BUSI 240 Introduction to Information Systems Tuesday & Thursday 8:05am – 9:30am Wyant Lecture Hall Please initial the roster on the back table. The course syllabus is available at: http://home.apu.edu/~jbirch/BUSI240 Or http://online.apu.edu

Foundations of Information Systems in Business 1 Chapter Foundations of Information Systems in Business Why should you study information systems? How does a firm use information systems? What are the components of an information system? McGraw-Hill/Irwin Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved.

Why study Information Systems and Information Technology? Vital component of successful businesses Helps businesses expand and compete Businesses use IS and IT To improve efficiency and effectiveness of business processes For managerial decision making For workgroup collaboration You might just as well ask why study accounting, finance, operations management, marketing, human resources, management. Most business majors include a class in IS.

What is a system? A system Is a set of interrelated components With a clearly defined boundary Working together to achieve a common set of objectives Almost everything is a system One system can be made up of other systems or can be part of a bigger system

Information System

Basic Information System

What is an Information System? An organized combination of People Hardware Software Communications networks Data resources Policies and procedures That stores, retrieves, transforms, and disseminates information in an organization This is a simple definition that we will expand upon later What’s an example? Smoke signals to transmit information Card catalogs in a library Book bag with day planner, notebooks, that allows you organize inputs from lectures, presentations and discussions. The output is homework and good exam grades Cash register at restaurant Other examples?

Information System (IS) versus Information Technology (IT) IS is all the components and resources necessary to deliver information and functions to the organization IT is hardware, software, networking and data management In theory, IS could be paper based But we will focus on Computer-Based Information Systems (CBIS) Definition of IS from prior slide: An organized combination of People Hardware Software Communications networks Data resources Policies and procedures That stores, retrieves, transforms, and disseminates information in an organization In theory, an IS could be pencil and paper based

IS Knowledge Framework for Business Professionals

What should a Business Professional know about IS? Foundation Concepts: fundamental behavioral, technical, business and managerial concepts Information Technology: Hardware, software, networks, data management and Internet-based technology Business Applications: Major uses of the IS in the organization Development Processes: How to plan, develop and implement IS to meet business opportunities Management Challenges: The challenges of effectively and ethically managing IT Refers back to figure 1.2 on prior slide Foundation Concepts: Examples: general systems theory, competitive strategies. Covered in chapters 1, 2 Information Technology: Covered in chapters 3-6 Business Applications: Chapter 7: applications in functional areas, Chapter 8: electronic commerce applications and Chapter 9: decision making Development Processes: By both business professionals and IS specialists. Chapter 10. Management Challenges: Managing IT at the end user, enterprise and global levels of a business. Chapter 11 is security challenges and Chapter 12 is how to manage IT in global businesses.

What does IS do for a business? Examples of business processes: record purchases, track inventory, pay employees, etc. Business would stop without such IS. Examples of decision making: what lines of merchandise need to be added, what kind of investment required. Examples of competitive advantage: put kiosk in store to connect to e-commerce website. Help gain advantage over competitor without such a kiosk.

Business Applications expanding role over time Note that while IS has expanded, they are still doing the same basic things that they’ve been doing. What has changed is: more integration of functions, greater connectivity across components, better use for maximum advantage of business and strategic opportunities

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

How e-business is being used

E-business use Reengineer internal business processes Enterprise collaboration systems: support communications, coordination and collaboration among teams and work groups, e.g., virtual teams Electronic commerce: buying, selling, marketing and servicing of products and services over computer networks

Types of IS

Operations support systems What are they? Efficiently process business transactions Control industrial processes Support communications and collaboration Update corporate databases

Types of Operations Support Systems Transaction Processing Systems Record and process data from business transactions Examples: sales processing, inventory systems, accounting systems Process Control Systems Monitor and control physical processes Example: in a petroleum refinery use sensors to monitor chemical processes Enterprise Collaboration Systems Enhance team and work group communications Examples: e-mail, videoconferencing

Two ways to process transactions Batch Processing: Accumulate transactions over time and process periodically Example: a bank processes all checks received in a batch at night Online Processing: Process transactions immediately Example: a bank processes an ATM withdrawal immediately

Management Support Systems What are they? Provide information and support for effective decision making by managers

Types of Management Support Systems Management Information Systems (MIS) Provide reports and displays to managers Example: daily sales analysis reports Decision Support Systems (DSS) Provide interactive ad hoc support for decision making Example: A what-if-analysis to determine where to spend advertising dollars Executive Information Systems (EIS) Provide critical information for executives and managers Example: easy access to actions of competitors

Operational or Management Systems Expert Systems Provide expert advice Example: credit application advisor Knowledge Management Systems Support creation, organization and dissemination of business knowledge throughout company Example: Intranet access to best business practices Support either operations or management applications The city of Albuquerque, New Mexico, designed a computer-based restaurant recommendation system that can help any of their many visitors find a restaurant that meets their particular needs. When visitors use the system, they answer questions presented about their preferences for price range, atmosphere, food selections, and location and receive a short list of restaurants that fit their preferences. This is an example of an Expert system.

Classifications of IS by scope Functional business systems Focus on operational and managerial applications of basic business functions Examples: support accounting, finance or marketing Strategic information systems Help get a strategic advantage over its customers Examples: shipment tracking, e-commerce web systems Cross-functional information systems Systems that are combinations of several types of information systems Provide support for many functions In reality most systems are Cross-functional

Challenges and Opportunities of IT

Measuring success of an IS Efficiency Minimize cost, time and use of information resources Effectiveness Support business strategies Enable business processes Enhance organizational structure and culture Increase the customer and business value What’s the difference between Efficiency and Effectiveness?

Developing IS Solutions

What is a system? A system Is a set of interrelated components With a clearly defined boundary Working together to achieve a common set of objectives By accepting inputs and producing outputs in an organized transformation process Repeating definition from earlier but adding accepting inputs, producing outputs, and transformation

Systems have three basic functions: Input involves capturing and assembling elements that enter the system to be processed Processing involves transformation process that convert input into output Output involves transferring elements that have been produced by the transformation process to their ultimate destination

Cybernetic system All systems have input, processing and output A cybernetic system, a self-monitoring, self-regulating system, adds feedback and control: Feedback is data about the performance of a system Control involves monitoring and evaluating feedback to determine whether a system is moving towards the achievement of its goal

A Cybernetic system A cybernetic system has both feedback and control. A home thermostat accepts the desired room temperature as input and sends a message to fire the furnace. The thermostat provides feedback to shut the system down when the desired temperature is reached.

A business as a system A business can be viewed as a system. This system does not operate in a vacuum rather it functions in an environment containing other systems. A business is an open system in that it interacts with other systems in the environment. It is also an adaptive system in that it can change itself or its environment in order to survive.

Information systems model Major components of an information: people, hardware, software, data and networks. These components perform input, processing, output, storage, and control activities.

Components of an IS People Hardware Resources Software Resources End users: the people who use the IS or the information from the IS IS specialists: the people who develop and operate IS Hardware Resources All physical devices used in information processing Machines, data media, peripherals Software Resources All information processing instructions including programs and procedures System software, application software and procedures Hardware: Peripherals include keyboard, mouse, video screen, printer

Components of an IS (cont.) Data Resources Facts about the business transactions Processed and organized information Databases of organized data Network Resources Communications media Network infrastructure: hardware and software The Internet, intranets and extranets Communications media: twisted pair wire, coaxial cable, wireless technologies

Data versus Information Data are raw facts about physical phenomena or business transactions Information is data that has been converted into meaningful and useful context for end users Example: Sales data is names, quantities and dollar amounts Sales information is amount of sales by product type, sales territory or salesperson In an information system, image data normally takes the form of graphic shapes and figures.

IS Activities Input of data resources Data entry activities Processing of data into information E.g., calculate, compare, sort, classify, summarize Output of information products Messages, reports, forms and graphic images Storage of data resources Data elements and databases Control of system performance Monitoring and evaluating feedback

Recognizing IS As a business professional, you should be able to look at an IS and identify The people, hardware, software, data and network resources they use The type of information products they produce The way they perform input, processing, output, storage and control activities

IT Careers Outsourcing of basic programming to India, the Middle-East and Asia-Pacific countries Strong employment opportunities in other areas in IS Shortage of qualified IS personnel Long-term job outlook positive and exciting

Career Opportunities in IS

Job growth Among the fastest growing occupations through 2012 Systems Analyst, Database administrators, Other managerial-level positions Network specialists Information security

IS Function represents Major functional area of business Important contributor to operational efficiency, employee productivity, morale, customer service and satisfaction Major source of information and support for effective decision making Vital ingredient in developing competitive products and services in the global marketplace Dynamic and challenging career opportunity Key component of today’s networked business

Ethical challenges of IT applications

Ethical responsibilities What uses of IT might be considered improper or harmful to other individuals or society? What is the proper business use of the Internet or a company’s IT resources? How can you protect yourself from computer crime? What uses of IT might be considered improper or harmful to other individuals or society? Improper uses might include collecting data that you don’t need, not protecting personal customer data, etc. What is the proper business use of the Internet or a company’s IT resources? Is it proper to use the company’s computers to surf the web, send personal e-mail, etc. How can you protect yourself from computer crime? Virus and spam protection, never replying to phishing, etc.

Strategic IT Technology is no longer an afterthought in forming business strategy, but the actual cause and driver. IT can change the way businesses compete. A strategic information system is Any kind of information system That uses IT to help an organization Gain a competitive advantage Reduce a competitive disadvantage Or meet other strategic enterprise objectives The real business and competitive value of information technology lies in the capabilities of the software and value of the information a business acquires and uses.

Competitive Forces and Strategies

Competitive Forces If a business wants to succeed must develop strategies to counter these forces: Rivalry of competitors within its industry Threat of new entrants into an industry and its markets Threat posed by substitute products which might capture market share Bargaining power of customers Bargaining power of suppliers According to Michael Porter’s classic model of competition, any business that wants to succeed must develop strategies to counter these 5 forces

Five Competitive Strategies Cost Leadership Become low-cost producers Help suppliers or customers reduce costs Increase cost to competitors Example, Priceline uses online seller bidding so buyer sets the price Differentiation Strategy Develop ways to differentiate a firm’s products from its competitors Can focus on particular segment or niche of market Example, Moen uses online customer design To counter the threats of competitive forces

Competitive Strategies (cont.) Innovation Strategy Find new ways of doing business Unique products or services Or unique markets Radical changes to business processes to alter the fundamental structure of an industry Example, Amazon uses online full-service customer systems Growth Strategy Expand company’s capacity to produce Expand into global markets Diversify into new products or services Example, Wal-Mart uses merchandise ordering by global satellite tracking

Competitive strategies (cont.) Alliance Strategy Establish linkages and alliances with Customers, suppliers, competitors, consultants and other companies Includes mergers, acquisitions, joint ventures, virtual companies Example, Wal-Mart uses automatic inventory replenishment by supplier

Using these strategies The strategies are not mutually exclusive Organizations use one, some or all Notice that Wal-Mart was an example in both growth and alliance A strategy can fall into one or more categories.

Using IT for these strategies Often use the Internet as the foundation for such strategies

Other competitive strategies Lock in customers and suppliers And lock out competitors Deter them from switching to competitors Build in switching costs Make customers and suppliers dependent on the use of innovative IS Barriers to entry Discourage or delay other companies from entering market Increase the technology or investment needed to enter

Other competitive strategies (cont.) Include IT components in products Makes substituting competing products more difficult Leverage investment in IT Develop new products or services not possible without IT

Customer-focused business What is the business value in being customer-focused? Keep customers loyal Anticipate their future needs Respond to customer concerns Provide top-quality customer service Focus on customer value Quality not price has become primary determinant of value For classroom discussion: Do you agree that quality and not price is the customer’s primary determinant of value? Are there limits? Is it always quality rather than price?

How can we provide customer value? Track individual preferences Keep up with market trends Supply products, services and information anytime, anywhere Provide customer services tailored to individual needs Use Customer Relationship Management (CRM) systems to focus on customer

Building customer value using the Internet The Internet and Intranets create new channels for interactive communications within a company, with customers, with suppliers. Allows customers to ask questions, make complaints, evaluate products, request support, and make and track purchases

Value Chain View the firm as a chain of basic activities that add value to its products and services Activities are either Primary processes directly related to manufacturing or delivering products Support processes help support the day-to-day running of the firm and indirectly contribute to products or services Use the value chain to highlight where competitive strategies can best be applied to add the most value

Using IS in the value chain Examples of where IS can be used to provide value in both support and primary business processes

Business Process Reengineering Called BPR or Reengineering Fundamental rethinking and radical redesign Of business processes To achieve improvements in cost, quality, speed and service Potential payback high Risk of failure is also high

How BPR differs from business improvement

A cross-functional process Order management consists of several business processes Crosses the boundaries of traditional business functions

Reengineering order management

Agility Agility is the ability of a company to prosper In a rapidly changing, continually fragmenting Global market for high-quality, high-performance, customer-configured products and services An agile company can make a profit with Broad product ranges Short model lifetimes Mass customization Individual products in large volumes An agile company often uses the Internet to integrate and manage business processes while providing the processing power to treat masses of customers as individuals

Four strategies for agility An agile company: Provides products as solutions to their customers’ individual problems Cooperates with customers, suppliers and competitors to bring products to market as quickly and cost-effectively as possible Organizes so that it thrives on change and uncertainty Leverages the impact of its people and the knowledge they possess

How IT helps a company be agile

Virtual Company A virtual company uses IT to link People, Organizations, Assets, And ideas Creates interenterprise information systems to link customers, suppliers, subcontractors and competitors

A virtual company This company is using the Internet, intranet and extranets to link to business partners This creates interenterprise information systems to link customers, suppliers, subcontractors and competitors Flexible and adaptable virtual workgroups An “intranet” is an Internet-like network inside the enterprise.

Strategies of virtual companies A company facing a new market opportunity might not have the time or resources to develop the manufacturing and distribution infrastructures, the competencies or the IT needed. By forming a virtual company with an alliance with others it can quickly provide the solution needed.

Knowledge Creation Knowledge-creating company or learning organization Consistently creates new business knowledge Disseminates it throughout the company And builds in the new knowledge into its products and services To have lasting competitive advantage, a company must be a knowledge creating company or learning organization

Two kinds of knowledge Explicit knowledge Tacit knowledge Data, documents and things written down or stored on computers Tacit knowledge The “how-to” knowledge which reside in workers’ minds A knowledge-creating company makes such tacit knowledge available to others Tacit knowledge is often some of the most important information within a firm. But its not recorded anywhere since it’s in the employee’s mind.

Knowledge issues What is the problem with organizational knowledge being tacit? Why are incentives to share this knowledge needed? Issues: What if the person who has the knowledge leaves the company? What if someone in another part of the company could use the expertise? How do you know who knows what you need to know? How do you find what you need to know Company wastes money “re-inventing the wheel” Unless people are given incentive to share the knowledge, They won’t want to spend time doing something that they are not rewarded for They will worry about losing their status of having the expertise

Knowledge management techniques Three levels of techniques, technologies, and systems that promote the collection, organization, access, sharing and use of workplace and enterprise knowledge Create techniques, technologies, systems and rewards for getting employees to share what they know. Source: Adapted from Marc Rosenberg, e-Learning: Strategies for Delivering Knowledge in the Digital Age (New York: McGraw-Hill, 2001), p.70.

Knowledge management systems (KMS) KMS manage organizational learning and business know-how Goal: Help knowledge workers to create, organize, and make available knowledge Whenever and wherever it’s needed in an organization