Chapter
1
Foundations of
Information Systems in Business
McGraw-Hill/Irwin
Copyright 2008, The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
1. Understand the concept of a system and how it
relates to information systems
2. Explain why knowledge of information
systems is important for business professionals
Identify five areas of information systems
knowledge needed
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Learning Objectives
3. Give examples to illustrate how business
applications of information systems can
support a firms
Business processes
Managerial decision making
Strategies for competitive advantage
4. Provide examples of information systems from
your experiences with business organizations
in the real world
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Learning Objectives
5. Identify challenges that a business manager
might face in managing the successful, ethical
development and
use of information technology
6. Provide examples of the components
of real world information systems
7. Become familiar with the myriad of career
opportunities in information systems
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Foundation Concepts
Why study information systems and information
technology?
Vital component of successful businesses
Helps businesses expand and compete
Improves efficiency and effectiveness of
business processes
Facilitates managerial decision making and
workgroup collaboration
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Case 1: Heidelberg, Honeywell, Eaton
Smart services, smart products
Using information technology to monitor,
intervene, assist
Machines relay information via the Internet
and wireless systems
Optimized performance
Minimized maintenance and repair costs
Less unanticipated downtime
Increased value justifies premium charge
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Case Study Questions
1. Why should manufacturing companies build
smart products and provide smart services?
What business benefits can be gained?
Provide examples beyond those discussed in
this case
2. What information technologies are used
by the companies in this case to build smart
products and provide smart services?
What other IT components might be used?
Give examples of the capabilities they would
provide
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Case Study Questions
3. What are some limitations of a smart products
and smart services strategy?
Give several examples that a business might
encounter
Explain how it might overcome them
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What is a System?
A set of interrelated components
With a clearly defined boundary
Working together
To achieve a common set of objectives
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What is an Information System?
An organized combination of
People
Hardware and software
Communication networks
Data resources
Policies and procedures
This system
Stores, retrieves, transforms, and disseminates
information in an organization
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Information Technologies
Information Systems
All the components and resources necessary to
deliver information and functions to the
organization
Could be paper based
Information Technologies
Hardware, software, networking, data
management
Our focus will be on computer-based
information systems (CBIS)
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What Should Business Professionals Know?
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Fundamental Roles of IS in Business
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Trends in Information Systems
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What is E-Business?
Using Internet technologies to empower
Business processes
Electronic commerce
Collaboration within a company
Collaboration with customers, suppliers, and
other business stakeholders
In essence, an online exchange of value
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How E-Business is Being Used
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E-Business Use
Reengineering
Internal business processes
Enterprise collaboration systems
Support communications, coordination and
coordination among teams and work groups
Electronic commerce
Buying, selling, marketing, and servicing of
products and services over networks
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Types of Information Systems
Operations Support Systems
Efficiently process business transactions
Control industrial processes
Support communication and collaboration
Update corporate databases
Management Support Systems
Provide information as reports and displays
Give direct computer support to managers during
decision-making
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Purposes of Information Systems
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Operations Support Systems
What do they do?
Efficiently process business transactions
Control industrial processes
Support communications and collaboration
Update corporate databases
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Types of Operations Support Systems
Transaction Processing Systems
Record and process business transactions
Examples: sales processing, inventory systems,
accounting systems
Process Control Systems
Monitor and control physical processes
Example: using sensors to monitor chemical
processes in a petroleum refinery
Enterprise Collaboration Systems
Enhance team and workgroup communication
Examples: email, video conferencing
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Two Ways to Process Transactions
Batch Processing
Accumulate transactions over time and process
periodically
Example: a bank processes all checks received in
a batch at night
Online Processing
Process transactions immediately
Example: a bank processes an ATM withdrawal
immediately
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Management Support Systems
What do they do?
Provide information and support for effective
decision making by managers
Management information systems
Decision support systems
Executive information systems
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Types of Management Support Systems
Management Information Systems (MIS)
Reports and displays
Example: daily sales analysis reports
Decision Support Systems (DSS)
Interactive and ad hoc support
Example: a what-if analysis to determine where
to spend advertising dollars
Executive Information Systems (EIS)
Critical information for executives and managers
Example: easy access to actions of competitors
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Other Information Systems
Expert Systems
Provide expert advice
Example: credit application advisor
Knowledge Management Systems
Support creation, organization, and dissemination
of business knowledge throughout company
Example: intranet access to best business
practices
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Other Information Systems
Strategic Information Systems
Help get a strategic advantage over customer
Examples: shipment tracking, e-commerce Web
systems
Functional Business Systems
Focus on operational and managerial applications
of basic business functions
Examples: accounting, finance, or marketing
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IT Challenges and Opportunities
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Measuring IT Success
Efficiency
Minimize cost, time, and use of information
resources
Effectiveness
Support business strategies
Enable business processes
Enhance organizational structure and culture
Increase customer and business value
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Developing IS Solutions
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Challenges and Ethics of IT
Application of IT
Customer relationship management
Human resources management
Business intelligence systems
Potential Harm
Infringements on privacy
Inaccurate information
Collusion
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Challenges and Ethics of IT
Potential Risks
Consumer boycotts
Work stoppages
Government intervention
Possible Responses
Codes of ethics
Incentives
Certification
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Ethical Responsibilities
What uses of IT might be considered improper
or harmful to other individuals or society?
What is the proper business use of the Internet
or a companys IT resources?
How can you protect yourself from computer
crime?
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IT Careers
Economic downturns have affected all job
sectors, including IT
Rising labor costs are pushing jobs to India,
the Middle East, and Asia-Pacific countries
However, IT employment opportunities are
strong, with new jobs emerging daily
Shortages of IT personnel are frequent
The long-term job outlook is positive and
exciting
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IT Careers
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IT Careers
Job increases will be driven by
Rapid growth in computer system design and
related services
The need to backfill positions
Information sharing and client/server
environments
The need for those with problem-solving skills
Falling hardware and software prices, which will
fuel expanded computerization of operations
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The IS Function
The IS function is
A major functional area of business
An important contributor to operational
efficiency, employee productivity, morale,
customer service and satisfaction
A major source of information and support for
decision making
A vital ingredient in developing competitive
products and services in the global marketplace
A dynamic and challenging career opportunity
A key component of todays networked business
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System Concepts: A Foundation
System concepts help us understand
Technology: hardware, software, data
management, telecommunications networks
Applications: to support inter-connected
information systems
Development: developing ways to use
information technology includes designing the
basic components of information systems
Management: emphasizes the quality, strategic
business value, and security of an organizations
information systems
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Real World Case: Lufthansa
Lufthansa wants to
Keep 3,500 pilots
Trained on the latest technology and procedures
Plugged into the corporate infrastructure
Informed about schedules, weather events, and other
facts that affect their jobs
Control costs
Provide Internet access to passengers
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Case Study Questions
Are many of Lufthansas challenges identified in
the case similar to those being experienced by
other businesses in todays global economy?
What other tangible and intangible benefits,
beyond those identified by Lufthansa, might a
mobile workforce enjoy as a result of deploying
mobile technologies?
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Case Study Questions
Lufthansa was clearly taking a big risk with their
decision to deploy notebook computers to their
pilots. What steps did they take to manage the
risk, and what others might be needed in todays
business environment?
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What is a System?
A system is
A set of interrelated components
With a clearly defined boundary
Working together
To achieve a common set of objectives
By accepting inputs and producing outputs
In an organized transformation process
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Basic Functions of a System
Input
Capturing and assembling elements that enter the
system to be processed
Processing
Transformation process that converts input into
output
Output
Transferring transformed elements to their
ultimate destination
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Cybernetic System
All systems have input, processing, and output
A cybernetic system, a self-monitoring, selfregulating system, adds feedback and control:
Feedback is data about the performance of a
system
Control involves monitoring and evaluating
feedback to determine whether a system is
moving toward the achievement of its goal
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A Cybernetic System
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A Business as a System
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Other System Characteristics
If a system is one of the components of a larger
system, it is a subsystem
The larger system is an environment
Several systems may share the same
environment
Some may be connected via a shared boundary,
or interface
Types of systems
Open
Adaptive
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Components of an IS
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Information System Resources
People Resources
Specialists
End users
Hardware Resources
Machines
Media
Software Resources
Programs
Procedures
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Information System Resources
Data Resources
Product descriptions, customer records, employee
files, inventory databases
Network Resources
Communications media, communications
processors, network access and control software
Information Resources
Management reports and business documents
using text and graphics displays, audio responses,
and paper forms
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Data Versus Information
Data are raw facts about physical phenomena or
business transactions
Information is data that has been converted into
meaningful and useful context for end users
Examples:
Sales data is names, quantities, and dollar
amounts
Sales information is amount of sales by product
type, sales territory, or salesperson
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IS Activities
Input of data resources
Data entry activities
Processing of data into information
Calculations, comparisons, sorting, and so on
Output of information products
Messages, reports, forms, graphic images
Storage of data resources
Data elements and databases
Control of system performance
Monitoring and evaluating feedback
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Recognizing Information Systems
Business professionals should be able to look at
an information system and identify
The people, hardware, software, data, and
network resources they use
The type of information products they produce
The way they perform input, processing, output,
storage, and control activities
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Case 3: Aviall, Inc.
Supplier of airplane parts and components
Had lost track of its inventory
Price-tracking software didnt work with
inventory control or purchasing forecasting
Sent wrong parts to wrong customers
Sales falling
Needed a middleware vision
Get all the software to work together
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Case Study Questions
Why do you think that Aviall failed in their
implementation of an airplane parts and
components inventory control system?
How has information technology brought new
business success to Aviall? How did IT change
Avialls business model?
How could other companies use Avialls
approach to the use of IT to improve their
business success?
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Case 4: Continental Airlines
Building customer loyalty has become crucial
for success in the airline industry
Continental employs CallMinder systems to
Monitor calls and keystrokes
Data mine keystrokes and voice calls
This technology resulted in
Fewer calls going to the help desk
Higher customer satisfaction
Reduction of flight confirmation calls
Cost savings in excess of $1 million
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Case Questions
What are the business benefits of the CallMiner
system?
How can new technologies like CallMiner help
companies improve their customer service and
gain a competitive edge in the marketplace?
Andre Harris refers to calls to reconfirm a flight
as quite frankly, low-value calls. Why are they
classified as low value? Why do you think so
many customers are placing such calls?
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