Chapter 1: Approaching information systems

Chapter 1

Approaching information systems

Essential reading
Laudon, Kenneth C. and Jane P. Laudon Management Information Systems: Organization and Technology in the Networked Enterprise. (New Jersey: Prentice Hall, 2000) sixth edition [ISBN 013-015682-5] Chapters 1 and 2. Porter, M. How Information can Help You Compete, Harvard Business Review (AugustSeptember 1985).

Further reading
Alter, Steven Information Systems: A Management Perspective. (Reading Mass: Addison-Wesley, 1999) third edition [ISBN 0-201-52108-3] Chapters 1 and 2. Avgerou, Chrisanthi and Tony Cornford Developing Information Systems: Concepts, Issues and Practice. (London: Macmillan, 1998) second edition [ISBN 0-333-73231-6] Chapter 1. Bocij, Paul, Dave Chaffey, A. Greasley and S. Hickie Business Information Systems: Technology, Development and Management. (London: Financial Times Pitman, 1999) [ISBN 0-273-63849-1] Chapters 1 and 2. Curtis, Graham Business Information Systems: Analysis, Design and Practice. (London: Addison Wesley, 1998) third edition [ISBN 0-201-33136-5] Chapter 1. Venkatraman, Chapter 5 in Scott-Morton, M. The corporation of the 1990s: information technology and organizational transformation. (New York: OUP, 1991) [ISBN 0-19-506806-8].

Introduction
In this chapter we explore the principal concepts that underlie the description of the use of information and communications technologies (ICT) in terms of information systems. This requires an understanding of the notion of information and data, as well as of what the word system implies. You should be aware that considering the use of ICT through the concept of an information system is in some contrast to an approach that looks simply at computers as technical devices, or as direct routes to solving individual and isolated information handling requirements. Seeing information systems as a part of an organisations infrastructure brings us on to discussing issues of information systems as support for jobs, tasks and work processes, and nally to their strategic role in helping an organisation survive and thrive in its environment. In Laudon and Laudon, Chapter 1, they introduce the sociotechnical approach as one of a contrasting set of approaches to information systems including a purely technical approach drawing on computer science, and a behavioural approach drawing on sociology and psychology and focusing on cognitive processes.1 In contrast, the sociotechnical approach seeks to balance a concern with technology and with the people who work with it. If we understand an information system as a combination of some technical apparatus and involved people all working together to some goals, then a sociotechnical approach is very appropriate.2

In the Alter book the sociotechnical approach is not mentioned as such, but the whole book is built around a Work Centred Analysis (WCA) model that is essentially drawing on the same theme.

For further reading on the sociotechnical approach in information systems see Avison and Fitzgerald.

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Computer-based information systems

Information and information systems

Scene-setting exercise
First read Chapter 1 of Laudon with the following question in mind. How many reasons can you list to sustain the argument that information systems are transforming: organisations economic structures management practices our lives as citizens?

Try to list your reasons under each of the headings, and give three illustrative examples.

It is often suggested today that we live in an information age and for both business and public sector organisations the use that they make of information is critical to their success. This sentence was easy to write, but of course, as a student, the correct response by you to anything which is often suggested is to ask for some more solid evidence or theoretical justication. So, why is information a key element of our age? We might suggest reasons such as the following: Information is produced and used for decision-making in modern organisations. Information is more and more traded as a commodity. The ability to use information resources has a profound impact on the shape and structure of organisations and industries, and their ability to compete and thrive. Information is now widely held by governments and companies and is central to our ability as citizens to participate in society.

These may be the start of good answers, but we nonetheless do not have a single universally accepted theory of information that explains the essence of the concept. Hence we can offer no single denition or overarching theory. Certainly many disciplines have studied information, and various theories have been proposed. Linguists study the way in which meaning (information) is conveyed to people by the use of language. Communications engineers study how information is transmitted: for example in designing a telephone network to carry a certain volume of calls. Logicians have an interest in information in the sense that information is truth. Statisticians are interested in exploring and extracting meaning out of quantities of observations of events, and they too are seeking to provide insight into the activities they study information. Economists too study information, because individuals make economic decisions on the basis of what they know or believe to be true again information.

It would be possible to expend a great deal of effort and words in investigating the concept of information as it is used in a variety of disciplines. For the purposes of this unit however a fairly simple underpinning for the concept can be used at least at the start; information is knowledge about the world that is sought by people in order to satisfy their psychological needs and on the basis of which to take action or make decisions.

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Chapter 1: Approaching information systems

Exercise
Contrast this denition with that given in Laudon and Laudon Chapter 1, and other textbooks. Try asking people (not students of this course) to provide their own denition of the term information.

There are a number of important themes in the candidate denition above:

The aspect of information that is generally stressed in consideration of information systems in a business context is support for decision-making, but as we will see there is a bit more to it than that.
3

It suggests that information is valued by people, since they actively seek it. It suggests that information tells us something about the world; that is, it communicates to us some state of affairs. It also suggests that people seek information because they will use it. This may be a direct use (to watch a video or read a novel) or a use in making decisions (to follow a cooking recipe).3

The information we use in our daily lives is both paid for and free. We expect to pay for some information, and organisations expend considerable resources on developing strategies to ensure that they have information that supports their business objectives, that suitable information resources and information systems are developed and that information resources are secured and protected. This focus on information activities leads us to emphasise the kinds of jobs and roles that rely increasingly on using information what Laudon and Laudon refer to as knowledge workers. Each of the three themes above tells us something about the nature of the jobs of such knowledge workers. Other authors will offer other denitions and explanations of information. You should certainly be motivated to seek out information on information, collect other peoples denitions, and ponder the decision as to which denitions or explanations are preferable. If information is seen as having value then that value may be based on a number of characteristics: The information is reliable and accurate. The information is accessible. The information is up-to date or timely. The information is conveniently presented. The information is at an appropriate level of detail. The information reduces uncertainty. The information is exclusive. The information pleases. The information enables some other valued task.

You will nd a brief introduction to systems in Laudon and Laudon Chapter 1, section 1.1; Bocij Chapter 10 has a fuller treatment; also Curtis Chapter 1; Alter, Chapter 2. Further reading: Avgerou and Cornford Chapter 6.

Systems4
We describe our topic as information systems, and we have considered the issue of information, so the next question might be, What is a system? A common denition is to say that a system is a collection of components that interact together and can be seen as collectively undertaking a common purpose. Systems can either be closed or open. If they are closed, then this means they have no relationship with the world beyond their boundaries. This means they have no effect or consequences for that world and are not affected by events in the world. At times it may be sensible to think of a computer as a closed system, and to concentrate on simply the internal elements and their interaction, ignoring any inputs and outputs from beyond the boundary for example when designing some internal elements of

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software. However, for our purposes and with our concern with information systems within business and administrative structures, we will usually think of systems as open systems that interact with their environment. These are systems which do exchange within their environment (an exchange based on data and information), and which can affect the world beyond their boundary. Exercise
Would you consider the economic system of your country as being an open system or a closed system?

Information systems will almost always be open systems, though specifying the boundary and the signicant characteristics of the environment can be quite tricky. The principal interaction that an information system has with its environment is the receipt of signs or signals from the environment (inputs). It stores them in an organised manner as data, processes or manipulates them, and then passes signs and signals back into the environment (outputs). These outputs will often be mediated through people, as when a computer provides some information to a person, who then acts on it. Outputs will be in response to some input, for example the arrival of an order for a product. Within a systems perspective this process will be overseen by some form of control mechanism, to see it operates correctly. Control can be based on feedback, either positive or negative. Within the computer component of an information system this control activity is one of the tasks of software. Nevertheless, it must be remembered that information systems are much more than computers, and control activity will also be undertaken by people, for example an auditor checking the accounting system.5 This point is important and gives us another opportunity to say that an information system is more than computers and their programs which is just a computer system. Information systems include people as components, and when information systems are studied or designed, people, the organisations they belong to and the jobs they do must be included too. Commercial businesses and other forms of organisation where we nd information systems, such as government ministries, hospitals or sports clubs, are made up of and are operated by people, so it is vital to remember from the outset that people are a part of an information system. One way to say this is that information systems are social systems supported by technology.

Control issues are discussed in some detail in Curtis, Chapter 8, in Alter, Chapter 13. See also Chapter 8 of this guide.

Information systems in business

Scene-setting exercise
First review Laudon and Laudon Chapter 2 with this question in mind. What is the essential character of a strategic information system when compared to any other use of a computer or network?

All the textbooks referenced in this guide start out by suggesting what role information systems play for organisations and in a business environment. This is usually presented in a historical manner, noting how the use of ICTs and the systems they are built into has expanded and changed over the past 40 years. In the past, it is argued, information systems were narrowly focused on particular functions that required data processing: for example, accounting, order processing or a company payroll. The goal was to do these tasks efciently for themselves. However, once such a system is established, and it starts to develop resources of data, then often other uses of this data are found. Hence we come to management information systems, which make data available to managers in diverse ways to help them do their jobs. In more recent times, as technologies have developed further, our ability to support

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Chapter 1: Approaching information systems

organisational activities and business processes has expanded, and so computer-based information systems have expanded their role. Many people see the key change as being found in the development of the personal computer (desktop or portable) and the availability of networks to link machines (and people) together. For example, now information systems often operate as communication systems between individuals and groups, as much as functional data processing systems. Todays information systems also extend beyond any one business or organisation to what are generally described as inter-organisational systems. By use of technologies such as email, the Internet, web pages, portable computers, mobile phones, video conferencing, people and organisations can work together, share information, debate and discuss. One consequence that is much studied is the effect of all this on organisations themselves. Chapter 1 of Laudon and Laudon suggests a number of such consequences: attening the structure of organisations separating work from location reorganising work ow and business processes increasing exibility of organisations and their responsiveness changing management processes redening organisational boundaries.

Exercise
Try to develop a similar list of consequences of new network technologies (including the Internet) for individual citizens.

The key technology that is driving these changes today, most people would agree, is the Internet and the Worldwide Web (WWW). The arrival of the Internet as a massuse system for communications, information sharing and supporting business processes is a fairly recent phenomenon. These changes are based on new and powerful networking capabilities, available to a large proportion of the citizens of developed countries and to their business community. The Internet spans countries around the world and operates through various types of software, including the browsers on our PCs (and now on mobile telephones too), as well as the server software that provides the back-end data and information management power for all manner of web applications. The ability to link people and computers across the world, and almost at will, has had and will continue to have a profound impact on business, society and our individual lives. Throughout your study of this unit you should keep asking, on almost any topic covered, Yes, but what is the impact of the Internet on this? This leads to a need to develop a good understanding of the emerging topics of debate, e-commerce and e-business, globalisation, the ethical and security issues raised, and the shape of the emerging business and social environments.

Models of information system types

Information systems can be found in a great variety of environments including almost all types of organisations and areas such as government, education, the military, massentertainment, as well as diverse industry sectors including manufacturing, distribution, nance and banking, and retailing. One of the contexts in which information systems are most prominent (and have been studied extensively), is in business organisations. It is usual to identify information systems as serving various needs in terms of a hierarchy of the organisation, from the strategic at the top, to the operational at the bottom. In Laudon and Laudon, Figure 2.1, this is shown as a fourlayer pyramid with four classes of system serving four types of person within the

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organisation. Other textbooks, such as Bocij Figure 2.3, offer slightly different versions of this model. It is a useful exercise to read contrasting versions of this basic pyramidal model of the organisation and its information systems. Within this broad classication it is usual to delineate a number of separate and distinct classes of information systems within business organisations. You should be familiar with the following broad classication and be aware of how they relate and compare. However, these classications are not denitive. The pyramid structure of organisations is itself open to many challenges, and many systems in organisations may transcend the boundaries of any one class in such frameworks. This is what Alter (Chapter 5) refers to as hybrid information systems.
6

For each of these system types look at the entry in Davis.

Transaction processing systems6 These are the systems that undertake standard, regular and high-volume, informationhandling activities. Standard examples would be payroll, invoicing, order processing, sales ledgers, cheque clearing, and many other accounting functions. Most organisations started out using computers principally for these purposes, and of course still do. However, in the networked world, these systems often extend beyond the organisations boundary (known as inter-organisational systems). For example, an order-taking system of a bookseller linked to the web, or an airlines database of ights, fares, available seats accessible by travel agents or individual customers. Management information systems As the name suggests, management information systems are designed to provide information to managers about business operations, on the basis of which they can make better informed decisions. Management information systems are generally based upon the resources of data that transaction systems supply (their databases). Management information systems might be further divided into those that support operational control, checking that the work has been done, and those that provide support for tactical management and planning. Often, in practice, the same information may be required in each case. Decision support systems Decision support systems (DSS) are a particular development of management information systems. Whereas a management information system essentially provides access to data, decision support systems will offer an enhanced ability to perform manipulations on that data or to apply models (in the management science sense) to it so as to explore the consequences of different actions or decisions. Knowledge work and ofce automation systems It is not just senior or middle managers who have access to a computer but potentially any ofce worker. Ofce automation has been the name given to the use of computers to provide general support for people working in ofces. Such systems can become very sophisticated, based on providing general facilities for supporting work tasks (e.g. word processors, databases, desktop publishing and spreadsheets) and for supporting communications (e.g. electronic mail, video conferencing, online group discussion forums), and in part providing access to functionally oriented applications (e.g. an accounting system, an order entry system, a customer service system). Long ago, ofce automation just meant providing word processors to secretaries and typists; today it means providing appropriate technologies, tools and systems to all kinds of worker in the ofce, in the factory and on the road. In recent times we have added another category of information system, the knowledge work system to support knowledge workers. Examples might include:

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Chapter 1: Approaching information systems

intranet applications providing access to company data; procedures and reports a work-ow system that enables a sales consultant to monitor a customers order as it progresses through the company (and thus linked to transaction processing system) a design workstation (Computer Aided Design: CAD) used by an engineer (or a fashion designer) to prepare a new design for manufacture.

This topic leads us to discussion of expert systems. As fallout from articial intelligence research, there has been considerable interest over many years in building practical computer applications that can exhibit some element of intelligence or special expertise, or support people who provide such services. In the past such systems have been described as expert systems, but knowledge work systems is perhaps a better term to describe them. Examples of domains often seen as suitable for such support from technology would be: medical diagnosis credit risk assessment in a bank conguring computers.

See also Laudon and Laudon Chapter 14.

Technically this can be achieved on the basis of providing some knowledge about a subject within a system (some rules or a knowledge base), together with a software system that is capable of making inferences based on this knowledge. In addition we need a user interface (screens, menus, graphs, etc.) that allows the user (knowledge worker) to pose problems for the expert system to solve and presents the expert judgement including the reasons (rules) for that judgement. Thus a medical expert system might receive a patients symptoms as input, perhaps through check boxes on a screen (runny nose, coughing, slight temperature), and then deliver a diagnosis (the common cold) and justify this with reference to some rule.7 Executive information systems The executive information system (EIS) is yet another general classication that has crept into the language in the past decade. In Laudon and Laudon this is termed an executive support system (ESS). An EIS or ESS is a system that provides information to senior managers and directors. Their needs, in contrast to middle managers or knowledge workers, are for a broad mix of information from within the organisation and from beyond it. The emphasis of EIS is on timely presentation of a wide range of information across organisational functions and hierarchies at the appropriate level required to support decision-making at a senior executive level.

8 The theme of strategy is introduced here, but returned to in other chapters of this guide. In many ways the theme of strategy permeates the whole subject. See also Alter, Chapter 6.

Strategy and information systems8

Having a model of information system types, as above, is useful and starts to suggest how varied the information systems found in organisations can be, but it does not provide a deeper account of the motives to build such systems. Why, for example, might a company develop an expert system to help its designers? Should it better spend its money on an efcient and reliable transaction processing system (and perhaps link it up to the web so customers can place orders, check their deliveries and make payments)? Is an intranet a central requirement of a modern knowledge-based organisation, or is it a dangerous waste of effort quite at odds with an organisations hierarchical style of management? To answer such questions we need some model of what information systems do for an organisation, and which are most important that is, a strategic perspective that lets us identify strategic information systems and relate them to overall business strategy.

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Since the early 1980s this strategic role of information systems has been hotly debated. For some people it is obvious that computer technology and information systems are the new core of businesses, and almost all information systems are strategic. Others are more sceptical, saying that computers are rarely a panacea, and the opportunity for waste, failure and lost directions is very real. One of the key ideas developed to identify the strategic system is that of sustainable competitive advantage. The goal (not easy to achieve) is to develop information systems that make organisations more competitive in their marketplace and in a way that they are able to keep this advantage over the years. If an information system is simply based on the latest technology, then competitors can probably buy themselves the same equipment, so sustainable competitive advantage needs technology integrated with new ways of working, new management approaches and new business relationships.
9

Bocij has a good review of the main models.

10 Bocji provides a review of Porters model in the last part of Chapter 2, dealing with concepts of competitive strategies supported by information systems, and in Chapter 14. You should read Porters 1985 Harvard Business Review paper, How Information Can Help You Compete. See also Chapter 6 of Targett. 11

Various models have been developed to explore the strategic potential for information systems for any given organisation.9 Perhaps the best-known is Porters competitive forces and value chain model. This emphasises the position of an organisation within an industry structure, in terms of how it relates to customers and suppliers, and competes with actual and potential rivals.10 It sees that information systems can offer an opportunity to support key activities of the organisation in such a way as to address the threats from outside, be it ckle customers, efcient rivals or substitute products. Porters approach suggests three generic strategies for organisations that can be supported or enabled with information systems, namely: product differentiation lower costs new markets.11

As you read case studies in the textbooks it is a useful exercise to attempt to classify them in these terms. Most successful strategic systems are essentially of one type or the other.

Two other themes for identifying strategic information systems (discussed in Laudon and Laudon Chapter 2) are a focus on supply chain management, including such ideas as just-in-time supply and stockless inventory. This builds quite directly on Porters ideas. The other, and rather different, idea is that of identifying and enhancing core competencies through information systems. Firms cannot be good at everything, but they can strive to be good at a limited range of things, and it is this that will bring them success in the market. Ideas of enhancing core competencies, in so far as these competencies are in the people a rm employs, are obviously linked to the idea of developing knowledge work systems and supporting knowledge workers. In the Targett book a number of the chapters use another model for exploring strategic issues, based on work at MIT in a study known as Managing in the 1990s.12 This model proposes a ladder of business benet derived from information systems:

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Venkatraman, N. IT-induced business reconguration. In Scott-Morton.

The degree of business transformation

5. 4. 3. 2. 1.

Business scope redenition (e.g. changing the business model).

Business network redesign (e.g. who business is done with).

Business process redesign (e.g. how business is done)

Internal integration (e.g. across business units of the same company).

Localised exploitation (e.g. in a business unit)

Range of potential benets

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Chapter 1: Approaching information systems

The logic of this model is that organisations have to progress up the ladder one step at a time, starting from localised exploitation and moving onwards. The dashed line in the gure represents the shift from what Venkatraman calls evolutionary levels, to revolutionary levels when the nature of the business itself is changed. This is an interesting approach, since it suggests that where we can go is very much dependent on where we are now. No radical departures, just steady progress to integrate IS into a business. However, the success of some new e-business start-up companies or case studies of radical transformation initiatives successfully undertaken suggest that it may be possible to parachute in at a higher level: that is, to go directly to a use of information systems which is radically different and strategically signicant, without moving patiently through the intermediate steps on the ladder. Finally we need to understand that developing some ideas for strategic systems on paper is (relatively) easy, and the models and ideas discussed here can be used to frame many innovative and interesting applications. However, to go from an idea to an actual strategic system in use is not easy, particularly if it is innovative, new and changes the structure or culture of an existing organisation. So, once again we see the need for active management of information systems within the sociotechnical framework. Exercises
1. The director of a medical supply organisation was in the warehouse with his employees celebrating the movement of 1m of stock through the warehouse in one week (a record gure). He congratulated the staff and then told them that his intention was to reduce this stock movement to zero as fast as he could, using online information systems to link customers placing orders to suppliers who would despatch goods directly. Why would the director want to bypass his own warehouse? How would you explain this to the warehouse staff? How would you keep them committed to their work? 2. What arguments could you put forward for and against the idea of sustainable competitive advantage for an individual company through information systems? 3. Does the availability of network-based inter-organisational systems change the economic factors that may encourage one company to co-operate with another? 4. In January 2000 the Ford motor company announced that they would give a computer and Internet access to every employee of the company worldwide for a nominal sum for their own personal use. The cost was estimated as $300m. Why would they wish to do this, and what benets could they expect? 5. Give two examples of possible systems projects in a motor car manufacturer that fall under each of the rungs of Venkatramans benets ladder.

Learning outcomes
By the end of this chapter and having undertaken the relevant readings and exercises you should be able to: give a reasoned explanation of the concept of information and why we describe information-handling activities in terms of systems contrast the aims of various generic types of information system found in organisations, how they support the organisation and how they link together analyse information systems in terms of a strategic case for their development based on appropriate models.

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