ITM 2253/2233 - Management Information Systems

Information Systems in global

business today
Lesson 01

Buddhika Ranaweera (Ph. D), Department of Information Systems, FMS, RUSL

 Lesson outline
• IS transform Business & they are so essential for running
& managing a business today
• Define an IS, working process of an IS, components
(management, organization & technology) of an IS &
contribution given by complementary assets to ensure
that IS provide genuine value for an organization
• Academic disciplines used to study IS & their
contribution to understand an IS
Learning Objectives
• To understand the effects of information systems on business
and their relationship to globalization.
• To explain why information systems are so essential in business
today.
• To define an information system and describe its management,
organization, and technology components.
• To define complementary assets and explain how they ensure
that information systems provide genuine value to an
organization.
• To describe the different academic disciplines used to study
information systems and explain how each contributes to our
understanding of them.
• To explain what is meant by a sociotechnical systems perspective.
 Three Fundamental Roles of Information
Systems in Business

• Information Storage and Analysis

• Assist with Making Decisions
• Assist with Business Processes
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
Information Technology Capital Investment

Information technology capital investment, defined as hardware, software, and

communications equipment, grew from 21 percent to 37 percent of all invested capital
between 1999 and 2015.
• In the emerging fully digital firm:
– Significant business relationships are digitally enabled
and mediated.
– Core business processes are accomplished through
digital networks.
– Key corporate assets are managed digitally.
• Digital firms offer greater flexibility in
organization and management.
– Time shifting (any time), space shifting (any place)
 The Interdependence Between Organizations and
Information Technology
Growing interdependence between ability to use information technology and
ability to implement corporate strategies and achieve corporate goals

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.
Business firms invest heavily in information systems to
achieve six strategic business objectives:

1. Operational excellence
2. New products, services, and business models
3. Customer and supplier intimacy
4. Improved decision making
5. Competitive advantage
6. Survival
• Operational excellence:
– Improvement of efficiency to attain higher
profitability
– Information systems, technology an important tool
in achieving greater efficiency and productivity
– Ex. Walmart’s Retail Link system links suppliers to
stores for superior replenishment system
• 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
• Ex. Apple’s iPad, Google’s Android OS, and Netflix
 • Customer and supplier intimacy:
– Serving customers well leads to customers returning,
which raises revenues and profits.
• Ex. High-end hotels that use computers to track customer
preferences and used to monitor and customize
environment
– Intimacy with suppliers allows them to provide vital
inputs, which lowers costs.
• Ex. JCPenney ’ s information system which links sales
records to contract manufacturer

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• 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
– Ex. Verizon’s Web-based digital dashboard to provide
managers with real-time data on customer complaints,
network performance, line outages, and so on
• Competitive advantage
– Delivering better performance
– Charging less for superior products
– Responding to customers and suppliers in
real time
– Ex. Apple, Walmart, UPS
• Survival
– Information technologies as necessity of business
– Industry-level changes
• Ex. Citibank’s introduction of ATMs
– Governmental regulations requiring record-
keeping
• Ex. Toxic Substances Control Act, Sarbanes-Oxley
Act
Perspectives on Information Systems
• Information system:
– Set of interrelated components
– 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

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.
• 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
• 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.
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. • Organizations
• Technology
• Management
• Organizational dimension of information
systems
– Hierarchy of authority, responsibility
• 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.
• Organizational dimension of information
systems (cont.)
– Separation of business functions
• Sales and marketing
• Human resources
• Finance and accounting
• Manufacturing and production
– Unique business processes
– Unique business culture
– Organizational politics
• Management dimension of information systems
– Managers set organizational strategy for responding
to business challenges
– In addition, managers must act creatively:
• Creation of new products and services
• Occasionally re-creating the organization
• Technology dimension of information systems
– Computer hardware and software
– Data management technology
– Networking and telecommunications technology
• Networks, the Internet, intranets and extranets,
World Wide Web
– IT infrastructure: provides platform that system
is built on
• Business perspective on information
systems:
– Information system is an instrument for creating
value
– Investments in information technology will result in
superior returns:
• Productivity increases
• Revenue increases
• Superior long-term strategic positioning
• Business information value chain
– Raw data acquired and transformed through stages
that add value to information
– Value of information system determined in part by
extent to which it leads to better decisions, greater
efficiency, and higher profits
• Business perspective:
– Calls attention to organizational and managerial nature
of information systems
 The Business Information Value Chain

From a business perspective, information systems are part of a series of value-

adding activities for acquiring, transforming, and distributing information that
managers can use to improve decision making, enhance organizational
performance, and, ultimately, increase firm profitability.
• Investing in information technology does not
guarantee good returns.
• There is considerable variation in the returns
firms receive from systems investments.
• Factors:
– Adopting the right business model
– Investing in complementary assets (organizational
and management capital)
Variation in returns on Information Technology
Investment
Although, on
average,
investments in
information
technology produce
returns far above
those returned by
other investments,
there is considerable
variation across
firms.
• Complementary assets:
– Assets required to derive value from a primary
investment
– Firms supporting technology investments with
investment in complementary assets receive
superior returns
– Example: Invest in technology and the people to
make it work properly
• Complementary assets include:
– Organizational assets, for example:
• Appropriate business model
• Efficient business processes
– Managerial assets, for example:
• Incentives for management innovation
• Teamwork and collaborative work environments
– Social assets, for example:
• The Internet and telecommunications infrastructure
• Technology standards
Contemporary Approaches to Information
Systems

The study of
information
systems deals with
issues and insights
contributed from
technical and
behavioral
disciplines.
• Technical approach
– Emphasizes mathematically based models
– Computer science, management science, operations
research
• Behavioral approach
– Behavioral issues (strategic business integration,
implementation, etc.)
– Psychology, economics, sociology
• Management Information Systems
– Combines computer science, management science,
operations research and practical orientation with
behavioral issues
• Four main actors
– Suppliers of hardware and software
– Business firms
– Managers and employees
– Firm’s environment (legal, social, cultural context)
• Sociotechnical view
– Optimal organizational performance achieved by jointly
optimizing both social and technical systems used in
production
– Helps avoid purely technological approach
A Sociotechnical Perspective on Information
Systems

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

both the technology and the organization mutually adjust to each other until a
satisfactory fit is obtained.
 Summary _ 1st Lesson
• Learned how to explain why ISs are so essential in business today.
• ISs are a foundation for conducting business today. In many industries, survival
and even existence is difficult without extensive use of IT.
• Learned how to define an IS from both a technical and a business perspective.
• Learned how to identify and describe the three dimensions of IS.
• System represents a combination of Management, organization and technology
elements.
• Learned how to assess the complementary assets required for IT to provide
value to a business.
• An IS is part of a series of value-adding activities for acquiring, transforming and
distributing information to improve management decision making, enhance
organizational performance and ultimately increase firm profitability.
• learned to identify and describe contemporary approaches to study of IS and
distinguish between computer literacy and IS literacy.
Thank you