Management

Information Systems

Unit 1
 The Role of Information Systems in Business
Today
• How information systems are transforming business
• Emerging mobile digital platform
• Growing business use of “big data”
• Growth in cloud computing
• Globalization opportunities
• Internet has drastically reduced costs of operating on global scale
• Increases in foreign trade, outsourcing
• Presents both challenges and opportunities
Information Technology Capital Investment

Information technology capital investment, defined as hardware, software, and communications equipment, grew from 32 percent to 52
percent of all invested capital between 1980 and 2011..
 The Role of Information Systems in Business
Today
• In the emerging, 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.
• Digital firms offer greater flexibility in organization and management.
• Time shifting, space shifting
 The Role of Information Systems in Business
Today
• Growing interdependence
between:
• Ability to use information
technology
• Ability to implement
corporate strategies and
achieve corporate goals
 The Role of Information Systems in Business
Today
• Firms invest heavily in information systems to achieve six strategic business
objectives:
1. Operational excellence
2. New products, services, and business models
3. Customer and supplier intimacy
4. Improved decision making
5. Competitive advantage
6. Survival
 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
• Walmart’s Retail Link system links suppliers to stores for superior replenishment
system
 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 iPad, Google’s Android OS, and Netflix
 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 used to
monitor and customize environment
• Intimacy with suppliers allows them to provide vital inputs, which lowers costs.
• Example: JCPenney’s information system which links sales records to contract manufacturer
 The Role of Information Systems in Business
Today
• Improved decision making
• Without accurate information:
• Managers must use forecasts, best guesses, luck
• Results in:
• Overproduction, underproduction
• Misallocation of resources
• Poor response times
• Poor outcomes raise costs, lose customers
• Example: Verizon’s Web-based digital dashboard to provide managers with real-time data on customer
complaints, network performance, line outages, and so on
 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
• Examples: Apple, Walmart, UPS
 The Role of Information Systems in Business
Today
• Survival
• Information technologies as necessity of business
• Industry-level changes
• Example: Citibank’s introduction of ATMs
• Governmental regulations requiring record- keeping
• Examples: Toxic Substances Control Act, Sarbanes-Oxley Act
• Dodd-Frank Act
 What is an Information System?
• Information system:
• Set of interrelated components
• Collect, process, store, and distribute information
• Support decision making, coordination, and control
• Information vs. data
• Data are streams of raw facts.
• Information is data shaped into meaningful form.
 Data and Information

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.
 Functions of an Information System
An information system contains
information about an organization
and its surrounding environment.
Three basic activities—input,
processing, and output— produce the
information organizations need.
Feedback is output returned to
appropriate people or activities in the
organization to evaluate and refine
the input.
Environmental actors, such as
customers, suppliers, competitors,
stockholders, and regulatory
agencies, interact with the
organization and its information
systems.

Figure 1.4
 What is an Information System?
• Three activities of information systems 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
 What is an Information System?
• Feedback:
• Output is 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.
 Information systems are more than computers

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
 What is an Information System?
• Organizational dimension of information systems
• Hierarchy of authority, responsibility
• Senior management
• Middle management
• Operational management
• Knowledge workers
• Data workers
• Production or service workers
 Levels in a Firm
Business organizations are
hierarchies consisting of
three principal levels: senior
management, middle
management, and operational
management. Information
systems serve each of these
levels. Scientists and
knowledge workers often
work with middle
management.

Figure 1.6
 What is an Information System?
• Organizational dimension of information systems (cont.)
• Separation of business functions
• Sales and marketing
• Human resources
• Finance and accounting
• Manufacturing and production
• Unique business processes
• Unique business culture
• Organizational politics
 What is an Information System?

• Management dimension of information systems

• Managers set organizational strategy for responding to business
challenges
• In addition, managers must act creatively:
• Creation of new products and services
• Occasionally re-creating the organization
 What is an Information System?

• Technology dimension of information systems

• Computer hardware and software
• Data management technology
• Networking and telecommunications technology
• Networks, the Internet, intranets and extranets, World Wide Web
• IT infrastructure: provides platform that system is built on
 What is an Information System?
• Dimensions of UPS tracking system
• Organizational:
• Procedures for tracking packages and managing inventory and provide information
• Management:
• Monitor service levels and costs
• Technology:
• Handheld computers, bar-code scanners, networks, desktop computers, and so on
 What is an Information System?
• Business perspective on information systems:
• Information system is instrument for creating value
• Investments in information technology will result in superior returns:
• Productivity increases
• Revenue increases
• Superior long-term strategic positioning
 What is an Information System?
• Business information value chain
• Raw data acquired and transformed through stages that add value to that information
• Value of information system determined in part by extent to which it leads to better
decisions, greater efficiency, and higher profits
• Business perspective:
• Calls attention to organizational and managerial nature of information systems
 The Business Information Value Chain

Figure 1-7 From a business perspective, information systems 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.
 What is an Information System?
• Investing in information technology does not guarantee good returns.
• There is considerable variation in the returns firms receive from systems
investments.
• Factors:
• Adopting the right business model
• Investing in complementary assets (organizational and management capital)
 Variation in Returns on Information
Technology Investment
Although, on average,
investments in information
technology produce returns
far above those returned by
other investments, there is
considerable variation across
firms.

Figure 1.8
 What is an Information System?

• Complementary assets:
• Assets required to derive value from a primary investment
• Firms supporting technology investments with investment in
complementary assets receive superior returns
• Example: Invest in technology and the people to make it work properly
 What is an Information System?

• Complementary assets include:

• Organizational assets, for example:
• Supportive organizational culture that values efficiency and effectiveness
• Appropriate business model
• Efficient business processes
• Decentralized authority
• Distributed decision-making rights
• Strong IS development team
 What is an Information System?

• Complementary assets include:

• Managerial assets, for example:
• Strong senior management support for technology investment and change
• Incentives for management innovation
• Teamwork and collaborative work environments
• Training programs to enhance management decision skills
• Management culture that values flexibility and knowledge-based decisionmaking.
 What is an Information System?

• Complementary assets include:

• Social assets, for example:
• The Internet and telecommunications infrastructure
• IT-enriched educational programs raising labor force computer literacy
• Standards (both government and private sector)
• Laws and regulations creating fair, stable market environments
• Technology and service firms in adjacent markets to assist implementation
 Contemporary Approaches to Information
Systems
The study of information
systems deals with issues
and insights contributed
from technical and
behavioral disciplines.

Figure 1.9
 Studying Information Systems
• Technical approach
• Emphasizes mathematically based models
• Computer science, management science, operations research
• Behavioral approach
• Behavioral issues (strategic business integration, implementation, etc.)
• Psychology, economics, sociology
 Studying Information Systems
• Management Information Systems
• Combines computer science, management science, operations research, and practical
orientation with behavioral issues
• Four main actors
• Suppliers of hardware and software
• Business firms
• Managers and employees
• Firm’s environment (legal, social, cultural context)
 Review Summary
• How are information systems transforming business, and what is their relationship to
globalization?
• Why are information systems so essential for running and managing a business today?
• What exactly is an information system? How does it work? What are its management,
organization, and technology components?
• What are complementary assets? Why are complementary assets essential for ensuring
that information systems provide genuine value for an organization?
• What academic disciplines are used to study information systems? How does each
contribute to an understanding of information systems? What is a sociotechnical
systems perspective?