Chapter 1

Information Systems in Business

Today

1-1
 Learning Objectives

• Understand the effects of information

systems on business.
• Explain why information systems are so
essential in business today.
• Define an information system and describe
its management, organization, and
technology components.

1-2
How information systems are
transforming business?
• Emerging mobile digital platform
• Growing business use of “big data”
• Growth in cloud computing

1-3
 Information Technology Capital
Investment

FIGURE 1-1 Information technology capital investment, defined as hardware, software, and communications
equipment, grew from 32 percent to 52 percent of all invested capital between 1980 and 2009.

1-4
The Role of Information Systems
in Business Today
• Operational excellence
• Improved decision making
• Competitive advantage

1-5
 Operational excellence

• Improvement of efficiency to attain

higher profitability
• Information systems, technology
an important tool in achieving
greater efficiency and productivity
• Examples: Salaries from company
to banks electronically.

1-6
 Improved decision making

• Without accurate information:

• Results in:
• Overproduction, underproduction
• Misallocation of resources
• Poor response times
• Poor outcomes raise costs, lose customers
• Examples: Expectation of number of students
in classes.

1-7
 Competitive advantage

• Delivering better performance

• Charging less for superior
products
• Responding to customers and
suppliers in real time
• Examples: Apple, Walmart

1-8
 Perspectives on Information
Systems
• Information system:
• Set of interrelated components
• Collect, process, store, and distribute
information
• Support decision making, and control
A set of interrelated components that collect
(or retrieve), process, store, and distribute
information to support decision making and
control in an organization

1-9
 Information vs. data

• Data are streams of raw facts.

• Information is data shaped into
meaningful form.

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 Information vs. data

Figure 1.3 Raw data from a supermarket checkout counter can be processed and organized
to produce meaningful information, such as the total unit sales of dish
detergent or the total sales revenue from dish detergent for a specific store
or sales territory.

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Activities in an Information System

Data PROCESS Information

FEEDBACK

1-12
Activities in an Information System

• Three activities of information systems

produce information organizations need
• Input: Captures raw data from
organization or external environment
• Processing: Converts raw data into
meaningful form
• Output: Transfers processed
information to people or activities that
use it

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 Information Systems

Using information
systems effectively
requires an
understanding of the
organization,
management, and
information
technology shaping
the systems. An
information system
creates value for the
firm as an
organizational and
management
solution to
challenges posed by
the environment.

Figure 1.5

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 Organizations

Key Elements:
• People: Managers, knowledge workers, data
workers, production or service workers

• Structure: Organization chart , groups of specialists,

products, geography

• Operating procedures: Standard operating

procedures (rules for action)
 Management

Levels:
• Senior managers: make long-range strategic
decisions about products and services

• Middle managers: Carry out the programs and plans

of senior management

• Operational managers: monitor the firm’s daily

activities
 Computer Technology

Tools managers use to cope with change

• Hardware: Physical equipment

• Software: Detailed preprogrammed instructions

• Storage: Physical media for

storing data and the software
 Computer Technology

• Communications Technology: transfers data

from one physical location to another

• Networks: link computers to share data or

resources
Levels of Managerial
Decision Making

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 Information Quality

Information products are made more valuable

by their attributes, characteristics, or qualities
Outdated, inaccurate, or hard to understand
information has much less value

Information has three dimensions

Time Content Form
Attributes of Information
Quality
 Decision Structure

Structured The procedures to follow when a

(operational) decision is needed can be
specified in advance

Semi-structured Decision procedures can be

(tactical) pre-specified, but not enough to
lead to the correct decision

Unstructured It is not possible to specify in

(strategic) advance most of the decision
procedures to follow
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Levels of Managerial
Information Systems
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 Transaction Processing
System (TPS)
 Focus: Data
 Inputs : Transactions
 Output: Organized Data
 Motives: Large volume of Data
 Target People: Operational People
 Examples: Student Registration,
airline reservation.

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27
 Management
Information Systems (MIS)
 Focus: Information
 Inputs : Organized Data from TPS
 Output: Reports
 Motives: Structured and routine
problems
 Target People: Middle Management
 Examples: Student Transcript.

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30
 Decision Support
Systems (DSS)
 Focus: Decision
 Inputs : Internal and External data
 Output: Decision analysis and
Alternatives
 Motives: Semi Structured and
Unstructured problems
 Target People: Top Management

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 The
TheStructure
Structureof
ofDecision
DecisionSupport
SupportSystems
Systems

Model
Management

Dialog
Management
Data
User
Management
Decision Support System

...
Internal and External
Databases
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 Executive Information
Systems
Provide support for top executives and their aids.
Unstructured and semi-structured decision
making.
 Provide easy access to key information
pertaining to the company and environment
 Users' time is a premium
 Provide access to internal & external DB‘s

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 Expert Systems
• Knowledge based about a specific
domain
• Use heuristic in the process
• New systems use neural nets
• Expert systems are knowledge based
systems that imitate a reasoning
process (heuristic) to suggest a
solution within a specific domain
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 The
TheStructure
StructureofofExpert
ExpertSystems
Systems

Explanation
Facility
Facts of the Case
User Inference
Interface Engine
Recommendation,
User Explanation

Expert System Knowledge Base

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