Unit 1: Foundations of Information Systems (IS) in Business

- Why study information systems?

- Why do businesses need information technology?
- What do you need to know about the use and management of information technologies
in business?
- The introductory chapters are designed to answer these fundamental questions
about the role of information systems in business.

The real world of information system

- Information systems have become as integrated into our daily business activities as
accounting, finance, operations management, marketing, human resource management,
or any other major business function.
- Information technologies, including Internet-based information systems, are playing vital
and expanding roles in business.
- Information technology can help all kinds of businesses improve the efficiency and
effectiveness of their business processes, managerial decision making, and workgroup
collaboration, which strengthens their competitive positions in rapidly changing
marketplaces.
- Information technologies and systems are, quite simply, an essential ingredient for
business success in today’s dynamic global environment.

What Is an Information System?

- An information system (IS) can be any organized combination of people, hardware,
software, communications networks, data resources, and policies and procedures that
stores, retrieves, transforms, and disseminates information in an organization.
- Following figure illustrates a framework that outlines the major areas of information
systems knowledge needed by business professional.

Fig: A framework that outlines the major

areas of information systems knowledge
needed by business professionals.

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 ● Foundation Concepts: Fundamental behavioral, technical, business, and managerial
concepts about the components and roles of information systems.
● Information Technologies: Major concepts, developments, and management issues in
information technology - that is, hardware, software, networks, data management, and
many Internet-based technologies.
● Business Applications: The major uses of information systems for the operations,
management, and competitive advantage of a business.
● Development Processes: How business professionals and information specialists plan,
develop, and implement information systems to meet business opportunities.
● Management Challenges: The challenges of effectively and ethically managing
information technology at the end-user, enterprise, and global levels of a business.

The fundamental Roles of IS in Business

There are three vital roles that information systems can perform for a business enterprise:
a. Support of business processes and operations.
b. Support of decision making by employees and managers.
c. Support of strategies for competitive advantage.

Following figure illustrates how the fundamental roles interact in a typical organization:

Fig: The three fundamental

roles of the business applications of
information systems.

a. Support of Business Processes and Operations: As a consumer, you regularly

encounter information systems that support the business processes and operations at the
many retail stores where you shop. For example, most retail stores now use computer-
based information systems to help their employees record customer purchases, keep
track of inventory, pay employees, buy new merchandise, and evaluate sales trends. Store
operations would grind to a halt without the support of such information systems.
b. Support of Business Decision Making: Information systems also help store managers
and other business professionals make better decisions. 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

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 systems. This function not only supports the decision making of store managers, buyers,
and others, but also helps them look for ways to gain an advantage over other retailers in
the competition for customers.
c. Support of Strategies for Competitive Advantage: Gaining a strategic advantage over
competitors requires the innovative application of information technologies. For example,
store management might make a decision to install touch-screen kiosks in all stores, with
links to the e-commerce Web site for online shopping. This offering might attract new
customers and build customer loyalty because of the ease of shopping and buying
merchandise provided by such information systems. Thus, strategic information systems
can help provide products and services that give a business a comparative advantage
over its competitors.

The role of e-business in business

- e-business can be more generally considered an online exchange of value.
- Any online exchange of information, money, resources, services, or any combination
thereof falls under the e-business umbrella.
- The Internet and Internet-like networks - those inside the enterprise (intranet) and between
an enterprise and its trading partners (extranet) - have become the primary information
technology infrastructure that supports the e-business applications of many companies.
- These companies rely on e-business applications to:
a. reengineer internal business processes,
b. implement e-commerce systems with their customers and suppliers, and
c. promote enterprise collaboration among business teams and workgroups

Types of Information Systems

Several types of information systems can be classified as either operations or management
information systems.

Fig: Operations
and management
classifications of
information
systems.

a. Operations
support
systems:
- Operations
support systems produce a variety of information products for internal and external

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 use; however, they do not emphasize 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 firm’s operations support systems is to process business
transactions, control industrial processes, support enterprise communications and
collaborations, and update corporate databases efficiently.
● Transaction processing systems: Process data resulting from business
transactions, update operational databases, and produce business
documents. Examples: sales and inventory processing and accounting
systems.
● Process control systems: Monitor and control industrial processes.
Examples: petroleum refining, power generation, and steel production
systems.
● Enterprise collaboration systems: Support team, workgroup, and
enterprise communications and collaborations. Examples: email, chat, and
video conferencing groupware systems.

b. 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.
● Management information systems: Provide information in the form of
prespecified reports and displays to support business decision making.
Examples: sales analysis, production performance, and cost trend
reporting systems.
● Decision support systems: Provide interactive ad hoc support for the
decision-making processes of managers and other business professionals.
Examples: product pricing, profitability forecasting, and risk analysis
systems.
● Executive information systems: Provide critical information from MIS,
DSS, and other sources tailored to the information needs of executives.
Examples: systems for easy access to analyses of business performance,
actions of competitors, and economic developments to support strategic
planning.

c. Other classifications of IS
● Expert systems: Knowledge-based systems that provide expert advice and act
as expert consultants to users. Examples: credit application advisor, process
monitor, and diagnostic maintenance systems.
● Knowledge management systems: Knowledge-based systems that support the
creation, organization, and dissemination of business knowledge within the
enterprise. Examples: intranet access to best business practices, sales proposal
strategies, and customer problem resolution systems.

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 ● 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: Support operations or management processes
that provide a firm with strategic products, services, and capabilities for competitive
advantage. Examples: online stock trading, shipment tracking, and e-commerce
Web systems.

Managerial Challenges of Information Technology (IT)

- Success in today’s 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.

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 organization’s 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 to realize, however, that information technology and information systems
can be mismanaged and misapplied in such a way that IS performance problems create
both technological and business failures.

Developing IS solutions
- Most computer-based information systems are conceived, designed, and implemented
using some form of systematic development process.

- In this development process, end users and information specialists design

information system applications on the basis of an analysis of the business
requirements of an organization.

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 - Examples of other activities include investigating the economic or technical
feasibility of a proposed application, acquiring and learning how to use any
software necessary to implement the new system, and making improvements to
maintain the business value of a system.

Challenges and Ethics of IT

- What uses of information technology might be considered improper, irresponsible, or
harmful to other people or to society?
- What is the proper business use of the Internet and an organization’s IT 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?
- These are some of the questions that outline the ethical dimensions of information
systems.

[infringement: the action of breaking the terms of a law, agreement, etc.; violation.]
[collusion: secret or illegal cooperation or conspiracy in order to deceive others.]

Challenges of IT careers
- In recent years, economic downturns have affected all job sectors, including IT.
- Further, rising labor costs in North America, Canada, and Europe have resulted in a large-
scale movement to outsource basic software programming functions to India, the Middle
East, and Asia-Pacific countries.
- Despite this move, employment opportunities in the information systems field are strong,
with more new and exciting jobs emerging each day as organizations continue to expand
their use of information technology.
- In addition, these new jobs pose constant human resource management challenges to all
organizations because shortages of qualified information systems personnel frequently
occur.
- Dynamic developments in business and information technologies cause constantly
changing job requirements in information systems, which will ensure that the long-term
job outlook in IT remains both positive and exciting.

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 - According to recent reports by the U.S. Department of Labor, computer systems analysts,
database administrators, and other managerial-level IS positions are expected to be
among the fastest-growing occupations through 2012.
- Despite the recent economic downturn among information technology firms, IS
professionals still enjoy favorable job prospects.
- Perhaps the time has come to put a sharper edge on this message: The field of information
systems is growing at an increasingly rapid pace, and there is no risk of being unemployed
upon graduation!

The IS Function
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 equally 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 recognized source of value to the firm.
● 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 give 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 today’s networked
business enterprises.
● A strategic resource.

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