FOUNDATIONS OF

INFORMATION SYSTEMS
IN BUSINESS

Data vs. Information

n

Data: raw facts, observations or measurements

typically about physical phenomena or business
transactions
Data: stored representations of meaningful objects
and events
n

numbers, text, dates, images, video, documents

Information: data processed to increase

knowledge in the person using the data

What is Information?
n Information

is data that has been

organized and interpreted, and
possibly formatted, filtered, analyzed,
and summarized
n Data that have been converted into a
meaningful and useful context for
specific end users
3

Role of Information In Organizations

n

Information As a Resource
n

Information is an input into the production of

goods and services.

Role of Information In Organizations

n

Information As an Asset
n

The property of a person or an organization

that contributes to a company's output

Role of Information In Organizations

n

Information As a Product
n

Companies can also sell information, the output of its production, as

a product or service or as an embedded component of a product.

Information Technology vs.

Information Systems
n

Information Technology (IT) various hardware

components necessary for the system to operate
IT Includes computer hardware, software,
database management systems, and data
communication systems
Information Systems (IS) Combines information
technology with data, procedures for processing
data, and people who collect and use the data
8

What is an Information System?

Any organized combination of people, hardware,

software, communications networks, and data
resources that stores, collects (or retrieves),
process, and distribute (or transforms, and
disseminates) information to support decision
making and control in an organization.
9

Why Study Information

Systems?
n

Information technology can help all kinds of

businesses improve the efficiency and
effectiveness of their business processes,
managerial decision making, and workgroup
collaboration, thus strengthening their
competitive positions in a rapidly changing
marketplace.
Internet-based systems have become a
necessary ingredient for business success in
todays dynamic global environment.
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Roles of IS in Business

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Types of Information
Technologies
n

Computer Hardware Technologies

including microcomputers, midsize servers, and large
mainframe systems, and the input, output, and storage
devices that support them

Computer Software Technologies

including operating system software, Web browsers,
software productivity suites, and software for business
applications like customer relationship management and
supply chain management
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Types of Information
Technologies
n

Telecommunications Network
Technologies
including the telecommunications media, processors, and
software needed to provide wire-based and wireless
access and support for the Internet and private Internetbased networks

Data Resource Management Technologies

including database management system software for the
development, access, and maintenance of the databases
of an organization
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IS Framework for Business

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Types of Information Systems

15

Transaction Processing Systems

n

n
n
n
n

Basic business systems that serve the organizations

operational level
Process and record an organization's transactions
n A unit of business activity, such as purchasing a
product, making a banking deposit, or reserving an
airline seat
Input: Transactions, events
Processing: Sorting, listing, merging, updating
Output: Detailed reports, lists, summaries
Users: Operations personnel, supervisors
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Typical applications of TPS

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Types of Information Systems

18

Management Support Systems

n

Supply information that managers need to

make effective decisions and coordinate
their activities
n

Example
n A

human resources manager might use a

management support system to evaluate the
performance of an employee before deciding
whether or not to give him a raise

19

Management Information Systems

(MIS)
n

n
n
n

provide information in the form of pre-specified reports and

displays to support business decision making.
Serve management level; provide reports and access to company
data
Supply information that managers need to make decisions and
coordinate their activities
Input: Summary transaction data, high-volume data, simple
models
Processing: Routine reports, simple models, low-level analysis
Output: Summary and exception reports
Users: Middle managers
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How management information systems obtain their data

from the organizations TPS

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A sample report that might be produced by the MIS

22

Decision-Support Systems (DSS)

n

n
n
n
n

provide interactive ad hoc support for the decision

making processes of managers and other business
professionals.
Serve management level with data analysis for making
decisions
Input: Low-volume data or massive databases, analytic
models, and data analysis tools
Processing: Interactive, simulations, analysis
Output: Special reports, decision analyses, responses
to queries
Users: Professionals, staff managers
23

Executive Support Systems (ESS)

n

Provide critical information from MIS, DSS, and other

sources tailored to the information needs of executives.
Provide the information that top executives need to
quickly identify problems, scan data for trends,
communicate with employees, and set strategic
objectives

Input: External and internal aggregate data

Processing: Graphics, simulations, interactive

Output: Projections, responses to queries

Users: Senior Managers

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Model of a typical executive support system

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Interrelationships among systems

26

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Examples of Sales and Marketing Information

Systems
System

Description

Organizational
Level

Order
processing

Enter, process, and

track orders

Operational

Pricing analysis

Determine prices
for products and
services

Management

Sales trend
forecasting

Prepare 5-year
sales forecasts

Strategic

28

Examples of Manufacturing and Production

Information Systems
System

Description

Organizational
Level

Machine control Control the actions Operational

of machines and
equipment
Production
planning

Decide when and how

many products should
be produced

Management

Facilities
location

Decide where to
Strategic
locate new facilities
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Examples of Finance and Accounting Information

Systems
System

Description

Organizational
Level

Accounts
receivable

Track money owed

the firm

Operational

Budgeting

Prepare short-term Management

budgets

Profit planning

Plan long-term
profits

Strategic

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Examples of Human Resources Information Systems

System

Description

Organizational
Level

Training and
development

Track employee
Operational
training, skills, and
performance

Compensation
analysis

Monitor wages,
salaries, benefits

Management

Human
resources
planning

Plan long-term
labor force needs

Strategic

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Enterprise Applications

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Enterprise Applications

n
n

Enterprise resource planning (ERP)

Provides single information system for
organization-wide coordination and integration
of key business processes
Models and automates many business
processes

33

Enterprise Applications

34

Enterprise Applications
n

Supply Chain Management Systems (SCM): Automate

flow of information between firm and suppliers to
optimize production and delivery
Supply Chain Management: Close linkage of activities
involved in buying, making, moving a product
Supply Chain: Network of organizations and business
processes for production and distribution of products

35

Enterprise Applications
A supply chain

36

Information Systems Can Help Supply

Chain Participants
n
n
n
n
n
n
n
n

Decide when and what to produce, store, and move

Rapidly communicate orders
Track status of orders
Check and monitor inventory
Reduce inventory, transportation, warehousing costs
Track shipments
Plan production based on actual customer demand
Rapidly communicate changes in product design

37

Customer Relationship Management

(CRM)
n

n
n

Manages ways used to deal with existing and

potential customers
Uses information systems to coordinate all
customer interaction processes in sales,
marketing, and service.
Track all customer interactions
Analyze data to optimize revenue, profitability,
customer satisfaction, customer retention
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Customer Relationship Management

(CRM)

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Knowledge Management Systems (KMS)

Collect relevant knowledge and

experience in firm to support business
processes and management decisions
Manage and distribute documents and
other digital knowledge objects

40

Role of Knowledge Management

Systems

n
n
n
n

Acquire knowledge
Store knowledge
Distribute knowledge
Apply knowledge

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Strategic View of Information

Systems
n

Information systems are vital competitive

networks. IT can change the way businesses
compete.
Information systems are a means of
organizational renewal.
IS are a necessary investment in technologies
that help a company adopt strategies and
business processes that enable it to reengineer
or reinvent itself in order to survive and succeed
in todays dynamic business environment.
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Competitive Strategies
Cost Leadership
Differentiation
n Innovation
n Growth
n Alliance
n
n

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Cost Leadership Strategy

n

Becoming a low-cost producer of products

and services
Finding ways to help suppliers and
customers reduce their costs
Increase costs of competitors
44

Differentiation Strategy
n

Developing ways to differentiate a firms

products and services from its competitors
Reduce the differentiation advantages of
competitors

45

Innovation Strategy
n

Development of unique products and services

Entry into unique markets or market niches

Making radical changes to the business

processes for producing or distributing products
and services that are so different from the way a
business has been conducted that they alter the
fundamental structure of an industry
46

Growth Strategy
n

Significantly expanding a companys capacity to

produce goods and services

Expanding into global markets

Diversifying into new products and services

Integrating into related products and services

47

Alliance Strategy
n

Establishing new business linkages and

alliances with customers, suppliers,
competitors, consultants, and other
companies

48

Competitive Strategy Examples

49