1

Foundations of Information
Systems
in Business

1
Historical Background
• The Data Processing Industry grew rapidly in the
1960’s, however, the “quantity” of output, most
often, far outstripped the “quality” of output.
• The growth of the 1960’s and 1970’s saw a shift from
“computer” orientation, to “information” orientation.
• The role of “information resource manager” in the
organization offered an opportunity to migrate from
the technocratic image of the past, and establish an
image as a business manager, a general manager, an
information manager. Today this is the role of the
CIO - Chief Information Officer.
John Diebold (1979) wrote:
• “Information, which in essence is the analysis and synthesis of data,
will unquestionably be one of the most vital corporate resources in
the 1980’s. It will be structured into models for planning and
decision-making. It will be incorporated into measurements of
performance and profitability. It will be integrated into product
design and marketing methods. In other words, information will be
recognized and treated as an asset.”
Information Systems Today
• The early focus on IS was for the support of operations,
management, analysis and decision-making in organizations.
• A significant emphasis was on models of planning and
control.
• The late 1980’s and early 1990’s saw IS expand from the
support not only of decision-making, but but for improved
communication support as well. Social impacts began to be
recognized.
• The explosion of the Web has added the important
characteristic of providing information access.
• Today the emphasis in organizations is on the support of
business processes.
Importance of MIS
• Liberalization and globalization
• Information age
 1 What IS a system?

• A group of interrelated or interacting elements

forming a unified whole, OR
• A group of interrelated components working
together toward a common goal by accepting
inputs and producing outputs in an organized
transformation process (dynamic system).

• Three basic interacting components:

• Input
• Processing (transformation process)
• Output

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 1 Add Feedback and Control Loops..

• And the system, now called a cybernetic

system, becomes even more useful.
• Self-monitoring
• Self-regulating

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 1 Other System Characteristics

• A system exists and functions in an environment

containing other systems.

• Subsystem – a component of a larger system.

• Systems that share the same environment may be

connected to one another through a shared
boundary, or interface.

• Open versus closed system.

• Adaptive system
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What is an Information System?
• Let’s look at some different definitions and then explore the context
of an IS in the organizational setting.
• The contrasting definitions should provide a variety of different
perspectives.
Davis and Olson: (1985)
• A management information system is:
• an integrated user-machine system
• for providing information
• to support the operations, management, analysis, and decision-making functions in an
organization.
• The system utilizes:
• computer hardware and software
• manual procedures
• models for analysis, planning, control, and decision-making
• a database
Laudon and Laudon (1995)
• Information system - (definition) Interrelated components that
collect, process, store, and disseminate information to support
decision-making, control, analysis, and visualization in an
organization.
Turban, McLean, Wetherbe (1996)
• An information systems is a collection of components that collects,
processes, stores, analyzes, and disseminates information for a
specific purpose.
• The major components of a computer-based information system
(CBIS) can include (1) hardware, (2) software, (3) a database (4) a
network (5 )procedures, and (6) people.
• The system operates in a social context, and the software usually
includes application programs which perform specific tasks for users.
Alter (1999)
• A work system is a system that produces products for internal and
external customers through a business process performed by human
participants with the help of information technology.

• An information system is a particular type of work system that uses

information technology to capture transmit store, retrieve,
manipulate, or display information, thereby supporting one or more
other work systems.
Information Systems Today
• The early focus on IS was for the support of operations,
management, analysis and decision-making in organizations.
• A significant emphasis was on models of planning and
control.
• The late 1980’s and early 1990’s saw IS expand from the
support not only of decision-making, but but for improved
communication support as well. Social impacts began to be
recognized.
• The explosion of the Web has added the important
characteristic of providing information access.
• Today the emphasis in organizations is on the support of
business processes.
Terminology
• In many textbooks and contexts, the terms
Management Information Systems (or MIS) and
Information Systems (IS) are used interchangeably.
• However, in other contexts, Management Information
Systems are considered as a subset of the more
general Information Systems. MIS are considered to
be information systems which provides information
specifically for managing an organization generally at a
tactical or middle management level. Information
Systems would be a more general term that can
include other systems (e.g. group communication
systems). We will generally follow this convention.
1 Major Roles of IS

Support
Competitive
Advantage

Support
Business
Decision Making

Support of
Business Processes and Operations

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 1 Major Roles of IS (continued)

• Support Business Processes

• Support Decision Making
• Support Competitive Advantage

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Information Requirements by Management
Level
Characteristics Operational Management Strategic
of Information Control Control Planning
Source Largely Internal Internal and
Largely External
Scope Well defined, Very wide
narrow
Level of Detailed Aggregate
Aggregation
Time Horizon Historical Future

Currency Highly current Need not be up to

the minute
Required High Lower, Estimates
Accuracy are acceptable
Frequency of Use Very frequent Infrequent, ad-hoc
Information Systems for Operational Control
• Operational Control: process of ensuring operational activities are
carried out effectively and efficiently.
• Processing support:
• Transaction processing
• Report processing
• Inquiry processing
Information Systems for Management
Control
• Management Control: Information that is required
by managers of departments, profit centers, etc. to
measure performance, decide on control actions,
formulate new decision rules to be applied by the
operational personnel and allocate resources.
• Processing support:
• Planning and budget models to assist managers in finding problems and
preparing plans and budgets.
• Variance reporting programs; Exception Reports
• Problem analysis models
• Decision models to analyze a problem situation and provide solutions
• Inquiry models to assist in responding to queries.
Information Systems for Strategic Planning
• Systems that are designed to help managers perform the strategic
planning function
• This function has the responsibility of developing strategies to achieve
objectives and goals
• Such systems might have to provide information on:
• economic outlook
• political environment
• competitive environment
• impact analysis of alternative strategies, etc.
MIS Characteristics
• System Approach
• Management Oriented
• Need Based
• Exception Based
• Future Oriented
• Integrated
• Common Data Flow
• Long Term Planning
• Sub-System Concept
• Central Database
MIS Functions
Disseminatio
Data Capture Processing
n

Retrieval

Storage of
Data
1 Components of an INFORMATION System

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 Components of an Information System
1 (Continued)

• People Resources
• End Users
• IS Specialists

• Hardware Resources
• Computer systems
• Peripherals

• Software Resources
• System software
• Application software
• Procedures

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 Components of an Information System
1 (Continued)

• Data Resources
• Data versus Information
• Knowledge Base

• Network Resources
• Communication media
• Network support

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1 Trends in Information Systems

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New in MIS
• Technology
• Cloud computing platform emerges as a major business area of innovation
• More powerful, energy efficient computer processng and storage devices
• Growth n software as a service
• Netbooks emerging as a growing presence in the PC marketplace, suboften
using open source software
• A mobile digital platform emerges to compete with the PC as a busness
system
New in MIS (Continued)
• Management
• Managers adopt online collaboration and social networking software to
improve coordination, collaboration and knowledge
• Business intelligence applications acccelerate
• Managers adopt millions of mobile tools such as smartphones and mobile
Internet devices to accelerate decision making and improve performance
• Virtual meetings proliferate
New in MIS (Continued)
• Organisation
• Web 2.0 applications are widely used
• Telework gains momentum n the workplace
• Outstanding production
• Co-creation of business values
Fig 2.1: Types of Information Systems 31
Data, Information &
Knowledge
Forms of Information
In this topic, we will be looking at:

• What we mean by the word “data”

• The four basic types of data
• The difference between data and
information
• Processing and encoding
What is Data?
Data is a stream of raw facts representing
things or events that have happened.

In ICT, we usually say that data is made up

from four basic types:
• Numbers
• Text
• Images
• Sound
What is Information?
• Information is data that has been processed to
make it meaningful and useful
• Data + Meaning = Information
• Another way to add meaning is to process the
data. For example, individual exam marks are
raw data, but if you were to process those to
say that the average mark for the class was
53%, or that boys did better than girls, or that
76% of the students in your school got a grade
A or B, then that is information!
Data or Information?
• The number of newspapers sold today
• The name of the best-selling
newspaper
• The increase in house prices over the
last year
• 352098527
• Your mark for this week’s assignment
• The average mark for the assignment
Encoding Information

• Processing turns data into information

• Sometimes you might want to turn
information into data – i.e. to store it –
this is called encoding
• How do you code information to make it
easy to re-process, without losing it’s
meaning?
The Value of Information
• It is often said that we are in the information age,
and that information is a valuable commodity.
• Why is information valuable? Because:
• It allows us to plan how to run our business more
effectively – e.g. shops can stock what customers
want, when they want it, and manufacturers can
anticipate demand
• Marketing materials can be targeted at people and
customers that you know could be interested in
your products and services
• This can lead to increased customer satisfaction
and therefore profit
The Characteristics of Valuable Information

Table 1.2: Characteristics of Valuable Information

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The Characteristics of Valuable Information
(continued)

Table 1.2: Characteristics of Valuable Information

(continued)
41
Collecting Information
How is information about people collected?
1. Obviously you can ask people questions about their
spending habits, etc. (but they might not like it!)
2. Or you can use a more indirect approach:
• Supermarket loyalty cards
- e.g. easily identify wine-drinking vegetarians!
• Credit card transactions
- amounts and locations
- can help prevent fraud, too!
• ATMs, CCTV, till transactions, etc.
Knowledge
• Data and information deal with facts and
figures
• Knowing what to do with them requires
knowledge
• Knowledge = information + rules
• Rules tell us the likely effect of something
• For example: you are more likely to pass
your A level IF you do your coursework and
revise for your exam!
An example of this relationship could be; Blood pressure of
a patient is known as Data. By checking the blood pressure
of the patient we can say that the patient is having high
blood pressure. This is information. We are then able to
conclude or get a meaningful conclusion from the blood
pressure readings, so we call this information. The patient is
having high blood pressure because of his family history.
This conclusion is of reason of high blood pressure given by
a doctor based on his experience and learning. This is then
knowledge. So the chain is complete.
Data represents a fact or statement of event without relation to other things.
Ex: It is raining.
Information embodies the understanding of a relationship of some sort,
possibly cause and effect.
Ex: The temperature dropped 15 degrees and then it started raining.
Knowledge represents a pattern that connects and generally provides a
high level of predictability as to what is described or what will happen next.
Ex: If the humidity is very high and the temperature drops substantially
the atmosphere is often unlikely to be able to hold the moisture so it rains.
Wisdom embodies more of an understanding of fundamental principles
embodied within the knowledge that are essentially the basis for the
knowledge being what it is. Wisdom is essentially systemic.
Ex: It rains because it rains. And this encompasses an understanding
of all the interactions that happen between raining, evaporation,
air currents, temperature gradients, changes, and raining.