Chapter 2 Foundations

concept in management
Information Systems
By teshome
Foundation Concepts
 Why study information systems and information
technology?
 Vital component of successful businesses
 Helps businesses expand and compete
 Improves efficiency and effectiveness of
business processes
 Facilitates managerial decision making and
workgroup collaboration

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 Introduction
 Information systems designed to support
business processes and operations providing
data to, or accepting data from business.
 The three fundamental roles of the business
applications of information systems are:
Support of business processes and
operations, Support of decision making by
employees and managers, Support of
strategies for competitive advantage
 Information systems designed to support business processes and
operations providing data to, or accepting data from business.
 The three fundamental roles of the business applications of
information systems are:
1. Support of business processes and operations.
 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.
 Business operations would stop without the support of IS3
 2. Support of decision making by employees and managers.
 Information systems also help store managers and other business
professionals make better decisions.
For example:
 decisions about what lines of merchandise/product need to be
added or
 What lines of merchandise need to be discontinued and
 what kind of investments they require are typically made after
analysis provided by computer-based information systems.
 Which customer need which type of good
 Which geographic location customers prefer which type of good
 Which customer age range need which type of product
 Which customers are loyal
3. 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
 Using information systems effectively
requires an understanding of the
organization, management, and
information technology shaping the
systems. An information system creates
value for the firm as an organizational and
management solution to challenges posed
by the environment.
 The key elements of an organization are its
 People
 Structure
 Business processes,
 Politics
 Organizational Hierarchy of authority, responsibility
 Senior management
 Middle management
 Operational management
 Knowledge workers
 Data workers
 Production or service workers
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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 Data , information, knowledge and wisdom
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 System view

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I. System Concepts: The Foundation for Business
Processes
 Other System Characteristics
 Environment and Subsystems
 Interface – a shared boundary between
systems
 Open (and Closed) Systems – open systems
interact with other systems (closed systems
do not interact with other systems)
 Adaptive Systems – have the ability to change
themselves or their environment
A framework of information
system

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 What Should Business
Professionals Know?

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 Framework of major areas:
 Foundation Concepts – fundamental behavioral, technical,
business, and managerial concepts about information
systems
 Information Technologies – major concepts, developments,
and management issues in IT
 Business Applications – major uses of IS for operations,
management, and competitive advantage
 Development Process – how an IS is planned, developed,
and implemented to meet business opportunities
 Management Challenges – effectively and ethically managing
IT at the end-user, enterprise, and global levels of a business
Fundamental Roles of IS in
Business

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 Trends in Information Systems

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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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Developing IS Solutions

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 Developing IS Solutions – an Information Systems is
a Solution to a Business Problem
 Investigate (Plan) – recognize the problem exists
 Analyze – investigate the current system
 Design – designing the new system
 Implement – put the new system into effect
 Maintain (Use) – use, monitor, and maintain the new system
Challenges and Ethics of IT
 Application of IT
 Customer relationship management
 Human resources management
 Business intelligence systems
 Potential Harm
 Infringements on privacy
 Inaccurate information
 Collusion
 Potential Risks
 Consumer boycotts
 Work stoppages
 Government intervention
 Possible Responses
 Codes of ethics
 Incentives
 Certification
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Ethical Responsibilities
 What uses of IT might be considered improper
or harmful to other individuals or society?
 What is the proper business use of the Internet
or a company’s IT resources?
 How can you protect yourself from computer
crime?

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IT Careers
 Economic downturns have affected all job
sectors, including IT
 Rising labor costs are pushing jobs to India, the
Middle East, and Asia-Pacific countries
 However, IT employment opportunities are
strong, with new jobs emerging daily
 Shortages of IT personnel are frequent
 The long-term job outlook is positive and
exciting
 Figure

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 IT Careers

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IT Careers
 Job increases will be driven by…
 Rapid growth in computer system design and
related services
 The need to backfill positions
 Information sharing and client/server
environments
 The need for those with problem-solving skills
 Falling hardware and software prices, which
will fuel expanded computerization of
operations
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The IS Function
 The IS function is…
A major functional area of business
 An important contributor to operational efficiency,
employee productivity, morale, customer service
and satisfaction
 A major source of information and support for
decision making
 A vital ingredient in developing competitive
products and services in the global marketplace
 A dynamic and challenging career opportunity
 A key component of today’s networked business

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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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