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An Introduction to Information

Systems

Prof. Himanshu Joshi


himanshu@imi.edu

1.1 © 2010 by Prentice Hall


COURSE OBJECTIVES

• To explain the relationship between business challenges and


managers need for information systems
• To understand the types of information systems that are needed
to support the various levels of a business enterprise
• To understand the process of designing and developing an
information system
• To understand the infrastructure needed for information system.
• To understand the role of IS in electronic business and enterprise
wide computing
• To develop an awareness of critical issues around information
systems like data security, privacy and ethical use of information.
• To demonstrate managerial problem solving skills using exercises,
case scenarios and project.

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EVALUATION

Case – 10 + 5 %
Quiz – 25%
Term Project – 20%
End Term – 40%

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Management Information Systems
Information Systems in Global Business Today

Discussion Points?
 Why study information systems?
 Why information systems?
 Information systems, business and globalization.
 What is an IS, its management, organization, and technology
components.
 Various types of IS
 Role of IS at various levels of management.
 Integration of business processes and information systems.
 IS applications and organizational performance.

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Why study Information System?

• Computers are everywhere


• People/Workers all have to use computers and depend on
information systems in their work
• Information systems are at the foundation of organizations
today
• Electronic commerce is rapidly becoming the dominant way
of doing business, of transacting business and managing
organizations
• Business to Business (B2B), _ to Customer, _ to Employee
• Business to Government, Government to Consumer, …
• To help you
• Advance your career
• Be a better manager
• In your own personal life

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IPL and IS – The relationship?

• Cricket is just like any other business today- How has


IPL used IS?
• Team composition
• Team Selection
• Performance evaluation
• Strengths
• Weaknesses
• Analytical software help find answers to questions

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Why Information System?

Because of the changing business environment

• Globalization
• Transformation of Industrial Economies
• Transformation of the Business Enterprise
• Emergence of the Digital Firm

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The Role of Information Systems in Business Today

• Globalization
• Management and Control in a global marketplace
• Competition in world markets
• Global work-groups and delivery systems
• Internet has drastically reduced costs of operating on
global scale
• Transformation of Industrial Economy
• Knowledge & Information based economies
• New products and services; Time based competition
• Shorter Product Life and Turbulent Environment
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The Role of Information Systems in Business Today

• Transformation of Business Enterprise


– Flattening
– Decentralization
– Flexibility
– Location independence
– Low transaction and coordination costs
– Empowerment
– Collaborative work and teamwork

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The Role of Information Systems in Business Today

• Emergence of a fully digital firm


– Significant business relationships are digitally enabled
and mediated
– Core business processes are accomplished through
digital networks
– Key corporate assets are managed digitally
– Rapid sensing and responding to environmental
changes
– Digital firms offer greater flexibility in organization and
management
• Time shifting, space shifting

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Digital Economy

• An economy based on digital technologies,


including communication networks (the Internet ,
intranets, and extranets), computers, software,
and other related technologies; also sometimes
called the Internet economy, the new economy,
or the Web economy.
• Doing business in the digital economy using
Web-based systems on the Internet and other
electronic networks.

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Networked Computing
• e-business/ e-commerce the conducting of business
functions (e.g., buying and selling goods and services,
servicing customers, collaborating with business
partners) electronically, in order to enhance an
organization’s operations.

• The infrastructure for e-business is network computing,


which connects computers and other electronic devices
via telecommunication networks.

• These computers may be connected to the global


networked environment, known as the internet, or to its
counter part within organizations, called an intranet,
many companies link their intranet to those of their
business partners over networks called extranets.
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Digital networking and communications
infrastructures includes:

• A vast array of digitizable product -data bases, news and


information, books, magazines, TV and radio
programming , movies, electronic games, musical CDs,
and software- which are delivered over the digital
infrastructure any time, anywhere in the world
• Consumers and firm conducting financial transaction
digitally-through digital currencies or financial tokens
carried via networked computers and mobile devices
• Physical goods such as home appliances and
automobiles that are embedded with microprocessors
and networking capabilities.

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How IS are transforming business?

The Role of Information Systems in Business Today

• Growing interdependence between ability to use


information technology and ability to implement
corporate strategies and achieve corporate goals

• Business firms invest heavily in information


systems to achieve six strategic business
objectives:

– Operational excellence
– New products, services, and business models
– Customer and supplier intimacy
– Improved decision making
– Competitive advantage
– Survival

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Strategic Business Objectives

The Role of Information Systems in Business Today

• Operational excellence:
– Improvement of efficiency to attain higher profitability
– Information systems, technology an important tool in
achieving greater efficiency and productivity
• Wal-Mart’s RetailLink system links suppliers to stores for
superior replenishment system

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The Role of Information Systems in Business Today

• New products, services, and business models:


– Business model: describes how company produces,
delivers, and sells product or service to create wealth
– Information systems and technology a major enabling
tool for new products, services, business models
• Examples: Apple’s iPod, iTunes, and iPhone, Netflix’s Internet-
based DVD rentals

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The Role of Information Systems in Business Today

• Customer and supplier intimacy:


– Serving customers well leads to customers returning,
which raises revenues and profits
• Example: High-end hotels that use computers to track
customer preferences and use to monitor and customize
environment

– Intimacy with suppliers allows them to provide vital


inputs, which lowers costs
• Example: Maruti Suzuki information system which links sales
records to contract manufacturer

1.17 © 2010 by Prentice Hall


The Role of Information Systems in Business Today

• Improved decision making


– Without accurate information:
• Managers must use forecasts, best guesses, luck
• Leads to:
– Overproduction, underproduction of goods and services
– Misallocation of resources
– Poor response times
• Poor outcomes raise costs, lose customers
– Example: Organizations use digital dashboard to
provide managers with real-time data on customer
complaints, network performance, line outages, etc.

1.18 © 2010 by Prentice Hall


The Role of Information Systems in Business Today

• Competitive advantage
– Delivering better performance
– Charging less for superior products
– Responding to customers and suppliers in real time
– Example: Toyota and TPS (Toyota Production
System) enjoy a considerable advantage over
competitors – information systems are critical to the
implementation of TPS

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The Role of Information Systems in Business Today

• Survival
– Information technologies as necessity of
business
– May be:
• Industry-level changes, e.g. Citibank’s introduction
of ATMs
• Governmental regulations requiring record-keeping

1.20 © 2010 by Prentice Hall


How technology has changed the way we do
business

Example Old New

Buying and selling Visit the bookstore Visit web site for
text book publishers and retailers
Registering for Walk around campus to Access campus web site
classes Departments, Registrar’s
office, etc.
Photography Buy film, use camera, take Use digital camera
picture, take it for processing
Paying for Gasoline Fill up your car, go inside, pay Insert credit card, receive
cash or credit card authorization, fill gas
Paying the Pay cash, metal tokens Metro cards electronic
Transportation cards
Paying for goods Visit store, take the item, pay , Use self – service kiosks
go

1.21 © 2010 by Prentice Hall


The Role of Information Systems in Business Today
The Interdependence Between Organizations and
Information Technology

In contemporary systems there is a growing interdependence between a firm’s information systems


and its business capabilities. Changes in strategy, rules, and business processes increasingly
require changes in hardware, software, databases, and telecommunications. Often, what the
organization would like to do depends on what its systems will permit it to do.

Figure 1-2
1.22 © 2010 by Prentice Hall
What is a System?

INPUT PROCESS OUTPUT

FEEDBACK

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A business as a system

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What is an Information System?

• An IS can be any organized combination of


people, hardware, software, communication
networks, and data resources that stores and
retrieves, transforms and disseminates
information in an organization.
• An IS can also be defined as a set of interrelated
components that collect (or retrieve), process,
store and distribute information to support
decision making and control in an organization.

1.25 © 2010 by Prentice Hall


What is an Information System

Perspectives on Information Systems

• Three activities produce information organizations need


– Input: Captures raw data from organization or external
environment
– Processing: Converts raw data into meaningful form
– Output: Transfers processed information to people or
activities that use it
• Feedback:
– Output returned to appropriate members of organization to
help evaluate or correct input stage
• Computer/Computer program vs. information system
– Computers and software are technical foundation and tools,
similar to the material and tools used to build a house

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Information systems model

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Components of an IS
• People
– End users: the people who use the IS or the
information from the IS
– IS specialists: the people who develop and operate IS
• Hardware Resources
– All physical devices used in information processing
– Machines, data media, peripherals
• Software Resources
– All information processing instructions including
programs and procedures
– System software, application software and procedures

1.28 © 2010 by Prentice Hall


Components of an IS (cont.)

• Data Resources
– Facts about the business transactions
– Processed and organized information
– Databases of organized data
• Network Resources
– Communications media
– Network infrastructure: hardware and software
– The Internet, intranets and extranets

1.29 © 2010 by Prentice Hall


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
• Example:
– Sales data is names, quantities and dollar amounts
– Sales information is amount of sales by product type,
sales territory or salesperson

1.30 © 2010 by Prentice Hall


Data and Information

Perspectives on Information Systems

Raw data from a supermarket checkout counter can be processed and organized to produce
meaningful information, such as the total unit sales of dish detergent or the total sales
revenue from dish detergent for a specific store or sales territory.

Figure 1-3
1.31 © 2010 by Prentice Hall
Data versus Information

• Data – raw facts


– Intel stock price – $32.375
– Temperature – 75° F.
• Information – facts within a given context
– Intel stock price after the 2-1 stock split yesterday
settled at $32.375/share – now you know the number
of shares and their value
– The temperature at midnight in Times Square, NYC
was 75° F – NYC winter heat wave still continues

1.32 © 2010 by Prentice Hall


Information System (IS) versus
Information Technology (IT)

• IS is all the components and resources


necessary to deliver information and
functions to the organization
• IT is hardware, software, networking and
data management

• In theory, IS could be paper based


• But we will focus on Computer-Based
Information Systems (CBIS)

1.33 © 2010 by Prentice Hall


Computer Based Information
Systems (CBIS)

Formal Systems
Fixed definitions of data procedures
Collecting, Storing, Processing,
Disseminating, Using Data.
CBIS are much more than just
computers

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Putting Things in Context

• Information Technology - the hardware, software, and networks that


make Information Systems possible.
• Information System - a system that uses information technology to
capture, transmit, store, retrieve, manipulate, and display
information.
• Business process - a related group of steps or activities that use
people, information, and other resources, to create value for internal
or external customers.
• Firm (or organization) - consists of a large number of interdependent
business processes that work together to generate products or
services in a business environment.
• Business environment - includes the firm and everything else that
affects its success, such as competitors, suppliers, customers,
regulatory agencies, and demographic, social, and economic
conditions.

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What does IS do for a business?

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Trends in Information Systems

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Information Systems:
A Business Perspective
Perspectives on Information Systems

People, Structure, H/W, S/W, Databases,


processes, politics Networks, the Internet,
& culture intranets and extranets,
World Wide Web

Strategies to manage challenge, allocation of


resources, new product and services
Using information systems effectively requires an understanding of the organization,
management, and information technology shaping the systems. An information system
creates value for the firm as an organizational and management solution to challenges posed
by the environment.
Figure 1-5
1.38 © 2010 by Prentice Hall
Importance of Complementary Assets

Perspectives on Information Systems

• Investing in information technology does not


guarantee good returns

• Considerable variation in the returns firms


receive from systems investments

• Factors:
– Adopting the right business model
– Investing in complementary assets (organizational
and management capital)

1.39 © 2010 by Prentice Hall


Perspectives on Information Systems

• Complementary assets include:


– Organizational investments, e.g.
• Appropriate business model
• Efficient business processes, Strong team
– Managerial investments, e.g.
• Incentives for management innovation
• Teamwork and collaborative work environments
– Social investments, e.g.
• The Internet and telecommunications infrastructure
• Technology standards, laws, regulations

1.40 © 2010 by Prentice Hall


Information Systems and Levels

KIND OF SYSTEM GROUPS SERVED


STRATEGIC LEVEL SENIOR
MANAGERS

MANAGEMENT LEVEL MIDDLE


MANAGERS

KNOWLEDGE LEVEL KNOWLEDGE &


DATA WORKERS

OPERATIONAL OPERATIONAL
LEVEL SALES & MANUFACTURING FINANCE ACCOUNTING HUMAN
MANAGERS
MARKETING RESOURCES
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Types of Information System

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Operations support systems

• What are they?


–Efficiently process business transactions
–Control industrial processes
–Support communications and collaboration
–Update corporate databases

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Types of Operational Support Systems

• Transaction Processing Systems


– Record and process data from business transactions
– Examples: sales processing, inventory systems,
accounting systems
• Process Control Systems
– Monitor and control physical processes
– Example: in a petroleum refinery use sensors to monitor
chemical processes
• Enterprise Collaboration Systems/ Office Automation
Systems
– Enhance team and work group communications
– Examples: e-mail, videoconferencing
1.44 © 2010 by Prentice Hall
A Payroll TPS

A Payroll TPS
A TPS for payroll
processing captures
employee payment
transaction data
(such as a time card).
System outputs
include online and
hard-copy reports for
management and
employee paychecks.

Figure 2-2

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TRANSACTION PROCESSING SYSTEMS
(TPS)

• OPERATIONAL LEVEL
• INPUTS: TRANSACTIONS, EVENTS
• PROCESSING: UPDATING
• OUTPUTS: DETAILED REPORTS
• USERS: OPERATIONS PERSONNEL
EXAMPLE: ACCOUNTS PAYABLE

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TYPICAL TPS APPLICATIONS
Sales & Marketing Systems
MAJOR FUNCTIONS OF SYSTEMS:
• Sales Management; Market Research;
Promotion; Pricing; New Products
MAJOR APPLICATION SYSTEMS:
• Sales Order Info System; Market Research
System; Pricing System
*

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TYPICAL TPS APPLICATIONS
Manufacturing & Production Systems
MAJOR FUNCTIONS OF SYSTEMS:
• Scheduling; Purchasing; Shipping /
Receiving; Engineering; Operations
MAJOR APPLICATION SYSTEMS:
• Materials Resource Planning Systems;
Purchase Order Control Systems;
Engineering Systems; Quality Control
Systems

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TYPICAL TPS APPLICATIONS
Finance & Accounting Systems
MAJOR FUNCTIONS OF SYSTEMS:
• Budgeting; General Ledger; Billing: Cost
Accounting
MAJOR APPLICATION SYSTEMS:
• General Ledger; Accounts Receivable /
Payable; Budgeting; Funds Management
Systems

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TYPICAL TPS APPLICATIONS
Human Resources Systems
MAJOR FUNCTIONS OF SYSTEMS:
• Personnel Records; Benefits;
Compensation; Labor Relations; Training
MAJOR APPLICATION SYSTEMS:
• Payroll; Employee Records; Benefit
Systems; Career Path Systems; Personnel
Training Systems

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TYPICAL TPS APPLICATIONS
Other Types (e.g., University)
MAJOR FUNCTIONS OF SYSTEMS:
• Admissions; Grade Records; Course
Records; Alumni
MAJOR APPLICATION SYSTEMS:
• Registration System; Student Transcript
System; Curriculum Class Control System;
Alumni Benefactor System

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Types of Management Support System

• Management Information Systems (MIS)


– Provide reports and displays to managers
– Example: daily sales analysis reports
• Decision Support Systems (DSS)
– Provide interactive ad hoc support for decision making
– Example: A what-if-analysis to determine where to spend
advertising dollars
• Executive Information Systems (EIS)
– Provide critical information for executives and managers
– Example: easy access to actions of competitors

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Management Information System

• Management Level
• Inputs: High Volume Data
• Processing: Simple Models
• Outputs: Summary Reports
• Users: Middle Managers
• Structured & Semi-Structured Decisions
• Report Control Oriented
• Past & Present Data
• Internal Orientation
• Lengthy Design Process
• Example: Annual Budgeting
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TPS Data for MIS Applications

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The Order Fulfillment Process

Figure 2-1 Fulfilling a customer order involves a complex set of steps that requires the close
coordination of the sales, accounting, and manufacturing functions.

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Sample MIS Management Report

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Classification of Information Systems
from User Perspective

Systems from a constituency perspective


– Transaction processing systems:
supporting operational level employees
– Management information systems and
decision-support systems: supporting
managers
– Executive support systems: supporting
executives

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Decision Support System

• Middle Management Level


• Inputs: Low Volume Data
• Processing: Interactive
• Outputs: Decision Analysis
• Users: Professionals, Staff
• Example: Contract Cost Analysis
• Flexible, Adaptable, Quick
• User Controls Inputs/Outputs
• No Professional Programming
• Supports Decision Process
• Sophisticated Modeling Tools
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Executive Support Systems

• Strategic Level
• Inputs: Aggregate Data
• Processing: Interactive
• Outputs: Projections
• Users: Senior Managers and Top Level Management
• Designed To The Individual
• Ties CEO To All Levels
• Very Expensive To Keep Up
• Extensive Support Staff
• Example: 5 Year Operating Plan

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INTERRELATIONSHIPS
AMONG SYSTEMS
ESS

MIS DSS

KWS
TPS
OAS

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