintenance and repair costs
Less unanticipated downtime

Increased value justifies premium charge

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Case Study Questions

1. Why should manufacturing companies build
smart products and provide smart services?

What business benefits can be gained?

Provide examples beyond those discussed in
this case

2. What information technologies are used

by the companies in this case to build smart
products and provide smart services?

What other IT components might be used?

Give examples of the capabilities they would
provide
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Case Study Questions

3. What are some limitations of a smart products
and smart services strategy?

Give several examples that a business might

encounter
Explain how it might overcome them

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What is a System?

A set of interrelated components

With a clearly defined boundary
Working together
To achieve a common set of objectives

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What is an Information System?

An organized combination of

People
Hardware and software
Communication networks
Data resources
Policies and procedures

This system
Stores, retrieves, transforms, and disseminates
information in an organization

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Information Technologies
Information Systems
All the components and resources necessary to
deliver information and functions to the
organization
Could be paper based

Information Technologies
Hardware, software, networking, data
management

Our focus will be on computer-based

information systems (CBIS)
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What Should Business Professionals Know?

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Fundamental Roles of IS in Business

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Trends in Information Systems

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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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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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IT Challenges and Opportunities

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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

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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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IT Careers
Economic downturns have affected all job
sectors, including IT
Rising labor costs are pushing jobs to India,
the Middle East, and Asia-Pacific countries
However, IT employment opportunities are
strong, with new jobs emerging daily
Shortages of IT personnel are frequent
The long-term job outlook is positive and
exciting
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IT Careers

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IT Careers
Job increases will be driven by
Rapid growth in computer system design and
related services
The need to backfill positions
Information sharing and client/server
environments
The need for those with problem-solving skills
Falling hardware and software prices, which will
fuel expanded computerization of operations

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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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Real World Case: Lufthansa

Lufthansa wants to
Keep 3,500 pilots
Trained on the latest technology and procedures
Plugged into the corporate infrastructure
Informed about schedules, weather events, and other
facts that affect their jobs

Control costs
Provide Internet access to passengers

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Case Study Questions

Are many of Lufthansas challenges identified in
the case similar to those being experienced by
other businesses in todays global economy?
What other tangible and intangible benefits,
beyond those identified by Lufthansa, might a
mobile workforce enjoy as a result of deploying
mobile technologies?

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Case Study Questions

Lufthansa was clearly taking a big risk with their
decision to deploy notebook computers to their
pilots. What steps did they take to manage the
risk, and what others might be needed in todays
business environment?

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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 Cybernetic System

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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

Types of systems
Open
Adaptive
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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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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 3: Aviall, Inc.

Supplier of airplane parts and components
Had lost track of its inventory
Price-tracking software didnt work with
inventory control or purchasing forecasting
Sent wrong parts to wrong customers
Sales falling

Needed a middleware vision

Get all the software to work together

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Case Study Questions

Why do you think that Aviall failed in their
implementation of an airplane parts and
components inventory control system?
How has information technology brought new
business success to Aviall? How did IT change
Avialls business model?
How could other companies use Avialls
approach to the use of IT to improve their
business success?

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Case 4: Continental Airlines

Building customer loyalty has become crucial
for success in the airline industry
Continental employs CallMinder systems to
Monitor calls and keystrokes
Data mine keystrokes and voice calls

This technology resulted in

Fewer calls going to the help desk

Higher customer satisfaction
Reduction of flight confirmation calls
Cost savings in excess of $1 million
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Case Questions
What are the business benefits of the CallMiner
system?
How can new technologies like CallMiner help
companies improve their customer service and
gain a competitive edge in the marketplace?
Andre Harris refers to calls to reconfirm a flight
as quite frankly, low-value calls. Why are they
classified as low value? Why do you think so
many customers are placing such calls?
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