Chapter 1: Business Information Systems Overview

Overview

  • Learn the types of information systems businesses use and why familiarity with information technology is important for your career.
  • Identify the functions of different types of information systems and consider major ethical and societal concerns about acquiring, storing, and reporting potentially sensitive information.

The Power of Digital Systems

  • Binary counting uses two digits: 0 and 1.
  • Digital systems represent any information as a combination of zeros and ones.
  • Information can be represented, stored, communicated, and processed digitally.
  • Digital information is stored and communicated by electromagnetic signals; extremely fast and exact copies of the original are possible.

The Purpose of Information Systems

  • Businesses use information systems to:
    • Make sound decisions; a decision arises when more than one solution exists.
    • Solve problems; a problem is any undesirable situation.
  • Both problem solving and decision making require information.
  • Keys to success in business:
    • Gather correct information efficiently.
    • Store information.
    • Use information.
  • Information systems support daily operations (TPS); they lower the cost of doing business and help maintain management control over operations.

Data, Information, and Information Systems

  • Common terms:
    • Data: raw facts that cannot yet assist managers.
    • Information: facts or conclusions that have meaning within context.
    • System: an array of components that work together to achieve goals.
  • Understanding the similarities and differences among data, information, and information systems is essential.

Data vs Information

  • Data: raw facts (numbers, statements, pictures).
  • Information: data that has meaning in context.
  • Information is data that has been processed.

Data Manipulation

  • Collect data via surveys.
  • Reading data is time consuming; manipulating data (e.g., categorizing, statistics) can yield valuable information.
  • Applications include marketing and manufacturing practices.

Generating Information

  • Data manipulation (the process) usually produces information.
  • A piece of information in one context may be data (input) in another context.

Information in Context

  • Not all information is useful.
  • Characteristics of useful information:
    • Relevant
    • Complete
    • Accurate
    • Current
    • Economical

What Is a System?

  • System: an array of components that work together to achieve goals.
  • A system:
    • Accepts input
    • Processes input
    • Produces output

What is a System? (cont’d.)

  • Characteristics of a system:
    • May have multiple goals
    • May contain subsystems
  • Subsystem: a component of a larger system; has subgoals that contribute to the main goal; can receive input from and transfer output to other subsystems.

Open and Closed Systems

  • Closed system: limited interoperability with other systems; few connections.
  • Open system: interfaces and interacts with other systems; subsystems by definition are always open.

Information and Managers

  • Systems thinking: view organization as subsystems; powerful for problem solving and decision making.
  • Database: collection of electronic records.
  • Information systems automate information exchange among subsystems.

Information Maps

  • Information map: description of data and information flow within an organization.
  • Shows a network of information subsystems exchanging information with each other and with the outside world.

Information Systems in Organizations

  • IS consist of data, hardware, software, telecommunications, people, and procedures.
  • A computer-based information system includes one or more computers at its center; computers collect, store, and process data into information; people give instructions via computer programs.

Components of an Information System (Figure 1.4)

  • Data
  • Hardware
  • Software
  • Telecommunications
  • People
  • Procedures

Trends in Information Systems

  • Trends that have made IS important:
    • Growing capacity and decreasing costs of data storage devices
    • Increasing variety and ingenuity of computer programs
    • Cloud computing capabilities (IaaS, PaaS, SaaS)

More IS Trends

  • Affordable SaaS applications due to quick, reliable communication lines and Internet access.
  • Growth of the Internet and increasing computer literacy of the workforce.
  • Organizations must continuously upgrade IS features and employee skills.

The Four Stages of Processing

  • Input: enter data into the IS; transaction is a business event; Transaction Processing System (TPS); input devices include keyboards, bar code readers, voice recognition systems, touch screens.
  • Processing: changing and manipulating data.
  • Output: information produced by the IS; output devices include printers and speakers.
  • Storage: maintaining vast amounts of data and information; storage devices include optical discs.

Computer Equipment for Information Systems

  • Four data processing function support technologies:
    • Input devices
    • Processors
    • Output devices
    • Storage devices
  • Network devices and communication lines: transfer data.
  • Telecommunications: communication between computers over distances.

Types of Information Systems

  • Different types of IS serve different functions; many applications are integrated (merged) into enterprise systems.
  • Management Information Systems (MIS) support management activities: planning, controlling, and decision making.

Transaction Processing Systems (TPS)

  • TPS: most widely used IS; records data at the point of business transactions with other parties.
  • Point-of-Sale (POS) machines record sales; examples include cash registers, ATMs, and purchase order systems.

Supply Chain Management (SCM) Systems

  • SCM systems support activities from purchasing raw materials to after-sale services; include marketing, document management, and customer portfolio monitoring.
  • Also known as Enterprise Resource Planning (ERP) systems; enterprises connect subsystems into one large IS.

Customer Relationship Management (CRM) Systems

  • CRM systems help manage relations with customers; used in help desks and customer service; often linked to web applications tracking online transactions.
  • Retaining loyal customers is less expensive than acquiring new ones.

Business Intelligence (BI) Systems

  • BI systems identify relationships and trends in data to compete effectively; often include statistical models and large data pools.
  • Data warehouse: large database that stores transactional records.

Decision Support Systems (DSS) and Expert Systems (ES)

  • DSS: supports decision making; uses models to produce tables and what-if analyses.
  • ES: supports knowledge-intensive decisions; uses AI techniques; preserves knowledge of retiring experts.

Geographic Information Systems (GIS)

  • GIS ties data to physical locations; represents data on maps; may include demographic information and GPS data; examples include Google Earth and MapQuest.

Information Systems in Business Functions

  • Functional areas: accounting, finance, marketing, human resources, etc.; part of a larger enterprise system.

Accounting

  • Accounting information systems: record transactions, produce periodic statements, report for compliance, support management reporting, and enforce controls.

Finance

  • Finance systems: support financial planning and transactions; budgeting, cash flow management, investment analysis, and decision making.

Marketing

  • Marketing information systems analyze demand by region/demographics, identify trends, and measure advertising impact on profit; web data collection and promotion.

Human Resources

  • HR information systems assist with hiring, record-keeping, evaluation, and benefits.

Web-Empowered Enterprises

  • E-commerce involves buying and selling via the Internet.
  • The Internet is a global network; the Web shapes IS by enabling e-commerce and serving as an advertising medium.

Careers in Information Systems

  • IT professionals are in demand; historical BLS projection indicates substantial growth.

Roles and Traits

  • Systems Analyst: starts as programmer; researches, plans, and recommends software and system choices; cost analyses, design, timelines, feasibility; strong communication skills.
  • Database Administrator (DBA): manages databases and data warehouses; builds applications; ensures privacy and security compliance.
  • Network Administrator: manages networks; implements security (firewalls, access controls).
  • System Administrator (SysAdmin): manages operating systems; ensures integration, backups, user management, upgrades.
  • Mobile Applications Developer: develops apps; understands user needs; programming and design skills.
  • Webmaster: creates and maintains web sites; security and transaction software; manages intranet/extranet.
  • Chief Security Officer / Chief Information Security Officer (CSO/CISO): oversees information system security; reports to CIO.
  • Chief Information Officer / Chief Technology Officer (CIO/CTO): leads IT strategy; combines business understanding with technology.

Figure 1.6 Traits of a Successful CIO

  • Business executive: understands processes, market, competition; aligns IT with corporate strategy.
  • Technologist: knows current and developing IT; asks proper questions about technology.
  • Leader: inspires staff and leads by example.
  • Entrepreneur: proposes new IT-enabled products/services.

Summary

  • Professionals must know how to develop and use IT; computer-based systems pervade life.
  • A system is a set of components that work together; a subsystem is a system that performs a limited task within a larger goal.
  • Data processing has four stages; MIS supports management; numerous IS types exist; enterprise applications tie together functional areas.
  • ISs are used in accounting, finance, marketing, and HR.
  • Career prospects in IT are strong; IS raises societal concerns around privacy, identity theft, spam, and web annoyances.