ICS 3202 INFORMATION

SYSTEMS
Chapter 1
Introduction to Information Systems
 Acknowledgements

• Notes adapted from the book Principles of

Information Systems 9th Edition by George
Reynolds and Ralph Stair
 Learning Outcomes

• By the end of this chapter, the learner should

be able to:
– Differentiate data, information and knowledge.

– Describe the value of information.

– Describe components of Computer-based

Information Systems.
 Introduction
• People and organizations use information every
day.
– Many retail chains, for example, collect data from
their stores to help them stock what customers want
and to reduce costs.

• The components that are used are often called an

information system.
 What is an Information System?

• A set of interrelated components

that collect, manipulate, store, and
disseminate data and information
and provide a feedback mechanism
to meet an objective.
 Information Systems

• It is the feedback mechanism that helps

organizations achieve their goals, such as
increasing profits or improving customer
service.

• Businesses can use information systems to

increase revenues and reduce costs.
 Information Systems
• An information system’s ability to organize
information so that it provides fuel for
smart business decisions is the real value of
computer-based information systems.
– SAP, IBM, Oracle, and other computer-based
information systems developers do much more than
provide hardware systems and databases.
 Information Systems
• The systems they install are governed by
software that implements best business
practices.
• These systems assist managers in designing the
best business solutions, which is why selecting
the right computer-based information system is
crucial to a company’s success.
 Why Learn About Information
Systems?
• Information systems are used in almost every
imaginable profession.
– Entrepreneurs and small business owners use
information systems to reach customers around the
world.
– Sales representatives use information systems to
advertise products, communicate with customers, and
analyze sales trends.
 Why Learn About Information
Systems?
• Managers use them to make multimillion-dollar
decisions, such as whether to build a
manufacturing plant or research a cancer drug.

• Financial planners use information systems to

advise their clients to help them save for
retirement or their children’s education.
 Why Learn About Information
Systems?
• From a small music store to huge
multinational companies, businesses of all
sizes may not survive without information
systems to perform accounting and finance
operations.
 Why Learn About Information
Systems?
• Regardless of your college major or chosen
career, information systems are indispensable
tools to help you achieve your career goals.
• Learning about information systems can help
you land your first job, earn promotions, and
advance your career.
 Why Learn About Information
Systems?
• Today we live in an information economy.
– Information itself has value, and commerce often
involves the exchange of information rather than
tangible goods.

• Systems based on computers are increasingly

being used to create, store, and transfer
information.
 Why Learn About Information
Systems?
• Using information systems:
– Investors make multimillion-dollar decisions.

– Financial institutions transfer billions of dollars

around the world electronically.

– Manufacturers order supplies and distribute

goods faster than ever before.
 Why Learn About Information
Systems?
• Computers and information systems will continue
to change businesses and the way we live.

• To prepare for these innovations, you need to be

familiar with fundamental information concepts.
 Data, Information, and
Knowledge
• Data consists of raw facts.

• Examples:
– An employee number, total hours worked in a
week, inventory part numbers, or sales orders.
 Data, Information, and
Knowledge
• Data represents real-world things.
– Hospitals and healthcare organizations, for
example, maintain patient medical data, which
represents actual patients with specific health
situations.
 Data, Information, and
Knowledge
• In many cases, hospitals and healthcare organizations
are converting data to electronic form.
– Some have developed electronic records management
(ERM) systems to store, organize, and control important
data.

• However, data (raw facts) has little value beyond its

existence.
 Data, Information, and
Knowledge
• Information is a collection of facts organized so
that they have additional value beyond the value
of the individual facts.
– E.g., sales managers might find that knowing the total
monthly sales suits their purpose more (i.e., is more
valuable) than knowing the number of sales for each
sales representative.
 Data, Information, and
Knowledge
• Providing information to customers can also
help companies increase revenues and profits.

• Turning data into information is a process, or a

set of logically related tasks performed to
achieve a defined outcome.
 Data, Information, and
Knowledge
• The process of defining relationships among data to
create useful information requires knowledge.
• Knowledge is the awareness and understanding of a
set of information and the ways that information can
be made useful to support a specific task or reach a
decision.
– Having knowledge means understanding relationships in
information.
 Data, Information, and
Knowledge
• Therefore, you can also think of information as data made
more useful through the application of knowledge.
– Knowledge workers (KWs) are people who create, use, and
disseminate knowledge, and are usually professionals in science,
engineering, business, and other areas.
– A knowledge management system (KMS) is an organized
collection of people, procedures, software, databases, and
devices used to create, store, and use the organization’s
knowledge and experience.
 Data, Information, and
Knowledge
• In some cases, people organize or process
data mentally or manually.

• In other cases, they use a computer.

– E.g. a manager could have manually calculated the
sum of the sales of each representative, or a
computer could have calculated this sum.
The Process of Transforming
Data into Information
 The Characteristics of Valuable
Information
• To be valuable to managers and decision makers, information should have the
characteristics:
– Accurate.
– Accessible.
– Complete.
– Economical.
– Flexible.
– Relevant.
– Simple.
– timely.
– Verifiable.
– Secure.
 The Characteristics of Valuable
Information
• Accessible:
– Information should be easily accessible by authorized users so
they can obtain it in the right format and at the right time to
meet their needs.
• Accurate:
– Accurate information is error free.
– In some cases, inaccurate information is generated because
inaccurate data is fed into the transformation process.
• This is commonly called garbage in, garbage out [GIGO].
 The Characteristics of Valuable
Information
• Complete:
– Complete information contains all the important facts.
– E.g., an investment report that does not include all important
costs is not complete.
• Economical:
– Information should also be relatively economical to produce.
– Decision makers must always balance the value of information
with the cost of producing it.
 The Characteristics of Valuable
Information
• Flexible:
– Flexible information can be used for a variety of purposes.
– E.g., information on how much inventory is on hand for a
particular part can be used by:
• A sales representative in closing a sale,
• A production manager to determine whether more inventory is
needed, and
• A financial executive to determine the total value the company has
invested in inventory.
 The Characteristics of Valuable
Information
• Relevant:
– Relevant information is important to the decision
maker.

– Information showing that wood prices

might drop might not be relevant to a computer
chip manufacture.
 The Characteristics of Valuable
Information
• Reliable:
– Reliable information can be trusted by users.
• In many cases, the reliability of the information depends
on the reliability of the data-collection method.
• In other instances, reliability depends on the source
of the information.
– A rumor from an unknown source that oil prices might go up
might not be reliable.
 The Characteristics of Valuable
Information
• Secure:
– Should be secure from access by unauthorized users.
• Simple:
– Sophisticated and detailed information might not be
needed.
– Too much information can cause information overload,
whereby a decision maker has too much information and is
unable to determine what is really important.
 The Characteristics of Valuable
Information
• Timely:
– Timely information is delivered when it is needed. Knowing
last week’s weather conditions will not help when trying to
decide what coat to wear today.

• Verifiable:
– Information should be verifiable. This means that you can
check it to make sure it is correct, perhaps by checking
many sources for the same information.
 The Characteristics of Valuable
Information
• These characteristics make the information
more valuable to an organization.
– E.g. Many shipping companies can determine the
exact location of inventory items and packages in
their systems, and this information makes them
responsive to their customers.
 The Characteristics of Valuable
Information
• In contrast, if an organization’s information is
not accurate or complete, people can make
poor decisions, costing thousands, or even
millions, of dollars.
 The Characteristics of Valuable
Information
• Depending on the type of data you need,
some characteristics become more valuable
than others.
– E.g., with market-intelligence data, some
inaccuracy and incompleteness is acceptable, but
timeliness is essential.
 The Characteristics of Valuable
Information
• Market intelligence might alert you that
competitors are about to make a major price
cut.
– The exact details and timing of the price cut might
not be as important as being warned far enough
in advance to plan how to react.
 The Characteristics of Valuable
Information
• On the other hand, accuracy, verifiability, and
completeness are critical for data used in
accounting to manage company assets such as
cash, inventory, and equipment.
 The Value of Information
• The value of information is directly linked to how it helps decision
makers achieve their organization’s goals.
• Valuable information can help people and their organizations
perform tasks more efficiently and effectively.
– Consider a market forecast that predicts a high demand
for a new product.
• If you use this information to develop the new product and your company
makes an additional profit of $10,000, the value of this information to the
company is $10,000 minus the cost of the information.
 The Value of Information
• Valuable information can also help managers
decide whether to invest in additional
information systems and technology.
– A new computerized ordering system might cost
$30,000, but generate an additional $50,000 in sales.
– The value added by the new system is the additional
revenue from the increased sales of $20,000.
 The Value of Information

• Using information systems, some

manufacturing companies have slashed
inventory costs by millions of dollars.

• Other companies have increased inventory

levels to increase profits.
 System Concepts

• A system is a set of elements or components that

interact to accomplish goals.

• The elements themselves and the relationships

among them determine how the system works.

• Systems have inputs, processing mechanisms,

outputs, and feedback.
System Concepts
 System Concepts: Input
• Input is the activity of gathering and capturing raw data.
• Examples:
– In producing paychecks, the number of hours every employee
works must be collected before paychecks can be calculated or
printed.
– In a university grading system, instructors must submit student
grades before a summary of grades for the semester or quarter
can be compiled and sent to the students.
 System Concepts: Processing
• Processing means converting or transforming data into
useful outputs.
– Processing can involve making calculations, comparing
data and taking alternative actions, and storing data for
future use.

• Processing data into useful information is critical in

business settings.
 System Concepts: Processing

• Processing can be done manually or with

computer assistance.
• After these calculations and comparisons are
performed, the results are typically stored.
• Storage involves keeping data and information
available for future use, including output.
 System Concepts: Output
• Output involves producing useful information,
usually in the form of documents and reports.
• Outputs can include:
– Paychecks for employees
– Reports for managers, and
– Information supplied to stockholders, banks,
government agencies, and other groups.
 System Concepts: Output

• In some cases, output from one system can

become input for another.
– E.g., output from a system that processes sales
orders can be used as input to a customer billing
system.
 System Concepts: Feedback

• Feedback is information from the system that

is used to make changes to input or processing
activities.
– E.g., errors or problems might make it necessary
to correct input data or change a process.
 System Concepts: Feedback
• Feedback is also important for managers and
decision makers.
– E.g., a furniture maker could use a computerized
feedback system to link its suppliers and plants.
– The output from an information system might indicate
that inventory levels for mahogany and oak are
getting low—a potential problem.
 System Concepts: Feedback
• A manager could use this feedback to decide to
order more wood from a supplier.
• These new inventory orders then become input
to the system.
• In addition to this reactive approach, a computer
system can also be proactive i.e. predicting
future events to avoid problems.
 System Concepts: Feedback
• This concept, often called forecasting, can be
used to estimate future sales and order more
inventory before a shortage occurs.
• Forecasting is also used to predict the strength
and landfall sites of hurricanes, future stock-
market values, and who will win a political
election.
 System Performance and
Standards
• System performance can be measured in
various ways:
– Efficiency

– Effectiveness.
 System Performance and
Standards
– Efficiency is a measure of what is produced
divided by what is consumed.

– It can range from 0 to 100 percent.

 System Performance and
Standards
• Effectiveness is a measure of the extent to
which a system achieves its goals.
– It can be computed by dividing the goals actually
achieved by the total of the stated goals.
 System Performance and
Standards
• Evaluating system performance also calls for
using performance standards.
– A system performance standard is a specific objective
of the system.
– E.g. a system performance standard for a marketing
campaign might be to have each sales representative
sell $100,000 of a certain type of product each year
 Computer-Based Information
Systems
• A computer-based information system (CBIS) is a
single set of hardware, software, databases,
telecommunications, people, and procedures
that are configured to collect, manipulate, store,
and process data into information.
Components of a Computer-
Based Information System
 Components of a CBIS: Hardware

• Hardware consists of computer equipment used

to perform input, processing, and output
activities.
• Input devices include keyboards, mice and other
pointing devices, automatic scanning devices, and
equipment that can read magnetic ink characters.
 Components of a CBIS : Software

• Software consists of the computer programs that

govern the operation of the computer.
– These programs allow a computer to process payroll, send
bills to customers, and provide managers with information
to increase profits, reduce costs, and provide better
customer service.

• With software, people can work anytime at any place.

 Components of a CBIS: Database

• A database is an organized collection of facts and

information, typically consisting of two or more
related data files.
• An organization’s database can contain facts and
information on customers, employees, inventory,
competitors’ sales, online purchases, and much
more.
 Components of a CBIS: Database

• Most managers and executives consider a

database to be one of the most valuable parts
of a computer-based information system.
 Components of a CBIS:
Telecommunications, Networks,
and the Internet
• Telecommunications, Networks, and the Internet
Telecommunications is the electronic
transmission of signals for communications,
which enables organizations to carry out their
processes and tasks through effective computer
networks.
 Components of a CBIS:
Telecommunications, Networks,
and the Internet
• Networks connect computers and equipment in a building,
around the country, or around the world to enable
electronic communication.
– Investment firms can use wireless networks to connect
thousands of investors with brokers or traders.
– Many hotels use wireless telecommunications to allow guests to
connect to the Internet, retrieve voice messages, and
exchange e-mail without plugging their computers or mobile
devices into an Internet connector.
 Components of a CBIS:
Telecommunications, Networks,
and the Internet
• The Internet is the world’s largest computer
network, consisting of thousands of
interconnected networks, all freely exchanging
information.
• Research firms, colleges, universities, high
schools, and businesses are just a few examples
of organizations using the Internet.
 Components of a CBIS: People
• People can be the most important element in most
computer-based information systems.
– They make the difference between success and failure for
most organizations.

• Information systems personnel include all the people

who manage, run, program, and maintain the system.
 Components of a CBIS: People
• Users are people who work with information
systems to get results.
• Users include financial executives, marketing
representatives, manufacturing operators, and
many others.
• Certain computer users are also IS personnel.
 Components of a CBIS:
Procedures
• Procedures include the strategies, policies, methods,
and rules for using the CBIS, including the operation,
maintenance, and security of the computer.
– E.g., some procedures describe when each program should
be run.
– Others describe who can access facts in the
database or what to do if a disaster renders the CBIS
unusable.
 Components of a CBIS:
Procedures
• Good procedures can help companies take advantage
of new opportunities and avoid potential disasters.
• Poorly developed and inadequately implemented
procedures, however, can cause people to waste their
time on useless rules or result in inadequate responses
to disasters.
End of Chapter