Chapter 1

INFORMATION SYSTEMS IN
BUSINESS TODAY

Eng. Rasha Al Ababseh

 CHAPTER 1: INFORMATION SYSTEMS IN BUSNESS TODAY

Learning Objectives

• How are information systems transforming business, and what is their

relationship to globalization?
• Why are information systems so essential for running and managing a
business today?
• What exactly is an information system? How does it work? What are its
management, organization, and technology components?
• What are complementary assets? Why are complementary assets
essential for ensuring that information systems provide genuine value for
an organization?
• What academic disciplines are used to study information systems? How
does each contribute to an understanding of information systems? What is
a sociotechnical systems perspective?

Eng. Rasha Al Ababseh

 The Role of Information Systems in Business Today

• What makes management information systems the most

exciting topic in business?
₋ continual change in technology,
₋ management use of the technology, and the impact on
business success.
₋ successful firms are those that learn how to use the new
technologies.
• three interrelated changes in the technology area:
1- the emerging mobile digital platform.
2- the growing business use of "big data“
3- and the growth in “cloud computing,” where more and more
business software runs over the Internet.
Eng. Rasha Al Ababseh
The Role of Information Systems in Business Today

Eng. Rasha Al Ababseh

Eng. Rasha Al Ababseh
Eng. Rasha Al Ababseh
Eng. Rasha Al Ababseh
• Businesses sought to sense and respond to,
- rapidly changing customer demand,
- reduce inventories to the lowest possible levels,
- and achieve higher levels of operational efficiency.
- Supply chains have become more fast-paced, with
companies of all sizes depending on just-in-time
inventory to reduce their overhead costs and get to
market faster.

Eng. Rasha Al Ababseh

 What does globalization have to do with management
information systems?

• the Internet has drastically reduced the costs of operating

and transacting on a global scale.

• Communications are instant and virtually free

• information systems enable globalization

Eng. Rasha Al Ababseh

 THE EMERGING DIGITAL FIRM

• digital firm is one in which nearly all of the organization’s significant business

relationships with customers, suppliers, and employees are digitally enabled

and mediated. Core business processes are accomplished through digital

networks. Key corporate assets—intellectual property, core competencies, and

financial and human assets—are managed through digital means.

• Digital firms offer greater flexibility in organization and management

• Time shifting, space shifting

Eng. Rasha Al Ababseh

• Growing interdependence between ability to use
information technology and ability to implement
corporate strategies and achieve corporate goals.

• Business firms invest heavily in information systems to

achieve six strategic business objectives:
1. Operational excellence
2. New products, services, and business models
3. Customer and supplier intimacy
4. Improved decision making
5. Competitive advantage
6. Survival

Eng. Rasha Al Ababseh

Eng. Rasha Al Ababseh
The Role of Information Systems in Business Today

Eng. Rasha Al Ababseh

 The Role of Information Systems in Business Today

• New products, services, and business models:

₋ Business model: describes how company
produces, delivers, and sells product or service to
create wealth
₋ Information systems and technology a major
enabling tool for new products, services,
business models
• Examples: Apple’s iPod, iTunes, iPhone, iPad,
Google’s Android OS, and Netflix

Eng. Rasha Al Ababseh

 The Role of Information Systems in Business Today

• Customer and supplier intimacy:

₋ Serving customers well leads to customers returning,
which raises revenues and profits
Example: High-end hotels that use computers to track
customer preferences and use to monitor and customize
environment
₋ Intimacy with suppliers allows them to provide vital
inputs, which lowers costs
Example: J.C.Penney’s information system which links
sales records to contract manufacturer

Eng. Rasha Al Ababseh

The Role of Information Systems in Business Today

Eng. Rasha Al Ababseh

 The Role of Information Systems in Business Today
• Operational excellence:
₋ Improvement of efficiency to attain higher profitability
• New products, services, and business models:
₋ Enabled by technology
• Customer and supplier intimacy:
₋ Serving customers raises revenues and profits
₋ Better communication with suppliers lowers costs
• Improved decision making
₋ More accurate data leads to better decisions

Eng. Rasha Al Ababseh

 The Role of Information Systems in Business Today

• Competitive advantage
₋ Delivering better performance
₋ Charging less for superior products
₋ Responding to customers and suppliers in real
time
₋ Examples: Apple, Walmart, UPS

Eng. Rasha Al Ababseh

 The Role of Information Systems in Business Today

• Survival
₋ Information technologies as necessity of business.
₋ Information systems are not a luxury. In most businesses,
information systems and technology are the core to survival
₋ example:
• Citibank was the first banking firm to introduce ATMs. In
doing so, they had a major competitive advantage over
their competitors. In order to remain and survive in the
retail banking industry, other banks had no choice but to
provide ATM services to banking customers.
• Governmental regulations requiring record-keeping
Examples: Toxic Substances Control Act, Sarbanes-Oxley Act
Eng. Rasha Al Ababseh
 Perspectives on Information Systems

• Information system:
– Set of interrelated components
– Collect, process, store, and distribute information
– Support decision making, coordination, and control
• Information vs. data
– Data are streams of raw facts
– Information is data shaped into meaningful and useful
form

Eng. Rasha Al Ababseh

Perspectives on Information Systems
Data and Information

Raw data from a supermarket checkout counter can be processed and organized to
produce meaningful information, such as the total unit sales of dish detergent or the
total sales revenue from dish detergent for a specific store or sales territory.

Eng. Rasha Al Ababseh

 Perspectives on Information Systems

• Three activities of information systems

produce information organizations need
1. Input: Captures raw data from organization or
external environment
2. Processing: Converts raw data into meaningful
form
3. Output: Transfers processed information to people
or activities that use it

Eng. Rasha Al Ababseh

 Perspectives on Information Systems

• Feedback:
– Output returned to appropriate members of
organization to help evaluate or correct input stage
• Computer/Computer program vs. information
system
– Computers and software are technical foundation and
tools, similar to the material and tools used to build a
house

Eng. Rasha Al Ababseh

 Perspectives on Information Systems

Functions of an Information
System
An information system contains
information about an
organization and its surrounding
environment. Three basic
activities—input, processing, and
output—produce the information
organizations need. Feedback is
output returned to appropriate
people or activities in the
organization to evaluate and
refine the input. Environmental
actors, such as customers,
suppliers, competitors,
stockholders, and regulatory
agencies, interact with the
organization and its information
systems.

Eng. Rasha Al Ababseh

 Perspectives on Information Systems

Information Systems Are More

Than Computers

Using information systems

effectively requires an
understanding of the
organization, management, and
information technology shaping
the systems. An information
system creates value for the firm
as an organizational and
management solution to
challenges posed by the
environment.

Eng. Rasha Al Ababseh

 Perspectives on Information Systems

• Organizational dimension of information systems

₋ Hierarchy of authority “structure”, responsibility
• Senior management: long-term strategic decisions,
financial performance
• Middle management: carries out the programs and
plans of senior management
• Operational management
• Knowledge workers
• Data workers: assist with scheduling and
communications at all levels of the firm
• Production or service workers

Eng. Rasha Al Ababseh

 Perspectives on Information Systems

Levels in a Firm

Business organizations are hierarchies

consisting of three principal levels: senior
management, middle management, and
operational management. Information
systems serve each of these levels.
Scientists and knowledge workers often
work with middle management.

Eng. Rasha Al Ababseh

 Perspectives on Information Systems

• Organizational dimension of information systems

(cont.)
– Separation of business functions
• Sales and marketing
• Human resources
• Finance and accounting
• Manufacturing and production
– Unique business processes
– Unique business culture: the ways of doing things
– Organizational politics

Eng. Rasha Al Ababseh

 Perspectives on Information Systems

• Organizational politics are the processes through

which people:
• Represent different interests, agendas, and
perspectives
• Compete, come in to conflict and/or collaborate in
order to:
 Interpret and evaluate information and make
decisions
 Structure or restructure the organization

Eng. Rasha Al Ababseh

 Perspectives on Information Systems

• Management dimension of information systems

– Managers set organizational strategy for responding to
business challenges
– Managers perceive business challenges in the environment;
– they set the organizational strategy for responding to those
challenges;
– and they allocate the human and financial resources to
coordinate the work and achieve success.
– In addition, managers must act creatively:
• Creation of new products and services
• Occasionally re-creating the organization

Eng. Rasha Al Ababseh

 Perspectives on Information Systems

• Technology dimension of information systems

– Computer hardware and software
– Data management technology
– Networking and telecommunications technology
• Networks, the Internet, intranets and extranets, World
Wide Web
– IT infrastructure: provides platform that system is built on

Eng. Rasha Al Ababseh

 Perspectives on Information Systems

• Internet.
• Intranets: providing the connectivity to link different
systems and networks within the firm based on
Internet technology.
• Extranets: Private intranets extended to authorized
users outside the organization.
• World Wide Web is a service provided by the Internet
that uses universally accepted standards for storing,
retrieving, formatting, and displaying information in a
page format on the Internet

Eng. Rasha Al Ababseh

 Perspectives on Information Systems

• Business perspective on information systems:

– Information system is instrument for creating
value
– Investments in information technology will result
in superior returns:
• Productivity increases
• Revenue increases
• Superior long-term strategic positioning
• Decrease the cost.

Eng. Rasha Al Ababseh

 Perspectives on Information Systems

• Business information value chain

– Raw data acquired and transformed through stages
that add value to that information
– Value of information system determined in part by
extent to which it leads to better decisions, greater
efficiency, and higher profits
• Business perspective:
– Calls attention to organizational and managerial
nature of information systems

Eng. Rasha Al Ababseh

 Perspectives on Information Systems
The Business Information Value Chain

From a business perspective, information systems are part of a series of value-adding activities for acquiring,
transforming, and distributing information that managers can use to improve decision making, enhance organizational
performance, and, ultimately, increase firm profitability.

Eng. Rasha Al Ababseh

 Perspectives on Information Systems

Variation in Returns On
Information Technology
Investment

Although, on average,
investments in information
technology produce returns far
above those returned by other
investments, there is
considerable variation across
firms.

Eng. Rasha Al Ababseh

 Perspectives on Information Systems

• Investing in information technology does not

guarantee good returns
• Considerable variation in the returns firms receive
from systems investments
• Factors:
– Adopting the right business model
– Investing in complementary assets (organizational
and management capital)

Eng. Rasha Al Ababseh

 Perspectives on Information Systems

• Complementary assets:
– Assets required to derive value from a primary
investment
– Firms supporting technology investments with
investment in complementary assets receive superior
returns
– E.g.: invest in technology and the people to make it
work properly

Eng. Rasha Al Ababseh

 Perspectives on Information Systems

• Complementary assets include:

– Organizational assets, e.g.
• Appropriate business model
• Efficient business processes
– Managerial assets, e.g.
• Training programs to enhance management decision skills
• Teamwork and collaborative work environments
– Social assets, e.g.
• The Internet and telecommunications infrastructure
• Technology standards

Eng. Rasha Al Ababseh

 Contemporary Approaches to Information Systems

Contemporary Approaches
to Information Systems

The study of information

systems deals with issues and
insights contributed from
technical and behavioral
disciplines.

Eng. Rasha Al Ababseh

 Contemporary Approaches to Information Systems

• Technical approach
– Emphasizes mathematically based models
– Computer science, management science, operations
research
• Behavioral approach
– Behavioral issues (strategic business integration,
implementation, etc.)
– Psychology, economics, sociology
– concentrates on changes in attitudes, management
and organizational policy, and behavior

Eng. Rasha Al Ababseh

 Contemporary Approaches to Information Systems
• sociologists study information systems with an eye
toward how an organizations shape the development of
systems, how systems affect individuals, groups, and
organizations.
• Psychologists study information systems with an
interest in how human decision makers perceive and
use formal information.
• Economists study information systems with an interest
in understanding the production of digital goods, the
dynamics of digital markets, and how new information
systems change the control and cost structures within
the firm.
Eng. Rasha Al Ababseh
 Contemporary Approaches to Information Systems

• Management Information Systems

– Combines computer science, management science,
operations research and practical orientation with
behavioral issues
• Four main actors
– Suppliers of hardware and software
– Business firms
– Managers and employees
– Firm’s environment (legal, social, cultural context)

Eng. Rasha Al Ababseh

 Contemporary Approaches to Information Systems

• Approach of this book: Sociotechnical view

• Optimal organizational performance achieved by jointly

optimizing both social and technical systems used in
production

• Helps avoid purely technological approach

• Both the technical and behavioral components need

attention. This means that technology must be changed
and designed in such a way as to fit organizational and
individual needs.
Eng. Rasha Al Ababseh
 Contemporary Approaches to Information Systems

A Sociotechnical Perspective on Information Systems

In a sociotechnical perspective, the performance of a system is optimized when both the technology and the organization
mutually adjust to one another until a satisfactory fit is obtained.

Eng. Rasha Al Ababseh