Chapter

Foundations of
Information Systems in
Business

McGraw-Hill/Irwin

Copyright 2009 by The McGraw-Hill Companies, Inc. All rights

Learning Objectives

1. Understand the concept of a

system and how it relates to
information systems
2. Explain why knowledge of
information systems is important for
business professionals
Identify five areas of information
systems knowledge needed
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Learning Objectives
3. Give examples to illustrate how business
applications of information systems can
support a firms

Business processes
Managerial decision making
Strategies for competitive advantage

4. Provide examples of information systems

from your experiences with business
organizations in the real world

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Learning Objectives

5. Identify challenges that a business

manager might face in managing the
successful, ethical development and
use of information technology
6. Provide examples of the components
of real world information systems
7. Become familiar with the myriad of
career opportunities in information
systems
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Case 1: Sew What? Inc.

Sew What? provides custom theatrical draperies and
fabrics for stages, concerts, fashion shows, and
special events worldwide.
After launching the company web site, they acquired
clients from all over the world and their revenue has
been growing more than 45% per year.
Sew What? runs most of its business with Intuits
Quick-Books Enterprise Solutions & Dell PowerEdge
servers.
Recently, the National Federation of Independent
Businesses (NFIB) and Dell Inc. presented Sew
What? Small Business Excellence Award in
recognition of its innovative use of technology to
improve its customers experience.
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Case Study Questions

1. How do information technologies

contribute to the business success
of Sew What? Inc.? Give several
examples from the case regarding
the business value of information
technology that demonstrate this
conclusion.

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Case Study Questions

2. If you were a management

consultant to Sew What? Inc., what
would you advise Megan Duckett to
do at this point to be even more
successful in her business? What
role would information technology
play in your proposals? Provide
several specific recommendations.
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Case Study Questions

3. How could the use of information

technology help a small business
you know be more successful?
Provide several examples to support
your answer.

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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 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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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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What Should Business Professionals Know?

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Fundamental Roles of IS in Business

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Trends in Information Systems

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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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Types of Information Systems

Operations Support Systems

Efficiently process business transactions

Control industrial processes
Support communication and collaboration
Update corporate databases

Management Support Systems

Provide information as reports and displays
Give direct computer support to managers
during decision-making

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Purposes of Information Systems

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Operations Support Systems

What do they do?

Efficiently process business
transactions
Control industrial processes
Support communications and
collaboration
Update corporate databases

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Types of Operations Support Systems

Transaction Processing Systems
Record and process business transactions
Examples: sales processing, inventory systems,
accounting systems

Process Control Systems

Monitor and control physical processes
Example: using sensors to monitor chemical
processes in a petroleum refinery

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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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

Management Information Systems (MIS)
Reports and displays
Example: daily sales analysis reports

Decision Support Systems (DSS)

Interactive and ad hoc support
Example: a what-if analysis to determine where
to spend advertising dollars

Executive Information Systems (EIS)

Critical information for executives and managers
Example: easy access to actions of competitors
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Other Information Systems

Expert Systems
Provide expert advice
Example: credit application advisor

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

Strategic Information Systems

Help get a strategic advantage over
customer
Examples: shipment tracking, e-commerce
Web systems

Functional Business Systems

Focus on operational and managerial
applications of basic business functions
Examples: accounting, finance, or marketing
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IT Challenges and Opportunities

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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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Challenges and Ethics of IT

Application of IT
Customer relationship management
Human resources management
Business intelligence systems

Potential Harm
Infringements on privacy
Inaccurate information
Collusion
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Challenges and Ethics of IT

Potential Risks
Consumer boycotts
Work stoppages
Government intervention

Possible Responses
Codes of ethics
Incentives
Certification
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Ethical Responsibilities

What uses of IT might be considered

improper or harmful to other
individuals or society?
What is the proper business use of
the Internet
or a companys IT resources?
How can you protect yourself from
computer crime?
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IT Careers
Economic downturns have affected all job
sectors, including IT
Rising labor costs are pushing jobs to India,
the Middle East, and Asia-Pacific countries
However, IT employment opportunities are
strong, with new jobs emerging daily
Shortages of IT personnel are frequent
The long-term job outlook is positive and
exciting
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IT Careers

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IT Careers
Job increases will be driven by
Rapid growth in computer system design and
related services
The need to backfill positions
Information sharing and client/server
environments
The need for those with problem-solving skills
Falling hardware and software prices, which
will fuel expanded computerization of
operations
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The IS Function
The IS function is
A major functional area of business
An important contributor to operational efficiency,
employee productivity, morale, customer service
and satisfaction
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 todays networked business
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System Concepts: A Foundation

System concepts help us understand
Technology: hardware, software, data
management, telecommunications networks
Applications: to support inter-connected
information systems
Development: developing ways to use
information technology includes designing the
basic components of information systems
Management: emphasizes the quality, strategic
business value, and security of an organizations
information systems
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Real World Case: JetBlue and the Veterans

Administration
Good IT processes are as important as hardware
and software when it comes to creating business
value through the use of technology.
Even seemingly smaller and less critical processes
can have ramifications of a large magnitude in the
interconnected world in which we live.
The information system, which was developed by
JetBlue in 24 hours and implemented in the middle
of crisis in 2007, has now been implemented as a
full-time system in the company.
At Veterans Administration an unscheduled system
failure took down key applications in 17 (VA)
medical facilities for a day
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Case Study Questions

1. Eric Brinker of JetBlue noted that

the database developed during the
crisis had not been needed before
since the company had never
experienced a meltdown. What are
the risks and benefits associated
with this approach to IT planning?
Provide some examples of each.
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Case Study Questions

2. With hindsight, we now know that the

decision made by Eric Raffin of the VA
not to fail over to the Denver site was
the correct one. However, it involved
failing to follow established backup
procedures. With the information he
had at the time, what other
alternatives could he have
considered? Develop at least two of
them.
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Case Study Questions

3. A small, undocumented change

resulted in the collapse of the VA
system, largely because of the high
interrelationship between its
applications. What is the positive
side of this high degree of
interconnection, and how does this
benefit patients? Provide examples
from the case to justify your answer.
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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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Cybernetic System
All systems have input, processing, and
output
A cybernetic system, a self-monitoring,
self-regulating system, adds feedback and
control:
Feedback is data about the performance of a
system
Control involves monitoring and evaluating
feedback to determine whether a system is
moving toward the achievement of its goal
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A Cybernetic System

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A Business as a System

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Other System Characteristics

If a system is one of the components of

a larger system, it is a subsystem
The larger system is an environment

Several systems may share the same

environment
Some may be connected via a shared
boundary, or interface

Types of systems
Open
Adaptive
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Components of an IS

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Information System Resources

People Resources
Specialists
End users

Hardware Resources
Machines
Media

Software Resources
Programs
Procedures
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Information System Resources

Data Resources
Product descriptions, customer records,
employee files, inventory databases

Network Resources
Communications media, communications
processors, network access and control
software

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, 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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Recognizing Information Systems

Business professionals should be able

to look at an information system and
identify
The people, hardware, software, data,
and network resources they use
The type of information products they
produce
The way they perform input, processing,
output, storage, and control activities
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Case 3: Heidelberg, Honeywell, and Eaton

Today, it is not be enough for a company to
offer services but it will have to provide smart
services.
To provide smart services, companies must
use information technology to build smart
products.
Smart products can detect that a part is
approaching failure and alert users, thus
giving the company opportunity to provide
maintenance services and enjoy the resulting
benefits.
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Case 3: Heidelberg, Honeywell, and Eaton

Heidelberg developed the technology to monitor
its equipment remotely, using built-in sensors,
networking microprocessors, and other
information technologies.
With such smart services, Heidelberg now offers
total support of its products.
Eaton corporation has developed a product called
Home Heartbeat which monitors the status of
various home systems and alerts the homeowner
when something is wrong.

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Case Study Questions

1. Why should manufacturing companies build smart
products and provide smart services? What business
benefits can they gain? Provide several examples
beyond those discussed in this case.
2. What information technologies are used by the
companies in this case to build smart products and
provide smart services? What other IT components
might be used? Give examples of the capabilities they
would provide.
3. What are some limitations of a smart products and
smart services strategy? Give several examples of
challenges that a business might encounter, and
explain how it might overcome them.
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Case 4: Lufthansa
In 2001, Lufthansa launched the Lufthansa Mobile
Initiative, which aimed to provide all pilots with
notebook computers.
It helps 3,500 highly mobile airline pilots plugged into
the corporate infrastructure, that informs them about
schedules, weather events, and other facts that affect
their jobs throughout the world.
The Lufthansa Mobile Initiative is yielding significant
productivity and efficiency improvements, while
keeping costs manageable.
Pilots use their notebook computers for computerbased training whether they are learning about new
aircraft or things like specific hydraulic systems.
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Case Questions
1. Are many of Lufthansas challenges identified in
the case similar to those being experienced by
other businesses in todays global economy?
Explain and provide some examples.
2. What other tangible and intangible benefits,
beyond those identified by Lufthansa, might a
mobile workforce enjoy as a result of deploying
mobile technologies? Explain.
3. Lufthansa was clearly taking a big risk with their
decision to deploy notebook computers to their
pilots. What steps did they take to manage that
risk, and what others might be needed in todays
business environment? Provide some examples.
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