LESSON ONE : Introduction to Information Systems

Overview
After completing this chapter, you will be able to:
Define an information system
• Distinguish between computer literacy and information system literacy
• Explain why information systems are so important today and how they are transforming
organization and management
• Identify the major management challenges to building and using information systems in
organization
Define data, information, system and computer based information system

Summary of the subtopics

• Why information systems?
• Approaches to information systems
• Systems

1.1 Why information systems?

The environment of business has changed from the traditional environment where management
processes are treated as a face-to-f
ace, personal art and not a global coordination process while information itself was not treated as
an important asset for a firm. But today, most of the organization recognizes the importance of
information. For individuals, information systems are needed for entertainment and as an
enlightment to their life. Meanwhile for businesses, information systems are mostly needed to
help in decision making and problem solving. Besides that, it is used to gather, store and
manipulate information. There are three main factors that contribute to the recognition of the
importance of information to any organization.

• The first factor is the emergence and strengthening of the global economy. Globalization of the
world’s industrial economies greatly enhances the value of information to the firm and offers new
opportunities to businesses. Information system provides the communication and analytical power
that firms need for conducting trade and managing businesses on a global scale.
• The second factor is due to the transformation of industrial economies and societies into
knowledge and information based service economies. In knowledge based economies, knowledge
and information are key ingredients in creating wealth to an organization. Knowledge and
information are becoming the foundation for many new services and products. Intensification of
knowledge utilization in the production of traditional products has increased as well. New kinds
of knowledge- and information-intense organizations have emerged that are devoted entirely to
the production, processing, and distribution of information

• The third factor is due to the transforming of the business enterprise. Traditional firms was and
still is a hierarchical, centralized, structured arrangement of specialist that typically relies on a
fixed set of standard operating procedures to deliver a mass-produced product or services. But the
business enterprises has change into flattened, decentralized, flexible arrangement of generalists
who rely on nearly instant information to deliver mass-customized products and services uniquely
suited to specific markets or customers

Besides the above mentioned three main factors, there are also several trends that have made the
use of information systems very important in business:

• Computers’ power has grown tremendously, while their prices have dropped.
• Computer programs’ variety and ingenuity have increased.
• Quick and reliable communication lines and access to the Internet and World Wide Web have
become widely available and affordable.
• The fast growth of the Internet has opened opportunities, as well as competition in global
markets.
• An increasing ratio of the workforce is computer literate.
In this environment, organizations will quickly lag behind if they do not take advantage of this
progress and use the technologies and skills to meet their goals.
1.1.1 What is an Information System?
Information system consists of physical and nonphysical components working together. A
computer alone is not an information system. A computer combines with a software program may
constitute an information system, but only if the program is designed to produce information that
helps an organization or person to achieve a specific goal. Information system can be further
defined as a set of interrelated components that collect or retrieve, process, store and distribute
information to support decision making and control in an organization. Information systems can
also help managers and workers to analyze problems, visualize complex subjects and create new
subjects. It may contain information about significant people, places and things within the
organization or in the environment surrounding it. All information systems (IS) operate in the same
basic fashion whether they include a computer or not. However, the computer provides a
convenient means to execute the four main operations of an information system. The four main
activities are entering data into the IS (input), changing and manipulating the data in the IS (data
processing), getting information out of the IS (output) and storing data and information (storage).
Besides the four main operations, feedback is also needed to return the output to the appropriate
people or activities in the organization to evaluate and refine the input.

Storage

Input Process Output

Feedback
Figure 1.1 Diagram showing the four main operations

The first step in producing information is collecting and introducing data into the IS, known as
input. Input captures or collect raw data from within the organization or from its external
environment. Data are streams of raw facts representing events occurring in organizations or the
physical environment before they have been organized and arranged into a form that people can
understand and use. An input device is the tools used to enter data into an IS. Input devices
include the keyboard, infrared devices that sense bar codes, and voice recognition systems.
The second step in producing information is processing. This is the step where computer
contributes to the efficiency of the data processing, which is essential to a robust IS. In this step,
computer helps in converting the raw input into a more meaningful form through various methods
like conversion, manipulation and analysis. The computer’s speed and accuracy let organizations
process millions of pieces of data in several seconds.

Output is the information an IS produces and displays on an output device in the format most
useful to an organization. Information is data that have been shaped into a form that is meaningful
and useful to human beings. A good IS must be able to produce information that carries the
following characteristics:

• Relevant – information must pertain to the problem at hand.

• Complete – partial information is often worst than no information. It is difficult for managers
to make decisions without sufficient information.
• Accurate – erroneous information may lead to disastrous decisions.
• Current – decisions are often based upon the latest information available.
• Economical – in a business setting, the cost of obtaining information must be considered as
one cost element involved in any decision.
• Timely - Information must be available at the right time when needed. Otherwise, the benefit
of the information is lost.

The information needs to be transferred to the people or activities where it will be used. The most
widely used output device is the video display, or video monitor, which displays output visually.
However, computers can communicate output through speakers in the form of music of speech
and can also transmit it to another computer or electronic device in computer-coded form for later
interpretation.
One of the greatest benefits of using computers is their ability to store vast amount of data and
information. Computer stores information on both devices that are internal to the machine and
those that are external.
Feedback is output returned to appropriate people or activities in the organization to evaluate and
refine the input.
The four basic components of the computer system within an IS:
• Input device that introduces data into the IS.
• The computer processes data through the IS.
• Output device that displays the information produces by the IS.
• Storage device to store data and information.
In addition to the above components, communication also occurs between computers.
Communications technology lets users not only access multiple input, output and storage devices
with a single computer, but access data and resources of more than one computer as well.
1.1.2 A Business Perspective on Information System

From a business perspective, an information system is an organizational and management solution,

based on information technology, to a challenge posed by the environment. It emphasizes the
organizational and management nature of information system: To understand information system
– to be information system literate as opposed to computer literate – a manager must understand
the broader organization, management and information technology dimensions of systems and
their power to provide solutions to challenges and problems in the business environment

Organizations Technology

Informatio
n System

Management

Figure 1.2

The key elements of an organization are its people, structure and operating procedures, politics
and culture. An organization coordinates work through a structured hierarchy and formal standard
operating procedures (SOPs). SOPs are formal rules for accomplishing tasks that have been
developed over a long time. These rules guide employees in variety of procedures. Most of the
procedures are formalized and written down, but many others are informal work practices. Major
organizational functions are like sales and marketing, manufacturing, finance, accounting and
human resources (personnel), research and development.
• Research and development: The research and development department of an organization does
two things. (1) it carries out research relating to discoveries to the organizations new and current
products. (2) it does product development and tests and modifies new and existing products and
services created by the researchers.
• Production: The production department makes the product or provides the services. In a
manufacturing company, it takes the raw materials and has people and machinery convert it into
finished goods.
• Sales and marketing: The marketing department oversees advertising, promotion and sales. The
people in this department plan, price, advertise, promote, package, and distribute the services
and products. The sales representatives use laptops, cell phones, e-mail and faxes in their work
while on the road.
• Accounting and finance: this department handles all financial matters .it handles cash
management, pays bills, taxes, issue cheques etc. They also provide financial forecasting and
financial budgets.
• Human resource: This department finds and hires people, administers leave and retirement
matters. It is also concerned with matters of compensation, retirement and employee relations.
Management’s job is to make sense out of many situations faced by organization and formulate
action plans to solve organizational problems. A substantial part of management is creative work
driven by new knowledge and information. Information technology can play a powerful role in
redirecting and redesigning the organization. Managerial roles and decisions vary at different
levels of the organization.
• Senior managers – make long-range strategic decisions about products and services to
produce.
• Middle managers – carry out the programs and plans senior management.
• Operational managers – responsible for monitoring the firm’s daily activities.

Information technology is in one of many tools available to managers for coping with change
which consists of computer hardware, computer software, storage technology and communication
technology. Computer hardware is physical equipments used for input, processing and output
activities in an information system. Computer software is detailed, preprogrammed instructions
that control and coordinate the work of computer hardware components in an IS. Storage
technology is physical media and software governing the storage and organization of data for use
in an IS. Lastly, communication technology is physical devices and software that link various
computer hardware components and transfer data for use in an IS. A network links two or more
computers to share data or resources such as printer.

1.2 Approaches to information systems

Multiple perspectives on IS shows that the study of information systems is a multidisciplinary

field, where no single theory or perspective dominates. Figure 1.3 shows the major disciplines
that contribute problem, issues and solutions. In general, the field can be divided into technical,
behavioral and socio-technical approaches.
Technical approach emphasizes mathematically based, normative models to study information
systems as well as the physical technology and formal capabilities of these systems. Three
disciplines that contribute to this approach are:
• Management Science: emphasizes the development of models of decision making and
management practices.
• Computer Science: establishing theories of compatibility, method of computation and
methods of data storage and access.
• Operation Research: focuses on mathematical technique for optimizing selected
parameters of organizations. E.g. transportation, inventory control and transaction cost.
Behavioral approach Is more concern with development and long-term maintenance of
information systems, which emphasizes on issues like strategic business integration, design,
implementation and utilization. Three disciplines that contribute to this approach are
Psychology: concerned with individual responses to IS and cognitive models of human reasoning.
Economics: impact of information systems on the economy.
Sociology: Impact of IS on groups, organization and society

Computer Science
Management
Science Operation
Research
MIS
Psychology
Economics Sociology
 Figure 1.3
Socio-technical approach avoids a purely technological approach to information systems. This
approach stress the need to optimize the performance of the system as a whole where both the
technical and behavioral components needs attention, which means that the technology must be
changed and designed in such a way as to fit organizational and individual needs meanwhile
organization and individual must also be changed through training, learning and planned
organizational change in order to allow the technology to operate and prosper.
1.3 The New Role of Information Systems in Organization

The new relationship (as illustrated in Figure 1.4) between organization and IS shows that there is
a growing interdependence between organizational business strategy, rules and procedures on the
one hand and information system software, hardware, databases and telecommunications on the
other. The changes in strategy, rules and procedures require changes in hardware, software,
databases and telecommunications. This relationship becomes critical when management plans
for the future.

Hardware

Business
Software Database

Interdependence

Tele-communication

Organization Information System

Figure 1.4

A second change in the relationship of IS and organizations results from the growing complexity
and scope of system projects and applications. Over time, information systems have come to play
a larger role in the life of the organization. Early information systems brought about largely
technical changes that were relatively easy to achieve and accomplish and affects few people.
Later systems affected managerial control and behavior (who has what information about whom,
when and how often); ultimately systems influenced “core” institutional activities (what products
and services are produced, under what conditions and by whom) concerning products, markets,
suppliers and customers.

1.3.1 New Options for Organizational Design: The Networked Enterprise

The explosive growth in computing power and networks is turning organizations into networked
enterprises, allowing information to be instantly distributed within and beyond the organization.
This capability can be used to redesign and reshape organizations, transforming their structure,
scope of operations, reporting and control mechanisms, work practices, work flows, products and
services. The following describes the new ways of conducting business electronically.
Flattening organizations will results in fewer levels of management, with lower-level
employees being given greater decision-making authority. Those employees are empowered to
make more decisions than in the past are no longer work standard 8 hours and no longer necessary
work in an office and they can be scattered geographically. Contemporary information technology
makes more information available to line workers so they can make decisions that previously had
been made by managers. Networked computers have made it possible for employees to work
together as a team. Team members can collaborate closely even from distant locations. These
changes mean that the management span of control has also been broadened, allowing high-level
managers to manage and control more workers spread over greater distances.
Separating work from location is possible as organizing globally while working locally is made
possible through technologies like e-mail, the Internet, video conferencing. Communication
technology eliminates distance as a factor for many types of work in many situations.
Collaborative teamwork across thousands of miles has become a reality designer’s work on the
design of a new product together even if they are located on different continents. Companies are
not limited to physical locations or their own organizational boundaries for providing products and
services. Virtual organization becomes reality where organization using network linking people,
assets and ideas to create and distribute products and services without being limited by traditional
organizational boundaries or physical location.
Reorganizing work flows as IS have been progressively replacing manual work procedures with
automated work procedures, work flows and work processes. Improved work flow management
enabled many organizations not only to cut cost significantly but also to improve customer service
at the same time.
Increases flexibility of organization as companies uses communication technology to organize in
more flexible way, increases their ability to respond to changes in the marketplace and to take
advantage of new opportunities. Large organization can use information technology to achieve
some of the agility and responsiveness of small organizations like mass customization, the use of
software and computer networks to finely control production so that products can be easily
customized with no added cost for small production runs. The result is a dynamically responsive
environment in which products can be turned out in a greater variety.
Information technology is recasting the process of management, providing powerful new
capabilities to help managers plan, organize, lead and control. For example the use of Enterprise
Resource Planning (ERP) is a business management that integrates all facets of the business,
including planning, manufacturing, sales and finance so that they can become closely coordinated
by sharing information with each other.
Reducing organizational boundaries as networked information system enables transactions to
be exchanged electronically among different companies, hence reducing the cost of obtaining
products and services from outside the firm. An inter-organizational system is a system that
automates the flow of information across organizational boundaries and links a company to its
customers, distributors or suppliers.

1.4 Systems concepts

1.4.1 What is a system?

It is a group of interrelated components working together towards a common goal by accepting

inputs and producing outputs in an organized transformation process.

1.4.2 Types of systems

Formal system
A system that has accepted and fixed rules and regulations and they follow fixed procedures of
collecting, storing, processing, disseminating and using the data. The system is structured i.e. they
operate in conformity with predefined procedures known as SOP (standard operating procedures).

Informal system
This is a system that relays on unstated rules of behavior. In this system there is no arrangement
of how information is collected, stored or processed.

Deterministic system
A system which operates on some predefined procedures hence the future of the system can be
predicted accurately depending on the situation events. For the future to be predicted accurately,
the current state of affairs and the operations behavior or properties must be precisely known.

Probabilistic system
These are systems that operate on probability i.e. chance hence their future behavior cannot be
determined accurately.
An IS is both a deterministic and probabilistic system. It is deterministic in the sense that there is
an assumption that definite information is expected from the input data worked upon according to
some predefined instruction. An IS is probabilistic in that the output might be an unexpected
composition.

Cybernetic system
These are systems that have to adapt to their environment for survival. They are also described as
adoptive or self-organizing, self-monitoring, self-regulating system

Closed and open systems

Closed system: this is a system that does not interact with its events. It does not communicate from
(inputs) or to (outputs) to its environment. They are more relevant to scientific systems than social
systems.
Open system: a system which communicates with the environment. they get disorganized and need
to be regulated.
The system is concept is made more useful by inclusion of:
• Feedback: data about the performance of the system
• Control: systems that monitors the performance of the system by evaluating the feedback.

Entropy: characteristics where performance of the system tends to deteriorate over time. It is
also known as tendency of a system to lose its homosteostasis.

Chapter Summary
The new relationship between organization and IS shows that there is a growing interdependence
between organizational business strategy, rules and procedures on the one hand and information
system software, hardware, databases and telecommunications on the other. The changes in
strategy, rules and procedures require changes in hardware, software, databases and
telecommunications.