Foundations of Information Systems in

Business

Chapter

1

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

1. Understand the concept of a system and how it relates to information systems

2. Explain why knowledge of information systems is important for business professionals

– Identify five areas of information systems knowledge needed

Learning Objectives

1-2

3. Give examples to illustrate how business applications of information systems can support a firm’s

– Business processes– Managerial decision making– Strategies for competitive advantage

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

Learning Objectives

1-3

Learning Objectives

5. Identify challenges that a business manager might face in managing the successful, ethical development and use of information technology

6. Provide examples of the components of real world information systems

7. Become familiar with the myriad of career opportunities in information systems

1-4

Case 1: Sew What? Inc.

• Sew What? provides custom theatrical draperies and fabrics for stages, concerts, fashion shows, and special events worldwide.

• After launching the company web site, they acquired clients from all over the world and their revenue has been growing more than 45% per year.

• Sew What? runs most of its business with Intuit’s Quick-Books Enterprise Solutions & Dell PowerEdge servers.

• Recently, the National Federation of Independent Businesses (NFIB) and Dell Inc. presented Sew What? “Small Business Excellence Award” in recognition of its innovative use of technology to improve its customers’ experience.

1-5

Case Study Questions

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

1-6

Case Study Questions

2. 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 several specific recommendations.

1-7

Case Study Questions

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

1-8

Foundation Concepts

• Why study information systems and information technology?– Vital component of successful businesses– Helps businesses expand and compete– Improves efficiency and effectiveness of

business processes– Facilitates managerial decision making

and workgroup collaboration

1-9

What is an Information System?

• An organized combination of…– People– Hardware and software– Communication networks– Data resources– Policies and procedures

• This system…– Stores, retrieves, transforms, and disseminates

information in an organization

1-10

Information Technologies

• Information Systems– All the components and resources

necessary to deliver information and functions to the organization

– Could be paper based

• Information Technologies– Hardware, software, networking, data

management

• Our focus will be on computer-based information systems (CBIS)

1-11

What Should Business Professionals Know?

1-12

Fundamental Roles of IS in Business

1-13

Trends in Information Systems

1-14

What is E-Business?

• Using Internet technologies to empower…– Business processes– Electronic commerce– Collaboration within a company– Collaboration with customers, suppliers,

and other business stakeholders

• In essence, an online exchange of value

1-15

How E-Business is Being Used

1-16

E-Business Use

• Reengineering– Internal business processes

• Enterprise collaboration systems– Support communications, coordination

and coordination among teams and work groups

• Electronic commerce– Buying, selling, marketing, and servicing

of products and services over networks

1-17

Types of Information Systems

• Operations Support Systems– Efficiently process business transactions– Control industrial processes– Support communication and collaboration– Update corporate databases

• Management Support Systems– Provide information as reports and displays– Give direct computer support to managers

during decision-making

1-18

Purposes of Information Systems

1-19

Operations Support Systems

• What do they do?– Efficiently process business

transactions– Control industrial processes– Support communications and

collaboration– Update corporate databases

1-20

Types of Operations Support Systems

• Transaction Processing Systems– Record and process business transactions– Examples: sales processing, inventory systems,

accounting systems

• Process Control Systems– Monitor and control physical processes– Example: using sensors to monitor chemical

processes in a petroleum refinery

• Enterprise Collaboration Systems– Enhance team and workgroup communication– Examples: email, video conferencing

1-21

Two Ways to Process Transactions

• Batch Processing– Accumulate transactions over time and

process periodically– Example: a bank processes all checks

received in a batch at night

• Online Processing– Process transactions immediately– Example: a bank processes an ATM

withdrawal immediately

1-22

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

1-23

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

1-24

Other Information Systems

• Expert Systems– Provide expert advice– Example: credit application advisor

• Knowledge Management Systems– Support creation, organization, and

dissemination of business knowledge throughout company

– Example: intranet access to best business practices

1-25

Other Information Systems

• Strategic Information Systems– Help get a strategic advantage over

customer– Examples: shipment tracking, e-commerce

Web systems

• Functional Business Systems– Focus on operational and managerial

applications of basic business functions– Examples: accounting, finance, or

marketing

1-26

IT Challenges and Opportunities

1-27

Measuring IT Success

• Efficiency– Minimize cost, time, and use of

information resources

• Effectiveness– Support business strategies– Enable business processes– Enhance organizational structure and

culture– Increase customer and business value

1-28

Developing IS Solutions

1-29

Challenges and Ethics of IT

• Application of IT– Customer relationship management– Human resources management– Business intelligence systems

• Potential Harm– Infringements on privacy– Inaccurate information– Collusion

1-30

Challenges and Ethics of IT

• Potential Risks– Consumer boycotts– Work stoppages– Government intervention

• Possible Responses– Codes of ethics– Incentives– Certification

1-31

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 company’s IT resources?

• How can you protect yourself from computer crime?

1-32

IT Careers

• Economic downturns have affected all job sectors, including IT

• Rising labor costs are pushing jobs to India, the Middle East, and Asia-Pacific countries

• However, IT employment opportunities are strong, with new jobs emerging daily

• Shortages of IT personnel are frequent• The long-term job outlook is positive and

exciting1-33

IT Careers

1-34

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

– The need for those with problem-solving skills

– Falling hardware and software prices, which will fuel expanded computerization of operations

1-35

The IS Function

• The IS function is…– A major functional area of business

– An important contributor to operational efficiency, employee productivity, morale, customer service and satisfaction

– A major source of information and support for decision making

– A vital ingredient in developing competitive products and services in the global marketplace

– A dynamic and challenging career opportunity

– A key component of today’s networked business

1-36

System Concepts: A Foundation

• System concepts help us understand…

– Technology: hardware, software, data management, telecommunications networks

– Applications: to support inter-connected information systems

– Development: developing ways to use information technology includes designing the basic components of information systems

– Management: emphasizes the quality, strategic business value, and security of an organization’s information systems

1-37

Real World Case: JetBlue and the VeteransAdministration

• Good IT processes are as important as hardware and software when it comes to creating business value through the use of technology.

• Even seemingly smaller and less critical processes can have ramifications of a large magnitude in the interconnected world in which we live.

• The information system, which was developed by JetBlue in 24 hours and implemented in the middle of crisis in 2007, has now been implemented as a full-time system in the company.

• At Veterans Administration an unscheduled system failure took down key applications in 17 (VA) medical facilities for a day

1-38

Case Study Questions

1. Eric Brinker of JetBlue noted that the database developed during the crisis had not been needed before since the company had never experienced a meltdown. What are the risks and benefits associated with this approach to IT planning? Provide some examples of each.

1-39

Case Study Questions

2. With hindsight, we now know that the decision made by Eric Raffin of the VA not to fail over to the Denver site was the correct one. However, it involved failing to follow established backup procedures. With the information he had at the time, what other alternatives could he have considered? Develop at least two of them.

1-40

Case Study Questions

3. A small, undocumented change resulted in the collapse of the VA system, largely because of the high interrelationship between its applications. What is the positive side of this high degree of interconnection, and how does this benefit patients? Provide examples from the case to justify your answer.

1-41

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 process1-42

Basic Functions of a System

• Input– Capturing and assembling elements that

enter the system to be processed

• Processing– Transformation process that converts

input into output

• Output– Transferring transformed elements to

their ultimate destination

1-43

Cybernetic System

• All systems have input, processing, and output

• A cybernetic system, a self-monitoring, self-regulating system, adds feedback and control:– Feedback is data about the performance of a

system– Control involves monitoring and evaluating

feedback to determine whether a system is moving toward the achievement of its goal

1-44

A Cybernetic System

1-45

A Business as a System

1-46

Other System Characteristics

• If a system is one of the components of a larger system, it is a subsystem– The larger system is an environment

• Several systems may share the same environment– Some may be connected via a shared

boundary, or interface

• Types of systems…– Open– Adaptive

1-47

Components of an IS

1-48

Information System Resources

• People Resources– Specialists– End users

• Hardware Resources– Machines– Media

• Software Resources– Programs– Procedures

1-49

Information System Resources

• Data Resources– Product descriptions, customer records,

employee files, inventory databases

• Network Resources– Communications media, communications

processors, network access and control software

• Information Resources– Management reports and business documents

using text and graphics displays, audio responses, and paper forms

1-50

Data Versus Information

• Data are raw facts about physical phenomena or business transactions

• Information is data that has been converted into meaningful and useful context for end users

• Examples:– Sales data is names, quantities, and dollar

amounts– Sales information is amount of sales by

product type, sales territory, or salesperson1-51

IS Activities

• Input of data resources– Data entry activities

• Processing of data into information– Calculations, comparisons, sorting, and so on

• Output of information products– Messages, reports, forms, graphic images

• Storage of data resources– Data elements and databases

• Control of system performance– Monitoring and evaluating feedback

1-52

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

1-53

Case 3: Heidelberg, Honeywell, and Eaton

• Today, it is not be enough for a company to offer services but it will have to provide “smart services.”

• To provide smart services, companies must use information technology to build “smart products.”

• Smart products can detect that a part is approaching failure and alert users, thus giving the company opportunity to provide maintenance services and enjoy the resulting benefits.

1-54

Case 3: Heidelberg, Honeywell, and Eaton

• Heidelberg developed the technology to monitor its equipment remotely, using built-in sensors, networking microprocessors, and other information technologies.

• With such smart services, Heidelberg now offers total support of its products.

• Eaton corporation has developed a product called Home Heartbeat which monitors the status of various home systems and alerts the homeowner when something is wrong.

1-55

Case Study Questions

1. Why should manufacturing companies build smart products and provide smart services? What business benefits can they gain? Provide several examples beyond those discussed in this case.

2. What information technologies are used by the companies in this case to build smart products and provide smart services? What other IT components might be used? Give examples of the capabilities they would provide.

3. What are some limitations of a smart products and smart services strategy? Give several examples of challenges that a business might encounter, and explain how it might overcome them.

1-56

Case 4: Lufthansa• In 2001, Lufthansa launched the “Lufthansa Mobile

Initiative,” which aimed to provide all pilots with notebook computers.

• It helps 3,500 highly mobile airline pilots plugged into the corporate infrastructure, that informs them about schedules, weather events, and other facts that affect their jobs throughout the world.

• The Lufthansa Mobile Initiative is yielding significant productivity and efficiency improvements, while keeping costs manageable.

• Pilots use their notebook computers for computer-based training whether they are learning about new aircraft or things like specific hydraulic systems.

1-57

Case Questions1. Are many of Lufthansa’s challenges identified in

the case similar to those being experienced by other businesses in today’s global economy? Explain and provide some examples.

2. What other tangible and intangible benefits, beyond those identified by Lufthansa, might a mobile workforce enjoy as a result of deploying mobile technologies? Explain.

3. Lufthansa was clearly taking a big risk with their decision to deploy notebook computers to their pilots. What steps did they take to manage that risk, and what others might be needed in today’s business environment? Provide some examples.

1-58