Chap 01

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1-1
Chapter
1
Foundations of
Information Systems
in Business
Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved. 1-2
Learning Objectives
1. Explain why knowledge of information

systems is important for business
professionals and identify five areas of
information systems knowledge they need.
2. Give examples to illustrate how the business

applications of information systems can
support a firm’s business processes,
managerial decision making, and strategies
for competitive advantage.
Learning Objectives
3. Provide examples of several major types

of information systems from your
experiences with business organizations
in the real world.
4. Identify several challenges that a

business manager might face in
managing the successful and ethical
development and use of information
technology in a business.
Learning Objectives
5. Provide examples of the components of

real world information systems. Illustrate
that in an information system, people
use hardware, software, data and
networks as resources to perform input,
processing, output, storage, and control
activities that transform data resources
into information products.
Why Study Information Systems?
• Information technology can help all kinds

of businesses improve the efficiency and
effectiveness of their business processes,
managerial decision making, and
workgroup collaboration, thus
strengthening their competitive positions
in a rapidly changing marketplace.
Why Study Information Systems
• Internet-based systems have become a

necessary ingredient for business success
in today’s dynamic global environment.
• Information technologies are playing an

expanding role in business.
Case #1: Athens Olympics Network
• What makes the Olympic Games a unique

project is that the athletes aren’t going to
stop running just because the server
does.
• Major Components:
• Games Management System (GMS)
• Information Diffusion System (IDS)
GMS:
• Managed access accreditations for the games
IDS:
• Collected and distributed event results and
rankings to press agencies and certain websites
• Live feed for broadcasters commenting on
events
• Results, rankings, statistics and biographies
available to commentators .3 seconds after the
athletes crossed the line
Goals & Constraints:

• Reduce the amount of risk
• 100% availability
• Non-negotiable deadline
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Fail-Safe Plan:
• Redundancy
• Constructed the network in such a way that
service could be provided even if one of the
routers was damaged.
• Stored data in two physically distant data
centers (in different earthquake zones).
• Test. Test. Test. “We wanted to be sure

that every stupid thing that can happen
was planned for.”
1. Could the 2004 Athens Olympics have been a

success without all of the networks and
backup technologies?
2. How would your 2004 Olympics experience

changed without the GMS and IDS systems?
3. The 2004 Olympics is a global business. Can

a business today succeed without information
technology? Why or why not?

4. Claude Philipps said dealing with the

“crazy scenarios of what might happen
in every area: a network problem, staff
stopped in a traffic jam, a security
attack… everything that might happen,”
was the reason for so much testing.
Can you think of other businesses that
would require “crazy scenario” testing?
Explain.

5. Are the redundancies and backup

systems in place limited to one-time
systems like those at the Olympics or
should they exist in other business
environments? Explain your position
and provide specific examples.

What is an Information System?
Any organized combination of people,

hardware, software, communications
networks, and data resources that stores,
retrieves, transforms, and disseminates
information in an organization.

Information Systems vs.
Information Technology
• Information Systems (IS) – all

components and resources necessary to
deliver information and information
processing functions to the organization
• Information Technology (IT) – various

hardware components necessary for the
system to operate

Types of Information Technologies
• Computer Hardware Technologies

including microcomputers, midsize servers, and large
mainframe systems, and the input, output, and storage
devices that support them
• Computer Software Technologies

including operating system software, Web browsers,
software productivity suites, and software for business
applications like customer relationship management and
supply chain management

Types of Information Technologies
• Telecommunications Network
Technologies
including the telecommunications media, processors,
and software needed to provide wire-based and
wireless access and support for the Internet and private
Internet-based networks
• Data Resource Management

Technologies
including database management system software for
the development, access, and maintenance of the
databases of an organization

Conceptual Framework of IS Knowledge

Roles of IS in Business

Trends in Information Systems

What is E-Business?
Definition:
• The use of Internet technologies to work
and empower business processes,
electronic commerce, and enterprise
collaboration within a company and with
its customers, suppliers, and other
business stakeholders.
• An online exchange of value.

E-Business Information Technology
Infrastructure

Enterprise Collaboration Systems
Definition:
• Involve the use of software tools to
support communication, coordination, and
collaboration among the members of
networked teams and workgroups.

What is E-Commerce?
Definition:
The buying and selling, and marketing
and servicing of products, services, and
information over a variety of computer
networks.

Types of Information Systems

Operation Support Systems
Definition:
• Information systems that process data
generated by and used in business
operations
• Goal is to efficiently process business
transactions, control industrial processes,
support enterprise communications and
collaboration, and update corporate
databases

Examples of Operations Support Systems
• Transaction Processing Systems (TPS) –

process data resulting from business
transactions, update operational databases, and
produce business documents.
• Process Control Systems (PCS) – monitor and

control industrial processes.
• Enterprise Collaboration Systems – support

team, workgroup, and enterprise
communications an collaboration.
A Transaction Processing System Example

Management Support Systems
Definition:
• Information systems that focus on
providing information and support for
effective decision making by managers

Management Support Systems
• Management Information Systems (MIS) –

provide information in the form of pre-specified
reports and displays to support business
decision making.
• Decision Support Systems (DSS) – provide

interactive ad hoc support for the decision
making processes of managers and other
business professionals.
• Executive Information Systems (EIS) – provide

critical information from MIS, DSS, and other
sources tailored to the information needs of
executives.
A Decision Support System Example

Operational & Managerial IS
• Expert Systems – provide expert advice

for operational chores or managerial
decisions
• Knowledge Management Systems –

support the creation, organization, and
dissemination of business knowledge to
employees and managers

IS Classifications by Scope
• Functional Business Systems – support basic

business functions
• Strategic Information Systems – support

processes that provide a firm with strategic
products, services, and capabilities for
competitive advantage
• Cross-functional Information Systems –

integrated combinations of information systems

Management Challenges & Opportunities

Measures of Success
• Efficiency
• Minimize costs
• Minimize time
• Minimize the use of information resources
• Effectiveness
• Support an organization’s business strategies
• Enable its business processes
• Enhance its organizational structure and culture
• Increase the customer business value of the
enterprise

Developing IS Solutions

The Systems Development Lifecycle

Ethical Challenges of IT

IT Career Trends
• Rising labor costs have resulting in large-scale

movement to outsource programming functions to India,
the Middle East and Asia-Pacific countries.
• More new and exciting jobs emerge each day as

organizations continue to expand their wide-scale use of
IT.
• Frequent shortages of qualified information systems

personnel.
• Constantly changing job requirements due to dynamic

developments in business and IT ensure long-term job
outlook in IT remains positive and exciting.
The IS Function represents…
• A major functional area of business

equally as important to business success
as the functions of accounting, finance,
operations management, marketing, and
human resource management.
• An important contributor to operational

efficiency, employee productivity and
morale, and customer service and
satisfaction.
• A major source of information and support

needed to promote effective decision
making by managers and business
professionals.
• A vital ingredient in developing

competitive products and services that
give an organization a strategic advantage
in global marketplace.

• A dynamic, rewarding, and challenging

career opportunity for millions of men and
women.
• A key component of the resources,

infrastructure, and capabilities of today’s
networked business enterprise.

Case #2: Connecting the Mobile Workforce
Goals:
• Keep 3,500 highly mobile airline pilots:
• Trained on the latest technology and
procedures
• Plugged into the corporate infrastructure
• Informed about schedules, weather events,
and other facts that affect their jobs
• Control costs

Productivity and Efficiency Improvements:

• Pilots can access updated data electronically.
• Pilots can work in a variety of locations including

airplanes, airports, hotels, and other remote
locations.
• Pilots appreciate the convenience of not having

to carry heavy manuals and documentation to
multiple locations.
• Pilots can take their required training on their

laptops during downtime in any airport.
1. 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.
4. How might mobile computing improve

your productivity and efficiency?
Provide some examples.
5. What challenges in pilot morale,

performance, and management might
arise with the use of mobile computing
devices in the field and in the cockpit?
What preventive actions or solutions to
these potential problem areas could you
suggest?

What is a System?
Definition:
A group of interrelated components, with a
clearly defined boundary, working together
toward a common goal by accepting
inputs and producing outputs in an
organized transformation process.

System Components
• Input – capturing and assembling

elements that enter the system to be
processed
• Processing – transformation steps that

convert input into output
• Output – transferring elements that have

been produced by a transformation
process to their ultimate destination
Cybernetic Systems
Definition:
a self-monitoring, self-regulating system.
• Feedback – data about the performance

of a system
• Control – monitoring and evaluating

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

A Business System

IS Resources & Activities

Information System Resources
• People – end users and IS specialists
• Hardware – physical devices and

materials used in information processing
including computer systems, peripherals,
and media
• Software – sets of information processing

instructions including system software,
application software and procedures
Information Systems Resources (con’t)
• Data – facts or observations about

physical phenomena or business
transactions
• Network – communications media and

network infrastructure

Data vs. Information
• Data – raw facts or observations typically

about physical phenomena or business
transactions
• Information – data that have been

converted into a meaningful and useful
context for specific end users

Network Resources
• Communications Media – examples

include twisted-pair wire, coaxial and
fiber-optic cables, microwave, cellular, and
satellite wireless technologies
• Network Infrastructure – examples include

communications processors such as
modems and internetwork processors,
and communications control software
such as network operating systems and
Internet browser packages.
Information Systems Activities
• Input of Data Resources

• Processing of Data into Information
• Output of Information Products
• Storage of Data Resources
• Control of System Performance

Recognizing Information Systems
Fundamental Components of IS
• People, hardware, software, data and
network resources used
• Types of information products produced
• Input, processing, output, storage and

control activities performed

Case #3: Failure to Success with IT
Aviall on the Ropes:

• A failed enterprise resource planning system
that had been designed to automate and
integrate the company’s order processing,
inventory control, financial accounting, and
human resources business systems
• Couldn’t properly order or ship items to

customers
• Quarterly sales dropping
• Airline industry shrinking

Goals:
• Save Aviall from financial disaster
• Turn Aviall from a catalog business into a

full-scale logistics business that hundreds
of aviation parts manufacturers and
airlines could depend on for ordering,
inventory control, and demand forecasting

Challenges:
• Integrate five Web-enabled e-business
software systems from different software
providers
• Customized pricing for 17,000 customers

who receive various types of discounts
• 380,000 different aerospace parts

Benefits of Aviall.com:
• Customer order obtained via web costs only 39
cents compared with $9 for an order taken via
telephone
• Sales force freed from routine order taking can

devote more time to developing relationships
with customers
• Customers have the ability to transfer orders

from an Excel spreadsheet directly to website

Benefits of Aviall.com (con’t):

• Customers can receive pricing and availability
information on parts within 5 seconds
• Helps build relationships with suppliers by

providing them with customer ordering data that
enables them to better match production with
demand

Case #3: Aviall Inc.
1. Why do you think that Aviall failed in their

implementation of an enterprise resource
planning system? What could they have done
differently?
2. How has information technology brought new

business success to Aviall? How did IT
change Aviall’s business model?
3. How could other companies use Aviall’s

approach to the use of IT to improve their
business success? Give several examples.
Case #4: This Call is Being Monitored
Goals:
• Increase customer loyalty
• Reduce number of calls forwarded to
internal help desk
• Improve decision making

Witness Systems Call-center Software &

CallMiner:
• Records conversations
• Captures keystrokes
• Tracks caller choices
• Transcribes conversations into text

Benefits:
• Revenues increased 60%
• 20% fewer calls sent to help desk saving
$1 million
• Customer satisfaction rose 10%
• E-ticket sales increased 8%
• Reduced staffing needs

1. What are the business benefits of the CallMiner

system? Provide some additional examples beyond
those discussed in the case.
2. How can new technologies like CallMiner help

companies improve their customer service and gain a
competitive edge in the marketplace? Explain.
3. Andre Harris refers to calls to reconfirm a flight as

“quite frankly, low-value calls.” Why are they
classified as low value? Why do you think so many
customers are placing such calls?

Summary
• There is no longer a distinction between

an IT project and a business initiative.
• Information systems are an important

contributor to operational efficiency,
employee productivity and morale, and
customer service and satisfaction.

Summary
• Information systems are a major source of

information and support needed to
promote effective decision making by
managers and business professionals.
• Information systems can be categorized

based on their intended purpose.

Summary
• Managing and using information systems

can pose several challenges including the
development process and ethical
responsibilities.

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1
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1. Explain why knowledge of information

2. Give examples to illustrate how the business

3. Provide examples of several major types

4. Identify several challenges that a

5. Provide examples of the components of

• Information technology can help all kinds

• Internet-based systems have become a

• Information technologies are playing an

• What makes the Olympic Games a unique

Goals & Constraints:

Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved. 1 - 10

• Test. Test. Test. “We wanted to be sure

1. Could the 2004 Athens Olympics have been a

2. How would your 2004 Olympics experience

3. The 2004 Olympics is a global business. Can

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4. Claude Philipps said dealing with the

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5. Are the redundancies and backup

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Any organized combination of people,

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• Information Systems (IS) – all

• Information Technology (IT) – various

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• Computer Hardware Technologies

• Computer Software Technologies

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• Data Resource Management

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• An online exchange of value.

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• Transaction Processing Systems (TPS) –

• Process Control Systems (PCS) – monitor and

• Enterprise Collaboration Systems – support

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• Management Information Systems (MIS) –

• Decision Support Systems (DSS) – provide

• Executive Information Systems (EIS) – provide

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• Expert Systems – provide expert advice

• Knowledge Management Systems –

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• Functional Business Systems – support basic

• Strategic Information Systems – support

• Cross-functional Information Systems –

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• Rising labor costs have resulting in large-scale