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WHY INFORMATION SYSTEMS?

Management Information SystemsManaging the Digital Firm

Capital management

Foundation of doing business

Productivity

Strategic opportunity and advantage

Why Information Systems Matter

There are four reasons why IT makes a difference to thesuccess of a business:


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IT is the largest single component of capitalinvestment in the United States.

About $1.8 trillion is spent each year by Americanbusinesses.

Managers and business students need to know howto invest this capital wisely.

The success of your business in the future may welldepend on how you make IT investment decisions.

Capital Management:



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Information Technology Capital Investment



Information technology investment, defined as hardware, software, and communications equipment, grew from 34% to50% between 1980 and 2004.Source: Based on data in U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Product Accounts,2006.


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Most businesses today could not operate withoutextensive use of information systems and

technologies.

IT can increase market share.

IT can help a business become a high-quality,low-cost producer.

IT is vital to the development of new products.

Foundation of doing business:



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The Interdependence between Organizations andInformation Systems


There is a growing interdependence between a firms 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 itssystems will permit it to do.


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IT is one of the most important tools managershave to increase productivity and efficiency ofbusinesses.

According to the Federal Reserve Bank, IT hasreduced the rate of inflation by 0.5 to 1% in thelast decade. For firms this means IT is a majorfactor in reducing costs.

It is estimated that IT has increased productivityin the economy by about 1% in the last decade.For firms this means IT is a major source of labor

and capital efficiency.


Productivity:


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Create competitive advantage: IT makes itpossible to develop competitive advantages.

New Business Models: Dell Computer has built itscompetitive advantage on an IT enabled build-to-order business model that other firms have not

been able to imitate.


Strategic Opportunity and Advantage:


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Create new services: eBay has developed thelargest auction trading platform for millions of

individuals and businesses. Competitors havenot been able to imitate its success.

Differentiate yourself from your competitors:

Amazon has become the largest book retailer inthe United States on the strength of its hugeonline inventory and recommender system. It hasno rivals in size and scope.


Strategic Opportunity and Advantage:


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Internet growth and technology convergence Transformation of the business enterprise Growth of a globally connected economy Growth of knowledge and information-based

economies Emergence of the digital firm

Why IT Now? Digital Convergence and the ChangingBusiness Environment

Growing impact of IT in business firms can beassessed from the following five factors:



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Growth in e-business, e-commerce, and e-government

Internet is bringing about rapid changes inmarkets and market structure: financial servicesand banking such as eTrade.com.

The Internet is making many traditionalbusiness models obsolete: the corner musicstore and video store.


The Internet and Technology Convergence:


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Rise of the Information Economy:

Time-based competition

Shorter product life

Turbulent environment

Limited employee knowledge base


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The Growth of the Information Economy



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Digital firm-All of orgs significant businessrelationships with customers, suppliers, and

employees are digitally enabled Core business processes accomplished using

digital networks

Agile sensing and responding to environmentalchanges

Seamless flow of information within the firm, andwith strategic partners

Cisco & Dell computers Digital firms


Emergence of the Digital Firm:


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The Emerging Digital Firm


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Business processes:

Refer to the set of logically related tasks & behaviors that

organizations develop over time to produce specific business

results & the unique manner in which these activities areorganized & coordinated.

Eg: Developing a new product, generating & fulfilling order,

creating marketing plan, hiring an employee

Management Information Systems

Managing the Digital Firm



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PERSPECTIVES ON INFORMATION SYSTEMS


What Is an Information System?

Technology perspective: A set of interrelated

components that collect (or retrieve), process, store,

and distribute information to support decision

making and control in an organization


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What is an Information System? (Continued)

Data: Streams of raw facts representing events

such as business transactions

Information: data that have been shaped into a formthat is meaningful and useful to human beings in

the processes such as making decisions


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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 salesterritory.

Data and Information

Perspectives on Information Systems



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Functions of an Information System

Figure 1-6


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I/p captures raw data from within the org. or from its external

environment Processing converts raw i/p into a meaningful form

O/P transfers the processed information to the users

Feedback used to evaluate or correct the i/p stage



Functions of an Information System


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Rely on computer hardware and software

Processing and disseminating information

Fixed definitions of data and procedures

Collecting, storing, and using information


Computer-Based Information System (CBIS)


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Information systems are an organizational and managementsolution to business challenges that arise from the businessenvironment.

Based on information technology but also requiresignificant investment in organizational and managementchanges and innovations

IS create value primarily by changing business processesand management decision making


Information systems are more than just technology.Businesses invest in IS in order to create value and increaseprofitability.

A Business Perspective on Information Systems


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The Business Information Value Chain

Figure 1-7


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Dimensions of Information Systems

Figure 1-8


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Sales and marketing

Manufacturing

Finance

Accounting Human resources


Major Business Functions Rely on Information Systems

Dimensions of Information SystemsThree Important Dimensions of Information Systems

OrganizationsManagersTechnology

You will need to understand and balance thesedimensions of information systems in order to createbusiness value.


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People ,Structure, Business processes, Culture, Politics


The Organizational Dimension of Information Systems

The Management Dimension of Information Systems

Managers are: Sense makers Decision makers PlannersRoles Senior managers - long term strategic decisions Middle managers - carry out the programs & plans of senior

managers Operational managers - monitor the firms daily activities


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Hardware: Physical equipment Software: Detailed preprogrammed instructions

that control h/w components

Storage: Physical media for storing data and the software Communications technology: Transfers data from one

physical location to another Networks: Links computers to share data or resources

All these technologies represent resources that can be sharedthroughout the organization & constitutes the firms IT infrastructure(platform for building specific IS)


Information technology is one of the tools managersuse to cope with change:

The Technology Dimension of Information Systems


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Variation in Returns on Information Technology Investment

Figure 1-9

Source: Based on Erik Brynjolfsson and Lorin M.Hitt, Beyond Computation: Information Technology,

Organizational Transformation and BusinessPerformance. Journal of Economic Perspectives

14, no. 4 (Fall 2000). Used with permission of theAmericanEconomic Association

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