Chapter1

What Is an Information System?

Book:
David T. Bourgeois, Information Systems for
Business and Beyond, 2014.
 Chapter 1
1.1. Introduction
1.2. Defining Information Systems
1.3. The Components of Information Systems
1.4. The Role of Information Systems
1.5. Can Information Systems Bring
Competitive Advantage?
1.6. Sidebar: Walmart Uses Information
Systems to Become the World’s Leading
Retailer
 1.1. Introduction

• If you are reading this, you are most likely taking a course in
information systems, but do you even know what the course is going
to cover?
• When you tell your friends or your family that you are taking a course
in information systems, can you explain what it is about?
• For the past several years, I have taught an Introduction to
Information Systems course.
• The first day of class I ask my students to tell me what they think an
information system is. I generally get answers such as “computers,”
“databases,” or “Excel.”
• These are good answers, but definitely incomplete ones.
• The study of information systems goes far beyond understanding
some technologies.
• Let’s begin our study by defining information systems.
 1.2. Defining Information Systems

• “Information systems (IS) is the study of complementary networks

of hardware and software that people and organizations use to
collect, filter, process, create, and distribute data.” (Wikipedia entry
on "Information Systems," as displayed on August 19, 2012.
Wikipedia: The Free Encyclopedia. San Francisco: Wikimedia
Foundation.
http://en.wikipedia.org/wiki/Information_systems_(discipline).
• “Information systems are combinations of hardware, software, and
telecommunications networks that people build and use to collect,
create, and distribute useful data, typically in organizational
settings.” (Excerpted from Information Systems Today - Managing
in the Digital World, fourth edition. Prentice-Hall, 2010).
• “Information systems are interrelated components working
together to collect, process, store, and disseminate information to
support decision making, coordination, control, analysis, and
viualization in an organization.” (Excerpted from Management
Information Systems, twelfth edition, Prentice-Hall, 2012.)
1.3. The Components of Information Systems

1.3.1. Technology
1.3.2. Hardware
1.3.3. Software
1.3.4. Data
1.3.5. Networking Communication: A
Fourth Technology Piece?
1.3.6. People
1.3.7. Process
 1.3.1. Technology

• Technology can be thought of as the application of scientific

knowledge for practical purposes.
• From the invention of the wheel to the harnessing of electricity for
artificial lighting, technology is a part of our lives in so many ways
that we tend to take it for granted.
• As discussed before, the first three components of information
systems – hardware, software, and data – all fall under the
category of technology.
• Each of these will get its own chapter and a much lengthier
discussion, but we will take a moment here to introduce them so
we can get a full understanding of what an information system is.
 1.3.2. Hardware

• Information systems hardware is the part

of an information system you can touch –
the physical components of the
technology.
• Computers, keyboards, disk drives,
iPads, and flash drives are all examples
of information systems hardware.
 1.3.3. Software

• Software is a set of instructions that tells the hardware what to

do. Software is not tangible – it cannot be touched.
• When programmers create software programs, what they are
really doing is simply typing out lists of instructions that tell the
hardware what to do.
• There are several categories of software, with the two main
categories being operating-system software, which makes the
hardware usable, and application software, which does
something useful.
• Examples of operating systems include Microsoft Windows on a
personal computer and Google’s Android on a mobile phone.
• Examples of application software are Microsoft Excel and
Microsoft Power Point.
 1.3.4. Data

• The third component is data. You can think of data as a collection of

facts.
• For example, your street address, the city you live in, and your phone
number are all pieces of data.
• Like software, data is also intangible.
• By themselves, pieces of data are not really very useful. But
aggregated, indexed, and organized together into a database, data
can become a powerful tool for businesses.
• In fact, all of the definitions presented at the beginning of this chapter
focused on how information systems manage data.
• Organizations collect all kinds of data and use it to make decisions.
• These decisions can then be analyzed as to their effectiveness and
the organization can be improved.
 1.3.5. Networking Communication: A Fourth Technology Piece?

• Besides the components of hardware, software, and data, which have

long been considered the core technology of information systems, it
has been suggested that one other component should be added:
communication.
• An information system can exist without the ability to communicate –
the first personal computers were stand-alone machines that did not
access the Internet.
• However, in today’s hyper-connected world, it is an extremely rare
computer that does not connect to another device or to a network.
• Technically, the networking communication component is made up of
hardware and software, but it is such a core feature of today’s
information systems that it has become its own category.
 1.3.6. People
• When thinking about information systems, it is easy to
get focused on the technology components and forget
that we must look beyond these tools to fully
understand how they integrate into an organization.
• A focus on the people involved in information systems
is the next step.
• From the front-line help-desk workers, to systems
analysts, to programmers, all the way up to the chief
information officer (CIO), the people involved with
information systems are an essential element that must
not be overlooked.
 1.3.7. Process

• The last component of information systems is process.

• A process is a series of steps undertaken to achieve a desired outcome or
goal. Information systems are becoming more and more integrated with
organizational processes, bringing more productivity and better control to
those processes.
• But simply automating activities using technology is not enough – businesses
looking to effectively utilize information systems do more.
• Using technology to manage and improve processes, both within a company
and externally with suppliers and customers, is the ultimate goal.
• Technology buzzwords such as “business process reengineering,” “business
process management,” and “enterprise resource planning” all have to do with
the continued improvement of these business procedures and the integration
of technology with them.
• Businesses hoping to gain an advantage over their competitors are highly
focused on this component of information systems.
1.4. The Role of Information Systems

1.4.1. The Mainframe Era

1.4.2. The PC Revolution
1.4.3. Client-Server
1.4.4. The World Wide Web and E-
Commerce
1.4.5. Web 2.0
1.4.6. The Post-PC World
 1.4.1. The Mainframe Era

• From the late 1950s through the 1960s, computers were seen as a
way to more efficiently do calculations.
• These first business computers were room-sized monsters, with
several refrigerator-sized machines linked together.
• The primary work of these devices was to organize and store large
volumes of information that were tedious to manage by hand.
• Only large businesses, universities, and government agencies
could afford them, and they took a crew of specialized personnel
and specialized facilities to maintain.
• These devices served dozens to hundreds of users at a time
through a process called time-sharing.
• Typical functions included scientific calculations and accounting,
under the broader umbrella of “data processing.”
• In the late 1960s, the Manufacturing Resources Planning (MRP)
systems were introduced.
• This software, running on a mainframe computer, gave companies the
ability to manage the manufacturing process, making it more efficient.
• From tracking inventory to creating bills of materials to scheduling
production, the MRP systems (and later the MRP II systems) gave
more businesses a reason to want to integrate computing into their
processes.
• IBM became the dominant mainframe company.
• Nicknamed “Big Blue,” the company became synonymous with
business computing.
• Continued improvement in software and the availability of cheaper
hardware eventually brought mainframe computers (and their little
sibling, the minicomputer) into most large businesses.
 1.4.2. The PC Revolution

• In 1975, the first microcomputer was announced on the cover of Popular Mechanics: the Altair 8800.
• Its immediate popularity sparked the imagination of entrepreneurs everywhere, and there were
quickly dozens of companies making these “personal computers.”
• Though at first just a niche product for computer hobbyists, improvements in usability and the
availability of practical software led to growing sales.
• The most prominent of these early personal computer makers was a little company known as Apple
Computer, headed by Steve Jobs and Steve Wozniak, with the hugely successful “Apple II.”
• Not wanting to be left out of the revolution, in 1981 IBM (teaming with a little company called
Microsoft for their operating-system software) hurriedly released their own version of the personal
computer, simply called the “PC.”
• Businesses, who had used IBM mainframes for years to run their businesses, finally had the
permission they needed to bring personal computers into their companies, and the IBM PC took off.
• The IBM PC was named Time magazine’s “Man of the Year” for 1982.
• Because of the IBM PC’s open architecture, it was easy for other companies to copy, or “clone” it.
• During the 1980s, many new computer companies sprang up, offering less expensive versions of
the PC.
• This drove prices down and spurred innovation.
• Microsoft developed its Windows operating system and made the PC even easier to use.
• Common uses for the PC during this period included word processing, spreadsheets, and
databases.
• These early PCs were not connected to any sort of network; for the most part they stood alone as
islands of innovation within the larger organization.
 1.4.3. Client-Server

• In the mid-1980s, businesses began to see the need to

connect their computers together as a way to collaborate
and share resources.
• This networking architecture was referred to as “client-
server” because users would log in to the local area
network (LAN) from their PC (the “client”) by connecting to
a powerful computer called a “server,” which would then
grant them rights to different resources on the network
(such as shared file areas and a printer).
• Software companies began developing applications that
allowed multiple users to access the same data at the
same time.
• This evolved into software applications for communicating,
with the first real popular use of electronic mail appearing
at this time.
• This networking and data sharing all stayed within the confines of each business, for the
most part.
• While there was sharing of electronic data between companies, this was a very
specialized function.
• Computers were now seen as tools to collaborate internally, within an organization.
• In fact, these networks of computers were becoming so powerful that they were
replacing many of the functions previously performed by the larger mainframe
computers at a fraction of the cost.
• It was during this era that the first Enterprise Resource Planning (ERP) systems were
developed and run on the client-server architecture.
• An ERP system is a software application with a centralized database that can be used
to run a company’s entire business.
• With separate modules for accounting, finance, inventory, human resources, and many,
many more, ERP systems, with Germany’s SAP leading the way, represented the state
of the art in information systems integration.
 1.4.4. The World Wide Web and E-Commerce

• First invented in 1969, the Internet was confined to use by universities,

government agencies, and researchers for many years.
• Its rather arcane commands and user applications made it unsuitable for
mainstream use in business.
• One exception to this was the ability to expand electronic mail outside
the confines of a single organization.
• While the first e-mail messages on the Internet were sent in the early
1970s, companies who wanted to expand their LAN-based e-mail
started hooking up to the Internet in the 1980s.
• Companies began connecting their internal networks to the Internet in
order to allow communication between their employees and employees
at other companies.
• It was with these early Internet connections that the computer truly
began to evolve from a computational device to a communications
device.
• In 1989, Tim Berners-Lee developed a simpler
way for researchers to share information over the
network at CERN laboratories, a concept he
called the World Wide Web.
• This invention became the launching point of the
growth of the Internet as a way for businesses to
share information about themselves.
• As web browsers and Internet connections
became the norm, companies rushed to grab
domain names and create websites.
• In 1991, the National Science Foundation, which governed how
the Internet was used, lifted restrictions on its commercial use.
• The year 1994 saw the establishment of both eBay and
Amazon.com, two true pioneers in the use of the new digital
marketplace.
• A mad rush of investment in Internet-based businesses led to
the dot-com boom through the late 1990s, and then the dot-com
bust in 2000.
• While much can be learned from the speculation and crazy
economic theories espoused during that bubble, one important
outcome for businesses was that thousands of miles of Internet
connections were laid around the world during that time.
• As it became more expected for companies to be
connected to the Internet, the digital world also became a
more dangerous place.
• Computer viruses and worms, once slowly propagated
through the sharing of computer disks, could now grow
with tremendous speed via the Internet.
• Software written for a disconnected world found it very
difficult to defend against these sorts of threats.
• A whole new industry of computer and Internet security
arose.
 1.4.5. Web 2.0
• As the world recovered from the dot-com bust, the use of technology in
business continued to evolve at a frantic pace.
• Websites became interactive; instead of just visiting a site to find out about a
business and purchase its products, customers wanted to be able to
customize their experience and interact with the business.
• This new type of interactive website, where you did not have to know how to
create a web page or do any programming in order to put information online,
became known as web 2.0. Web 2.0 is exemplified by blogging, social
networking, and interactive comments being available on many websites.
• This new web-2.0 world, in which online interaction became expected, had a
big impact on many businesses and even whole industries.
• Some industries, such as bookstores, found themselves relegated to a niche
status.
• Others, such as video rental chains and travel agencies, simply began going
out of business as they were replaced by online technologies.
• This process of technology replacing a middleman in a transaction is called
disintermediation.
• As the world became more connected, new questions
arose.
• Should access to the Internet be considered a right?
Can I copy a song that I downloaded from the Internet?
How can I keep information that I have put on a website
private? What information is acceptable to collect from
children? Technology moved so fast that policymakers
did not have enough time to enact appropriate laws,
making for a Wild West–type atmosphere.
 1.4.6. The Post-PC World
• After thirty years as the primary computing device used in
most businesses, sales of the PC are now beginning to
decline as sales of tablets and smartphones are taking off.
• Just as the mainframe before it, the PC will continue to
play a key role in business, but will no longer be the
primary way that people interact and do business.
• The limited storage and processing power of these
devices is being offset by a move to “cloud” computing,
which allows for storage, sharing, and backup of
information on a massive scale.
• This will require new rounds of thinking and innovation on
the part of businesses as technology continues to
advance.
The Eras of Business Computing
 1.5. Can Information Systems Bring Competitive Advantage?

• It has always been the assumption that the implementation of information systems will,
in and of itself, bring a business competitive advantage.
• After all, if installing one computer to manage inventory can make a company more
efficient, won’t installing several computers to handle even more of the business
continue to improve it?
• In 2003, Nicholas Carr wrote an article in the Harvard Business Review that questioned
this assumption.
• The article, entitled “IT Doesn’t Matter,” raised the idea that information technology has
become just a commodity.
• Instead of viewing technology as an investment that will make a company stand out, it
should be seen as something like electricity: It should be managed to reduce costs,
ensure that it is always running, and be as risk-free as possible.
• As you might imagine, this article was both hailed and scorned. Can IT bring a
competitive advantage?
• It sure did for Walmart (see sidebar).
1.6. Sidebar: Walmart Uses Information Systems to Become the World’s Leading
Retailer

• Walmart is the world’s largest retailer, earning $15.2 billion on sales of $443.9 billion in the fiscal
year that ended on January 31, 2012.
• Walmart currently serves over 200 million customers every week, worldwide.5 Walmart’s rise to
prominence is due in no small part to their use of information systems.
• One of the keys to this success was the implementation of Retail Link, a supply-chain management
system.
• This system, unique when initially implemented in the mid-1980s, allowed Walmart’s suppliers to
directly access the inventory levels and sales information of their products at any of Walmart’s more
than ten thousand stores.
• Using Retail Link, suppliers can analyze how well their products are selling at one or more Walmart
stores, with a range of reporting options.
• Further, Walmart requires the suppliers to use Retail Link to manage their own inventory levels.
• If a supplier feels that their products are selling out too quickly, they can use Retail Link to petition
Walmart to raise the levels of inventory for their products.
• This has essentially allowed Walmart to “hire” thousands of product managers, all of whom have a
vested interest in the products they are managing.
• This revolutionary approach to managing inventory has allowed Walmart to continue to drive prices
down and respond to market forces quickly.
• Today, Walmart continues to innovate with information technology. Using its tremendous market
presence, any technology that Walmart requires its suppliers to implement immediately becomes a
business standard.