Chapter 1 Why Information Systems Matter www.pearsoned.ca/jessup Robert Riordan, Carleton University

Learning Objectives 1. Define and understand the term Information Systems (IS) 2. Explain the technology, people, and organizational components of Information Systems 3. Describe the types of jobs and career opportunities in Information Systems and related fields

Learning Objectives 4. Describe the various types of Information Systems (IS) Describe the dual nature of Information Systems in the success and future of modern organizations 6. Understand and plan for the future of managing IS

The Purpose of Information Systems Businesses use information systems To make sound decisions To solve problems Problem is any undesirable situation Decision arises when more than one solution to problem exists

The Purpose of Information Systems (continued) Problem solving and decision making require information Keys to success in business are Gathering correct information Storing information Using information

Data, Information, and Information Systems “Data”, “information” and “system” are commonly used terms Important to understand their similarities and differences

Information: facts or conclusions that have meaning within context Data vs. Information Data: a given or fact Derived from the Latin word datum, meaning a given fact. Can be number, statement, or picture Information: facts or conclusions that have meaning within context Composed of data that is manipulated

Data is manipulated to make useful information Data Manipulation Data is manipulated to make useful information Survey is common method of collecting data Raw data is hard to read Information is more useful to business than data

Generating Information A process is manipulation of data Process usually produces information Process may produce more data A piece of information in one context may be considered data in another context

Generating Information (continued) Figure 1.1: Input-process-output

Information in Context Not all information is useful Useful information is Relevant Complete Accurate

Information in Context (continued) Useful information is Current Obtained economically (in business)

Information in Context (continued) Figure 1.2: Characteristics of useful information

What Is a System? System: array of components that work together to achieve goal or goals System Accepts input Processes input Produces output

What is a system? (continued) System may have multiple goals System may contain subsystems Subsystems have sub-goals that meet main goal Subsystems transfer output to other subsystems

What is a system? (continued) Closed system: has no connections with other systems Open system: interfaces and interacts with other systems Often a subsystem of a bigger system Information system: processes data and produces information

Information and Managers Systems thinking: thinking of an organization in terms of subsystems Database: collection of electronic records Information systems automate exchange among subsystems Information map: network of information systems Information technology: technologies that facilitate construction and maintenance of information systems

The Benefits of Human-Computer Synergy Humans are relatively slow and make mistakes Computers cannot make decisions Synergy: combining resources to produce greater output

The Benefits of Human-Computer Synergy (Continued) Figure 1.4: Qualities of humans and computers that contribute to synergy

Information Systems in Organizations Computer-based Information system: system with computer at center Certain trends have made information systems important in business Organizations lag behind if they do not use information systems

Components of information systems Figure 1.5: Components of an information system

What are Information Systems? - A combination of technical components - Built and used by people to collect, create, and distribute useful data - Used typically in organizational settings but are evolving for personal use

Information Systems Components: Data Hardware Telecommunications People Data Software The raw inputs for entry into information systems Organized, processed and stored by an IS to support user information needs Provides basis for qualitative/quantitative analysis

Information Systems Components: Hardware Telecommunications People Data Software The physical components of information systems Hardware components include processors, input and output devices, and storage devices (Pentium 4) Typical configurations based on application include micro, mid-range, mainframe, and supercomputers

Information Systems Components: Software Hardware Telecommunications People Data Software The instructions that operate the information system System software controls the hardware (e.g. Windows XP) Application software allows users to perform specific tasks to increase productivity (e.g. MS Word)

Information Systems Components: Telecommunications Hardware Telecommunications People Data Software The communication mechanism of information systems Allows two or more computers to communicate (Internet) Utilizes standard protocols for IS communication

Information Society Evolution: Periods of Change Agricultural Industrial Informational (Prior to 1890’s) (1890’s to 1960’s) (1960’s to Present)

Information Society Evolution: Terms and Issues 1960 2000 Knowledge Worker (Peter Drucker 1959) A term invented to describe a future trend in the workforce These will be professionals that create, modify and/or synthesize information as a fundamental part of their job They will require higher education levels and received higher compensation than workers in agriculture or manufacturing The term is still generally accepted today (Drucker was right!)

Information Society Evolution: Terms and Issues 1960 2000 Knowledge Society (Drucker - 1959) Term invented to describe the next evolution of society This evolution would be a result of the rise in the numbers and importance of knowledge workers in society Education was described as the cornerstone of the knowledge society as it is core of the knowledge worker Drucker was right again!

Information Society Evolution: Terms and Issues 1960 2000 New Economy (Wired Magazine - Late 1990s) Similar to “knowledge society” but more descriptive Describes a society where people use their brains more than their hands in their work and personal lives Where communications technology and other IT systems will create global competition for all products and services Other names: Digital Economy, Network Era, Internet Era

The New Economy (NE): Societal Perspectives Perspective 1: Sims –Taylor The new economy creates risks for Knowledge Workers Knowledge workers will be the first to be replaced by automation with information technology Perspective 2: Rikfin The over reliance on information technology has caused society to act hastily The result has been a loss of perspective Perspective 3: THE DIGITAL DIVIDE Those with access to information technology have great advantages over those that don’t IT access will further polarize society

Forms of Technology Technology – any mechanical and/or electrical means to supplement, extend, or replace human manual operations Examples: building heating/cooling systems, car brakes, etc. Information Technology – any machine technology that is controlled by or uses information for operation Example: a programmable industrial robot receiving instructions from a computer-based database Computer- based Information Systems – any computer-based technology that provides information for use by persons or machines to make decisions or control processes Example: Software that controls CD burning hardware

Information Systems: Turn Data into Information Raw material Unformatted information Generally has no context Processed material Formatted information Data given context Individual time cards for factory workers entered into the payroll system Examples Department Labour Report, Project Status Report, Employee Payroll Checks

Information and Communication Technology Firms in Canada

Three Distinct Competencies of IS Professionals Technical Knowledge of hardware, software, networking, and security Most IS professionals are not deep technical experts but can direct/manage others with the required technical skills Business Understand the nature of business including process, management, social, and communication domains Unique skills over those with only technical skills Systems Knowledge of approaches and methods, also possess critical thinking and problem solving skills necessary to build and integrate large information systems Unique skills over those with only technical skills

IS Impact on Organizations: New Opportunities CRA creates a website and allows NETFILE Current CRA Tasks New Website Modified CRA Tasks Post Office Stock Forms & Publications Post Office Minimal Stocking of Forms/Pubs CRA Office Mail Forms/Publications Enter Tax Returns in System Conduct Audits CRA Office Minimal Mailing Forms/Pubs Reduced Entry of Tax Returns Conduct Audits (MORE!) CRA Hotline Answer FAQs Resolve Problems IRS Hotline Reduced Answering FAQs Resolve Problems Activate NETFILE Implementation Results Reduced labour costs in forms distribution, hotline support, data entry from access to info/materials on the website and NETFILE Allow for redeployment of resources to primary activities including conducting audits and resolving problems

Levels of the Organization and Traditional Systems Executive Information Systems Decision Support Systems (both levels) Management Information Systems Transaction Processing Systems Expert Systems Functional Area Information Systems (Across all levels within a function)

Traditional Information System Functions Transaction Processing Systems Management Information Systems Executive Decision Support Systems Expert Systems Functional Area Process day-to-day business event data in an organization (Operational level) Produce detailed information to help manage a firm or part of a firm (Managerial) Provide very high-level, aggregate information to support decisions (Executive) Provide analysis tools and databases to support quantitative decision making (Multiple) Mimic human expert in a particular area and provide answers or advice (Operational) Support the activities within a specific functional area of the firm (All)

Other Information Systems - Not as Easy to Categorize Office Automation System Collaboration System Customer Relationship Management Electronic Commerce Enterprise Resource Planning System Support a wide range of predefined, daily work activities of individuals or groups (e.g. MS Word) Enable people to communicate, collaborate, and coordinate with each other (e.g. email) Support the interaction between the firm and its customers (e.g. sales force automation or call center technology) Enable customers to buy goods and services from a firm’s website. (www.amazon.com) Support and integrate all facets of the business (e.g. planning, manufacturing, sales, etc.)

Many types of information systems From Recording Transactions to Providing Expertise: Types of Information Systems Many types of information systems Capabilities of applications have been combined and merged Management Information System: supports planning, control, and making decisions

Transaction Processing Systems Most widely used type of system Records data collected at point where organization interacts with other parties Encompasses cash registers, ATMs and purchase order systems

Supply Chain Management Systems Supply chain: sequence of activities involved in producing products Activities include marketing, purchasing raw materials, manufacturing, shipping, billing, collection, and after-sale services Also known as enterprise resource planning systems

Customer Relationship Management Systems Customer relationship management: managing relations with customers Used in combination with telephones to provide customer service Often linked to Web applications that track online transactions

Business Intelligence Systems Business Intelligence: gather data to help organization compete Often contains statistical models Access large pools of data Data warehouse: large database that usually store transactional records

Decision Support and Expert Systems Decision support system: supports decision-making Relies on models to produce tables Extrapolates data to predict outcomes Expert system: supports knowledge-intensive decision-making Uses artificial intelligence

Geographic Information Systems Geographic information system: ties data to physical locations Represents data on a map in different formats May reflect demographic information in addition to geographic May use information from GPS satellites

Geographic Information Systems (continued)

Information Systems in Business Functions Functional business area: services within a company that support main business Includes accounting, finance, marketing, and human resources Part of a larger enterprise system

Information systems help record transactions Accounting Information systems help record transactions Produce periodic statements Create required reports for law Create supplemental reports for managers

Finance Finance systems facilitate financial planning and business transactions Tasks include organizing budgets, managing cash flow, analyzing investments, and making decisions

Pinpoint likely customers and promote products Marketing Pinpoint likely customers and promote products Marketing information systems analyze demand for products in regions and demographic groups Identify trends in demand for products/services Web provides opportunity to collect marketing data

Human resource management systems aid record-keeping Human Resources Human resource management systems aid record-keeping Must keep accurate records Aids recruiting, selection, placement, and reward analysis Performance evaluation systems provide grading utilities

Web Empowered Enterprises E-commerce: Buying and selling goods and services through Internet Internet is a vast network of computers connected globally Web has a profound impact on information systems

IS Competitive Advantage Perspectives: Who is Right? “IT Doesn’t Matter” - Carr 2003 As IT becomes more pervasive, technology becomes more standardized and ubiquitous The result is that the same technologies are available to all competitors in an industry This produces no competitive advantage “The Engine that Drives Success: The Best Companies have the Models Because they Have the Best IT Strategies” - Lundberg 2004 Companies with bad business models fail regardless of IT systems or other capabilities Companies with good business models use IT to execute successful business models and succeed

IS for Competitive Advantage: Business Value Using IS to create/support business strategy is the most effective approach creating the most business value Strategic IS systems are typically custom built and are integrated to support the business strategy Strategic IS systems are by nature hard to replicate just as are good business models

Competitive Advantage: Dual Nature of Systems FedEx Customer Website versus Denver International Airport Baggage System IS that works (FedEx) IS gone wrong (DIA) Evaluation Factors Strategic in Nature Established Technology Capable Suppliers Structured Implementation Capable IS Support Yes Yes No ??

Organizational IT Roles Central IT Organization Responsible for IT Planning Coordinates implementations Establishes organization’s IT methods and standards IT Business Unit Support Liaison between Central IT and the Business Unit Spends much time onsite at the Business Unit Reports to both orgs Business Unit Responsible for determining IS business requirements Supply budget and personal resources for implementations

Executive Roles in Information Technology Manages External Stakeholder Relationships Sets Strategic Direction Defines High Level IT Needs for the Future CEO Chief Executive Officer COO Chief Operations Officer CFO Chief Financial Officer CIO Chief Information Officer Manages Operations Allocates Resources Primary Consumer of IT within the Organization Manages Accounting & Finance Forecasts Needs and Secures Financial Resources Allocates Budget for IT Expenditures

Executive Roles in Information Technology CEO Chief Executive Officer COO Chief Operations Officer CFO Chief Financial Officer CIO Chief Information Officer Manages IT Organization and Operations Forecasts IT Needs from Business Strategy Sets Direction for IT Architecture and Organization Plans, Designs and Delivers IT throughout the firm

The Future of Information Systems: Trends Ownership and Control (Old School IS) Large backlogs of user requests…very poor service Arrogance and feeling of ownership and control of IT Can’t do attitude…told users why they couldn’t do things Resulted in a very poor relationship with users T H E N Business managers became technology savvy Systems evolved and became easier to develop Business organizations developed their own systems Consulting and Service Mentality (New School IS) IS is taking on an IT consulting role “Service Mentality”…users are customers to be served Proactively support and problem solve for their customers Fundamentally believe that customers own the technology

IS Role in Change: Trends and Terms Downsizing (Sometimes called Rightsizing) Reducing organizational headcount to meet the financial goals of the organization IS is viewed as the lever to provide the systems necessary to increase productivity Outsourcing Transferring business functions outside the organization to increase service levels and/or reduce operating cost IS is not immune to this trend. Certain commodity IS technical jobs will be increasingly transferred overseas IS must find better methods to manage offshore work

The Future for IS IS needs will continue to grow as technology developments advance Although outsourcing will continue, there will be strong demand for IS professionals There is a need for personnel that can speak the language of technology and business and the skills to manage projects and people Characteristics for success include: continuous learning and growth, finding new ways to add value, flexibility, and developing unique skills