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Foundations of

Information Systems

in Business

Chapter

1Chapter

1

1 - 3Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

1. Explain why knowledge of information systems is important for business professionals and identify five areas of information systems knowledge they need.

2. Give examples to illustrate how the business applications of information systems can support a firm’s business processes, managerial decision making, and strategies for competitive advantage.

Learning ObjectivesLearning Objectives

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Learning ObjectivesLearning Objectives

3. Provide examples of several major types of information systems from your experiences with business organizations in the real world.

4. Identify several challenges that a business manager might face in managing the successful and ethical development and use of information technology in a business.

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Learning ObjectivesLearning Objectives

5. Provide examples of the components of real world information systems. Illustrate that in an information system, people use hardware, software, data and networks as resources to perform input, processing, output, storage, and control activities that transform data resources into information products.

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Why Study Information Systems?Why Study Information Systems?

• Information technology can help all kinds of businesses improve the efficiency and effectiveness of their business processes, managerial decision making, and workgroup collaboration, thus strengthening their competitive positions in a rapidly changing marketplace.

1 - 7Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

Why Study Information SystemsWhy Study Information Systems

• Internet-based systems have become a necessary ingredient for business success in today’s dynamic global environment.

• Information technologies are playing an expanding role in business.

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Case #1: Athens Olympics NetworkCase #1: Athens Olympics Network

• What makes the Olympic Games a unique project is that the athletes aren’t going to stop running just because the server does.

• Major Components:• Games Management System (GMS)• Information Diffusion System (IDS)

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Case #1: Athens Olympics NetworkCase #1: Athens Olympics Network

GMS: • Managed access accreditations for the games

IDS:• Collected and distributed event results and

rankings to press agencies and certain websites• Live feed for broadcasters commenting on

events• Results, rankings, statistics and biographies

available to commentators .3 seconds after the athletes crossed the line

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Case #1: Athens Olympics NetworkCase #1: Athens Olympics Network

Goals & Constraints:

• Reduce the amount of risk

• 100% availability

• Non-negotiable deadline

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Case #1: Athens Olympics NetworkCase #1: Athens Olympics Network

Fail-Safe Plan: • Redundancy

• Constructed the network in such a way that service could be provided even if one of the routers was damaged.

• Stored data in two physically distant data centers (in different earthquake zones).

• Test. Test. Test. “We wanted to be sure that every stupid thing that can happen was planned for.”

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Case #1: Athens Olympics NetworkCase #1: Athens Olympics Network

1. Could the 2004 Athens Olympics have been a success without all of the networks and backup technologies?

2. How would your 2004 Olympics experience changed without the GMS and IDS systems?

3. The 2004 Olympics is a global business. Can a business today succeed without information technology? Why or why not?

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Case #1: Athens Olympics NetworkCase #1: Athens Olympics Network

4. Claude Philipps said dealing with the “crazy scenarios of what might happen in every area: a network problem, staff stopped in a traffic jam, a security attack… everything that might happen,” was the reason for so much testing. Can you think of other businesses that would require “crazy scenario” testing? Explain.

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Case #1: Athens Olympics NetworkCase #1: Athens Olympics Network

5. Are the redundancies and backup systems in place limited to one-time systems like those at the Olympics or should they exist in other business environments? Explain your position and provide specific examples.

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What is an Information System?What is an Information System?

Any organized combination of people, hardware, software, communications networks, and data resources that stores, retrieves, transforms, and disseminates information in an organization.

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Information Systems vs. Information Technology

Information Systems vs. Information Technology

• Information Systems (IS) – all components and resources necessary to deliver information and information processing functions to the organization

• Information Technology (IT) – various hardware components necessary for the system to operate

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Types of Information TechnologiesTypes of Information Technologies

• Computer Hardware Technologiesincluding microcomputers, midsize servers, and large mainframe systems, and the input, output, and storage devices that support them

• Computer Software Technologiesincluding operating system software, Web browsers, software productivity suites, and software for business applications like customer relationship management and supply chain management

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Types of Information TechnologiesTypes of Information Technologies

• Telecommunications Network Technologiesincluding the telecommunications media, processors, and software needed to provide wire-based and wireless access and support for the Internet and private Internet-based networks

• Data Resource Management Technologiesincluding database management system software for the development, access, and maintenance of the databases of an organization

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Conceptual Framework of IS KnowledgeConceptual Framework of IS Knowledge

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Roles of IS in BusinessRoles of IS in Business

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Trends in Information SystemsTrends in Information Systems

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What is E-Business?What is E-Business?

Definition:

• 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.

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E-Business Information Technology Infrastructure

E-Business Information Technology Infrastructure

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Enterprise Collaboration SystemsEnterprise Collaboration Systems

Definition:

• Involve the use of software tools to support communication, coordination, and collaboration among the members of networked teams and workgroups.

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What is E-Commerce?What is E-Commerce?

Definition:

The buying and selling, and marketing and servicing of products, services, and information over a variety of computer networks.

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Types of Information SystemsTypes of Information Systems

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Operation Support SystemsOperation Support Systems

Definition:

• Information systems that process data generated by and used in business operations

• Goal is to efficiently process business transactions, control industrial processes, support enterprise communications and collaboration, and update corporate databases

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Examples of Operations Support SystemsExamples of Operations Support Systems

• Transaction Processing Systems (TPS) – process data resulting from business transactions, update operational databases, and produce business documents.

• Process Control Systems (PCS) – monitor and control industrial processes.

• Enterprise Collaboration Systems – support team, workgroup, and enterprise communications an collaboration.

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A Transaction Processing System ExampleA Transaction Processing System Example

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Management Support SystemsManagement Support Systems

Definition:

• Information systems that focus on providing information and support for effective decision making by managers

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Management Support SystemsManagement Support Systems

• Management Information Systems (MIS) – provide information in the form of pre-specified reports and displays to support business decision making.

• Decision Support Systems (DSS) – provide interactive ad hoc support for the decision making processes of managers and other business professionals.

• Executive Information Systems (EIS) – provide critical information from MIS, DSS, and other sources tailored to the information needs of executives.

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A Decision Support System ExampleA Decision Support System Example

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Operational & Managerial ISOperational & Managerial IS

• Expert Systems – provide expert advice for operational chores or managerial decisions

• Knowledge Management Systems – support the creation, organization, and dissemination of business knowledge to employees and managers

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IS Classifications by ScopeIS Classifications by Scope

• Functional Business Systems – support basic business functions

• Strategic Information Systems – support processes that provide a firm with strategic products, services, and capabilities for competitive advantage

• Cross-functional Information Systems – integrated combinations of information systems

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Management Challenges & OpportunitiesManagement Challenges & Opportunities

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Measures of SuccessMeasures of Success

• Efficiency • Minimize costs• Minimize time • Minimize the use of information resources

• Effectiveness • Support an organization’s business strategies• Enable its business processes• Enhance its organizational structure and culture • Increase the customer business value of the

enterprise

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Developing IS SolutionsDeveloping IS Solutions

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The Systems Development LifecycleThe Systems Development Lifecycle

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Ethical Challenges of ITEthical Challenges of IT

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IT Career TrendsIT Career Trends

• Rising labor costs have resulting in large-scale movement to outsource programming functions to India, the Middle East and Asia-Pacific countries.

• More new and exciting jobs emerge each day as organizations continue to expand their wide-scale use of IT.

• Frequent shortages of qualified information systems personnel.

• Constantly changing job requirements due to dynamic developments in business and IT ensure long-term job outlook in IT remains positive and exciting.

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The IS Function represents…The IS Function represents…

• A major functional area of business equally as important to business success as the functions of accounting, finance, operations management, marketing, and human resource management.

• An important contributor to operational efficiency, employee productivity and morale, and customer service and satisfaction.

1 - 42Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

The IS Function represents…The IS Function represents…

• A major source of information and support needed to promote effective decision making by managers and business professionals.

• A vital ingredient in developing competitive products and services that give an organization a strategic advantage in global marketplace.

1 - 43Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

The IS Function represents…The IS Function represents…

• A dynamic, rewarding, and challenging career opportunity for millions of men and women.

• A key component of the resources, infrastructure, and capabilities of today’s networked business enterprise.

1 - 44Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

Case #2: Connecting the Mobile WorkforceCase #2: Connecting the Mobile Workforce

Goals:

• Keep 3,500 highly mobile airline pilots:• Trained on the latest technology and

procedures• Plugged into the corporate infrastructure• Informed about schedules, weather events,

and other facts that affect their jobs

• Control costs

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Case #2: Connecting the Mobile WorkforceCase #2: Connecting the Mobile Workforce

Productivity and Efficiency Improvements:• Pilots can access updated data electronically.

• Pilots can work in a variety of locations including airplanes, airports, hotels, and other remote locations.

• Pilots appreciate the convenience of not having to carry heavy manuals and documentation to multiple locations.

• Pilots can take their required training on their laptops during downtime in any airport.

1 - 46Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

Case #2: Connecting the Mobile WorkforceCase #2: Connecting the Mobile Workforce

1. Are many of Lufthansa’s challenges identified in the case similar to those being experienced by other businesses in today’s global economy? Explain and provide some examples.

2. What other tangible and intangible benefits, beyond those identified by Lufthansa, might a mobile workforce enjoy as a result of deploying mobile technologies? Explain.

1 - 47Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

Case #2: Connecting the Mobile WorkforceCase #2: Connecting the Mobile Workforce

3. Lufthansa was clearly taking a big risk with their decision to deploy notebook computers to their pilots. What steps did they take to manage that risk and what others might be needed in today’s business environment? Provide some examples.

4. How might mobile computing improve your productivity and efficiency? Provide some examples.

1 - 48Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

Case #2: Connecting the Mobile WorkforceCase #2: Connecting the Mobile Workforce

5. What challenges in pilot morale, performance, and management might arise with the use of mobile computing devices in the field and in the cockpit? What preventive actions or solutions to these potential problem areas could you suggest?

1 - 49Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

What is a System?What is a System?

Definition:

A group of interrelated components, with a clearly defined boundary, working together toward a common goal by accepting inputs and producing outputs in an organized transformation process.

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System ComponentsSystem Components

• Input – capturing and assembling elements that enter the system to be processed

• Processing – transformation steps that convert input into output

• Output – transferring elements that have been produced by a transformation process to their ultimate destination

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Cybernetic SystemsCybernetic Systems

Definition: a self-monitoring, self-regulating system.

• Feedback – data about the performance of a system

• Control – monitoring and evaluating feedback to determine whether a system is moving toward the achievement of its goal

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Example of a Cybernetic SystemExample of a Cybernetic System

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A Business SystemA Business System

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IS Resources & ActivitiesIS Resources & Activities

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Information System ResourcesInformation System Resources

• People – end users and IS specialists

• Hardware – physical devices and materials used in information processing including computer systems, peripherals, and media

• Software – sets of information processing instructions including system software, application software and procedures

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Information Systems Resources (con’t)Information Systems Resources (con’t)

• Data – facts or observations about physical phenomena or business transactions

• Network – communications media and network infrastructure

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Data vs. Information Data vs. Information

• Data – raw facts or observations typically about physical phenomena or business transactions

• Information – data that have been converted into a meaningful and useful context for specific end users

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Network ResourcesNetwork Resources

• Communications Media – examples include twisted-pair wire, coaxial and fiber-optic cables, microwave, cellular, and satellite wireless technologies

• Network Infrastructure – examples include communications processors such as modems and internetwork processors, and communications control software such as network operating systems and Internet browser packages.

1 - 59Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

Information Systems ActivitiesInformation Systems Activities

• Input of Data Resources

• Processing of Data into Information

• Output of Information Products

• Storage of Data Resources

• Control of System Performance

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Recognizing Information SystemsRecognizing Information Systems

Fundamental Components of IS

• People, hardware, software, data and network resources used

• Types of information products produced

• Input, processing, output, storage and control activities performed

1 - 61Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

Case #3: Failure to Success with ITCase #3: Failure to Success with IT

Aviall on the Ropes:• A failed enterprise resource planning system

that had been designed to automate and integrate the company’s order processing, inventory control, financial accounting, and human resources business systems

• Couldn’t properly order or ship items to customers

• Quarterly sales dropping

• Airline industry shrinking

1 - 62Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

Case #3: Failure to Success with ITCase #3: Failure to Success with IT

Goals:

• Save Aviall from financial disaster

• Turn Aviall from a catalog business into a full-scale logistics business that hundreds of aviation parts manufacturers and airlines could depend on for ordering, inventory control, and demand forecasting

1 - 63Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

Case #3: Failure to Success with ITCase #3: Failure to Success with IT

Challenges:

• Integrate five Web-enabled e-business software systems from different software providers

• Customized pricing for 17,000 customers who receive various types of discounts

• 380,000 different aerospace parts

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Case #3: Failure to Success with ITCase #3: Failure to Success with IT

Benefits of Aviall.com: • Customer order obtained via web costs only 39

cents compared with $9 for an order taken via telephone

• Sales force freed from routine order taking can devote more time to developing relationships with customers

• Customers have the ability to transfer orders from an Excel spreadsheet directly to website

1 - 65Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

Case #3: Failure to Success with ITCase #3: Failure to Success with IT

Benefits of Aviall.com (con’t):• Customers can receive pricing and availability

information on parts within 5 seconds

• Helps build relationships with suppliers by providing them with customer ordering data that enables them to better match production with demand

1 - 66Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

Case #3: Aviall Inc.Case #3: Aviall Inc.

1. Why do you think that Aviall failed in their implementation of an enterprise resource planning system? What could they have done differently?

2. How has information technology brought new business success to Aviall? How did IT change Aviall’s business model?

3. How could other companies use Aviall’s approach to the use of IT to improve their business success? Give several examples.

1 - 67Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

Case #4: This Call is Being MonitoredCase #4: This Call is Being Monitored

Goals:

• Increase customer loyalty

• Reduce number of calls forwarded to internal help desk

• Improve decision making

1 - 68Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

Case #4: This Call is Being MonitoredCase #4: This Call is Being Monitored

Witness Systems Call-center Software & CallMiner:

• Records conversations

• Captures keystrokes

• Tracks caller choices

• Transcribes conversations into text

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Case #4: This Call is Being MonitoredCase #4: This Call is Being Monitored

Benefits:

• Revenues increased 60%

• 20% fewer calls sent to help desk saving $1 million

• Customer satisfaction rose 10%

• E-ticket sales increased 8%

• Reduced staffing needs

1 - 70Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

Case #4: This Call is Being MonitoredCase #4: This Call is Being Monitored

1. What are the business benefits of the CallMiner system? Provide some additional examples beyond those discussed in the case.

2. How can new technologies like CallMiner help companies improve their customer service and gain a competitive edge in the marketplace? Explain.

3. Andre Harris refers to calls to reconfirm a flight as “quite frankly, low-value calls.” Why are they classified as low value? Why do you think so many customers are placing such calls?

1 - 71Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

SummarySummary

• There is no longer a distinction between an IT project and a business initiative.

• Information systems are an important contributor to operational efficiency, employee productivity and morale, and customer service and satisfaction.

1 - 72Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

SummarySummary

• Information systems are a major source of information and support needed to promote effective decision making by managers and business professionals.

• Information systems can be categorized based on their intended purpose.

1 - 73Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

SummarySummary

• Managing and using information systems can pose several challenges including the development process and ethical responsibilities.

1 - 74Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

End of Chapter

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