Fundamentals of Information

Systems

An Introduction to Information Systems

in Organizations
 Principles and Learning Objectives

• The value of information is directly linked to how it

helps decision makers achieve the organization’s
goals
– Distinguish data from information and describe the
characteristics used to evaluate the quality of data

2
 Principles and Learning Objectives
(continued)
• Knowing the potential impact of information
systems and having the ability to put this
knowledge to work can result in a successful
personal career, organizations that reach their
goals, and a society with a higher quality of life
– Identify the basic types of business information
systems and discuss who uses them, how they are
used, and what kinds of benefits they deliver

3
 Principles and Learning Objectives
(continued)
• System users, business managers, and information
systems professionals must work together to build
a successful information system
– Identify the major steps of the systems development
process and state the goal of each

4
 Principles and Learning Objectives
(continued)
• The use of information systems to add value to the
organization can also give an organization a
competitive advantage
– Identify the value-added processes in the supply
chain and describe the role of information systems
within them
– Identify some of the strategies employed to lower
costs or improve service
– Define the term competitive advantage and discuss
how organizations are using information systems to
gain such an advantage
5
Why Learn About Information Systems
in Organizations?
• Information systems (ISs) can cut costs and
increase profits
• Students in most fields need to know ISs

6
 Introduction

• Information system (IS)

– Set of interrelated components: collect, manipulate,
store, and disseminate data and information
– Provides feedback to meet an objective

7
 Information Concepts: Data,
Information, and Knowledge
• Data: raw facts
– Alphanumeric, image, audio, and video
• Information: collection of facts organized in such a
way that they have additional value beyond the
value of the facts themselves

8
Data, Information, and Knowledge
(continued)

Table 1.1: Types of Data

9
 Data, Information, and Knowledge
(continued)

Figure 1.1: Defining and Organizing Relationships Among Data Creates

Information
10
Data, Information, and Knowledge
(continued)

Figure 1.2: The Process of Transforming Data into Information

11
The Characteristics of Valuable
Information

Table 1.2: Characteristics of Valuable Information

12
 The Characteristics of Valuable
Information (continued)

Table 1.2: Characteristics of Valuable Information (continued)

13
 The Value of Information

• Value of information is directly linked to how it

helps decision makers achieve their organization’s
goals
• For example, value of information might be
measured in:
– Time required to make a decision
– Increased profits to the company

14
Computer-Based Information Systems

• Computer-based information system (CBIS):

single set of hardware, software, databases,
telecommunications, people, and procedures
configured to collect, manipulate, store, and
process data into information

15
Computer-Based Information Systems
(continued)

Figure 1.4: The Components of a Computer-Based Information System

16
Computer-Based Information Systems
(continued)
• CBIS components
– Hardware: computer equipment used to perform
input, processing, and output activities
– Software: computer programs that govern the
operation of the computer
– Database: organized collection of facts and
information
– Telecommunications: electronic transmission of
signals for communications
– Networks: connect computers and equipment in a
building, around the country, and around the world
17
Computer-Based Information Systems
(continued)
• CBIS components (continued)
– Internet: world’s largest computer network
– People: manage, run, program, and maintain the
system
– Procedures: strategies, policies, methods, and rules
for using a CBIS

18
 Business Information Systems

• Most common types of information systems used in

business organizations
– Electronic and mobile commerce systems
– Transaction processing systems
– Management information systems
– Decision support systems
– Specialized business information systems

19
Business Information Systems
(continued)

Figure 1.5: Business Information Systems

20
 Electronic and Mobile Commerce

• E-commerce: any business transaction executed

electronically between parties
– Companies (B2B)
– Companies and consumers (B2C)
– Consumers and other consumers (C2C)
– Companies and the public sector
– Consumers and the public sector

21
 Enterprise Systems: Transaction
Processing Systems and Enterprise
Resource Planning
• Transaction: business-related exchange
– Payments to employees
– Sales to customers
– Payments to suppliers
• Transaction processing system (TPS):
organized collection of people, procedures,
software, databases, and devices used to record
completed business transactions

22
Transaction Processing Systems
(continued)

Figure 1.9: A Payroll Transaction Processing System

23
 Enterprise Resource Planning
• Integrated programs capable of managing a
company’s vital business operations for an entire
multisite organization
• Coordinate planning, inventory control, production,
and ordering

24
 Management Information Systems
• Management information system (MIS)
– Organized collection of people, procedures,
software, databases, and devices
– Provides routine information to managers/decision
makers
• Primary focus is operational efficiency

25
 Decision Support Systems

• Decision support system (DSS)

– Organized collection of people, procedures,
software, databases, and devices
– Supports problem-specific decision making
• Focus is on decision-making effectiveness

26
 Specialized Business Information Systems:
Knowledge Management, Artificial Intelligence,
Expert Systems, and Virtual Reality
• Knowledge management systems (KMSs): an
organized collection of people, procedures, software,
databases, and devices to create, store, share, and
use the organization’s knowledge and experience
Condition 1 (ex. Condition 2 Action
LAN cable (router on)
connected)
yes no Turn on router
no yes Connect cable
yes yes Perform ping test
no no Connect cable, turn on router

28
 Artificial intelligence (AI): field in which the computer
system takes on the characteristics of human intelligence

Figure 1.12: The Major Elements of Artificial Intelligence

29
 Expert Systems

• Give the computer the ability to make suggestions

and act like an expert in a particular field
• Allow organizations to capture and use the wisdom
of experts and specialists
• The knowledge base contains the collection of
data, rules, procedures, and relationships that must
be followed to achieve value or the proper outcome

30
 Example of Expert System Algorithm

• IF-THEN
• IF forced volume capacity is high (.625)
• AND Bronchoscopy results are positive (.250)
• AND local symptoms are present (.125)
• THEN Surgery is probably necessary
• However,
• IF Metastasis is present (.500)
• OR Contraindications to surgery exist (.500)
• THEN surgery is probably not appropriate

Fundamentals of Information Systems, Fourth Edition 31

 Virtual Reality

• Simulation of a real or imagined environment that

can be experienced visually in three dimensions
• Immersive virtual reality
• Applications that are not fully immersive
• Can be a powerful medium for communication,
entertainment, and learning

32
 Systems Development
• Systems development: creating or modifying
existing business systems
• Systems development can be:
– Performed in-house
– Outsourced
• To improve results of a systems development
project, it is divided into several steps

33
Systems Development (continued)

Figure 1.14: An Overview of Systems Development

34
 Systems Investigation and Analysis

• Systems investigation: gain understanding of the

problem to be solved or opportunity to be
addressed
• Systems analysis: defines problems and
opportunities of the existing system

35
 Systems Design, Implementation,
Maintenance, and Review
• Systems design: how the new system will work to
meet the business needs defined during systems
analysis
• Systems implementation: creating or acquiring
the various system components defined in the
design step, assembling them, and putting the new
system into operation
• Systems maintenance and review: check and
modify the system so that it continues to meet
changing business needs

36
 Organizations and Information
Systems
• Organization: collection of people and other
resources established to accomplish a set of goals
• An organization is a system
– Inputs: resources (materials, people, money)
– Outputs: goods or services

37
 Organizations and Information
Systems (continued)
• Value chain: series (chain) of activities that
includes inbound logistics, warehouse and storage,
production, finished product storage, outbound
logistics, marketing and sales, and customer
service
• Upstream management: management of raw
materials, inbound logistics, and warehouse and
storage facilities
• Downstream management: management of
finished product storage, outbound logistics,
marketing and sales, and customer service
38
Organizations and Information
Systems (continued)

Figure 1.16: The Value Chain of a Manufacturing Company

39
 Organizations and Information
Systems (continued)
• Supply chain management (SCM)
– Determines required supplies, needed quantities,
processing, and shipment
• Customer relationship management (CRM)
– Helps company manage all aspects of customer
encounters, including marketing, advertisement,
sales, service, and maintaining loyalty

40
 Factors That Lead Firms to Seek
Competitive Advantage

• Five-forces model identifies key factors

– Rivalry among existing competitors
– Threat of new entrants
– Threat of substitute products and services
– Bargaining power of buyers
– Bargaining power of suppliers

41
Return on Investment and the Value of
Information Systems
• Earnings growth
– Increase in profits
• Market share
– Percentage of sales in relation to total market
• Customer awareness and satisfaction
– Based on feedback from internal and external users
• Total cost of ownership
– Measurement of total cost of owning computer
equipment

42
 Risk

• Managers must consider the risks of designing,

developing, and implementing new or modified
information systems
• Information system may be a failure
• Costs of development and implementation can be
greater than the returns from the new system

43
 Global Challenges in Information
Systems
• Cultural challenges
• Language challenges
• Time and distance challenges
• Infrastructure challenges
• Currency challenges
• Product and service challenges
• Technology transfer issues
• State, regional, and national laws
• Trade agreements
44