CHAPTER I: FOUNDATIONS OF INFORMATION SYSTEMS IN BUSINESS

Why are Information Systems (IS) important?

Information technologies are playing a vital role in business.

Especially in today’s global environment, internet-based information technologies are becoming a necessary ingredient for business success.

IS have a major impact on business.

System concept

System: A group of interrelated elements working together toward a common goal.

Systems are divided into three distinct parts: INPUTS, PROCESSES, and OUTPUTS.

Components of System

INPUT includes those elements that enter the system.

All the elements necessary to convert or transform the inputs into outputs are included in the PROCESSES.

OUTPUT transfers the elements that have been produced by a transformation process to their ultimate destination.

System concept (cont’d)

System examples:HOSPITAL SYSTEM

Patientsadmitted tohospital

FollowingTests, or examinations

Curedpeople

INPUT PROCESS OUTPUT

MANUFACTURING SYSTEM Raw material

Following operatingprocedures

Finishedgood

INPUT PROCESS OUTPUT

System concept (cont’d)

Systems are surrounded by an environment. Example: a business performs its activities in a social,

economical and political environment. We call such systems OPEN SYSTEM which interact

with the other systems in its environment. Systems frequently include a feedback mechanism. A feedback is data about the performance of a system. Control monitors whether a system is moving toward

the achievement of its goals. If a system has feedback and control components, it is

called CYBERNETIC SYSTEM (self-regulating system). Ex: Thermostat-controlled heating system.

System concept (cont’d)

Systems are evaluated and analyzed along two major dimensions: Efficiency and Effectiveness.

Efficiency: Doing the “thing” right. Ex: How much money is used to generate a certain level of sales?

Effectiveness: Doing the “right” thing. (accomplishing the goal). Ex: Total sales of a company.

Information system (IS)

An IS collects, processes, stores, analyzes and disseminates information for a specific purpose.

IS can be either computer-based or manual (paper and pencil technology).

In this course we will concentrate on computer-based information systems which rely on computer hardware and software.

Information system (IS)

IS is a system that accepts data resources as input and processes them into useful information as output.

IS Activities

Information System Activities:

Data Calculating, classifying, sorting, etc.

Reports, forms, graphic images

Stored for future use

INPUT PROCESSINGOUTPUT

STORAGECONTROL of system performance

Components of Information System

1. People

2. Hardware

3. Software

4. Data

5. Networks

Components of IS

1. People : those individuals who work with the system or use its outputs. a. End users (customers, managers, engineers. Most end users are knowledge workers)

b. IS specialists (programmers, system analysts).2. Hardware: The physical equipment used for input, processing and

output activities in an IS. Ex: Keyboard, monitor, printer, processor, floppy disks, mouse.

3. Software: Programs and procedures. Program: a set of instructions that causes a computer to perform a particular

task.Procedures: a set of instructions used by people to complete a task. 3.a. System software: It controls and supports the operations of a computer

system.3.b.Application software: Programs which are used by end users. Ex: Word,

Excel. 3.c.Procedures: Set of instructions about how to use an IS. Ex: Instruction for

using a software package.

Components of IS (cont’d)

4. Data : Distinguish between data and information.

465889724

DATA

465-88-9724

Located in a certain database

In John Doe’s file

In a field labeled “SSN”

INFORMATION

1200100

WestCharles Mann

79154 TM Shoes

Monthly Sales Report for West Region

Sales Rep: Charles MannEmp No. 79154Item Qty Sold PriceTM Shoes 1200 $100

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Data Versus Information

Components of IS (cont’d)

4. Data is unformatted information. Information is data that have been shaped into a form that is meaningful and useful.

• Data records, data files, databases are data resources. Ex: Employee files, customer records.5. Network resources: Connecting system that permits the sharing of

resources by different computers. Ex: computers, Internet, intranet, extranet, satellite wireless technologies,

cellular phones and communication processors.

Types of IS

McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.

Types of IS

IS can be classified in several ways. A. Operations Support Systems (OSS): IS that monitors the elementary

activities and transactions of the organization such as sales, cash deposits, credit decisions. Deals with the day-to-day operations of an organization. It is categorized into three types:

Transaction Processing Systems (TPS): TPSs are computerized systems that perform and record the daily routine transactions necessary to conduct the business. Payroll processing, order processing, order tracking are the examples of the activities supported by TPS.

Payroll TPS

Payroll master file

Data elements in payrollmaster file

Employee numberEmployee name

Employee departmentEmployee occupation

Employee pay rateEarningsState tax

Payroll system

Managementreports

Government documents

Employeechecks

INPUT PROCESS OUTPUTCalculating payCalculating cost of taxesetc.

TPS

TPSs process transactions in two ways: Batch processing Online processing Batch Processing of transactions occurs when transactions are

collected and then processed together as a “batch” at some later time.

Ex: Banks often use batch processing when reconciling checks drawn or customer accounts.

Online processing of transactions provide immediate results. Data is processed immediately after a transaction occurs.

Ex: Online reservation processing.

Types of IS

2. Process Control Systems: Process Control Systems are systems, which make use of computers to control ongoing physical processes. These systems are designed to automatically make decisions, which adjust the physical production processes. EX: the assembly lines of automated factories.

3. Enterprise collaboration systems: Enterprise collaboration systems are systems that use a variety of information technologies to help people work together. These systems help us collaborate, share resources and co-ordinate our cooperative work efforts. EX: Electronic mail system, videoconferencing.

Management Support Systems

B. Management Support Systems: Support and provide information for managerial decision-making. It is categorized into three types:

1. MIS: MISs are designed to get the right information to the right people in the right format at the right time to help them make better decisions. MISs summarize and report on the company’s basic operations. MIS usually produces weekly, monthly, and yearly results- not day-to-day activities. Sales forecasting, inventory planning, advertising are some of the activities supported by MISs. Ex: MIS reports might list the total pounds of lettuce used this quarter by a fast-food chain.

MIS

Data elements in MIS filesSales data

Product description dataSales region data

Product dataProduct code data

etc.

MIS FILES

MISReports, graphic

displays, etc.Managers

Product code

Product description

Sales region

Actual sales Planned

4469 Carpet cleaner

Northeast 4,066,700 4,800,000

West 2,546,000 2,500,000

South 3,778,122 3,750,000

TOTAL 10,390,822 11,050,000

Aggregation Summarization etc.

INPUTPROCESS OUTPUT

Types of IS

2. Decision Support Systems: Basic objective of DSS is to provide computerized support to complex, non-routine unique decisions. Ex: Excel is the most commonly used DSS tool.

3. Executive Information Systems: Provides information about key factors that are critical to accomplishing a firm's strategic objectives to executives. Long-range and strategic planning and crisis management are supported by EIS.

Career in IS

Employment opportunities in the field of IS are excellent. Most of them are well-paid.

Huge demand for system analysts, programmers, website designers.