Chapter-1

Definition of System:

A system is a set of interrelated components, with a clearly defined boundary, working together to achieve a
common set of objectives.

Definition of Information System:

An information system (IS) can be any organized combination of people, hardware, software, communications
networks, data resources, and policies and procedures that stores, retrieves, transforms, and disseminates
information in an organization.

Definition of E-business:

E-business is the use of Internet technologies to work and empower business processes, e-commerce, and
enterprise collaboration within a company and with its customers, suppliers, and other business stakeholders. It
can be more generally considered an online exchange of value.

Examples of Computer less information system:

i) Smoke signals for communication: transmitted valuable information to others who were too far
to see or hear the sender
ii) Card catalogs in a library: to store data about the books in an organized manner that allows
readers to locate a particular book by its title, author name, subject, or a variety of other approaches.
iii) Book bag, day planner, notebooks, and file folders: to help you organize the inputs provided
to you via handouts, lectures, presentations, and discussions. They also help you process these inputs
into useful outputs: homework and good exam grades.
iv) Cash register at your favorite fast-food restaurant: tracks the products sold, the time of a
sale, inventory levels, and the amount of money in the cash drawer; it also contributes to the analysis
of product sales in any combination of locations anywhere in the world
v) A paper-based accounting ledger: to record the daily transactions and to keep a record of the
balances in their various business and customer accounts.

Five areas of IS knowledge:

i) Foundation Concepts: Fundamental behavioral, technical, business,

and managerial concepts about the components and roles of
information systems.
ii) Information Technologies: Major concepts, developments, and
management issues in information technology—that is, hardware,
software, networks, data management, and many Internet-based
technologies.
iii) Business Applications: The major uses of information systems for
the operations, management, and competitive advantage of a business.
iv) Development Processes: How business professionals and
information specialists plan, develop, and implement information
systems to meet business opportunities.
v) Management Challenges: The challenges of effectively and ethically managing information
technology at the end-user, enterprise, and global levels of a business.

The Fundamental Roles of IS in Business

Information systems provide an organization with support for business processes and operations, decision
making, and competitive advantage. There are three (03) fundamental reasons/roles for all business applications
of information technology:
 i) Support of business processes and operations: Most retail stores
now use computer-based information systems to help their employees
record customer purchases, keep track of inventory, pay employees,
buy new merchandise, and evaluate sales trends. Store operations
would grind to a halt without the support of such information systems
ii) Support of decision making by employees and managers:
decisions about what lines of merchandise need to be added or
discontinued and what kind of investments they require are typically
made after an analysis provided by
iii) Support of strategies for competitive advantage: Gaining a
strategic advantage over competitors requires the innovative application of information technologies.
For example, store management might make a decision to install touch-screen kiosks in all stores, with
links to the e commerce Web site for online shopping.

Trends in Information Systems:

Enterprise Resource Planning and Business Intelligence: 2000s–2010s

Enterprise wide common-interface applications data mining and data visualization, customer relationship
management, suppl chain management
Electronic Business and Commerce: 1990s–2000s
Internet-based e-business and e-commerce systems:
Web-enabled enterprise and global e-business operations and electronic commerce on the Internet,
intranets, extranets, and other networks
Strategic and End-User Support: 1980s–1990s
End-user computing systems:
Direct computing support for end-user productivity and workgroup collaboration
Executive information systems:
Critical information for top management
Expert systems:
Knowledge-based expert advice for end users
Strategic information systems:
Strategic products and services for competitive advantage
Decision Support: 1970s–1980s
Decision support systems:
Interactive ad hoc support of the managerial decision-making process
Management Reporting: 1960s–1970s
Management information systems:
Management reports of pre-specified information to support decision making
Data Processing: 1950s–1960s
Electronic data processing systems:
Transaction processing, record-keeping, and traditional accounting applications

The Role of e-Business in Business:

The Internet and related technologies and applications have changed
the ways businesses operate and people work, as well as how
information systems support business processes, decision making, and
competitive advantage.

Businesses today depend on the Internet, intranets, and extranets to

implement and manage innovative e-business applications.

The Internet and Internet-like networks—those inside the enterprise

(intranet) and between an enterprise and its trading partners (extranet)

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— have become the primary information technology infrastructure that supports the e-business applications of
many companies. These companies rely on e business applications to:

i) reengineer internal business processes,

ii) implement e-commerce systems with their customers and suppliers,
iii) promote enterprise collaboration among business teams and workgroups.
 Enterprise collaboration systems involve the use of software tools to support communication,
coordination, and collaboration among the members of networked teams and workgroups. A business
may use intranets, the Internet, extranets, and other networks to implement such systems.
 E-commerce is the buying, selling, marketing, and servicing of products, services, and information over
a variety of computer networks. Many businesses now use the Internet, intranets, extranets, and other
networks to support every step of the commercial process, including everything from advertising, sales,
and customer support on the World Wide Web to Internet security and payment mechanisms that ensure
completion of delivery and payment processes.

Types of Information Systems:

1) Operations Support Systems: Operations support

systems produce a variety of information products for
internal and external use; however, they do not
emphasize the specific information products that can
best be used by managers. Further processing by
management information systems is usually
required. The role of Operations Support Systems is:
i) Transaction processing systems are important
examples of operations support systems that
record and process the data resulting from
business transactions. They process transactions in
two basic ways. In batch processing, transactions
data are accumulated over a period of time and processed periodically. In real-time (or online) processing,
data are processed immediately after a transaction occurs. For example, point-of-sale (POS) systems at
many retail stores use electronic cash register terminals to capture and transmit sales data electronically
over telecommunications links to regional computer centers for immediate (real-time) or nightly (batch)
processing.
ii) Process control systems monitor and control physical processes. For example, a petroleum refinery uses
electronic sensors linked to computers to monitor chemical processes continually and make instant (real-
time) adjustments that control the refinery process.
iii) Enterprise collaboration systems enhance team and workgroup communications and productivity and
include applications that are sometimes called office automation systems. For example, knowledge workers
in a project team may use e-mail to send and receive e-messages or use videoconferencing to hold
electronic meetings to coordinate their activities.
2) Management Support Systems:
When information system applications focus on providing information and support for effective decision making
by managers, they are called management support systems. Providing information and support for decision
making by all types of managers and business professionals is a complex task.

i) Management information systems (MIS) provide information in the form of pre-specified reports and
displays to support business decision making. Examples: sales analysis, production performance, and cost
trend reporting systems.
ii) Decision support systems (DSS) Provide interactive ad hoc support for the decision-making processes
of managers and other business professionals. Examples: product pricing, profitability forecasting, and
risk analysis systems.

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 iii) Executive information systems (EIS) Provide critical information from MIS, DSS, and other sources
tailored to the information needs of executives. Examples: systems for easy access to analyses of
business performance, actions of competitors, and economic developments to support strategic planning
3) Other Classifications of Information Systems:
i) Expert systems. Knowledge-based systems that provide expert advice and act as expert consultants to
users. Examples: credit application advisor, process monitor, and diagnostic maintenance systems.
ii) Knowledge management systems. Knowledge-based systems that support the creation, organization,
and dissemination of business knowledge within the enterprise. Examples: intranet access to best business
practices, sales proposal strategies, and customer problem resolution systems.
iii) 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.
iv) Functional business systems. Support a variety of operational and managerial applications of the basic
business functions of a company. Examples: information systems that support applications in accounting,
finance, marketing, operations management, and human resource management.

Managerial Challenges of Information Technology:

Developing successful information system solutions to business problems is a major challenge for business
managers and professionals today.

The challenges and opportunities that business managers face in managing information systems and technologies
to meet business goals are as follows:

Business / IT Challenges Business / IT Developments Business / IT Goals (Customer

(Strategies/ Processes/ (Information Technology) / business value)
Structure/ Culture of Business)
Speed and flexibility requirements of Use of the Internet, intranets, Give customers what they want,
product development, manufacturing, extranets, and the Web as the when and how they want it, at the
and delivery cycles. primary IT infrastructure lowest cost
Reengineering and cross-functional Diffusion of Web technology to Coordination of manufacturing
integration of business processes internetwork employees, and business processes with
using Internet technologies. customers, and suppliers. suppliers and customers.
Integration of e-business and e Global networked computing, Marketing channel partnerships
commerce into the organization’s collaboration, and decision with suppliers and distributors.
strategies, processes, structure, and support systems
culture.

Measuring success of IT:

 The success of an information system should not be measured only by its efficiency in terms of minimizing
costs, time, and the use of information resources.
 Success should also be measured by the effectiveness of the information technology in supporting an
organization’s business strategies, enabling its business processes, enhancing its organizational
structures and culture, and increasing the customer and business value of the enterprise.

Developing IS solutions:

Developing successful information system solutions to business problems is a major challenge for business
managers and professionals today. Developing information systems solutions to business problems can be
implemented and managed as a multistep process or cycle. These includes:

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Most computer-based information systems are conceived, designed, and Investigate
implemented using some form of systematic development process. Several
major activities must be accomplished and managed in a complete IS
Maintain Analyse
development cycle.

In this development process, end users and information specialists design

information system applications on the basis of an analysis of the business
requirements of an organization. Examples of other activities include Implement Design
investigating the economic or technical feasibility of a proposed application,
acquiring and learning how to use any software necessary to implement the new system, and making
improvements to maintain the business value of a system.

Ethical Challenges or risk of IT:

As a manager, business professional, or knowledge worker, one might be challenged by the ethical
responsibilities generated by the use of information technology. For example, how can you protect yourself
from computer crime and other risks of information technology?

Applications of IT Potential Harms Potential Risks Possible Responses

i) CRM i) Consumer boycotts

i) Infringements on privacy ii) Work stoppages i) Codes of ethics
ii) HRM
ii) Inaccurate information iii) Government ii) Incentives
iii) BIS (Business Intelligence
iii) Collusion intervention iii) Certification
Systems)

The IS Function:

The information systems function represents:

i) A major functional area of business equally as important to business success as the functions of
accounting, finance, operations management, marketing, and human resource management.
ii) An important contributor to operational efficiency, employee productivity and morale, and customer
service and satisfaction.
iii) A recognized source of value to the firm.
iv) A major source of information and support needed to promote effective decision making by managers
and business professionals.
v) A vital ingredient in developing competitive products and services that give an organization a strategic
advantage in the global marketplace.
vi) A dynamic, rewarding, and challenging career opportunity for millions of men and women.
vii) A key component of the resources, infrastructure, and capabilities of today’s networked business
enterprises.
viii) A strategic resource.

Systems have three basic functions and two additional functions known as cybernetic or self-
monitoring, self-regulating system):
i) Input involves capturing and assembling elements that enter the system to be processed. For example,
raw materials, energy, data, and human effort must be secured and organized for processing.
ii) Processing involves transformation processes that convert input into output. Examples are
manufacturing processes, the human breathing process, or mathematical calculations.
iii) Output involves transferring elements that have been produced by a transformation process to their
ultimate destination. For example, finished products, human services, and management information must
be transmitted to their human users.
iv) Feedback is data about the performance of a system. For example, data about sales performance are
feedback to a sales manager. Data about the speed, altitude, attitude, and direction of an aircraft are
feedback to the aircraft’s pilot or autopilot.
v) 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, a sales manager
exercises control when reassigning salespersons to new sales territories after evaluating feedback about
their sales performance. An airline pilot, or the aircraft’s autopilot, makes minute adjustments after

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 evaluating the feedback from the instruments to ensure that the plane is exactly where the pilot wants
it to be.
Example. A manufacturing system accepts raw materials as input and produces finished goods as output. An
information system is a system that accepts resources (data) as input and processes them into products
(information) as output. A business organization is a system in which human and economic resources are
transformed by various business processes into goods and services.

Characteristics of System (IS):

A system does not exist in a vacuum; rather, it exists and functions in an environment containing other systems.
If a system is one of the components of a larger system, it is a subsystem, and the larger system is its
environment. Several systems may share the same environment. Some of these systems may be connected to
one another by means of a shared boundary, or interface.
 Open system, a system that interacts with other systems in its environment.
 Adaptive system, a system that has the ability to change itself or its environment to survive.

 Information systems are made up of interrelated components: People, hardware, software, peripherals,
and networks.
 They have clearly defined boundaries: Functions, modules, type of application, department, or end-user
group.
 All the interrelated components work together to achieve a common goal by accepting inputs and
producing outputs in an organized transformation process: Using raw materials, hiring new people,
manufacturing products for sale, and disseminating information to others.
 Information systems make extensive use of feedback and control to improve their effectiveness: Error
messages, dialog boxes, passwords, and user rights management
 Many information systems are designed to change in relation to their environments and are adaptive:
Intelligent software agents, expert systems, and highly specialized decision support systems.
Information systems are systems just like any other system. Their value to the modern organization, however, is
unlike any other system ever created.

Components of System:
All information systems use people, hardware, software, data, and network resources to perform input,
processing, output, storage, and control activities that transform data resources into information products.

People Resources
End Users—anyone else who uses information systems. Knowledge workers who spend most of their time
communicating and collaborating in teams and workgroups and creating, using and distributing information.
Specialists— Operate and develop IS. Ex: systems analysts, software developers, systems operators.
Hardware Resources: includes-
Machines—computers, video monitors, magnetic disk drives, printers, optical scanners.
Media—floppy disks, magnetic tape, optical disks, plastic cards, paper forms.
Ex: i) Computer System: consisting CPU containing microprocessors, variety of interconnected devices-printer,
scanner, monitors.
ii) Computer peripherals: Devices such as keyboard, mouse-for input, video screen, printer-for output.
Software Resources:
Programs—operating system programs, spreadsheet programs, word processing programs, payroll programs.
Procedures—data entry procedures, error correction procedures, paycheck distribution procedures.
Ex: i) System software: controls and supports the operations of a computer system
ii) Application software: processing for particular use- word processing
iii) Procedures: operating instructions for the people who will use an information system.
Data Resources
Data are more than the raw material of information systems.
Data can take many forms.
Product descriptions, customer records, employee files, inventory databases.
Network Resources:
Communications media: twisted-pair wire, coaxial and fiber optic cables, and microwave, cellular, and satellite
wireless technologies.
Communications processors: modems and inter-network processors
Network access control software: network operating systems and Internet browser packages.
Information Products
Management reports and business documents using text and graphics displays, audio responses, and paper forms.

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Four (04) major concepts that can be applied to all types of
information systems:

i) People, hardware, software, data, and networks are the five

basic resources of information systems.
ii) People resources include end users and IS specialists, hardware
resources consist of machines and media, software resources
include both programs and procedures, data resources include
data and knowledge bases, and network resources include
communications media and networks.
iii) Data resources are transformed by information processing
activities into a variety of information products for end users.
iv) Information processing consists of the system activities of input,
processing, output, storage, and control.

Information System Activities:

Input: Data about business transactions and other events must be captured and prepared for processing by the
input activity. End users usually enter data directly into a computer system or record data about transactions.
This entry includes a variety of editing activities to ensure that they have recorded the data correctly. Once
entered, data may be transferred onto a machine-readable medium, such as a magnetic disk, until needed for
processing. Ex: Optical scanning of bar-coded tags on merchandise.
Processing. Data are typically subjected to processing activities, such as calculating, comparing, sorting,
classifying, and summarizing. These activities organize, analyze, and manipulate data, thus converting them into
information for end users.
Output. Information in various forms is transmitted to end users and made available to them in the output
activity. The goal of information systems is the production of appropriate information products for end users.
Such as messages, reports, forms, and graphic images, which may be provided by video displays, audio
responses, paper products, and multimedia.
Storage. Storage is the information system activity in which data are retained in an organized manner for later
use. Such as: Maintaining records on customers, employees, and products.
Control. An information system should produce feedback about its input, processing, output, and storage
activities. This feedback must be monitored and evaluated to determine whether the system is meeting
established performance standards. Then appropriate system activities must be adjusted so that proper
information products are produced for end users.

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