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Foundations of Information Systems in Business

I. CHAPTER OVERVIEW

Foundation Concepts: Foundations of Information in Business presents an overview of the five basic areas of
information systems knowledge needed by business professionals, including the conceptual system components and
major types of information systems.
Why Information Systems Are Important An understanding of the effective and responsible use and
management of information systems and technologies is important for managers, business professionals, and other
knowledge workers in todays internetworked enterprises. Information systems play a vital role in the e-business
and e-commerce operations, enterprise collaboration and management, and strategic success of businesses that must
operate in an internetworked global environment. Thus, the field of information systems has become a major
functional area of business administration.
An IS Framework for Business Professionals The IS knowledge that a business manager or professional needs
to know is illustrated in Figure 1.2 and covered in this chapter and text. This included (1) foundation concepts:
fundamental behaviour, technical, business, and managerial concepts like system components and functions, or
competitive strategies; (2) information technologies: concepts, developments, or management issues regarding
hardware, software, data management, networks, and other technologies; (3) business applications: major uses of IT
for business processes, operations, decision making, and strategic/competitive advantage; (4) development
processes: how end users and IS specialists develop and implement business/IT solutions to problems and
opportunities arising in business; and (5) management challenges: how to effectively and ethically manage the IS
function and IT resources to achieve top performance and business value in support of the business strategies of the
enterprise.
System Concepts A system is a group of interrelated components working toward the attainment of a common
goal by accepting inputs and producing outputs in an organized transformation process. Feedback is data about the
performance of a system. Control is the component that monitors and evaluates feedback and makes any necessary
adjustments to the input and processing components to ensure that proper output is produced.
An Information System Model An information system uses the resources of people, hardware, software, data,
and networks to perform input, processing, output, storage, and control activities that convert data resources into
information products. Data are first collected and converted to a form that is suitable for processing (input). Then
the data are manipulated and converted into information (processing), stored for future use (storage), or
communicated to their ultimate user (output) according to correct processing procedures (control).
IS Resources and Products - Hardware resources include machines and media used in information processing.
Software resources include computerized instructions (programs) and instruction for people (procedures). People
resources include information systems specialists and users. Data resources include alphanumeric, text, image,
video, audio, and other forms of data. Network resources include communications media and network support.
Information products produced by an information system can take a variety of forms, including paper reports, visual
displays, multimedia documents, electronic messages, graphics images, and audio responses.
Business Applications of Information Systems - Information systems perform three vital roles in business firms.
Business applications of IS support an organizations business processes and operations, business decision-making,
and strategic competitive advantage. Major application categories of information systems include operations
support systems, such as transaction processing systems, process control systems, and enterprise collaboration
systems, and management support systems, such as management information systems, decision support systems, and
executive information systems. Other major categories are expert systems, knowledge management systems,
strategic information systems, and functional business systems. However, in the real world most application
categories are combined into cross-functional information systems that provide information and support for
decision-making and also perform operational information processing activities. Refer to Figures 1.12, 1.14, and

1.16 for summaries of the major application categories of information systems.

II. LEARNING OBJECTIVES

Learning Objective
Explain why knowledge of information systems is important for business professionals and identify five
areas of information systems knowledge they need.
Give examples to illustrate how the business applications of information systems can support a firms
business processes, managerial decision-making, and strategies for competitive advantage.
Provide examples of several major types of information system from your experiences with business
organizations in the real world.
Identify several challenges that a business manager might face in managing the successful and ethical
development and use of information technology in a business.

III. TEACHING SUGGESTIONS

This chapter provides the framework used to structure the text, and introduces the fundamental systems concepts
used throughout the text. Use Figure 1.2 to discuss the layout of the text, and in particular it outlines the major
areas of information systems knowledge needed by business professionals. Discussion is particularly important at
the beginning of this course since there is a tendency for non-MIS majors to be skeptical of the importance of the
MIS course. The real world cases in this chapter can be used to demonstrate the extensive use of information
systems by managerial end users. Figure 1.3 illustrates how information systems rely on people, and a variety of
hardware, software, data, and communication network technologies as resources to collect, transform, and
disseminate information in an organization. Figure 1.5 summarizes the components of an information system. It
illustrates that all information systems use people, hardware, software, data, and network resources to perform input,
processing, output, storage, and control activities that transform data resources into information products.
Figure 1.8 outlines the three major roles of information systems in an organization. It illustrates that information
systems provide an organization with support for business operations, managerial decision-making, and strategic
advantage. Figure 1.9 outlines the role of the internetworked enterprise and how it depends on the Internet,
intranets, extranets, and other networks for enterprise collaboration among a companys business functions which
supports electronic commerce with customers, suppliers, and other business partners. Figure 1.10 can be used to
discuss the expanding roles of IS in business and management. Most students find this slide quite interesting and
often become involved in a good discussion of these expanding concepts. Figure 1.11 illustrates that the conceptual
classification of information systems is categorized as either operations support systems or management support
systems. They are categorized this way to spotlight the major roles each plays in the operations and management of
a business. Instructors must instill in students that not all IS projects undertaken in an organization are met with
success. There are a number of key reasons why some projects are successful while others are doomed to failure. It
is important for students to realize that information technology and information systems can be mismanaged and
misapplied so that they create both technological and business failure. Figure 1.19 shows that several major
activities are involved in a complete IS development cycle. This concept is further developed in Chapter 10.

IV: LECTURE NOTES

Section I:

Foundation Concepts: Information Systems and Technologies

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 SYSTEMS
Analysing BellSouth Corp.
We can learn a lot about the importance of information technology and information systems from this case. Take a
few minutes to read it, and we will discuss it (See BellSouth Corporation: The Business Payback of Information
Technology in Section IX).
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?
An IS Framework for Business Professionals: [Figure 1.2]
Managers or business professionals 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 professional needs to know about information
systems. It emphasizes five areas of knowledge:
Foundation Concepts

Information Technologies
Business Applications
Development Processes
Management Challenges

What is an Information System? [Figure 1.3]

An information system (IS) can be any organized combination of people, hardware, software, communications
networks, and data resources that collect, transforms, and disseminate information in an organization.
Information Technologies:
Business professionals rely on many types of information systems that use a variety of information technologies.
For example:
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 information systems (IS) use hardware, software, the Internet, and other telecommunications
networks, computer-based data resource management techniques, and other forms of information technologies (IT)
to transform data resources into a variety of information products for consumers and business professionals.

SYSTEM CONCEPTS - A FOUNDATION

System concepts underlie the field of information systems. Understanding system concepts will help you
understand many other concepts in the technology, applications, development, and management of information
systems. System concepts help you understand:
Technology. That computer networks are systems of information processing components that uses a variety of
hardware, software, data and telecommunication technologies.
Applications. That electronic business and commerce involves interconnected business information systems.

Development. That developing ways to use information technology n business includes designing the basic
components of information systems.
Management. That managing information technology emphasizes the quality, strategic business value, and
security of an organizations information systems.

What is a System?
Question:

What is a system as it applies to the concept of an information system?

Answer:

A system is a group of interrelated components working together toward a common goal by accepting
inputs and producing outputs in an organized transformation process.

A system (sometimes called a dynamic system) has three basic interacting components or functions. These include:
Input involves capturing and assembling elements that enter the system to be processed.

Processing involves transformation processes that convert input into output.

Output involves transferring elements that have been produced by a transformation process to their ultimate
destination.

Feedback and Control:

Two additional components of the system concept include feedback and control. A system with feedback and
control components is sometimes called a cybernetic system, that is, a self-monitoring, self-regulating system.
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 goals. The control function then makes necessary adjustments to a system's input and
processing components to ensure that it produces proper output.

Other System Characteristics:

A system does not exist in a vacuum; rather, it exists and functions in an environment containing other systems.
Subsystem:

A system that is a component of a larger system, where the larger system is its
environment.

System Boundary:

A system is separated from its environment and other systems by its system boundary.

Interface:

Several systems may share the same environment. Some of these systems may be
connected to one another by means of a shared boundary, or interface.

Open System:

A system that interacts with other systems in its environment is called an open system
(connected to its environment by exchanges of inputs and outputs).

Adaptive System:

A system that has the ability to change itself or its environment in order to survive is
called an adaptive system.

COMPONENTS OF AN INFORMATION SYSTEM -[Figure 1.5]

An information system model expresses a fundamental conceptual framework for the major components and
activities of information systems. An information system depends on the resources of people, hardware, software,
data, and networks to perform input, processing, output, storage, and control activities that convert data resources
into information products.
The information systems model outlined in the text emphasizes four major concepts that can be applied to all types
of information systems:
People, hardware, software, data, and networks, are the five basic resources of information systems.

People resources include end users and IS specialists, hardware resources consist of machines and media,
software resources include both programs and procedures, data resources can include data and knowledge
bases, and network resources include communications media and networks.
Data resources are transformed by information processing activities into a variety of information products
for end users.
Information processing consists of input, processing, output, storage, and control activities.

INFORMATION SYSTEM RESOURCES

The basic IS model shows that an information system consists of five major resources:
People resources

Hardware resources
Software resources
Data resources
Network resources

People Resources:
People are required for the operation of all information systems. These people resources include end users and IS
specialists.
End Users (also called users or clients) are people who use an information system or the information it
produces. Most of us are information system end users. And most end users in business are knowledge
workers, that is, people who spend most of their time communicating and collaborating in teams of workgroups
and creating, using, and distributing information.
IS Specialists are people who develop and operate information systems. They include system analysts,
software developers, system operators, and other managerial, technical, and clerical IS personnel.
Systems analysts design information systems based on the information requirements of end users.
Software developers create computer programs based on the specifications of systems analysts.
System operators monitor and operate large computer systems and networks.
Hardware Resources:
Hardware resources include all physical devices and materials used in information processing.
Machines - physical devices (computers, peripherals, telecommunications networks, etc.)

Media

- all tangible objects on which data are recorded (paper, magnetic disks etc.)

Examples of hardware in computer-based information systems are:

Computer Systems which consist of central processing units containing microprocessors, and a variety of
interconnected peripheral devices.
Computer peripherals which are devices such as a keyboard or electronic mouse for input of data and
commands, a video screen or printer for output of information, and magnetic or optical disks for storage of data
resources.
Software Resources:
Software resources include all sets of information processing instructions.
Program - a set of instructions that causes a computer to perform a particular task.

Procedures - set of instructions used by people to complete a task.

Examples of software resources are:

System software such as an operating system program, that controls and supports the operations of a computer
system.
Application software are programs that direct processing for a particular use of computers by end users.

Procedures are operating instructions for the people who will use an information system.

Data Resources:
Data constitutes a valuable organizational resource. Thus, data resources must be managed effectively to benefit all
end users in an organization. The data resources of information systems are typically organized into:
Databases - a collection of logically related records or files. A database consolidates many records previously
stored in separate files so that a common pool of data records serves many applications.
Knowledge Bases - which hold knowledge in a variety of forms such as facts and rules of inference about
various subjects.
Data versus Information. The word data is the plural of datum, though data is commonly used to represent both
singular and plural forms. The terms data and information are often used interchangeably. However, you should
make the following distinction:
Data: - are raw facts or observations, typically about physical phenomena or business transactions. More
specifically, data are objective measurements of the attributes (characteristics) of entities, such as people, places,
things, and events.
Information: - is processed data, which has been placed in a meaningful and useful context for an end user. Data is
subjected to a value-added process (data processing or information processing) where:
Its form is aggregated, manipulated, and organized.

Its content is analyzed and evaluated

It is placed in a proper context for a human user

Network Resources:
Telecommunications networks like the Internet, intranets, and extranets have become essential to the successful
electronic business and commerce operations of all types of organizations and their computer-based information
systems. Telecommunications networks consist of computers, communications processors, and other devices
interconnected by communications media and controlled by communications software. The concept of network
resources emphasizes that communications networks are a fundamental resource component of all information
systems. Network resources include:
Communications media (twisted-pair wire, coaxial cable, fiber-optic cable, and microwave, cellular, and

satellite wireless systems.

Network support (people, hardware, software, and data resources that directly support the operation and use of
a communications network).

INFORMATION SYSTEM ACTIVITIES

Information processing (or data processing) activities that occur in information system include the following:
Input of data resources

Processing of data into information

Output of information products
Storage of data resources
Control of system performance

Input of Data Resources:

Data about business transactions and other events must be captured and prepared for processing by the input
activity. Input typically takes the form of data entry activities such as recording and editing.
Once entered, data may be transferred onto a machine-readable medium such as magnetic disk or type, until
needed for processing.
Processing of Data into Information:
Data is typically subjected to processing activities such as calculating, comparing, sorting, classifying, and
summarizing. These activities organize, analyze, and manipulate data, thus converting them into information
for end users.
A continual process of correcting and updating activities must maintain quality of data stored in an information
system.
Output of Information Products:
Information in various forms is transmitted to end-users and made available to them in the output activity. The
goal of information systems is the production of appropriate information products for end users.
Storage of Data Resources:
Storage is a basic system component of information systems.
Storage is the information system activity in which data and information are retained in an organized
manner for later use.
Control of System Performance:
An important information system activity is the control of its performance.
An information system should produce feedback about its input, processing, output, and storage activities.

Feedback must be monitored and evaluated to determine if the system is meeting established performance
standards.
Feedback is used to make adjustments to system activities to correct deficiencies.

RECOGNIZING INFORMATION SYSTEMS

As a business professional, you should be able to recognize the fundamental components of information systems
you encounter in the real world. This means that you should be able to identify:
The people, hardware, software, data, and network resources they use.

The types of information products they produce.

The way they perform input, processing, output, storage, and control activities.

Analysing BellSouths Information System

From the Real World Case of BellSouth Corporation, we will try to recognize or visualize the resources used,
activities performed, and information products produced by their information systems.
IS Resources:
People resources include end users like BellSouths online customers and employees, and IS specialists like
CIO Fran Dramis and project leader Lori Groves.
Hardware Resources:
Thousands of PC server

Other computers that BellSouth and its customers must be using

Software Resources:
Web browsers

Operating systems
e-commerce websites software
Oracles customer relationship management system
Other proprietary BellSouth business software.

Network Resources:
Communications media and network support components that are part of the network resources that
BellSouth would need to support the e-business and e-commerce activities of such a large
telecommunications company.
Data Resources:
Computer-accessible databases of data about their customers, employees, services, and other necessary
business information.
Information Products:
Displays on customer and employee networked PCs that provide information about and support the
provision of BellSouths services, such as you would find by visiting their Websites at www.bellsouth.com
and www.bellsouthcorp.com.
IS Activities:
Input activities include the input of Web site navigation clicks and e-commerce and e-business data entries
and selections, and online collaboration queries and responses made by customers, suppliers, and
employees.
Processing Activities:
Processing activities are accomplished whenever any of BellSouths computers executes the programs that
are part of their e-business and e-commerce software resources.
Output Activities:
Output activities primarily involve the display or printing of information products mentioned earlier.
Storage Activities:
Storage activities take place whenever business data is stored and managed in the files and databases on the

disk drives and other storage media of BellSouths computer systems.

Control Activities:
Control activities include the use of passwords and other security codes by customers, suppliers, and
employees for entry into BellSouths e-business and e-commerce websites, and access of their databases
and knowledge bases.

Section II: Foundation Concepts: Business Applications, Development, and

Management
THE FUNDAMENTAL ROLES OF IS APPLICATIONS IN BUSINESS
Information systems perform three vital roles in any type of organization. That is, they support an organizations:
Business processes and operations

Decision making by employees and managers

Strategies for competitive advantage

Analysing Royal Caribbean International

We can learn a lot about the challenges of revitalizing and redirecting information technology in a company from the
Real World Case of Royal Caribbean International. Take a few minutes to read it, and we will discuss it (See Royal
Caribbean International: Renewing and Realigning IT with Business in Section IX).
The Major Roles of IS: Examples [Figure 1.8]
Three major roles of the business applications of information systems include:
Support Business Processes involves dealing with information systems that support the business processes and
operations in a business.
Support Decision Making help decision makers to make better decisions and attempt to gain a competitive
advantage.
Support Competitive Advantage help decision makers to gain a strategic advantage over competitors requires
innovative use of information technology.

e-BUSINESS IN BUSINESS - [Figure 1.9]

The explosive growth of the Internet and related technologies and applications is revolutionizing the way businesses
are operated and people work, and how information technology supports business operations and end user work
activities.
Businesses are becoming e-business enterprises. The Internet and Internet-like networks inside the enterprise
(intranets), and between an enterprise and its trading partners (extranets) have become the primary information
technology infrastructure that supports the business operations of many companies. e-business enterprises rely on
such technologies to:
Reengineer and revitalize internal business processes.

Implement electronic commerce systems among businesses and their customers and suppliers.
Promote enterprise collaboration among business teams and workgroups.

e-business is defined as the use of Internet technologies to internetwork and empower business processes, electronic
commerce, and enterprise communication and collaboration within a company and with its customers, suppliers, and
other business stakeholders.
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 e-business enterprise
depends on intranets, the Internet, extranets, and other networks to implement such systems.
Electronic commerce is the buying and selling, and marketing and servicing of products, services, and information
over a variety of computer networks. An internetworked e-business enterprise uses the Internet, intranets, extranets,
and other networks to support every step of the commercial process.
TRENDS IN INFORMATION SYSTEMS - [Figure 1.10]
The roles given to the information systems function have expanded significantly over the years.
1950s - 1960s - Data Processing - Electronic data processing systems
Role: Transaction processing, record keeping, and accounting, and other electronic data processing (EDP)
applications
1960s - 1970s - Management Reporting Management information systems
Role: Providing managerial end users with predefined management reports that would give managers the
information they needed for decision-making purposes.
1970s - 1980s - Decision Support - Decision support systems
Role: The new role for information systems was to provide managerial end users with ad hoc support of their
decision-making process. This support would be tailored to the unique decision-making styles of managers as they
confronted specific types of problems in the real world.
1980s - 1990s - Strategic and End User Support
Role: End users could use their own computing resources to support their job requirements instead of waiting for the
indirect support of corporate information services departments.
End User Computing Systems
Role: Direct computing support for end user productivity and work group collaboration.

Executive Information Systems (EIS) Role: These information systems attempt to give top executives an easy way to get the critical information they
want, when they want it, tailored to the formats they prefer.

Expert Systems (ES) and other Knowledge-Based Systems

Role: Expert systems can serve as consultants to users by providing expert advice in limited subject areas.
Strategic Information Systems (SIS)
Role: Information technology becomes an integral component of business processes, products, and services that help
a company gain a competitive advantage in the global marketplace.
1990s - 2000 Electronic business and commerce systems
Role: The rapid growth of the Internet, intranets, extranets, and other interconnected global networks has
revolutionising the operations and management of todays business enterprises.

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TYPES OF INFORMATION SYSTEMS - [Figure 1.11]

Information Systems perform important operational and managerial support roles in businesses and other
organizations. Therefore, several types of information systems can be classified conceptually as either:
Operations Support Systems

Management Support Systems

Operations Support Systems

Information systems are needed to process data generated by and used in business operations. Such operations
support systems (OSS) produce a variety of information products for internal and external use. However, they do
not emphasize producing the specific information products that can best be used by managers. Further processing
by management information systems is usually required. The role of a business firms operations support systems is
to:
Effectively process business transactions

Control industrial processes

Support enterprise communications and collaboration
Update corporate databases

Transaction Processing Systems (TPS)

Focus on processing the data generated by business transactions and operations. Transaction processing systems
record and process data resulting from business transactions (sales, purchases, inventory changes). TPS also
produce a variety of information products for internal or external use (customer statements, employee paychecks,
sales receipts etc.).
TPS process transactions in two basic ways:
Batch Processing - transactions data is accumulated over a period of time and processed periodically.

Real-time (or online) processing - data is processed immediately after a transaction occurs.
Process Control Systems (PCS) - Process control systems are systems, which make use of computers to control
ongoing physical processes. These computers are designed to automatically make decisions, which adjust the
physical production process. Examples include petroleum refineries and the assembly lines of automated factories.
Enterprise Collaboration Systems - Enterprise collaboration systems are information systems that use a variety of
information technologies to help people work together. Enterprise collaboration systems help us:
Collaborate - to communicate ideas

Share resources
Co-ordinate our cooperative work efforts as members of the many formal and informal process and project
teams

The goal of enterprise collaboration systems is to use information technology to enhance the productivity and
creativity of teams and workgroups in the modern business enterprise.
Management Support Systems (MSS) Management support systems focus on providing information and support for effective decision making by
managers. They support the decision-making needs of strategic (top) management, tactical (middle) management,
and operating (supervisory) management. Conceptually, several major types of information systems support a
variety of decision-making responsibilities:
Management Information Systems (MIS)

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Decision Support Systems (DSS)

Executive Information Systems (EIS)

Management information systems are the most common form of management support systems. They provide
managerial end users with information products that support much of their day-to-day decision-making needs. MIS
provide a variety of prespecified information (reports) and displays to management that can be used to help them
make more effective, structured types of day-to-day decisions. Information products provided to managers include
displays and reports that can be furnished:
On demand

Periodically, according to a predetermined schedule

Whenever exceptional conditions occur

Decision support systems provide managerial end users with information in an interactive session on an ad hoc (as
needed) basis. Managers generate the information they need for more unstructured types of decisions in an
interactive, computer-based information system that uses decision models and specialized databases to assist the
decision-making processes of managerial end users.
Executive information systems provide top and middle management with immediate and easy access to selective
information about key factors that are critical to accomplishing a firms strategic objectives. EIS are easy to operate
and understand.
Other Classifications of Information Systems:
Several other categories of information systems that support either operations or management applications include:
Expert Systems

Knowledge Management Systems

Functional Business Information Systems
Strategic Information Systems
Cross-functional Information Systems

MANAGERIAL CHALLENGES OF INFORMATION TECHNOLOGY

For managerial end users, the information systems function represents:
A major functional area of business that is important to a business success

An important factor affecting 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.
An important ingredient in developing competitive products and services that give an organization a strategic
advantage in the marketplace.
A major part of the resources of an organization and its cost of doing business
A vital, dynamic, and challenging career opportunity for many men and women.

Success and Failure with IT:

Is important that students 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

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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

Developing IS Solutions: [Figure 1.19] [Chapter 10, 11, & 12]

Developing successful information system solutions to business problems is a major challenge for business
managers and professionals today. As a business professional, you will be responsible for proposing or developing
new or improved use of information systems for your company. As a business manager, you will also frequently
manage the development efforts of information systems specialists and other business end users.
Most computer-based information systems are conceived, designed, and implemented using some form of
systematic development process. Figure 1.19 shows that:
Several major activities must be accomplished and managed in a complete IS development cycle.

In the development process, end users and information specialists design information system applications based
on an analysis of the business requirements of an organization.
Investigating the economic or technical feasibility of a proposed application.
Acquiring and learning how to use the software required to implement the new system, and make improvements
to maintain the business value of a system.

Challenges of Ethics and 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 example:
What uses of information technology might be considered improper, irresponsible, or harmful to other
individuals or to society?
What is the proper use of an organizations information resources?

What does it take to be a responsible end user of information technology?

How can you protect yourself from computer crime and other risks of information technology?

Ethical dimensions of information systems deal with ensuring that 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 worlds limited
supplies of material, energy, and other resources.
Challenges of IT Careers:
Information technology and its uses in information systems have created interesting, highly paid, and
challenging career opportunities.
Employment opportunities in the field of information systems are excellent, as organizations continue to expand
their use of information technology.
Employment surveys continually forecast shortages of qualified information systems personnel in a variety of
job categories.
Job requirements in information systems are continually changing due to dynamic developments in business and
information technology.

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The IS Function:
The information systems function represents:
A major functional area of business that is 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 gives an organization a strategic
advantage in the 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 todays internetworked e-business
enterprise.

V. KEY TERMS AND CONCEPTS - DEFINED

Computer-Based Information System:
An information system that uses computer hardware and software to perform its information processing activities.
Control:
The systems component that evaluates feedback to determine whether the system is moving toward the achievement
of its goal and then makes any necessary adjustments to the input and processing components of the system to
ensure that proper output is produced.
Data:
Facts or observations about physical phenomena or business transactions. More specifically, data are objective
measurements of the attributes (characteristics) of entities, such as people, places, things, and events.
Data or Information Processing:
The act of converting data into information.
Data Resources:
Data, model, and knowledge bases
Developing Business/IT Solutions:
End users and IS specialists develop and implement business/IT solutions to problems and opportunities arising in
businesses.
Electronic Business:
Using the Internet, intranets, and extranets as the IT platform for internal business operations, electronic commerce,
and enterprise collaboration.
E-Business in Business:
Businesses today are using Internet technologies to web-enable business processes and create innovative e-business
applications.
Electronic Commerce:
The buying and selling, marketing and servicing, and delivery and payment of products, services, and information
over the Internet, intranets, extranets, and other networks, between an internetworked enterprise and its prospects,
customers, suppliers, and other business partners.
End User:

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Anyone who uses an information system or the information it produces.

Enterprise Collaboration System:
The use of groupware tools and the Internet, intranets, extranets, and other computer networks to support and
enhance communication, coordination, collaboration, and resource sharing among teams and workgroups in an
internetworked enterprise.
Extranet:
Interorganizational Internet-like networks among trading partners.
Feedback:
Data or information concerning the components and operations of a systems performance.
Hardware Resources:
Includes all physical devices and materials used in information processing (Machines and media).
Information - Products:
The degree to which information has the appropriate information that is useful for users. Information products
include messages, reports, forms, and graphic images.
Information - Quality:
The degree to which information has content, form, and time characteristics that gives it value to specific end users.
Information System:
A system that uses the resources of hardware, software, and people to perform input, processing, output, storage, and
control activities that transform data resources into information products.
Information System Activities:
Input, processing, output, storage, and control
Information System Model:
An information system uses people, hardware, software, network, and data resources to perform input, processing,
output, storage, and control activities that transform data resources into information products.
Information Technology:
Hardware, software, telecommunications, database management, and other information processing technologies
used in computer-based information systems.
Intranet:
Internet-like networks and websites inside a company.
IS Knowledge Needed by Business Professionals:
Fundamental concepts about information systems, their technology, development, applications, and management.
Knowledge Workers:
People whose primary work activities include creating, using, and distributing information.
Management Challenges of IS:
Managing the IT resources of a company effectively and ethically to improve its business performance and value.
Network Resources:
Network resources include communications media and network support.
People Resources:
IS Specialists and end users.

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Roles of IS Applications in Business:

Information systems perform three vital roles in any type of organization:
1. Support of business operations
2. Support of managerial decision-making
3. Support of strategic competitive advantage
Software Resources - Programs:
A set of instructions that cause a computer to perform a particular task.
Software Resources - Procedures:
Set of instructions used by people to complete a task.
System:
A system is a group of interrelated components working together toward a common goal by accepting inputs and
producing outputs in an organized transformation process.
Trends in Information Systems:
See Figure 1.10
Types of Information Systems - Cross-Functional Systems:
Information systems that cross the boundaries of functional business areas in order to support business processes
across the organization.
Types of Information Systems - Management Support Systems:
Include executive information systems, decision support systems, and management information systems.
Types of Information Systems - Operations Support Systems:
Include office automation systems, transaction processing systems, and process control systems.

VI.

REVIEW QUIZ - Match one of the key terms and concepts

[See Review Quiz Answers found at the end of the text]

VII. ANSWERS TO DISCUSSION QUESTIONS

1.

How can information systems support a companys business processes and decision-making, and give it a
competitive advantage? Give examples to illustrate your answer.
Information systems play a vital role in the success of an enterprise. For example, the Internet and Internetlike internal networks, or intranets, and external interorganizational networks, called extranets, can provide
the information infrastructure a business needs for efficient operations, effective management, and
competitive advantage.

2.

How does the use of the Internet, intranets, and extranets by a business enterprise support their e-commerce
activities?
In order to succeed today, organizations are increasingly competing in global markets. The increased use of
technologies such as the Internet, intranets, and extranets will definitely revolutionize how businesses will
operate and how they will use computers to compete.

3.

Refer to the Real World Case on ABE Books in the chapter. Is a bricks-and-clicks strategy the best ecommerce model for a business today? Why or why not?

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The bricks-and-clicks strategy works very well under certain circumstances, as evidenced by both ABE
Books (Real World Case 1) and Staples, Inc. in chapter 2 (Real World Case 3). In these cases, retailers were
able to take advantage of an infrastructure connecting independent retailers or franchises in a research chain.
Access to the database connecting these suppliers allows customers seamless access to a wide base of
merchandise. However, this strategy will not work for all retailers. Attempting to implement a similar system
by other retailers may not be financially viable, and may take the focus from the existing customer base who
rely on the physical presence of the retailer.
4.

Why do big companies still fail in their use of information technology? What should they be doing
differently?

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

Certainly the reasons listed in the table above could some of the major causes of why companies fail in their
use of information technology. However, it is important to note that the field of technology is changing at
such a rapid pace that many large and successful companies are having difficulty keeping up with it. Other
ideas may include such things as a demand for skilled employees in this area; the major expense involved in
managing and developing systems and hardware acquisitions, increased and more aggressive competition
from competitors both domestic and international.
5.

How can a manager demonstrate that he or she is a responsible end user of information systems? Give
several examples.
Students answers will vary, however they must realize that information is a powerful resource that can be
used in an inappropriate matter. As a manager or other end user of information, we must insure that we
always consider the ethical responsibilities of the use of information. For example, uses of information
technology might be used in an improper, irresponsible, or harmful way, which can hurt other individuals or
society as a whole. Information systems must be managed to benefit society while meeting the goals of the
organization. Irresponsible use would include taking advantage of access to confidential data for personal
gain or interest.

6. Refer to the Real World Case on Royal Caribbean in the chapter. Are business managers or IT executives
responsible for successfully aligning an IT organization with the business needs and goals of a company?
Certainly, business managers and IT executives are responsible for the successful alignment of the IT
organization with the business needs and goals of a company. No department within side an organization
works in isolation from the other departments. They all need access to company data, and they all must work
together in a respectable manner in order to work towards meeting and exceeding the business needs, and to
realize the goals of the organization. In the Royal Caribbean case one of the main ingredients was integrity
and respect for each other. Top management must be able to demonstrate their buy in of IT, and show that
the projects are supported from the top.

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7.

What are some of the toughest management challenge in developing IT solutions to solve business problems
and meet new e-business opportunities?
One only has to pick up virtually any newspaper or business-related magazine to see a story about some facet
of new e-business opportunities. Businesses are increasingly incorporating technology into their quest to
survive and compete in the marketplace. The Internet and the WWW provide the enabling mechanisms to
foster the growth of electronic commerce and electronic business. Electronic commerce is defined as the use
of electronic transmission mediums (telecommunications) to engage in the exchange, including buying and
selling, of products and services requiring transportation, either physically or digitally, from location to
location. Electronic business opportunities include the exchange of information not directly related to the
actual guying and selling of goods. Increasingly, businesses are using electronic mechanisms to distribute
information and provide customer support. From the two definitions defined in this answer, it is clear to see
that the management challenge in developing IT solutions to solve business problems and meet new ebusiness opportunities may spell the difference between success and failure of many firms.

8.

Why are there so many conceptual classifications of information systems? Why are they typically integrated
in the information systems found in the real world?
Conceptual classifications of information systems are designed to emphasize the many different roles of
information systems. This can be done from various points of view, such as the level of management that the
information systems serve, or the business functions they support. In practice, these roles are not always
clearly divided, and in any case, information produced by one business activity may serve as input data to
another activity. Thus it makes sense to integrate various roles into one information system.

9.

In what major ways have the roles of information systems applications in business expanded during the last
40 years? What is one major change you think will happen in the next 10 years?
Data processing (1950s-1960s), management reporting (1960s-1970s), decision support (1970s-1980s),
strategic end user support (1980s-1990s), enterprise and global internetworking (1990s-2000s). (See Figure
1.10). Ethics will become a very important challenge in the new types of information systems.

10.

Can the business use of the Internet help a company gain a competitive advantage? Give an example to
illustrate your answer.
There is no doubt that the Internet can help a company gain a competitive advantage. Competition in global
markets will require better and innovative ways of capturing and retaining customers. Areas such as market
research, electronic commerce, electronic focus groups etc. are examples of how a company can use the
Internet to gain a competitive advantage.

VIII. ANSWERS TO APPLICATION EXERCISES

1.

Using the Internet for Business Research

a) Prepare a one-or two-page summary of some of your findings and the sources you used.
b) End your paper with a few sentences describing one thing you have learned from your research that might
help you in your future career in business.
This is a subjective question, which will vary from student to student. Todays students are very adept at
using search engines in order to locate information that would satisfy this question. Most web sites offer easy
of use and a large array of information. One intriguing example of the business use of information
technology is in the area of forensic science and the use of technology to solve crime.
2.

Visiting the SmartBiz Site

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Choose an article in the SmartBiz Tech Centre that you found interesting and prepare a one- or two-page summary
describing its relevance for a business end-user.
This is a subjective question, which will vary from student to student. Students would find informative and
interesting items on this site. Students are increasingly seeking to read additional material that is not found in
the text. The articles on the site further aid them in their learning and understanding in this field.
3.

University of Windsor: Recognizing IS Components

a) Identify the people, hardware, software, network, and data resources and the information products of this
information system.
The desktop and laptop microcomputers are hardware, the word processing program is software, the students
represent people resources in the system, the case study analysis is data, and the final document produced is
the information product. No specific network resources are discussed in this example.

b) Identify the input, processing, output, storage, and control activities that occurred.
The system accepts input in the form of text data typed by the student on the keyboard. The word processing
software processes this input data to format it appropriately for display or printing, and facilitate editing of
the input document. Output is in the form of a copy of the document file saved on disk, display of the
document on the video screen, and a printed copy of the document. The document is temporarily stored in
the computers primary memory and permanently stored on disk when it is saved. The warning message
received when saving a file under a name that has already been used is an example of control.
4.

Office Products Corporation: Recognizing IS Components

a) Identify the people, hardware, software, data, and network resources and the information products of this
information system.
People: customers, dealers, order entry clerks, warehouse personnel, president.
Hardware: IBM AS/400, 60 PC workstations, printers, telecommunications links, video display terminals,
dumb terminals (dealers), PC workstation for president, controller, sales manager, inventory manager, and
other executives.
Software: database management system
Network: local area network
Data resources: database
Information products: orders

b) Identify the input, processing, output, storage, and control activities that occurred.
Input: order entries
Processing: AS/400 (checks the availability of ordered parts, allocates the stock, and updates customer and
product databases).
Output: order pick list on the warehouse printer, management reports (printed and viewed on screen).
Storage: magnetic disk on AS/400
Control: Data entry procedures, formatted screens, AS/400 checks the order as it is entered.
5.

Western Chemical Corporation: Recognizing the Types and Roles of Information Systems

a) Make an outline that identifies how information systems support (1) business operations, (2) business
decision-making, (3) strategic advantage, (4) an e-business enterprise, (5) electronic commerce at Western
Chemical.

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The telecommunications system, word processing, and data from the chemical refinery process are designed
primarily to support business operations. The use of the refinery data to suggest answers to problems to the
engineer and the periodic, exception and demand reports generated by the system are designed to support
managerial decision making. The text summaries and graphics displays provided to top management help
support strategic decision-making. Overall, the systems improve operational efficiency, which helps the
strategic position of Western Chemical in the industry.

b) There are many different types of information systems at Western Chemical. Identify as many as you can
in the preceding scenario. Refer to Figure 1.12, 1.14, and 1.16 to help you. Explain the reasons for your
choices.
Using the system to capture data about sales orders and purchases describes a transaction processing system.
The electronic mail and word processing systems are office automation systems. The sensors capturing data
about the refinery process are part of a process control system. The use of the data to suggest answers to
complex refinery problems would represent an expert system. The reports sent to managerial end users
represent an information reporting system. The use of computers by managerial end users to interactively
assess the possible results of alternative decisions represents a decision support system. The text summaries
and graphic displays provided to top management are an executive information system.

IX. ANSWERS TO REAL WORLD CASES

Real World Case 1: The Advanced Book Exchange (ABE Books):
New Focus on Consumers
1.

What e-commerce challenges are facing small business retailers like ABE Books?
The main hurdle facing small companies such as ABE Books is the high cost of implementation and
maintenance for an e-Commerce infrastructure that enables the provision of the business products and
services in the online environment. By shifting their focus from their physical storefront to the deployment
and operation of an online storefront, the businesses risk losing their customer base.

2.

How can information technology and a bricks-and-clicks strategy help small retailers meet such
challenges?
By implementing a system that can be managed by one service provider, small retailers can pay for the
services provided without having to worry about implementation and maintenance details. The use of
distributed systems allows for the creation of an infrastructure that links across the various enterprises to
provide seamless access to the Internet customer base. With a brick-and-click strategy, furthermore,
companies can leverage their physical presence to better serve their customers. The physical point of
presence can provide cost advantages in customer service and distribution of the product to the end-user.

3.

Visit the www.abebooks.com Web site. Evaluate the content of the site and the e-commerce strategies it
reveals. What other e-commerce moves could you recommend to ABE Books? Defend your
recommendations.
The site was evaluated on the basis of the 7Cs of its web interface, namely, Context, Content, Community,
Commerce, Communication, Customization, and Connection. The main gaps observed relate to the lack of
community-based features on the website. Being an infomediary service, ABE Books can increase the
stickiness of its website by providing a forum for like-minded readers to interact with each other and
possibly the book sellers in order to discuss their interests. This would in turn also provide further revenue

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opportunities for the website by providing another channel to advertise the products of its sellers,
potentially to a customer base that is highly disposed to the specific titles that are offered by the bookseller.
Real World Case 2: Royal Caribbean International:
Renewing and Realigning IT with Business
1.

Why did the IT group at Royal Caribbean have such poor performance and business status in the company?
The IT group at Royal Caribbean were disorganized and ineffective in supporting the needs of the business,
and had thus lost the respect of the rest of the company. The traditional method of working in this
department was done through command and control. Everything was locked down; everything was about
not spending money. There was no IT strategy for the future and no respect from the business side of IT.
Morale was terrible, and IT groups were made up of factions. Tension ran high, and employees in each IT
department worked in isolation from other IT department employees.

2.

What are the top three factors in Tom Murphys turnaround of the IT function at Royal Caribbean? Explain
the reasons for your choices.
Three top factors in Tom Murphys turnaround was that he revitalized the IT group by stressing and
demonstrating integrity, respect, through communication, accountability, teamwork, and a service and
customer-oriented focus. Murphy broke up special-interest IT factions by requiring cross-teams of
specialists on development projects and improved performance by establishing specific performance
measures for managers, whom he freed from other chores to concentrate on managing their people.
Murphy created the atmosphere and the environment that allowed these very qualified and technical people
to work together toward a common company goal.
What Tom Murphy did was to give the power to the people, make them accountable, and show pride in
what they do. By showing them his respect, they in turn showed him theirs. Communication is the key to
success in this case. Morale of the IT group is high, and they have earned to respect of the rest of the
company by creating IT solutions that support the needs and goals of the business.

3.

Visit the website of Royal Caribbean. Evaluate the effectiveness of the website and the services being
offers to attract and serve the travel needs of customers and prospective customers. What could be
improved? Outline the business impact of your idea.
Students will suggest a variety of answers here. After visiting the Royal Caribbean Web site
(www.royalcarribean.com), it was hard to go back to work. Visitors can choose just about anything that
they are looking for at this very attractive and well laid out Web site. For example, they can search for
certain ships by name, they can find a ship, embarkation and shore excursions forms, hot deals, check out
whats new, view special features, and you can even keep information in the My Cruise Folder that you
think may be your ideal vacation. The site offers many areas, and it would be difficult to imagine what
students would suggest to make this site better than it currently is.
Real World Case 3: WH Smith PLC:
Supporting Retail Management with Information Technology

1.

Why did WH Smith need a new retail management system?

In their traditional method of operation, WH Smith did not have the capability to really understand their
customers, and their buying habits. They also did not have a good handle on their inventory, or their best
selling items. On top of all of that, WH Smith themselves did not have a good handle on their store

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operations and what was working best at different stores. WH Smith wanted to get a grasp on customers
buying patterns, anticipate trends, and more carefully align inventory in order to maximize profits in its
1,200 UK based stores.
2.

How well does WH Smiths new CRM system support its business goals? Explain.
The goal of the CRM system at WH Smith was to cut the amount of paper shuttling back and forth between
stores and the corporate headquarters in Swindon, England, and give store managers greater insight into
what was happening in their own stores and throughout the WH Smith network. The new system allowed
WH Smiths store managers and corporate office to communicate better and with current information. The
new system enabled the company managers to integrate and gain insight into their most profitable items.
The new CRM system enabled store managers in one store to communicate and share information with
other stores. This information enables them to know what is selling best or not at all, better inventory
management, determine highest-margin items which are ranked by sales, identify market and customer
buying trends, better product displays of high selling items, provide better and more personalized customer
service.

2.

In what other ways could IT help WH Smith support its retail managers, marketers, and customers?
Defend your proposals.
Students answers will vary; however they may identify issues such as market segmentation trends, income,
age, sex, gender, economic, geographic, etc. Through data warehousing and data mining techniques WH
Smith will be able to analyze the detail to greater depth, and identify smaller market segments not currently
be served by themselves or their competitors. Customer personalization and service is one of the growing
trends towards building better customers relationships. Study the market to determine what customers want
and are willing to buy is a major capability of IT today.

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