1. Foundations of Information Systems in Business
Chapter 1
Foundations of Information Systems in Business
McGraw-Hill/Irwin
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Learning Objectives
Understand the concept of a system and how it relates to information systems
Explain why knowledge of information systems is important for business professionals
Identify five areas of information systems knowledge needed
1-2

3. Learning Objectives
Give examples to illustrate how business applications of information systems can support a firm’s
Business processes
Managerial decision making
Strategies for competitive advantage
Provide examples of information systems from your experiences with business organizations in the real world
1-3

4. Provide examples of the components of real world information systems
Learning Objectives
Identify challenges that a business manager might face in managing the successful, ethical development and use of information technology
Provide examples of the components of real world information systems
Become familiar with the myriad of career opportunities in information systems
1-4

5. Case 1: Sew What? Inc.
Sew What? provides custom theatrical draperies and fabrics for stages, concerts, fashion shows, and special events worldwide.
After launching the company web site, they acquired clients from all over the world and their revenue has been growing more than 45% per year.
Sew What? runs most of its business with Intuit’s Quick-Books Enterprise Solutions & Dell PowerEdge servers.
Recently, the National Federation of Independent Businesses (NFIB) and Dell Inc. presented Sew What? “Small Business Excellence Award” in recognition of its innovative use of technology to improve its customers’ experience.
1-5

6. Case Study Questions
How do information technologies contribute to the business success of Sew What? Inc.? Give several examples from the case regarding the business value of information technology that demonstrate this conclusion.
1-6

7. Case Study Questions
If you were a management consultant to Sew What? Inc., what would you advise Megan Duckett to do at this point to be even more successful in her business? What role would information technology play in your proposals? Provide several specific recommendations.
1-7

8. Case Study Questions
How could the use of information technology help a small business you know be more successful? Provide several examples to support your answer.
1-8

9. Why study information systems and information technology?
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
1-9

10. 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
1-10

11. 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)
1-11

12. What Should Business Professionals Know?
1-12

13. Fundamental Roles of IS in Business
1-13

14. Trends in Information Systems
1-14

15. Using Internet technologies to empower…
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
1-15

16. How E-Business is Being Used
1-16

17. Enterprise collaboration systems
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
1-17

18. 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
1-18

19. Purposes of Information Systems
1-19

20. Operations Support Systems
What do they do?
Efficiently process business transactions
Control industrial processes
Support communications and collaboration
Update corporate databases
1-20

21. 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: , video conferencing
1-21

22. 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
1-22

23. 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
1-23

24. 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
1-24

25. 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
1-25

26. 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
1-26

27. IT Challenges and Opportunities
1-27

28. Efficiency Effectiveness Measuring IT Success
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
1-28

29. Developing IS Solutions
1-29

30. 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
1-30

31. Challenges and Ethics of IT
Potential Risks
Consumer boycotts
Work stoppages
Government intervention
Possible Responses
Codes of ethics
Incentives
Certification
1-31

32. 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 company’s IT resources?
How can you protect yourself from computer crime?
1-32

33. Economic downturns have affected all job sectors, including IT
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
1-33

34. IT Careers
1-34

35. Job increases will be driven by…
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
1-35

36. 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 today’s networked business
1-36

37. 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 organization’s information systems
1-37

38. Real World Case: JetBlue and the Veterans Administration
Good IT processes are as important as hardware and software when it comes to creating business value through the use of technology.
Even seemingly smaller and less critical processes can have ramifications of a large magnitude in the interconnected world in which we live.
The information system, which was developed by JetBlue in 24 hours and implemented in the middle of crisis in 2007, has now been implemented as a full-time system in the company.
At Veterans Administration an unscheduled system failure took down key applications in 17 (VA) medical facilities for a day
1-38

39. Case Study Questions
Eric Brinker of JetBlue noted that the database developed during the crisis had not been needed before since the company had never experienced a meltdown. What are the risks and benefits associated with this approach to IT planning? Provide some examples of each.
1-39

40. Case Study Questions
With hindsight, we now know that the decision made by Eric Raffin of the VA not to fail over to the Denver site was the correct one. However, it involved failing to follow established backup procedures. With the information he had at the time, what other alternatives could he have considered? Develop at least two of them.
1-40

41. Case Study Questions
A small, undocumented change resulted in the collapse of the VA system, largely because of the high interrelationship between its applications. What is the positive side of this high degree of interconnection, and how does this benefit patients? Provide examples from the case to justify your answer.
1-41

42. A system is… What is a System? 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
1-42

43. 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
1-43

44. All systems have input, processing, and output
Cybernetic System
All systems have input, processing, and output
A cybernetic system, a self-monitoring, self-regulating 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
1-44

45. A Cybernetic System
1-45

46. A Business as a System
1-46

47. 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
1-47

48. Components of an IS
1-48

49. Information System Resources
People Resources
Specialists
End users
Hardware Resources
Machines
Media
Software Resources
Programs
Procedures
1-49

50. 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
1-50

51. 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
1-51

52. Input of data resources Processing of data into information
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
1-52

53. 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
1-53

54. Case 3: Heidelberg, Honeywell, and Eaton
Today, it is not be enough for a company to offer services but it will have to provide “smart services.”
To provide smart services, companies must use information technology to build “smart products.”
Smart products can detect that a part is approaching failure and alert users, thus giving the company opportunity to provide maintenance services and enjoy the resulting benefits.
1-54

55. Case 3: Heidelberg, Honeywell, and Eaton
Heidelberg developed the technology to monitor its equipment remotely, using built-in sensors, networking microprocessors, and other information technologies.
With such smart services, Heidelberg now offers total support of its products.
Eaton corporation has developed a product called Home Heartbeat which monitors the status of various home systems and alerts the homeowner when something is wrong.
1-55

56. Case Study Questions
Why should manufacturing companies build smart products and provide smart services? What business benefits can they gain? Provide several examples beyond those discussed in this case.
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.
What are some limitations of a smart products and smart services strategy? Give several examples of challenges that a business might encounter, and explain how it might overcome them.
1-56

57. Case 4: Lufthansa
In 2001, Lufthansa launched the “Lufthansa Mobile Initiative,” which aimed to provide all pilots with notebook computers.
It helps 3,500 highly mobile airline pilots plugged into the corporate infrastructure, that informs them about schedules, weather events, and other facts that affect their jobs throughout the world.
The Lufthansa Mobile Initiative is yielding significant productivity and efficiency improvements, while keeping costs manageable.
Pilots use their notebook computers for computer-based training whether they are learning about new aircraft or things like specific hydraulic systems.
1-57

58. Case Questions
Are many of Lufthansa’s challenges identified in the case similar to those being experienced by other businesses in today’s global economy? Explain and provide some examples.
What other tangible and intangible benefits, beyond those identified by Lufthansa, might a mobile workforce enjoy as a result of deploying mobile technologies? Explain.
Lufthansa was clearly taking a big risk with their decision to deploy notebook computers to their pilots. What steps did they take to manage that risk, and what others might be needed in today’s business environment? Provide some examples.
1-58