Chapter 1 Foundations

of Information Systems
in Business
James A. O'Brien, and George Marakas.
Management Information Systems with MISource
2007, 8th ed. Boston, MA: McGraw-Hill, Inc.,
2007. ISBN: 13 9780073323091
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
1950-1960 1960-1970 1970-1980 1980-1990 1990-2000

Data Management Decision Strategic & Electronic

Processing Reporting Support End User Commerce

Electronic
Data Management
Processing Information
- TPS Decision
Systems
Support
Systems End User
- Ad hoc Computing
Reports Exec Info Sys Electronic
Expert Systems Business &
SIS Commerce
-Internetworked
E-Business &
Commerce

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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 OSS
 Transaction Processing Systems
 Record and process business transactions
 Example: 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
 Example: 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
 Strategic Information Systems - help get a strategic
advantage over customer
 Example: shipment tracking, e-commerce Web
systems
 Functional Business Systems - focus on operational and
managerial applications of basic business functions
 Example: 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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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
organization’s information systems
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What is a System?
 A system is…
 A set of interrelated components
 With a clearly defined boundary
 Working together
 To achieve a common set of objectives
 By accepting inputs and producing outputs
 In an organized transformation process

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Basic Functions of a System
 Input
 Capturing and assembling elements that enter
the system to be processed
 Processing
 Transformation process that converts input
into output
 Output
 Transferring transformed elements to their
ultimate destination

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

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 A Business as a System

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Other System Characteristics
 If a system is one of the components of a larger
system, it is a subsystem
 The larger system is an environment
 Several systems may share the same
environment
 Some may be connected via a shared
boundary, or interface
 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
 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
 Example:
 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 IS
 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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