Information Technology for Management

-An Introduction
Decision Making and Managerial Effectiveness

Decision Making is the prime

responsibility
Effectiveness Depends upon awareness
of Internal and External Environment
Pervasiveness of Information
Changing Decision Making Scenario
Changing Decision Making Scenario

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 Why Information Systems Matter

There are four reasons why IT makes a difference to the success

of a business:
• Large amount of Capital expenditure

• Foundation of doing business

• Impacts Productivity

• Offers Strategic opportunity and advantage

 WHY INFORMATION SYSTEMS?
Capital Management
• Besides Manufacturing Plant and Machinery, IT is the
largest single component of capital investment in most of
the companies

• About $1.8 trillion is spent each year by American

businesses. India is also catching up with the global trend

• Managers and business students need to know how to

invest this capital wisely

• The success of the business in the future may well depend

on how IT investment decisions are made
 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 (Think, how?)

• IT can help a business become a high-quality,

low-cost producer

• IT is vital to the development of new products

 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
 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 customer –
segment-focused business model that other firms have
not been able to imitate
• Tata Motors has been able to reduce the cost of input
by creating more competitive environment in
procurement online
• Mazda has been able to build its competitive advantage
by customisation of vehicles
 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 U.S. on the
strength of its huge online inventory and recommender
system. Competitors have not been able to imitate its
success
 How Much Does IT Matter?

• Commoditization of technology is typically a spur to

innovation and new business models, products and
services

• Competitive advantage derives not from the

technology, but on how businesses use the technology

• Innovations in business processes, management and

organization are not easily copied from one firm to
another
 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 (Flat
organizations)
• Growth of a globally connected economy
(integration of markets)
• Growth of knowledge and information-based
economies(IT enabled services)
• Emergence of the digital firm
 Internet growth and
technology convergence
• Growth of the Internet: 120 million on line in the U.S.,
1500 million global users
• The Internet is bringing about a convergence of
telecommunications and computing: VOIP telephones.
Growth in e-business, e-commerce, and e-government
• Internet is bringing about rapid changes in markets and
market structure: financial services and banking
• The Internet is making many traditional business
models obsolete: the corner music store and video
store
 Transformation of the Business Enterprise:

• Flattening

• Decentralization

• Flexibility
 Rise of the Information Economy:

• Knowledge and information-based economies

• New products and services

• Knowledge as a central productive and strategic

asset
 Rise of the Information Economy:

• Time-based competition

• Shorter product life

• Turbulent environment

• Limited employee knowledge base

 Emergence of the Digital Firm:

• Digitally enabled relationships with customers, suppliers,

and employees

• Core business processes accomplished using digital

networks

• Digital management of key corporate assets

 Data, Information & Knowledge
One of the primary goals of Information Systems is to
economically process data into information or knowledge.
• Data items refer to an elementary description of things,
events, activities, and transactions that are recorded,
classified, and stored, but not organized to convey any
specific meaning.
• Information is data that have been organized so that they
have meaning and value to the recipient.
• Knowledge consists of data or information that have been
organized and processed to convey understanding,
experience, accumulated learning, and expertise.
 Hierarchy of Information

3rd
rd Generation (2003)

Intelligence
_____________________________________________________________________________________________________

Chart
s
2nd
nd Generation (1996-2002)

Knowledge
_____________________________________________________________________________________________________

1stst Generation
Information
(1990s)

Data &
Data Information
 Information as a Corporate Resource

• Value Added Resource

• Has a Specific Cost
• Value Depends on purpose of use and degree of
Utilisation
• High Rate of Obsolescence
• Requires Pruning to avoid congestion

Quality of Information
Accuracy, Promptness, Precision
Completeness, Un-ambiguity
 Process of Generation of Information
Data Acquisition
Data capture
Data organisation and storage
Data Pruning

Data Transformation
Rearranging (Sorting)
Classifying
Calculating and statistical analysis
Summarising

Info Management
Communicating
Reporting
Data Visualisation
 Information Needs of Business

• Operational Information
– Useful in exercising control
– Pertains to activities that are measurable
– Sources of data are internal
– Predictive element is low and has short term horizon
• Tactical Information
– Useful in allocation of resources
– Pertains to activities meant for implementation of top
level plans
– Sources of data are partly internal and partly external
– Predictive element is focused on short term trends
 Information Needs of Business

• Strategic Information
– Useful in making strategic choices
– Pertains to defining goals, priorities, policies for
acquisition of corporate resources
– Sources of data is mainly external
– Predictive element is very high
– Focused on long term horizon and trends
USING INFO SYSTEMS AS A STRATEGIC TOOL
Levels of Management and Type of Information

Strategic
Top

Middle Tactical

Lower Operational
 Defining Business Information
System
• Information: Understanding that one derives
from facts about a subject, with a view to
reduce uncertainty regarding elements of an
environment
• System: Set of inter-related elements, designed
to achieve pre-determined objectives
An Information system is a set of interrelated elements
that acquire, process, store and disseminate
information to support decision making, automating
coordinating, control, analysis of business processes