Unit 2

Information Systems: Concepts and

Management

CHAPTER OUTLINE
2.1 Types of Information Systems
2.2 Competitive Advantage and Strategic
Information Systems
2.3 Why Are Information Systems Important
to Organizations and Society?
2.4 Managing Information Resources

LEARNING OBJECTIVES
Describe the components of computer-based

information systems.
Describe the various types of information
systems by breadth of support.
Identify the major information systems that
support each organizational level.
Describe strategic information systems
(SISs), and explain their advantages.

Learning Objectives (continued)

Describe porters competitive forces model

and his value chain model, and explain how IT

helps companies improve their competitive
positions.
Describe five strategies that companies can
use to achieve competitive advantage in their
industries.
Describe how information resources are
managed, and discuss the roles of the
information systems department and the end
users.

Chapter Opening Case

Upstream activities: exploration
and production

Downstream activities: refining,

marketing, transportation, sales

2.1 Types of Information Systems

Computer-based information systems (CBIS)
use computer technology to perform some or
all of their tasks and are composed of:
Hardware
Software
A Database
A Network
Procedures
People

Information Systems Inside Your

Organization

Information Technology Outside Your

Organization

Application Programs
An application program is a computer
program designed to support a specific task,
a business process or another application
program.

Breadth of Support of Information

Systems

Functional area information systems

Enterprise resource planning systems
Transaction processing systems
Interorganizational information systems

Breadth of Support of Information

Systems
Functional area information systems support

particular functional areas in an organization.

Enterprise resource planning systems tightly integrate
the functional area information systems via a common
database.
Transaction processing systems support the
monitoring, collection, storage, and processing of data
from the organizations basic business transactions.
Interorganizational information systems connect two
or more organizations. Examples are supply chain
management systems and electronic commerce
systems.

Information Systems Support for

Organization Employees
Office automation systems
Functional area information systems
Business intelligence systems
Expert Systems
Dashboards

Information Systems Support for

Organization Employees
Office automation systems typically support the clerical staff, lower

and middle managers, and knowledge workers. These people use

OASs to development documents, schedule resources, and
communicate.
Functional area information systems summarize data and prepare
reports, primarily for middle managers.
Business intelligence systems provide computer-based support for
complex, non-routine systems, primarily for middle managers and
knowledge workers.
Expert systems attempt to duplicate the work of human experts by
applying reasoning capabilities, knowledge, and expertise within a
specific domain.
Dashboards support all managers by providing rapid access to timely
information and direct access to structured information in the form of
reports.

2.2 Competitive Advantage and

Strategic Information Systems
Competitive Advantage
Strategic Information Systems (SIS)

Porters Competitive Forces Model

The best-known framework for analyzing
competitiveness is Michael Porters
competitive forces model (Porter, 1985).

Porters Competitive Forces Model

Porters Competitive Forces Model

Threat of entry of new competitors is high

when it is easy to enter a market and low

when significant barriers to entry exist.
A barrier to entry is a product or service
feature that customers expect from
organizations in a certain industry.
For most organizations, the Internet
increases the threat that new competitors will
enter a market.

Porters Competitive Forces Model

The bargaining power of suppliers is high

when buyers have few choices and low when

buyers have many choices.
Internet impact is mixed. Buyers can find
alternative suppliers and compare prices
more easily, reducing power of suppliers.
On the other hand, as companies use the
Internet to integrate their supply chains,
suppliers can lock in customers.

Porters Competitive Forces Model

The bargaining power of buyers is high

when buyers have many choices and low

when buyers have few choices.
Internet increases buyers access to
information, increasing buyer power.
Internet reduces switching costs, which are
the costs, in money and time, to buy
elsewhere. This also increases buyer power.

Porters Competitive Forces Model

The threat of substitute products or

services is high when there are many

substitutes for an organizations products or
services and low where there are few
substitutes.
Information-based industries are in the
greatest danger from this threat (e.g., music,
books, software). The Internet can convey
digital information quickly and efficiently.

Porters Competitive Forces Model

The rivalry among firms in an industry is

high when there is fierce competition and low

when there is not.

Porters Value Chain Model

This model identifies specific activities where
organizations can use competitive strategies
for greatest impact.
Primary activities
Support activities

Porters Value Chain Model

Strategies for Competitive Advantage

Cost Leadership
Differentiation
Innovation
Operational Effectiveness
Customer-orientation

2.3 Why are Information Systems

Important to Organizations & Society
IT will reduce the number of middle

managers.
IT will change the managers job.
IT impacts employees at work.
IT provides quality-of-life improvements.

Ergonomic Products

When ergonomics doesnt work

When all else fails.

Enabling People with Disabilities

to Work with Computers

The Robot Revolution

See Invasion of the Humanoid Robots

The Robot Revolution

See video of
Big Dog robot
in action

The Robot Revolution (continued)

See ASIMO commercial
See video of ASIMO in action

Hondas ASIMO robot

DeLaval Voluntary Milking System

Improvements in Health Care

Improvements in Health Care

(continued)

The Pill Cam: Wireless endoscopy

The daVinci Surgical Robot

The robot
The surgeons console

The daVinci Surgical Robot (continued)

The daVinci robot in use

Medical Simulation
Two physicians
perform a
procedure on a
simulated human
(mannequin)

Managing Information Resources

Which IT Resources are Managed and By

Whom?
The Role of the IS Department

Traditional Major IS Functions

Managing systems development and systems project

management
Managing computer operations
Staffing, training, developing IS skills
Providing technical services
Infrastructure planning, development, control

New (Consultative) IS Functions

Initiating and designing strategic information systems
Incorporating the Internet and e-commerce into the business
Managing system integration
Educating non-IS managers about IT
Educating IS staff about the business
Supporting end-user computing
Partnering with executives
Managing outsourcing
Innovate
Ally with vendors and IS departments in other organizations

Supporting End Users

One form of end-user support is the help desk, where
IS staffers help users troubleshoot problems with
their systems.
This video shows the first help desk.

Chapter Closing Case

Todd Pacific
Shipyards

Wireless PDA

CHAPTER 8

Organizational Information Systems

CHAPTER OUTLINE
8.1 Transaction Processing Systems
8.2 Functional Area Information Systems
8.3 Enterprise Resource Planning Systems
8.4 Customer Relationship Management
Systems
8.5 Supply Chain Management Systems
8.6 Electronic Data Interchange and
Extranets

LEARNING OBJECTIVES
Describe transaction processing systems.
Describe functional area information systems

and the support they provide for each

functional area of the organization.
Describe enterprise resource planning
systems.

LEARNING OBJECTIVES (continued)

Describe customer relationship management

systems.
Describe supply chain management systems.
Discuss electronic data interchange and
extranets.

Chapter Opening Case

Toyota
Production
System

Toyota Production System (continued)

Electronic dashboard showing

status of assembly line

Toyota Production System (continued)

Toyota Production System (continued)

How light curtains work

8.1 Transaction Processing Systems

(TPS)
Transaction processing
system (TPS) monitors,
collects, stores and
processes data
generated from all
business transactions.
Note: the barcode
scanner is an example of
source data automation

Batch Processing
Online Transaction Processing (OLTP)

 Batch Processing is when the firm collects

data from transactions as they occur, placing

them in groups or batches, then prepares and
processes the batches periodically (say,every
night).
Online Transaction Processing (OLTP) is
when business transactions are processed
online as soon as they occur.
Source data automation involves collecting
data from sensors (e.g., barcode
scanners)and entering the data directly into a
computer without human intervention.

How Transaction Processing Systems

Manage Data

8.2 Functional Area Information Systems

Functional area information Systems are

designed to support a functional area by

increasing its internal effectiveness and
efficiency in the following areas:
Accounting
Finance
Marketing
Operations (POM)
Human Resources Management

Examples of Information Systems

Supporting the Functional Areas

Functional Area Information Systems Reports

Routine reports
Ad hoc (on demand) reports

Drill-down reports
Key-indicator reports
Comparative reports

Exception reports

Summary Report

A summary
report is one
type of routine
report

Detailed Report
A detailed
report is
another type of
routine report

Drill-Down Report
Drill-down
report is a
type of adhoc report

Key-Indicator Report

Key-indicator
report is a
type of ad-hoc
report

Comparative Report
Comparative
report is one
type of ad-hoc
report.

Exception Report

8.3 Enterprise Resource Planning

Systems (ERP)
The major objective of ERP systems is to tightly
integrate the functional areas of the organization and
to enable seamless information flows across the
functional areas.

8.3 Enterprise Resource Planning

Systems (ERP)
Enterprise Resource Planning (ERP) systems

integrate the planning, management and use of all

resources of the organization. That is, ERP systems
are designed to break down the information silos of
an organization.
Many information systems were developed for

specific functional areas and did not communicate

with systems in other functional areas. Therefore,
these systems are referred to as information silos.

Problems with information silos

ERP Systems (continued)

SAP Modules

SAP Modules
SAP is moving away from describing their system as a set of modules, and
now is using the term solutions. On their Website, SAP has structured their
Solutions tab as follows:
Financials
Human Resources
Customer Relationship Management
Supplier Relationship Management
Product Lifecycle Management
Supply Chain Management
Business Intelligence

SAP Modules
SAP modules:
FI Financial Accounting essentially your regulatory books of record
General ledger
Book close
Tax
Accounts receivable
Accounts payable
Consolidation
Special ledgers
CO Controlling basically your internal cost/management accounting
Cost elements
Cost centers
Profit centers
Internal orders
Activity based costing
Product costing
AM Asset Management track, value and depreciate your assets
Purchase, Sale ,Depreciation ,Tracking ,PS Project Systems
manage your projects, large and small

SAP Modules
Make to order

Plant shut downs (as a project)

Third party billing (on the back of a project)

HR Human Resources people

Employment history
Payroll
Training
Career management
Succession planning
PM Plant Maintenance maintain your equipment
Labor
Material
Down time and outages
MM Materials Management underpins the supply chain
Requisitions

Goods receipts
Accounts payable
Inventory management
Bills of Material
Master raw materials, finished goods etc
QM Quality Management improve the quality of your goods
Planning
Execution
Inspections
Certificates
PP Production Planning manages your production process
Capacity planning
Master production scheduling
Material requirements planning
Shop floor
SD Sales and Distribution from order to delivery
RFQ
Sales orders
Pricing
Picking (and other warehouse processes)
Packing

ERP Systems (continued)

A business process is a set of related steps or
procedures designed to produce a specific outcome.

8.4 Customer Relationship

Management
Includes a one-to-one
relationship between a
customer and a seller.
One simple idea Treat
different customers
differently.
Helps keep profitable
customers and maximizes
lifetime revenue from them.

The Need for CRM

It costs six times more to sell to a new

customer than to sell to an existing one.

A typical dissatisfied customer will tell 8-10
people.
By increasing the customer retention rate by
5%, profits could increase by 85%.
Odds of selling to new customers = 15%,
compared to the odds of selling to existing
customers (50%)
70% of complaining customers will remain
loyal if problem is solved

The Customer Life Cycle

Customer Value

Customer Touch Points

E-mail
Telephone

Conventional mail

Web site

Store

Help desk

CRM Applications
CRM systems provide applications in 3 major areas:
Sales - sales force automation (SFA).
Marketing support marketing campaigns & provide
opportunities for cross-selling, up-selling and bundling.
Customer Service can take many Web-based forms.
Sales force automation (SFA) functions provide such data as sales

prospect and contact information, product information, product

configurations and sales quotes.
Cross-selling is the marketing of complementary products to customers.
Up-selling is the marketing of higher-value products or services to
customers.
Bundling is a type of cross-selling in which a vendor sells a combination
of products together at a lower price than the combined costs of the
individual products.

Customer Service
Customer service can take many forms and

includes:
Technical and other information and services
Customized products and services
Tracking account or order status
Personalized Web pages
FAQs
E-mail and automated response
Call centers

Software as a Service for CRM

(ITs About Business 8.2)

Putting it all together

The relationships
among SCM, ERP,
and CRM

8.5 Supply Chain Management

Systems (SCM)
Supply chain
Supply chain management (SCM)
Interorganizational information system (IOS)
Global information system

Supply Chain (recall Figure 2.2)

Warners Digital Supply Chain (ITs

About Business 8.3)

The Structure & Components of

Supply Chains
A supply chain involves three segments:
Upstream
Internal
Downstream

Tiers of suppliers

Generic Supply Chain

The Flows of the Supply Chain

Material flows
Information flows
Financial flows
Material flows are the physical products, raw materials,

supplies and so forth that flow along the chain.

Information flows are all data related to demand, shipments,
orders, returns and schedules as well as changes in any of these
data.
Financial flows are all transfers of money, payments and creditrelated data.
A supply chain involves a product life cycle approach, from dirt
to dust.

Problems Along the Supply Chain

Poor customer service
Poor quality product
High inventory costs
Loss of revenues
New technologies

Problems Along the Supply Chain

(continued)
Problems stem mainly from two sources:

Uncertainties due to demand forecast, delivery

times, quality problems in materials and parts
that can create production delays;
The need to coordinate several activities,
internal units and business partners.

Bullwhip effect refers to erratic shifts in

orders up and down the supply chain.

The Bullwhip Effect

Issues of Global IOS Design

Cultural differences
Localization
Economic and Political Differences
Legal issues
Cross-border data transfer which refers to the

flow of corporate data across nations

borders.

8.6 Electronic Data Interchange (EDI)

and Extranets
Electronic data interchange (EDI)
Extranets
Electronic data interchange (EDI) is a

communication standard that enables business

partners to exchange routine documents, such as
purchase orders, electronically.
Extranets link business partners to one another over
the Internet by providing access to certain areas of
each others corporate intranets.

EDI Benefits
Minimize data entry errors
Length of messages are shorter
Messages are secured
Reduces cycle time
Increases productivity
Enhances customer service
Minimizes paper usage and storage

EDI Limitations
Significant initial investment to implement
Ongoing operating costs are high due to the

use of expensive, private VANs

Traditional EDI system is inflexible
Long startup period
Multiple EDI standards exist

Comparing Purchase Order Fulfillment

Without EDI

Comparing Purchase Order Fulfillment

With EDI

Extranets
The main goal of extranets is to foster

collaboration between business partners.

An extranet is open to selected B2B
suppliers, customers and other business
partners.

The Structure of an Extranet

CHAPTER 9

Managerial Support Systems

CHAPTER OUTLINE
9.1 Managers and Decision Making
9.2 Business Intelligence, Multidimensional
Data Analysis, Data Mining, and Decision
Support Systems
9.3 Digital Dashboards
9.4 Data Visualization Technologies
9.5 Intelligent Systems

LEARNING OBJECTIVES
Describe the concepts of management,

decision making and computerized support

for decision making.
Describe multidimensional data analysis and
data mining
Describe dashboards

LEARNING OBJECTIVES (continued)

Describe data visualization, and explain

geographical information systems and virtual

reality.
Describe artificial intelligence (AI).
Define an expert system and identify its
components.
Describe natural language processing and
natural language generation, and neural
networks.

Chapter Opening Case

9.1 Managers and Decision Making

Management is a process by which
organizational goals are achieved
through the use of resources (people,
money, energy, materials, space,
time).

The Managers Job and Decision Making

Managers have three basic roles (Mintzberg
1973)
Interpersonal roles
Informational roles
Decisional roles

The Managers Job & Decision Making

(continued)
Decision refers to a choice that individuals

and group make among two or more

alternatives.
Decision making is a systematic process
composed of three major phases:
intelligence, design and choice (Simon 1977)

Implementation phase was added later.

Decision Making Process

Why Managers Need IT Support

The number of alternatives to be considered

constantly increases.
Decisions must be made under time
pressure.
Decisions are more complex
Decision makers can be in different locations
and so is the information.

A Framework for Computerized

Decision Analysis

A Framework for Computerized

Decision Analysis

Lower-level managers usually perform the structured and

operational-control oriented
tasks in cells 1, 2, and 4. (Blue color above).
Middle managers and staff usually perform the tasks in cells 3,
5, and 7. (Orange color above).
Senior executives usually perform the tasks in cells 6, 8, and 9.
(Yellow color above.)

Problem Structure
The first dimension deals with the problem structure, where
does the decision making processes fall along the continuum
ranging from highly structured to highly unstructured decisions.
Structured
Unstructured
Semi structured
Structured problems are routine and repetitive problems for
which standard solutions exist.
Unstructured problems are fuzzy, complex problems for which
there are no cut-and-dried solutions.
Semi structured problems are problems in which only some of
the decision process phases are structured.

The Nature of Decisions

The second dimension of decision support deals with the nature
of decisions
Operational control
Management control
Strategic planning
Operational control involves executing specific tasks efficiently
and effectively.
Management control involves decisions concerning acquiring
and using resources efficiently in accomplishing organizational
goals.
Strategic planning involves decisions concerning the long
range goals and policies for growth and resource allocation.

9.2 BI, Multidimensional Data

Analysis, Data Mining, and DSSs
Business Intelligence (BI)
Business Intelligence (BI) refers to applications and technologies

for consolidating, analyzing, and providing access to vast amounts of

data to help users make better business and strategic decisions .

Two types of BI Systems:

Those that provide data analysis tools
Multidimensional data analysis (or online analytical
processing)
Data mining
Decision support systems
Those that provide information in structured format
Dashboards

How Business Intelligence Works

(Figure 9.3)

Multidimensional Data Analysis

Provides users with a look at what is

happening or what has happened.

Allows users to analyze data in such a way
that they can quickly answer business
questions.

Data Mining
Searching for valuable business information

in a large database or data warehouse.

Data mining performs two basic operations:
Predicting trends and behaviors
Identifying previously unknown patterns and
relationships

9.2 Decision Support Systems (DSS)

Decision support systems
DSS capabilities

Sensitivity analysis
What-if analysis
Goal-seeking analysis

9.2 Decision Support Systems (DSS)

Decision support systems (DSSs) are computer-based

information systems that combine models and data in an

attempt to solve semi structured and some unstructured
problems with extensive user involvement.
Sensitivity analysis is the study of the impact that changes in
one (or more) parts of a model have on other parts.
What-if analysis is the study of the impact of a change in the
assumptions (input data) on the proposed solution.
Goal-seeking analysis is the study that attempts to find the
value of the inputs necessary to achieve a desired level of
output.

Group Decision Support Systems

(GDSS)
Group decision support system (GDSS) is

an interactive computer-based system that

supports the process of finding solutions by a
group of decision makers.
Decision Room is a face-to-face setting for a
group DSS, in which terminals are available
to the participants.

Organizational Decision Support

System (ODSS)
Organizational Decision Support System

(ODSS) is a DSS that focuses on an

organizational task or activity involving a
sequence of operations and decision makers.

It affects several organizational units or corporate

problems;
It cuts across organizational functions or
hierarchical layers;
It involves computer-based and (usually)
communications technologies.

9.3 Digital Dashboards

Dashboards:

Provide rapid access to timely information.

Provide direct access to management reports.
Are very user friendly and supported by
graphics.

Sample Performance Dashboard

(Figure 9.4)

Another Example of Dashboard

Executive Dashboard Demo

http://www.informationbuilders.com/rfr/qtdemo
/AdvVis_ExecDash/AdvVis_ExecDash.html

A Bloomberg Terminal (Figure 9.5)

Management Cockpit (Figure 9.6)

Management Cockpit
A strategic management room that enables top-level

decision makers to pilot their businesses better.

The environment encourages more efficient
management meetings and boosts team
performance via effective communication.
Key performance indicators and information relating
to critical success factors are displayed graphically
on the walls of the meeting room.
External information can be easily imported to the
room to allow competitive analysis.

9.4 Data Visualization Systems

The Power of Visualization

Even though a picture is worth a thousand

words, we have to be very careful about just
what we are seeing.
Remember, on the Internet, it is user beware!

New York City Police Department

Command Center

Data visualization in action

Types of data visualization systems

Geographical Information Systems
Virtual Reality
Geographical Information Systems: a computer-

based system for capturing, integrating,manipulating,

and displaying data using digitized maps.
Virtual Reality: interactive, computer-generated,
three-dimensional graphics delivered to the user via a
head-mounted display.

Geographic Information System

GIS for
existing
land use

9.5 Intelligent Systems

Intelligent systems
Artificial intelligence (AI)

9.5 Intelligent Systems

Intelligent systems
Artificial intelligence (AI)
Intelligent systems is a term that describes the

various commercial applications of AI.

Artificial intelligence (AI) is a subfield of computer
science concerned with:

* studying the thought processes of humans

* recreating those processes via machines, such

as computer and robots.

Expert Systems
Expertise
Expert systems (ESs)
Star Trek
Voyagers doctor:
a 24th century
expert system

Expert Systems
Expertise
Expert systems (ESs)
Expertise refers to the extensive, task-specific knowledge

acquired from training, reading and experience.

Expert systems (ESs) attempt to mimic human experts
by applying expertise in a specific domain. Can support
decision makers or completely replace them.

Expert Systems (continued)

The transfer of expertise from an expert to a computer
and then to a user involves four activities:

Knowledge acquisition: Knowledge is from experts or from

documented sources.
Knowledge representation: Acquired knowledge is organized as
rules or frames (objective-oriented) and stored electronically in a
knowledge base.
Knowledge inferencing: Given the necessary expertise stored in the
knowledge base, the computer is programmed so that it can make
inferences. The reasoning function is performed in a component called
the inference engine, which is the brain of ES.
Knowledge transfer: The inferenced expertise is transferred to the
user in the form of a recommendation.

The Components of Expert Systems

Knowledge base

Inference engine
User interface
Blackboard
Explanation subsystem

The Components of Expert Systems

Knowledge base contains knowledge necessary for

understanding, formulating and solving problems.

Inference engine is a computer program that
provides a methodology for reasoning and
formulating conclusions.
User interface enables users to communicate with
the computer
Blackboard is an area of working memory set aside
for the description of a current problem.
Explanation subsystem explains its
recommendations.

Structure and Process of an Expert

System

Natural Language Processing & Voice

Technologies
Natural language processing (NLP)
Natural language understanding / speech (voice) recognition
Natural language generation/voice synthesis

Natural language processing (NLP): Communicating with a

computer in English or whatever language you may speak.
Natural language understanding/speech (voice) recognition:
The ability of a computer to comprehend instructions given in
ordinary language, via the keyboard or by voice.
Natural language generation/voice synthesis: Technology that
enables computers to produce ordinary language, by voice or
on the screen, so that people can understand

Neural Networks
Neural network is a system of programs and

data structures that approximates the

operation of the human brain.
Neural networks are particularly good at
recognizing subtle, hidden and newly
emerging patterns within complex data as
well as interpreting incomplete inputs.