Download The Role of Information Systems in Business Today

Chapter 1
Information Systems in
Business Today
MGMT172 Chapter 1
Information Technology Capital Investment
FIGURE 1-1
Information technology capital investment, defined as hardware, software, and communications equipment, grew from 32 percent
to 52 percent of all invested capital between 1980 and 2009.
Management Information Systems, Global Edition
Chapter 1: Information Systems in Global Business Today
The Role of Information Systems in Business Today
• How information systems are transforming
business
• Emerging mobile digital platform
• Growing business use of “big data”
• Growth in cloud computing
• Globalization opportunities
• Internet has drastically reduced costs of operating on
global scale
• Increases in foreign trade, outsourcing
• Presents both challenges and opportunities
1.3
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Why invest?
• Growing interdependence between ability to use
information technology and ability to implement corporate
strategies and achieve corporate goals. This is due to the
importance of good information when making business
decision (e.g. Parcel delivery or banking)
• Web 2.0 – web based services allowing interaction e.g.
instant messaging, social networks
• Teleworking/distance working with mobile platform, wi-fi
• Cloud computing – infrastructure run on the Cloud and not
on-premise – more flexibility, pay for what you get
• Software as a service
The Interdependence Between Organizations and Information Technology
Figure 1.2
In contemporary systems there is a growing interdependence between a firm’s information systems and its business capabilities.
Changes in strategy, rules, and business processes increasingly require changes in hardware, software, databases, and
telecommunications. Often, what the organization would like to do depends on what its systems will permit it to do.
Why invest?
• Businesses often invest heavily in information systems to
achieve six strategic business objectives:
–
Operational excellence
–
New products, services, and business models
–
Customer and supplier intimacy
–
Improved decision making
–
Competitive advantage
–
Survival
The Role of Information Systems in Business Today
• 1) Operational excellence:
– Improvement of operational efficiency to attain higher profitability –
examples?
– Information systems and technology are an important tool in achieving
greater efficiency and productivity. Does IT make your life more
efficient ? How ?
– Walmart’s Retail Link system links suppliers to stores for superior
replenishment system. Walmart has $405B in retail sales annually. RL
system links 8,400 stores to suppliers with real time updates ->
improved stock/order levels, less wastage = higher profits
– E.g. Building maintenance systems e.g. Maximo Asset Management for
work schedules, information manuals, assistance
The Role of Information Systems in Business Today
• 2) New products, services, and business
models:
– Business model: describes how company produces,
delivers, and sells product or service to create wealth
– Information systems and technology a major enabling
tool for new products, services, business models
• Examples: Apple’s iPad, Google Advertising, and Netflix
• Apple iTunes – what did we used to do?
• Netflix – what did we used to do?
• eBay – what did we used to do?
• VOIPMobile, Skype, Whatsapp
The Role of Information Systems in Business Today
• 3) Customer and supplier intimacy:
– Serving customers well leads to customers returning,
which raises revenues and profits.
• Example: High-end hotels that use computers to track customer
preferences and used to monitor and customize environment.
Mandarin Oriental Hotel : bedroom, TV film, breakfast, checkout
time, gym etc preferences ready for next time you stay !
• Example: Tesco clubcard; Sainsbury nectarcard; UK supermarkets.
Using card gives you discount and rewards – however value is in
knowing what you buy….new mother, off to school ? Can
market/offer targeted products. What customer information do
you think might be useful ? What would it allow you to do ? How
could you better serve your customers ?
• Tesco Clubcard
9
The Role of Information Systems in Business Today
• 4) Improved decision making
– Without accurate information:
• Managers must use forecasts, best guesses, luck
• Results in:
– Overproduction, underproduction
– Misallocation of resources
– Poor response times
• Poor outcomes raise costs, lose customers
– Example: Disney – 30 million visitors per year. Large queues, rides at capacity.
Implemented camera system to let central control know which rides busy and
which had space ; can send info to customers via ‘mobile magic’ app ; or can
divert disney characters to where they are most needed, or extra staff to
restaurant etc – happier customers ! What useful information could you
collect before the customer arrive at Disney ?
The Role of Information Systems in Business Today
• 5) Competitive advantage
– Delivering better performance
– Charging less for superior products
– Responding to customers and suppliers in
real time
=Customer retention, higher profit
– Examples: as we have seen in previous
examples – Walmart, Tesco, e-Bay
The Role of Information Systems in Business Today
• 6) Survival / Legal Requirement
– Information technologies as necessity of business
– Industry-level changes
• Example: Citibank’s introduction of ATMs (imagine a
bank without ATMs!) ie you are forced to do it
– Governmental regulations requiring record-keeping
• Examples: Toxic Substances Control Act, Sarbanes-Oxley
Act
• Airplane maintenance records
What do we mean by an Information System?
• Information system:
– Set of interrelated components (computers, network,
people, data inputs, outputs)
– Collect, process, store, and distribute information
– Support decision making, coordination, and control
• Information vs. data
– Data are streams of raw facts.
– Information is data shaped into meaningful form.
Data and Information
Figure 1.3
Raw data from a supermarket checkout counter can be processed and organized to produce meaningful
information, such as the total unit sales of dish detergent or the total sales revenue from dish detergent for a
specific store or sales territory.
Perspectives on Information Systems
• Three activities of information systems
produce information organizations need
– Input: Captures raw data from organization or external
environment
– Processing: Converts raw data into meaningful form
– Output: Transfers processed information to people or
activities that use it
– E.g. barometric pressure, wind speed, temperature (data) > tropical storm starting at 4pm in north eastern region
(information)
Perspectives on Information Systems
• Feedback:
– Output is returned to appropriate members of
organization to help evaluate or correct input stage.
• Computer/Computer program vs.
information system
– Computers and software are technical foundation
and tools, similar to the material and tools used to
build a house.
Functions of an Information System
An information system contains
information about an organization
and its surrounding environment.
Three basic activities—input,
processing, and output—produce
the information organizations need.
Feedback is output returned to
appropriate people or activities in
the organization to evaluate and
refine the input. Environmental
actors, such as customers,
suppliers, competitors,
stockholders, and regulatory
agencies, interact with the
organization and its information
systems.
Figure 1.4
Information Systems Are More Than Computers
Using information systems
effectively requires an
understanding of the organization,
management, and information
technology shaping the systems. An
information system creates value
for the firm as an organizational
and management solution to
challenges posed by the
environment.
Figure 1.5
Perspectives on Information Systems
• Organizational influence on information systems
• Organization can change the way information is allowed to be
used (e.g. personal data use by Google, healthcare records)
• Separation of business functions (use different types of info)
•
•
•
•
Sales and marketing
Human resources
Finance and accounting
Manufacturing and production
• Unique business processes (guides info systems)
• Unique business culture (values, design a customer first info
system)
Perspectives on Information Systems
• Management/people influence on information
systems
• Hierarchy of authority, responsibility (use
different information)
•
•
•
•
•
•
Senior management
Middle management
Operational management
Knowledge workers
Data workers
Production or service workers
Levels in a Firm
Business organizations are
hierarchies consisting of three
principal levels: senior
management, middle management,
and operational management.
Information systems serve each of
these levels. Scientists and
knowledge workers often work with
middle management.
Figure 1.6
Perspectives on Information Systems
• People/Management influence on information
systems
• Workers must be trained in how to use an information
system – otherwise it is useless
• Attitude toward using new information systems
• Design of new information systems
• Design of new technology
• The unique combination of these 3 factors creates a
unique Information System within the company
Perspectives on Information Systems
• Technology dimension of information systems
• Computer hardware and software
• Data management technology
• Networking and telecommunications technology
• Networks: the Internet, intranets (internal corporate
network based on internet technology standards) and
extranets (intranet which has been extended to
authorized users outside of the organization), World
Wide Web (all the services delivered over the internet)
• IT infrastructure: provides platform that system is built
on