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types of hardware and software used in an information system, including computers and networking equipment. The goal of Information System is to enable managers to make better decisions by providing quality information. The physical equipment used in computing is called hardware. The set of instructions that controls the hardware is known as software. In the early days of computers, the people directly involved in are tended to be programmers, design analysts, and a few external users. Today, almost everyone in the firm is involved with the information system. Procedures are instructions that help people use the systems. They include items such as user manuals, documentation, and procedures to ensure that backups are made regularly. Data- bases are collections of related data that can be retrieved easily and processed by the computers. As you will see in the cases throughout our book, all of these components are vital to creating an effective information system. To create an effective information system, you need to do more than simply purchase the various components. Quality is an important issue in business today, particularly as it relates
to information systems. The quality of an information system is measured by its ability to provide exactly the information needed by managers in a timely manner. The information must be accurate and up-to-date. Users should be able to receive the information in a variety of formats: tables of data, graphs, summary statistics, or even pictures or sound: Users have different perspectives and different requirements, and
a good information system must have the flexibility to present information in diverse forms for each user.
1.2 Data, Information, Knowledge, and Wisdom Let us consider the case of a retail store that is trying to increase sales. Some of the data available includes sales levels for the last 36 months, advertising expenses, and customer comments from surveys. By itself, this data may be interesting, but it must be organized and analyzed to be useful in making a decision. For example, a manager might use economic and marketing models to forecast patterns and determine relationships among various advertising expenses and sales. The resulting information (presented in equations, charts, and tables) would clarify relationships among the data and would be used to decide how to proceed It requires knowledge to determine how to analyze data and make decisions. Education and experience create knowledge in humans. A manager learns which data to collect, the proper models to apply, and ways to analyze results for making better decisions. In some cases, this knowledge can be transferred to specialized computer programs (expert systems). Wisdom is more difficult to define but represents the ability to learn from experience and adapt to changing conditions. In this example, wisdom would enable a manager to spot trends, identify potential problems, and develop new techniques to analyze the data.
Timeliness: Information must reach the user in a timely manner, just when it is needed; not too early, because by the time it is used it would be out-of-date; not too late because the user will not be able to incorporate it into his/her decision-making. Appropriateness: Information must be relevant to the person who is using it. It must be within the sphere of his/her activities so that it can be used to reduce uncertainty in his/her decision-making. Accuracy: Accuracy costs. We don't always need 100% accurate information so long as we know the degree of accuracy it represents (eg: + or - 5%). (Remember the value of information). Conciseness: Information should always contain the minimum amount of detail that is appropriate for the user. Too much detail causes information overload. Frequency: Frequency is related to timeliness. Too often the information presented is linked to the calendar (end of the week, beginning of the month); its frequency should be synchronized with the timing of the decision making of the user. Understandability: The format and presentation of information are very important. Some people prefer tabular information, whereas others may need it in a graphical form. Also the use of colors enhances the understandability of what is presented.
Relevant: It pertains to the particular problem. What data is relevant depends on the decision-making model used. E.g. university admissions officials may choose to consider the results of some high-school test irrelevant, if they believe that it doesnt improve the chances of some applicant later becoming a successful student.
Complete: All the relevant parts are included. E.g. marketing data about household incomes may lead to bad decisions, if not accompanied by consumption habits of the target population . Current: Decisions are often based on the latest information available
Economical: The costs of gathering information should be justified by the overall benefits
the following basic interacting components (functions): 1. Input 2. Processing 3. Output 4. Feedback 5. Control
Let me explain the concept of system with an example. The following example will
give you better understanding about System. Example: Sales Force Automation System (SFAS) Suppose you are a regional manager who supervises 100 salespersons in Mumbai. Your company's headquarters are located in Chennai. Your performance is daily evaluated by the headquarters. You are compared with managers in other regions such as Delhi, Kolkata etc. Your company publishes various books: encyclopedia, children's books, etc. In short, the headquarters are not interested in each salesperson's performance. All they care about is your performance, i.e. the regional sales results. In order to save your job, you have to keep increasing sales. You have to motivate, encourage, help, and discipline salespeople in Mumbai, if they perform, your job is secured. If they don't perform, you will be fired.
Case 1 Each morning, you are supposed to submit a daily report to the headquarters. In the report, you should include the total sales made in Mumbai yesterday, and sub-total of each category (encyclopedia, children's books, etc.). At the end of each day, a salesperson submits his sales record to the Mumbai regional office. The record is added to compute the total sales, and also summarized in terms of book category. The total sales, and sub-total sales in terms of book category, are presented in the daily report. Here, the daily record submission indicates "INPUT" in a system. Adding and summarizing indicates "PROCESSING" in a system. Reporting indicates "OUTPUT" in a system.
Case 2:
In order to increase sales, you decided to implement a kind of performance under your
supervision.
According to the program, if a salesperson makes daily sales greater than one million, he will be
awarded a gift certificate of Ebony Department Store. On the other hand, if a salesperson makes daily sales less than one hundred thousand rupees, he will be given a warning. If he makes a sales less than one hundred thousand rupees two days in a row, a more serious warning letter will be sent to him. If he makes sales less than one hundred thousand rupees three days in a row, he will be fired.
If you manually check all the sales records to comply the new performance evaluation program, most of your time will be occupied by processing the data and paperwork In other words, you will have no time to do anything else: reading a new book, learning new things, or playing golf, etc. In contrast, if you develop an information system that can carry out the performance evaluation program, your life will be much easier. The program is now automated with a computer-based information system. A major difference between this new system in Case 2 and the previous system in Case 1 is that feedback and control functions are added to the new information system.
yourself today?
Most of us think only of hardware and software when we think of an Information System. There is another component of the triangle that should be considered, and that's the people side, or "persware." Think of it
this way:
PERSWARE
SOFWARE HARDWARE
We talk about the input, processing, output and feedback processes. Most important is the feedback
process; unfortunately it's the one most often overlooked. Just as in the triangle above, the hardware (input and output) and the software (processing) receive the most attention. With those two alone, you have computer literacy. But if you don't use the "persware" side of the triangle to complete the feedback loop, you don't accomplish much. Add the "persware" angle with good feedback and you have the beginnings of information
literacy.
An information system differs from other kinds of systems in that its objective is to monitor/document the operations of some other system, which we can call a target system. An information system cannot exist without such a target system. For example, production activities would be the target system for a production scheduling system, human resources in the business operations would be the target system of a human resource information system, and so on. It is important to recognise that within a vending machine there is a component/sub-system that can be considered an information system. In some sense, every reactive system will have a subsystem that can be considered an information system whose objective is to monitor and control such a reactive system.
Organizations
Organizations are funny things. Each one tends to have its own individual personality and yet share many things in common with other organizations. Look us at some of the organizations
you may be associated with - cricket team, fraternity, health club, or a child's cricket team. See, organizations exist everywhere and each of them has its own structure, just 5
cases, habits.
A cricket team needs talented, well-trained players at different positions. Sometimes, the success of the team depends on a good, well-informed coach or manager. So too with the workplace organization. Business organizations need many kinds of players with various
organizations. Management
IT Organisation
sometimes to learn how to use every feature of all those new products. 6
1.7 Components of an IS
In an organization, information systems consist of the following components. These components will formulate a system, which will help us to gather the required information for making decision in various levels of management. We will now see these components in brief and discuss them in detail in the later lectures.
Data - Input that the system takes to produce information Hardware - Computer itself and its peripheral equipment: input, output, storage devices; includes data communication equipment Software - Sets of instructions that tell the computer how to input, process, output and store data Communication networks - Hardware and software specializing in transmission and reception of electronic data People - IS professionals and users who design, construct, operate and maintain IS Procedures - Rules to process data, e.g. priorities in running different applications, security measures, routines for malfunctioning IS, etc.
information systems can be easily achieved by employing these resources to their optimum level by keeping in view that the purpose of using IS in an organization.
People Resources o End users o IS specialists Hardware Resources o Machines o Media Software Resources o Program Operating Systems (OS) Examples: Windows, Unix, etc. Application Software Examples: Excel, Access, MS-Word, etc. Application software that makes people buy computers that can run the software. Example 1: Lotus 1-2-3 (a spreadsheet program): In early 1980s, personal computer market was dominated 7
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PC compatibles that run on MS-DOS. Example 2: email system. To use an email system (software), people buy computers.
o
Procedures: Operating instructions for the people who will use an information system.
Examples: Instructions for filling out a paper form or using a software
package. Data Resources: o Data vs. Information 1. Data: Raw facts, observations, business transactions Objective measurements of the attributes (characteristics) of entities (people, places, things, events, etc.) Attributes can be last name, first name, gender, etc. for an entity of "people." 2. Information: Data that have been converted into a meaningful and useful context for specific end users. Processed data placed in a context that gives it value for specific end users. 1. Its form is aggregated, manipulated, and organized. 2. Its content is analyzed and evaluated. 3. It is placed in a proper context for a human user. Network Resources: o Communications media o Communications processors o Network access & control software
available information into a competitive advantage for your company. Emergence of the Global Economy
Next time you purchase a product, any product, look at the fine print and see where it's made. It could be China, or the Philippines, or India, or even in the USA. You can disagree with the many manufacturing jobs that are being moved from the U.S. to foreign countries. But look at the vast number of jobs that are being created in this country. Maybe they aren't the traditional factory jobs we're used to. In fact, many of our new jobs are in the information industry. Many of them service whole new markets that didn't exist just a few years ago. There was no position called "Webmaster" in 1991 because the Web didn't exist. But now, that particular job category is one of the fastest growing in the overseas. The global economy I am talking about is being made possible by technology. And that's why it's so important that you understand how to use Information Systems Technology instead of just
computer technology. There's a big difference between the two, and we'll talk about it more. Transformation of Industrial Economies
"In a knowledge- and information-based economy, knowledge and information are key ingredients in creating wealth." Think back to the early 1900s when the horse and buggy were the main form of transportation. Along came a guy named Ford who built a whole new industry around the automobile. Many jobs, such as horse groomers, horse shoers, and buggy manufacturers, were lost forever. Now think about all the new jobs that were created - not just in the factories but all the other businesses associated with the car. The people in the
horse and buggy industry adapted, retrained for the new jobs, and the whole country changed. The same thing is happening now with the information industry. Many of the new jobs that are being created have better working conditions, better pay, and more advantages than the old jobs had. You just have to be equipped to take advantage of the situation. You have to take advantage of retraining opportunities. You have to gain the skills necessary for the transformation of the industries that have been a mainstay of this country. It's not that hard - it just takes a lot of hard work. We often think of industries such as manufacturing and financial institutions as information-based. But even farmers and ranchers in this country are learning informationbased skills so that they can become more efficient and cut costs. They are taking advantage of the technological explosion by using computers and Global Positioning Systems on their farms and ranches to increase crop yields or reduce workloads. They're catching on to the idea that Information Systems are a key to success. Transformation of the Business Enterprise You can't help but know about the entire job cuts occurring in our country. It seems like every week we hear about thousands and thousands of people losing their jobs. Back in the 80s most of the job losses were in the blue-collar sector. In the 90s it seems many of the cuts are being made in the white collar, management jobs. Why? Think about it. Technology, to a large extent, has driven organizations to change the way they operate and that includes the way they manage. We're going to take an in-depth look at how organizations work and how they've been transformed by technology. 11.602 9
situation.
An organization can't afford to view its information resources as belonging to either the techies (technical approach) or the non-techies (behavioral approach). Responsibility for information belongs to everyone in the organization. This is the sociotechnical approach, that is, a combination of the two. Everyone has to work together to ensure that Information
technical and behavioral approaches to be combined for the good of the organization.
National Level
Developed nations have adopted the diffusion of information systems and technologies as a national policy. There appear to be two approaches at the national level. Countries like Japan and the United Kingdom have invested in the technical infrastructure
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to enable them to leverage the power of information and communication technologies. Company Level
Many companies have attained higher product and service quality, shorter product cycles, lower costs and better responsiveness to customer requirements through the use of IS. Information systems allow the automation of certain functions (eg: inventory management or sales order processing), provide critical information for decision making and integrate business processes. Successful companies leverage the power of information as a competitive
information as a resource, like money, equipment or energy. Managers must use IS to:
rapid changes in technology intense international competition faster product life cycles more complex and specialised markets
Managers:
are responsible for investments in IS need to be proactive and selective must understand how IS are used in the functional areas of business.
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If you take a look at the above figure you can understand the evolution of Information Systems in organizations. Technology was considered, well, too technical for the rest of us to understand. Computers were relegated to the back room with a few technicians running around in white coats. No one else understood what these people did or how they did it. It was a different world and actually seemed disconnected from the mainstream operations of
the company.
As the time line indicates, technology and its associated Information Systems are now integrated throughout the organization. Everyone is concerned about technologys role and impact on their work activities. End users take on greater responsibilities for the success of Information Systems and are actually doing a lot of the work that once belonged to the techies. Even the executive levels of an organization can no longer ignore the technology and
involved in the introduction or change of technology and everyone plays a part in its success.
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Even though the Internet as a whole has existed since 1969, the World Wide Web
didn't exist until around 1993-1994. That's less than 10 years. Now you can't pick up a magazine or a newspaper, turn on the television or radio, even drive by a billboard, without some kind of reference to "dot com." Businesses are rushing to the Internet in an effort to keep up with the competition or to create whole new businesses. Now organizations struggle with such issues as how to design and develop a Web site or how to determine a fair email
opportunities just as quickly. Now an organization has to design new systems, or transform old ones, with not just the company in mind, but 100 million other users of the Internet, Extranets, and Intranets. They have to decide how much or how little information to provide in what way, with what level of access, how best to present it, etc. It's a huge job! New Options for Organizational Design: The Networked Enterprise Many of the job losses of the 1990s occurred because technology allowed organizations operate efficiently with flatter organizations - with fewer levels of bureaucracy. One manager can now oversee a larger group of people. More important, technology increases the span of communication a manager can accomplish with a single email. You can
make information available to a greater number of people much more easily than ever before.
But wait. You can make that information available to more people, but you have to train them how to use it, and when it's appropriate to use it and with what latitude they can use it. Again, it all comes back to the "persware" portion of the triangle. Yes, your hardware enables more people to connect to the Information System, and the software is becoming much easier to use and more widespread than ever before. But you still have to concentrate on the people who are using the software to connect to the hardware. Technology now allows workers to work from anywhere. It's becoming common for companies to literally shift their work through time zones. That is, the person in New York will shift blueprints for a new product to a worker in California. The Californian can then collaborate on the product for an additional three hours before zipping it to another person across the ocean who will work on it while the others sleep. Talk about telecommuting! Technology now allows companies in foreign countries to merge their organizations in ways never before possible. Think of Daimler from Germany and Chrysler in Michigan. Opportunities for new products and new production methods exist with this merger. However, think of the challenges it poses to management information systems and employees.
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The figure you see depicts the possibilities of virtual organizations. XYZ and ABC companies can team up, work on a project, and then go their separate ways. ABC could then seek out LMN corporation to develop a new technology from which both will gain but which neither could accomplish on their own. This is happening more and more in technology companies. In November 1998, America Online purchased Netscape. At the same time AOL announced a collaboration with Sun Microsystems to develop and deliver enhanced technology that AOL couldn't produce on its own. A few years ago, virtual organizations were difficult to develop and even more difficult to manage. New technologies and new management information systems now make such partnerships easier and more productive
customer demands.
A few years ago we couldn't imagine having Levi Strauss make a pair of jeans just for us. It wasn't possible for a gardening company to produce a catalog strictly for our own backyard. There was no way for an airline reservation company to know your favorite city to visit and send you special ticket deals for a weekend getaway in a weekly email message. All that is now possible thanks to the newer management information systems. But with all these
possible through new and improved technology. Companies are realizing that they can't afford "islands of information" and must have the means to share information resource across all boundaries. And speaking of boundaries, most of those are either rearranged or eliminated 11.602 14
core processes to accommodate the changes required for doing business on the Web.
There are many opportunities offered by the Internet, Extranets, and Intranets. Yet there are many problems associated with developing a company's electronic commerce and electronic business. It is easy to put up a Web site - a snazzy, colorful Web site that looks very pretty and may even be easy to use. But you must consider how you're going to incorporate that part of your business with the other, more established methods of doing business. What internal processes must you change or adapt? What new processes must you establish? What training must you do with the people who will run the E-business, both
1.12 Summary
Information Literacy is more than just clicking a mouse, pounding the computer keyboard, or surfing the Web. It's about integrating various elements of an organization, technical and non-technical, into a successful enterprise. As a successful manager you must concentrate on all three parts of the Information Systems triangle (hardware, software, and persware) and integrate them into a single, cohesive system that serves the needs of the organization, the wants of the customer, and the desires of the employees. The more complex,
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Points to Ponder
Business Trends
Changing business environment
Specialization
Management by Methodology and Franchises
Object Orientation
Decentralization and Small Business
Re-engineering
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Information Technology
Continues to advance at a rapid pace Rate of advancement has slowed, doubling every 18 to 24 months Has played a substantial role in most organizations Has altered the concept of time and distance May have implications for managers May potentially impact society
___________________________________ ___________________________________
ENVIRONMENT
Customers Suppliers ORGANIZATION INFORMATION SYSTEM
INPUT
PROCESS
___________________________________ ___________________________________
FEEDBACK
Regulatory Agencies
Stockholders
Competitors
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Global Perspective
Many organizations are expanding their operations beyond national borders. Organizations do not have to a head office located in any one country. Information technology allows for communications and information dissemination. Networks and communications allow information to move around the globe unimpeded.
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Business Perspective of IS
Organizations
We must understand the nature, the purpose, and the structure of the organizations that will use the IS.
People
We must understand how they use the IS, why they use the IS, and it affects their jobs and daily activities.
Technology
We must understand the capabilities, limitations, and
functionality if the technology that underlies the IS.
Review Questions
1. Why is it important to understand the difference between Computer Literacy and Information Literacy? 2. What are the three elements of an Information System that managers must consider?
3. What are some of the factors managers must consider when considering changes in
technology? 4. What are some of the new roles Information Systems are playing in organizations?
Discussion Questions
Discuss the Benefits of Information Technology in doing successful business across the world? List down the advantages and disadvantages and explain how IT is giving
Application Exercises
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commerce or e-business?
2. Using the resources of your library (government data, annual reports, business publications, etc.), find statistics to document at least two business trends. Draw
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