Introduction to Information Systems ISYS 363 David Chao

What is an Information System? An organized combination of… People Hardware and software Communication networks Data resources Policies and procedures This system… Stores, retrieves, transforms, and disseminates information in an organization An organizational solution, based on information technology, to challenges posed by the environment.

Fundamental Roles of IS in Business

Types of Information Systems Operations Support Systems Efficiently support day-to-day operations Management Support Systems Provide information and support for effective decision making by managers Strategic Information Systems Help get a strategic advantage over customer

Operations Support Systems Transaction Processing Systems, TPS Record and process business transactions Any exchange of money or other benefits between two or more parties Order processing, purchasing General ledger, accounts payable, accounts receivable Large amount of data, high processing speed, high reliability, accuracy, and security (fault tolerant) Data: internal, historical, detailed

Current Trend in Operations Support Systems Enterprise Resources Planning ERP for the internal world of a company Customer Relationship Management CRM for the external world of a company.

Enterprise Resources Planning, ERP ERP software is multi-module application software that integrates activities across functional departments, from product planning, parts purchasing, inventory control, product distribution, to order tracking. ERP software may include application modules for the finance, accounting and human resources aspects of a business. Integrated Cross-functional Shared database Major vendors: SAP, Oracle, Microsoft

Functional Organizational Structure Most common organizational structure Functional structure divided into functions or departments Functions perform specialized tasks or activities But, business processes cut across functions

Typical Functional Structure

Silo Effect Focusing on functional objectives without regard to process objectives Optimizing functional goals vs. process goals Process execution requires Communication and coordination among functions

Enterprise Systems Enterprise systems (ES) support end-to-end processes Investments in ES have provided Increased profitability Increased productivity Competitive edge

Business Processes Sequence of tasks or activities that produce desired outcomes A generic business process model:

Key Business Processes Procurement process (Buy): All activities involved in buying or acquiring materials used by the organization, such as raw materials needed to make products. Production process (Make): Involves the actual creation of the products. Fulfillment process (Sell): All steps involved in selling and delivering the products to customers.

A Procurement Process

A Production Process

A Fulfillment Process

Fulfillment Process Steps

SAP Demo Client #: 255 User: GBIFAC-01

Customer Relationship Management, CRM Front office operations: Call Center Direct interaction with customers, e.g. phone calls, e-mail, online services etc. Sales Force Automation tracks all contact that has been made with a given customer, the purpose of the contact, and any follow up that might be required. Sales Intelligence Cross-selling: selling an additional product or service to an existing customer Up-selling: induces the customer to purchase more expensive items, upgrades, or other add-ons. Switch-selling: customers are attracted by a special offer on some goods but the salesman's real aim is to sell other more expensive goods instead

Example of CRM Vendor SalesForce.Com

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

Management Information Systems Facilitate management control by producing summarized reports that compare actual performance against planned performance on a regular and recurring basis. Management control: Ensuring that performance meets established standards. Serve middle management Provide reports on firm’s current performance, based on data from TPS

Sample MIS Report

Sample MIS Report

Other Examples: Budget control: LYTD VS YTD Sales comparison http://www.olemiss.edu/projects/sap/REPORTS_II_Budget_Control_System.pdf LYTD VS YTD Sales comparison

Budget Control Report

Sales Comparison

Decision support systems Serve middle management Support nonroutine decision making E.g. What is impact on production schedule if December sales doubled? Often use external information as well from TPS and MIS

Information and Management Decisions A decision is a selection between several courses of action: Penalty for bad decision Information helps reduce uncertainty: Incomplete information Information systems improve decision-making effectiveness by providing decision makers with information related to the decisions for which they are responsible.

Components of DSS Database: Current & Historical Data from Many Sources. Internal and external data Model base: Collection of Mathematical & Analytical Building Blocks Interface for analysis: What - If Questions; visual dashboard

Using Decision Support Systems What-IF Analysis:Observing how changes to selected variables affect other variables. Sensitivity Analysis: Observing how repeated changes to a single variable affect other variables. Goal-Seeking Analysis:Set a target value for a variable, and then repeatedly changes other variables until the target is achieved. Example: Benefit.Xls Optimization Analysis Simulation: IBM Innov8 2.0 http://www-01.ibm.com/software/solutions/soa/innov8/index.html

Strategic Information System Information systems that provide a firm with competitive products and services which give it a strategic advantage over its competitors in the marketplace. Information systems that promote business innovation, improve operational efficiency.

Strategic Advantage and Strategic Necessity Strategic advantage refers to obtaining a sustainable competitive edge over competitors. The ability to obtain a greater than normal return on investment. A strategic necessity is a system that must be installed to remain competitive and stay in business.

Competitive forces model by Michael Porter Threat of New Entrants Bargaining Power of Suppliers Rivalry among Existing Competitors Bargaining Power of Customers Threat of Substitute Products

Competitive Strategies Cost leadership strategy: Become a low cost producer of products and services Find ways to help suppliers or customers reduce their costs Product differentiation strategy. Innovation strategy: Finding new way of doing business, enter new market. Alliance strategy: Establish alliances with customer, suppliers, competitors, other company. Growth strategy: expanding, diversifying, integrating.

Strategic Roles for Information Systems Improving business operations Promoting business innovation Locking in customers and suppliers Interorganizational IS, EDI, automatic inventory replenishment system Creating switching costs make customers dependent on the continued use of innovative IS. Raising barriers to entry discourage competitors from entering a market

Components of an Information System Information technology People Database Procedure

People Information specialists End-user: programmer, system analyst, database administrator, etc. End-user: Menu-level end users Command-level end users End-user programmer End-user computing and management

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?

Workplace PCs May Not Be Very Private Don’t be fooled: It may be personal, but it is not private. Cyber-surveillance: The person most likely to be spying on you is your boss. 27% of businesses surveyed by the American Management Association said they review employee email. Reasons: Productivity Liability Network performance

Database A group of related files Support business operations Provide information

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Major Functions of Database Management Creating a database Analysis: Entity-Relationship Diagram Design: Design file structure Implementation Accessing a database Updating a database

Database Security Logical protection: Physical protection Illegal access Illegal update Virus Physical protection

Internet firms flocks to store data in blast-proof bunker Some biggest companies are running their Internet operations on systems installed in a 300-foot-deep nuclear blast-proof bunker.

Weird Data Center Location http://en.wikipedia.org/wiki/Pionen

Procedures Procedure: A step-by-step process or a set of instructions for accomplishing specific results. Operations Backup and Recovery Security Development

Operations Procedure: A procedure that describes how a computer system or application is used, how often it can be used, who is authorized to use it, and where the results of processing should go. Backup Procedure: A procedure that describes how and when to make extra copies of information or software to protect against losses. http://www.tldp.org/LDP/lame/LAME/linux-admin-made-easy/server-backup.html Recovery Procedure: An action taken when information or software must be restored. Security Procedure: A procedure designed to safeguard data centers, communications networks, computers, and other IT components from accidental intrusion or intentional damage. Development Procedure: A procedure that explains how IT professionals should describe user needs and develop applications to meet those needs.