Chapter: 1 Foundations of Information Systems in Business

1. Understand the concept of a system and how it relates to information systems. 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 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. Now applying the general concept of system to information system: Information systems are made up of interrelated components: - People, hardware, software, peripherals and networks. They have clearly defined boundaries: - Functions, modules, type of application, department or end-user group. All the interrelated components work together to achieve a common goal by accepting inputs and producing outputs in an organized transformation process. Using raw materials, hiring new people, manufacturing products for sale, and disseminating information to others.

Information systems make extensive use of feedback and control to improve their effectiveness: Error messages, dialog boxes, passwords and user rights management.

Many information systems are designed to change in relation to their environments and are adaptive: Intelligent software agents, expert systems, and highly specialized decision support systems.

Information systems are systems just like any other system. Their value to the modern organization, however is unlike any other system ever created.

2. Explain why knowledge of information systems is important for business professionals, and identify five areas of information systems knowledge that they need. 3. Describe the framework of Management Information System. 4. Give examples to illustrate how the business applications of information systems can support a firms business processes, managerial decision making, and strategies for competitive advantage. 5. Describe the three major roles of the business applications of Information Systems. Who are the real users or organizational level of these three roles? 6. Discuss the basic roles that information systems perform in the organization? Support your answer with suitable examples. 7. How do information systems serve the various levels of management in a business? 8. How can information technology support a companys business processes and decision making, and give it a competitive advantage? There are three fundamental reasons for all business applications of information technology. - Support of business processes and operations: Providing support to complete a task faster, more cheaply, and perhaps with greater accuracy and/or consistency Support of business processes and operations involves dealing with information systems that support the business processes and operations in a business. Adoption of information system simplifies business processes and removes unnecessary activities. Information systems add controls to employee processes, ensuring that only users with the applicable rights can perform certain tasks. Further, information systems eliminate repetitive tasks and increase accuracy, allowing employees to concentrate on more high-level functions. For example: most retail stores now use computer based information systems to help their employees record customer purchases, keep track of inventory, pay employees and evaluate sales trends. Store operations would grind to a halt without the support of such information systems. - Support of decision making by employees and managers: Providing support to improve day-to-day operations by creating, acquiring, and transferring knowledge The long term success of a company depends upon the adequacy of its strategic plans. An organizations management team uses information systems to formulate strategic plans and make decisions for the organizations longevity and prosperity. For example: decisions about what lines of merchandise need to be added or discontinued and what kind of investments they require are typically made after an analysis provided by computer-based information systems. This function not only supports the decision making of store managers, buyers and others, but it also helps them look for ways to gain an advantage over other retailers in the competition for customers. - Support of strategies for competitive advantage: Providing support in a way that enables the firm to gain or sustain competitive advantage over rivals Gaining a strategic advantage over competitors requires innovative use of information technology. For example, store managers might make a decision to install computerized touch-screen catalog ordering systems in all of their stores, tied in with computer-based telephone ordering systems and an Internet-based computer shopping network. This might attract new customers and lure customers away from competing stores because of the ease of ordering merchandise provided by such innovative information systems. Strategic information systems can help provide strategic products and services that give a business organization a comparative advantage over its competitors.

Strategic Level

Management Level

Operational Level

Figure 1: Roles of Information System at different management level

9. In what major ways have information systems in business changed during the last 40 years? What is one major change you think will happen in the next 10 yrs? 10. Trends in Information System 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 revolutionizing the operations and management of todays business enterprises. 11. How does the use of the Internet, intranets and extranets by companies today support their business processes and activities? 12. The role of e-business in Business The explosive growth of the Internet and related technologies and applications is revolutionizing the way businesses are operated and people work, and how information technology supports business operations, decision making, competitive advantage and end user work activities. Businesses are becoming e-business enterprises. 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 business operations of many companies. e-business enterprises rely on such technologies to: - Reengineer and revitalize internal business processes. - Implement electronic commerce systems among businesses and their customers and suppliers. - Promote enterprise collaboration among business teams and workgroups. e-business is defined as the use of Internet technologies to internetwork and empower business processes, electronic commerce, and enterprise communication and collaboration within a company and with its customers, suppliers, and other business stakeholders. Any online exchange of information, money, resources, services or any other combinations fall under e-business. Enterprise collaboration systems involve the use of groupware tools to support communication, coordination, and collaboration among the members of networked teams and workgroups. An internetworked e-business enterprise depends on intranets, the Internet, extranets, and other networks to implement such systems. For example: employees and external consultants may form a virtual team that uses a corporate intranet and the Internet for e-mail, videoconferencing, e-discussion groups, and web pages of work-in-progress information to collaborate on business projects. Electronic commerce is the buying and selling, and marketing and servicing of products, services, and information over a variety of computer networks. An internetworked e-business enterprise uses the Internet, intranets, extranets, and other networks to support every step of the commercial process. For example: e-commerce systems include Internet Web site for online sales, extranet access to inventory databases by large customers, and the use of corporate intranets by sales reps to access customer records for customer relationship management. 13. Provide examples of several major types of information systems from your experiences with business organizations in the real world. Information Systems perform important operational and managerial support roles in businesses and other organizations. Therefore, several types of information systems can be classified conceptually as either: - Operations Support Systems - Management Support Systems

Operations Support Systems: Information systems are needed to process data generated by and used in business operations. Such operations support systems (OSS) produce a variety of information products for internal and external use. However, they do not emphasize producing the specific information products that can best be used by managers. Further processing by management information systems is usually required. The role of a business firms operations support systems is to: Effectively process business transactions Control industrial processes Support enterprise communications and collaboration Update corporate databases

Transaction Processing Systems (TPS) Focus on processing the data generated by business transactions and operations. Transaction processing systems record and process data resulting from business transactions (sales, purchases and inventory changes). TPS also produce a variety of information products for internal or external use (customer statements, employee paychecks, sales receipts etc.). TPS process transactions in two basic ways Batch Processing - transactions data is accumulated over a period of time and processed periodically. Real-time (or online) processing - data is processed immediately after a transaction occurs.

Process Control Systems (PCS) Process control systems are systems, which make use of computers to control ongoing physical processes. These computers are designed to automatically make decisions, which adjust the physical production process. Examples include petroleum refineries and the assembly lines of automated factories. Enterprise Collaboration Systems Enterprise collaboration systems are information systems that use a variety of information technologies to help people work together. Enterprise collaboration systems help us - Collaborate - to communicate ideas - Share resources - Co-ordinate our cooperative work efforts as members of the many formal and informal process and project teams. The goal of enterprise collaboration systems is to use information technology to enhance the productivity and creativity of teams and workgroups in the modern business enterprise. Management Support Systems (MSS) Management support systems focus on providing information and support for effective decision making by managers. They support the decision-making needs of strategic (top) management, tactical (middle) management, and operating (supervisory) management. Conceptually, several major types of information systems support a variety of decisionmaking responsibilities: - Management Information Systems (MIS) - Decision Support Systems (DSS)

Executive Information Systems (EIS)

Management information systems 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 pre-specified 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 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 provide top and middle management with immediate and easy access to selective information about key factors that are critical to accomplishing a firms strategic objectives. EIS are easy to operate and understand. Other Classifications of Information Systems: Several other categories of information systems that support either operations or management applications include: - Expert Systems Knowledge based systems that provide expert advice and act as expert consultants to users like equipment diagnostics or managerial decisions such as loan portfolio management. - Knowledge Management Systems Knowledge management systems are knowledge based information systems that support the creation, organization and dissemination of business knowledge to employees and managers throughout a company. For example: intranet access to best business practices, sales proposal strategies, and customer problem resolution systems. - Functional Business Systems Support a variety of operational and managerial applications of the basic business functions of a company. Examples: Information Systems that support applications in accounting, finance, marketing, operations management and human resource management. - Strategic Information Systems Strategic Information Systems apply information technology to a firms products, services or business processes to help it gain a strategic advantage over its competitors. Examples: Online stock trading, shipment tracking and e-commerce Web Systems. - Cross-functional Information Systems System that provide a variety of functions or integrated combination of the several types of Information System are Cross-functional Information System. Information Systems are designed to produce information and support decision making for various levels of management and business functions, as well as perform record keeping and transaction processing chores. 14. Identify several challenges that a business manager might face in managing the successful and ethical development and use of information technology in business.

15. What are some of the toughest management challenges in developing IT solutions to solve business problems and meet new business opportunities? - Success in todays dynamic business environment depends heavily on maximizing the use of Internet-based technologies and Web-enabled information systems to meet the competitive requirements of customers, suppliers and other business partners in a global marketplace. Information systems and their technologies must be managed to support the business strategies, business processes, and organizational structures and culture of a business enterprise. Success and Failure with IT: The success of an information system should not be measured only by its efficiency in terms of minimizing costs, time and the use of information resources. Success should also be measured by the effectiveness of the information technology in supporting an organizations business strategies, enabling its business processes, enhancing its organizational structures and culture and increasing the customer and business value of the enterprise. 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: Developing successful information system solutions to business problems is a major challenge for business managers and professionals today. As a business professional, you will be responsible for proposing or developing new or improved use of information systems for your company. As a business manager, you will also frequently manage the development efforts of information systems specialists and other business end users. Most computerbased information systems are conceived, designed, and implemented using some form of systematic development process. Figure 1.20 shows that: - Several major activities must be accomplished and managed in a complete IS development cycle. - In the development process, end users and information specialists design information system applications based on an analysis of the business requirements of an organization. - Investigating the economic or technical feasibility of a proposed application. - Acquiring and learning how to use the software required to implement the new system, and make improvements to maintain the business value of a system. 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 organizations 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 worlds limited supplies of material, energy, and other resources.

Challenges of IT Careers: Information technology and its uses in information systems have created interesting, highly paid, and challenging career opportunities. Employment opportunities in the field of information systems are excellent, as organizations continue to expand their use of information technology. Employment surveys continually forecast shortages of qualified information systems personnel in a variety of job categories. Job requirements in information systems are continually changing due to dynamic developments in business and information technology

16. Information System functions The successful management of information systems and technologies presents major challenges to business managers and professionals. Thus the information systems function represents: - A major functional area of business that is as important to business success as the functions of accounting, finance, operations management, marketing, and human resource management. - An important contributor to 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 and business professionals. - A vital ingredient in developing competitive products and services that gives an organization a strategic advantage in the global marketplace. - A dynamic, rewarding, and challenging career opportunity for millions of men and women. - A key component of the resources, infrastructure, and capabilities of todays internetworked e-business enterprise. 17. Describe the major components of an information system. 18. Provide examples of the components of real world information systems. Illustrate that, in an information system, 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.

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 People Resources: People are required for the operation of all information systems. These people resources include end users and IS specialists. - End Users (also called users or clients) are people who use an information system or the information it produces. Most of us are information system end users. And most end users in business are Knowledge workers, that is, people who spend most of their time communicating and collaborating in teams of workgroups and creating, using, and distributing information. IS Specialists are people who develop and operate information systems. They include system analysts, software developers, system operators, and other managerial, technical, and clerical IS personnel. Systems analysts design information systems based on the information requirements of end users. Software developers create computer programs based on the specifications of systems analysts. System operators monitor and operate large computer systems and networks.

Hardware Resources: Hardware resources include all physical devices and materials used in information processing: - Machines: physical devices (computers, peripherals, telecommunications networks, etc.) - Media: all tangible objects on which data are recorded (paper, magnetic disks etc.) Examples of hardware in computer-based information systems are: Computer Systems which consist of central processing units containing microprocessors, and a variety of interconnected peripheral devices. Computer peripherals which are devices such as a keyboard or electronic mouse for input of data and commands, a video screen or printer for output of information, and magnetic or optical disks for storage of data resources.

Software Resources: Software resources include all sets of information processing instructions. - Program a set of instructions that causes a computer to perform a particular task. - Procedures set of instructions used by people to complete a task. Examples of software resources are:

System software such as an operating system program that controls and supports the operations of a computer system. Application software are programs that direct processing for a particular use of computers by end users. Procedures are operating instructions for the people who will use an information system.

Data Resources: Data constitutes a valuable organizational resource. Thus, data resources must be managed effectively to benefit all end users in an organization. The data resources of information systems are typically organized into: - Databases -a collection of logically related records or files. A database consolidates many records previously stored in separate files so that a common pool of data records serves many applications. - Knowledge Bases - which hold knowledge in a variety of forms such as facts and rules of inference about various subjects. Examples of Data Resources are: Product descriptions, customer records, employee files, inventory databases Data versus Information The word data is the plural of datum, though data is commonly used to represent both singular and plural forms. The terms 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 an end user. 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 Products : Management reports and business documents using text and graphics displays, audio responses and paper forms. 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 type, 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 end users. - A continual process of correcting and updating activities must maintain quality of data stored in an information system. 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. Analyzing BellSouths Information System From the Real World Case of BellSouth Corporation, we will try to recognize or visualize the resources used, activities performed, and information products produced by their information systems. IS Resources: - People resources include end users like BellSouths online customers and employees, and IS specialists like CIO Fran Dramis and project leader Lori Groves.

Hardware Resources: Thousands of PC server Other computers that BellSouth and its customers must be using.

Software Resources: Web browsers Operating systems e-commerce websites software Oracles customer relationship management system Other proprietary BellSouth business software.

Network Resources: Communications media and network support components that are part of the network resources that Bell South would need to support the e-business and e-commerce activities of such a large telecommunications company.

Data Resources: Computer-accessible databases of data about their customers, employees, services, and other necessary business information.

Information Products: Displays on customer and employee networked PCs that provide information about and support the provision of BellSouths services, such as you would find by visiting their Websites at www.bellsouth.comand www.bellsouthcorp.com.

IS Activities: Input activities include the input of Web site navigation clicks and e-commerce and e-business data entries and selections, and online collaboration queries and responses made by customers, suppliers, and employees. Processing Activities: Processing activities are accomplished whenever any of BellSouths computers executes the programs that are part of their e-business and e-commerce software resources. Output Activities: Output activities primarily involve the display or printing of information products mentioned earlier. Storage Activities: Storage activities take place whenever business data is stored and managed in the files and databases on the disk drives and other storage media of BellSouths computer systems. Control Activities: Control activities include the use of passwords and other security codes by customers, suppliers, and employees for entry into BellSouths e-business and e-commerce websites, and access of their databases and knowledge bases.

19. Demonstrate familiarity with the myriad of career opportunities in information system. 20. Why do big companies still fail in their use of information technology What should they be doing differently?? 21. How can a manager demonstrate that he or she is a responsible end user of information systems? Give several examples. 22. Why are there so many conceptual classifications of information systems? Why are they typically integrated in the information systems found in the real world?