Information system concepts,types and usage information

Information system refers to various information technology systems like

computers, software, database, communication systems, the internet, devices, and
others used by an organization to collect, transfer, organize, and store data.

Information system refers to various information technology systems like

computers, software, database, communication systems, the internet, devices, and
others used by an organization to collect, transfer, organize, and store data.
Bursting with changes, the current business milieu has helped companies
implement a varied set of advanced technologies into different processes. These IT
applications have introduced automation, efficiency, and timeliness in various
business activities.

The introduction of information systems into the business has evoked a chain
reaction among different interrelated processes that have only benefited the
companies by increasing profits and reducing costs and lead time, among other
things. Therefore, it is imperative to understand the growing importance of
information systems in companies.

What Is Information Systems And its Importance?

An information system is a group of data sets that ensures that business operates
smoothly, embracing change, and helping companies achieve their goal. The
dictionary defines an information system as a computer system or set of
components for collecting, creating, storing, processing and distributing
information. The information system is incomplete without the support
of information technology (IT) systems.

An information system is not primarily associated with technology or IT system.

Instead, it is related to how technology is used to fulfil the needs of- individuals,
groups or organizations. In the digital era that we are in, the importance of
information systems is increasing because it standardizes the process of passing,
collecting, storing, and accessing information or data for individuals or businesses.

There are different types of information systems that help individuals and
companies to use the information to their benefit. In the succeeding part of the
article, we will discuss various types of information systems in detail.
Six Types Of Information Systems And Their Application

Although many information systems offer various benefits, typically, businesses

use these five applications in their company. Whichever information system you
plan to implement in your business, here are the benefits it will offer:

 It will induce innovation in business activities through its research and

development.
 It will enable automation, reducing steps undertaken to complete a task.
 It helps keep the hardware, software, data storage, and networking system
safe and up to date.

Now that you know the changes information systems can bring about in an
organization, let’s look at the application that yields the power to change the
business process- types of information systems.

What Are The Types Of Information Systems?

1. Knowledge Work System

There are different knowledge management systems that an organization
implements to ensure a continuous flow of new and updated knowledge into the
company and its processes. A knowledge work system (KWS) is one of the
knowledge management systems that ease the integration of new information or
knowledge into the business process.
Furthermore, KWS also offers support and resources to various knowledge
creation techniques, artificial intelligence applications, and group collaboration
systems for knowledge sharing, among others. It also uses graphics, visuals, etc., to
disseminate new information. Below are some of the applications that work on the
core fundamentals of KWS.

 Designers often use computer-aided design systems (CAD) to automate their

design process.
 Financial workstations are used to analyze huge amounts of financial data
with the help of new technologies.
 Virtual reality systems are found in the scientific, education, and business
fields for using graphics and different systems to present data.

2. Management Information System

The management information system provides aid to managers by automating
different processes that were initially done manually. Business activities like
business performance tracking and analysis, making business decisions, making a
business plan, and defining workflow. It also provides feedback to the managers by
analyzing the roles and responsibilities.
A management information system is considered a significant application that
helps managers immensely. Here are some of the advantages of the information
system:

 It enhances the efficiency and productivity of the company

 It provides a clear picture of the organization’s performance
 It adds value to the existing products, introduces innovation and improves
product development
 It assists in communication and planning for business processes
 It helps the organization provide a competitive advantage

3. Decision Support System

A decision support system is an information system that analyses business data and
other information related to the enterprise to offer automation in decision-making
or problem-solving. A manager uses it in times of adversities arising during the
operation of the business. Generally, the decision support system is used to collect
information regarding revenue, sales figures or inventory. It is used across different
industries, and the decision support system is a popular information system.

4. Office Automation System

An office automation system is an information system that automates different
administrative processes like documenting, recording data, and office transactions,
among others. The office automation system is divided into managerial and clerical
activities. Here are some of the business activities that are done under this type of
information system:

 Email
 Voice mail
 Word processing

5. Transaction Processing System

The transaction processing system automates the transaction collection,
modification, and retrieval process. The peculiar characteristic of this type of
information system is that it increases the performance, reliability and consistency
of business transactions. It helps businesses perform daily operations smoothly
without hassle.
Once you are well-versed with different types of information systems,
understanding the application of these systems becomes easy to comprehend.
Therefore, in the last part of the article, we will look into applying information
systems.

6. Executive Support System

An Executive Support System or ESS helps top-level executives to plan and
control workflow and make business decisions. It is very similar to Management
Information System or MIS.
Here are some of the unique characteristics of ESS:

 It provides great telecommunication, better computing capabilities, and

effective display options to executives.
 It enables them with information through static reports, graphs, and textual
information on demand.
 It helps monitor performances, track competitors’ strategies, and forecast
future trends, among others.

How To Apply Information Systems in Business?

Here are some of the business activities that require the intervention of an
information system.

 Enterprise resource planning (ERP)

Applying information systems to enterprise resource planning helps automate

business administration and planning functions.

 Supply chain management (SCM)

Information systems provide a common forum to connect with different parties in

supply chain management. Moreover, it makes communication between parties
easy and resourceful.

 Customer relationship management (CRM)

Many information systems help in realizing customer requirements. Furthermore,

other information applications help companies interact with their audience easily
and hassle-free.
To understand the use of information technology and its ancillary systems, many
business professionals pursue different courses. Emeritus India offers some of the
best IT courses in partnership with various Indian and international institutes. So,
enrol in our famous IT courses to accentuate your career.

Economics of Information Systems

an information-processing chain, only the initial inputs (“environment”) and the
terminal outputs (“actions”) affect directly the benefit to the user who maximizes
its expected excess over cost. All intermediate flows (“symbols”) affect directly
only costs and delays. Delays affect benefit non-additively, through “impatience”
and, possibly, “obsolescence.” Traditionally, statistical theory disregards delays,
and communication theory treats them as costs. A more complete, unifying
approach is proposed, and it is asked whether convexity conditions (e.g.,
“decreasing marginal returns”) required for competitive market equilibrium are
satisfied.
The Economics of Information Systems and Software focuses on the economic
aspects of information systems and software, including advertising, evaluation of
information systems, and software maintenance. The book first elaborates on value
and values, software business, and scientific information as an economic category

What is the impact of information systems on organizations-

Information systems have become integral, online, interactive tools deeply i nvolved
in the minute-to-minute operations and decision making of large organizations. Over
the past decade, information systems have fundamentally altered the economics of
organizations and greatly increased the possibilities for organizing work. Theories
and concepts from economics and sociology help us understand the changes brought
about by IT.

1. Economic Impacts
From the point of view of economics, IT changes both the relative costs of capital
and the costs of information. Information systems technology can be viewed as a
factor of production that can be substituted for traditional capital and labor. As the
cost of information technology decreases, it is substituted for labor, which
historically has been a rising cost. Hence, information technology should result in a
decline in the number of middle managers and clerical workers as information
technology substitutes for their labor.

As the cost of information technology decreases, it also substitutes for other forms
of capital such as buildings and machinery, which remain relatively expensive.
Hence, over time we should expect managers to increase their investments in IT
because of its declining cost relative to other capital investments.

IT also affects the cost and quality of information and changes the economics of
information. Information technology helps firms contract in size because it can
reduce transaction costs—the costs incurred when a firm buys on the marketplace
what it cannot make itself. According to transaction cost theory, firms and
individuals seek to economize on transaction costs, much as they do on production
costs. Using markets is expensive because of costs such as locating and
communicating with distant suppliers, monitoring contract compliance, buying
insurance, obtaining information on products, and so forth (Coase, 1937;
Williamson, 1985). Traditionally, firms have tried to reduce transaction costs
through vertical integration, by getting bigger, hiring more employees, and buying
their own suppliers and distributors, as both General Motors and Ford used to do.

Information technology, especially the use of networks, can help firms lower the
cost of market participation (transaction costs), making it worthwhile for firms to
contract with external suppliers instead of using internal sources. As a result, firms
can shrink in size (numbers of employees) because it is far less expensive to
outsource work to a competitive marketplace rather than hire employees.

For instance, by using computer links to external suppliers, automakers such as

Chrysler, Toyota, and Honda can achieve economies by obtaining more than 70
percent of their parts from the outside. Information systems make it possible for
companies such as Apple Cisco Systems and Dell Inc. to outsource assembly of
iPhones to contract manufacturers such as Foxconn instead of making their products
themselves.

As transaction costs decrease, firm size (the number of employees) should shrink
because it becomes easier and cheaper for the firm to contract for the purchase of
goods and services in the marketplace rather than to make the product or offer the
service itself. Firm size can stay constant or contract even as the company increases
its revenues. For example, when Eastman Chemical Company split off from Kodak
in 1994, it had $3.3 billion in revenue and 24,000 full-time employees. In 2017, it
generated $9.5 billion in revenue with only 14,500 employees.

Information technology also can reduce internal management costs. According to

agency theory, the firm is viewed as a “nexus of contracts” among self-interested
individuals rather than as a unified, profit-maximizing entity (Jensen and Meckling,
1976). A principal (owner) employs “agents” (employees) to perform work on his
or her behalf. However, agents need constant supervision and management;
otherwise, they will tend to pursue their own interests rather than those of the
owners. As firms grow in size and scope, agency costs or coordination costs rise
because owners must expend more and more effort supervising and managing
employees.

Information technology, by reducing the costs of acquiring and analyzing

information, permits organizations to reduce agency costs because it becomes easier
for managers to oversee a greater number of employees. By reducing overall
management costs, information technology enables firms to increase revenues while
shrinking the number of middle managers and clerical workers. We have seen
examples in earlier chapters where information technology expanded the power and
scope of small organizations by enabling them to perform coordinated activities such
as processing orders or keeping track of inventory with very few clerks and
managers.

Because IT reduces both agency and transaction costs for firms, we should expect
firm size to shrink over time as more capital is invested in IT. Firms should have
fewer managers, and we expect to see revenue per employee increase over time.

2. Organizational and Behavioral Impacts

Theories based in the sociology of complex organizations also provide some
understanding about how and why firms change with the implementation of new IT
applications.

2.1. IT Flattens Organizations

Large, bureaucratic organizations, which primarily developed before the computer
age, are often inefficient, slow to change, and less competitive than newly created
organizations. Some of these large organizations have downsized, reducing the
number of employees and the number of levels in their organizational hierarchies.
Behavioral researchers have theorized that information technology facilitates
flattening of hierarchies by broadening the distribution of information to empower
lower-level employees and increase management efficiency (see Figure 3.6). IT
pushes decision-making rights lower in the organization because lower-level
employees receive the information they need to make decisions without supervision.
(This empowerment is also possible because of higher educational levels among the
workforce, which give employees more capabilities to make intelligent decisions.)
Because managers now receive so much more accurate information on time, they
become much faster at making decisions, so fewer managers are required.
Management costs decline as a percentage of revenues, and the hierarchy becomes
much more efficient.

These changes mean that the management span of control has also been broadened,
enabling high-level managers to manage and control more workers spread over
greater distances. Many companies have eliminated thousands of middle managers
as a result of these changes.

2.2. Postindustrial Organizations

Postindustrial theories based more on history and sociology than economics also
support the notion that IT should flatten hierarchies. In postindustrial societies,
authority increasingly relies on knowledge and competence and not merely on
formal positions. Hence, the shape of organizations flattens because professional
workers tend to be self-managing, and decision making should become more
decentralized as knowledge and information become more widespread throughout
the firm.

Information technology may encourage task force-networked organizations in which

groups of professionals come together-face-to-face or electronically— for short
periods of time to accomplish a specific task (e.g., designing a new automobile);
once the task is accomplished, the individuals join other task forces. The global
consulting service Accenture is an example. Many of its 373,000 employees move
from location to location to work on projects at client locations in more than 56
different countries.

Who makes sure that self-managed teams do not head off in the wrong direction?
Who decides which person works on which team and for how long? How can
managers evaluate the performance of someone who is constantly rotating from team
to team? How do people know where their careers are headed? New approaches for
evaluating, organizing, and informing workers are required, and not all companies
can make virtual work effective.

2.3. Understanding Organizational Resistance to Change

Information systems inevitably become bound up in organizational politics because
they influence access to a key resource—namely, information. Information systems
can affect who does what to whom, when, where, and how in an organization. Many
new information systems require changes in personal, individual routines that can
be painful for those involved and require retraining and additional effort that may or
may not be compensated. Because information systems potentially change an
organization’s structure, culture, business processes, and strategy, there is often
considerable resistance to them when they are introduced.

There are several ways to visualize organizational resistance. Research on or-

ganizational resistance to innovation suggests that four factors are paramount: the
nature of the IT innovation, the organization’s structure, the culture of people in the
organization, and the tasks affected by the innovation (see Figure 3.7).

Here, changes in technology are absorbed, interpreted, deflected, and defeated by

organizational task arrangements, structures, and people. In this model, the only way
to bring about change is to change the technology, tasks, structure, and people
simultaneously. Other authors have spoken about the need to “unfreeze”
organizations before introducing an innovation, quickly implementing it, and
“refreezing” or institutionalizing the change (Kolb and Frohman, 1970).

Because organizational resistance to change is so powerful, many information

technology investments flounder and do not increase productivity. Indeed, research
on project implementation failures demonstrates that the most common reason for
failure of large projects to reach their objectives is not the failure of the technology
but organizational and political resistance to change. Therefore, as a manager
involved in future IT investments, your ability to work with people and organizations
is just as important as your technical awareness and knowledge.

3. The Internet and Organizations

The Internet, especially the World Wide Web, has an important impact on the
relationships between many firms and external entities and even on the organization
of business processes inside a firm. The Internet increases the accessibility, storage,
and distribution of information and knowledge for organizations. In essence, the
Internet is capable of dramatically lowering the transaction and agency costs facing
most organizations. For instance, a global sales force can receive nearly instant
product price information updates using the web or instructions from management
sent by e-mail or text messaging on smartphones or mobile laptops. Vendors of some
large retailers can access retailers’ internal websites directly to find up-to-the-minute
sales information and to initiate replenishment orders instantly.

Businesses are rapidly rebuilding some of their key business processes based on
Internet technology and making this technology a key component of their IT
infrastructures. If prior networking is any guide, one result will be simpler business
processes, fewer employees, and flatter organizations than in the past.

4. Implications for the Design and Understanding of Information Systems

To deliver genuine benefits, information systems must be built with a clear un-
derstanding of the organization in which they will be used. In our experience, the
central organizational factors to consider when planning a new system are the
following:

 The environment in which the organization must function

 The structure of the organization: hierarchy, specialization, routines, and
business processes
 The organization’s culture and politics
 The type of organization and its style of leadership
 The principal interest groups affected by the system and the attitudes of
workers who will be using the system
 The kinds of tasks, decisions, and business processes that the information
system is designed to assist
 E- BUSINESS FUNDAMENTALS

INTRODUCTION

The term "e-business" was coined by IBM's marketing and Internet team in 1996
that defines e-business as "a secure, flexible and integrated approach to delivering
differentiated business value by combining the systems and processes that run
core business operations with the simplicity and reach made possible by Internet
technology."

E-business means the administration of conducting business via the internet or doing
business with the help of internet network. It covers all the aspects of business such
as firm, clients, suppliers, customers, communication, selling, marketing research
etc.

Electronic Business or e-business is a term which can be used for any kind of
business or commercial transaction that includes sharing information across the
internet. It is a more generic term than E-Commerce because it refers to not only
buying and selling but also servicing customers and collaborating with business
partners.

The scope of E-business includes all types of business functions and transforms
business relationships such as B-B (Business to business), C-C (Company to
company) in a strategic manner and drives efficiencies, speed, innovation and new
value creation for an organization.

While a website is one of the most common implementations, e-Business is much

more than just a web presence. There is a vast array of internet technologies all
designed to help businesses work smarter not harder. Think about collaboration
tools, mobile and wireless technology, Customer Relationship Management and
social media to name a few.
 FEATURES: E-BUSINESS
1. Medium
One thing that sets an e-business apart is the online niche it occupies. E-business
encompasses a broad variety of businesses, but the basic premise is its reliance on
the Internet for commerce. The organization uses online media to promote, buy and
sell various products and services. Additionally, being solely online allows an e-
business to access the entire world market with ease.
2. Website
Although many businesses have websites, this decision is not optional for a focused
e-business. To sell itself to the world and perform transactions, the organization
requires a website. While websites are advantageous for any business, an e-business
cannot exist -- let alone be labeled as such -- without this tool.
3. Location
Another key feature of an e-business is its versatility. While conventional
businesses require an office or store, e-businesses can be run without this added
expense. In fact, many e-businesses are home-based. This makes it easy for
entrepreneurs to work from home at much lower cost than traditional businesses.
However, this also means that e-businesses are much more focused, competing only
with similar businesses in their niche.
4. Communication
Communication is crucial for any business, but the seamless nature of online
communication makes it a key feature in e-business. By placing your business
online, you can provide all the necessary contact information to your clients. In turn,
the business has instant access to both current and potential clients. This is especially
true of media like email.
5. Access
Access is always a useful feature, one that an e-business greatly benefits from. By
focusing so heavily online, the organization is always open and selling its products
or services. In short, customers do not have to worry about operating hours.
Similarly, it is easy for e-business owners to quickly interact with and receive
feedback from clients through online questionnaires or surveys.

BENEFITS OF E-BUSINESS

1. Ease of Formation
Unlike a host of procedural requirements for setting up an industry, e-business is
relatively easy to start. The benefits of internet technology accrue to big or small
business alike. In fact, internet is responsible for the popularity of the phrase
'networked individuals and firms are more efficient than networked individuals'.
2. Easy Marketing
With an e-business, all of the marketing efforts of the company drive the target
traffic to one central point that is the business website and allows to use many online
marketing tactics including email marketing, article marketing, social media
networking and e-newsletters that are low cost or free.
3. Convenience
E-business breaks down the time barriers that location-based businesses encounter
as the Internet is available 24 hours a day, seven days a week, your business never
closes (24*7). An e-business can literally be making money while one is fast asleep.
4. Global Reach
An e-business also allows broadening the reach of the traditional business and
eliminates the geographic boundaries. An online business can reach customers in the
four corners of the Earth and as long as someone has an Internet connection, business
is able to reach and sell their product or service to these visitors to the company’s
business website.
5. Reduces Cost
Transaction Cost- Running an online business reduces the cost per transaction
because it takes less manpower to complete an online transaction. The customer can
place the order online on the website, which removes the need for a salesperson.
Overhead Cost- Running an e-business cut back or out most of the costs involved
in running a physical location as it do not require any additional space and can be
run from home or office.
6. Other benefits:
Speed: Internet has high speed. This benefit becomes all the more attractive in the
case of information regarding intensive products.

Movement towards a paperless society: Dependence on paper work has been

considerably reduced through internet. Many companies and even the government
departments and regulatory authorities are going in this direction.

DISADVANTAGES OF E-BUSINESS

1. Security and Integrity Issues

Hackers are adept at manipulating online business websites to harvest financial
data. The customer information required by the company like the shipping
address, credit card details and email, potentially provides ample resource for
hackers to initiate identity theft. This risk keeps some people from shopping
online.
Company has to assure customers of the security of their personal data as they
interact with the e-business and ensure high site integrity by implementing good
security measures, including digital signatures and data encryption, to protect client
information lest it falls in the wrong hands and lawsuits ensue.
2. Momentary Intangibility
The personal touch is a missing factor in online transactions. An e-business normally
offers the customer no physical proximity to the items purchased until delivery.
Experiencing the feel, taste or smell of a product can influence the decision to buy.
Unless it's a repeat buyer, a typical customer would want to feel the texture of the
leather wallet, the comfort of the shoe or smell the cologne before ordering. The
absence of an opportunity to physically examine the product places a major
limitation on e-businesses.
3. Less privacy

The nature of internet technology e-business is such that private information of the
online customers can be easily collected and recorded on the server side. The buying
pattern of a customer can be known to an e-shop with the help of certain
sophisticated tools. You know that cookies can be used to track customers online in
Electronic business. On one hand these technologies are useful for doing
customization but on the other, they can be said to have caused the breach of
informational privacy rights in E-Commerce of a person.

4. Technical Disadvantages
There can be lack of system security, reliability or standards owing to poor
implementation of e-Commerce.
 Software development industry is still evolving and keeps changing rapidly.
 In many countries, network bandwidth might cause an issue as there is
insufficient telecommunication bandwidth available.
 Special types of web server or other software might be required by the
vendor setting the e-commerce environment apart from network servers.
 Sometimes, it becomes difficult to integrate E-Commerce software or
website with the existing application or databases.
 There could be software/hardware compatibility issue as some E-Commerce
software may be incompatible with some operating system or any other
component.