Information Systems in Business

• What is an information system?
• Why study information systems?
• What managerial end users need to know?
• Roles of information systems in business.
• Benefits of use network computer.

1.1. Introduction
There has been a tremendous increase in the computerization during the last three decades. Now a day, there are many companies, which depend on their computers for their day-to-day activities. Many companies think that they are saving money and time as they use computer system and it is a good communication device among various departments within an organization. Managers find it very useful in making their decisions; they can get necessary information from such computer system.

The present modern age may be referred as “Age of Information Technology”, because of rapid changes taking place in this area. Information through computers plays a very important role in the management of all kinds of organizations whether small, medium or large; a public or a private sector undertakings; a manufacturing or a services organization; a local or global corporation and an established business house.

Management Information System (MIS) is not new, only its computerization is new. Before commuters, MIS techniques existed to supply managers with the information that would permit them to plan and control operations. The computer has added one or more dimensions, such as speed, accuracy, and increased volumes of data that permit the consideration of more alternatives in a decision. The application of computers to information processing began in 1954 when one of the first computers was programmed to process payroll. Today, computerized processing of transaction data is a routine activity of large organization.

1.2. What is an information systems?
An information system (IS) can be any organized combination of people, hardware, software, communications networks, data resources, and policies and procedures that collects, stores, retrieves, transforms, and disseminates information in an organization. (O’Brien-04-New)

People rely on modern information systems to communicate with each other using a variety of physical devices (hardware), information processing instructions and procedures (software), communications channels (networks), and stored data (data management). While today’s information systems are typically thought of as having something to do with computers, we have been using information systems since the dawn of civilization. Even today we make regular use of information systems that have nothing to do without a computer. (O’Brien-04-New)

Today end users rely on many types of information systems (IS). They might include simple manual (paper-and-pencil) hardware devices and informal (word-of-mouth) communications channels. However, in this course, we will concentrate on computer-based information systems that use computer hardware and software, telecommunications networks, computer-based data management techniques, and other forms of information technology to transform data resources into a variety of information products. (O’Brien-06-Old)

1.3. Why study information systems and information technology? (O’Brien-04-New)
Why study information systems and information technology? That’s the same as asking why anyone should study accounting, finance, operations management, marketing, human resource management, or any other major business function. Information systems and technologies are a vital component of successful businesses and organizations. They thus constitute an essential field of study in business administration and management. That’s why most business majors include a course in information systems. Since you probably intend to be a manager, entrepreneur, or business professional, it is just as important to have a basic understanding of information systems as it is to understand any other functional area in business.

Information technologies, including Internet-based information systems, are playing a vital and expanding role in business. Information technology can help all kinds of businesses improve the efficiency and effectiveness of their business processes, managerial decision making, and workgroup collaboration, thus strengthening their competitive positions in a rapidly changing marketplace. This is true whether information technology is used to support product development teams, customers support processes, electronic commerce transaction, or any other business activity. Information technologies and systems are, quite simply, a necessary ingredient for business success in today’s dynamic global environment.

We can discuss importance of information systems in two perspectives: (O’Brien-06_Old)
• An end user perspective, and
• An enterprise perspective

An end user perspective: Anyone who uses an information system or the information it produces is an end users. This usually applies to most people in an organization, as distinguished from the smaller number of people who are information systems specialists, such as systems analysts or professional computer programmers. A managerial end user is a manager, entrepreneur, or managerial-level professional who personally uses information systems. So, most managers are managerial end users.

Business and other organizations need people who can use networked computer workstations to enhance their own personal productivity and the productivity of their work groups, departments, and organizations. For example, you should be able to use word processing and electronic mail to communicate more effectively. You should also be aware of the management problems and opportunities presented by the use of information technology, and how you can effectively confront such challenges. Then you can play a major role in seeing that information system resources are used efficiently and effectively to benefit your career goals and the goals of the business firms or other organizations you may work for in the future.
An enterprise perspective: Information systems play a vital role in the business success of an enterprise. Information technology can provide the information a business needs for efficient operations, effective management, and competitive advantage. However, if information systems do not properly support the strategic objectives, business operations, or management needs of an enterprise, they can seriously damage its prospects for survival and success. So, the proper management of information systems is a major challenge for managers.
Thus, the information systems function represents:
A major functional area of business that is as important to business success.
• A major part of the resources of an enterprise and its cost of doing business.
• An important factor affecting operational efficiency, employee productivity and morale, and customer service and satisfaction.
• A major source of information and support needed to promote effective decision making by managers.
• An important ingredient in developing competitive products and services that give an organization a strategic advantage in the global marketplace.
• A vital, dynamic, and challenging career opportunity for millions of men and women.

1.4. What managerial end users need to know? (O’Brien-12_Old)
What exactly does a business end user need to know about information systems? The field of information systems, like other areas in management and business administration, is based on a variety of academic disciplines and encompasses a great amount of technological and behavioral knowledge. The IS field is constantly changing and expending as dramatic technological developments and behavioral research findings push back the frontiers of this dynamic discipline. (O’Brien-12) Even top executives can feel over-whelmed by the complex technologies, abstract behavioral concepts, and specialized applications involved in the field of information systems. However, most managers and other end users do not have to absorb all of this knowledge. Figure 1.1 illustrates a useful conceptual framework that outlines what end users need to know about information systems. It emphasizes that you should concentrate your efforts in five areas of knowledge: foundation concepts, technology, applications, development, and management. (O’Brien-13)

a. Foundation Concepts: What are information systems, and why are they important to end users and their organizations? In order to answer this question, you need to understand what the basic components and types of information systems are. You should learn some fundamental behavioral and technical concepts that will help you understand how information systems can support the business operations, managerial decision-making, and strategic advantage of business firms and other organizations.

b. Technology: What should end users know about the technologies used in computer-based information systems? The answer to this question is that they should have an understanding of major concepts, developments, and management issues in information technology- that is, hardware, software, telecommunications, database management, and other information processing technologies.

c. Applications: In what ways can information systems assist end users and organizations in accomplishing their work activities and meeting their strategic objectives? Answer this question requires a knowledge of the major applications of information systems for end user activities and the operations, management, and competitive advantage of business firms and other organizations. You should gain a basic understanding of information systems concepts and applications in areas such as end-user computing, office automation, transaction processing, the functional areas of business, management reporting, decision support, executive support, competitive advantage, and artificial intelligence.

d. Development: How should end users or information specialists develop information systems solutions to business problems? To answer this question, you should learn some fundamental problem-solving and development concepts. You should understand how methodologies such as the system approach, the system development life cycle, and prototyping can used by end users and IS specialists to construct information systems applications that successfully meet end user and organizational needs

e. Management: How should business end users meet the major challenges they face in managing information technology in their organization? Answering this question requires understanding what methods you can use to manage the resources, technologies, and activities of information systems.

1.5. Roles of information systems and information technology in business (O’Brien-15_Old)
Information technology is reshaping the basics of business. Customers service, operations, product and marketing strategies, and distribution are heavily, or sometimes even entirely dependent on IT. The computers that support these functions can be found on the desk, on the shop floor, in the store, even in briefcases. Information technology, and its expense, have become an everyday part of business life.

Information systems perform three vital roles in any type of organization:
• Support of business operations.
• Support of managerial decision making.
• Support of strategic competitive advantage.

Let us take a retails store as an example.
As a consumer, you have to deal regularly with the information systems that support business operations at the many retail stores where you shop. For example, most retail stores now use computer-based information systems to help them record customer purchases, keep track of inventory, pay employees, buy new merchandise, and evaluate sales trends.

Information systems also help store managers make better decisions and attempt to gain a strategic competitive advantage. For example, decisions on what lines of merchandise need to be added or discontinued, or on what kind of investment they require, are typically made after an analysis provided by computer-based information systems. This not only supports the decision making of store managers but also helps them look for ways to gain an advantage over other retailers in the competition for customers.

1.6. Benefits of use network computers (O’Brien-21_Old)
Figure 1.2 shows many examples of the use of networked computers to gain a fast response capability.
Industry or Function Application Benefits
Marketing Track status of promotions
Identify purchase influences and timing of decisions
Prepare reports on site Better information on sales activities
Reports get done more quickly
Distribution Bill of leading data and calculations
Delivery and field sales data collection
Enter and track parcel data More timely information on field operations
Better customer service
Field Service Remote access to parts catalog and availability
Troubleshooting support
Repair handbooks
Scheduling and dispatching
Service records
Payment and receipt records Better service to customer
More efficient scheduling
Transportation Airline and train schedules
Rental car check-in and receipt generation
Monitor on time performance Convenience to customers
Replace paper forms and records
More timely information
Financial Services Stock exchange floor trader support More accurate records
Reduces risk of fraud
Wholesale Sales Record sales results
Send results to corporate mainframe
Receive updates on product prices and availability More accurate and timely information
Eliminate unnecessary phone contracts
Cuts paperwork
Retail Sales Capture sales and demographic data
Update inventory data Assesses promotional results
Tighter control over field operations
Insurance Access corporate data for quotes
Perform complex rate calculations. Quicker quotations to customers.


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