Eleventh Edition 1 Introduction to Information Systems Essentials for the Internetworked E-Business Enterprise Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. C h a p t e r James A. O’Brien 1 Foundations of Information Systems in Business

Eleventh Edition James A. O’Brien 2 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Explain why knowledge of information systems is important for business professionals and identify five areas of information systems knowledge they need. Give examples to illustrate how electronic business, electronic commerce, or enterprise collaboration systems could support a firm’s business processes, managerial decision making, and strategies for competitive advantage. Chapter Objectives

Eleventh Edition James A. O’Brien 3 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Provide examples of the components of real world information systems. Illustrate that in an information system, people use hardware, software, data, and networks as resources to perform input, processing, output, storage, and control activities that transform data resources into information products. Chapter Objectives

Eleventh Edition James A. O’Brien 4 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Provide examples of several major types of information systems from your experiences with business organizations in the real world. Identify several challenges that a business manager might face in managing the successful and ethical development and use of information technology in a business. Chapter Objectives

Eleventh Edition James A. O’Brien 5 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. An IS Framework for Business Professionals

Eleventh Edition James A. O’Brien 6 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Information Systems Resources People Software Hardware Networks Data Components of an Information System

Eleventh Edition James A. O’Brien 7 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. What is an Information System? Input of Data Resources Input of Data Resources Processing Data Processing Data Output of Information Products Output of Information Products Control of System Performance Storage of Data Resources

Eleventh Edition James A. O’Brien 8 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. What is a System? Manufacturing Process Input of Raw Materials Output of Finished Products Environment Other Systems Control by Management Control Signals Control Signals Feedback Signals Feedback Signals System Boundary

Eleventh Edition James A. O’Brien 9 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Components of an Information System

Eleventh Edition James A. O’Brien 10 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Data versus Information WestCharles Mann 79154TM Shoes Monthly Sales Report for West Region Sales Rep: Charles Mann Emp No Item Qty Sold Price TM Shoes 1200 $100

Eleventh Edition James A. O’Brien 11 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Attributes of Information Quality

Eleventh Edition James A. O’Brien 12 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Name Field Name Field Payroll Record Payroll Record Payroll File Payroll File Personnel Database Logical Data Elements

Eleventh Edition James A. O’Brien 13 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Major Roles of Information Systems Support Strategies for Competitive Advantage Support Business Decision Making Support Business Processes and Operations

Eleventh Edition James A. O’Brien 14 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. History of the role of Information Systems Data Processing Management Reporting Decision Support Strategic & End User Electronic Commerce Electronic Data Processing - TPS Management Information Systems Decision Support Systems - Ad hoc Reports End User Computing Exec Info Sys Expert Systems SIS Electronic Business & Commerce -Internetworked E-Business & Commerce

Eleventh Edition James A. O’Brien 15 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. The e-Business Enterprise Manufacturing and Production Engineering & Research Accounting, and Finance Suppliers and Other Business Partners Supply Chain Management Procurement, Distribution, and Logistics Customer Relationship Management Marketing Sales Customer Service Consumer and Business Customers Company Boundary Intranets The Internet Extranets

Eleventh Edition James A. O’Brien 16 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Types of Information Systems Transaction Processing Systems Process Control Systems Enterprise Collaboration Systems Operations Support Systems Management Information Systems Decision Support Systems Executive Information Systems Management Support Systems Information Systems

Eleventh Edition James A. O’Brien 17 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Other Categories of Information Systems Expert Systems Knowledge Management Systems Functional Business Systems Strategic Information Systems Cross-Functional Information Systems

Eleventh Edition James A. O’Brien 18 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. The Information Systems Development Process

Eleventh Edition James A. O’Brien 19 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Management Challenges of the E-business Enterprise Business Strategies Business Processes Business Needs Customer Relationships Business Partners Suppliers Business Customers Ethical Considerations Potential Risks? Potential Laws? Possible Responses? IS Human Resources IS Development IT Infrastructure IS Performance Organization Structure and Culture User Acceptance

Eleventh Edition James A. O’Brien 20 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Information Systems play a vital role in the efficient and effective operations of E- business, E-commerce and enterprise collaboration. The business professional must know: –Foundations (fundamentals) of IS –Information Technologies –Business Applications –Development Processes; and –Managerial Challenges Chapter Summary

Eleventh Edition James A. O’Brien 21 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Chapter Summary (cont) A system is a group of interrelated components working toward the attainment of a common goal by accepting inputs and producing outputs in an organized transformation process. An information system uses the resources of people, hardware, software, data, and networks to perform input, processing, output, storage and control activities.

Eleventh Edition James A. O’Brien 22 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. IS Resources: –Hardware Resources –Software Resources –People Resources –Data Resources –Network Resources Products: –Paper Reports –Visual Displays –Multimedia Documents –Electronic Messages –Graphics images –Audio Responses Chapter Summary (cont)

Eleventh Edition James A. O’Brien 23 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Information systems perform three vital roles in business firms. They support: –Business processes and operations, –Business decision making; and –Strategic competitive advantage Major application categories of information systems include: –Operations Support Systems; and –Management Support Systems Chapter Summary (cont)

Eleventh Edition 24 Introduction to Information Systems Essentials for the Internetworked E-Business Enterprise Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. C h a p t e r James A. O’Brien 2 Competing with Information Technology

Eleventh Edition James A. O’Brien 25 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Identify several basic competitive strategies and explain how they can use information technologies to confront the competitive forces faced by a business. Identify several strategic uses of information technology for electronic business and commerce, and give examples of how they give competitive advantages to business. Give examples of how business process reengineering frequently involves the strategic use of e-business technologies. Chapter Objectives

Eleventh Edition James A. O’Brien 26 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Identify the business value of using e-business technologies for total quality management, to become an agile competitor, or to form a virtual company. Explain how knowledge management systems can help a business gain strategic advantages. Chapter Objectives

Eleventh Edition James A. O’Brien 27 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. The Competitive Environment Threat of New Entrants Rivalry Among Existing Competitors Bargaining Power of Customers Bargaining Power of Suppliers Threat of Substitutes

Eleventh Edition James A. O’Brien 28 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Fundamental Competitive Strategies - Cont. Differentiation Strategies Innovation Strategies Growth Strategies Alliance Strategies Cost Leadership Strategies

Eleventh Edition James A. O’Brien 29 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Strategic Uses of Information Technology Improving Business Process Promote Business Innovation Locking in Customers and Suppliers Use IT to reduce costs of doing business Use IT to improve quality Use IT to link business to customers and suppliers Use IT to create new products or services Enhance Efficiency Create New Business Opportunities Maintain Valuable Customers and Relationships Strategy IT Role Outcome

Eleventh Edition James A. O’Brien 30 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Strategic Uses of Information Technology Raise Barriers to Entry Build a Strategic IT Platform Build a Strategic Information Base Increase amount of investment or complexity of IT needed to compete Use IT to provide information to support firm’s competitive strategy Leverage investment in IS resources from operat- ional uses to strategic uses Increase Market Share Create New Business Opportunities Enhance Organizational Collaboration Strategy IT Role Outcome

Eleventh Edition James A. O’Brien 31 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. The Value Chain Administrative Coordination & Support Services Human Resource Management Technology Development Procurement of Resources Inbound Logistics Inbound Logistics Operations Outbound Logistics Outbound Logistics Marketing and Sales Marketing and Sales Customer Service Customer Service Competitive Advantage

Eleventh Edition James A. O’Brien 32 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. The Internet Value Chain Marketing and Product Research Sales and Distribution Support and Customer Feedback Data for market research, establishes consumer responses Access to customer com- ments online Immediate re- sponse to customer problems Low cost distribution Reaches new customers Multiplies contact points Increase Market Share Lower Cost Margins Enhanced Customers Satisfaction Internet Capability Benefits to Company Opportunity for Advantage

Eleventh Edition James A. O’Brien 33 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Strategic Positioning of Internet Technologies Global Market Penetration E-Commerce Website Value-added IT Services Product and Services Transformation E-Business; Extensive Intranets and Extranets Cost and Efficiency Improvements , Chat Systems Performance Improvements in Business Effectiveness Intranets and Extranets Strategy Solution Low High Customer Competition Connectivity E-Business Processes Connectivity Internal Drivers External Drivers

Eleventh Edition James A. O’Brien 34 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Customer-Focused e-Business Let customers place orders thru distribution partners Transaction Database Link Employees and distribution partners Let customers check order history and delivery status Let customers place orders directly Customer Database Build a community of customers, employees, and partners Give all employees a complete view of customers

Eleventh Edition James A. O’Brien 35 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Business Reengineering and Quality Management Business Quality Improvement Business Quality Improvement Business Reengineering Business Reengineering Definition Target Potential Payback Potential Payback Risk What Changes? Primary Enablers Primary Enablers Incrementally Improving Existing Processes Radically Redesigning Business Systems Any Process Strategic Business Processes 10%-50% Improvements 10-Fold Improvements Low High Same Jobs - More Efficient Big Job Cuts; New Jobs; Major Job Redesign IT and Work Simplification IT and Organizational Redesign

Eleventh Edition James A. O’Brien 36 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. The Customer- Focused Agile Competitor Leverage the Impact of People and IS Resources Accessibility Delivery Time Customer’s time to market Anticipation of future needs Customization Conformance Cost of Transaction Cost of Value-added Services Give Customers Solutions to Problems Give Customers Solutions to Problems Cooperate with Business Partners and Competitors Cooperate with Business Partners and Competitors Organize to Master Change Organize to Master Change

Eleventh Edition James A. O’Brien 37 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Borderless Technology Excellence Trust-Based Adaptability Opportunism Six Characteristics of Virtual Companies Virtual Corporations

Eleventh Edition James A. O’Brien 38 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Knowledge Management Systems Solution Knowledge Development Engineers Technical Support Staff Product Managers Other Vendors Customers The Internet Intranet

Eleventh Edition James A. O’Brien 39 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Information systems can play several strategic roles in business. The Internet, intranets, extranets, and other Internet-based technologies can be used strategically for e-business and e-commerce that provide a competitive advantage. A key strategic use of Internet technologies is to build an e-business which develops its business value by making customer value its strategic focus. Chapter Summary

Eleventh Edition James A. O’Brien 40 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. IT is a key ingredient in reengineering business operations, by enabling radical changes to business processes that dramatically improve their efficiency and effectiveness. IT can be strategically used to improve the quality of business performance. A business can use IT to help it become an agile company, that can respond quickly to changes in its environment. Chapter Summary (cont)

Eleventh Edition James A. O’Brien 41 Introduction to Information Systems Irwin/McGraw-Hill Copyright © 2002, The McGraw-Hill Companies, Inc. All rights reserved. Chapter Summary (cont) Forming virtual companies has become an important competitive strategy in today’s dynamic global market. Lasting competitive advantages today can only come from innovative use and management of organizational knowledge by knowledge creating companies and learning organizations.