An information system (IS) collect, process, stores, analyzes, and disseminates information for a specific purpose. Like any others system, an information system includes inputs ( data, instructions ) and outputs ( reposts, calculation ). It processes the inputs by using technology such as PCs and produces outputs that are sent to users or to other systems via electronic networks. A feedback mechanism that controls the operation may be included ( see Figure 1.4 ). Like any other system, an information system also includes people, procedures, any physical facilities, and it operates within an environment. An information system is not necessary computerized, although most of them are. ( For a more general discussion of systems, see Online File W1.7 at the book’s Web site. )
FORMAL AND INFORMAL INFORMATION SYSTEMS.
An information system can be formal or informal. Formal systems include agreed-upon procedures, standard inputs and outputs, and fixed definitions. A company’s accounting system, for example, would be a formal information system that processes financial trans-actions. Informal systems take many shapes, ranging from an office gossip network to a group of friends exchanging letters electronically. Both types of information systems must be studied.
WHAT IS A COMPUTER-BASED INFORMATION SYSTEM?
A computer-based information system ( CBIS )
is an information system that uses computer technology to perform some or all of its intended tasks. Such a system can include as little as a personal computer and software. Or it may include several thousand computers of various sizes with hundreds of printers, plotters, and other devices, as well as communication networks ( wireline and wireless ) and databases. In most cases an information system also includes people. The Basic
components of information system are listed below. Note that not every system includes all these components.
· Hardware is a set of devices such as processor, monitor, keyboard, and printer. Together, they accept data and information, process them, and display them.
· Software is a set of programs that instruct the hardware to process data.
· A database is a collection of related files, tables, relations, and so on, that stores data and the associations among them.
· A network is a connecting system that permits the sharing of resources by different computers. It can be wireless.
· Procedures are the set of instructions about how to combine the above components in order to process information and generate the desired output.
· People are those individuals who work with the system, interface with it, or use its output.
In addition, all information system have a purpose and a social context. A typical purpose is to provide a solution to a business problem. In the Siemens case, for example, the purpose of the system was to coordinate internal units, to collaborate with the many suppliers and customers, and to improve costs and customer service. The social context of the system consists of the values and beliefs that determine what is admissible and possible within the culture of the people and groups involved.
The difference between computers and information system.Computers provide effective and efficient ways of processing data, and they are a necessary part of an information system. An is IS requires an understanding of the business and its environment that is supported by the IS. For example, to build an IS that supports transactions executed on the New York Stock Exchange, it is necessary to understand the procedures related to buying and selling stocks, bonds, option, and so on, including irregular demands made on the system, as well as all related government regulation.
In learning about information system, it is therefore not sufficient just to learn about computers. Computers are only one part of a complex system that must be designed, operated, and maintained. A public transportation system in a city provides an analogy. Buses are a necessary ingredient of the system, but more is needed. Designing the bus routes, bus stops, different schedules, and so on requires considerable understanding of customer demand, traffic patterns, city regulations, safety requirements, safety requirements, and the like. Computers, like buses, are only one competent in a complex system.
What is information technology?
Earlier in the chapter we broadly defined information technology as the collection of computer system used by an organization. Information technology, in its narrow definition, refers to the technological side of an information system. In includes the hardware, software, databases, networks, and other electronic devices. It can be viewed as a subsystem of an information system. Sometimes, though, the term information technology is also used interchangeably with information system. In this book, we use the term IT in its broadest sense – to describe an organization’s collection of information system, their users, and the management that oversees them. The purpose of this book is to acquaint you with all aspects of information systems/ information technology.
Now that the basic terms have been defined? We present some examples of IS applications worldwide.
Millions of different information systems are in use throughout the world. The following examples ate intended to show the diversity of applications and the benefits provided. At the end of each example, we list the critical response activities supported by the system.
As the examples in this section show? Information systems are being used successfully in all functional areas of business. We provide here five examples, one for each of the major functional areas: accounting, production/ operations management, marketing, human resource management, and finance.
Beginning here, and continuing throughout the book, icons positioned in the margins will call out the functional areas to which our real-world examples apply. In addition we will point to IT applications in government and in other public services such as health care and education by using icons. Finally, you have already seen that other icons will identify global examples- IT used by non- U.S. – based companies or by any company with significant business outside the United States. For a key that identifies the icons, see the note on page 6 or in the preface.
Managing Accounting Information Across Asia. Le Saunda Holding Company (Hong Kong) manages 32 subsidiaries in four Asian countries, mostly in the manufacture, import, and sale of shoes. Managing the financing and cash flow is a complex process. All accounting information flows to head-quarters electronically. Also, sales data are electronically collected at point-of-sale (POS) terminals. The sales data, together with inventory data (which are updated automatically when a sale occurs), are transferred to headquarters. Other relevant data, such as advertising and sales promotions, merchants, and cash flow, are also transmitted electronically and collected in a centralized database for storage and processing.
To cope with the rapid growth of the company, a sophisticated accounting software package was installed. The result was radical improvements in accounting procedures. For example, it now takes less than 10 minutes, rather than a day, to produce an ad-hoc complex report. The company’s accountants can generate reports as they are needed, helping functional managers make quicker and better decisions. The system is also much more reliable, and internal and external auditing is easier. Headquarters knows what is going on almost as soon as it occurs. All these improvements have led to a substantial growth in revenue and profits for the firm.
Critical response activities supported: decision making, managing large amounts of information, improved quality, reduced cycle time, enhanced strategic competitiveness.
The Dallas Mavericks: Using IT for Successful Play and Business. Mark Cuban, the owner of the Dallas Mavericks of the National Basketball Association (NBA), expects the franchise to play well and also to perform as a business. He wants to fill every seat at every game and to maximize sales from concessions and souvenir sales.
Cuban’s strategy to reach his business goals is to give fans the best possible experience, with a high-quality team on the court and excellent service at arena bars, barbecue stands, and souvenir shops. In the 2002 season, the “Mavs” filled the 19,200-seat American Airlines Center to 103,7 percent capacity, bringing in 2003 the best NBA city by The Sporting News.
Filling seats is critical. To track attendance, the Mavs became the first NBA team to put barcodes on tickets and then scan them in part to find out if group sales and community-organization giveaways were putting bodies in seats or just wasting tickets. The team’s business managers have found other uses for the for the attendance information as well. By enabling improved attendance forecasting for particular games, for example, the system has helped reduce beverage inventories by 50 percent.
Each of the 144 luxury suites in the Center is equipped with PCs that handle orders for merchandise, food, and beverages Wireless access from all seats in the arena is available so that fans can place orders directly from their seats. All 840 cash registers at concessions stands, restaurants, stores, and bars use a sophisticated point-of-sale system. In the big retail store in the ground floor, salespeople using hand-held computing devices ring up credit-card purchases when lines get too long. The system allows the Mavs to process credit-card transaction in only 3 seconds, because there is an always-on Internet connection to the processing facility. During a game, managers can see which concession stands are busy and which ones can be closed early to cut labor costs.
Technology also supports the Mavs on the court. The team has 10 assistant coaches, and each has a laptop computer and a hand-held computing device. Game film is streamed over the Web for coaches to view on the road or at home. A digital content management system developed in-house matches game footage with the precise, to-the-minute statistics provide for every play of every game by the NBA. The searchable database allows coaches to analyze the effectiveness of particular plays and combinations of players in different game situations.
In 2002, the Mavs started using hand-held computers to track the performance of each referee in every one of their games. The coaches can look at trends- for example, to see which referee favors a given team or which one calls more 3-second violations-and they can tell the team’s players. Another program logs different offensive and defensive schemes used against the Mavs. This system will let coaches make real-time adjustments using statistics from previous games.
Critical response activities supported: Decision making, increased sales, improved customer service inventory management, better utilization of capacity.
The Success Story of Campusfood.com. Campusfood.com’s recipe for success was a simple one: Provide interactive menus to college students, using the power of the Internet to enhance traditional telephone ordering of meals. Launched at the University of Pennsylvania, the company has taken thousands of orders for local restaurants, bringing pizza, hoagies, and wings to the Penn community.
Founder Michael Saunders began developing the site in 1997, while he was a junior at Penn, and with the help of some classmates, launched the site in 1998. After graduation, Saunders began building the company’s customer base.
This involved registering other schools, attracting students, and generating a list of local restaurants from which students could order food to be delivered. Currently, this activity is outsourced to a marketing firm, and schools nationwide are being added to the list. By 2003 there were more than 200 participating schools and more than 1 000 participating restaurants.
Financed through private investors, friends, and family members, the site was built on an investment of less than $1 million. (For comparison, another company, with services also reaching the college-student market has investment of $100 million.) Campusfood.com’s revenue is generated through transaction fees; the site takes a 5 percent commission on each order.
When you visit Campusfood.com, you can do the following: Search a list of local restaurants, their hours of operation, addresses, phone numbers, and other information. Browse an interactive menu, which shows each participating restaurant’s standard print menus, including the latest prices and a listing of every topping, every special, and every drink offered. Bypass busy-signals and place an order without being placed on hold, and avoid miscommunications on orders. Get access to more specials, including discounts and meal deals available online exclusively to Campusfood.com customers. Have access to electronic payment capabilities and your own account record (“My Account”). (Source: Prince, 2002 and campusfood.com.)
Critical response activities supported: customer service, improves cycle time, and innovative marketing method.
State-of-the-Art Human Resources Management in China. International Information Products Company LTD (ĎĐŃ) produces IBM personal computers (PCs) in Shenzhen, China. The company is one of China’s top-10 exporters and one of the world’s most efficient manufacturers of IBM PCs. The company’s success is attributed, in part, to its world-class Human Resources Information System (powered by PeopleSoft’s HRMS). In operation since October 2011, the system includes these basic elements: employee record management, recruitment, variable pay analysis, performance appraisal, payroll, and management of fringe benefits and absence records. In addition, employees can self-manage their personal data and report leaves and absences on the intranet. Using e-kiosks placed in several locations within the plant (e.g., the cafeteria), employees who do not have Internet access at work or home can use the system as well.
China’s employee tax and benefits systems (e.g., health care and social insurance) are very complex, requiring many computations. Using HRMS and its Global Payroll component, ĎĐŃ was able to reduce the payroll cycle from 11 days to 4 days, and to reduce the computation run time from 6 hours to 2 hours, while eliminating errors. The system automates labor-intensive HR processes such as workforce administration, enabling HR staff to concentrate on staffing, training, career planning, rewards and promotions, and other nonclerical HR services. Furthermore, the data collected in the system are used by top management for supporting strategic decisions. (Source: Smith, 2002.)
Critical response activities supported: improved cycle time, improved dissemination of information, automated clerical tasks, and use by employees for self-service.
Mobile Banking at Handelsbanken of Sweden. Handelsbanken of Sweden is the largest bank in Scandinavia, where more than 80 percent of the population over 15 years old carries mobile phones. Operating in a very competitive banking
Environment, the bank is trying to meet customers’ expectations of using their mobile phones to organize their personal and working lives while on the movie. Mobile banking services, including stock trading, was an opportunity for the bank to gain a competitive edge, and so the bank becomes the world’s first to have mobile banking applications.
An interactive service allows customers to access up-to-the-minute banking information, including the latest stock market and interest rate data, whenever and wherever they like. Handelsbanken’s e-banking has become so popular that it is used by tens of thousands of customers. It opens up critical business and personal information to safe and easy access from mobile devices. Both the bank’s financial advisors and its customers can access general and personalized stock market and account information, transfer money, request loans, buy and sell stock and bonds, and pay bills. This move into mobile banking is a key first step in a strategy to exploit the potential of e-business, while also extending the bank’s brand reach. (Sources: Compiled from IBM’s case study: Handelsbanken at www-3.ibm.com/e-business/doc/content/case study/35433.html, accessed March 2003, and from press releases at handelsbanken.com.)
In addition to functional areas, we can classify applications by the industry in which they are used. For example, retailing, financial services, educations, health care, social service, and government are heavy users. An example of a government service is provided in Online Minicase W1.2.