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1 Foundations of Information
Systems in Business
I. CHAPTER OVERVIEW
This chapter presents an overview of the five basic areas of information systems knowledge needed by business professionals, including the conceptual system components and major types of information systems.
Section I: Foundation Concepts: Information Systems in Business Section II: Foundation Concepts: The Components of Information Systems
II. LEARNING OBJECTIVES
Learning Objectives
1. Explain why knowledge of information systems is important for business professionals and identify five areas of information systems knowledge they need. 2. Give examples to illustrate how the business applications of information systems can support a firm’s business processes, managerial decision making, and strategies for competitive advantage. 3. Provide examples of several major types of information systems from your experiences with business organizations in the real world. 4. Identify several challenges that a business manager might face in managing the successful and ethical development and use of information technology in a business. 5. Provide examples of the components of real world information systems. Illustrate that in a information systems, people use hardware, software, data, and networks as resources to perform input, processing, output, storage, and control activities that transform data resources into information products.
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III. TEACHING SUGGESTIONS
This chapter provides the framework used to structure the text, and introduces the fundamental systems concepts used throughout the text. Use Figure 1.2 to discuss the layout of the text, and outline the major areas of information systems knowledge needed by business professionals. Discussion is particularly important at the beginning of this course since there is a tendency for non-MIS majors to be skeptical of the importance of the MIS course. The real world cases in this chapter can be used to demonstrate the extensive use of information systems by managerial end users. Figure 1.3 outlines the three major roles of information systems in an organization. It illustrates that information systems provide an organization with support for business operations, managerial decision-making, and strategic advantage. Figure 1.4 can be used to discuss the expanding roles of IS in business and management. Most students find this slide quite interesting and often become involved in a good discussion of these concepts. Figure 1. outlines the role of the internetworked enterprise and how it depends on the Internet, intranets, extranets, and other networks for enterprise collaboration among a company’s business functions which supports electronic commerce with customers, suppliers, and other business partners. Figure 1.6 illustrates that the conceptual classification of information systems is categorized as either operations support systems or management support systems. They are categorized this way to spotlight the major roles each plays in the operations and management of a business. Instructors must instill in students that not all IS projects undertaken in an organization are met with success. There are a number of key reasons why some projects are successful while others are doomed to failure. It is important for students to realize that information technology and information systems can be mismanaged and misapplied so that they create both technological and business failure. Figure 1.13 shows the major steps involved in the traditional systems development life cycle. This concept will be further discussed in chapter 10 – Developing e-business Solutions.
Section 2 discusses the components of information systems. Figure 1.18 summarizes what these components are. It illustrates that all information systems use people, hardware, software, data, and network resources to perform input, processing, output, storage, and control activities to transform data resources into information products. Figure 1. gives examples of information systems products. Figure 1.20 provides basic examples of information system activities (input, processing, output, storage, and control).
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An IS Framework for Business Professionals: [Figure 1.2]
Managers or business professionals are not required to know the complex technologies, abstract behavioural concepts, or the specialized applications involved in the field of information systems. Figure 1.2 illustrates a useful conceptual framework that outlines what a manager or business professional needs to know about information systems. It emphasizes five areas of knowledge:
- Foundation Concepts
- Business Applications
- Development Processes
- Management Challenges
- Information Technologies
Foundation Concepts Fundamental behavioral, technical, business, and managerial concepts [Chapter 1 & 2] about the components and roles of information systems.
Information Technologies Major concepts, developments, and management issues in [Chapter 3 - 6] information technology (hardware, software, networks, data resource management, and other information processing technologies such as the Internet).
Business Applications The major uses of information systems for the operations, management, [Chapter 7 - 10] and competitive advantage of an e-business enterprise, including electronic business, commerce, collaboration and decision-making using the Internet, intranets, and extranets.
Development Processes How business professionals and information specialists plan, develop and [Chapter 11 - 12] implement information systems to meet e-business opportunities using several strategic planning and application development approaches.
Management Challenges The challenges of effectively and ethically managing e-business [Chapter 13 - 14] technologies, strategies, and security at the end user, enterprise, and global levels of a business.
The Fundamental Roles of IS in Business [Figure 1.3]
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. Example: Most retail stores now use computer-based information systems to help them record customer purchases, keep track of inventory, pay employees, buy new merchandise, and evaluate sales trends.
● Support of decision making by its employees and managers. Example: Decisions about what lines of merchandise need to be added or discontinued, or about what kind of investment they require, are typically made after an analysis provided by computer-bases information systems.
● Support of its strategies for competitive advantage. Example: Store management might make a decision to install touch-screen kiosks in all of their stores, with links to their e-commerce 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.
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Trends in Information Systems: [Figure 1.4]
The roles given to the information systems function have expanded significantly over the years.
1950s - 1960s - Data Processing - Electronic data processing systems Role: Transaction processing, record keeping, and accounting, and other electronic data processing (EDP) applications
1960s - 1970s - Management Reporting – Management information systems Role: Providing managerial end users with predefined management reports that would give managers the information they needed for decision-making purposes.
1970s - 1980s - Decision Support - Decision support systems Role: The new role for information systems was to provide managerial end users with ad hoc support of their decision-making process. This support would be tailored to the unique decision-making styles of managers as they confronted specific types of problems in the real world.
1980s - 1990s - Strategic and End User Support Role: End users could use their own computing resources to support their job requirements instead of waiting for the indirect support of corporate information services departments.
- End User Computing Systems Role: Direct computing support for end user productivity and work group collaboration.
- Executive Information Systems (EIS) - Role: These information systems attempt to give top executives an easy way to get the critical information they want, when they want it, tailored to the formats they prefer.
- Expert Systems (ES) and other Knowledge-Based Systems Role: Expert systems can serve as consultants to users by providing expert advice in limited subject areas.
- Strategic Information Systems (SIS) Role: Information technology becomes an integral component of business processes, products, and services that help a company gain a competitive advantage in the global marketplace.
- 1990s - 2000 – Electronic business and commerce systems Role: The rapid growth of the Internet, intranets, extranets, and other interconnected global networks has revolutionise the operations and management of today’s business enterprises.
The Roles of e-Business in Business : [Figure 1.5]
The Internet and related technologies and applications have changes the way businesses are operated and people work, and how information systems support business processes, decision making, and competitive advantage, Thus many businesses today are using Internet technologies to Web-enable business processes and create innovative e-business applications.
The Internet and Internet-like networks – inside the enterprise ( intranets ), and between an enterprise and its trading partners ( extranets ) – have become the primary information technology infrastructure that supports the e-business applications of many companies. These companies rely on e-business applications to:
- Reengineer internal business processes.
- Implement electronic commerce systems with their customers and suppliers.
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Management Support Systems
When information system applications focus on providing information and support for effective decision making by managers, they are called Management Support Systems. Providing information and support for decision making by all types of managers and business professionals is a complex task. Conceptually, several major types of information systems support a variety of decision-making responsibilities: (1) management information systems, (2) decision support systems, and (3) executive information systems. See Figure 1.9.
Management information systems (MIS) - are the most common form of management support systems. They provide managerial end users with information products that support much of their day-to-day decision-making needs. MIS provide a variety of prespecified information (reports) and displays to management that can be used to help them make more effective, structured types of day-to-day decisions. Information products provided to managers include displays and reports that can be furnished:
- On demand
- Periodically, according to a predetermined schedule
- Whenever exceptional conditions occur
Decision support systems (DSS) – provide managerial end users with information in an interactive session on an ad hoc (as needed) basis. Managers generate the information they need for more unstructured types of decisions in an interactive, computer-based information system that uses decision models and specialized databases to assist the decision-making processes of managerial end users.
Executive information systems (EIS) - provide top and middle management with immediate and easy access to selective information about key factors that are critical to accomplishing a firm’s strategic objectives. EIS are easy to operate and understand.
Other Classifications of Information Systems: [Figure 1.11]
Several other categories of information systems that support either operations or management applications include:
- Expert Systems
- Knowledge Management Systems
- Functional Business Information Systems
- Strategic Information Systems
- Cross-functional Information Systems
Managerial Challenges of Information Technology: [Figure 1.12]
For managerial end users, the information systems function represents:
- A major functional area of business that is important to a business’ success
- An important factor affecting operational efficiency, employee productivity and morale, and customer service and satisfaction.
- A major source of information and support needed to promote effective decision making by managers.
- An important ingredient in developing competitive products and services that gives an organization a strategic advantage in the marketplace.
- A major part of the resources of an organization and its cost of doing business
- A vital, dynamic, and challenging career opportunity for many men and women.
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Success and Failure with IT:
Is important that students realize that information technology and information systems can be mismanaged and misapplied so that they create both technological and business failure.
Top Five Reasons for Success Top Five Reasons for Failure
User involvement Lack of user input
Executive management support Incomplete requirements and specifications Clear statement of requirements Changing requirements and specifications
Proper planning Lack of executive support
Realistic expectations Technological incompetence
Developing IS Solutions: [Figure 1.13]
Developing information system solutions to business problems is the responsibility of many business professionals today.
For example:
- As a business professional, you will be responsible for proposing or developing new or improved uses of information technology for your company.
- As a business manager, you will frequently manage the development efforts of information systems specialists and other business end users.
Challenges of Ethics and IT:
As a prospective managerial end user and knowledge worker in a global society, you should also become aware of the ethical responsibilities generated by the use of information technology.
For example:
- What uses of information technology might be considered improper, irresponsible, or harmful to other individuals or to society?
- What is the proper use of an organization’s information resources?
- What does it take to be a responsible end user of information technology?
- How can you protect yourself from computer crime and other risks of information technology?
Ethical dimensions of information systems deal with ensuring that information technology and information systems are not used in an improper or irresponsible manner against other individuals or to society.
A major challenge for our global information society is to manage its information resources to benefit all members of society while at the same time meeting the strategic goals of organizations and nations. For example, we must use information systems to find more efficient, profitable and socially responsible ways of using the world’s limited supplies of material, energy, and other resources.
Challenges of IT Careers:
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IV: LECTURE NOTES (con’t)
Section II: Foundation Concepts: The Components of Information Systems
System Concepts: A Foundation
System concepts underlie the field of information systems. Understanding system concepts will help you understand many other concepts in the technology, application, development, and management of information systems.
System concepts help you understand:
- Technology. That computer networks are systems of information processing components that uses a variety of hardware, software, data management, and telecommunication technologies.
- Applications. That electronic business and commerce involves interconnected business information systems.
- Development. That developing ways to use information technology in business includes designing the basic components of the information systems.
- Management. That managing information technology emphasizes the quality, strategic business value, and security of an organization’s information systems.
Analyzing Lufthansa
We can learn a lot about how information systems can be used to support business from this case. Take a few minutes to read it, and we will discuss it (See Lufthansa: Taking Mobile Computing to the Skies While Keeping the Mobile Workforce Connected in Section IX).
What is a System?
Question: What is a system as it applies to the concept of an information system?
Answer: A system is a group of interrelated components working together toward a common goal by accepting inputs and producing outputs in an organized transformation process.
A system (sometimes called a dynamic system) has three basic interacting components or functions. These include:
- Input involves capturing and assembling elements that enter the system to be processed.
- Processing involves transformation processes that convert input into output.
- Output involves transferring elements that have been produced by a transformation process to their ultimate destination.
Feedback and Control:
Two additional components of the system concept include feedback and control. A system with feedback and control components is sometimes called a cybernetic system, that is, a self-monitoring, self-regulating system.
- Feedback is data about the performance of a system.
- Control involves monitoring and evaluating feedback to determine whether a system is moving toward the
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achievement of its goals. The control function then makes necessary adjustments to a system's input and processing components to ensure that it produces proper output.
Other System Characteristics
A system does not exist in a vacuum; rather, it exists and functions in an environment containing other systems.
Subsystem : A system that is a component of a larger system, where the larger system is its environment.
System Boundary : A system is separated from its environment and other systems by its system boundary.
Interface : Several systems may share the same environment. Some of these systems may be connected to one another by means of a shared boundary, or interface.
Open System : A system that interacts with other systems in its environment is called an open system (connected to its environment by exchanges of inputs and outputs).
Adaptive System : A system that has the ability to change itself or its environment in order to survive is called an adaptive system.
Components of An Information System: [Figure 1.18]
An information system model expresses a fundamental conceptual framework for the major components and activities of information systems. An information system depends on the resources of people, hardware, software, data, and networks to perform input, processing, output, storage, and control activities that convert data resources into information products.
The information systems model outlined in the text emphasizes four major concepts that can be applied to all types of information systems:
- People, hardware, software, data, and networks, are the five basic resources of information systems.
- People resources include end users and IS specialists, hardware resources consist of machines and media, software resources include both programs and procedures, data resources can include data and knowledge bases, and network resources include communications media and networks.
- Data resources are transformed by information processing activities into a variety of information products for end users.
- Information processing consists of input, processing, output, storage, and control activities.
Information System Resources:
The basic IS model shows that an information system consists of five major resources:
- People resources
- Hardware resources
- Software resources
- Data resources
- Network resources
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- Knowledge Bases - hold knowledge in a variety of forms such as facts and rules of inference about various subjects.
Data versus Information. The word data is the plural of datum , though data is commonly used to represent both singular and plural forms. The term’s data and information are often used interchangeably. However, you should make the following distinction:
- Data: - are raw facts or observations, typically about physical phenomena or business transactions. More specifically, data are objective measurements of the attributes (characteristics) of entities , such as people, places, things, and events.
- Information: - is processed data, which has been placed in a meaningful and useful context for end users. Data is subjected to a “value-added” process (data processing or information processing) where:
- Its form is aggregated, manipulated, and organized.
- Its content is analyzed and evaluated
- It is placed in a proper context for a human user
Network Resources:
Telecommunications networks like the Internet, intranets, and extranets have become essential to the successful electronic business and commerce operations of all types of organizations and their computer-based information systems. Telecommunications networks consist of computers, communications processors, and other devices interconnected by communications media and controlled by communications software. The concept of network resources emphasizes that communications networks are a fundamental resource component of all information systems. Network resources include:
- Communications media (twisted-pair wire, coaxial cable, fiber-optic cable, and microwave, cellular, and satellite wireless systems.
- Network support (people, hardware, software, and data resources that directly support the operation and use of a communications network).
Information System Activities:
Information processing (or data processing) activities that occur in information system include the following:
- Input of data resources
- Processing of data into information
- Output of information products
- Storage of data resources
- Control of system performance
Input of Data Resources :
- Data about business transactions and other events must be captured and prepared for processing by the input activity_._ Input typically takes the form of data entry activities such as recording and editing.
- Once entered, data may be transferred onto a machine-readable medium such as magnetic disk or tape, until needed for processing.
Processing of Data into Information:
- Data is typically subjected to processing activities such as calculating, comparing, sorting, classifying, and summarizing. These activities organize, analyze, and manipulate data, thus converting them into information for
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end users.
- Quality of data stored in an information system must be maintained by a continual process of correcting and updating activities.
Output of Information Products:
- Information in various forms is transmitted to end-users and made available to them in the output activity. The goal of information systems is the production of appropriate information products for end users.
Storage of Data Resources:
Storage is a basic system component of information systems.
- Storage is the information system activity in which data and information are retained in an organized manner for later use.
Control of System Performance:
An important information system activity is the control of its performance.
- An information system should produce feedback about its input, processing, output, and storage activities.
- Feedback must be monitored and evaluated to determine if the system is meeting established performance standards.
- Feedback is used to make adjustments to system activities to correct deficiencies.
Recognizing Information Systems:
As a business professional, you should be able to recognize the fundamental components of information systems you encounter in the real world. This means that you should be able to identify:
- The people, hardware, software, data, and network resources they use.
- The types of information products they produce.
- The way they perform input, processing, output, storage, and control activities.
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V. KEY TERMS AND CONCEPTS - DEFINED
Computer-Based Information System (6): An information system that uses computer hardware and software to perform its information processing activities.
Control (24): The systems component that evaluates feedback to determine whether the system is moving toward the achievement of its goal and then makes any necessary adjustments to the input and processing components of the system to ensure that proper output is produced.
Data (29): Facts or observations about physical phenomena or business transactions. More specifically, data are objective measurements of the attributes (characteristics) of entities , such as people, places, things, and events.
Data or Information Processing (30): The act of converting data into information.
Data Resources (28): Data, model, and knowledge bases
Developing Business/IT Solutions (17): End users and IS specialists develop and implement business/IT solutions to problems and opportunities arising in businesses.
E-business (11): The use of Internet technologies to inter-network and empower business processes, electronic business processes, electronic commerce, and enterprise communication and collaboration within a company and with its customers, suppliers, and other business stakeholders.
E-business role in business (11): Businesses today are using the Internet, corporate intranets, and inter-organizational extranets for electronic business operations, e-commerce, and enterprise collaboration.
Electronic Commerce (12): The buying and selling, marketing and servicing, and delivery and payment of products, services, and information over the Internet, intranets, extranets, and other networks, between an inter-networked enterprise and its prospects, customers, suppliers, and other business partners.
End User (27): Anyone who uses an information system or the information it produces.
Enterprise Collaboration System (12): The use of groupware tools and the Internet, intranets, extranets, and other computer networks to support and enhance communication, coordination, collaboration, and resource sharing among teams and workgroups in an internetworked enterprise.
Extranet (12): A network that links selected resources of a company with its customers, suppliers, and other business partners, using the Internet or private networks to link the organizations’ intranets.
Feedback (24): Data or information concerning the components and operations of a systems performance.
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Hardware Resources (28): Includes all physical devices and materials used in information processing (machines and media).
Information – Products (31): The degree to which information has the appropriate information that is useful for users. Information products include messages, reports, forms, and graphic images.
Information System (6): A system that uses the resources of hardware, software, and people to perform input, processing, output, storage, and control activities that transform data resources into information products.
Information System Activities (30): Input, processing, output, storage, and control
Information System Model (26): An information system uses people, hardware, software, network, and data resources to perform input, processing, output, storage, and control activities that transform data resources into information products.
Information Technology (IT) (6): Hardware, software, telecommunications, database management, and other information processing technologies used in computer-based information systems.
Intranet (12): Internet-like networks and websites inside a company.
IS Knowledge Needed by Business Professionals (6): Fundamental concepts about information systems, their technology, development, applications, and management.
Knowledge Workers (27): People whose primary work activities include creating, using, and distributing information.
Management Challenges of IS (16): Managing the IT resources of a company effectively and ethically to improve its business performance and value.
Network Resources (29): Network resources include communications media and network support.
People Resources (27) : Information system specialists and end users.
Roles of IS Applications in Business (8): Information systems perform three vital roles in any type of organization: (1) Support of business processes and operations, (2) Support of business decision making, and (3) Support of strategic competitive advantage.
Software Resources – Programs (28): A set of instructions that cause a computer to perform a particular task.
Software Resources – Procedures (28): Set of instructions used by people to complete a task.
System (24) : A system is a group of interrelated components working together toward a common goal by accepting inputs and producing outputs in an organized transformation process.
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VI. REVIEW QUIZ - Match one of the key terms and concepts
1 21 IS knowledge needed by business professionals 22 14a Machines
2 22 Knowledge workers 23 14b Media 3 19 Information technology (IT) 24 27 Software resources 4 26 Roles of IS applications in business 25 27a Programs 5 26a Support of business processes & operations 26 27b Procedures
6 26b Support of business decision making 27 25 People resources 7 26c Support of strategies for competitive advantage 28 17a Input 8 16 Information system 29 17b Processing
9^1 Computer-based information system^ 30 17c^ Output 10 10 End user 31 17d Storage 11 8 E-business role in business 32 17e Control 12 9 Electronic commerce 33 30 Types of information systems
13^11 Enterprise collaboration systems^ 34 30c^ Operations support systems 14 28 System 35 30b Management support systems 15 13 Feedback 36 30a Cross-functional systems 16 2 Control 37 29 Trends in information systems
17^3 Data^ 38^20 Intranet 18 15 Information 39 12 Extranet 19 4 Data of information processing 40 23a Ethics and IT 20 18 Information system model 41 23 Management challenges of IS
21^14 Hardware resources^ 42^8 Electronic business
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VII. ANSWERS TO DISCUSSION QUESTIONS
1. How can information technology support a company’s business processes and decision-making, and give it a competitive advantage? Give examples to illustrate your answer.
Information technology plays a vital role in the success of an enterprise. For example, the Internet and Internet-like internal networks, or intranets , and external interorganizational networks, called extranets, can provide the information infrastructure a business needs for efficient operations, effective management, and competitive advantage.
2. How does the use of the Internet, intranets, and extranets by companies today, support heir business processes and activities?
In order to succeed today, organizations are increasingly competing in global markets. The increased use of technologies such as the Internet, intranets, and extranets will definitely revolutionize how businesses will operate and how they will use computers to compete.
3. Refer to the Real World Case on the 2004 Athens Olympics in the chapter. Are the redundancies and backup systems in place limited to one-time systems like those at the Olympics or should they exist in other **business environments? Explain your position and provide specific examples?
- Why do big companies still fail in their use of information technology? What should they be doing** differently?
Top Five Reasons for Success Top Five Reasons for Failure
User involvement Lack of user input
Executive management support Incomplete requirements and specifications Clear statement of requirements Changing requirements and specifications
Proper planning Lack of executive support
Realistic expectations Technological incompetence
Certainly the reasons listed in the table above could some of the major causes of why companies fail in their use of information technology. However, it is important to note that the field of technology is changing at such a rapid pace that many large and successful companies are having difficulty keeping up with it. Other ideas may include such things as a demand for skilled employees in this area; the major expense involved in managing and developing systems and hardware acquisitions, increased and more aggressive competition from competitors both domestic and international.
5. How can a manager demonstrate that he or she is a responsible end user of information systems? Give several examples.
Students’ answers will vary, however they must realize that information is a powerful resource that can be used in an inappropriate matter. As a manager or other end user of information, we must insure that we always consider the ethical responsibilities of the use of information. For example, uses of information technology might be used in an
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