01 Information Systems in Business

Unit 1
Information Systems in Business
Unit I
Information Systems in Business
Chapter I, O'Brien
Overview of IS
Impact of IS in Business
Transformation to Digital Economy
Digital Divide
Concept of Systems
Components of IS
CBIS (computer based information system)
Why do businesses and organisations

use information technology?
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Information System in Business

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LastAre
yearorganisations
Answers ..able
. to
achieve all these objectives?
Your views???

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Consequences of using IT
Intended
Consequences
Misuse of IT
Refuse to use IT
Data overload
Increase in
Speed
Increase in
Volume of
transactions
Increase in
Accuracy
Unintended
consequences
Positive/ Negative
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Types of Consequences
1.
2.
3.
First Order Effect

Automobile: Change from horse drawn carriage to automobiles
IT: increase in speed, accuracy and volume
Second Order Effect
Auto: People begin to travel more; go to places that would have not
been possible before
IT: some departments and personnel may not be needed at all and
may shift to other tasks. When ATMs were introduced in banks, the
job of tellers was reduced and sometimes eliminated.
Organisation structure changes
Third Order Effect
Auto: Entire economy changes to use the new transportation;
suburbs emerge
IT: Businesses have been eliminated. For instance, with online
booking sites, the people based travel agent services have disappear
E Business7
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1. First order effect - increase in speed or efficiency

2. Second order effect - restructuring of organisations
3. Third order effect - restructuring of the industry
The decision making here involves:
Knowing how to leverage IT to increase speed or efficiency - by reducing
the negative consequences of using IT, and increasing the positive
consequences.
Knowing what are the retraining and restructuring needs of the
organisation, so as to derive benefits from use of IT - some of the
restructuring may be intended, while others may be unintended. Either
way, it is important for managers to retrain workers so as to reduce the
negative consequences.
Knowing how to manage the consequences of restructuring of the
industry - the consequences can be positive as well as negative for the
organisation. The role of the manager is to reduce the impact (on the
organisation) of negative consequences, while increasing the impact of
positive ones.
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IT as a tool
IT as a medium for doing business
IT as business

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Motivation
1. Large number of jobs today creating
information systems for managing
organizations.
2. As managers, you should be able to interact
effectively with IT service providers and
system analysts.
3. Know what IS can do for your organisation and
what it cannot.
4. The one technology that impacted businesses
maximum in 21st century.
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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.

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organization.
Components of IS
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organization.
Functions of IS
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What IS can do to Business?

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IS Enables Supply Chain Flows

INFORMATION
MATERIAL
FINANCE
SUPPLIERS
MANUFACTURER
CAPACITY, PROMOTION PLANS, DELIVERY

SCHEDULES
RAW MATERIALS, INTERMEDIATE PRODUCTS,
FINISHED GOODS
CREDITS, PAYMENT TERMS, INVOICE
DISTRIBUTORS
RETAILERS
SALES, ORDERS, INVENTORY, PROMOTION

PLANS
INFORMATION
RETURNS, REPAIRS, RECYCLING, DISCARD
MATERIAL
PAYMENTS
CUSTOMERS
FINANCE
Source: Hau L. Lee; 2000, Creating Value through Supply Chain Integration, September/October 2000 issue of Supply
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Chain Management
Review
Information
System in Business
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IS Facilitates integration of Functional Areas of a

Business
OperationsIncrease Efficiency
Facilitate Functions
IS
Better Decision
Making
IS
IS
Increase Efficiency
Marketing
Increase Efficiency IS
HRM
IS
Increase Efficiency
IS
Finance

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IT - Tool to compete in the digital age

1. What are the processes that should be
deployed consistently across the
organisation, and how IT is used for this
deployment
2. How to use the insights gained from data
within the IT infrastructure to innovate
3. How to leverage technology to propagate the
best ideas across the firm.
Read: https://hbr.org/2008/07/investing-in-the-it-that-makes-a-competitivedifference.
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IS as a platform for doing business
Ubiquity
Global reach
Universal standards
Information richness
Interactivity
Information density
Personalization/customization
Social technology

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Roles of IS in Business

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EXAMPLE OF INFORMATION
NEEDED BY A SHOPKEEPER ?
1.
2.
3.
4.
Daily sales account

Inventory List and balance stock
Long overdue payments
Profit and loss account
Used to streamline day to day operations called

Operational information
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EXAMPLE OF INFORMATION NEEDED

BY A SHOPKEEPER (CONTD)
1. Slow and fast moving items
2. Reliable supplier of items
3. Sales trends
Used to improve profitability of shop

called Tactical information
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1. Whether to stock different varieties of items
2. Whether to diversify.
3. Whether to start a new branch in a different
locality.
4. Whether to start an e-shop
Information to expand business and explore
new opportunities known as Strategic
Information
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1. Income tax account
2. Sales tax account
3. Used to provide information to the
government
Known as Statutory Information
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TYPES OF INFORMATION
1. OPERATIONAL : Needed for day to day
operations of the organization. Eg: Daily
Sales, Billing.
2. TACTICAL : Needed to take short range
decisions to improve profitability and
performance.
3. STRATEGIC : Needed for long range planning
and directions. This is less structured.
4. STATUTORY : Needed by law to sent to
government authorities. Eg: Sales tax return.
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MANAGEMENT HIERARCHY AND

INFORMATION NEEDS

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Decision Structure
1. Structured (operational)
The procedures to follow when decision
is needed can be specified in advance
2. Unstructured (strategic)
It is not possible to specify in advance
most of the decision procedures to follow
3. Semi-structured (tactical)
Decision procedures can be pre-specified,
but not enough to lead to the correct decision

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Roles of IS in Business

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Discussion
1. Can we classify the B TRAC (Banglore Traffic
Management System) into the different types
of information systems?

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2016: Mobile Social Analytics - Cloud

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Distinction between Data and Information

1. DATA : Raw Material
2. Data collection significant first step costs money.
3. Collect only necessary
and sufficient data
4. Data is generally used
by machines
5. Data is useless unless
it is processed to
create INFORMATION
1. INFORMATION : Processed
data
2. Data processed by
machines giving
information
3. Information is used to run
an organization efficiently
4. Information used by
managers to initiate
actions
Data + Context = Information

Data is potentially valuable to all; information is valuable to its intended user
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WHY COMPUTER BASED INFORMATION

SYSTEMS NEEDED?
1. Increasing size of organizations thus data volume
increases
2. Distributed organizations
3. Timely processing for fast action
4. Better competitiveness with better information
5. Increasing of complexity of organizations require
innovative processing
6. Same data can be processed in different ways.
7. Facilitates: Simplification, innovation, flexibility.
IT/IS is no more an option,
System in Business
but a must forInformation
business
management
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Motivation - 2
1. The IS function is
A major functional area of business
An important contributor to operational efficiency,
employee productivity, morale, customer service and
satisfaction
A major source of information and support for decision
making
A vital ingredient in developing competitive products and
services in the global marketplace
A dynamic and challenging career opportunity
A key component of todays networked business

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Types of Information Systems

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What do they do?

Efficiently process business transactions
Control industrial processes
Support communications and
collaboration
Update corporate databases
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Information systems that focus on providing
information and support for effective decision
making by managers
What do they do?

Efficiently process business transactions
Control industrial processes
Support communications and collaboration
Update corporate databases
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Two Ways to Process Transactions
1. Batch Processing
Accumulate transactions over time and process
periodically
Example: a bank processes all checks received in a
batch at night or pay roll system.
2. Online transaction processing (OLTP) is a real-time
system that captures transactions immediately
Example: a bank processes an ATM withdrawal
immediately or a ticket reservation system.
process data resulting from business

transactions, update operational databases,
and produce business documents.
Examples: sales processing, inventory
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systems,
accounting
systems
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The Transaction Processing Cycle

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Process Control Systems (PCS) monitor

and control industrial processes.
Example: using sensors to monitor
chemical
processes in a petroleum refinery
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Enterprise Collaboration Systems support team,

workgroup communications.
Examples: email, video conferencing, Office
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automation
system
(MS Outlook)
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Information systems that focus on providing
information and support for effective decision
making by managers

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Management Information Systems (MIS)
provide information in the form of prespecified reports and displays to support
business decision making.
Example: daily sales analysis reports,
inventory levels.

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Decision Support Systems (DSS) provide
interactive ad hoc support for the decision
making processes.
Example: a what-if analysis to determine
where to spend advertising funds; vendor
rating

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MIS vs. DSS

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Executive Information Systems (EIS) provide critical
information from MIS, DSS, and other sources
tailored to the information needs of executives.
Example: easy access to actions of competitors;
business performance

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A Business as a System
What is Business? An organization where goods and services are
created and exchanged for one another or for money.
What is a System? A system is defined as a set of inter related components,

with a clearly defined boundary, working together to achieve a common set of
objectives by accepting inputs and producing outputs in an organised
transformation process

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What is Business? An organization where goods and services are
exchanged for one another or for money.
What is a System? A system is defined as a set of inter related components,

with a clearly defined boundary, working together to achieve a common set of
objectives by accepting inputs and producing outputs in an organised
transformation process

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Systems exists in an
environment.
A system can be a sub
system of a larger
system.
Adaptive systems
survives.
Systems share
boundaries Supply
Chains
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Components of an IS
IS Resources
People Resources
Specialists
End users
Hardware Resources
Machines
Media
Software Resources
Programs
Procedures
Data Resources
Product descriptions,
customer records,
employee files,
inventory databases
Network Resources

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Communications media,
communications
processors, network
access and control
software
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IS Activities
Input of data resources
Components of
an IS
Data entry activities
IS Resources
People Resources
Specialists
End users
Hardware Resources
Machines
Media
Processing of data into

information
Calculations,
comparisons, sorting,
and so on
Software Resources
Programs
Procedures
Data Resources
Output of information
products
Messages, reports,
forms, graphic images
Product descriptions,
customer records,
employee files,
inventory databases
Storage of data resources

Data elements and
databases
Network Resources
Control of system
performance
Monitoring and
evaluating feedback
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Communications media,
communications
processors, network
access and control
software
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Summary: How IT can help a companys

competitive advantage?
1. Information technologies can support many
competitive strategies including cost leadership,
differentiation, innovation, growth and alliance.
2. IT can help
Build customer-focused businesses

Reengineer business processes
Businesses become agile companies
Create virtual companies
Build knowledge-creating companies
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1. Information
technologies can
support many
competitive
strategies such as :
cost leadership,
differentiation,
innovation,
Growth
Alliance.
Becoming a low-cost
producer of products and
services
Finding ways to help
suppliers and customers
reduce their costs
Increase costs of competitors

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1. Information
technologies can Developing ways to
differentiate a firms
support many
products and services
competitive
strategies such as : from its competitors
cost leadership,
differentiation,
innovation,
Growth
Alliance.
Reduce the
differentiation
advantages of
competitors

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1. Information
technologies can
Development of
support many
unique products and
competitive
strategies such as : services
cost leadership, Entry into unique
markets or market
differentiation,
niches
innovation,
Growth
Alliance.
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1. Information
Significantly expanding a
technologies can
companys capacity to
produce goods and
support many
services
competitive
cost leadership,
differentiation,
innovation,
Growth
Alliance.
Expanding into global

markets
Diversifying into new

products and services

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1. Information
technologies can
support many
competitive
cost leadership,
differentiation,
innovation,
Growth
Alliance.
Establishing new
business linkages and
alliances with
customers, suppliers,
competitors,
consultants, and other
companies

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1.
Information technologies can support

many competitive strategies including
cost leadership, differentiation,
innovation, growth and alliance.
2. IT can help
Build customer-focused
businesses
Reengineer business
processes
Businesses become agile
companies
Build knowledge-creating
companies
can anticipate
customers future
needs.
responds to customer
concerns.
provides top-quality
customer service.

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1.

2. IT can help
businesses
Reengineer business
processes
companies
companies
Fundamental rethinking
and radical redesign of
business processes to
achieve dramatic
improvements in cost,
quality, speed, and
service.

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1.

2. IT can help
businesses
Reengineer business
processes
companies
companies
A company that can

make a profit in markets
with broad product
ranges and short model
lifetimes, and can
produce orders
individually and in
arbitrary lot sizes.

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1.

2. IT can help
businesses
Reengineer business
processes
companies
companies
An organization
that uses
information
technology to link
people,
organizations,
assets, and
ideas.

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1.

2. IT can help
businesses
Reengineer business
processes
companies
companies
Consistently creating
new business
knowledge,
disseminating it widely
throughout the
company, and quickly
building the new
knowledge into their
products and services.

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Unit 1

Information Systems in Business

Why do businesses and organisations

Last year Answers .. .

Information System in Business

Information System in Business

First Order Effect

1. First order effect - increase in speed or efficiency

Information System in Business

What is an Information System?

Information System in Business

What is an Information System?

What is an Information System?

What IS can do to Business?

Information System in Business

IS Enables Supply Chain Flows

CAPACITY, PROMOTION PLANS, DELIVERY

CREDITS, PAYMENT TERMS, INVOICE

SALES, ORDERS, INVENTORY, PROMOTION

RETURNS, REPAIRS, RECYCLING, DISCARD

IS Facilitates integration of Functional Areas of a

Information System in Business

IT - Tool to compete in the digital age

IS as a platform for doing business

Information System in Business

Information System in Business

Daily sales account

Used to streamline day to day operations called

EXAMPLE OF INFORMATION NEEDED

Used to improve profitability of shop

EXAMPLE OF INFORMATION NEEDED

EXAMPLE OF INFORMATION NEEDED

MANAGEMENT HIERARCHY AND

Information System in Business

Information System in Business

Information System in Business

Information System in Business

Information System in Business

2016: Mobile Social Analytics - Cloud

Information System in Business

Information System in Business

Distinction between Data and Information

Data + Context = Information

WHY COMPUTER BASED INFORMATION

A key component of todays networked business

Types of Information Systems

Information System in Business

Types of Information Systems

What do they do?

Types of Information Systems

What do they do?

Types of Information Systems

process data resulting from business

The Transaction Processing Cycle

Information System in Business

Types of Information Systems

Process Control Systems (PCS) monitor

Types of Information Systems

Enterprise Collaboration Systems support team,

Types of Information Systems

Information System in Business

Types of Information Systems

Information System in Business

Types of Information Systems