MANAGEMENT

INFORMATION SYSTEM
Prof Arun Kumar Dutta
IBS Pune
 Information system
An integrated set of components for collecting, storing and processing
data and for providing information, knowledge, and digital products.

Organizations rely on Information systems to carry out operations,

interact with customers/ suppliers and compete in the marketplace.
Information systems are used to run inter-organizational Supply
Chains and electronic markets.

Ex. Corporations use information systems to :

 process financial accounts,
 manage their human resources, and
 reach their potential customers with online promotions.

Information and knowledge became vital economic resources. Yet,

the dependence on Information Systems brought new threats.
What is an Information System ?

An organized combination of – People, Hardware, Software,

communication Network, Data resources and Policy / procedures
that stores, Retrieves, Transforms and Disseminates information in an Organization

Challenges
Technologies
Business
Applications

INFORMATION
SYSTEM

Development Foundation
Processes Concepts
 3 FUNDAMENTAL ROLES OF IS

Supports
Strategies

Supports
Business
Decision Making

Supports Business
Processes/ Operations
Fundamental roles of the business applications of information system. IS
supports Business Processes/ Operations, Decision Making and Strategies for
competitive advantage
 Can Information Systems Bring Competitive Advantage?
Walmart is the world’s largest retailer, earning $15.2 billion on sales of
$443.9 billion in 2012. Walmart currently serves over 200 million
customers every week, worldwide.

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 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.
 CHALLENGES & ETHICS of IT
What uses of IT might be considered improper, irresponsible or
harmful to other people or society?

What is the proper business use of the Internet and the

Organisation’s IT resources?

What does it take to be a responsible end user of IT.

How can you protect yourself from computer crimes, and other
risks (infringements on privacy, work stoppages, inaccurate
information) of IT?

Ex. Hannaford Bros a fruit/ vegetable vendor, said in a notice to

customers posted in its Web site that unknown intruders had
accessed its systems and stolen 4.2 million Credit / Debit card info.
2 Class-action law suits were filed arguing that inadequate Data
security was the cause of data leaks.
 Strategy Company Strategic use of Benefits
Information System
Cost leadership Dell Computers Online build to order Lowest cost producers
eBay.com Online auction Auction set prices
Differentiation Amazon Customer/ supplier Increase Market share
ecommerce
Innovation Federal express Online package Market leadership
tracking & Flight mgmt

Amazon Online Full-service Market leadership

customer systems
Growth Walmart Merchandise ordering Market leadership
by global satellite
network
Alliance Walmart , Automatic inventory Reduced inventory
P&G replenishment by cost/ increased sales
suppliers
EXAMPLES OF HOW, OVER TIME, COMPANIES HAVE USED INFORMATION
TECHNOLOGY TO IMPLEMENT COMPETITIVE STRATEGIES FOR STRATEGIC
ADVANTAGE … Fig 2.4, pg 51
The Internet Suppliers and Other Business
Extranets Partners Company
Boundary
Supply chain management
Procurement, Distribution and Logistics

Intranets
Engineering and Manufacturing and Accounting and
Research Production Finance

Intranets

Customer relationship management

Marketing, Sales & Customer Service

Extranets Consumers and

Business Customers
Businesses are depending on Internet, intranets and extranets to
implement & manage innovative e-business applications
Internet of things (IOT) -

has emerged, as sensors and actuators have been widely distributed in the physical
environment and are supplying data, such as acidity of a square yard of soil, the
speed of a driving vehicle, or the blood pressure of an individual. The availability of
such information enables a rapid reaction when necessary as well as decision
making based on processing of massive accumulated data.

Extensive networking infrastructure supports the growing move to cloud

computing, with the information-system resources shared among multiple
companies, leading to utilization efficiencies and freedom in localization of the data
centres.

Massive collection and processing of the quantitative, or structured, data, as well as

of the textual data often gathered on the Web, has developed into a broad initiative
known as “big data.”

Ex: a firm collects the prices of goods by crowd-sourcing (collecting from numerous
independent individuals) via smartphones around the world. Many benefits can
arise from decisions based on the facts reflected by big data.
 VALUE CHAIN AND STRATEGIC I. S.

C
S Administrative coordination/ Travel helpdesk
O
U M
P P
Human resources / employee benefits
P E
O TI
R Product development / Technology development TI
T V
E-Commerce, Web portals for Suppliers E
P
R A
O INBOUND OUTBOUND MARKETING SERVICE
OPERATIONS D
C LOGISTICS LOGISTICS & SALES
V
E CRM
A
S TARGETED
N
S MKTG
T
E A
S PRIMARY BUSINESS PROCESSES G
E
 Role of CIO
Information
Technology
Management

Managing Managing the

Managing IT
Application
Business and Organization &
Development
IT Strategy Infrastructure
& Technology

CEO & CIO CIO & CTO CIO & IT

Managers
Many companies are built entirely around information systems.
 eBay, a largely auction marketplace;

 Amazon, an expanding electronic mall and provider of cloud computing services;

 Alibaba, a (B2B) business-to-business E-marketplace; and

 Google, a search engine company that derives its revenue from keyword
advertising on Internet searches.

Governments deploy IS to provide services to citizens.

Digital goods — electronic books, Video products, and software,
gaming and social networking, are delivered with information
systems.

Individuals rely on Internet for conducting much of their personal

lives: for socializing, study, shopping, banking, and entertainment.
Operational management level
Users at this level make structured decisions. This means that they have defined rules that
guides them while making decisions.
Ex. if a store sells items on credit and they have a credit policy that has some set limit on
the borrowing. All the sales person needs to decide whether to give credit to a customer or
not is based on the current credit information from the system. Invoicing is done per
current Price master.

Tactical Management Level

Tactical users make semi-structured decisions. The decisions are partly based on set
guidelines and judgmental calls.
Example, a tactical manager can check the credit limit and payments history of a customer
and decide to make an exception to raise the credit limit for a particular customer. The
decision is partly structured in the sense that the tactical manager has to use existing
information to identify a payments history that benefits the organization and an allowed
increase percentage.

Strategic Management Level

This is the most senior level in an organization. The users at this level make unstructured
decisions.
Senior level managers are concerned with the long-term planning. They use information
from tactical managers and external data when making unstructured decisions.
 SUPPORT OF Classification of
SUPPORTS
BIZ Information Systems MANAGERIAL
OPERATIONS
DECISION
Operation Support Management MAKING
System Support System

Specialized Transaction Process Enterprise MIS DSS EIS SPS

processing processing Control Collaboration
system SPS system System System
CONTROL TEAM,
INDUSTRIAL WORKGROUP
COLLABORATION
PROCESSES
Expert Knowledge Strategic Functional
system Management Information Business
system system system

Expert
Manage Support SUPPORT
advice to
organization Competitive BASIC BIZ
Decision knowledge FUNCTIONS
Makers advantage
Support of Business Processes and Operations:
Ex. Retail stores using computer based billing to record customer purchases, keeping
track of inventory, buying new merchandise. Store operation will come to a grinding halt
w/o the support of such information system.

Transaction processing system – process Data resulting from business transaction,

update databases and produce business documents.

Examples include;
Point of Sale (POS) Systems – records daily sales

Payroll systems – processing employees salary, loans management, etc.

Stock Control systems – keeping track of inventory levels

Airline booking systems – flights booking management

Customer care system – create repair job card, monitor progress, report completion

POS systems use e-cash register terminals to capture and transmit sales data to regional
data centres for real time or batch processing.
 Operations Support Systems

Common business Accounting Systems

Examples include;
Order processing – captures & processes customer orders and generates data for
Inventory control / AR…..DATA ELEMENTS

Inventory Control – processes data reflecting changes in inventory , provides shipping

and Reorder information …..DATA ELEMENTS

Accounts Receivables – keeping track of customer invoices, customer Outstanding

statements; Credit Management reports

Payroll – records employees work and compensation data, produces paychecks, F16

Fields present in Order processing system - Order no,

order date, delivery date, order qty, items / Parts description and
No, shipping / delivery address goods, invoice no and dates,
credit rating or Limit,
 Operations Support Systems

Process control Systems – Monitor and control physical/ industrial processes.

Ex. Petroleum refining, power generation and steel production systems

Enterprise Collaboration systems – Support teams, workgroup, and enterprise

communications and collaborations.

Ex e-mail, chat videoconferencing systems

Decision support system – provide support for decision making process for
Managers and other business professionals.

Ex product pricing, profitability forecasting and risk analysis systems

Executive Information System – provide critical information from MIS , DSS and
other sources tailored to information needs of Executives.
Ex. Competitor analysis, Business performance
 Supports Business Decision Making

The main objective of DSS is to provide solutions to problems that are unique and change
frequently. Decision support systems answer questions such as :-
What would be the impact of employees' performance if we double the production?
What would happen to our sales if a new competitor entered the market?
Decision support systems are used by senior management to make better decisions.
Decision support systems use input from internal systems (transaction processing systems
and Management information systems) and external systems.

DSS use mathematical models, and statistical techniques (probability, predictive modeling)
to provide solutions, and they are very interactive.

Financial planning systems – it enables managers to evaluate alternative ways of achieving

goals. The objective is to find the optimal way of achieving financial goal.

Example- the net profit for a business is calculated using the formula Total Sales less (Cost
of Goods + Expenses). A financial planning system will enable senior executives to ask what
if questions and adjust the values for total sales, the cost of goods, etc. to see the effect of
the decision and on the net profit and find the most optimal way.

Bank loan management systems – it is used to verify the credit of the loan applicant and
predict the likelihood of the loan being recovered.
Support of Strategies for Competitive Advantage

This requires innovative application of IT. They can help business cut costs,
differentiate and innovate in its products and Services, promote growth, develop
alliances, lock in Customers and Suppliers, create switching costs, raise barriers
to entry and leverage its investment in IT systems.

Thus IT can help business gain a competitive advantage in its relationship with
customers, competitors and new entrants and producers of substitute products.

Reengineering Business Process - IT enables Company to make radical changes

to business processes and significantly improve their efficiency and
effectiveness. Internet technologies can play a major role in supporting
innovative changes in the design of workflows, job requirements and
organizational structure in a company.

Becoming an agile company

Building a knowledge creating company

 KNOWLEDGE MANAGEMENT SERVICE
Knowledge management systems provide a means to assemble and act on the
knowledge accumulated throughout an organization. Implement as a project.
Includes:

Processes & procedures, Patents, Reference works, Formulas, Best practices,

Forecasts, solutions to problems / product complaints
Do cost-benefit analysis , Employee cost/ time

Such knowledge may include the texts and images contained in patents, design
methods, best practices, competitor intelligence, and similar sources, with the
elaboration and commentary included. Placing the organization’s documents and
communications in an indexed and cross-referenced form enables rich search
capabilities.

Numerous application programs, such as Microsoft’s SharePoint, exist to facilitate

the implementation of such systems. Organizational knowledge is often tacit,
rather than explicit, so these systems must also direct users to members of the
organization with special expertise.
Ex. Complaint tracker till resolution
 Information system – Historical Perspective

First large-scale mechanical information system was Herman Hollerith’s census

tabulator. Invented in time to process the 1890 U.S. census. Hollerith’s machine
represented a major step in automation, as well as an inspiration to develop
information systems.

UNIVAC I, installed at the U.S. Bureau of the Census in 1951 for administrative use
and at General Electric in 1954 for commercial use.

Beginning in the late 1970s, personal computers brought some of the advantages of
information systems to small businesses and to individuals.

Early in the same decade the Internet began its expansion as the global network
of networks.

In 1991 the World Wide Web, invented by Tim Berners-Lee as a means to access
the interlinked information stored in the globally dispersed computers connected
by the Internet, began operation. The global penetration of the Internet and the
Web has enabled access to information and other resources and facilitated the
forming of relationships among people and organizations.
 E- Business
The progress of electronic commerce over the Internet has resulted in a dramatic
growth in digital interpersonal communications (via e-mail and social networks),
distribution of products (software, music, e-books, and movies), and business
transactions (buying, selling, and advertising on the Web).

With the worldwide spread of smartphones, tablets, laptops, and other computer-
based mobile devices, all of which are connected by wireless communication
networks, information systems have been extended to support mobility as the
natural human condition.

These systems :-
 quickened the pace of daily activities,
 enabled people to develop and maintain new and more-rewarding
relationships,
 affected the structure and mix of organizations,
 changed the type of products bought, and
 influenced the nature of work.
The aggregated data supplies early information on price movements,
enabling more responsive decision making than was previously
possible.

Components of Information Systems -Hardware, software, data, people,

and process.

The first three, fitting under the category technology, are generally what most
students think of when asked to define information systems. But the last two,
people and process, are really what separate the idea of information systems from
more technical fields, such as computer science.

In order to fully understand information systems, students must understand how

all of these components work together to bring value to an organization.

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.
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.
Ex. Operating systems include Microsoft Windows on a personal computer
and Google’s Android on a mobile phone.
Example of application software : Microsoft Excel.

The third component is Data. Data is 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 when aggregated, indexed, and organized together into
a database, data can become a powerful tool for businesses.

Organizations collect all kinds of data and use it to make decisions.

Networking Communication: A Fourth Technology Piece?

Besides the components of 1) hardware, 2) software, and 3) 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
People

Qualified people are a vital component of any information system. From the front-line
help-desk workers, to systems analysts, to programmers, all the way up to the CIO,
people involved with information systems are an essential element that must not be
overlooked.

Technical personnel include development and operations managers, business analysts,

systems analysts and designers, database administrators, programmers, computer
security specialists, and computer operators. In addition, all workers in an organization
must be trained to utilize the capabilities of information systems as fully as possible.

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

“Business process reengineering,” “business process management,” and “enterprise

resource planning” all have to do with the continued improvement of these business
procedures. Businesses hoping to gain an advantage over their competitors are highly
focused on this component of information systems
Operational Support and Enterprise systems

Transaction processing systems support the operations through which products are
designed, marketed, produced, and delivered.

In larger organizations, transaction processing is frequently accomplished with large

integrated systems known as enterprise systems. In this case, the information systems
that support various functional units— Sales and marketing, Production, Finance, and
Human resources—are integrated into an Enterprise Resource Planning (ERP) system.

ERP systems support the value chain—that is, the entire sequence of activities or
processes through which a firm adds value to its products. For example, an individual or
another business may submit a custom order over the Web that automatically initiates
just-in-time production to the customer’s specifications through an approach known
as mass customization. This involves sending orders from the customers to the firm’s
warehouses and to suppliers to deliver input materials just in time for a batch custom
production run.
Transaction processing systems can also serve to integrate the overall supply chain of which
the organization is a part.

This includes all firms involved in designing, producing, marketing, and delivering the goods
and services—from raw materials to the final delivery of the product. A supply chain
management (SCM) system manages the flow of products, data, money, and information
throughout the entire supply chain, which starts with the suppliers of raw materials, runs
through the intermediate tiers of the processing companies, and ends with the distributors
and retailers.

For example, purchasing an item at a major retail store generates more than a cash register
receipt: it also automatically sends a restocking order to the appropriate supplier, which in
turn may call for orders to the supplier’s suppliers. With an SCM system, suppliers can also
access a retailer’s inventory database over the Web to schedule efficient and timely
deliveries in appropriate quantities.

The third type of enterprise system, Customer Relationship Management (CRM), supports
dealing with the company’s customers in marketing, sales, service, and new product
development.

A CRM system gives a business a unified view of each customer and its dealings with that
customer, enabling a consistent and proactive relationship. In co-creation initiatives, the
customers may be involved in the development of the company’s new products.
Management Reporting Systems (MIS)

Information systems support all levels of management, from those in charge of short-
term schedules and budgets for small work groups to those concerned with long-term
plans and budgets for the entire organization.

Management reporting systems provide routine, detailed, and voluminous information

reports specific to each manager’s areas of responsibility. These systems are typically used
by first-level supervisors. Generally, such reports focus on past and present activities,
rather than projecting future performance.

To prevent information overload, reports may be automatically sent only under

exceptional circumstances or at the specific request of a manager.
Ex. Responsibilitywise Budget and actual spend

Decision Support Systems and Business Intelligence

All information systems support decision making, however indirectly, but

decision support systems are expressly designed for this purpose. As these systems are
increasingly being developed to analyze massive collections of data (known as big data),
they are becoming known as business intelligence, or business analytics, applications.

The two principal varieties of decision support systems are model-driven and data-driven.
Knowledge management systems

Management support

A large category of information systems comprises those designed to support the

management of an organization. These systems rely on the data obtained by transaction
processing systems, as well as on data and information acquired outside the organization
(on the Web, for example) and provided by business partners, suppliers, and customers.
Ex. Warranty failure data – Repair action taken by ASC
Knowledge management systems

Advantages:

 Taking Informed Decisions

 Faster problem solving

 Increase organizational agility

 Improve business processes

 Increase operational efficiency and productivity

 Increase employee involvement

Challenges:

 Capturing knowledge
 Creating KM repository centrally
 Motivating employees to share Tacit knowledge
 Selecting knowledge management Technology
 Building corporate culture for KM
Business Intelligence

The primary objective of data-driven business intelligence systems is to analyze large pools
of data, accumulated over long periods of time in data warehouses, in a process known as
data mining.

Data mining aims to discover significant patterns, such as sequences (buying a new house,
followed by a new dinner table), clusters, and correlations (large families and van sales),
with which decisions can be made. Predictive analytics attempts to forecast future
outcomes based on the discovered trends.

Data-driven decision support systems include a variety of statistical models and may rely on
various artificial intelligence techniques, such as expert systems, neural networks, and
machine learning.

In addition to mining numeric data, text mining is conducted on large aggregates of

unstructured data, such as the contents of social media that include social networks, wikis,
blogs, and microblogs.

As used in electronic commerce, for example, text mining helps in finding buying trends,
targeting advertisements, and detecting fraud.
Executive information systems (EIS)
Executive information systems make a variety of critical information readily available in a
highly summarized and convenient form, typically via a graphical digital dashboard.

Senior managers characteristically employ many informal sources of information, however,

so that formal, computerized information systems are only of partial assistance.

Nevertheless, this assistance is important for the chief executive officer, senior and
executive vice presidents, and the board of directors to monitor the performance of the
company, assess the business environment, and develop strategic directions for the future.

In particular, these executives need to compare their organization’s performance with that
of its competitors and investigate general economic trends in regions or countries.

Often individualized and relying on multiple media formats, executive information systems
give their users an opportunity to “drill down” from summary information to increasingly
focused details.
Acquisition from external sources
There are several principal ways to acquire an information system from outside the
organization. Many firms have resorted to outsourcing their information systems.
Outsourcing entails transferring the major components of the firm’s systems and
operations—such as data centres, telecommunications, and software development
and maintenance—to a specialized company that provides its services under long-
term contracts specifying the service levels (that is, the scope and the quality of
service to be provided).

In some cases the outsourcing entails moving the services abroad—i.e., offshoring
in pursuit of the cost or expertise advantages. Responsibility for the acquisition of
new applications then falls to the outside company. In other cases the company
may outsource just the development or maintenance of their information systems,
with the outside company being a systems developer.
Cloud Computing - is increasingly being adopted as a source of
information services. It offers on-demand access via the Internet to
services furnished by a provider that runs data centres with the
necessary software and other resources.

The services can be provided at one of three levels:

1. as the infrastructure for running existing applications,
2. as the platform for developing new applications, or
3. as software-as-a-service (SaaS) to be used by the firm over the
network. In particular, SaaS has become a cost-effective way to
use enterprise systems.

Generally, cloud computing is provided by external vendors,

although some firms implement their own private clouds in order to
share resources that employees can access over the network from a
variety of devices, often including smartphones. Scalability and
avoidance of capital expenditures are notable advantages of public
clouds; the partial loss of control is a drawback.
All these increased capabilities, the systems of tomorrow will be
focused on increasing Speed and Reach of systems to provide even
tighter integration, combined with greater flexibility.

Right information at the Right time to make Accurate decisions and

to optimize processes.
The Role of Information Systems

As technology has developed, this role has evolved into the backbone of the organization.
To get a full appreciation of the role information systems play, we will review how they have
changed over the years

The Mainframe Era

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
The Role of Information Systems

The PC Revolution
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
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.

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.
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.

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.
 Technology Trends
Open systems with unrestricted connectivity uses Internet Networking Technology.
This drives telecommunication technology drivers, Web browsers, HTML web page editors,
Internet and Intranet servers.

These technologies are applied in Internet and Intranet and extranet Applications for E-
commerce and collaborations. Client server networks are based on Open-system
architecture which create easy access by End-users and Networked Computer Systems.

Open systems provide greater connectivity , that is , the ability of of networked computers
and other devices to access and share information.
Artificial intelligence techniques in business

Artificial intelligence systems mimic human expertise to identify patterns in large data
sets. Companies such as Amazon, Facebook, and Google, etc. use artificial intelligence
techniques to identify data that is most relevant to you.

Let's use Facebook as an example, Facebook usually makes very accurate predictions of
people that you might know or went with to school. They use the data that you provide to
them, the data that your friends provide and based on this information make predictions
of people that you might know.

Amazon uses artificial intelligence techniques too to suggest products that you should buy
also based on what you are currently getting.

Google also uses artificial intelligence to give you the most relevant search results based
on your interactions with Google and your location.

These techniques have greatly contributed in making these companies very successful
because they are able to provide value to their customers.
Online Analytical Processing (OLAP)

Online analytical processing (OLAP) is used to query and analyze multi-dimensional data
and produce information that can be viewed in different ways using multiple dimensions.

Let's say a company sells laptops, desktops, and Mobile device. They have four (4)
branches A, B, C and D. OLAP can be used to view the total sales of each product in all
regions and compare the actual sales with the projected sales.

Each piece of information such as product, number of sales, sales value represents a
different dimension

The main objective of OLAP systems is to provide answers to ad hoc queries within the
shortest possible time regardless of the size of the datasets being used.
 Characteristics of good information

Accurate – information must be free from errors and mistakes. This is achieved by
following strict set standards for processing data into information. For example,
adding $6 + 10 would give us inaccurate information. Accurate information for our
example is multiplying $6 by 10.

Complete – all the information needed to make a good decision must be available.
Nothing should be missing. If TAX is an application to the computation of the total
amount that the customer should pay then, it should be included as well. Leaving it
out can mislead the customer to think they should pay $60 only when in actual fact,
they must pay tax as well.

Cost Effective – the cost of obtaining information must not exceed the benefit of the
information in monetary terms.

Relevant – the information must be relevant to the recipient. The information must
be directly related to the problem that the intended recipient is facing. If the ICT
department wants to buy a new server, information that talks about a 35% discount
on laptops would not be relevant in such a scenario.
 Characteristics of good information

User-focused – the information must be presented in such a way that it should

address the information requirements of the target user. For example, operational
managers required very detailed information, and this should be considered when
presenting information to operational managers. The same information would not be
appropriate for senior managers because they would have to process it again. To
them, it would be data and not information.

Authoritative – the information must come from a reliable source. Let's say you have
a bank account and you would like to transfer money to another bank account that
uses a different currency from yours. Using the exchange rate from a bureau de
change would not be considered authoritative compared to getting the exchange rate
directly from your bank.

Timely – information should be available when it is needed. Let's say your company
wants to merge with another company. Information that evaluates the other
company that you want to merge with must be provided before the merger, and you
must have sufficient time to verify the information.
“The cloud” refers to applications, services, and data storage on the Internet. These service
providers rely on giant server farms and massive storage devices that are connected via
Internet protocols. Cloud computing is the use of these services by individuals and
organizations. You probably already use cloud computing in some forms. For example, if you
access your e-mail via your web browser, you are using a form of cloud computing. If you use
Google Drive’s applications, you are using cloud computing. While these are free versions of
cloud computing, there is big business in providing applications and data storage over the
web. Salesforce (see above) is a good example of cloud computing – their entire suite of CRM
applications are offered via the cloud. Cloud computing is not limited to web applications: it
can also be used for services such as phone or video streaming.

Advantages of Cloud Computing

• No software to install or upgrades to maintain.
• Available from any computer that has access to the Internet. • Can scale to a large number
of users easily.
• New applications can be up and running very quickly.
• Services can be leased for a limited time on an as-needed basis.
• Your information is not lost if your hard disk crashes or your laptop is stolen.
• You are not limited by the available memory or disk space on your computer

Disadvantages of Cloud Computing • Your information is stored on someone else’s computer

– how safe is it? • You must have Internet access to use it. If you do not have access, you’re
out of luck. • You are relying on a third-party to provide these services.
Cloud computing has the ability to really impact how organizations manage technology.
For example, why is an IT department needed to purchase, configure, and manage
personal computers and software when all that is really needed is an Internet
connection? Using a Private Cloud Many organizations are understandably nervous about
giving up control of their data and some of their applications by using cloud computing.
But they also see the value in reducing the need for installing software and adding disk
storage to local computers. A solution to this problem lies in the concept of a private
cloud. While there are various models of a private cloud, the basic idea is for the cloud
service provider to section off web server space for a specific organization. The
organization has full control over that server space while still gaining some of the
benefits of cloud computing.

Virtualization
Virtualization One technology that is utilized extensively as part of cloud computing is
“virtualization.” Virtualization is the process of using software to simulate a computer or
some other device. For example, using virtualization, a single computer can perform the
functions of several computers. Companies such as EMC provide virtualization software
that allows cloud service providers to provision web servers to their clients quickly and
efficiently. Organizations are also implementing virtualization in order to reduce the
number of servers needed to provide the necessary services
Software gives the instructions that tell the hardware what to do. There are two basic
categories of software:
operating systems and applications. Operating systems provide access to the computer
hardware and make system resources available.

Application software is designed to meet a specific goal.

Productivity software is a subset of application software that provides basic business

functionality to a personal computer: word processing, spreadsheets, and presentations. An

ERP system is a software application with a centralized database that is implemented across
the entire organization. Cloud computing is a method of software delivery that runs on any
computer that has a web browser and access to the Internet. Software is developed through
a process called programming, in which a programmer uses a programming language to put
together the logic needed to create the program.

Which of the following are operating systems and which are applications:

Microsoft Excel, Google Chrome, iTunes, Windows, Android.

Data, Information, and Knowledge Data are the raw bits and pieces of information with no
context. If I told you, “15, 23, 14, 85,” you would not have learned anything. But I would have
given you data. Data can be quantitative or qualitative. Quantitative data is numeric, the
result of a measurement, count, or some other mathematical calculation. Qualitative data is
descriptive.

By itself, data is not that useful. To be useful, it needs to be given context. Returning to the
example above, if I told you that “15, 23, 14, and 85″ are the numbers of students that had
registered for upcoming classes, that would be information

Once we have put our data into context, aggregated and analyzed it, we can use it to make
decisions for our organization. We can say that this consumption of information produces
knowledge. This knowledge can be used to make decisions, set policies, and even spark
innovation.

The final step up the information ladder is the step from knowledge (knowing a lot about a
topic) to wisdom. We can say that someone has wisdom when they can combine their
knowledge and experience to produce a deeper understanding of a topic.

Examples of Data Almost all software programs require data to do anything useful. For
example, if you are editing a document in a word processor such as Microsoft Word, the
document you are working on is the data. The wordprocessing software can manipulate the
data: create a new document, duplicate a document, or modify a document. Some other
examples of data are: an MP3 music file, a video file, a spreadsheet, a web page, and an e-
book. In some cases, such as with an e-book, you may only have the ability to read the data.
Databases The goal of many information systems is to transform data into information in order
to generate knowledge that can be used for decision making. In order to do this, the system
must be able to take data, put the data into context, and provide tools for aggregation and
analysis. A database is designed for just such a purpose. A database is an organized collection
of related information. It is an organized collection, because in a database, all data is described
and associated with other data. All information in a database should be related as well;
separate databases should be created to manage unrelated information. For example, a
database that contains information about students should not also hold information about
company stock prices. Databases are not always digital – a filing cabinet, for instance, might be
considered a form of database

Relational Databases Databases can be organized in many different ways, and thus take many
forms. The most popular form of database today is the relational database. Popular examples
of relational databases are Microsoft Access, MySQL, and Oracle. A relational database is one
in which data is organized into one or more tables. Each table has a set of fields, which define
the nature of the data stored in the table. A record is one instance of a set of fields in a table.
To visualize this, think of the records as the rows of the table and the fields as the columns of
the table. In the example below, we have a table of student information, with each row
representing a student and each column representing one piece of information about the
student.
Rows and columns in a table In a relational database, all the tables are related by one or more
fields, so that it is possible to connect all the tables in the database through the field(s) they
have in common. For each table, one of the fields is identified as a primary key. This key is the
unique identifier for each record in the table
Designing a Database Suppose a university wants to create an information system to track
participation in student clubs. After interviewing several people, the design team learns
that the goal of implementing the system is to give better insight into how the university
funds clubs. This will be accomplished by tracking how many members each club has and
how active the clubs are. From this, the team decides that the system must keep track of
the clubs, their members, and their events. Using this information, the design team
determines that the following tables need to be created: • Clubs: this will track the club
name, the club president, and a short description of the club. • Students: student name, e-
mail, and year of birth. • Memberships: this table will correlate students with clubs,
allowing us to have any given student join multiple clubs. • Events: this table will track
when the clubs meet and how many students showed up.
Now that the design team has determined which tables to create, they need to define the
specific information that each table will hold. This requires identifying the fields that will
be in each table. For example, Club Name would be one of the fields in the Clubs table.
First Name and Last Name would be fields in the Students table. Finally, since this will be a
relational database, every table should have a field in common with at least one other
table (in other words: they should have a relationship with each other). In order to
properly create this relationship, a primary key must be selected for each table. This key is
a unique identifier for each record in the table. For example, in the Students table, it
might be possible to use students’ last name as a way to uniquely identify them. However,
it is more than likely that some students will share a last name (like Rodriguez, Smith, or
Lee), so a different field should be selected. A student’s e-mail address might be a good
choice for a primary key, since e-mail addresses are unique. However, a primary key
cannot change, so this would mean that if students changed their e-mail address we
would have to remove them from the database and then re-insert them – not an
attractive proposition. Our solution is to create a value for each student — a user ID —
that will act as a primary key. We will also do this for each of the student clubs
 EVENTS CLUBS MEMBER STUDENTS
SHIPS

Event-id Club-id Club-id Student-id

Event name Club name Student- First name

id
Club-id President Last name

Date Short Year of birth

description
Attendance Long
description

Student Clubs database diagram

DATA TYPES

Text, Number , Number, Date/Time, Currency, Paragraph, Object (image/ music file)

There are two important reasons that we must properly define the data type of a field. First,
a data type tells the database what functions can be performed with the data. For example,
if we wish to perform mathematical functions with one of the fields, we must be sure to tell
the database that the field is a number data type. So if we have, say, a field storing birth
year, we can subtract the number stored in that field from the current year to get age. The
second important reason to define data type is so that the proper amount of storage space
is allocated for our data. For example, if the First Name field is defined as a text(50) data
type, this means fifty characters are allocated for each first name we want to store.
However, even if the first name is only five characters long, fifty characters (bytes) will be
allocated. While this may not seem like a big deal, if our table ends up holding 50,000
names, we are allocating 50 * 50,000 = 2,500,000 bytes for storage of these values. It may
be prudent to reduce the size of the field so we do not waste storage space

The Difference between a Database and a Spreadsheet ???

DATABASE MANAGEMENT SYSTEMS

To the computer, a database looks like one or more files. In order for the data in the
database to be read, changed, added, or removed, a software program must access it.
Many software applications have this ability: iTunes can read its database to give you a
listing of its songs (and play the songs); your mobile-phone software can interact with your
list of contacts. But what about applications to create or manage a database? What
software can you use to create a database, change a database’s structure, or simply do
analysis? That is the purpose of a category of software applications called database
management systems (DBMS)

DBMS packages generally provide an interface to view and change the design of the
database, create queries, and develop reports. Most of these packages are designed to
work with a specific type of database.

Microsoft Access and Open Office Base are examples of personal database-management
systems. These systems are primarily used to develop and analyze single-user databases.
These databases are not meant to be shared across a network or the Internet, but are
instead installed on a particular device and work with a single user at a time.
Enterprise Databases A database that can only be used by a single user at a time is not
going to meet the needs of most organizations. As computers have become networked and
are now joined worldwide via the Internet, a class of database has emerged that can be
accessed by two, ten, or even a million people. These databases are sometimes installed on
a single computer to be accessed by a group of people at a single location. Other times,
they are installed over several servers worldwide, meant to be accessed by millions. These
relational enterprise database packages are built and supported by companies such as
Oracle, Microsoft, and IBM. The open-source MySQL is also an enterprise database. As
stated earlier, the relational database model does not scale well. The term scale here refers
to a database getting larger and larger, being distributed on a larger number of computers
connected via a network. Some companies are looking to provide large-scale database
solutions by moving away from the relational model to other, more flexible models. For
example, Google now offers the App Engine Datastore, which is based on NoSQL.
Developers can use the App Engine Datastore to develop applications that access data from
anywhere in the world. Amazon.com offers several database services for enterprise use,
including Amazon RDS, which is a relational database service, and Amazon DynamoDB, a
NoSQL enterprise solution.

Big Data A new buzzword that has been capturing the attention of businesses lately is big
data. The term refers to such massively large data sets that conventional database tools do
not have the processing power to analyze them. For example, Walmart must process over
one million customer transactions every hour. Storing and analyzing that much data is
beyond the power of traditional database-management tools. Understanding the best tools
and techniques to manage and analyze these large data sets is a problem that governments
Sidebar: What Is Metadata?

The term metadata can be understood as “data about

data.” For example, when looking at one of the values of
Year of Birth in the Students table, the data itself may be
“1992″. The metadata about that value would be the
field name Year of Birth, the time it was last updated,
and the data type (integer).

Another example of metadata could be for an MP3

music file. Information such as the length of the song,
the artist, the album, the file size, and even the album
cover art, are classified as metadata. When a database is
being designed, a “data dictionary” is created to hold
the metadata, defining the fields and structure of the
database.
Data Warehouse As organizations have begun to utilize databases as the centerpiece of their
operations, the need to fully understand and leverage the data they are collecting has
become more and more apparent. However, directly analyzing the data that is needed for
day-to-day operations is not a good idea; we do not want to tax the operations of the
company more than we need to. Further, organizations also want to analyze data in a
historical sense: How does the data we have today compare with the same set of data this
time last month, or last year? From these needs arose the concept of the data warehouse.
The concept of the data warehouse is simple: extract data from one or more of the
organization’s databases and load it into the data warehouse (which is itself another
database) for storage and analysis. However, the execution of this concept is not that simple.
A data warehouse should be designed so that it meets the following criteria: • It uses non-
operational data. This means that the data warehouse is using a copy of data from the active
databases that the company uses in its day-to-day operations, so the data warehouse must
pull data from the existing databases on a regular, scheduled basis. • The data is time-
variant. This means that whenever data is loaded into the data warehouse, it receives a time
stamp, which allows for comparisons between different time periods. • The data is
standardized. Because the data in a data warehouse usually comes from several different
sources, it is possible that the data does not use the same definitions or units. For example,
our Events table in our Student Clubs database lists the event dates using the mm/dd/ yyyy
format (e.g., 01/10/2013). A table in another database might use the format yy/mm/dd
(e.g., 13/01/10) for dates. In order for the data warehouse to match up dates, a standard
date format would have to be agreed upon and all data loaded into the data warehouse
would have to be converted to use this standard format. This process is called extraction-
transformation-load (ETL)
Benefits of Data Warehouses Organizations find data warehouses quite beneficial for a
number of reasons: • The process of developing a data warehouse forces an organization to
better understand the data that it is currently collecting and, equally important, what data is
not being collected. • A data warehouse provides a centralized view of all data being collected
across the enterprise and provides a means for determining data that is inconsistent. • Once
all data is identified as consistent, an organization can generate one version of the truth. This
is important when the company wants to report consistent statistics about itself, such as
revenue or number of employees. • By having a data warehouse, snapshots of data can be
taken over time. This creates a historical record of data, which allows for an analysis of trends.

Data Mining Data mining is the process of analyzing data to find previously unknown trends,
patterns, and associations in order to make decisions. Generally, data mining is accomplished
through automated means against extremely large data sets, such as a data warehouse. Some
examples of data mining include: • An analysis of sales from a large grocery chain might
determine that milk is purchased more frequently the day after it rains in cities with a
population of less than 50,000. • A bank may find that loan applicants whose bank accounts
show particular deposit and withdrawal patterns are not good credit risks. • A baseball team
may find that collegiate baseball players with specific statistics in hitting, pitching, and fielding
make for more successful major league players. In some cases, a data-mining project is begun
with a hypothetical result in mind. For example, a grocery chain may already have some idea
that buying patterns change after it rains and want to get a deeper understanding of exactly
what is happening. In other cases, there are no presuppositions and a data-mining program is
run against large data sets in order to find patterns and associations
Business Intelligence and Business Analytics With tools such as data warehousing and data
mining at their disposal, businesses are learning how to use information to their advantage.
The term business intelligence is used to describe the process that organizations use to take
data they are collecting and analyze it in the hopes of obtaining a competitive advantage.
Besides using data from their internal databases, firms often purchase information from data
brokers to get a big-picture understanding of their industries. Business analytics is the term
used to describe the use of internal company data to improve business processes and
practices.

Knowledge Management We end the chapter with a discussion on the concept of knowledge
management (KM). All companies accumulate knowledge over the course of their existence.
Some of this knowledge is written down or saved, but not in an organized fashion. Much of
this knowledge is not written down; instead, it is stored inside the heads of its employees.
Knowledge management is the process of formalizing the capture, indexing, and storing of
the company’s knowledge in order to benefit from the experiences and insights that the
company has captured during its existence.
we learned about the role that data and databases play in the context of information
systems. Data is made up of small facts and information without context. If you give data
context, then you have information. Knowledge is gained when information is consumed
and used for decision making. A database is an organized collection of related information.
Relational databases are the most widely used type of database, where data is structured
into tables and all tables must be related to each other through unique identifiers. A
database management system (DBMS) is a software application that is used to create and
manage databases, and can take the form of a personal DBMS, used by one person, or an
enterprise DBMS that can be used by multiple users. A data warehouse is a special form of
database that takes data from other databases in an enterprise and organizes it for analysis.
Data mining is the process of looking for patterns and relationships in large data sets. Many
businesses use databases, data warehouses, and datamining techniques in order to produce
business intelligence and gain a competitive advantage.
Wireless Networking Today we are used to being able to access the Internet wherever we go.
Our smartphones can access the Internet; Starbucks provides wireless “hotspots” for our
laptops or iPads. These wireless technologies have made Internet access more convenient
and have made devices such as tablets and laptops much more functional. Let’s examine a
few of these wireless technologies. Wi-Fi Wi-Fi is a technology that takes an Internet signal
and converts it into radio waves. These radio waves can be picked up within a radius of
approximately 65 feet by devices with a wireless adapter. Several Wi-Fi specifications have
been developed over the years, starting with 802.11b (1999), followed by the 802.11g
specification in 2003 and 802.11n in 2009. Each new specification improved the speed and
range of WiFi, allowing for more uses. One of the primary places where Wi-Fi is being used is
in the home. Home users are purchasing Wi-Fi routers, connecting them to their broadband
connections, and then connecting multiple devices via Wi-Fi. Mobile Network As the
cellphone has evolved into the smartphone, the desire for Internet access on these devices
has led to data networks being included as part of the mobile phone network. While Internet
connections were technically available earlier, it was really with the release of the 3G
networks in 2001 (2002 in the US) that smartphones and other cellular devices could access
data from the Internet. This new capability drove the market for new and more powerful
smartphones, such as the iPhone, introduced in 2007. In 2011, wireless carriers began
offering 4G data speeds, giving the cellular networks the same speeds that customers were
used to getting via their home connection.
Bluetooth
While Bluetooth is not generally used to connect a device to the Internet, it is an important
wireless technology that has enabled many functionalities that are used every day. When
created in 1994 by Ericsson, it was intended to replace wired connections between devices.
Today, it is the standard method for connecting nearby devices wirelessly. Bluetooth has a
range of approximately 300 feet and consumes very little power, making it an excellent
choice for a variety of purposes. Some applications of Bluetooth include: connecting a
printer to a personal computer, connecting a mobile phone and headset, connecting a
wireless keyboard and mouse to a computer, and connecting a remote for a presentation
made on a personal computer.

VoIP
A growing class of data being transferred over the Internet is voice data. A protocol called
voice over IP, or VoIP, enables sounds to be converted to a digital format for transmission
over the Internet and then recreated at the other end. By using many existing technologies
and software, voice communication over the Internet is now available to anyone with a
browser (think Skype, Google Hangouts). Beyond this, many companies are now offering
VoIP-based telephone service for business and home use.
Client-Server

The personal computer originally was used as a stand-alone computing device. A

program was installed on the computer and then used to do word processing or number
crunching. However, with the advent of networking and local area networks, computers
could work together to solve problems. Higher-end computers were installed as servers,
and users on the local network could run applications and share information among
departments and organizations. This is called client-server computing.

Intranet

Just as organizations set up web sites to provide global access to information about their
business, they also set up internal web pages to provide information about the
organization to the employees. This internal set of web pages is called an intranet. Web
pages on the intranet are not accessible to those outside the company; in fact, those
pages would come up as “not found” if an employee tried to access them from outside
the company’s network. Extranet

Sometimes an organization wants to be able to collaborate with its customers or

suppliers while at the same time maintaining the security of being inside its own
network. In cases like this a company may want to create an extranet, which is a part of
the company’s network that can be made available securely to those outside of the
company. Extranets can be used to allow customers to log in and check the status of their
orders, or for suppliers to check their customers’ inventory levels
Information Systems Security
The Information Security Triad: Confidentiality, Integrity, Availability (CIA)
Confidentiality
When protecting information, we want to be able to restrict access to those who
are allowed to see it; everyone else should be disallowed from learning anything
about its contents. This is the essence of confidentiality. For example, federal law
requires that universities restrict access to private student information. The
university must be sure that only those who are authorized have access to view the
grade records.

Integrity
Integrity is the assurance that the information being accessed has not been altered
and truly represents what is intended. Just as a person with integrity means what he
or she says and can be trusted to consistently represent the truth, information
integrity means information truly represents its intended meaning. Information can
lose its integrity through malicious intent, such as when someone who is not
authorized makes a change to intentionally misrepresent something. An example of
this would be when a hacker is hired to go into the university’s system and change a
grade. Integrity can also be lost unintentionally, such as when a computer power
surge corrupts a file or someone authorized to make a change accidentally deletes a
file or enters incorrect information.
Availability Information availability is the third part of the CIA triad. Availability means that
information can be accessed and modified by anyone authorized to do so in an appropriate
timeframe. Depending on the type of information, appropriate timeframe can mean
different things. For example, a stock trader needs information to be available immediately,
while a sales person may be happy to get sales numbers for the day in a report the next
morning. Companies such as Amazon.com will require their servers to be available twenty-
four hours a day, seven days a week. Other companies may not suffer if their web servers
are down for a few minutes once in a while.

Tools for Information Security

Authentication The most common way to identify someone is through their physical
appearance, but how do we identify someone sitting behind a computer screen or at the
ATM? Tools for authentication are used to ensure that the person accessing the information
is, indeed, who they present themselves to be. Authentication can be accomplished by
identifying someone through one or more of three factors: something they know, something
they have, or something they are. For example, the most common form of authentication
today is the user ID and password. In this case, the authentication is done by confirming
something that the user knows (their ID and password). But this form of authentication is
easy to compromise (see sidebar) and stronger forms of authentication are sometimes
needed. Identifying someone only by something they have, such as a key or a card, can also
be problematic. When that identifying token is lost or stolen, the identity can be easily
stolen. The final factor, something you are, is much harder to compromise. This factor
identifies a user through the use of a physical characteristic, such as an eye-scan or
fingerprint. Identifying someone through their physical characteristics is called biometrics
A more secure way to authenticate a user is to
do multi-factor authentication. By combining
two or more of the factors listed above, it
becomes much more difficult for someone to
misrepresent themselves. An example of this
would be the use of an RSA SecurID token. The
RSA device is something you have, and will
generate a new access code every sixty
seconds. To log in to an information resource
using the RSA device, you combine something
you know, a four-digit PIN, with the code
generated by the device. The only way to
properly authenticate is by both knowing the
code and having the RSA device
Information system development
Large organizational systems, such as enterprise systems, are generally developed and
maintained through a systematic process, known as a system life cycle, which consists of six
stages: feasibility study, system analysis, system design, programming and testing,
installation, and operation and maintenance. The first five stages are system development
proper, and the last stage is the long-term exploitation. Following a period of use (with
maintenance as needed), the information system may be either phased out or upgraded. In
the case of a major upgrade, the system enters another development life cycle.

The principal objective of a feasibility study is to determine whether the system is desirable
on the basis of long-term plans, strategic initiatives, and a cost-benefit analysis. System
analysisprovides a detailed answer to the question, What will the new system do? The next
stage, system design, results in an extensive blueprint for how the new system will be
organized. During the programming and testing stage, the individual software modules of
the system are developed, tested, and integrated into a coherent operational system.
Further levels of testing ensure continuing quality control. Installation includes final testing
of the system in the work environment and conversion of organizational operations to the
new system, integrating it with other systems already in place. The later stages of
development include such implementation activities as training users and modifying the
organizational processes in which the system will be used.