UNIT-1

FOUNDATIONS OF INFORMATION SYSTEM IN BUSINESS

*CONCEPTUAL FOUNDATIONS
*PRESPECTIVES ON I.S
*PHASE IN BUILDING &MAINTAINING I.S
*BUSINESS PROCESSES
*VIEWING BUSINESS AS SYSTEM
*EVALUATION OF BUSINESS PROCESS PERFORMANCE.

CONCEPTUAL FOUNDATIONS

Introduction:-The information revolution,brought about by widespread deployment & use

of information technologies,is bringing about rapid change in almost all aspects of
society in general & organization in particular.Today,due to the advent & advancement of
IT,IS are playing a strategic role in organization.

Business grew in size & complexity from sole trading frims to global
corporations,from one are two commodities to several thousand products,from localized
operations to global operations with product facilities and wide marketing in many
countries.

The 2 words information & system are seperatly defined as:

Information:- Information consists of data that have been retrieved,processed or

otherwise used for informative purpose,argument or a basis for forecasting & decision
making.

System:- A system can be described simply as a set of elements joined together for a
common objective.

Definition of information system:-Some definitions if information system are,

• IS are a set of interrelated components that collect,process,store,and distribute

information to support decision making and control in an organization.
• IS is a system of communication among people and it is involved in
gathering,processing,distributing,and use of information.
• A system whether automated or manual,that comprises people,machines,and/or
methods organized to collect,process,transmit,and disseminate data is defined as
IS
• An IS consists of hardware,software,data,people,and procedures.
• The systems that deliver information & communication services.
• The organization function that plans,develops,and manages the IS.
 • An IS is defined technically as a set of interrelated components.

According to above definitions the key elements of an organization such as

people,business process,IT and data are diagrammatically represented as shown in fig:1

In the broader context of organization and its business environment,IS would

become a subsystem of the organization as shoen in fig.2

Historic Development:- IS is as old as recorded human history.In the third millennium

BC,the earliest use of IS discovered was in a Sumerian temple. The Sumerians used clay
tables for recording receipts and issues of grains to individuals,out of the temple grain
store.The data storage requirements was little in those days.
 IS moved fast toward S to growth track in the last few centuries.From 1950’s
the growth of IS was increased as shown in fig.3

• EDP--Mainly focus on data

• OAS-- Mainly focus on communication
• TPS-- Mainly focus on information
• DSS-- Mainly focus on decision support
• EIS-- Mainly focus on decision support for top management
• Es-- Mainly focus on consultation
• AI-- Mainly focus on self-learning/thinking systems.

OAS & TPS are based on managerial control.DSS & EIS are based on
institutional/organization core activities.ES & AI are based on vendors,customers beyond
the enterprise.

*Role of IS in business:-
Need & objectives of IS:-IS helps the management at various levels and it is means of
communication where data are collected,processed,stored and retrieved later for making
decisions regarding planning,operation and control of an organization.Each of the level of
organization needs IS.The specific needs vary from level to level.But,the general function
served by IS remaining same across all the three levels.

IS implementation is thus impactly suppliers,customers,distributors,employees,

Share holders & partners.It supports business operations at all levels & decision making
at various levels.The different purposes,different users &different functions across the
business network of IS is shown in fig (4).
 • Straregic advantage • Straregic managers • Marketing
• Decision making • Middle level • Finance
• Business managers • Production
operations • Customers • Human relations
• Participation • Partners
• Performance • Distributors
• Suppliers

Purpose Users Types of functions

The functionality of each and every function is

Collect
data

Store and
process the
data

Present
info to
managers

Impact of IS in organization :-
The advantage of IS is can offer a business are
numerous. The enable a business to reduce labour , provides accurate information
,provides a competitive advantage and creates systems to develop efficiently and
conveniently in business organization as shown in figure below.
 IS
organization
Better software
Low hardware cost
Easier to use software
Reduce cost
Reliable hardware

Business
value

Customer satisfaction
Productivity
profitability

Objectives of IS:-
The objectives of IS are derived from the company’s objectives.These
are clearly stated in writing . Each company objectives should be reflected in atleast one
IS objective company’s goal.

Characteristics of IS:-
• IS is management oriented.
• Management directed
 • Inergrated system
• Avoids redundancy in data storage
• Computerization
• Common data flow
• Heavy planning element
• Subsystem concept
• Common database
• Flexibility and case of use

Components of IS:-

There are 5 components .on the machine side,computer hardware executes

instructions in programs;on the human side ,people follow instructions in procedures .the
interface between the machine and human is data

Actors/Active Agents
Hardware
People

Acts as a bridge b/w human & machine

DATA

Procedure
Programs
Instructors

BRIDGE

Three dimensions of IS:-

Internal benefits include support for operational control, management control

and strategic planning,but the nature of supporting system is different.

IS improves product duality by enhancing the products information and also

improve product delivery by making the product more readily available. Information
systems are creating a new arena for competition .All these are shown in the following
diagrams
 How(system Developm
-ent process)

Proto typing(CASE)
Computer Assisted sys
-tems Engineering develop-
Strategic ent process(CASE)
Planning

Tactical Planning/
Management Control Support for strategic planning

Operational Control Support for management control

Product Quality Support for operational control

Product Delivery
Improve product quality

Improve product benifits

Perspectives on IS:-
Perspectives means the particular way of seeing something
.Perspectives on IS means how the IS can be seen in different ways.so ,we can consider
this perspectives on IS in 3 ways / types ,they are:
1. A business perspective on IS
2. A s/w developers perspective on IS
3. An end user’s perspective on IS
A Business perspective on IS:-
Business are not in the business of processing information for its own
sake. Instead they process information in order to improve organizational
performance and produce profits.From a business perspectives, an IS is an important
instrument for creating value for the organization.There are many ways in which IS
can contribute to firm value, including increasing the firms return on its investments,
enhancing the company’s strategic position or increasing the market value of the
firms stock.Information processing activities support management decision making,
enhance the execution of business processes and as a result increase business value.
Every business has an “information value chain”, shown in the fig (1),
in which raw information is systematically acquired, and then transformed through
various stages that add value to that information.The primary purpose of system built,
is to contribute to corporate value.
From a business perspective, ISO are part of a series of value-adding activities for
acquiring, transforming, and,distributing information that managers can use to
improve decision making,enhance organizational performance, and ultimately
increase firm profitability.
The business perspective calls attention to the organization and managerial
nature of information systems.An IS also represents an organization and management
solution, based on IT,to a challenge posed by the environment.To fully understand
ISs a manager must understand the broader organization,management and IT
dimensions of systems shown in fig.& their power to provide solutions to challenges
& problems in the business environment .

Inform
a
tion
system
 By this fig. , information systems are more than computers.using
information systems effectively requires an understanding of the organization
management & IT shaping the systems.All information systems can be described as
organizational and management solutions to challenges posed by the environment that
will help create value for the firm.

A Software Developers perspectives On IS:-

(A) S/W is mostly a collection of S/W components assembled and reused as needed
(B) Developers created these components to accumulate in the market place overtime.
(C) Applications don’t really exists as a way to describe a set of S/W services.
(D) Standard operating procedures (SOPs) are formal rules that have been developed
for a accomplishing tasks.These rules guide S/W developer in a variety of
procedures,from writing an invoice to respond to customer complaints.

An End-User’s perspectives on IS:-

(A) Different S/W helps different groups of users at different levels with in business
hierarchy.
(B) Services are marketed based on
*what level in the hierarchy user is located
*what goals they are using the system for overview of operational level
systems,strategic level systems and management level systems.

Phases in Bulding & Maintaining Information System:-

 The framework for visualizing any work system,is one of two “common
denominators” in organization. This frame work is used for describing how a system
currently operates or how it might operate differently in the future.the other common
denominator is a way to see how systems in organizations are built & maintained.

The starting point for bulding improving an IS is the recognization of a

business problems or opportunity and the belief that a better IS might create benfits by
improving the operation of a work system.

The refinement of that idea in to a specific statement of what the worksystem

should accomplish how the improved IS should help & what parts of IS will be
automated,Analysis or Designers decide how to create computer programs that
accomplish the automated functions on specific hardware. The technical staff either
writes the programs or acquires them. The organization acquires what ever hardware is
needed. The programs are tested to ensure the correct functions are performed in the
correct manner. A team implements the IS in the organization through a process
involving user training and conversion from the previous IS.

The IS then goes into operation & is modified as necessary for further
improvements in the worksystem.
Buy this,the S/W is produced by IS department,the user department or by an
out side vendor,this general process can be summarized interms of 4
phases:Initiation,Development,implementation & operation and maintenance, the
below fig..shows hoe to end the product of one phase is the starting point of the next.
It also shows some of the reasons for returning to a previous phase even though the 4
phases ideally occur in sequence.

INITIATION
Statements of what the problem is
& how the IS should help
Changes in
Purpose, Scope
DEVELOPMENT or schedule

programs that run on a computer

pulse under documentation &
Relation that the IS must be pocedures
Changed before implementation
Can be completed
IMPLEMENTATION

IS in operation as part
Of a business process
Realization that the implementation
Is incomplete OPERATION &
MAINTENANCE
 Initiation:-

It is the process of defining the need to change an existing

worksystem,identifying the people who should be involved in deciding what to do &
describing in general terms how the worksystem should operate differently & how any IS
that support it should operate differently. This phase may occur in response to recognized
problems,such as data that canot be found & used effectively or high rates. This phase
concludes with a verbal or written agreement about the directions in which the
worksystem IS should change,puls a shared understanding that the proposed changes are
technically & organizationally feasible.

Errors in the phase may result in IS that operate on the computer but don’t
support the organization goals. Because it is possible to change a system after it goes into
operation,design errors in the initiation phase may not be fatal to project.

Development:-

It is the process of building or acquiring & configuring hardware,software and

other resources needed to perform both the required IT-related functions & the required
functions not related to IT. This phase starts by deciding exactly how the computerized &
manual parts of the worksystem will operate. It then goes on to acquire the needed
resources & creating documentation explaning how both the worksystem & the IS are
supported to operate. The development phase concludes with thorough testing of the
entire IS to identify & correct misunderstandings & programming errors. Key goals of
this phase are:
(A) worksystem & IS features really solve problems the users want solved.
(B) To perform the technical work in a way that makes it easier to modify the IS
needs arise.
Some development failures also occur due to insufficient specification &
testing.

Implementation:-

It is a process of making a new or improved worksystem operational in the

organization. This phase starts from the point when the S/W runs on the computer & has
been tested.activities in implementation include planning,user training, conversion to the
new IS & worksystem & flow-up to make sure the entire system in operating
effectively.the implementation phase may involve a major change in the way
organization or induvidals operate. Conversion from the old to the new must be planned
& executed carefully to prevent errors or even chaos. The benefits are only modest in
many cases unless people consciously strive to change the way they work together.
Operation & Maintenance:-

It is the on going operation of the worksystem & the IS,puls efforts directed at
enhancing either system & correcting bugs. At minimum,this requires that someone be in
charge of ensuring that the worksystem is operating well, that the IS is providing the
anticipated benefits & that the worksystem & IS will be modified again if the business
situation for it.
On going operation support is the process of ensuring that the technical
system components continue to operate correctly & that the users use the system
effectively. Maintenance is the process of modifying the IS overtime. As users gain
experience with a system,they discover its short comings & usally suggest improvements.

BUSINESS PROCESSES:-

The word “Business” is defined as a set of activities of an entity(organization)

involved in commerce,manufacturing or service that results in the production of an
economic o/p with the intention of producing a profitable gain.

The word “process” is defined as a structured,measured set of activites

designed to produce a specified output for a particular customer/market.

Davenport & short(1990) defined business process as “a set of logically related

tasks performed to achieve a defined business outcome.” Business process refer to the set
of logically related tasks & behaviors that organization develop overtime to produce
specific business results & the unique manner in which these activities are organized &
co-ordinated. Developing a new product, generating & fulfilling an order,creating a
marketing plan & hiring an employee are examples of business process & the way
organizations accomplish their business process can be a source of competitive strength.

A business process in any area of the business organization performance

through basic steps,such as,receive input,measure,analyse,document,perform,process,
Record/store,access,produce & communicate. Business process eliminates redundancy by
eliminating the steps which do not contribute to the value customer is looking for. A
business process defined for reengineering has a clear cut ‘start & End’,resulting into a
business result. The basic elements of process is motivation to perform certain activities.
In the process execution,the data is gathered,processed & stored.
The basic steps for executing a process is receiving the input,measuring the
input,analysing the document,performing,processing,recording,accesing data,producing
the results & communicating them. Basic elements of business processes are:
• Motivation to perform
• Data gathering,processing & storing
• Information processing
• Checking,validating & control and relate to human initiative
• Decision making
• Communication
 Business processes are concrete workflows of material,information &
knowledge-sets of activities. The performance of a business firm depends on how
well its business processes are designed & co-ordinated. A companys business
processes can be source of competitive strength if they enable the company to
innovate or to execute better than its rivals. Business process can also be liabilities if
they are based on out dated ways of working that impede organizational
responsiveness & efficiency.

Every business can be seen as a collection of business process. Some of

these processes are part of larger encompassing processes.Many business processes
are tied to a specific functional area, some of them are:

Functional Area
Assembling the product
Manufacturing and
Production checking for quality

Producing bills of materials.

Identifying customers

Sales & Marketing making customers aware of the product

.
Selling the product.

Paying creditors

Finance & Accounting creating financial statements

Managing cash accounts.