Management Information Systems,

Sixth Edition

Chapter 1
Business Information Systems:
An Overview
 Objectives
• Explain why information technology matters
• Define digital information and explain why digital
systems are so powerful and useful
• Explain why information systems are essential to
business
• Describe how computers process data into useful
information for problem solving and decision
making
• Identify the functions of different types of
information systems in business

Management Information Systems, Sixth Edition 2

 Objectives (continued)

• Describe careers in information technology

• Identify major ethical and societal concerns
created by widespread use of information
technology

Management Information Systems, Sixth Edition 3

 Does Information Technology Matter?

• Hackett Group study: “Does IT Matter? Hackett

Concludes the Answer is Yes”
– World’s best performing companies spent 7%
more per employee on IT than typical companies
– They recouped the investment fivefold in lower
operational costs
• Today’s business professionals must know how
to develop and use IT

Management Information Systems, Sixth Edition 4

 The Power of Digital Systems

• Binary counting system uses only two digits:

0 and 1
• Digital systems:
– Computers and devices that use the binary
system
– Can represent any information as a combination
of zeros and ones
• Information can be represented, stored,
communicated, and processed digitally

Management Information Systems, Sixth Edition 5

 The Power of Digital Systems
(continued)
• Digital information is stored and communicated
by means of electromagnetic signals
– Extremely fast
– Digital copy is an exact copy of the original
• Accuracy and speed make digital systems
powerful, useful, and important

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 The Purpose of Information Systems

• Businesses use information systems

– To make sound decisions
– To solve problems
• Problem: any undesirable situation
• Decision: arises when more than one solution to
problem exists
• Both problem solving and decision making
require information

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 The Purpose of Information Systems
(continued)
• Keys to success in business:
– Gathering correct information efficiently
– Storing information
– Using information
• Purpose of information systems is to support
these activities

Management Information Systems, Sixth Edition 8

 Data, Information,
and Information Systems
• “Data,” “information,” and “system” are
commonly used terms
• Important to understand their similarities and
differences

Management Information Systems, Sixth Edition 9

 Data vs. Information

• Data: a given or fact

– Can be number, statement, or picture
– Is the raw material in the production of
information
• Information: facts or conclusions that have
meaning within context
– Composed of data that has been manipulated

Management Information Systems, Sixth Edition 10

 Data Manipulation

• Data is manipulated to make useful information

– New information can be generated from data,
such as averages, trends, etc.
• Survey is common method of collecting data
• Raw data is hard to read
• Information is more useful to business than data

Management Information Systems, Sixth Edition 11

 Generating Information

• Process: the manipulation of data

– Usually produces information
– May produce more data
• A piece of information (output of a process) in
one context may be considered data (input to a
process) in another context

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 Generating Information (continued)

Management Information Systems, Sixth Edition 13

 Information in Context

• Not all information is useful

• To be useful, information must be:
– Relevant
– Complete
– Accurate
• In business, information must also be:
– Current
– Obtained in a cost-effective manner

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 Information in Context (continued)

Management Information Systems, Sixth Edition 15

 What Is a System?

• System: array of components that work together

to achieve goal or goals
• System
– Accepts input
– Processes input
– Produces output

Management Information Systems, Sixth Edition 16

 What is a System? (continued)

• System may have multiple goals

• System may contain subsystems
• Subsystem: component of a larger system
• Subsystems have subgoals that contribute to
main goal
• Subsystems can receive input from and transfer
output to other subsystems

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 What is a System? (continued)

Management Information Systems, Sixth Edition 18

 What is a System? (continued)

• Closed system: has no connections with other

systems
• Open system: interfaces and interacts with
other systems
– Often a subsystem of a bigger system
– Subsystems by definition are always open
• Information system (IS): components that work
together to process data and produce
information

Management Information Systems, Sixth Edition 19

 Information and Managers

• Systems thinking: thinking of an organization in

terms of subsystems
– Powerful management approach that creates a
framework for problem solving and decision
making
– Helps keep managers focused on overall goals
• Database: collection of electronic records
• Information systems automate exchange of
information among subsystems

Management Information Systems, Sixth Edition 20

 Information and Managers (continued)

• Information map: description of data and

information flow within an organization
– Shows a network of information subsystems that
exchange information with each other and with
the outside world
• Information technology: technologies that
facilitate construction and maintenance of
information systems

Management Information Systems, Sixth Edition 21

 The Benefits of
Human-Computer Synergy
• Humans are relatively slow and make mistakes
• Computers cannot make decisions unless
programmed to do so
• Synergy: combining resources to produce
output that exceeds the sum of outputs of the
separate resources by themselves
• Human-computer combination allows human
thought to be translated into efficient processing
of data

Management Information Systems, Sixth Edition 22

 The Benefits of
Human-Computer Synergy (continued)

Management Information Systems, Sixth Edition 23

 Information Systems in Organizations

• Information system consists of data, hardware,

software, telecommunications, people, and
procedures
• Computer-based Information system: system
with one or more computers at center
• Organizations lag behind and lose
competitiveness if they do not use information
systems

Management Information Systems, Sixth Edition 24

 Information Systems in Organizations
(continued)
• Trends that have made information systems important
in business:
– Growing power and decreasing cost of computers
– Growing capacity and decreasing costs of data storage
devices
– Increasing variety and ingenuity of computer programs
– Available, reliable, affordable, and fast communications
links to the Internet
– Growth of the Internet
– Increasing computer literacy of the workforce

Management Information Systems, Sixth Edition 25

 Information Systems in Organizations
(continued)

Management Information Systems, Sixth Edition 26

 The Four Stages of Processing

• Input: collect and introduce data to system

– Transaction: a business event, usually entered
as input
– Transaction processing system (TPS): a
system that records transactions
– Input devices include keyboards, bar code
readers, voice recognition systems, touch
screens
• Data processing: perform calculations on input

Management Information Systems, Sixth Edition 27

 The Four Stages of Processing
(continued)
• Output: what is produced by the information
system
– Output devices include printers and speakers
• Storage: maintaining vast amounts of data
– Storage devices include optical discs

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 Computer Equipment
for Information Systems
• Different technologies are used to support the
four data processing functions:
– Input devices: receive input
– Computers: process data
– Output devices: display information
– Storage devices: store data
– Network devices: transfer data
• Telecommunications: communication that takes
place between computers over great distances

Management Information Systems, Sixth Edition 29

 Computer Equipment
for Information Systems (continued)

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 From Recording Transactions to
Providing Expertise:
Types of Information Systems
• Different types of information systems serve
different functions
• Capabilities of applications have been combined
and merged
• Management Information System: a system
that supports planning, control, and making
decisions

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 Transaction Processing Systems

• Transaction processing system (TPS): most

widely used type of system
– Records data collected at point where
organization transacts business with other parties
• Point-of-sale machines: record sales
– Include cash registers, ATMs, and purchase order
systems

Management Information Systems, Sixth Edition 32

 Supply Chain Management Systems

• Supply chain: sequence of activities involved in

producing and selling products or services
– For products, activities include marketing,
purchasing raw materials, manufacturing and
assembly, packing and shipping, billing,
collection, and after-sale services
– For services, activities include marketing,
document management, and monitoring
customer portfolios

Management Information Systems, Sixth Edition 33

 Supply Chain Management Systems
(continued)
• Supply chain management (SCM) systems:
systems that support these activities
• Also known as enterprise resource planning
systems
• SCM systems eliminate the need to reenter data
that was captured elsewhere in the organization
• An SCM is an enterprise application

Management Information Systems, Sixth Edition 34

Customer Relationship
Management Systems
• Customer relationship management (CRM)
systems: systems for managing relations with
customers
– Used in combination with telephones to provide
customer service
– Often linked to Web applications that track online
transactions
• Retaining loyal customers is less expensive than
acquiring new ones

Management Information Systems, Sixth Edition 35

 Business Intelligence Systems

• Business intelligence (BI) systems: systems

that glean relationships and trends from raw
data to help organization compete
– Often contain statistical models
– Access large pools of data
• Data warehouse: large database that usually
store transactional records

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 Decision Support and Expert Systems

• Decision support system (DSS): supports

decision making
– Relies on models to produce tables
– Extrapolates data to predict outcomes
– Helps answer “What if?” questions
• Expert system (ES): supports knowledge-
intensive decision making
– Uses artificial intelligence techniques
– Can preserve the knowledge of retiring experts

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 Geographic Information Systems

• Geographic information system (GIS): ties

data to physical locations
• Represents data on a map in different formats
• May reflect demographic information in addition
to geographic information
• May use information from global positioning
system (GPS) satellites
– Examples: Google Earth, Mapquest

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 Geographic Information Systems
(continued)

Management Information Systems, Sixth Edition 39

 Information Systems
in Business Functions
• Functional business area: services within a
company that support main business
– Includes accounting, finance, marketing, and
human resources
– Part of a larger enterprise system

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 Accounting

• Accounting information systems:

– Help record transactions
– Produce periodic statements
– Create required reports for law
– Create supplemental reports for managers
– Contain controls to guarantee adherence to
standards

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 Finance

• Finance systems:
– Facilitate financial planning and business
transactions
• Tasks include organizing budgets, managing
cash flow, analyzing investments, and making
decisions

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 Marketing
• Marketing’s purpose is to pinpoint likely customers
and promote products
• Marketing information systems:
– Analyze demand for products in regions and
demographic groups
– Identify trends in demand for products/services
– Help analyze how advertising campaigns affect
profit
• Web provides opportunity to collect marketing data
as well as promote products and services

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 Human Resources

• Human resource management systems aid

record-keeping
– Must keep accurate records
– Aids recruiting, selection, placement, benefits
analysis, requirement projections
• Performance evaluation systems provide
grading utilities

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 Web-Empowered Enterprises

• E-commerce: buying and selling goods and

services through Internet
• Internet is a vast network of computers
connected globally
• Web has a profound impact on information
systems
– An emerging advertising medium
– A place to conduct e-commerce

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 Careers in Information Systems

• Information technology professionals are

increasingly in demand
• Network administrator, system administrator,
system analyst, software engineering, data
communications analyst, and database
administrator jobs are increasing in demand

Management Information Systems, Sixth Edition 46

 Help Desk Technician

• Help desk technician:

– Supports end users in their daily use of IT
– Often provides help via telephone
– May use software that gives them control of the
user’s PC
– May need to have knowledge of a wide variety of
PC applications

Management Information Systems, Sixth Edition 47

 Systems Analyst
• Systems analyst:
– Researches, plans, and recommends software and
systems choices
– Responsible for developing cost analyses, design
considerations, implementation timelines, and
feasibility studies
• Involves analyzing system requirements,
documenting development efforts, and providing
specifications for programmers
• Requires communication and presentation skills

Management Information Systems, Sixth Edition 48

 Database Administrator

• Database administrator (DBA): responsible for

databases and data warehouses
– Develops and acquires database applications
– Must adhere to federal, state, and corporate
regulations to protect privacy of customers and
employees
– Responsible for securing the database

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 Network Administrator

• Network administrator: acquires, implements,

manages, maintains, and troubleshoots
networks
• Implements security
– Firewalls
– Access codes

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 System Administrator

• System administrator: manages an

organization’s computer operating systems
– Must ensure that operating systems work
together, support business requirements, and
function properly
– Responsible for backup and recovery, adding and
deleting user accounts, performing system
upgrades

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 Webmaster

• Webmaster: creates and maintains Web site

– Must be familiar with Web transaction software,
payment-processing software, security software
– Manages both the intranet and extranet
• Demand for Webmasters grows as more
businesses use Web

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 Chief Security Officer

• Chief security officer (CSO): supervises

security of information system
• Position exists due to growing threat to
information security
• Usually reports to chief information officer (CIO)

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Chief Information Officer and
Chief Technology Officer
• Chief information officer (CIO): responsible for
all aspects of information system
– Often a corporate vice president
– Must have technical understanding of information
technologies as well as business knowledge
• Chief technology officer (CTO): has similar
duties as CIO

Management Information Systems, Sixth Edition 54

Chief Information Officer and
Chief Technology Officer (continued)

Management Information Systems, Sixth Edition 55

 Summary

• Computer-based information systems pervade

almost every aspect of our lives
• A system is a set of components that work
together to achieve a common goal
• Subsystem: a system performs a limited task
that produces an end result, which must be
combined with other products from other
systems to reach an ultimate goal
• Data processing has four stages

Management Information Systems, Sixth Edition 56

 Summary (continued)

• Any IS that helps in management is a

management information system (MIS)
• Many different types of MIS
• Enterprise application systems (SCM or ERP) tie
together different functional areas of a business
• ISs are used in many business functions,
including accounting, finance, marketing, and
human resources

Management Information Systems, Sixth Edition 57

 Summary (continued)

• The job prospects for IT professionals are bright

• IT has created societal concerns regarding
privacy, identity theft, spam, and Web
annoyances

Management Information Systems, Sixth Edition 58