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
Chapter
1
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
1-3
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
1-4
Information System
INPUT
1-5
PROCESS
OUTPUT
Basic Information System
TIMECARD
1-6
PAYROLL
PAYCHECK
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
1-7
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)
1-8
IS Knowledge Framework for
Business Professionals
1-9
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
1-10
What does IS do for a business?
1-11
Business Applications expanding
role over time
1-12
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
1-13
online exchange of value.
How e-business is being used
1-14
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
1-15
Types of IS
1-16
Operations support systems
 What
are they?
 Efficiently
process business transactions
 Control industrial processes
 Support communications and collaboration
 Update corporate databases
1-17
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
1-18
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
1-19
Management Support Systems
 What
are they?
 Provide
information and support for effective decision
making by managers
1-20
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
 Provide
Information Systems (EIS)
critical information for executives and
managers
 Example: easy access to actions of competitors
1-21
Operational or Management
Systems
 Expert
Systems
 Provide
expert advice
 Example: credit application advisor
 Knowledge
 Support
Management Systems
creation, organization and dissemination of
business knowledge throughout company
 Example: Intranet access to best business practices
1-22
Classifications of IS by scope



1-23
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
Challenges and Opportunities of IT
1-24
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?
1-25
Developing IS Solutions
1-26
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
1-27
Systems have three basic functions:



1-28
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, selfregulating 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
1-29
A Cybernetic system
1-30
A business as a system
1-31
Information systems model
1-32
Components of an IS
 People
 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
 All
Resources
information processing instructions including
programs and procedures
 System software, application software and procedures
1-33
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
1-34
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
1-35
IS Activities
 Input
of data resources
 Data
entry activities
 Processing
 E.g.,
of data into information
calculate, compare, sort, classify, summarize
 Output
of information products
 Messages,
 Storage
 Data
reports, forms and graphic images
of data resources
elements and databases
 Control
of system performance
 Monitoring
1-36
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
1-37
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
1-38
Career Opportunities in IS
1-39
Job growth
 Among
the fastest growing occupations through 2012
 Systems
Analyst,
 Database administrators,
 Other managerial-level positions
 Network specialists
 Information security
1-40
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
1-41
Ethical challenges of IT applications
1-42
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?
1-43
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



2-44
Gain a competitive advantage
Reduce a competitive disadvantage
Or meet other strategic enterprise objectives
Competitive Forces and Strategies
2-45
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
2-46
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
 Develop
Strategy
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
2-47
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


2-48
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
2-49
Using these strategies
 The
strategies are not mutually exclusive
 Organizations use one, some or all
2-50
Using IT for these strategies
2-51
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
2-52
Other competitive strategies (cont.)
 Include
IT components in products
 Makes
substituting competing products more difficult
 Leverage
investment in IT
 Develop
IT
2-53
new products or services not possible without
Customer-focused business
 What
is the business value in being customerfocused?
 Keep
customers loyal
 Anticipate their future needs
 Respond to customer concerns
 Provide top-quality customer service
 Focus
on customer value
 Quality
value
2-54
not price has become primary determinant of
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
2-55
Building customer value using the
Internet
2-56
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
2-57
Using IS in the value chain
2-58
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
2-59
How BPR differs from business
improvement
2-60
A cross-functional process
2-61
Reengineering order management
2-62
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

2-63
Individual products in large volumes
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
2-64
How IT helps a company be agile
2-65
Virtual Company
A
virtual company uses IT to link
 People,
 Organizations,
 Assets,
 And
ideas
 Creates
 to
interenterprise information systems
link customers, suppliers, subcontractors and
competitors
2-66
A virtual company
2-67
Strategies of virtual companies
2-68
Knowledge Creation
 Knowledge-creating
organization
 Consistently creates
company or learning
new business knowledge
 Disseminates it throughout the company
 And builds in the new knowledge into its products and
services
2-69
Two kinds of knowledge
 Explicit
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
2-70
Knowledge issues
 What
is the problem with organizational knowledge
being tacit?
 Why are incentives to share this knowledge needed?
2-71
Knowledge management
techniques
Source: Adapted from Marc Rosenberg, e-Learning: Strategies for Delivering Knowledge in the Digital Age
(New York: McGraw-Hill, 2001), p.70.
2-72
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
2-73