1.

ICS 3208: MANAGEMENT

INFORMATION SYSTEMS
CHAPTER 1

Introduction to Information Systems

 Chapter objectives

• By the end of this chapter, the learner should be

able to:
– Differentiate data, information, knowledge and
wisdom.

– Describe the role of information systems in business.

– Discuss criteria used to classify Information Systems

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 Introduction

• All decisions made by companies involve, at some

level, the management and use of IS.

• Managers today need to know about their

organization’s capabilities and uses of
information as much as they need to understand
how to obtain and budget financial resources.

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 Introduction
• The ubiquity of personal computers (PCs) and
the Internet highlights this fact, because
together they form the backbone for virtually all
new business models.
• The proliferation of supply chain partnerships has
extended the urgency that business managers get
involved in technology decisions.

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 Business View

• A manager who does not understand the

basics of managing and using information
cannot be successful in this business
environment.
• Consider the now historic rise of companies
such as Amazon.com and Google.
 Business View
• Amazon.com started out as an online bookseller
and rapidly outpaced traditional brick-and-mortar
businesses like Barnes and Noble, Borders, and
Waterstones.
• Management at the traditional companies
responded by having their IS support personnel
build Web sites to compete.
 Business View
• Information technology (IT) is a critical resource
for today’s businesses.
• It both supports and consumes a significant
amount of an organization’s resources.
• Just like the other three major types of
business resources—people, money, and
machines—it needs to be managed wisely.
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 Data
• The information hierarchy begins with data, or simple
observations.
• Data are a set of specific, objective facts or
observations, such as “inventory contains 45 units.”
• Standing alone, such facts have no intrinsic meaning,
but can be easily captured, transmitted, and stored
electronically.

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 Informatio
• Information is data endowed with relevance
and purpose.

• People turn data into information by

organizing it into some unit of analysis (e.g.,
dollars, dates, or customers).

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 Informatio
• Deciding on the appropriate unit of analysis
involves interpreting the context of the data
and summarizing it into a more condensed
form.
• Consensus must be reached on the unit of
analysis.

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 Informatio
• To be relevant and have a purpose,
information must be considered within the
context that it is received and used.
• Because of differences in context, information
needs vary across the function and
hierarchical level.

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 Informatio
• For example, when considering functional
differences related to a sales transaction, a
marketing department manager may be
interested in the demographic characteristics
of buyers, such as their age, gender, and home
address.
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 Informatio
• A manager in the accounting department
probably won’t be interested in any of these
details, but instead will want to know details
about the transaction itself, such as method of
payment and date of payment.

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 Informatio
• Similarly, information needs may vary across
hierarchical levels.

• At the supervisory level, activities are narrow

in scope and focused on production or the
execution of the business’s basic transactions.

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 Informatio
• At supervisory level, information is focused on
day-to-day activities that are internally
oriented and accurately defined in a detailed
manner.
• The activities of senior management are
much broader in their scope.

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 Informatio
• Senior management performs long-term planning
and needs information that is aggregated,
externally oriented, and more subjective.

• The information needs of middle managers in

terms of these characteristics fall between the
needs of supervisors and senior management.

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 Informatio
• Because information needs vary across
levels, a daily inventory report of a large
manufacturing firm may serve as information
for a low-level inventory manager, whereas
the CEO would consider such a report to be
merely data.
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 Informatio
• A report does not necessarily mean
information.

• The context in which the report is used must

be considered.

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 Knowledg
• Knowledge is information synthesized and
contextualized to provide value.

• It is information with the most value.

• Knowledge consists of a mix of contextual

information, values, experiences, and rules.

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 Knowledg
• It is richer and deeper than information, and
more valuable because someone thought
deeply about that information and added his
or her own unique experience, judgment, and
wisdom.

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 Knowledg
• Knowledge also involves the synthesis of
multiple sources of information over time.
• The amount of human contribution increases
along the continuum from data to information to
knowledge.
• Computers work well for managing data, but are
less efficient at managing information.
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Knowledg
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 Wisdo
• Some people think there is a fourth level in
the information hierarchy, wisdom.

• In this context, wisdom is knowledge, fused

with intuition and judgment that facilitates
the ability to make decisions.

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 Wisdo
• Wisdom is that level of the information
hierarchy used by subject matter experts,
gurus, and individuals with a high level of
experience who seem to “just know” what to
do and how to apply the knowledge they gain.

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 Information
• An information system comprises three main
elements:
– Technology(Software, Hardware, Networks)

– People, and

– Process

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 System

Management

Information Systems

Technology Process
People

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 Information
• When most people use the term information
system, they actually refer only to the
technology element as defined by the
organization’s infrastructure.

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 Information
• The term infrastructure refers to everything
that supports the flow and processing of
information in an organization, including
hardware, software, data, and network
components, while architecture refers to the
strategy implicit in these components.
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 What is Information
• Information system is defined more broadly as
the combination of technology (the “what”),
people (the “who”), and process (the “how”)
that an organization uses to produce and
manage information.

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 Information
• An information system (IS) can be any
organized combination of people, hardware,
software, communications networks, data
resources, and policies and procedures that
stores, retrieves, transforms, and disseminates
information in an organization.
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 Information
• People resources include end users and IS
specialists, hardware resources consist of
machines and media, software resources include
both programs and procedures, data resources
include data and knowledge bases, and network
resources include communications media and
networks.

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 Information
• People are the essential ingredient for the
successful operation of all information
systems.
• These people resources include:
– End users and
– IS specialists.

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 Information
• End users(also called users or clients) are
people who use an information system or the
information it produces.
• They can be customers, salespersons,
engineers, clerks, accountants, or managers
and are found at all levels of an organization.

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 Information
• Most of us are information system end users.
• Most end users in business are knowledge
workers, that is, people who spend most of
their time communicating and collaborating in
teams and workgroups and creating, using,
and distributing information.

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 Information
• IS specialists are people who develop and
operate information systems.
• They include systems analysts, software
developers, system operators, and other
managerial, technical, and clerical IS
personnel.

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 Information
• People rely on modern information systems to
communicate with one another using a variety of
physical devices (hardware) , information
processing instructions and procedures
(software) , communications channels
(networks), and stored data (data resources) .

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 Information
• Although today’s information systems are
typically thought of as having something to do
with computers, we have been using
information systems since the dawn of
civilization.

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 Information
• In contrast, information technology (IT)
focuses only on the technical devices and
tools used in the system.
• Information technology is defined as all forms
of technology used to create, store, exchange,
and use information.

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 Information
• Above the information system itself is
management, which oversees the design and
structure of the system and monitors its
overall performance.

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 Information
• Management develops the business
requirements and the business strategy that
the information system is meant to satisfy.
• The system’s architecture provides a blueprint
that translates this strategy into components,
or infrastructure.

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 Information
• Information technologies, including Internet-
based information systems, are playing vital
and expanding roles in business.

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

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 Information
• This benefit occurs irrespective of whether
the information technology is used to support
product development teams, customer
support processes, e-commerce transactions,
or any other business activity.

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 Information
• Information technologies and systems are,
quite simply, an essential ingredient for
business success in today’s dynamic global
environment.

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 Information Systems Organization
Processes
• The general manager needs to understand the
processes internal to the IS group in order to
interact effectively with that group to
accomplish business goals.

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 Fundamental Roles of IS
in
• While there are a seemingly endless number
of software applications, there are three
fundamental reasons for all business
applications of information technology.

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 Fundamental Roles of IS
in
• They are found in the three vital roles that
information systems can perform for a business
enterprise:
– Support of business processes and operations.
– Support of decision making by employees and
managers.
– Support of strategies for competitive advantage.
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 Fundamental Roles of IS
in
• At any moment, information systems designed to
support business processes and operations may
also be providing data to, or accepting data from,
systems focused on business decision making or
achieving competitive advantage.
• The same is true for the other two fundamental
roles of IS.

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 Fundamental Roles of IS
in
• Today’s organizations are constantly striving
to
achieve integration of their systems to allow
information to flow freely through them,
which adds even greater flexibility and

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 Fundamental Roles of IS
in
business support than any of the individual
system roles could provide.

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 Support of Business
Processes
• As a consumer, you regularly encounter
information systems that support the business
processes and operations at the many retail
stores where you shop.

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 Support of Business
Processes
• For example, most retail stores now use
computer-based information systems to help
their employees record customer purchases, keep
track of inventory, pay employees, buy new
merchandise, and evaluate sales trends.
• Store operations would grind to a halt without
the support of such information systems.

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 Support of Business Decision
Making
• Information systems also help store managers and
other business professionals make better decisions.
• For example, decisions about what lines of
merchandise need to be added or discontinued and
what kind of investments they require are typically
made after an analysis provided by computer- based
information systems.

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 Support of Business Decision
Making
• This function not only supports the decision
making of store managers, buyers, and others,
but also helps them look for ways to gain an
advantage over other retailers in the
competition for customers.

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 Support of Strategies
for
• Gaining a strategic advantage over competitors
requires the innovative application of information
technologies.
• For example, store management might make a
decision to install touch-screen kiosks in all
stores, with links to the e-commerce Web site for
online shopping.

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 Support of Strategies
for
• This offering might attract new customers and
build customer loyalty because of the ease of
shopping and buying merchandise provided
by such information systems.

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 Support of Strategies
for
• Thus, strategic information systems can help
provide products and services that give a
business a comparative advantage over its
competitors.

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 Trends in Information
• Until the 1960s, the role of most information
systems was simple: transaction processing,
record keeping, accounting, and other
Electronic Data Processing (EDP) applications.

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 Trends in Information
• Then another role was added, namely, the
processing of all these data into useful,
informative reports.

• Thus, the concept of Management

Information Systems (MIS) was born.

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 Trends in Information
• This new role focused on developing business
applications that provided managerial end
users with predefined management reports
that would give managers the information
they needed for decision-making purposes.

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 Trends in Information
• By the 1970s, it was evident that the pre-
specified information products produced by
such management information systems were
not adequately meeting the decision-making
needs of management, so the concept of
Decision Support Systems (DSS) was born.
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 Trends in Information
• The new role for information systems was to
provide managerial end users with ad hoc,
interactive support of their decision-making
processes.

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 Trends in Information
• This support would be tailored to the unique
decisions and decision-making styles of
managers as they confronted specific types of
problems in the real world.

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 Trends in Information
• In the 1980s, several new roles for information
systems appeared.

• First, the rapid development of microcomputer

processing power, application software packages,
and telecommunications networks gave birth to
the phenomenon of end-user computing.

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 Trends in Information
• End users could now use their own computing
resources to support their job requirements
instead of waiting for the indirect support of
centralized corporate information services
departments.

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 Trends in Information
• Second, it became evident that most top
corporate executives did not directly use either
the reports of management information systems
or the analytical modeling capabilities of decision
support systems, so the concept of Executive
Information Systems (EIS) developed.

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 Trends in Information
• These information systems were created to
give top executives an easy way to get the
critical information they wanted, when they
wanted it, and tailored to the formats they
preferred.

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 Trends in Information
• Third, breakthroughs occurred in the
development and application of artificial
intelligence (AI) techniques to business
information systems.

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 Trends in Information
• Today’s systems include intelligent software agents that can be
programmed and deployed inside a system to act on behalf of their
owner, system functions that can adapt themselves on the basis of
the immediate needs of the user, virtual reality applications,
advanced robotics, natural language processing, and a variety of
applications for which artificial intelligence can replace the need for
human intervention, thus freeing up knowledge workers for more
complex tasks.

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 Trends in Information
• Expert systems (ES) and other knowledge-
based systems also forged a new role for
information systems.
• Today, expert systems can serve as
consultants to users by providing expert
advice in limited
subject areas.
Trends in Information
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 Trends in Information
• An important new role for information
systems appeared in the 1980s and continued
through the 1990s: the concept of a strategic
role for information systems, sometimes
called strategic information systems (SIS).

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 Trends in Information
• In this concept, information technology
becomes an integral component of business
processes, products, and services that help a
company gain a competitive advantage in the
global marketplace.

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 Trends in Information
• The mid- to late 1990s saw the revolutionary emergence of
Enterprise Resource Planning (ERP) systems.
• This organization-specific form of a strategic information
system integrates all facets of a firm, including its planning,
manufacturing, sales, resource management, customer
relations, inventory control, order tracking, financial
management, human resources, and marketing—virtually
every business function.

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 Trends in Information
• The primary advantage of these ERP systems
lies in their common interface for all
computer-based organizational functions and
their tight integration and data sharing,
necessary for flexible strategic decision
making.
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 Trends in Information
• We are also entering an era where a fundamental
role
for Information System is business intelligence (BI) .
• BI refers to all applications and technologies in the
organization that are focused on the gathering and
analysis of data and information that can be used to
drive strategic business decisions.

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 Trends in Information
• Through the use of BI technologies and
processes, organizations can gain valuable
insight into the key elements and factors—
both internal and external—that affect their
business and competitiveness in the
marketplace.
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 Trends in Information
• BI relies on sophisticated metrics and analytics
to “see into the data” and find relationships
and opportunities that can be turned into
profits.

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 Trends in Information
• Finally, the rapid growth of the Internet,
intranets, extranets, and other interconnected
global networks in the 1990s dramatically
changed the capabilities of information systems
in business at the beginning of the 21st century.
• Further, a fundamental shift in the role of
information systems occurred.

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 Trends in Information
• Internet-based and Web-enabled enterprises and
global e-business and e-commerce systems are
becoming commonplace in the operations and
management of today’s business enterprises.

• Information systems is now solidly entrenched as

a strategic resource in the modern organization.

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 Types of Information
• Conceptually, the applications of information
systems that are implemented in today’s
business world can be classified in several
different ways.

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 Types of Information
• For example, several types of information
systems can be classified as either operations or
management information systems.

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 Types of Information
• Information systems are categorized this way
to spotlight the major roles each plays in the
operations and management of a business.

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 Operations Support
• Information systems have always been needed
to
process data generated by, and used in,
business operations.
• Such operations support systems produce a variety of
information products for internal and external use;
however, they do not emphasize the specific
information products that can best be used by
managers.
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 Operations Support
• Further processing by management information
systems is usually required.
• The role of a business firm’s operations support
systems is to process business transactions,
control industrial processes, support enterprise
communications and collaborations, and update
corporate databases efficiently
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 Examples of Operations Support
Systems
• Transaction processing systems: Process data resulting from business
transactions, update operational databases, and produce business
documents.
– Examples: sales and inventory processing and accounting systems.
• Process control systems: Monitor and control industrial processes.
– Examples: petroleum refining, power generation, and steel production
systems.
• Enterprise collaboration systems: Support team, workgroup, and
enterprise communications and collaborations.
– Examples: e-mail, chat, and videoconferencing groupware systems.

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 Transaction processing
• Transaction processing systems are
important
examples of operations support systems that record
and process the data resulting from business
transactions.
• They process transactions in two basic ways. In batch
processing , transactions data are accumulated over a
period of time and processed periodically.
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 Transaction Processing
• In real-time (or online) processing, data are processed
immediately after a transaction occurs.
• For example, point-of-sale (POS) systems at many
retail stores use electronic cash register terminals to
capture and transmit sales data electronically over
telecommunications links to regional computer centers
for immediate (real-time) or nightly (batch) processing.

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 Process control systems
• Process control systems monitor and control
physical processes.
• For example, a petroleum refinery uses electronic
sensors linked to computers to monitor chemical
processes continually and make instant (real-
time) adjustments that control the refinery
process.
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 Enterprise collaboration systems

• Enterprise collaboration systems enhance team and

workgroup communications and productivity and
include applications that are sometimes called office
automation systems .
• For example, knowledge workers in a project team
may use e-mail to send and receive e-messages
or use videoconferencing to hold electronic meetings
to coordinate their activities.
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 Management Support
• When information system applications focus on
providing information and support for effective
decision making by managers, they are called
management support systems .
• Providing information and support for decision
making by all types of managers and business
professionals is a complex task.

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 Management Support
• Conceptually, several major types of
information systems support a variety of
decision-making responsibilities:
– Management Information Systems,

– Decision support systems, and

– Executive Information Systems.

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 Management information
systems (MIS)
• Management information systems (MIS) provide
information in the form of reports and displays to
managers and many business professionals.
• For example, sales managers may use their networked
computers and Web browsers to receive instantaneous
displays about the sales results of their products and
access their corporate intranet for daily sales analysis
reports that evaluate sales made by each salesperson.
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 Decision support systems (DSS)

• Decision support systems (DSS) give direct

computer support to managers during the
decision-making process.
• For example, an advertising manager may use a
DSS to perform a what-if analysis as part of the
decision to determine how to spend advertising
dollars.

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 Decision Support Systems

• A production manager may use a DSS to

decide how much product to manufacture,
based on the expected sales associated with a
future promotion and the location and
availability of the raw materials necessary to
manufacture the product.
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 Executive information systems
(EIS)
• Executive information systems (EIS) provide critical
information from a wide variety of internal and
external sources in easy-to-use displays to executives
and managers.
• For example, top executives may use touch-screen
terminals to view instantly text and graphics displays
that highlight key areas of organizational and
competitive performance.
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 Other classifications of
• Several other categories of information systems
can support either operations or management
applications.
• For example, expert systems can provide expert
advice for operational chores like equipment
diagnostics or managerial decisions such as loan
portfolio management.

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 Other classifications of
• Knowledge management systems are
knowledge-based information systems that
support the creation, organization, and
dissemination of business knowledge to
employees and managers throughout a
company.
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 Other Classification of
• Information systems that focus on operational
and managerial applications in support of
basic business functions such as accounting or
marketing are known as functional business
systems.

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 Other classifications of
• Finally, strategic information systems
apply
information technology to a firm’s products,
services, or business processes to help it gain
a strategic advantage over its competitors

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 Other classifications of
• It is also important to realize that business applications
of information systems in the real world are typically
integrated combinations of the several types of
information systems just mentioned.
• That is because conceptual classifications of
information systems are designed to emphasize the
many different roles of information systems.

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 Other classifications of
• In practice, these roles are combined into integrated or
cross-functional informational systems that provide a
variety of functions.
• Thus, most information systems are designed to
produce information and support decision making for
various levels of management and business functions,
as well as perform record-keeping and transaction-
processing chores.
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 Other classifications of
• Whenever you analyze an information system,
you probably see that it provides information
for a variety of managerial levels and business
functions.

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End of Chapter 1