Unit 1: Introduction to Information Systems PDF

Management Information System – LLC 3215 UNIT 1 INTRODUCTION TO INFORMATION SYSTEMS Unit Structure 1.0 Overview 1.1 Learning Outcomes 1.2 Introduction 1.3 Information Technology and Information 1.4 What is an Information System? 1.4.1 Components of an In...

Management Information System – LLC 3215 UNIT 1 INTRODUCTION TO INFORMATION SYSTEMS Unit Structure 1.0 Overview 1.1 Learning Outcomes 1.2 Introduction 1.3 Information Technology and Information 1.4 What is an Information System? 1.4.1 Components of an Information System 1.4.2 Functions of an Information System 1.4.3 Data versus Information 1.5 Advantages of Computerised Information Systems 1.6 Information Systems and Businesses 1.7 Factors affecting the Business Environment 1.7.1 Globalisation 1.7.2 Shifting from Industrial-based to Knowledge-based Economies 1.7.3 Transformation of the Enterprise 1.7.4 The Digital Firm 1.8 The Internet 1.9 New Options for Businesses 1.9.1 The Networked Enterprise 1.9.2 Electronic Business, Electronic Commerce and Electronic Government 1.10 Information Systems at Different Levels of Management 1.11 Management Challenges with Information Systems 1.12 Activities 1.13 Discussion Questions 1.14 Summary Unit 1 1  Management Information System – LLC 3215 1.0 OVERVIEW Nowadays, information is considered to be a very valuable resource in organisations. It is in fact comparable to other valuable resources like money, human power and raw materials. Information is vital in our everyday life. Consider the importance of weather forecasts in Mauritius during cyclonic periods. This leads us to the concept of information being a driver for decision-making. This unit will help you understand why we need to manage information and the role played by information systems in organisations towards better decision-making. 1.1 LEARNING OUTCOMES By the end of this unit, you should be able to do the following: 1. Define the concept of Information Systems (IS) and Management Information Systems (MIS). 2. Explain how MIS can be used in improving effectiveness and efficiency of operations in an organisation. 3. Evaluate the importance of Information Systems in a global competitive business environment. 4. Explain how Management Information Systems can be used at different levels of management. 5. Identify the main management challenges associated with the implementation of Information Systems. 1.2 INTRODUCTION As countries are moving more towards a knowledge-based economy, information has become the greatest asset of an organisation. Information systems, specifically computerised Information systems, have become vital to effectively and efficiently manage Information. These Information Unit 1 2  Management Information System – LLC 3215 Systems process, analyse and transform data into information which support the operations of an organisation at different managerial levels. It is essential for managers to have a sound knowledge of information systems to be able to make better decisions for their organisations. It is also a known fact that information systems have revolutionised the way businesses operate and have been a great tool in the battle towards competitive advantage. 1.3 INFORMATION TECHNOLOGY AND INFORMATION Technology has provided new sources of information, new ways of collecting, storing and processing information, and new methods of communicating this information to different sources. This in turn has meant that information needs have changed and will continue to change as new technologies become available. For example, in supermarkets, we now have point-of-sale (POS) terminals which collect information about items being purchased by using bar-code readers. At Automatic Teller Machines (ATMs), customers make use of their electronic cards to withdraw money, ask for their balance or to perform other monetary transactions. These are just some examples. If you look around, you will notice many different types of information systems which make use of information technology. 1.4 WHAT IS AN INFORMATION SYSTEM? So far we have brushed upon the importance of information and information systems. Let us now go into more details on information and try to define what exactly is an information system. An Information System is a collection of components that work together to provide information to help in the operation and management of an organisation. It transforms data stored in files or databases into information which support decision-making in an organisation. More precisely, it is a set of interrelated components working together to collect, process, store, and disseminate information for the purpose of facilitating planning, control, coordination, analysis, and decision- making in businesses and other organisations. Unit 1 3  Management Information System – LLC 3215 When we talk about an information system, it does not necessarily imply that it is a computerised information system. For instance, we could have a personal diary storing details of our contacts (Name, Address, Telephone, E-mail etc) which is in fact an information system. However, throughout this manual, discussions about information systems would be about computerised information systems. 1.4.1 Components of an Information System The basic components of an Information System are: Hardware This includes equipment such as computers, keyboards, bar code readers, scanners, communication devices, etc. Software These are instructions for the hardware to perform its task properly, e.g, reading a bar code on a product at a POS system. Stored Data This relates to data or facts stored in the system, eg, price of an item. Personnel We need people to operate the system, e.g, Cashiers. Procedures Clear instructions or guidelines should be followed when using an information system to ensure the right functioning of the system, e.g, direct the bar code reader over the product bar code to be able to retrieve details about a product. 1.4.2 Functions of an Information System We can identify four basic functions of an Information System: 1. Input accepts the input data from outside the system. 2. Storage retains input data and retrieves stored data. 3. Processing calculates and manipulates the input and stored data. 4. Output produces results of processing. Unit 1 4  Management Information System – LLC 3215 This can be illustrated by Figure 1.1. Information Systems Input Processing Output Storage Figure 1.1: Information System 1.4.3 Data versus Information The terms “data” and “information” are very often used interchangeably. However, these terms have distinct meanings. ♦ Data relate to raw facts and figures; consist of numbers, letters and symbols and relate to facts, events, and transactions. ♦ Information is data that have been processed in such a way that they are meaningful to the person who receives them. It is important to note that information for a process may be data for another. Only with accurate and timely information can managers monitor progress toward their goal and turn plans into reality. Unit 1 5  Management Information System – LLC 3215 1.5 ADVANTAGES OF COMPUTERISED INFORMATION SYSTEMS Computerised information systems can bring tremendous advantages to an organisation. Let us identify some of the main advantages they bring:  Storage and retrieval of data - Computers provide easy storage and retrieval of large amounts of data.  Distribution of digital content - Large amounts of data and information can now be shared easily through their digital format or softcopies to people at same or remote locations.  Standardisation of process - Formats and templates can easily be adopted for similar tasks.  Automation of tasks -Automation can be carried out for tedious, dangerous and complex tasks. Computers are good at automating tasks whenever there is a pattern. 1.6 INFORMATION SYSTEMS AND BUSINESSES From a business perspective, an information system is an organisational and management solution, based on information technology. Using information systems effectively requires an understanding of organisation, management, and information technology. So to design and use information systems effectively, one must:  Understand the environment, structure, function and politics of organisations;  Understand the role of management and management decision-making;  Examine the capabilities and opportunities provided by contemporary information technology to provide solutions. As a consequence of the above, it can be stated that organisation, management and technology create an information system together. Unit 1 6  Management Information System – LLC 3215 1.7 FACTORS AFFECTING THE BUSINESS ENVIRONMENT So far, we have defined an information system and we have seen the importance of information systems in organisations. Let us now identify some business trends which have forced companies to move towards computerised information systems. 1.7.1 Globalisation The location or time-zone difference is no longer a problem for many businesses. In Mauritius itself, Business Process Outsourcing (BPO) is an emerging sector. Many companies have also adopted the Global Delivery Model (GDM), especially in the field of software development. Other businesses have set up branches in different countries to take advantage of labour, raw materials and human expertise. The global marketplace has become a reality through information technology and information systems. 1.7.2 Shifting from Industrial-based to Knowledge-based Economies Many countries have moved from industrial-based economies to knowledge-based and information-based economies to be able to compete in the world market. As stated at the beginning of this unit, information is one of the prime assets of organisations. Businesses rely a lot on knowledge and best practices to be competitive and to offer the best products and services to customers. Information systems have played an important role to allow businesses to retrieve, retain, distribute and optimally use knowledge to become more efficient and help them to reduce costs. Unit 1 7  Management Information System – LLC 3215 1.7.3 Transformation of the Enterprise Prosperous companies are those that are moving away from hierarchical structures to flat, decentralised and flexible ones.  Communication problems are greatly removed in flat structures as employees have easier access to top management.  Issues and problems are escalated more quickly.  Information systems allow employees to interact and share their ideas and thoughts more easily. 1.7.4 The Digital Firm Information systems allow companies to have digitally-enabled relationships with employees, customers, suppliers and business partners. Through information systems, there is the digital management of key corporate assets where core business processes can be achieved. For example, resources of a company can now be managed from remote locations via digital networks. In Unit 2 and subsequent units, we will see how Supply Chain Management Systems, Customer Relationship Management Systems, Enterprise Systems and Knowledge Management Systems help in defining the digital firm. 1.8 THE INTERNET The Internet and the World Wide Web have become an integrated part of almost all businesses. Many businesses own their own websites which are used for advertising, connecting to their employees, customers and suppliers and even for dealing in transactions. The Internet offers easy communication facilities and provides novel ways of trading. Intranets and extranets are also common to many businesses now. However, businesses should also consider the different privacy and security issues which might crop up and take necessary precautionary measures. Unit 1 8  Management Information System – LLC 3215 1.9 NEW OPTIONS FOR BUSINESSES 1.9.1 The Networked Enterprise Technology now allows workers to work from anywhere. A robust network is therefore vital to allow businesses to communicate best practices more efficiently and to emphasise on teamwork. The networked enterprise aims at connecting different business units and at providing a common platform whereby businesses can communicate smoothly with each other and perform business transactions. In the same line, Enterprise Systems or Enterprise Resource Planning Systems (ERP) offer solutions which provide an integrated enterprise-wide information system which is able to coordinate key business processes. For example, an enterprise which has several branches spread across several countries needs to have a robust network as well as a standardised platform which can ensure a smooth and timely flow of its operations. As we shall see in future units, new technology supported by information systems, allows businesses to reorganise their work flows, making them more efficient and better able to meet new challenges. The potential for saving money is tremendous, and so are the opportunities to better meet customer demands. 1.9.2 Electronic Business, Electronic Commerce and Electronic Government Companies can now make use of e-business to execute business processes in their enterprise via Internet or another digital network. E-business allows companies to remain connected with different departments, business partners and suppliers. E-commerce forms part of e-business and it involves the buying and selling of goods or services over electronic systems. Different types of e-commerce exist to allow trade between customers and businesses. Government bodies are now going towards e-governance which “refers to the use of internet technology as a platform for exchanging information, providing services and transacting with citizens, businesses, and other arms of government.”. Information systems play an important role in making this a reality. Unit 1 9  Management Information System – LLC 3215 1.10 INFORMATION SYSTEMS AT DIFFERENT LEVELS OF MANAGEMENT Strictly speaking, managers exist at the three main levels of management for decision-making. The manager’s job is to use information provided to them to make short term and long term decisions of the organisation. Let us now identify the three main levels of managers. Senior Managers These managers make long-term strategic decisions about what products and services to produce. These decisions involve elements of high risks and uncertainty which may span over several years. Middle Managers Middle managers carry out the plans and programmes of senior management. These decisions may span over a few months to 1 year. Operational Managers At the operational level, managers are responsible for monitoring the firm’s daily activities. Managers at all levels are finding that computer-based information systems provide the information necessary for effective operation. These Management Information Systems (MIS) are rapidly becoming vital for planning, decision-making and control. Different types of information systems will be used at different management levels. These information systems will be introduced in the next Unit. Unit 1 10  Management Information System – LLC 3215 1.11 MANAGEMENT CHALLENGES WITH INFORMATION SYSTEMS Throughout this unit, we have seen what Information Systems are and how they can be used to achieve strategic benefits in the organisation. We will now discuss some of the management challenges associated with the implementation of information systems. Buying most up-to-date hardware or software does not ensure the success of an organisation. When buying new pieces of hardware or software, careful analysis of the requirements have to be carried out to ensure full integration of the technology into the organisation. The right tool and software to be used will differ from one company to the other according to the needs of the organisation. Moreover, the best architecture which suits the business needs to be defined as well. For example, the organisation should consider the type of its transaction and the volume of data which has to be transmitted and then identify the best type of network to satisfy those needs. Furthermore, as seen above, globalisation is one of the common business trends. A good Management Information System meets both domestic and foreign opportunities and challenges. One of the issues when a company goes global is how to perform transaction in different countries and how to tackle different exchange rates. Last but not least, the cost associated with information technology and information systems goes far beyond the cost of hardware and software. For example, companies often overlook costs associated with training, changeovers, software upgrades, etc. Unit 1 11  Management Information System – LLC 3215 1.12 ACTIVITIES A. True/False Questions True False 1. Data and information are the same. 2. Information Technology has no impact on Management Information Systems. 3. MIS are used only by top level management. 4. Managers cannot ignore technology any more and pass it off to secretaries or clerical workers or the Information Technology department. 5. Middle managers are responsible for monitoring the firm’s daily activities. B. SAMPLE TEST/EXAM TYPE QUESTIONS Question 1 SportsMart is a specialist in sports equipment. The company’s present computer-based systems applications portfolio consists mainly of in-house business systems. The company is thinking about adding to its existing portfolio more innovative ‘web-based’ technologies and systems to obtain competitive advantage. (i) As an IT specialist, inform the management of this company about the recent advances in Internet-based Technologies and how these will be beneficial to the company. [10 marks] Unit 1 12  Management Information System – LLC 3215 1.13 DISCUSSION QUESTIONS 1. Find out some concrete examples of data and information and compare your findings. 2. How have information systems change the management process? 3. Why have businesses been forced to use computerised information systems? How does this help them in their businesses? 4. Try to identify businesses or organisations in Mauritius which make use of e-business, e- commerce and e-government. 1.14 SUMMARY This unit has defined information systems and has elaborated on their importance in businesses as a tool to achieve competitive advantage and to be in better shape to face global challenges. New technologies and the Internet have also been outlined and their importance have been defined with respect to information systems. Different business trends have been identified and we have seen how information systems help businesses achieve competitive advantages. The different levels of management have been briefly discussed and the importance of information systems at each level has been defined. Finally, we have concluded this unit with a discussion of the challenges associated with the management of information systems. The following units will deepen the concepts discussed in this unit. Unit 1 13