Class I

IT Knowledge
Chapter 1
Information with Organization
Information
The word information has existed in the English language for far longer than the word
data. The concept of informing someone is well understood, and that gives us some
clues to meaning. Data that is (1) accurate and timely, (2) specific and organized for a
purpose, (3) presented within a context that gives it meaning and relevance, and (4) can
lead to an increase in understanding and decrease in uncertainty.

Information is the data that has been processed into a form that gives meaningful
message to the recipient and is of real or perceived value in current or progressive
decision.

Information is valuable because it can affect behavior, a decision, or an outcome. For

example, if a manager is told his/her company's net profit decreased in the past month,
he/she may use this information as a reason to cut financial spending for the next month.
A piece of information is considered valueless if, after receiving it, things remain
unchanged.

Value of information:
Information is of high value if it is –

Reliable (accurate)
Clean
Complete
Right quantity – avoiding intimidating overload
Relevant – and perceived as relevant by the receiver

For example,

President Barack Obama’s top intelligence official sent a memo to his staff saying "high
value information" was obtained during interrogations using controversial techniques.

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Some of the characteristics of good information are discussed as follows:

i. Understandable:
Since information is already in a summarized form, it must be understood by the receiver so that
he will interpret it correctly. He must be able to decode any abbreviations, shorthand notations
or any other acronyms contained in the information.

ii. Relevant:
Information is good only if it is relevant. This means that it should be pertinent and meaningful
to the decision maker and should be in his area of responsibility.

iii. Complete:
It should contain all the facts that are necessary for the decision maker to satisfactorily solve the
problem at hand using such information. Nothing important should be left out. Although
information cannot always be complete, every reasonable effort should be made to obtain it.

iv. Available:
Information may be useless if it is not readily accessible ‘in the desired form, when it is needed.
Advances in technology have made information more accessible today than ever before.

v. Reliable:
The information should be counted on to be trustworthy. It should be accurate, consistent with
facts and verifiable. Inadequate or incorrect information generally leads to decisions of poor
quality. For example, sales figures that have not been adjusted for returns and refunds are not
reliable.

vi. Concise:
Too much information is a big burden on management and cannot be processed in time and
accurately due to “bounded rationality”. Bounded rationality determines the limits of the
thinking process which cannot sort out and process large amounts of information. Accordingly,
information should be to the point and just enough – no more, no less.

vii. Timely:
Information must be delivered at the right time and the right place to the right person. Premature
information can become obsolete or be forgotten by the time it is actually needed.
Similarly, some crucial decisions can be delayed because proper and necessary information is
not available in time, resulting in missed opportunities. Accordingly the time gap between
collection of data and the presentation of the proper information to the decision maker must be
reduced as much as possible.

viii. Cost-effective:

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The information is not desirable if the solution is more costly than the problem. The cost of
gathering data and processing it into information must be weighed against the benefits derived
from using such information.

Data

Better Data – Better Business

Data comes from the Latin word datum, meaning “something given.” Over time, the
English language has evolved to use data as plural. Information in raw or unorganized
form (such as alphabets, numbers, or symbols) that refer to, or represent, conditions,
ideas, or objects is call data . Data is limitless and present everywhere in the universe.

Data is the raw materials of information. A data processing system processes data into
information.

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Difference between Data and Information

When improving decision making in a business, we need to understand the difference

between data and information to define our data quality goals.

Data and information are not the same–and they should not be confused.

Comparison chart

Data Information
Meaning Data is raw, unorganized facts that When data is processed, organized,
need to be processed. Data can be structured or presented in a given context
something simple and seemingly so as to make it useful, it is called
random and useless until it is information.
organized.
Example Each student's test score is one The average score of a class or of the
piece of data. entire school is information that can be
derived from the given data.
Etymology "Data" comes from a singular Latin "Information" is an older word that dates
word, datum, which originally back to the 1300s and has Old French and
meant "something given." Its early Middle English origins. It has always
usage dates back to the 1600s. referred to "the act of informing, " usually
Over time "data" has become the in regard to education, instruction, or
plural of datum. other knowledge communication.
Nature Raw, unanalyzed facts, figures and Useful knowledge derived from the data
events
Process Data is unprocessed instructions. If data is processed will become
information

Basis Data is material for information Information is gathering all material to be

Source Data is raw material for data
processing. Data relates to fact,
event and transactions.
it.
Information is data that has been
processed in such a way as to be
meaningful to the person who receives it.
It is anything that is communicated.

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Meaning Data is raw material which is
unprocessed for data processing. It
is normally entered by input
devices into computer and it can be
in any form, useable or not. It does
not bring meaning, some of them is
even in computer language.
Information is data that has been
processed, it can be useful for the person
receiving since it brings meaning. It can
be understood by human and normally
convey by output devices to people.

Example of Data:
Joe, Smith, 1234 Circle,SLC,UT,8404,8015553211

Example of Information:
Joe Smith
1234 Circle
Salt Lake City, UT 84084
(801)555-3211

Usefulness of data:
 Companies that sell product may mail order need to keep up to date lists of
name and
 Addresses of customers who may be interested in making a purchase. This data
is very
 Valuable and can be sold to other “like” companies. What would make this list
become of little value?
 What could be added to the data so that it can be kept up to date?
 Is the cost of keeping data up to date, accurate and complete worthwhile to the
company?

What are high value / high risk records and information?

High value and high risk records and information are determined by the business
context. Each organization has areas of business which are high risk and high value, or
which are critical because they are the core business of the organization. Identifying high
risk and high value business processes will depend on the nature of your organization’s

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business. For example, there may be business areas in your organization which
undertake:

 significant investment by Government or major contributions to the NSW

economy

 direct contact with individuals (for example, a regulatory, enforcement, health or

welfare activity where there may be dispute)

 development of policy which will impact on individuals and communities or

rights and entitlements

 management of natural resources, the protection and security of the state, or

infrastructure in NSW

 processes that are open to corruption or the potential of corrupt behavior, or

 a major program of international/national/state significance.

Importance of Information

Bill Gates, founder of Microsoft, stated:

“How you manage information determines whether you win
or lose.”

To gain the maximum benefits from your company's information system, you have to
exploit all its capacities.

To increase the information system's effectiveness, you can either add more data to make
the information more accurate or use the information in new ways.

Information systems gain their importance by processing the data from company inputs
to generate information that is useful for managing your operations.

Information technology is fundamental to the success of any business.

The information that is collected and/or assembled in any business is as valuable

resource as capital or people.

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Information may be processed, summarized and analyzed by computers before being

used by managers as the basis for decision making.

to get benefit, Information must be –

Accurate
Complete
Up-to-date

How Information Systems Impact Organizations and Business Firms

From an economic point of view, information systems technology can be seen as a

factor of production that can be freely substituted for capital and labor. As
information systems technology automates the production process, less capital and
labor are required to produce a specified output.

Relationship between Information Technology and Business

Information and communication technology has made rapid advances since the early
1990s, and has dramatically altered the way in which modern businesses work. It has
also enabled a greater number of people to work from home.
Relationship between information and organization: Information system and
organization has a complex two-way relationship. This complex two-way relationship
is mediated by many factors, not the least of which are the decisions made or not
made by managers. Other factors mediating the relationship include the
organizational culture, structure, politics, business process and environment.

Information Technology: Impact on the Economy

Information technology has impacted the economy in a number of ways. The most
noticeable changes involve e-commerce, marketing tactics, and facilitation of
globalization, job insecurity, and job design. This lesson will explore a variety of
concepts pertaining to the changing economy, including downsizing, outsourcing, the
use of cookies, the benefits and costs of globalization, and the impact of e-commerce.

E-Commerce

The last decade has seen incredible changes to the economy due to the World Wide
Web. Entrepreneurs have harnessed technology and changed the way we conduct and
transact business. Fortunes have been made and lost. Some experienced huge success
and became dot-com millionaires or billionaires overnight, while others became dot-
bomb failures.
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Meet Harry. He's one of the dot-com millionaires. He's experienced success and
helped forge a new economy. Electronic commerce, or e-commerce, enabled by
information technology, has fueled many changes and created a new economy. E-
commerce is the buying and selling of products over the Internet.

Redefining Organizational Boundaries

E-commerce eliminates barriers such as time, geography, language, currency, and

culture. Harry was able to rejuvenate his struggling hardware business by opening an
online storefront on the Internet. He can now compete with larger rivals like Home
Depot and Lowe's. He has also gained access to millions of consumers across the globe
he otherwise would not have been able to reach.

Information technology has redefined organizational boundaries. No longer are

businesses confined to brick and mortar stores. Transactions such as payments can be
conducted over the Internet. Relationships with customers, suppliers, and partners can be
strengthened and streamlined. Inventory can be kept electronically. Purchase orders can
easily be exchanged among different companies electronically.

Consider the increasing popularity of Cyber Monday. Cyber Monday is the term used to
describe the Monday after Thanks giving, in which companies offer great deals to
persuade consumers to purchase products. It is the official kick-off to the holiday
shopping season. It is growing in popularity and is in strong competition with Black
Friday, the day after Thanks giving, which is often cited as the biggest shopping day of
the year in the United States. Harry sees a 15% increase in sales on Cyber Monday, when
he offers his lowest prices and best deals of the season.

Marketing and Privacy

With e-commerce, sales and advertising can be customized to the individual consumer,
and websites can easily monitor consumer behavior without knowledge or consent.
Harry can track his customers' movements with the use of cookies. Cookies are small
data files that are written and stored on the user's hard drive by a website when that user
visits the site with a browser. The cookies provide Harry with information on pages
visited, items examined, and dates of visits. This information is stored in the cookie and
sent back to the company. Based on the information Harry receives, he can customize his
marketing to fit the needs of each individual customer. This information allows Harry's
Hardware to target customers based on preferences and increase sales.

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Companies like Harry's Hardware gather customer information for targeted marketing
and advertising. It is much more effective to send a user an advertisement specific to
their likes rather than just a general advertisement. The ability to predict consumer
preferences and behavior is greatly increased using this method. The concern that arises
is privacy. Information privacy is the right to determine when and to what extent
information about oneself can be communicated to others. Information technology has
created a more open society where privacy grows scarcer with the development of each
new technological innovation. Some are concerned about the data collected and how it
will be used.

Globalization

Globalization is the increasing movement of goods, services, and capital across

national borders. Global commerce has transformed the world's economy. In fact, one
fourth of all goods and services produced worldwide are sold to other nations.

The acceleration of globalization has been driven by several factors, one of which is
technological innovation. Software, hardware, Internet, fiber optic cables, and much
more have made it easier and faster for companies to communicate with employees,
partners, and suppliers from all over the globe in real time. Technology has improved
transportation, making it faster and cheaper to move goods from one place to another.
Globalization transfers technology. This means the best and newest innovations
spread quickly and become accessible to people all over the globe. Globalization
tends to reduce prices for consumers. Costs are kept down by moving operations
abroad, where it may be cheaper to hire labor or conduct business.

Transaction cost theory states that organizations grow in size because they can
obtain certain products or services internally at lower cost than by using external
firms in the marketplace. By lowering the cost of market participation (transaction
costs) information technology allows firms to obtain goods and services more
cheaply from outside sources than through internal means. Information systems can
thus help firms increase revenue while shrinking in size.

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THE TRANSACTION COST THEORY OF THE IMPACT OF INFORMATION

TECHNOLOGY ON THE ORGANIZATION

Firms traditionally grew in size to reduce transaction costs. IT potentially reduces the
costs for a given size, shifting the transaction cost curve inward, and opening up the
possibility of revenue growth without increasing size, or even revenue growth
accompanied by shrinking size.

Agency theory views the firm as a nexus of contracts among self- interested
individuals, who must be carefully supervised to ensure they pursue the interests of
the organization. Information technology can help reduce agency costs, the costs of
coordinating many different people and activities, so that each manager can oversee a
larger number of employees.

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THE AGENCY COST THEORY OF THE IMPACT OF INFORMATION

TECHNOLOGY ON THE ORGANIZATION

As firms grow in size and complexity, traditionally they experience rising agency
costs. IT shifts the agency cost curve down and to the right, enabling firms to increase
size while lowering agency costs.

Behavioral researchers have theorized that information technology facilitates

flattening of hierarchies by broadening the distribution of information to empower
lower-level employees and increase management efficiency.

Attributes of useful and effective information: (Page 29)

Availability
Purpose
Mode and format
Decay
Rate
Frequency

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Completeness
Reliability
Cost Benefit Analysis
Validity
Quality
Transparency
Value of Information

Organization

Organization
A social unit of people that is structured and managed to meet a need or to pursue
collective goals. All organizations have a management structure that determines
relationships between the different activities and the members, and subdivides and
assigns roles, responsibilities, and authority to carry out different tasks. Organizations
are open systems--they affect and are affected by their environment.

Why do organizations exist?

Organizations exist because groups of people working together can
achieve more than the sum of the achievements which the
individuals in the organization could produce when working
separately.

Organization exist because they:

Overcome people’s individual limitations, whether physical or intellectual

For example, one person might struggle all day to carry a

piano upstairs, whereas a team of four people, each taking one
corner, may need to put in much less than a quarter of the effort
of one person to complete the task (Coates et al., 1996, p. 19).

Enable people to specialize in what they do best.

Save time because people can work together or do two aspects of a different
Task at the same time.

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Accumulate and share knowledge (e.g. about how best to build cars)

Enable people to poll their expertise

Enable synergy

What do organizations have in common?

It is well known that most organizations try to do their own things and it usually does
not matter if their particular method is the most economical, cost efficient,
transparent, etc. But when 20 of the larger charities, municipalities, public and private
charities choose to partner with one organization to provide the same basic need, IT
SHOULD TELL YOU SOMETHING!

How do organizations differ? (Page 36)

Ownership – Public vs. Private.
Control
Activity – Manufacturing, service, healthcare.
Profit or Non-Profit Orientation
Size– small local business, multinational company.
Legal Status – Company, partnership, sole trader.
Source of Finance – Share issue, borrowing, government fund.
Technology – high use of technology, low use of technology.

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