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• Understanding the effects of information

systems on business and their relationship to
Information Systems in Global globalization.
Business Today • Explain why information systems are so
essential in business today.
• Define an information system and describe its
management, organization, and technology
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LEARNING OBJECTIVES (Continued) The Role of Information Systems in Business

• Define complementary assets and explain how • How & Why information systems are transforming
they ensure that information systems provide business
genuine value to an organization. • Increase in wireless technology use, Web sites
• Describe the different academic disciplines used • Increased business use of Web technologies
to study information systems and explain how • Cloud computing, mobile digital platform.
each contributes to our understanding of them.
• Business/ Artificial Intelligences
• Explain what is meant by a sociotechnical • Collaborative tools
systems perspective. • Laws and security .
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The emerging digital firm Strategic Business Objectives of IS

Digital Firm
A digital firm is one in which nearly all of the
 business relationships are digitally enabled and

 core business processes are accomplished through

digital networks  In contemporary systems there is a growing interdependence

 key corporate assets are managed digitally ( In a
between a firm’s information systems and its business capabilities.
digital firm, any piece of information required to support key  What a business would like to do in near future often depends on
what its systems will able to do/ permit it to do.
business decision is available at any time and anywhere)
 Changes in strategy, rules, and business processes increasingly
require changes in hardware, software, databases, and
1.6 telecommunications.
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Management Information Systems

The Role of Information Systems in
Business Today
Operational excellence:
Business firms invest heavily in information systems to

Improvement of efficiency to attain higher profitability
achieve six strategic business objectives:

 New products, services, and business models:

 Operational excellence  IT/IS are the major enabling tools for firms to create new
 New products, services, and business models products and services , as well as new business models.
 Customer and supplier intimacy
 Customer and supplier intimacy:
 Improved decision making
Serving customers raises revenues and profits
Competitive advantage

 Better communication with suppliers lowers costs
 Survival
 Improved decision making
 Correct data on Real time data leads to better decisions
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Hall 2011 Hall

Management Information Systems

Perspectives on Information Systems
 Competitive advantage  Information system:
 Delivering better performance  Set of interrelated components
 Charging less for superior products  Collect, process, store, and distribute information
Responding to customers and suppliers in real time
Support decision making, coordination, and control


Information vs. data

Information technologies as necessity of business
Data are streams of raw facts

May be:

Information is data shaped into meaningful form

 Industry-level changes, e.g. Bank’s introduction of ATMs 

 Governmental regulations requiring record-keeping

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Hall 2011 Hall 1.10 © 2010 by Prentice Hall

Perspectives on Information Systems Perspectives on Information Systems

Data and Information  Information system: Three activities produce

information organizations need
1. Input: Captures raw data from organization or external
2. Processing: Converts raw data into meaningful form
3. Output: Transfers processed information to people or
activities that use it
 Feedback: Information systems also require feedback, which is
output returned to appropriate members of organization to
help evaluate or correct input stage

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
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for a specific store or sales territory. © 2010 by Prentice Hall 1.12 © 2010 by Prentice Hall


Functions of an Information System Perspectives on Information Systems

Information Systems Are More Than Computers

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, Using information systems effectively requires an understanding of the organization, management, and information technology
competitors, stockholders, and regulatory agencies, interact with the organization and its information ©
systems. 13 shaping the systems. An information system creates value for the firm as an organizational and management solution 14 to
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challenges posed by the environment.

Perspectives on Information Systems Perspectives on Information Systems

 Organizational dimension of information systems: Information System Levels in a Firm

is the integral part of Organization
 Organization have a structure that is composed of different levels
and specialists & this structure reveal a clear-cut division of labor.
Hierarchy on authority & responsibility.
 Separation of business functions
 Sales and marketing
 Human resources
 Finance and accounting
 Manufacturing and production
 Unique business processes : logically related tasks & behavior for
accomplishing work
 Unique business culture : fundamental set of assumptions, values,
and ways of doing things, that has been accepted by most of the
member Business organizations are hierarchies consisting of three principal levels: senior management, middle management, and
15 operational management. Information systems serve each of these levels. Scientists and knowledge workers often work with
1.15 © 2010 by Prentice Hall 1.16
middle management. © 2010 by Prentice Hall

Perspectives on Information Systems Perspectives on Information Systems

 Management dimension of information systems  Technology dimension of information systems

 Management’s job is to make the sense out of many  IT is one of many tools managers use to cope with changes.
situations faced by organizations, make decisions , and
formulated action plans to solve organizational problems.  Computer hardware and software
 Managers set organizational strategy for responding to  Data management technology
business challenges  Networking and telecommunications technology
 In addition, managers must act creatively:
 Networks, the Internet, intranets and extranets, World Wide Web
 Creation of new products and services
 Occasionally re-creating the organization
 Information technology can play a powerful role in helping
managers design and deliver new services and directing and
redesign their organizations.
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Perspectives on Information Systems Perspectives on Information Systems

 Business perspective on information systems:  Business information value chain

Raw data acquired and transformed through stages that add
Managers and business firms invest in IT and systems

 value to that information
because they provide real economic value to the  Value of information system determined in part by extent to
business. which it leads to better decisions, greater efficiency, and higher
 Investments in information technology will result in
superior returns:  Business perspective: Calls attention to organizational
 Productivity increases and managerial nature of information systems
 Revenue increases
 Decreasing cost
 Superior long-term strategic positioning
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Perspectives on Information Systems Perspectives on Information Systems

The Business Information Value Chain Variation in Returns on Information Technology Investment

From a business perspective, information systems are part of a series of value-adding activities for Although, on average, investments in information technology produce
acquiring, transforming, and distributing information that managers can use to improve decision returns far above those returned by other investments, there is
making, enhance organizational performance, and, ultimately, increase firm profitability.
© 2010 by Prentice Hall considerable variation across firms.
© 2010 by Prentice Hall

Complementary Assets : Organizational Capital and

Perspectives on Information Systems
the Right Business Model

 Investing in information technology does not guarantee

good returns  Complementary assets:
 Considerable variation in the returns firms receive from  Assets required to derive value from a primary investment
systems investments  Firms supporting technology investments with investment in
complementary assets receive superior returns
 Factors:
1. Should accompanied by supportive values, structures , and  E.g.: invest in technology and the people to make it work
behavior pattern. properly
2. Adopting the right business model
3. Investing in complementary assets (organizational and
management capital)

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Contemporary Approaches to Information Systems

 Complementary assets include:

 Organizational investments, e.g.
 Appropriate business model

 Efficient business processes

 Managerial investments, e.g.

 Incentives for management innovation

 Teamwork and collaborative work environments

 Social investments, e.g.

 The Internet and telecommunications infrastructure

 IT- enabled educational programs, Laws and

The study of information systems deals with issues and insights contributed from technical and
1.25 regulations 25
© 2010 by Prentice Hall behavioral disciplines.
© 2010 by Prentice Hall

Contemporary Approaches to Information Contemporary Approaches to Information

Systems Systems
• Technical approach Sociotechnical view
• Management Information Science
• Emphasizes mathematically based models • Combines computer science, management science, operations
• Computer science, management science, operations research and practical orientation with behavioral issues like
research sociology, economics, and psychology .
• Behavioral approach • Optimal organizational performance is achieved by jointly
• Behavioral issues (strategic business integration, optimizing both the social and technical systems.
implementation, etc.) • Adopting a sociottechnical systems perspective helps to avoid
• Psychology, economics, sociology purely technical approach or behavior approach to IS.
• Technology must be changed and designed in such a way as to fit
organizational and individual needs. Sometime technology may
have to “ de-optimized” to accomplish this fit.
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Contemporary Approaches to Information Perspectives on Information Systems


Socio-technical view A Sociotechnical Perspective on Information Systems

•Optimal organizational performance achieved

by jointly optimizing both social and technical
systems used in production
•Helps avoid pure technological approach or
pure behabiour approach

In a sociotechnical perspective, the performance of a system is optimized when©both

2010 the technology
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and the organization mutually adjust to one another until a satisfactory fit is obtained.