Stair, Reynolds and Chesney: Principles of Business Information

Systems (9781844807796)
© Cengage Learning 2008

Chapter 01: An Introduction to

Information Systems
 Principles

• The value of information is directly linked to how it helps decision

makers achieve the organization’s goals
• Computers and information systems are constantly making it
possible for organizations to improve the way they conduct business
• Knowing the potential impact of information systems and having the
ability to put this knowledge to work can result in a successful
personal career, organizations that reach their goals, and a society
with a higher quality of life
• System users, business managers, and information systems
professionals must work together to build a successful information
system
• Information systems must be applied thoughtfully and carefully so
that society, business, and industry can reap their enormous
benefits

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
 Defining an Information System 1

What is a system?

• A system is a set of elements or components that

interact to accomplish goals.
• Systems have inputs, processing mechanisms, outputs,
and feedback
• A system processes the input to create the output
• Examples of systems are everywhere – an automatic car
wash, the heating in a building, the human body; you
should be able to think of many more

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
 Defining an Information System 2

What is information?

• Information is a collection of facts

• It can take many forms – text, numbers, images, audio
clips and video clips are all examples
• A closely related term is data
• These two terms can be used interchangeably

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
 Defining an Information System 3

Therefore…
• an information system (IS) is a set of interrelated
components that collect (input), manipulate & store
(process), and disseminate (output) information, and
provide a feedback mechanism to meet an objective
• In information systems, input is the activity of gathering
and capturing data
• Processing means converting or transforming this input
into useful outputs
• Output involves producing useful information, usually in
the form of documents and reports
• Feedback is information from the system that is used to
make changes to input or processing activities

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
The Characteristics of Valuable Information

To be useful to managers, information should have some

or possibly all of the following characteristics:

Accessible Accurate
Complete Economical
Flexible Relevant
Reliable Secure
Simple Timely
Verifiable

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
Manual and Computerised Information
Systems

• An information system can be manual, for

example paper-based, or computerised
• A computer-based information system (CBIS)
is a single set of hardware, software, databases,
telecommunications, people, and procedures
that are configured to collect, manipulate, store,
and process data into information

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
 Hardware

• Hardware consists of computer equipment used to

perform input, processing, and output activities
• Input devices include keyboards, mice and other pointing
devices, automatic scanning devices, and equipment
that can read magnetic ink characters
• Processing devices include computer chips that contain
the central processing unit and main memory
• Output devices include computer screens and printers

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
 Software

• Software consists of the computer programs

that govern the operation of the computer
• There are two types of software:
system software controls basic computer
operations, including start-up, input and output.
An example is Microsoft Windows
applications software allows you to accomplish
specific tasks, including word processing and
drawing charts. An example is Microsoft Excel

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
 Databases

• A database is an organized collection of facts

and information, typically consisting of two or
more related data files
• An organization’s database can contain
information on customers, employees, inventory,
competitors’ sales, online purchases, and much
more

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
Telecommunications, Networks, and the
Internet

• Telecommunication is the electronic transmission of

signals for communications, which enables organizations
to carry out their processes and tasks through computer
networks
• Networks connect computers and equipment in a
building, around the country, or around the world to
enable electronic communication
• The Internet is the world’s largest computer network,
actually consisting of thousands of interconnected
networks, all freely exchanging information

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
 People

• People are the most important element in most

computer-based information systems
• The people involved include users of the system
and information systems personnel, including all
the people who manage, run, program, and
maintain the system

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
 Procedures

• Procedures include the strategies, policies, methods,

and rules for using the CBIS, including the operation,
maintenance, and security of the computer
• Good procedures can help companies take advantage of
new opportunities and avoid potential disasters
• Poorly developed and inadequately implemented
procedures can cause people to waste their time or
result in inadequate responses to disasters

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
 Business Information Systems

• The most common types of information systems used in

business organizations are those designed for electronic
and mobile commerce, transaction processing,
management information, and decision support
• These systems help employees in organizations
accomplish routine and special tasks
• They are often integrated in one product and delivered
by the same software package
• For example, some enterprise resource planning
packages process transactions, deliver information, and
support decisions
Stair, Reynolds and Chesney Principles of Business Information
Systems (9781844807796) © Cengage Learning 2008
Electronic and Mobile Commerce

• E-commerce involves any business transaction executed

electronically
• Some types of e-commerce are:
– B2B (business-to-business): commerce between companies
– B2C (business-to-consumer, B2C): commerce between companies
and consumers
– C2C (consumer-to-consumer): commerce between consumers and
other consumers
• B2B represents the major volume of e-commerce, and its fastest-
growing segment
• Mobile commerce (m-commerce) refers to transactions conducted
anywhere, anytime
• M-commerce relies on wireless communications that managers and
corporations use to place orders and conduct business with
handheld computers, portable phones, laptop computers connected
to a network, and other mobile devices

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
Transaction Processing Systems

• A Transaction Processing System is an ‘Enterprise

System’
• Enterprise systems help organizations perform and
integrate important tasks, such as paying employees and
suppliers, controlling inventory, sending out invoices, and
ordering supplies
• A transaction processing system (TPS) is an
organized collection of people, procedures, software,
databases, and devices used to record completed
business transactions
• A transaction is any business-related exchange such as
payments to employees, sales to customers, or
payments to suppliers

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
 Enterprise Resource Planning

• An enterprise resource planning (ERP) system is also

an enterprise system
• It is a set of integrated programs that manage the vital
business operations for an entire multi-site, global
organization
• The scope of an ERP system might vary from company
to company, but most ERP systems provide integrated
software to support manufacturing and finance
• They are used to schedule inventory purchases and the
manufacturing process, so that the right number of
products are built at the right time, to meet customer
demand

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
 Management Information Systems

• A management information system (MIS) is

an organized collection of people, procedures,
software, databases, and devices that provides
routine information to managers and decision
makers
• An MIS focuses on operational efficiency
• The output of a TPS is the input to a MIS
• MIS typically provide standard reports generated
with data and information from the TPS

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
 Decision Support System

• A decision support system (DSS) is an organized

collection of people, procedures, software, databases,
and devices that support problem-specific decision-
making
• Decision support systems are used when the problem is
complex and the information needed to make the best
decision is difficult to obtain and use
• Typically a company will have either separate TPS, MIS
and DSS, or one integrated ERP system, which does the
work of the other three

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
Specialised Business Information Systems

• Knowledge management systems (KMS): an

organized collection of people, procedures, software,
databases, and devices to create, store, share, and use
the organization’s knowledge and experience
• Artificial Intelligence: attempts to have the computer
system take on the characteristics of human intelligence.
Applications include robotics and natural language
processing
• Virtual reality: simulation of a real or imagined
environment that can be experienced visually in three
dimensions

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
 Systems Development
Systems development is the activity of creating or
modifying business systems. The main stages are as
follows:
– Systems investigation, where a clear understanding of the
problem to be solved is developed
– Systems analysis, where the problems and opportunities of the
existing system are defined
– Systems design, which determines how the new system will work
to meet the business needs defined during systems analysis
– Systems implementation, which involves creating or acquiring the
various system components (hardware, software, databases, etc.)
defined in the design step, assembling them, and putting the new
system into operation
– Systems maintenance and review checks and modifies the
system so that it continues to meet changing business needs

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
 Security, Privacy, and Ethical Issues

• Security and privacy fears persist with computer users

• Computer-related mistakes are also a concern – in
Japan, a financial services firm had trading losses of
€245 million due to a typing mistake in entering a trade!
• Some IS professionals believe that computers may
create new opportunities for unethical behaviour –
unethical investors have placed false rumours or
incorrect information about a company on the Internet
and tried to influence its stock price to make money
• To protect against these and other threats, security and
control measures can be installed
Stair, Reynolds and Chesney Principles of Business Information
Systems (9781844807796) © Cengage Learning 2008
 Security and control measures

• Firewalls
• Anti virus software
• Password protection
• Physical protection – a security guard outside
the room where the servers are located for
instance
• Security procedures – users must change
passwords every month, for instance

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
 Global Challenges in IS 1

Changes in society as a result of increased international trade and

cultural exchange, often called globalisation, has always had a big
impact on organizations and their information systems:
• Cultural challenges: countries and regional areas have their own
cultures
• Language challenges
• Time and distance challenges
• Infrastructure challenges: high-quality electricity and water
might not be available in certain parts of the world. Telephone
services, Internet connections, and skilled employees might be
expensive or not readily available
• Currency challenges: the value of different currencies can vary
significantly over time, making international trade more difficult and
complex

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
 Global Challenges in IS 2

• Product and service challenges: traditional products that are

physical or tangible, such as a car or bicycle, can be difficult to
deliver to the global market
• Technology transfer issues: most governments don’t allow certain
military-related equipment and systems to be sold to some
countries.
• National laws: all countries have a set of laws that must be obeyed
by citizens and organizations operating in the country. Laws
restricting how data enters or exits a country are often called trans-
border data-flow laws. Keeping track of these laws and
incorporating them into the procedures and computer systems of
multinational and trans-national organizations can be very difficult
and time consuming, requiring expert legal advice
• Trade agreements: countries often enter into trade agreements
with each other
Stair, Reynolds and Chesney Principles of Business Information
Systems (9781844807796) © Cengage Learning 2008
 Summary

• Information: collection of facts organized in

such a way that they have value beyond the
facts themselves
• System: a set of elements that interact to
accomplish a goal
• Components of an information system: input,
processing, output, and feedback

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
 Summary (continued)

• Computer-based information system (CBIS):

a single set of hardware, software, databases,
telecommunications, people, and procedures
that are configured to collect, manipulate, store,
and process data into information
• Transaction processing system (TPS): an
organized collection of people, procedures,
software, databases, and devices used to record
completed business transactions

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008
 Summary (continued)

• Management information system (MIS): an organized

collection of people, procedures, software, databases,
and devices that provides routine information to
managers and decision makers
• Decision support system (DSS): an organized
collection of people, procedures, software, databases,
and devices used to support problem-specific decision
making
• Systems development: creating or modifying existing
business systems

Stair, Reynolds and Chesney Principles of Business Information

Systems (9781844807796) © Cengage Learning 2008