Chapter 1

Introduction to Information Systems and Their Capabilities

1.1 What Are Information Systems?

An information system is an organized set of components for collecting, transmitting, and storing, and processing data in order to deliver information for action. It is important to stress that in business firms and other organizations, this information is necessary for both operations and management. Most information systems in today's organizations are built around the information technologies of computers and telecommunications. They are computer-based information systems.

As we approach the twenty-first century, information technology emerges as the fundamental technology of business. It:

a. Enables efficient operations of a small business or a large corporation

b. Makes possible effective management

c. Supports the search for competitive advantage in the marketplace

d. Enables economic growth by moving to newer and more advanced technologies

e. Enables the globalization of businesses and enables global competition

As an individual, information systems literacy is necessary in order to:

a. Perform your job as a manager or a professional

b. Conduct a firm's activities

c. Seek opportunities in the marketplace for the products of a firm or of a nation.

Information systems literacy gives you the knowledge you need to apply information technology in a business setting to support your own work, the work of your team, and the operations of the organization at large in pursuit of its competitive goals.

1-2 What Do Information Systems Do for Organizations? [Figure 1.1][Slide 1.4]

Information systems in organizations include systems that:

a. Support business operations of the firm

b. Support its management

c. Assist general knowledge work (work with abstract information rather than with tangible materials).

Information systems include:

1. Transaction Processing Systems: Necessary for operational data processing.

2. Management Reporting Systems: Capable of producing reports for specific time periods, designed for managers responsible for specific functions or processes in a firm.

3. Decision Support Systems: Designed for the support of individual and collective decision making.

4. Executive Information Systems: Support the long-term strategic view that senior executives and company boards need to take of the business.

5. Professional Support Systems: Support performance of tasks specific to a given profession.

6. Office Information Systems: Support and help coordinate knowledge work in an office environment by handling documents and messages in a variety of forms - text, data, image, and voice.

Information systems of an organization can become connected to those of its suppliers, customers, and business partners, or to the providers of information about the external environment in which the firm operates. All of these are increasingly connected into interorganizational systems that help several firms share information in order to coordinate their work, collaborate on common projects, or sell and buy products and services.

A strategic information system assists a firm in realizing its long-term competitive goals.

The implementation of information systems in an organization should pay for themselves in business results.

1. Enhanced competitive position (increased market shares or profits

2. Increased productivity (lower costs per unit of output.

3. Improved quality of products or services leading to higher customer satisfaction.

4. Improved decision-making ability.

5. Ability to respond faster to the demands of the marketplace.

6. Enhanced ability to communicate and collaborate within the firm and with customers and suppliers.

7. Enhanced goodwill of employees

1.3 The Enabling Technologies: Computers and Telecommunications

Information systems today are largely computer-based. The principal information technologies related to computers and telecommunications.

Computer: An electronic general-purpose information processor.

Software: Programs that control the operation of a computer system (contrasted with hardware).

Hardware: Physical devices employed in computer systems (contrasted with software).

Telecommunications: Electronic transmission of information over distances; also, the means of this transmission.

Computer Network: A system of computers and telecommunications

Internet: A global network of networks that has become the worldwide information utility.

World Wide Web: Collection of hyper-linked multimedia (text, photos, graphics, voice, moving images) databases stored in computers known as servers all over the world and accessible via the Internet.

1.4 New Organizational Environment and New Ways to Work [Figure 1.3a/b][Slide 1.5 & 1.6]

Traditional Organizational Structures:

Traditional organizational structures, which still prevail today, were structured along functional or divisional lines.

Functional Structure: People who perform similar activities are placed together in formal units and thus the organization is subdivided in accordance with the functions of the enterprise.

Disadvantages of a functional structure include:

a. Poor coordination of effort across functions - with many decisions referred up the corporate hierarchy

b. Lack of clear responsibility for the overall product or service

c. General slow down in innovation necessary to respond to the rapidly changing competitive environment of today.

Divisional Structure: Company divisions are formed based on the groups of products or services they deliver, geographic regions they cover, or customer segments they serve.  Figure 1.3(b)  presents a company with a divisional structure.

Advantages of a divisional structure include:

a. Greater flexibility in responding to the competitive demands of the marketplace.


a. They often suffer from duplicating resources and efforts across divisions and from less developed functional expertise.

The traditional organizational structures are:

a. Defined by clear and long-term assignment of roles to employees, clear lines of responsibility and command, clear setting of the boundaries of the firm against the environment.

b. Stability is the hallmark.

c. Multilayered organization charts define the long-lasting hierarchical structure of an organization.

General drawbacks to the traditional organizational structure include:

a. Relative permanence and rigidity of both functional and divisional structures often lead to a lack of coordination across the corporation's units and to units pursuing their own, as opposed to organizational goals.

b. Multiple layers of management separate the line workers from the top managers

c. Layers of middle managers carry information up the hierarchy and decisions down to the Atroops? The process is slow and distortions may result.

Such organizations may be slow to respond to the needs of a highly dynamic marketplace - the objective often better served by virtual organizations.

Virtual Organizations: [Figure 1.4a/b][Slide1.7 & 1.8]

A virtual organization is an organization whose structure is to a large degree created by using information systems rather than following organizations charts. Figure 1.4a & 1.4b emphasize how the structures of the emerging virtual organizations are flexible and are created, to a large degree, with information systems. Thus, in a network organization, the core firm surrounds itself with long-term corporate partners, with each company contributing its core competencies. In a cluster organization, the principal work units are teams of varying purpose and lifetime, some of them including the employees of the firm's business partners.

Network Organization: An organizational structure in which a firm becomes the core of an extended virtual organization that includes long-term corporate partners, supplying goods and services to the core firm.

Core Competencies: A specific capability that distinguishes the firm and that is valued by the marketplace.

Outsourced: Contracting out some of the goods or services previously produced by the firm to specialized providers. In information services, the practice of contracting out the operation of a firm's data centers, telecommunications networks, or applications development to external vendors.

Cluster Organization: Organizational structure in which the principal work units are the temporary and permanent teams of people who contribute their distinct knowledge and experience.

Intranet: An internal corporate network that deploys the Internet facilities, primarily those of the World Wide Web.

Telecommuting and Virtual Workplaces:

Employees are working more and more frequently in virtual workplaces, outside of their company's premises, and are said to be telecommuting. Telecommuting may lead to:

a. Higher productivity of the workers

b. Employees take responsibility for their work and are often under less stress.

c. Employees gain a sense of autonomy and control

d. Private life improves and they can use time more effectively

e. Corporate savings

f. More even job distribution throughout a country or a region

g. Enables employment to individualities with disabilities

h. Reduction of the social costs of automobile traffic, congestion, and pollution


a. Not conducive to all type of jobs

b. Lack of visibility for promotion

c. Feelings of isolation

d. Security and confidentiality of data are widely dispersed outside of the corporation premises.

1.5 Capabilities of Information Systems:

Information systems offer a set of capabilities that can be exploited to achieve business results. Drawing on these capabilities by implementing systems that suit specific business needs enables a firm to respond to the demands of its environment. The principal capabilities of information systems are:

1. Fast and accurate data processing, with large-capacity storage and rapid communication between sites.

2. Instantaneous access to information.

3. Means of coordination (brings parts of an organization, or several collaborating organizations, together in a common effort).

4. Boundary spanning (systems through which an organization receives intelligence about its environment and provides computerized information for its customers, suppliers, and the public at large).

5. Support for decision making.

6. Supporting organizational memory and learning (means by which knowledge from the past exerts influence on present organizational activities. Increasingly, elements of the organizational memory are contained in the software and in the data and knowledge bases of the corporate information systems).

7. Routinizing organizational practice.

8. Differentiation of products and services.

9. Modeling (a simplified representation of a real object or phenomenon that helps to understand or develop the modelled object).

10. Automation (replacing human labor, for example, with information systems).

1-6 Business Process Redesign:

A business process is a set of related tasks performed to achieve a defined work product.

Business process redesign aims to rethink and streamline the firm's business processes in order to achieve specific business results. The radical redesign of major business processes, sometimes called business reengineering, aims at major gains in costs, quality, or time-to-market, and fundamentally changes the way organizations work.

1-7 An Initial Look at the Human Side of Information Systems in Organizations and in Society

Information systems do not benefit an organization or the society at large by simply being developed and installed. A system appropriate for the firm and its users has to be carefully identified and implemented from the sociotechnical perspective, seeking the technology that would best support the people in the organization. The sociotechnical perspective says that the purely technological approach to achieving higher productivity has to be balanced with the consideration of the social and human aspects of technology. Organizations should create workplaces that:

1. Provide job satisfaction

2. Give employees an opportunity to contribute to the development of an information system they will work with

3. Be motivated and trained to use the system.

The information system itself must be:

1. Designed to fit the needs of its users and the organization at large.

2. Evolve as needs change in the organization.

The principal ethical issues involved in the development and use of information systems are:

a. Privacy does the information system or the way the system is used abridge the right of individuals to control information about themselves?

b. Accuracy does the information system contain the necessary safeguards in order to provide accurate information?

c. Property is it right to copy a program without permission under certain circumstances?

d. Access how can we use information systems to break down rather than erect barriers to the enjoyment of benefits that society has to offer?