Chapter 1

Foundations of
Information Systems in
Business
McGraw-Hill/Irwin

Copyright 2010 by the McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives
Understand

the concept of a system and

how it relates to information systems

Explain

why knowledge of information

systems is important for business
professionals
Identify five areas of information systems
knowledge they need

1-2

Learning Objectives
Give

examples to illustrate how information

systems can support a firms
Business processes
Managerial decision making
Strategies for competitive advantage

Provide

examples of information systems from

your experiences with business organizations
in the real world

1-3

Learning Objectives
Identify

challenges that managers might face

in managing successful, ethical development
and use of information technology

Provide

examples of the components of real

world information systems

Become

familiar with the myriad of career

opportunities in information systems

1-4

Foundation Concepts

Vital
Vital component
component of
of
successful
successful businesses
businesses

Improves
Improves efficiency
efficiency and
and
effectiveness
effectiveness of
of
business
business processes
processes

Why study
information systems and
information technology?
Strengthens
Strengthens
competitive
competitive position
position in
in
rapidly
rapidly changing
changing
marketplaces
marketplaces

Facilitates
Facilitates managerial
managerial
decision
decision making
making
&& workgroup
workgroup
collaboration
collaboration
1-5

Case 1: Value Through Business Intelligence

eCourier

Tracks customer
satisfaction in real time
Immediate attention to
complaints, problems
Allows GPS tracking of
couriers and orders
Books 95% of deliveries
online
Uses SeeWhy software
to spot trends and anomalies
Optimizes system on an ongoing basis
1-6

Case 1: Value Through Business Intelligence

Cablecom

Uses online surveys to retain customers

Responds to complaints and problems within 24
hours
Bryan

Cave

Optimizes resources while delivering highest

customer value
Allows lawyers to track budgets in real time
Provides diversity dashboard
Enables firm to monitor client needs
Allows quick response to demands
1-7

Case Study Questions

How

do information technologies contribute to

the business success of the companies
depicted in the case?
Provide an example from each company,
explaining how the technology implemented
led to improved performance

1-8

Case Study Questions

The

Bryan Cave law firm used BI technology to

improve the availability, access, and
presentation of existing information; this
allowed them to provide tailored, innovative
services to customers
What other professions could benefit from a
similar use of these technologies, and how?
1-9

Case Study Questions

Cablecom

developed a prediction model to

better identify customers at risk of switching
to another company
In addition to those noted in the case, what
other actions could be taken if that information
were available?
Would you consider letting some customers
leave anyway?

1-10

What is an Information System?

Communication
networks
Policies and
procedures

People

Any organized
combination of
Data resources

Hardware and
software
Stores, retrieves, transforms,
and disseminates information
in an organization
1-11

Early Information Systems

They

werent computerized

Smoke signals
Library card catalogs
Book bag, day planner, and notebooks
Cash registers
Accounting ledger
1-12

What Should Business Professionals Know?

1-13

Fundamental Roles of IS in Business

1-14

Trends in Information Systems

1-15

What is E-Business?

Using Internet technologies to empower

Business processes
Electronic commerce
Collaboration within a company
Collaboration with customers, suppliers,
other business stakeholders
In essence, an online exchange of value
1-16

How E-Business is Being Used

1-17

E-Business Use

Reengineering
Internal
business
processes

Enterprise
collaboration

Electronic
commerce

Support
communication,
coordination,
coordination
among teams
and work
groups

Buying,
selling,
marketing,
and servicing
of products
and services
over networks

1-18

Types of Information Systems

Transaction processing
Operations

Process control
Enterprise collaboration
Updating of corporate databases
Decision support systems

Management

Executive information systems

1-19

Purposes of Information Systems

1-20

Types of Operations Support Systems

Transaction Processing Systems
Record and process business transactions
Sales, inventory, and accounting
Process Control Systems
Monitor and control physical processes
Using sensors to monitor refinery processes
Enterprise Collaboration Systems
Enhance team/workgroup communication
Email, video conferencing
1-21

Two Ways to Process Transactions

Batch Processing

Online Processing

Accumulate
transactions over time
and then process
periodically

Process all
transactions
immediately

Ex: Banks process all

checks in a batch at night

Ex: A bank processes

ATM withdrawals
immediately

1-22

Management Support Systems

What do they do?

Provide information and support for
effective decision making by managers
Management
information
systems

Decision
support
systems

Executive
information
systems

1-23

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
1-24

Other Information Systems

Expert
Expert
Systems
Systems

Knowledge
Knowledge
Management
Management
Systems
Systems

Provides expert advice

Credit application advisor

Creation, organization, dissemination

of knowledge throughout company
Intranet access to
best business practices

1-25

Other Information Systems

Strategic
Strategic
Information
Information
Systems
Systems

Functional
Functional
Business
Business
Systems
Systems

Helps get strategic advantage

Shipment tracking, e-commerce

Focus on operational and managerial

application of basic business functions
Accounting, finance, marketing

1-26

IT Challenges and Opportunities

1-27

Measuring IT Success
Efficiency

Minimizes cost, time,

use of information
resources
Effectiveness

Supports business strategies

Enables business processes
Enhances organizational structure and culture
Increases customer and business value
1-28

Developing IS Solutions

1-29

Challenges and Ethics of IT

Application of IT
Customer
relationship
management

Human
resource
management

Business
intelligence
systems

Potential Harm
Privacy
infringement

Inaccurate
information

Collusion

1-30

Challenges and Ethics of IT

Consumer boycotts
Potential
Risks

Work stoppages
Government intervention

Codes of ethics
Possible
Responses

Incentives
Certification
1-31

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 companys IT resources?

How

can you protect yourself from computer

crime?

1-32

IT Careers
Economic downturns affecting all job
sectors, including IT
Negative
Negative

Rising labor costs are pushing jobs to

India, the Middle East, Asia-Pacific
IT employment opportunities strong,
with new jobs emerging daily

Positive
Positive

Frequent shortages of IT personnel

Long-term job outlook is positive
and exciting
1-33

IT Careers

1-34

IT Careers

Job increases will be driven by

Rapid growth in computer system
design and related services
The need to backfill positions
Information sharing and
client/server environments
Need for those with problem-solving skills
Falling hardware and software prices, which
fuel expanded computerization of operations
1-35

The IS Function

Major functional area of

business

Dynamic and challenging

career opportunity

Important contributor to
operational efficiency,
employee productivity,
morale, customer
service/satisfaction

Vital ingredient in
developing competitive
products and services in
global marketplace

Major source of
information and support
for decision making

Key component of
todays networked
business
1-36

System Concepts: A Foundation

Technology

Hardware, software, data

management, telecommunications
networks

Applications

To support inter-connected
information systems

Development

Finding ways to use information

technology; includes designing basic
information system components

Management

Emphasizes the quality, strategic

business value, and security of an
organizations information systems
1-37

Case 2: JetBlue & the VA

Good

IT processes are as important as

hardware and software when it comes to
creating business value
Even smaller, less-critical processes can have
ramifications of a large magnitude in the
interconnected world in which we live

The

IS developed by JetBlue in 24 hours,

implemented during a crisis in 2007, is now a
full-time system

An

unscheduled system failure took down key

applications in 17 VA medical facilities for a day
1-38

Case Study Questions

Eric

Brinker of JetBlue noted that the database

developed during the crisis had not been
needed before; the company had never
experienced a meltdown
What are the risks and benefits associated with
this approach to IT planning?
1-39

Case Study Questions

With

hindsight, we know that the decision made

by Eric Raffin of the VA to not fail over to the
Denver site was the correct one. But, it involved
ignoring established backup procedures
With the information he had at the time, what
other alternatives could he have considered?

1-40

Case Study Questions

A small,

undocumented change resulted in the

collapse of the VA system, largely due to the
high interrelationship between its applications
What is the positive side of this high degree of
interconnection, and how does this benefit
patients?

1-41

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
1-42

Basic Functions of a System

Input
Input

Processing
Processing

Output
Output

Capturing
and
assembling
elements
that enter
the system
to be
processed

Transformation process
converts
input into
output

Transferring
transformed
elements to
their
ultimate
destination

1-43

Cybernetic System

All

systems have input, processing, output

A cybernetic

system, a self-monitoring, selfregulating system, adds

Feedback system performance data
Control monitoring and evaluating feedback
to determine whether a system is moving
toward the achievement of its goal

1-44

A Cybernetic System

1-45

A Business as a System

1-46

Other System Characteristics

A system

that is a component of a larger

system is a subsystem

The

larger system is an environment

Several systems may share one environment

Connected via a shared boundary (interface)
Types

of systems

Open and Adaptive

1-47

Components of an IS

1-48

Information System Resources

People

Hardware
Software

Information
Information
System Resources

Networks
Data

1-49

Data Versus Information

Data

are raw facts, typically about physical

phenomena or business transactions
Specifically, objective measurements of the
attributes of entities

Information

is data that was converted into

meaningful and useful context for end users
Aggregated, manipulated, and organized
Analyzed and evaluated
Placed in proper context for a human user
1-50

Basic IS Activities

Input
Processing
Output
Storage
Control
1-51

Recognizing Information Systems

Business

professionals should be able to look

at an information system 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

1-52

Case 3: Sew What? Inc.

Provides

custom theatrical draperies and

fabrics for stages, concerts, fashion shows,
and special events worldwide
Launched web site and acquired clients from
all over the world; revenue grew more than
45% per year
Runs its business with Intuits Quick-Books
Enterprise Solutions & Dell PowerEdge servers
Awarded Small Business Excellence Award
for its innovative use of technology to improve
customers experience

1-53

Case Study Questions

How

do information technologies contribute to

the business success of Sew What? Inc.?
Give examples from the case regarding the
business value of information technology that
demonstrate this conclusion
1-54

Case Study Questions

If

you were a management consultant to Sew

What? Inc., what would you advise Megan
Duckett to do at this point to be even more
successful in her business?
What role would information technology play
in your proposals? Provide specific
recommendations

1-55

Case Study Questions

How could the use of information technology help

a small business you know be more successful?

Provide examples to support your answer

1-56