Chapter 1

Foundations of Information Systems in Business

McGraw-Hill/Irwin Copyright 2010 by the McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives

Understand the concept of a system and how it relates to information systems Explain why knowledge of information systems is important for business professionals
Identify five areas of information systems knowledge they need

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Learning Objectives

Give examples to illustrate how information systems can support a firms

Business processes
Managerial decision making Strategies for competitive advantage

Provide examples of information systems from your experiences with business organizations in the real world

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Learning Objectives

Identify challenges that managers might face in managing successful, ethical development and use of information technology Provide examples of the components of real world information systems Become familiar with the myriad of career opportunities in information systems

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Foundation Concepts

Vital component of successful businesses

Improves efficiency and effectiveness of business processes

Why study information systems and information technology? Strengthens competitive position in rapidly changing marketplaces Facilitates managerial decision making & workgroup collaboration
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Case 1: Value Through Business Intelligence

eCourier
Tracks customer satisfaction in real time Immediate attention to complaints, problems Allows GPS tracking of couriers and orders Books 95% of deliveries online Uses SeeWhy software to spot trends and anomalies Optimizes system on an ongoing basis
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Case 1: Value Through Business Intelligence

Cablecom
Uses online surveys to retain customers Responds to complaints and problems within 24 hours

Bryan Cave
Optimizes resources while delivering highest customer value Allows lawyers to track budgets in real time Provides diversity dashboard Enables firm to monitor client needs Allows quick response to demands
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Case Study Questions

How do information technologies contribute to the business success of the companies depicted in the case?
Provide an example from each company, explaining how the technology implemented led to improved performance

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Case Study Questions

The Bryan Cave law firm used BI technology to improve the availability, access, and presentation of existing information; this allowed them to provide tailored, innovative services to customers
What other professions could benefit from a similar use of these technologies, and how?
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Case Study Questions

Cablecom developed a prediction model to better identify customers at risk of switching to another company
In addition to those noted in the case, what other actions could be taken if that information were available? Would you consider letting some customers leave anyway?

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What is an Information System?

Communication networks Policies and procedures

People

Any organized combination of

Data resources Hardware and software
Stores, retrieves, transforms, and disseminates information in an organization
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Early Information Systems

They werent computerized

Smoke signals Library card catalogs Book bag, day planner, and notebooks Cash registers Accounting ledger
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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, 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 Support communication, coordination, 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

Transaction processing

Operations

Process control

Enterprise collaboration
Updating of corporate databases

Decision support systems Management Executive information systems

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Purposes of Information Systems

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Types of Operations Support Systems

Transaction Processing Systems Record and process business transactions

Sales, inventory, and accounting

Process Control Systems Monitor and control physical processes Using sensors to monitor refinery processes Enterprise Collaboration Systems Enhance team/workgroup communication Email, video conferencing
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Two Ways to Process Transactions

Batch Processing
Accumulate transactions over time and then process periodically
Ex: Banks process all checks in a batch at night

Online Processing
Process all transactions immediately

Ex: A bank processes ATM withdrawals 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

Provides expert advice Credit application advisor

Knowledge Management Systems

Creation, organization, dissemination of knowledge throughout company Intranet access to best business practices

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Other Information Systems

Strategic Information Systems

Helps get strategic advantage Shipment tracking, e-commerce

Functional Business Systems

Focus on operational and managerial application of basic business functions

Accounting, finance, marketing

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IT Challenges and Opportunities

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Measuring IT Success

Efficiency
Minimizes cost, time, use of information resources

Effectiveness
Supports business strategies Enables business processes Enhances organizational structure and culture Increases 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 resource management Business intelligence systems

Potential Harm
Privacy infringement Inaccurate information
Collusion

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Challenges and Ethics of IT

Consumer boycotts

Potential Risks

Work stoppages Government intervention

Codes of ethics Possible Responses 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 affecting all job sectors, including IT Negative

Rising labor costs are pushing jobs to India, the Middle East, Asia-Pacific
IT employment opportunities strong, with new jobs emerging daily Positive Frequent shortages of IT personnel 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 Need for those with problem-solving skills Falling hardware and software prices, which fuel expanded computerization of operations
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The IS Function

Major functional area of business

Dynamic and challenging career opportunity

Important contributor to operational efficiency, employee productivity, morale, customer service/satisfaction

Major source of information and support for decision making

Vital ingredient in developing competitive products and services in global marketplace

Key component of todays networked business

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System Concepts: A Foundation

Technology
Hardware, software, data management, telecommunications networks To support inter-connected information systems Finding ways to use information technology; includes designing basic information system components Emphasizes the quality, strategic business value, and security of an organizations information systems
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Applications

Development

Management

Case 2: JetBlue & the VA

Good IT processes are as important as hardware and software when it comes to creating business value
Even smaller, less-critical processes can have ramifications of a large magnitude in the interconnected world in which we live

The IS developed by JetBlue in 24 hours, implemented during a crisis in 2007, is now a full-time system An unscheduled system failure took down key applications in 17 VA medical facilities for a day
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Case Study Questions

Eric Brinker of JetBlue noted that the database developed during the crisis had not been needed before; the company had never experienced a meltdown
What are the risks and benefits associated with this approach to IT planning?
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Case Study Questions

With hindsight, we know that the decision made by Eric Raffin of the VA to not fail over to the Denver site was the correct one. But, it involved ignoring established backup procedures
With the information he had at the time, what other alternatives could he have considered?

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Case Study Questions

A small, undocumented change resulted in the collapse of the VA system, largely due to the high interrelationship between its applications
What is the positive side of this high degree of interconnection, and how does this benefit patients?

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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

Processing Transformation process converts input into output

Output

Capturing and assembling elements that enter the system to be processed

Transferring transformed elements to their ultimate destination

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Cybernetic System

All systems have input, processing, output A cybernetic system, a self-monitoring, selfregulating system, adds
Feedback system performance data

Control 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

A system that is a component of a larger system is a subsystem

The larger system is an environment

Several systems may share one environment Connected via a shared boundary (interface)

Types of systems
Open and Adaptive

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Components of an IS

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Information System Resources

People Information System Resources

Information

Hardware Software

Networks

Data

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Data Versus Information

Data are raw facts, typically about physical phenomena or business transactions
Specifically, objective measurements of the attributes of entities

Information is data that was converted into meaningful and useful context for end users
Aggregated, manipulated, and organized Analyzed and evaluated Placed in proper context for a human user
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Basic IS Activities

Input
Processing Output Storage

Control

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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: Sew What? Inc.

Provides custom theatrical draperies and fabrics for stages, concerts, fashion shows, and special events worldwide
Launched web site and acquired clients from all over the world; revenue grew more than 45% per year Runs its business with Intuits Quick-Books Enterprise Solutions & Dell PowerEdge servers Awarded Small Business Excellence Award for its innovative use of technology to improve customers experience
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Case Study Questions

How do information technologies contribute to the business success of Sew What? Inc.?
Give examples from the case regarding the business value of information technology that demonstrate this conclusion
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Case Study Questions

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 specific recommendations

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Case Study Questions

How could the use of information technology help a small business you know be more successful?
Provide examples to support your answer

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