Explain why information technology matters

Chapter 1

Business Information Systems:

An Overview

Objectives

• Explain why information technology matters

• Define digital information and explain why digital

systems are so powerful and useful

• Explain why information systems are essential to

business

• Describe how computers process data into

useful information for problem solving and

decision making

• Identify the functions of different types of

information systems in business

2

Objectives (cont’d.)

• Describe careers in information technology

• Identify major ethical and societal concerns

created by widespread use of information

technology

3

Does Information Technology Matter?

• Examples of IT applied by businesses

– Social media for engaging customers

– Mobile banking

• Today’s business professionals must know how

to develop and use IT

4

The Power of Digital Systems

• Binary counting system uses only two digits:

0 and 1

• Digital systems: computers and devices that

use the binary system

– Can represent any information as a combination

of zeroes and ones

• Information can be represented, stored,

communicated, and processed digitally

5

The Power of Digital Systems (cont’d.)

• Digital information is stored and communicated

by means of electromagnetic signals

– Extremely fast

– Exact copy of the original is possible

• Accuracy and speed make digital systems

powerful, useful, and important

6

The Purpose of Information Systems

• Businesses use information systems to:

– Make sound decisions

– Solve problems

• Problem: any undesirable situation

• Decision: arises when more than one solution to

problem exists

• Both problem solving and decision making

require information

7

The Purpose of Information Systems

(cont’d.)

• Keys to success in business

– Gathering correct information efficiently

– Storing information

– Using information

• Information systems support daily operations

8

Data, Information, and Information

Systems

• Commonly used terms

– Data

– Information

– System

• Important to understand similarities and

differences among terms

9

Data vs. Information

• Data: a given or fact

– Can be number, statement, or picture

– Is the raw material in the production of

information

• Information: facts or conclusions that have

meaning within context

– Composed of data that has been manipulated

10

Data Manipulation

• Survey is common method of collecting data

• Reading data can be extremely time consuming

• Manipulating the data may provide valuable

information

• Examples: categorizing and producing statistics

– May be applied to marketing and manufacturing

practices

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Generating Information

• Process: the manipulation of data

– Usually produces information

– May produce more data

• A piece of information (output of a process) in

one context may be considered data (input to a

process) in another context

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Figure 1.1 Input-process-output

Information in Context

• Not all information is useful

• Characteristics of useful information

– Relevant

– Complete

– Accurate

– Current

– Economical

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What Is a System?

• System: array of components that work together

to achieve goal or goals

• A system:

– Accepts input

– Processes input

– Produces output

15

What is a System? (cont’d.)

• Characteristics of a system:

– May have multiple goals

– May contain subsystems

• Subsystem: component of a larger system

– Has subgoal that contributes to main goal

– Can receive input from and transfer output to

other subsystems

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Figure 1.3 Several subsystems make up this corporate accounting system

What is a System? (cont’d.)

• Closed system: has no connections with other

systems

• Open system: interfaces and interacts with

other systems

– Often a subsystem of a bigger system

– Subsystems by definition are always open

• Information system (IS): all components that

work together to process data and produce

information

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Information and Managers

• Systems thinking: considering an organization

in terms of subsystems

– Powerful management approach that creates a

framework for problem solving and decision

making

– Helps keep managers focused on overall goals

• Database: collection of electronic records

• Information systems automate information

exchange among subsystems

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Information and Managers (cont’d.)

• Information map: description of data and

information flow within an organization

– Shows a network of information subsystems that

exchange information with each other and with

the outside world

• Information technology: technologies that

facilitate construction and maintenance of

information systems

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Information Systems in Organizations

• Consist of data, hardware, software,

telecommunications, people, and procedures

• 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

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Figure 1.4 Components of an information system

Information Systems in Organizations (cont’d.)

• Trends that have made information systems (ISs)

important in business

– Growing capacity and decreasing costs of data

storage devices

– Increasing variety and ingenuity of computer

programs

– Cloud computing capabilities

23

Information Systems in Organizations (cont’d.)

• Trends that have made ISs important in

business (cont’d.)

– Affordable Software as a Service (SaaS)

applications due to

• Quick, reliable communication lines

• Internet and web access

– Growth of the Internet

– Increasing computer literacy of the workforce

• Organizations must continuously upgrade IS

features and employee skills

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The Four Stages of Processing

• Input: enter data into the IS

– Transaction: a business event, usually entered

as input

– Transaction processing system (TPS): a

system that records transactions

– Input devices include keyboards, bar code

readers, voice recognition systems, and touch

screens

• Processing: changing and manipulating the

data

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The Four Stages of Processing (cont’d.)

• Output: get information out of the IS

– Output devices include printers and speakers

• Storage: maintaining vast amounts of data and

information

– Storage devices include optical discs

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Computer Equipment for Information

Systems

• Different technologies are used to support the

four data processing functions

– Input devices: receive input

– Computers: process data

– Output devices: display information

– Storage devices: store data

– Network devices and communication lines:

transfer data

• Telecommunications: communication that

occurs between computers over distances

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Figure 1.5 Input, process, output, storage and networking devices

From Recording Transactions to

Providing Expertise

• Different types of information systems serve

different functions

• Capabilities of applications have been combined

and merged

• Management Information Systems (MISs)

support management activities

– Planning, controlling, and making decisions

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Transaction Processing Systems

• Transaction processing system (TPS): most

widely used ISs

– Records data collected at point where

organization transacts business with other parties

• Point-of-sale (POS) machines: record sales

– Include cash registers, ATMs, and purchase order

systems

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Supply Chain Management (SCM) Systems

• Supply chain: sequence of activities involved in

producing and selling products or services

– For products, activities include:

• Marketing, purchasing raw materials,

manufacturing and assembly, packing and

shipping, billing, collection, and after-sale services

– For services, activities include:

• Marketing, document management, and monitoring

customer portfolios

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SCM Systems (cont’d.)

• SCM systems support supply chain activities

– Also known as enterprise resource planning

systems

• SCM systems eliminate the need to reenter data

captured elsewhere in the organization

• Enterprise application: separate business

process subsystems connected to form one

large IS

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Customer Relationship

Management (CRM) Systems

• CRM systems help manage relations with

customers

– Used in combination with telephones to provide

customer service

– Often linked to Web applications that track online

transactions

• Retaining loyal customers is less expensive than

acquiring new ones

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Business Intelligence (BI) Systems

• BI systems glean relationships and trends from

raw data to help organization compete

– Often contain statistical models

– Access large pools of data

• Data warehouse: large database that usually

stores transactional records

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Decision Support Systems (DSSs) and

Expert Systems (ESs)

• DSS: supports decision making

– Relies on models to produce tables

– Extrapolates data to predict outcomes

– Helps answer “What if?” questions

• ES: supports knowledge-intensive decision

making

– Uses artificial intelligence techniques

– Can preserve the knowledge of retiring experts

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Geographic Information Systems (GIS)

• GIS: ties data to physical locations

• Represents data on a map in different formats

• May reflect demographic information in addition

to geographic information

• May use information from global positioning

system (GPS) satellites

– Examples: Google Earth, Mapquest

36

Information Systems

in Business Functions

• Functional business area: services within a

company that support main business

– Includes accounting, finance, marketing, human

resources, etc.

– Part of a larger enterprise system

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Accounting

• Accounting information systems:

– Help record transactions

– Produce periodic statements

– Create required reports for law

– Create supplemental reports for managers

– Contain controls to guarantee adherence to

standards

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Finance

• Finance systems:

– Facilitate financial planning and business

transactions

• Tasks include organizing budgets, managing

cash flow, analyzing investments, and making

decisions

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Marketing

• Marketing’s purpose is to pinpoint likely

customers and promote products

• Marketing information systems help:

– Analyze demand for products in regions and

demographic groups

– Identify trends in demand for products/services

– Determine how advertising campaigns affect

profit

• Web provides opportunity to collect marketing

data as well as promote products and services

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Human Resources

• Human resource (HR) management systems

assist in:

– Record-keeping

– Employee evaluation

– Employee benefits

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Web-Empowered Enterprises

• E-commerce: buying and selling goods and

services through Internet

• Internet is a vast network of computers

connected globally

• Web has a profound impact on information

systems

– A place to conduct e-commerce

– An emerging advertising medium

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Careers in Information Systems

• Information technology professionals are

increasingly in demand

• U.S. Bureau of Labor Statistics estimates a 22

percent increase in demand for computer and

information technology specialists for the

decade 2010–2020

43

Systems Analyst

• Systems analyst:

– Starts career as programmer or

programmer/analyst

– Researches, plans, and recommends software

and systems choices

– Responsible for developing cost analyses, design

considerations, implementation timelines, and

feasibility studies

• Requires excellent communication and

presentation skills

44

Database Administrator (DBA)

• DBA is responsible for databases and data

warehouses

– Develops and acquires database applications

– Must adhere to federal, state, and corporate

regulations to protect privacy of customers and

employees

– Responsible for securing the database

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Network Administrator

• Network administrator: acquires, implements,

manages, maintains, and troubleshoots

networks

• Implements security

– Firewalls

– Access codes

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System Administrator

• System administrator (“sys admin”): manages

an organization’s computer operating systems

– Must ensure that operating systems work

together, support business requirements, and

function properly

– Responsible for backup and recovery, adding and

deleting user accounts, and performing system

upgrades

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Mobile Applications Developer

• Mobile applications developer skills

– Technical expertise: software development tools

for mobile devices and programming languages

– Ability to determine users’ needs

• Communication and system design skills

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Webmaster

• Webmaster: creates and maintains Web site

– Must be familiar with Web transaction software,

payment-processing software, security software

– Manages both the intranet and extranet

• Involved in creatively representing the

organization on the web

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Chief Security Officer (CSO)

• CSO: supervises security of information system

– Also called chief information security officer

(CISO)

• Position exists due to growing threat to

information security

• Usually reports to chief information officer (CIO)

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Chief Information Officer (CIO) and

Chief Technology Officer (CTO)

• CIO: responsible for all aspects of information

system

– Often a corporate vice president

– Must have technical understanding of information

technologies as well as business knowledge

• CTO: has similar duties as CIO

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Figure 1.6 Traits of a successful CIO

Summary

• Business professionals are expected to know

how to develop and use IT

• Computer-based information systems pervade

almost every aspect of our lives

• A system is a set of components that work

together to achieve a common goal

• Subsystem: a system performs a limited task

that produces an end result, which must be

combined with other products from other

systems to reach an ultimate goal

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Summary (cont’d.)

• Data processing has four stages

• Any IS that helps in management is a

management information system (MIS)

• Many different types of ISs

• Enterprise application systems (SCM or ERP) tie

together different functional areas of a business

• ISs are used in many business functions,

including accounting, finance, marketing, and

human resources

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Summary (cont’d.)

• The job prospects for IT professionals are bright

• IT has created societal concerns regarding

privacy, identity theft, spam, and Web

annoyances

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