CHAPTER ONE

INTRODUCTION TO INFORMATION’S SYSTEMS IN ORGANIZATIONS

1. Introduction to information systems
Information system (IS) is a set of interrelated components that collect, manipulate, store, and
disseminate data and information and provide a feedback mechanism to meet an objective.
Examples: ATMs, airline reservation systems, course reservation systems. High-quality, up-to-
date, well-maintained computer-based information systems are at the heart of today’s most
successful global corporations. For a business to succeed globally, it must be able to provide the
right information to the right people in the organization at the right time, even if those people are
located around the world.

1.1.Why Learn About Information Systems?

Information systems are used in almost every imaginable profession. Example: -

 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.
 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.
 From a small music store to huge multinational companies, businesses of all sizes could
not survive without information systems to perform accounting and finance operations.
1.1.1. How information system is useful for the Competitive Business Environment

Three powerful worldwide changes have altered the environment of business.

 Emergence of the global economy: An increasing dependence on imports and exports is

emerging. Today, information systems provide the communication and analytic power that
firms need for conducting trade and managing businesses on a global scale. Globalization
and IT bring new threats to local businesses.

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  Transformation of industrial economies: Major leading economies are transforming to
knowledge- and information-based service economies. Information and knowledge intense
products are becoming the foundation for many services & products.
 Transformation of the business enterprise: The traditional firm is still hierarchical,
centralized, structured, and set of specialists, depend on rigid division of labor, formal rules
and plans. The new style is more towards decent., flexible set of generalists to produce
mass-customization products, depend on informal commitments and goals, flexible
arrangement of teams, and customer orientation for task forces.

Data consists of raw facts, such as an employee number, total hours worked in a week, inventory
part numbers, or sales orders., several types of data can represent these facts. When facts are
arranged in a meaningful manner, they become information. “Data: A representation of facts,
concepts or instructions in a formalized manner suitable. for communication, interpretation, or
processing by humans or by automatic means.”

Data refers to the lowest abstract or a raw input which when processed or arranged makes
meaningful output. It is the group or chunks which represent quantitative and qualitative attributes
pertaining to variables.

Information: is a collection of facts organized in such a way that they have additional value
beyond the facts themselves. Information is usually the processed outcome of data. More
specifically speaking, it is derived from data. Information is a concept and can be used in many
domains. Information is a collection of facts organized so that they have additional value beyond
the value of the individual facts. For example, 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

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for each sales representative. Providing information to customers can also help companies increase
revenues and profits.

If information is not accurate or complete – People can make poor decisions, costing thousands,
or even millions, of dollars. Information can be of little value to the organization – If information
is not relevant, not delivered to decision makers in a timely fashion, or too complex to understand.
Valuable information can help people and their organizations perform tasks more efficiently and
effectively and help managers decide whether to invest in additional information systems and
technology.

The Process of Transforming Data into Information

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1.1.2. Characteristics of quality information

1.1.3. Three Fundamental Types of Information System

Most organizations have a number of different information systems. When considering the role of
business managers in working with is, it is useful to divide information systems in to three types:
Personal IS, Group IS and Enterprise IS.

A. Personal IS: - includes information systems that improve the productivity of individual
users in performing stand-alone tasks. Examples include personal productivity software,
such as word-processing, presentation and spreadsheet software.

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 In today’s fast moving global work environment success depends on our ability to
communicate and collaborate with others including colleagues, clients and customers.
B. Group IS: - includes information systems that improve communications and supports
collaboration among members of a workgroup. Examples include Web conferencing
software, wikis and electronic corporate directories.
C. Enterprise IS: - includes information systems that organizations use to define structured
interactions among their own employees and/or with external customers, supplies,
government agencies and other business partners. For each type of information system,
certain key organizational complements must be in place to ensure successful
implementation and use of the system. These complements include:
 Well-trained workers. Employees must be well trained and understand the need
for the new system, what their role is in using or operating the system, and how to
get the results they need from the system.
 System support. Trained and experienced users who can show others how to gain
value from the system and overcome start-up problems.
 Better teamwork. Employees must understand and be motivated to work together
to achieve the anticipated benefits of the system.
 Redesigned processes. New systems often require radical redesign of existing
work processes as well as the automation of new processes.
 New decision rights. Employees must understand and accept their new roles and
responsibilities including who is responsible for making what decisions. Roles and
responsibilities often change with introduction of a new system.

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 1.2. Information System in Organizations
What is an organization?
An organization is a group of people that is structured and managed to meet its mission or set of
group goals. “structured” means that there are defined relationships between members of the
organization and their various activities and that procedures are defined that assign roles,
responsibilities and authority to complete the various activities. In many cases, the process is
automated using well defined information systems. Organizations are considered to be open
systems, meaning that they affect and are affected by their surrounding environment. From a
business perspective, an information system is an organizational and management solution, based
on information technology, to a challenge posed by the environment.

Technical definition: Stable, formal social structure that takes resources from environment and
processes to produce outputs. A formal legal entity with internal rules and procedures, as well as
a social structure.

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Behavioral definition: A collection of rights, privileges, obligations, and responsibilities that is
delicately balanced over a period of time through conflict and conflict resolution.

General model of an organization

Information systems support and work within the automated portions of an organizational process.

1.2.1. Features of organizations

All modern organizations share some characteristics, such as:

 Use of hierarchical structure

 Accountability, authority in system of impartial decision-making
 Adherence to principle of efficiency
 Other features include: Routines and business processes and organizational politics,
culture, environments and structures
1.2.2. Organizational structure

There are five basic kinds of organizational structure. These are: -

 Entrepreneurial: Small start-up business

 Machine bureaucracy: midsize manufacturing firm
 Divisional zed bureaucracy: Fortune 500 firms

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  Professional bureaucracy: Law firms, school systems, hospitals
 Adhocracy: Consulting firms
1.2.3. How Information Systems Impact Organizations and Business Firms?

Economic impacts: IT changes relative costs of capital and the costs of information. Because,
Information systems technology is a factor of production, like capital and labor. IT affects the cost
and quality of information and changes economics of information. Information technology helps
firms contract in size because it can reduce transaction costs (the cost of participating in markets).
Outsourcing expands.

Transaction cost theory: Firms seek to economize on cost of participating in market (transaction
costs). However, IT lowers market transaction costs for firm, making it worthwhile for firms to
transact with other firms rather than grow the number of employees.

Agency cost: Firm is connection of contracts among self-interested parties requiring supervision.
So, the firms experience agency costs (the cost of managing and supervising) which rise as firm
grows. But IT can reduce agency costs, making it possible for firms to grow without adding to the
costs of supervising, and without adding employees.

1.2.4. Information system on organizational and behavioral impacts

IT flattens organizations: Decision-making pushed to lower levels. So, fewer managers needed
(IT enables faster decision-making and increases span of control to the lower levels). Information
systems can reduce the number of levels in an organization by providing managers with
information to supervise larger numbers of workers and by giving lower-level employees more
decision-making authority.

Postindustrial organizations: Organizations flatten because in postindustrial societies, authority

increasingly relies on knowledge and competence rather than formal positions.

Organizational resistance to change: Information systems become bound up in organizational

politics because they influence access to a key resource – information. Information systems
potentially change an organization’s structure, culture, politics, and work. However, most common
reason for failure of large projects is due to organizational & political resistance to change.
Implementing information systems has consequences for task arrangements, structures, and

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people. According to this model, to implement change, all four components must be changed
simultaneously.

The Internet and organizations: The Internet increase the accessibility, storage, and distribution
of information and knowledge for organizations. Due to this reason the Internet can greatly lower
transaction and agency costs. E.g., large firm delivers internal manuals to employees via intranet,
saving millions of dollars in distribution costs.

Using Information Systems to Achieve Competitive Advantage

In Porter’s competitive forces model, the strategic position of the firm and its strategies are
determined not only by competition with its traditional direct competitors but also by four forces
in the industry’s environment: new market entrants, substitute products, customers, and suppliers.

1.2.5. Careers in information system in an organization

Today, most organizations cannot function or compete effectively without computer-based

information system. Indeed, organization’s often attribute their productivity improvement,
superior customer service, or competitive advantage in the marketplace to their information
systems. The information system worker functions at the intersection of business and technology
and designs and builds the solutions that allow organizations to effectively leverage information
technology.

Successful information system workers must enjoy working in a fast paced, dynamic environment
where the underlying technology changes all the time. They must be comfortable with meeting

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deadlines and solving unexpected challenges. They need good communication skills and often
serve as translators between business needs and technology-based solutions.

Specific technical skills that some experts believe are important for IS workers to possess include
the following.

 Capability to analyze large amount of structured and unstructured data

 Ability to design and build applications for mobile devices
 Traditional programing and application development skills
 Technical support expertise
 Project management skills
 Knowledge of networking and cloud computing
 Ability to audit systems and implement necessary security measures
 Web design and development skills
 Knowledge of data center operations.

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