Chapter

1
Foundations of
Information Systems in Business

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 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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 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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WHAT DO THESE PICTURES HAVE
IN COMMON?

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 THE REAL WORLD OF
INFORMATION SYSTEMS

 An Information System (IS)may be computerized or

not
 Smoke signals for communication
 Card catalogs in a library
 Your book bag, day planner, notebooks, and file
folders
 The cash register at your
favorite fast-food shop/ restaurant
 A paper-based accounting
ledger
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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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Fundamental Roles of IS in Business

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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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Purposes of Information Systems

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 Types of Information Systems

• 1) Operations Support Systems

• Efficiently process business transactions
• Control industrial processes
• Support communication and collaboration
• Update corporate databases
• 2) Management Support Systems
• Provide information as reports and displays
• Give direct computer support to managers during
decision-making

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 Types of Operations Support Systems

• 1.1 Transaction Processing Systems

• Record and process business transactions
• Examples: sales processing, inventory systems,
accounting systems
• 1.2 Process Control Systems
• Monitor and control physical processes
• Example: using sensors to monitor chemical
processes in a petroleum refinery
• 1.3 Enterprise Collaboration Systems
• Enhance team and workgroup communication
• Examples: 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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 2) 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

• 2.1 Management Information Systems (MIS)

• Reports and displays
• Example: daily sales analysis reports
• 2.2 Decision Support Systems (DSS)
• Interactive and ad hoc support
• Example: a what-if analysis to determine where
to spend advertising dollars
• 2.3 Executive Information Systems (EIS)
• Critical information for executives and managers
• Example: easy access to actions of competitors

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Types of Management Support Systems

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 3) Other Information Systems

• 3.1 Expert Systems

• Provide expert advice
• Example: credit application advisor
• 3.2 Knowledge Management Systems
• Support creation, organization, and dissemination
of business knowledge throughout company
• Example: intranet access to best business
practices

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 Other Information Systems

• 3.4 Strategic Information Systems

• Help get a strategic advantage over customer
• Examples: shipment tracking, e-commerce Web
systems
• 3.5 Functional Business Systems
• Focus on operational and managerial applications
of basic business functions
• Examples: accounting, finance, or marketing

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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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 The IS Function

• The IS function is…

• A major functional area of business equally as
important to business success as the functions of
accounting, finance, operations management,
marketing, and human resource management.
• An important contributor to operational efficiency,
employee productivity, morale, customer service and
satisfaction
• A recognized source of value to the firm.

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 The IS Function

• The IS function is…

• 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 the resources, infrastructure, and
capabilities of today’s networked business
enterprises.
• A strategic resource.

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 System Concepts: A Foundation

• System concepts help us understand…

• Technology: Computer networks are systems of
information processing components that use a variety of
hardware, software, data management, and
telecommunications network technologies.
• Applications: E-business and e-commerce applications
involve interconnected business information systems.
• Development: Developing ways to use information
technology includes designing the basic components of
information systems
• Management: Managing information technology
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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Components of an IS

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 Information System Resources

1 People Resources
• Specialists
• End users
2 Hardware Resources: These include all the physical
devices and materials used in information processing,
including all machines and data media. Key components
include:
• Computer Systems: These are the CPUs and their related
peripherals, such as terminals and networked PCs.
• Computer Peripherals: These are input and output devices like
keyboards, monitors, and secondary storage.

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 Information System Resources

• Telecommunications Networks: These are the computer

systems interconnected by various telecommunications media
such as modems.

3 Software Resources: These include all sets of

information processing instructions. Software resources
include:
• System Software: This controls the computer.
• Application Software: These are for a specific end user task,
such as word-processing.
• Procedures: These are the operating instructions for the people
who use the IS.

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 Information System Resources

4 Data Resources
• Product descriptions, customer records, employee
files, inventory databases
5 Network Resources
• Communications media, communications
processors, network access and control software
6 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
• Examples:
• Sales data….. is names, quantities,
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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