1. 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: Or

2. Foundations of Information Systems in Business1
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.

3. 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.

4. 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

5. Information System

6. Basic Information System

7. 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?

8. 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

9. IS Knowledge Framework for Business Professionals

10. 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.

11. 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.

12. 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

13. 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.

14. How e-business is being used

15. 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

16. Types of IS

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

18. 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: , videoconferencing

19. 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

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

21. 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

22. 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.

23. 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

24. Challenges and Opportunities of IT

25. 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?

26. Developing IS Solutions

27. 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

28. 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

29. 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

30. 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.

31. 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.

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

33. 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

34. 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

35. 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.

36. 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

37. 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

38. 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

39. Career Opportunities in IS

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

41. 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

42. Ethical challenges of IT applications

43. 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 , etc.
How can you protect yourself from computer crime? Virus and spam protection, never replying to phishing, etc.

44. 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.

45. Competitive Forces and Strategies

46. 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

47. 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

48. 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

49. 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

50. 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.

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

52. 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

53. 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

54. 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?

55. 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

56. 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

57. 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

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

59. 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

60. How BPR differs from business improvement

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

62. Reengineering order management

63. 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

64. 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

65. How IT helps a company be agile

66. 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

67. 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.

68. 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.

69. 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

70. 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.

71. 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

72. 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.

73. 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