1 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Chapter - 1  Foundations of Information Systems in Business

2 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Learning Objectives  Explain why knowledge of information systems is important for business professionals and identify five key areas of information systems knowledge.  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.

3 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Learning Objectives (Continued)  Provide examples of the components of real world information systems.  Provide examples of several major types of information systems.  Identify several challenges that a business manager might face in managing the successful and ethical development and use of information technology in a business.

4 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Section I Foundation Concepts: Information Systems and Technologies

5 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Information Systems Framework

6 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Information Systems Concepts (Continued)  Foundation Concepts  Fundamental concepts about the components and roles of information systems.  Information Technologies  Major concepts, developments, and management issues in information technology.

7 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Information Systems Concepts (Continued)  Business Applications  The major uses of information systems for operations, management, and competitive advantage.  Development Processes  How business professionals and information specialists plan, develop, and implement information systems.  Management Challenges  The challenge of managing ethically and effectively.

8 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. What IS a system?  A group of interrelated or interacting elements forming a unified whole, OR  A group of interrelated components working together toward a common goal by accepting inputs and producing outputs in an organized transformation process (dynamic system).  Three basic interacting components:  Input  Processing (transformation process)  Output

9 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Add Feedback and Control Loops..  And the system, now called a cybernetic system, becomes even more useful.  Self- monitoring  Self-regulating

10 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Other System Characteristics  A system exists and functions in an environment containing other systems.  Subsystem – a component of a larger system.  Systems that share the same environment may be connected to one another through a shared boundary, or interface.  Open versus closed system.  Adaptive system

11 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Components of an INFORMATION System

12 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Components of an Information System (Continued)  People Resources  End Users  IS Specialists  Hardware Resources  Computer systems  Peripherals  Software Resources  System software  Application software  Procedures  Data Resources  Data versus Information  Network Resources  Communication media  Network support

13 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Components of an Information System (Continued)

14 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Data Versus Information WestCharles Mann 79154TM Shoes Monthly Sales Report for West Region Sales Rep: Charles Mann Emp No Item Qty Sold Price TM Shoes 1200 $100

15 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Information Products  Focus is on the end-user.  They are the result of IS activities…  Input  Processing  Output  Storage  Control

16 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Section II Foundation Concepts: Business Applications, Development, and Management

17 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Major Roles of IS Support Competitive Advantage Support Business Decision Making Support of Business Processes and Operations

18 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. The Present and the Future  E-Business  The use of Internet technologies to internetwork and empower…  Business processes  Electronic commerce, and  Enterprise communication & collaboration  Within a company & with its customers, suppliers, & other business stakeholders.

19 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Trends in Information Systems

20 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Types of Information Systems

21 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

22 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Business Information Systems: TPS  TPS represent those IT-enabled applications that perform highly structured, routine, repetitive business transactions  A transaction is any business-related exchange of value or movement of goods  Payments to employees, sales to customers, payments to suppliers, receipt of items are all examples of transactions.  Input data, processing logic and outputs are well-defined

23 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Business Information Systems: TPS  A business usually has many TPS  They capture a large number of transactions on a daily basis  A severe impact on the business if the TPS breaks down.  For example, retail banking operations will be hampered if ATM systems fail  Operational (clerical) staff are the intended users of TPS

24 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Why do organizations need TPS?  TPS helps a business to improve efficiency by:  enhancing data accuracy  reducing the errors caused by clerical staff  speeding up processing of transactions

25 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Examples of TPS  Payroll system  Accounts payable system  Order entry systems  Student registration system  ATM transaction system  Inventory system

26 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Payroll TPS

27 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Types of TPS Systems

28 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Business Information Systems: MIS  MIS are IT-enabled IS systems that are designed to aid decision making of mid-level management of a business  MIS produce managerial reports which are in most cases produced periodically: daily, weekly, monthly or yearly  Because these reports are generated at a predetermined planned basis, they are called scheduled reports.

29 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Business Information Systems: MIS  A number of functional areas of a business such as marketing, finance, production are supported by MIS.  MIS provides reports by drawing upon data captured by many TPS in an organization.

30 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Business Information Systems: MIS  The primary difference between the reports generated by TPS and those produced by MIS is that MIS reports support managerial decision making at a higher level where the decisions themselves tend to be less routine.  An example of an MIS subsystem is a sales monitoring system that alerts managers when sales are either above or below expected levels

31 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Management Information System (MIS)

32 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.  Structured and semi-structured decisions  Report control oriented  Past and present data  Internal orientation  Lengthy design process Management Information System (MIS)

33 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Business Information Systems: DSS  DSS are developed to help business managers in addressing semi- structured business problems.  Information needed to solve semi structured problems are often not available.  Thus, uncertainty is involved and such problems require managers’ subjective judgment.  The essential elements of a DSS include a collection of complex mathematical models which draws upon to the data maintained within a business.

34 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Example of DSS  A DSS may be used by an automobile manufacturing company to determine the best location to build a new manufacturing facility.  An oil company may want to use a DSS to discover the best place to explore for oil.  Traditional MIS or TPS cannot be used for addressing the above mentioned semi-structured type of problems.

35 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Decision Support System (DSS)

36 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Decision Support System (DSS)

37 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Business Information Systems: EIS/ESS  EIS is a special MIS dedicated to high level management.  Such dedication is required because senior managers require access to internal and external data that are relevant to the critical success factors affecting their business.  These systems often present data in graphical format

38 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Executive Support System (ESS)

39 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.  Top level management  Designed to the individual  Ties CEO to all levels  Very expensive to keep up  Extensive support staff Executive Support System (ESS)

40 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. TPS Organizational Level OAS MIS KWS DSS ESS TYPE OF DECISIONOPERATIONALKNOWLEDGEMANAGEMENTSTRATEGIC STRUCTURED ACCOUNTS RECEIVABLE ELECTRONIC PRODUCTION SCHEDULING COST OVERRUNS SEMI- BUDGET STRUCTURED PREPARATION PROJECT SCHEDULING FACILITY LOCATION UNSTRUCTUREDPRODUCT DESIGN NEW PRODUCTS NEW MARKETS Different Kinds of Information Systems

41 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Types of Information Systems  Operations Support Systems  Transaction processing systems  Batch – transaction data accumulate over time, processed periodically.  Real-time – data processed immediately after a transaction occurs.  Process Control Systems – monitor & control physical processes.  Enterprise Collaboration Systems

42 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Types of Information Systems (continued)  Management Support Systems  Management Information Systems – pre- specified reports & displays to support decision-making.  Decision Support Systems – provide interactive ad hoc support.  Executive Information Systems – critical information tailored to the information needs of executives.

43 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Types of Information Systems (continued)  Other Classifications  Expert systems – expert advice  Knowledge management systems – support the creation, organization, & dissemination of business knowledge  Functional business systems – support the basic business functions  Strategic information systems – strategic advantage

44 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Managerial challenges of information technology  Information systems can be mismanaged and misapplied so that they create both technological and business failure. Top Five Reasons for Success Top Five Reasons for Failure User involvement Lack of user input Executive management support Incomplete requirements and specifications Clear statement of requirements Changing requirements and specifications Proper planning Lack of executive support Realistic expectations Technological incompetence

45 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Developing IS Solutions to Business Challenges

46 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Ethical Challenges  Just because we can, should we?  Where do we draw the line between customer privacy and collecting business information?  Do we owe it to society to use this technology wisely and responsibly? Why? Isn’t our job to make a profit?

47 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. In Summary, the IS Function…  Is a major functional area of business.  Is an important contributor to operational efficiency, employee productivity and morale, and customer service & satisfaction.  Is a major source of information and support for decision making.  Provides a strategic advantage in developing competitive products & services.

48 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Discussion Questions 1. How can information technology support a company’s business processes and decision making, and give it a competitive advantage? 2. How does the use of the Internet, intranets, and extranets by an e-business enterprise support their e-commerce activities? 3. Why do big companies still fail in their use of information technology? What should they be doing differently?

49 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Discussion Questions (continued) 4. How can a manager demonstrate that he or she is a responsible end user of information systems? 5. What are some of the toughest management challenges in developing IT solutions to solve business problems and meet new e-business opportunities? 6. Why are there so many conceptual classifications of information systems? Why are they typically integrated in information systems found in the real world?

50 McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved. Discussion Questions (continued) 7. 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? 8. Can the business use of Internet technologies help a company gain a competitive advantage?