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Chapter 1

Introduction to Information Systems in Business


Why Information Systems Are Important:

An understanding of the effective and responsible use and management of information systems is
important for managers and other business knowledge workers in todays global information
society. Information systems and technologies have become a vital component of successful
businesses and organizations. Information systems constitute an essential field of study in
business administration and management, as they are considered a major functional area in
business operations.

The Real World of Information:

Analysing NFO Research and TalkCity

We can learn a lot about the importance of information technology and information systems from
the Real World Case of NFO Research and Talk-City.
Take a few minutes to read it, and we will discuss it (See NFO Research & TalkCity in section

What You Need to Know:

Managerial end users need to know how information systems can be employed successfully in a
business environment. The important question for any business end user or manager is: What do
you need to know in order to help manage the hardware, software, data, and network resources
of your business, so they are used for the strategic success of your company?
A Framework for Business End Users: [Figure 1.2]
Managers or business end users are not required to know the complex technologies, abstract
behavioural concepts, or the specialized applications involved in the field of information systems.
Figure 1.2 illustrates a useful conceptual framework that outlines what a manager or business end
user needs to know about information systems. It emphasizes five areas of knowledge:
1. Foundation concepts of IS
2. Technology of IS
3. Applications of IS
4. Development of IS

5. Management of IS
Foundation Concepts of IS - Fundamental behavioural and technical concepts that will help
[Chapter 1 & 2]
you understand how information systems can support the business
operations, managerial decision making, and strategic advantage of
business firms and other organizations.
Technology of IS
- Major concepts, developments, and management issues in
[Chapter 4 - 7]
information technology (hardware, software, networks, database
management, and other information processing technologies).
Applications of IS
The major uses of information systems for the operations,
[Chapter 8-12]
management, and competitive advantage of an enterprise,
including electronic commerce and collaboration using the
Internet, intranets, and extranets.
Development of IS
[Chapter 3]

How end users or information specialists develop information

systems solutions to business problems using fundamental
problem-solving and developmental methodologies.

Management of IS
The challenges of effectively and ethically managing the resources
[Chapter 13-15]
and business strategies involved in using information technology at
the end user, enterprise, and global levels of a business.
Information System Resources and Technologies: [Figure 1.3]
An information system (IS) is an organized combination of people, hardware, software,
communications networks, and data resources that collects, transforms, and disseminates
information in an organization.
Types of IS

- Manual (paper-and-pencil) information systems

- Informal (word-of-mouth) information systems
- Formal (written procedures) information systems
- Computer-based information systems

Computer-Based (IS) use hardware, software, telecommunications networks, computer-based

data management techniques, and other forms of information technology (IT) to transform data
resources into information products. These products provide information for decision making by
An End User Perspective:

Anyone who uses an information system (IS) or the information

(output) it produces. This typically applies to most users in an
organization with the exception of information system specialists.

IS Specialists

Typically include systems analysts or professional computer



A manager, entrepreneur, or managerial level professional who

personally uses information systems. Therefore, most managers are
managerial end users.

An Enterprise Perspective:
Information systems play a vital role in the success of a business success of an enterprise. For
example, the Internet and Internet-like internal networks, or intranets, and external
interorganizational networks, called extranets, can provide the information infrastructure a
business needs for:
1. Efficient operations
2. Effective management
3. Competitive advantage
The success of an information systems should not be measured only by its efficiency in terms of
minimizing costs, time, and the use of information resources. Success should also be measured by
the effectiveness of the information technology in supporting an organizations
1. Business strategies
2. Enabling its business processes
3. Enhancing its organizational structures and culture
4. Increasing the business value of the enterprise in a dynamic business environment.
For managerial end users, the information systems function represents:
1. A major functional area of business that is important to a businesses success
2. An important factor affecting operational efficiency, employee productivity and morale, and
customer service and satisfaction.
3. A major source of information and support needed to promote effective decision making by
4. An important ingredient in developing competitive products and services that give an
organization a strategic advantage in the marketplace.
5. A major part of the resources of an organization and its cost of doing business
6. A vital, dynamic, and challenging career opportunity for many men and women.

A Global Information Society:

We are living in an emerging global information society, with a global economy that is
increasingly dependent on the creation, management, and distribution of information resources
over interconnected global networks like the Internet. So information is a basic resource in
todays society.

Agricultural Society

Are societies composed primarily of farmers.

Industrial Society

Are societies where a majority of the work force consists of factory

Knowledge Workers

The work force in many nations now consists primarily of workers

in service occupations or knowledge workers - individuals who
spend their workday communicating and collaborating in teams and
workgroups, and creating, using, and distributing information.
Knowledge workers include:
1. Executives, managers, and supervisors
2. Professionals such as accountants, engineers, scientists etc.
3. Staff personnel such as secretaries & clerical office personnel.

The Ethical Dimensions of IT:

As a prospective managerial end user and knowledge worker in a global society, you should also
become aware of the ethical responsibilities generated by the use of information technology. For
1. What uses of information technology might be considered improper, irresponsible, or harmful
to other individuals or to society?
2. What is the proper use of an organizations information resources?
3 .What does it take to be a responsible end user of information technology?
4. How can you protect yourself from computer crime and other risks of information
Ethical dimensions of information systems deals with ensuring that the use of information
technology and information systems are not used in an improper or irresponsible manner against
other individuals or to society.
A major challenge for our global information society is to manage its information resources to
benefit all members of society while at the same time meeting the strategic goals of organizations
and nations. For example, we must use information systems to find more efficient, profitable, and
socially responsible ways of using the world's limited supplies of material, energy, and other

Success and Failure with IT:

The Real World example of NFO Research and TalkCity emphasized the successful use of
information technology to transform business processes and gain competitive advantages.
However, it is important that you realize that information technology and information systems can
be mismanaged and misapplied so that they create both technological and business failure.
Top Five Reasons for Success

Top Five Reasons for Failure

User involvement

Lack of user input

Executive management support

Incomplete requirements and specifications

Clear statement of requirements

Changing requirements and specifications

Proper planning

Lack of executive support

Realistic expectations

Technological incompetence



The Fundamental Roles of Information Systems:

Information systems perform three vital roles in any type of organization. That is, they support an
1. Business operations
2. Managerial decision making
3. Strategic competitive advantage

The Increasing Value of Information Technology

The rapid pace of change in todays business environment has made information systems and
information technology vital components that help keep an enterprise on target to meets its
business goals. Information technology has become an indispensable ingredient in several
strategic thrusts that businesses have initiated to meet the challenge of change. These include:
1. Internetworking of computing
2. Internetworking of the enterprise
3. Globalization
4. Business process reengineering
5. Using information for competitive advantage

The Internetworking of Computing:

The internetworking of computing is one of the most important trends in information

technology. From the smallest microcomputer to the largest mainframe, computers are being
networked, or interconnected by the Internets, intranets, and other telecommunications networks.
This networked distribution of computer power throughout an organization most frequently takes
the form of a client/server approach, with networks of end user microcomputers (clients) and
network servers tied together to share processing software, and databases. In some client/server

systems, midrange computers or mainframes may act as superservers.

Characteristics of computer networks:
1. Enable end users and work groups to communicate and collaborate electronically
2. hare the use of hardware, software, and data resources
3. The growing reliance on the computer hardware, software, and data resources of the Internet,
intranets, extranets, and other networks has emphasized the importance of the concept that for
many users the network is the computer.
4. The network computing, or network-centric concept views networks as the central
computing resource of any computing environment, and it appears to be the architecture
that will take computing into the next century.

In network computing:
1. Network computers provide a browser-based user interface for processing small application
programs called applets.
2. Network computers are microcomputers without floppy or hard disk drives that are designed
as low-cost networked computing devices.
3. Servers provide the operating system, applets, databases, and database management software
needed by the end users in the network.
Common trends in network computing:
1. Downsizing of larger computer systems by replacing them with client/server networks
2. Client/server network of several interconnected local area networks (LANs) of
microcomputers and servers may replace a large mainframe-based network with many end
user terminals. This typically involves a complex and costly effort to install new application
software that replaces the software of older, traditional mainframe-based business information
systems, now called legacy systems.
3. Client/server networks are seen as more economical and flexible than legacy systems in
meeting end user, workgroup and business unit needs, and more scalable in adjusting to a
diverse range of computing workloads.
4. One of the attractions of corporate intranets is that their Internet-like technology makes them
more scalable, as well as easier and cheaper to develop and use than either traditional
client/server or mainframe-based legacy systems.

The Internetworked Enterprise:

The Internet is changing the way businesses are operated and people work, and how information
technology supports business operations and end user work activities.
Internetworked Enterprises:
The Internet and Internet-like networks - inside the enterprise (intranets), between an enterprise
and its trading partners (extranets), and other networks - have become the primary information
technology infrastructure that supports the business operations of many organizations. This is
especially evident in the areas of electronic commerce systems among businesses and their
customers and suppliers, and electronic collaboration systems among business teams and

Electronic Commerce:
Is the buying and selling, and marketing and servicing of products, services, and information over
a variety of computer networks. An internetworked enterprise uses the Internet, intranets,
extranets, and other networks to support every step of the commercial process.
Enterprise Collaboration Systems:
Involve the use of groupware tools to support communication, coordination, and collaboration
among the members of networked teams and workgroups. An internetworked enterprise depends
on intranets, the Internet, extranets, and other networks to implement such systems.

Globalization and Information Technology: [Figure 1.17]

Many companies are in the process of globalization; that is, becoming internetworked global
enterprises. For example, businesses are expanding into global markets for their products and
services, using global production facilities to manufacture or assemble products, raising money in
global capital markets, forming alliances with global partners, and battling with global competitors
for customers from all over the globe. Managing and accomplishing these strategic changes
would be impossible without the Internet, intranets, and other global computing and
telecommunications networks that are the central nervous system of today=s global companies.

Business Process Reengineering (BPR):

Business process reengineering (BPR) is an example of how information technology is being

used to restructure work (the way we do business) by transforming business processes. A
business process is any set of activities designed to produce a specified output for a customer or
market. Michael Hammer defines reengineering as the fundamental rethinking and radical
redesign of business processes to achieve dramatic improvements, such as cost, quality, service,
and speed. BPR focuses on the how and why of a business process so major changes can be
made in how work is accomplished.

Competitive Advantage: [Figure 1.21 & 1.22]

Using IT for globalization and business process reengineering frequently results in the
development of information systems that help give a company a competitive advantage in the
marketplace. These strategic information systems use IT to develop products, service, processes,
and capabilities that give a business a strategic advantage over the competitive forces it faces in its
industry. These forces include:
1. Firms competitors
2. Firms customers
3. Firms suppliers

4. Potential new entrants into its industry

5. Companies offering substitute products and services.
Several competitive strategies can be developed to help a firm confront these competitive forces.
These include:
Cost Leadership Strategy

- help you become a low-cost producer of products and services

- find ways to help suppliers or customers reduce their costs
- increase the costs that competitors must pay to remain in the

Differentiation Strategy

- develop ways to differentiate products and services from

competitors' so your customers perceive your products or services
as having unique features or benefits.
- reduce the differentiation advantages of competitors.

Innovation Strategy

- introduce unique products or services that include IT components

- make radical changes in your business processes that cause
fundamental changes in the way business is conducted in your