Management Information Systems

Managing the Digital Firm WHY INFORMATION SYSTEMS?

Why Information Systems Matter There are four reasons why IT makes a difference to the success of a business: Capital management Foundation of doing business Productivity Strategic opportunity and advantage
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Management Information Systems

Managing the Digital Firm WHY INFORMATION SYSTEMS?

Capital Management: IT is the largest single component of capital investment in the United States. About $1.8 trillion is spent each year by American businesses. Managers and business students need to know how to invest this capital wisely. The success of your business in the future may well depend on how you make IT investment decisions.
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Management Information Systems

Managing the Digital Firm WHY INFORMATION SYSTEMS?

Information Technology Capital Investment

Information technology investment, defined as hardware, software, and communications equipment, grew from 34% to 50% between 1980 and 2004.
Source: Based on data in U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Product Accounts, 2006.

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Management Information Systems

Managing the Digital Firm WHY INFORMATION SYSTEMS?

Foundation of doing business:

Most businesses today could not operate without extensive use of information systems and technologies. IT can increase market share.
IT can help a business become a high-quality, low-cost producer. IT is vital to the development of new products.
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Management Information Systems

Managing the Digital Firm WHY INFORMATION SYSTEMS?

The Interdependence between Organizations and Information Systems

There is a growing interdependence between a firms information systems and its business capabilities. Changes in strategy, rules, and business processes increasingly require changes in hardware, software, databases, and telecommunications. Often, what the organization would like to do depends on what its systems will permit it to do.

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Management Information Systems

Managing the Digital Firm WHY INFORMATION SYSTEMS?

Productivity: IT is one of the most important tools managers have to increase productivity and efficiency of businesses. According to the Federal Reserve Bank, IT has reduced the rate of inflation by 0.5 to 1% in the last decade. For firms this means IT is a major factor in reducing costs.

It is estimated that IT has increased productivity in the economy by about 1% in the last decade. For firms this means IT is a major source of labor and capital efficiency.
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Management Information Systems

Managing the Digital Firm WHY INFORMATION SYSTEMS?

Strategic Opportunity and Advantage:

Create competitive advantage: IT makes it possible to develop competitive advantages. New Business Models: Dell Computer has built its competitive advantage on an IT enabled build-toorder business model that other firms have not been able to imitate.

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Management Information Systems

Managing the Digital Firm WHY INFORMATION SYSTEMS?

Strategic Opportunity and Advantage:

Create new services: eBay has developed the largest auction trading platform for millions of individuals and businesses. Competitors have not been able to imitate its success.
Differentiate yourself from your competitors: Amazon has become the largest book retailer in the United States on the strength of its huge online inventory and recommender system. It has no rivals in size and scope.
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Management Information Systems

Managing the Digital Firm WHY INFORMATION SYSTEMS?

Why IT Now? Digital Convergence and the Changing Business Environment Growing impact of IT in business firms can be assessed from the following five factors:

Internet growth and technology convergence Transformation of the business enterprise Growth of a globally connected economy Growth of knowledge and information-based economies Emergence of the digital firm

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Management Information Systems

Managing the Digital Firm WHY INFORMATION SYSTEMS?

The Internet and Technology Convergence:

Growth in e-business, e-commerce, and egovernment

Internet is bringing about rapid changes in markets and market structure: financial services and banking such as eTrade.com.

The Internet is making many traditional business models obsolete: the corner music store and video store.
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Management Information Systems

Managing the Digital Firm WHY INFORMATION SYSTEMS?

Rise of the Information Economy:

Time-based competition

Shorter product life

Turbulent environment Limited employee knowledge base

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WHY INFORMATION SYSTEMS?

The Growth of the Information Economy

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Figure 1-3

Management Information Systems

Managing the Digital Firm WHY INFORMATION SYSTEMS?

Emergence of the Digital Firm:

Digital firm-All of orgs significant business relationships with customers, suppliers, and employees are digitally enabled Core business processes accomplished using digital networks Agile sensing and responding to environmental changes Seamless flow of information within the firm, and with strategic partners Cisco & Dell computers Digital firms
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The Emerging Digital Firm

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Figure 1-4

Management Information Systems Managing the Digital Firm

WHY INFORMATION SYSTEMS?

Business processes:
Refer to the set of logically related tasks & behaviors that organizations develop over time to produce specific business results & the unique manner in which these activities are organized & coordinated.
Eg: Developing a new product, generating & fulfilling order, creating marketing plan, hiring an employee

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Management Information Systems

Managing the Digital Firm PERSPECTIVES ON INFORMATION SYSTEMS

What Is an Information System? Technology perspective: A set of interrelated components that collect (or retrieve), process, store, and distribute information to support decision making and control in an organization

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Management Information Systems

Managing the Digital Firm PERSPECTIVES ON INFORMATION SYSTEMS

What is an Information System? (Continued) Data: Streams of raw facts representing events such as business transactions

Information: data that have been shaped into a form that is meaningful and useful to human beings in the processes such as making decisions

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Management Information Systems

Managing the Digital Firm Perspectives on Information Systems

Data and Information

Raw data from a supermarket checkout counter can be processed and organized to produce meaningful information, such as the total unit sales of dish detergent or the total sales revenue from dish detergent for a specific store or sales territory.

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Management Information Systems

Managing the Digital Firm PERSPECTIVES ON INFORMATION SYSTEMS

Functions of an Information System

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Figure 1-6

Management Information Systems

Managing the Digital Firm

PERSPECTIVES ON INFORMATION SYSTEMS Functions of an Information System I/p captures raw data from within the org. or from its external environment Processing converts raw i/p into a meaningful form O/P transfers the processed information to the users Feedback used to evaluate or correct the i/p stage

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Management Information Systems

Managing the Digital Firm PERSPECTIVES ON INFORMATION SYSTEMS

Computer-Based Information System (CBIS) Rely on computer hardware and software Processing and disseminating information Fixed definitions of data and procedures Collecting, storing, and using information

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Management Information Systems

Managing the Digital Firm PERSPECTIVES ON INFORMATION SYSTEMS

A Business Perspective on Information Systems

Information systems are more than just technology. Businesses invest in IS in order to create value and increase profitability. Information systems are an organizational and management solution to business challenges that arise from the business environment. Based on information technology but also require significant investment in organizational and management changes and innovations IS create value primarily by changing business processes and management decision making

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Management Information Systems

Managing the Digital Firm PERSPECTIVES ON INFORMATION SYSTEMS

The Business Information Value Chain

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Figure 1-7

Dimensions of Information Systems

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Figure 1-8

Management Information Systems

Managing the Digital Firm PERSPECTIVES ON INFORMATION SYSTEMS

Major Business Functions Rely on Information Systems

Sales and marketing Manufacturing Finance Accounting Human resources

Dimensions of Information Systems

Three Important Dimensions of Information Systems Organizations Managers Technology

You will need to understand and balance these dimensions of information systems in order to create business value.
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Management Information Systems

Managing the Digital Firm PERSPECTIVES ON INFORMATION SYSTEMS

The Organizational Dimension of Information Systems

People ,Structure, Business processes, Culture, Politics

The Management Dimension of Information Systems

Managers are:

Sense makers Decision makers Planners Roles Senior managers - long term strategic decisions Middle managers - carry out the programs & plans of senior managers Operational managers - monitor the firms daily activities
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Management Information Systems

Managing the Digital Firm PERSPECTIVES ON INFORMATION SYSTEMS

The Technology Dimension of Information Systems Information technology is one of the tools managers use to cope with change:
Hardware: Physical equipment Software: Detailed preprogrammed instructions that control h/w components Storage: Physical media for storing data and the software Communications technology: Transfers data from one physical location to another Networks: Links computers to share data or resources

All these technologies represent resources that can be shared

throughout the organization & constitutes the firms IT infrastructure (platform for building specific IS)
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Management Information Systems

Managing the Digital Firm PERSPECTIVES ON INFORMATION SYSTEMS

Variation in Returns on Information Technology Investment

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Source: Based on Erik Brynjolfsson and Lorin M. Hitt, Beyond Computation: Information Technology, Organizational Transformation and Business Performance. Journal of Economic Perspectives 14, no. 4 (Fall 2000). Used with permission of the American Economic Association.

Figure 1-9