An

Introduction
to
Information System
in Organizations

Chapter 1
Principles and Learning Objectives
• The value of Information is directly linked to how it
helps decision makers achieve the organization’s goals.
– Distinguish data from information and describe the
characteristics used to evaluate the quality of data.

• Knowing the potential impact of information systems

and having the ability to put this knowledge to work can
result in a successful personal career, an organization
that reaches its goals, and a society with a higher
quality of life.
– Identify the basic type of business information systems and
discuss who uses them, how they are used, and what kinds of
benefits they deliver.
Principles and Learning Objectives

• The use of information systems to add value to

the organization is strongly influenced by
organizational structure, culture, and change.

– Identify the value-added processes in the supply

chain and describe the role of information systems
within them.
– Provide a clear definition of the terms organizational
structure, culture, and change and discuss how they
affect the implementation of information systems.
Principles and Learning Objectives

• Because information systems are so important,

businesses need to be sure that improvements or
completely new systems help lower costs, increase
profits, improve service, or achieve a competitive
advantage.

– Identify some of the strategies employed to lower costs or

improve service.
– Define the term competitive advantage and discuss how
organizations are using information systems to gain such an
advantage.
– Discuss how organizations justify the need for information
systems.
Principles and Learning Objectives

• Information systems personnel are the key to

unlocking the potential of any new or modified
system.

– Define the types of roles, functions, and careers

available in information systems.
Information System (IS)
• A set of interrelated components that collect, manipulate
and disseminate data and information and provide a
feedback mechanism to meet an objective.

• IS are everywhere. An advance IS used by movie theaters provides

patrons quick retrieval for advance ticket sales ordered through the
telephone, internet, or automated kiosk.
Information Concepts
• To be an effective manager in any area of business, you need to
understand that information is one of an organization’s most valuable and
important resources. This term, however, is often confused with the term
data.
• Data Consist of raw facts, such as an employee’s
name and number of hours worked in a
week, inventory part numbers, or sales
orders. When these facts are organize or
arranged in a meaningful manner, they
become

• Information a collection of facts organized in such a way that they

have additional value beyond the value of the facts
themselves.
• Example: Manager might find the knowledge of total monthly sales
more suited to his purpose(more valuable) than the number of
sales for individual sales representatives.
• Turning data into information is a process, or a set of
logically related tasks performed to achieve a defined
outcome.
• The process of defining relationship among data to
create useful information requires knowledge, is an
awareness and understanding of a set of information and
ways that information can be made useful to support a
specific task or reach a decision.

The transformation
process (applying
knowledge by
Data selecting,
Information
organizing and
manipulating data)

Figure 1.1 Process of transforming Data into Information

Characteristic of Valuable Information

Accurate information is error free

Complete information contains all the important facts.

Economical information should also be relatively economical to

produce. Decision makers must always balance the
value of information with the cost of producing it.

Flexible Information can be used for a variety of purposes.

Reliable information can be depended on. In many cases, the

reliability of the information depends on the reliability of
the data collection method.
Characteristic of Valuable Information

Relevant Information is important to the decision maker.

Simple should also be simple, not overly complex.

Timely Information is delivered when it is needed.

Verifiable This means that you can check it to make sure it is

correct.
Accessible Information should be easily accessible by authorized
users to be obtained in the right format and at the right
time to meet their needs.

Secure Should be secure from access by unauthorized users.

System and Modeling Concepts
System -a set of elements or components that interact to
accomplish goals.
-The elements themselves and the relationships
among them determine how the system work.

Input Processing Output

Feedback

System boundary defines the limit of a system and

distinguishes it from everything else (The
environment).

Configuration the way system elements are organized or arranged.

 Examples of Systems and Their
Elements and Goals
Elements
System Goal
Input Processing Outputs

Fast Food Meat, potatoes, Frying, broiling, Hamburgers. Quickly

Restaurant tomatoes. drink dispensing, French fries, prepared,
Lettuce, bread, heating drinks, desserts inexpensive food
drinks, labor,
management

College Students, Teaching, Educated Acquisition of

professors, research, service students, knowledge
administrator, meaningful
textbooks, research, service
equipment to community.
State and nation

Movie Actors, directors, Filming, editing, Finished film Entertaining

staff, sets special effects, delivered to movie, film
equipment film distribution movie theaters award, profits
System Classification and their primary
characteristic
Simple- has few
components, and the
relationship or interaction
between elements is
uncomplicated and
straightforward
Open- Interacts with its
environment
Stable- Undergo very
little change over time
Adaptive- able to
change in response to
change in the
environment
Permanent- Exist for a
relatively long period of
time
Complex- has many
elements that are highly
related and
interconnected
Closed- has no
interaction with the
environment
Dynamic- Undergoes
rapid and constant
change overtime.
Non-adaptive- not able t
change in response to
change in the
environment
Temporary- Exist for
only a relatively short
period of time.
System Performance and Standards

• Efficiency a measure of what is produced

divided by what is consumed.

• Effectiveness a measure of the extent to which a

system achieves its goals; it can be
computed by dividing the goals
actually achieved by the total of the
stated goals.

• System performance standard

a specific objective of the system.
Manual and Computerized
Information System
• IS can be manual or computerized.

• Computerizing a manual IS does not guarantee

improved system performance.
Computer-Based Information System
• A single set of hardware, software, database,
telecommunications, people, and procedures, that are
configured to collect, manipulate, store, and process
data into information.
• Example: a company’s payroll system, order entry
system, and inventory control system.

Technology Infrastructure
 All the hardware, software, database,
telecommunications, people, and procedures, that are
configured to collect, manipulate, store, and process data
into information.
The Components of a CBIS
1.Hardware Computer equipment used to
perform input, processing, and
output activities.

2. Software computer program that govern

the operation of the computer.

3. Database an organized collection of facts

and information.
The Components of a CBIS
4. Telecommunication the electronic transmission of signals for
communications; enables organizations to carry out their processes
and tasks through effective computer networks.

– Networks connected computers and computer equipment

in a building, around the country, or around the world to enable
electronic communication.
– Internet The worlds largest computer network, actually
consisting of thousands of interconnected networks, all freely
exchanging information.
– Intranet an internal network based on web technologies
that allow people within an organization to exchange information
and work on projects.
– Extranet a network based on Web technologies that
allows selected outsiders, such as business partners and
customers, to access authorized resources of the intranet of a
company.
The Components of a CBIS

5. People are the most important element

in most CBIS.

6. Procedures the strategies, policies, methods,

and rules for using a CBIS.
BUSINESS
INFORMATION
SYSTEM
Most common Types of IS
used in Business
Organization
• E-commerce
• Transaction Processing Systems
• Management Information Systems
• Decision Support System
E-commerce
• Any business transaction executed
electronically between parties such as
companies (business-to-business), companies
and consumers (business-to-consumer),
business and the public sector, and consumers
and the public sector.
Transaction Processing System
• An organized collection of people, procedures,
software, databases, and devices used to record
completed business transactions.
• To understand TPS is to understand basic
business operations and functions.
• One of the first business systems to be
computerized was the payroll system.
Hours
worked Payroll
Payroll
transaction
processing checks

Pay rate
Management Information System
• An organized collection of people, procedure, software,
database, and device used to provide routine
information to managers and decision makers.
• Typically provide standard reports generated with data
and information from the TPS.

Marketing Manufacturing
MIS MIS
Common
Database

Financial Other
MIS TPS MIS
Management Information System
• Began to be developed in the 1960s and are characterized by the
use of information systems to produce managerial report.

• In most cases, these early reports were produced periodically-

daily, weekly, monthly, or yearly. Because they were printed on a
regular basis, they were called scheduled reports.

• Demand reports were developed to give decision makers certain

information upon request. ex. Prior to closing a sale, a sales
representative might seek a demand report on how much inventory
existed for a particular item.

• Exception reports describe unusual or critical situations. Like low

inventory levels. ex. In a bicycle manufacturing company, an
exception report might be produced by the MIS if the number of
bicycle seat is too low and more should be ordered.
Decision Support Systems
• An organized collection of people, procedures,
software, databases, and devices used to
support problem-specific decision making.

• DSS are used when the problem is complex

and the information needed to make the best
decision is difficult to obtain and use.
Special-Purpose Business
Information Systems:
• Artificial Intelligence
• Expert Systems and
• Virtual Reality
Artificial Intelligence
• A field in which the computer system
takes on the characteristics of
human intelligence.
The Major Elements of AI
– Robotics- an area of AI in which
machines take over complex, routine,
or boring tasks, such as welding car
frames or assembling computer
systems and components.
– Vision systems- allow robots and
other devices to have “sight” and to
store and process visual images. ex.
Camera
The Major Elements of AI
– Natural language processing-
involves the ability of computers to
understand and act on verbal or written
commands in English, Spanish, or
other natural languages.
– Learning systems-gives computers
the ability to learn from past mistakes
and experiences, such as playing
games or making business decisions.
The Major Elements of AI
–Neural networks-branch of AI
that allows computer to
recognize and act on patterns
or trends.
Expert systems
– give the computer the ability to make
suggestion and act like an expert in a
particular field.
– Have been used to monitor complex
systems like nuclear reactors, perform
medical diagnoses, locate possible
problems, design and configure
information system components, and
perform credit evaluations.
Virtual Reality
• Immersive virtual reality, which means the user
becomes fully immersed in an artificial, three
dimensional world that is completely generated by a
computer.
• It may represent any three-dimensional setting, real or
abstract, such as building, an archeological excavation
site, the human anatomy, a sculpture, or a crime scene
reconstruction.
• Virtual worlds can be animated, interactive, and shared.
• Through immersion, the user can gain a deeper
understanding of the virtual world’s behavior and
functionality.
 Systems Development
• The activity of creating or modifying existing
business systems.
• Two steps of Systems Development are:
– Systems Investigation- stage of a system
development that has as its goal to gain a clear
understanding of the problem to be solved or
opportunity to be addressed.
– Systems Analysis- stage of systems development
during which the problems and opportunities of the
existing system are defined.
Systems Design
• Stage of systems development that
determines how the new system will
work to meet the business needs
defined during systems analysis.
Systems Implementation
• Stage of systems development
during which the various system
components defined in the design
step are created or acquired and
then assembled and the new system
is put into operation.
Systems Maintenance and review
• Stage of systems development that
has its goal to check and modify the
system so that it continues to meet
changing business needs.
Computer literacy
• Knowledge of computer systems and
equipment and the ways they function; it
stresses equipment and devices,
programs and instructions, database and
telecommunication.
Information System literacy
• Knowledge of how data and information
are used by individuals, groups, and
organizations.
IS in the
Functional
Areas of
Business
• Finance and accounting, IS are used to forecast
revenues and business activity, determine the best
sources and uses of funds, manage cash and other
financial resources, analyze investment, and
perform audits t make sure the organization is
financially sound and that all financial reports and
documents are accurate.
• Sales and marketing, IS are used to developed
new goods and services(product analysis),
determine the best location for production and
distribution facilities(place or site analysis),
determine the best advertising and sales
approaches (promotion analysis), and set product
prices to get the highest total revenues(price
analysis).
• Manufacturing, IS are used to process
customer orders, develop production
schedules, control inventory levels, and
monitor product quality
• Human resource management, screen
applicants, administer performance test to
employees, monitor employee productivity,
and more.
• Legal Information systems, used to
analyze product liability and warranties and
to develop important legal documents and
reports.
Information
System in
Industry
• Airline Industry, employs Internet
auction sites to offer discount fares and
increase revenue.
• Investment firms, use IS to analyze
stocks, bonds, options, the future
market, and other financial instruments,
as well as to provide improved services
to their customers.
• Banks and savings and loan
companies, use IS to help make sound
loans and good investments.
• Transportation industry, use IS to
schedule trucks and trains to deliver
goods and services at the least cost.
• Publishing companies, use IS to
analyze markets and to develop and
publish newspapers, magazines, and
books.
• Healthcare organizations, use IS to
diagnose illness, plan medical
treatment, and bill patients.
• Retail companies, are using the Web to
take customer orders and provide
customer service support.
• Power management and utility
companies, use IS to monitor and control
power generation and usage.
• Professional services, use IS to improve
the speed and quality of services they
provide information on products, services,
skill levels, and past engagements to their
consultants.
Organizations & Information Systems
Value Chain
Technology Diffusion, Infusion, and
Acceptance

• Technology diffusion - measure of widespread

use of technology
• Technology infusion - extent to which
technology permeates a department
• Technology Acceptance Model (TAM) -
specifies factors that can lead to higher usage of
technology
Total Quality Management (TQM)

• Quality: ability of a product or service to meet or

exceed customer expectations

• TQM: approaches and techniques used to

achieve quality throughout the organization
Outsourcing and Downsizing

• Outsourcing: contracting with outside

professionals

• Downsizing: cutting the number of employees

Competitive Advantage
• Significant, long-term benefit to a company over
its competition

• Ability to establish and maintain a competitive

advantage is vital to the company’s success
Competitive Advantage
• Five forces motivate firms to seek
competitive advantage
– Rivalry among existing competition
– Threat of new entrants
– Threat of substitutions
– Buyers’ bargaining power
– Suppliers’ bargaining power
Strategic Planning for Competitive
Advantage

• Change the structure of the industry

• Create new products or services
• Improve existing products or services
• Use information systems for strategic planning
Strategic Planning for Competitive
Advantage
Performance-Based Information
Systems
Productivity
• A measure of output achieved divided by input
required

• Higher level of output for a given level of input

means greater productivity
Return on Investments and the
Value of Information Systems

• Earnings growth
• Market share
• Customer awareness and satisfaction
• Total cost of ownership
Roles, Functions, and Careers in
Information Systems Department

• Operations - focuses on the efficiency of

information
• Systems development - focuses on specific
development projects and ongoing maintenance
and review
• Support - provides user assistance
Typical IS Titles and Functions
• Chief Information Officer (CIO) - employs
the IS department’s equipment and personnel
to help the organization attain its goals

• LAN administrators - set up and manage

the network hardware, software, and security
processes
Typical IS Titles and Functions
• Internet careers
– Strategists
– Programmers
– Website operators
– Chief Internet Officer

• Consulting firms
Summary
• Value-added processes increase the relative worth of
combined inputs on their way to becoming final
outputs

• Business process reengineering involves the radical

redesign of business processes, organizational
structures, and information systems

• Information systems personnel typically work in an

information systems department that employs a chief
information officer, systems analysts, and computer
programmers
People overestimate what will happen in two years and
underestimate what will happen in 10.
- Bill Gates, Microsoft

END