Chapter 1 – Business

Information Systems: An
Overview
 Learning Objectives

At the end of the lesson, the students should be able to:

 explain why information systems are essential to business;
 determine how computers process data into useful information
for problem solving and decision making;
 identify the functions of different types of information systems
and how levels within an organizations are served by different
information system;
 evaluate the role of information systems in the organizations;
and
 identify the major ethical and societal conflicts created by
widespread use of information systems.
 Learning Contents

 Data, Information and System

 Components of Information System
 Four Stages of Data Processing
 Computer Equipment for Information System
 Types of Information Systems 
 Developing IS Solutions
 ISs in Functional Business Areas 
 ISs in Different Business Sectors 
 Ethical and Societal Issues The Dark Side of IS/IT 
 Information
 It is a data that has been processed into a form that is
meaningful to the user. An information system (IS) is an
organized combination of people, hardware, software,
communications network, and data resources that collect,
transform and disseminate information in an organization.
 Information systems and technologies are a vital component
of successful businesses and organizations. The Information
technology includes Internet-based information systems, are
playing a vital and expanding role in business in order to
improve the efficiency and effectiveness of a business
processes; managerial decision making; workgroup
collaboration and increase their competitive positions in a
rapidly changing marketplace.
 An information system (IS) can be any
organized combination of people, hardware,
software, communications networks, data resources,
policies and procedures that stores, retrieves,
transforms, and disseminates information in an
organization
 People rely on modern IS to communicate with each
other using a variety of physical devices (hardware),
information processing instructions & procedures
(software), communications channels (networks) &
stored data (data resources).
Data vs Information
Data is a raw fact and can take the form of a number or
statement such as a date or a measurement. It is necessary for
businesses to put in place procedures to ensure data are
recorded. For example, to ensure a call center operator includes
the postcode of every customer this can be written into their
script and a validation check performed to check these data
have been entered into the system.
Information is that is data that have been processed so that
they are meaningful. This requires a process that is used to
produce information which involves collecting data and then
subjecting them to a transformation process in order to create
information. Some example of information include a sales
forecast or a financial statement.
Data Manipulation
 Data is manipulated to make useful information, for example
the survey is common method of collecting data and raw data
is hard to read and information is more useful to business
than data.
Gathering Information
 A process is manipulation of data. The process usually
produces information and may produce more data. A piece of
information in one context may be considered data in another
context. Computer based ISs takes data as a raw material,
process it, and produce information as output.
Figure 1. Input-Process-Output
Characteristics of Useful Information

Figure 1.2. Characteristics of a useful information

What is a System?
 A system is defined as a set of interrelated components, with a clearly defined boundary, working together
to achieve a common set of objectives by accepting inputs and producing outputs in an organized
transformation process. The systems have three basic functions: Input, Processing and Output
 The system concept becomes even more useful by including two additional elements:
Feedback is data about the performance of a system. For example:
 data about sales performance is feedback to a sales manager
 Data about the speed, attitude, and direction of an aircraft is feedback to the aircraft’s pilot or autopilot.
Control involves monitoring and evaluating feedback to determine whether a system is moving toward the
achievement of its goal.
 the control function then makes the necessary adjustments to a system’s input and processing components to
ensure that it produces proper output.
 For example: An airline pilot, makes minute adjustments after evaluating the feedback from the instruments
to ensure the plane is exactly where the pilot wants it to be.
Classification of a System

 Closed system. It has no connections with other systems

 Open system. The interfaces and interacts with other systems, and often a subsystem of a
bigger system
 Information system. It processes data and produces information
Information and Managers

 Systems thinking: thinking of an organization in terms of subsystems

 Database: collection of electronic records Information systems automate exchange among
subsystems
 Information map: network of information systems
 Information technology: technologies that facilitate construction and maintenance of
information systems.
The Benefits of Human-Computer Synergy

 Humans are relatively slow and make mistakes. Computers cannot make decisions the synergy is when
combining resources to produce greater output.

Figure 1.3. Qualities of human and

computer that contribute to synergy
 Components of Information Systems
Data Resources Input that the system takes to produce information.
Hardware Computer peripherals and its peripheral equipment: input, output and
Resources storage devices; and also includes data communication equipment.

Software Resources Sets of instructions that tell the computer how to take data in, how to
process it how to display information and how to store data and
information.
Telecommunications Hardware and software that facilitate fast transmission and reception
of text, pictures, sound and animation in the form of electronic data

People Information systems professionals and users who analyze

organizational information needs, design and construct information
systems, write computer programs, operate the hardware and
maintain software.
Procedure Rules for achieving optimal and secure operations in data
processing; procedures include priorities in dispensing software
applications and security measures.

Table 1.1. Components of Information System

The Four Stages of Processing
 Input: collect and introduce data to system
 Transaction: a business event, usually entered as input
 Data processing: perform calculations on input
 Output: what is produced by the information system
 Storage: vast amounts of data stored on (for example) optical discs
 Input devices: receive input
 Computer: process data
 Output: displays information
 Storage devices: store data
 Network devices: transfer data

Figure 1.4. Computer Equipment for Information System

 ISs From Recording Transactions to Providing Expertise

Types of Information Systems

There are several types of information systems can be classified as either operational support systems or
management support systems.
Operational Support Systems
1. Transaction Processing Systems (TPS)
 Process data resulting from business transactions, update operational databases and produce business documents.
It record data and perform basic processing.
 Examples: sales and inventory processing and accounting systems; cash registers and ATMs
2. Process Control Systems
 Monitor and control industrial processes.
 Examples: petroleum refining, power generation, and steel production systems.
3. Enterprise Collaboration Systems
 Support team, workgroup, and enterprise communications and collaboration.
 Examples: e-mail, chat, and videoconferencing groupware systems.
Management Support Systems
 Management Information Systems (MIS)
 Provide information in the form of pre-specified reports and displays to support business decision making.
 Use recorded transactions and other data to produce information for problem solving and decision making.
 Examples: Sales analysis, production performance, and cost trend reporting systems.
 Decision Support Systems (DSS)
 Provide decision-making process of managers and other business professionals.
 It contain models, or formulas, that manipulate data into information
 Often answer “what if?” questions
 Examples: product pricing, profitability forecasting, and risk analysis systems.
 Group Decision Support Systems (GDSS)
 It help groups generate ideas, establish priorities, and reach decisions
 Executive Information Systems (EIS)
 Provide critical information from MIS, DSS, and other sources modified to the information needs of executives.
 Can gather information from vast amounts of data for high-level executives
 Highly useful in control and planning
 Examples: systems for easy access to analyses of business performance, actions of competitors, and economic developments to support
strategic planning.
Figure 1.5. Operations and Management classifications of
information systems
Other Classification of Information System
There are several other categories of information system can support either operations or management applications.
 Expert Systems – knowledge -based systems that provide expert advice and act as expect consultants to users.
 Examples: credit application advisor, process monitor, and diagnostic maintenance systems.
 Knowledge Management Systems – it support the creation, organization, and dissemination of business
knowledge within the enterprise.
 Examples: sales proposal strategies, and customer problem resolution systems.
 Strategic Information Systems – support operations or management processes that provide a firm with
strategic products, services, and capabilities for competitive advantage.
 Examples: online stock trading, shipment tracking, and e-commerce Web systems
 Functional Business Systems – support a variety of operational and managerial applications of the basic
business functions of a company.
 Examples: information system that support applications in accounting, finance, marketing, operations
management, and human resource management.
 ISs in Functional Business Areas
 Accounting. Record business transactions, produce periodic financial statements, and create reports
required by law
 Finance. Organize budgets, manage the flow of cash, analyze investments, and make decisions that could
reduce interest payments and increase revenues 
 Marketing. Analyze demand for various products in different regions and population groups
 Human Resources. Help with record keeping and employee evaluation
ISs  in Different Business Sectors 
 Manufacturing. Control inventory, process customer orders, prepare production
schedules, perform quality assurance, and prepare shipping documents
 Government. Tax authorities, national insurance and welfare agencies, defense
departments, economic organizations, immigration authorities
 Service. ISs are often the backbone of service organizations 
 Retail. Some retail stores (e.g., Wal-Mart, Kmart) are now linked to communication
networks by satellite. Management can determine which items move quickly and which do
not.
 New Businesses. ISs have made new products and services possible, such as credit reports
and shipment tracking. 
Ethical and Societal Issues: The Dark Side of IS/IT 
 Consumer Privacy
 Organizations collect (and sometimes sell) huge amounts of data on individuals.
 Employee Privacy
 IT supports remote monitoring of employees, violating privacy and creating stress.
 Freedom of Speech
 IT increases opportunities for pornography, hate speech, intellectual property crime, and
other intrusions; prevention may abridge free speech.