AGUSAN DEL SUR STATE COLLEGE OF AGRICULTURE AND TECHNOLOGY

Bunawan, Agusan del Sur

website: http://asscat.edu.ph
email address: asscat_op@yahoo.com
`

College of Engineering and Information Sciences (CEIS)

Bachelor of Science in Information Systems
MODULE in IS1 – Fundamentals of Information Systems

LO1 Understand fundamental terms and concepts of information systems and associated
technology
An Introduction to Information Systems
After this lesson the student will be able to:

 Define what an information system is by identifying its major components;

 Describe the basic history of information systems; and
 Describe the basic argument behind the article “Does IT Matter?” by Nicholas Carr

Chapter 1: What Is an Information System?

Introduction

If you are reading this, you are most likely taking a course in information systems, but do you
even know what the course is going to cover? When you tell your friends or your family that you
are taking a course in information systems, can you explain what it is about? For the past
several years, I have taught an Introduction to Information Systems course. The first day of
class I ask my students to tell me what they think an information system is. I generally get
answers such as “computers,” “databases,” or “Excel.” These are good answers, but definitely
incomplete ones. The study of information systems goes far beyond understanding some
technologies. Let’s begin our study by defining information systems.

Defining Information Systems

Almost all programs in business require students to take a course in something called
information systems. But what exactly does that term mean? Let’s take a look at some of the
more popular definitions, first from Wikipedia and then from a couple of textbooks:
 “Information systems (IS) is the study of complementary networks of hardware and
software that people and organizations use to collect, filter, process, create, and
distribute data.”[1]
 “Information systems are combinations of hardware, software, and telecommunications
networks that people build and use to collect, create, and distribute useful data, typically
in organizational settings.”[2]
 “Information systems are interrelated components working together to collect, process,
store, and disseminate information to support decision making, coordination, control,
analysis, and visualization in an organization.”[3]
As you can see, these definitions focus on two different ways of describing information systems:
the components that make up an information system and the role that those components play in
an organization. Let’s take a look at each of these.

The Components of Information Systems

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Bunawan, Agusan del Sur
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College of Engineering and Information Sciences (CEIS)

As I stated earlier, I spend the first day of my information systems class discussing exactly what
the term means. Many students understand that an information system has something to do
with

databases or spreadsheets. Others mention computers and e-commerce. And they are all right,
at least in part: information systems are made up of different components that work together to
provide value to an organization.
The first way I describe information systems to students is to tell them that they are made up of
five components: hardware, software, data, people, and process. The first three, fitting under
the technology category, are generally what most students think of when asked to define
information systems. But the last two, people and process, are really what separate the idea of
information systems from more technical fields, such as computer science. In order to fully
understand information systems, students must understand how all of these components work
together to bring value to an organization.
Technology
Technology can be thought of as the application of scientific knowledge for practical purposes.
From the invention of the wheel to the harnessing of electricity for artificial lighting, technology is
a part of our lives in so many ways that we tend to take it for granted. As discussed before, the
first three components of information systems – hardware, software, and data – all fall under the
category of technology. Each of these will get its own chapter and a much lengthier discussion,
but we will take a moment here to introduce them so we can get a full understanding of what an
information system is.
Hardware
Information systems hardware is the part of an information system you can touch – the physical
components of the technology. Computers, keyboards, disk drives, iPads, and flash drives are
all examples of information systems hardware. We will spend some time going over these
components and how they all work together in chapter 2.
Software
Software is a set of instructions that tells the hardware what to do.
Software is not tangible – it cannot be touched. When programmers
create software programs, what they are really doing is simply
typing out lists of instructions that tell the hardware what to do.
There are several categories of software, with the two main
categories being operating-system software, which makes the
hardware usable, and application software, which does something
useful. Examples of operating systems include Microsoft Windows
on a personal computer and Google’s Android on a mobile phone.
Examples of application software are Microsoft Excel and Angry Birds. Software will be explored
more thoroughly in chapter 3.
Data
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Bunawan, Agusan del Sur
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College of Engineering and Information Sciences (CEIS)

The third component is data. You can think of data as a collection of facts. For example, your
street address, the city you live in, and your phone number are all pieces of data. Like software,
data is also intangible. By themselves, pieces of data are not really very useful. But aggregated,
indexed, and organized together into a database, data can become a powerful tool for
businesses.

In fact, all of the definitions presented at the beginning of this chapter focused on how
information systems manage data. Organizations collect all kinds of data and use it to make
decisions. These decisions can then be analyzed as to their effectiveness and the organization
can be improved. Chapter 4 will focus on data and databases, and their uses in organizations.

Networking Communication: A Fourth Technology Piece?

Besides the components of hardware, software, and data, which have long been considered the
core technology of information systems, it has been suggested that one other component
should be added: communication. An information system can exist without the ability to
communicate – the first personal computers were stand-alone machines that did not access the
Internet. However, in today’s hyper-connected world, it is an extremely rare computer that does
not connect to another device or to a network. Technically, the networking communication
component is made up of hardware and software, but it is such a core feature of today’s
information systems that it has become its own category. We will be covering networking in
chapter 5.
People
When thinking about information systems, it is easy to get focused
on the technology components and forget that we must look
beyond these tools to fully understand how they integrate into an
organization. A focus on the people involved in information systems
is the next step. From the front-line help-desk workers, to systems
analysts, to programmers, all the way up to the chief information
officer (CIO), the people involved with information systems are an
essential element that must not be overlooked. The people
component will be covered in chapter 9.
Process
The last component of information systems is process. A process is a series of steps
undertaken to achieve a desired outcome or goal. Information systems are becoming more and
more integrated with organizational processes, bringing more productivity and better control to
those processes. But simply automating activities using technology is not enough – businesses
looking to effectively utilize information systems do more. Using technology to manage and
improve processes, both within a company and externally with suppliers and customers, is the
ultimate goal. Technology buzzwords such as “business process reengineering,” “business
process management,” and “enterprise resource planning” all have to do with the continued
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Bunawan, Agusan del Sur
website: http://asscat.edu.ph
email address: asscat_op@yahoo.com
`

College of Engineering and Information Sciences (CEIS)

improvement of these business procedures and the integration of technology with them.
Businesses hoping to gain an advantage over their competitors are highly focused on this
component of information systems. We will discuss processes in chapter 8.
Process
The last component of information systems is process. A process is a series of steps
undertaken to achieve a desired outcome or goal. Information systems are becoming more and
more

integrated with organizational processes, bringing more productivity and better control to those
processes. But simply automating activities using technology is not enough – businesses
looking to effectively utilize information systems do more. Using technology to manage and
improve processes, both within a company and externally with suppliers and customers, is the
ultimate goal. Technology buzzwords such as “business process reengineering,” “business
process management,” and “enterprise resource planning” all have to do with the continued
improvement of these business procedures and the integration of technology with them.
Businesses hoping to gain an advantage over their competitors are highly focused on this
component of information systems. We will discuss processes in chapter 8.
The Role of Information Systems
Now that we have explored the different components of information systems, we need to turn
our attention to the role that information systems play in an organization. So far we have looked
at what the components of an information system are, but what do these components actually
do for an organization? From our definitions above, we see that these components collect,
store, organize, and distribute data throughout the organization. In fact, we might say that one of
the roles of information systems is to take data and turn it into information, and then transform
that into organizational knowledge. As technology has developed, this role has evolved into the
backbone of the organization. To get a full appreciation of the role information systems play, we
will review how they have changed over the years.
The Mainframe Era
From the late 1950s through the 1960s, computers were
seen as a way to more efficiently do calculations. These
first business computers were room-sized monsters, with
several refrigerator-sized machines linked together. The
primary work of these devices was to organize and store
large volumes of information that were tedious to
manage by hand. Only large businesses, universities,
and government agencies could afford them, and they
took a crew of specialized personnel and specialized
facilities to maintain. These devices served dozens to IBM 704 Mainframe (Copyright: Lawrence
Livermore National Laboratory)
hundreds of users at a time through a process called
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Bunawan, Agusan del Sur
website: http://asscat.edu.ph
email address: asscat_op@yahoo.com
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College of Engineering and Information Sciences (CEIS)

time-sharing. Typical functions included scientific calculations and accounting, under the
broader umbrella of “data processing.”
In the late 1960s, the Manufacturing Resources Planning
(MRP) systems were introduced. This software, running on
a mainframe computer, gave companies the ability to
manage the manufacturing process, making it more
efficient. From tracking inventory to creating bills of
materials to scheduling production, the MRP systems (and Registered trademark of
later the MRP II systems) gave more businesses a reason International Business Machines
to want to integrate computing into their processes. IBM
became the dominant

mainframe company. Nicknamed “Big Blue,” the company became synonymous with business
computing. Continued improvement in software and the availability of cheaper hardware
eventually brought mainframe computers (and their little sibling, the minicomputer) into most
large businesses.

The PC Revolution
In 1975, the first microcomputer was announced on the cover of Popular Mechanics: the Altair
8800. Its immediate popularity sparked the imagination of entrepreneurs everywhere, and there
were quickly dozens of companies making these “personal computers.” Though at first just a
niche product for computer hobbyists, improvements in usability and the availability of practical
software led to growing sales. The most prominent of these early personal computer makers
was a little company known as Apple Computer, headed by Steve Jobs and Steve Wozniak,
with the hugely successful “Apple II.” Not wanting to be left out of the revolution, in 1981 IBM
(teaming with a little company called Microsoft for their operating-system software) hurriedly
released their own version of the personal computer, simply called the “PC.” Businesses, who
had used IBM mainframes for years to run their businesses, finally had the permission they
needed to bring personal computers into their companies, and the IBM PC took off. The IBM PC
was named Time magazine’s “Man of the Year” for 1982.
Because of the IBM PC’s open architecture, it was easy for other companies to copy, or “clone”
it. During the 1980s, many new computer companies sprang up, offering less expensive
versions of the PC. This drove prices down and spurred innovation. Microsoft developed its
Windows operating system and made the PC even easier to use. Common uses for the PC
during this period included word processing, spreadsheets, and databases. These early PCs
were not connected to any sort of network; for the most part they stood alone as islands of
innovation within the larger organization.

Client-Server
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Bunawan, Agusan del Sur
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College of Engineering and Information Sciences (CEIS)

In the mid-1980s, businesses began to see the need to connect their computers together as a
way to collaborate and share resources. This networking architecture was referred to as “client-
server” because users would log in to the local area network (LAN) from their PC (the “client”)
by connecting to a powerful computer called a “server,” which would then grant them rights to
different resources on the network (such as shared file areas and a printer). Software
companies began developing applications that allowed multiple users to access the same data
at the same time. This evolved into software applications for communicating, with the first real
popular use of electronic mail appearing at this time.

This networking and data sharing all stayed within the

confines of each business, for the most part. While there
was sharing of electronic data between companies, this was
a very specialized function. Computers were now seen as
tools to collaborate internally, within an organization. In fact,
these networks of computers were becoming so powerful
that they were replacing many of the functions previously Registered trademark of SAP
performed by the larger mainframe computers at a fraction
of the cost. It was during this era that the first Enterprise Resource Planning (ERP) systems
were developed and run on the client-server architecture. An ERP system is a software
application with a centralized database that can be used to run a company’s entire business.
With separate modules for accounting, finance, inventory, human resources, and many, many
more, ERP systems, with Germany’s SAP leading the way, represented the state of the art in
information systems integration. We will discuss ERP systems as part of the chapter on process
(chapter 9).
The World Wide Web and E-Commerce
First invented in 1969, the Internet was confined to use by universities, government agencies,
and researchers for many years. Its rather arcane commands and user applications made it
unsuitable for mainstream use in business. One exception to this was the ability to expand
electronic mail outside the confines of a single organization. While the first e-mail messages on
the Internet were sent in the early 1970s, companies who wanted to expand their LAN-based e-
mail started hooking up to the Internet in the 1980s. Companies began connecting their internal
networks to the Internet in order to allow communication between their employees and
employees at other companies. It was with these early Internet connections that the computer
truly began to evolve from a computational device to a communications device.
In 1989, Tim Berners-Lee developed a simpler way for researchers to share information over
the network at CERN laboratories, a concept he called the World Wide Web.[4] This invention
became the launching point of the growth of the Internet as a way for businesses to share
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Bunawan, Agusan del Sur
website: http://asscat.edu.ph
email address: asscat_op@yahoo.com
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College of Engineering and Information Sciences (CEIS)

information about themselves. As web browsers and Internet connections became the norm,
companies rushed to grab domain names and create websites.
In 1991, the National Science Foundation, which
governed how the Internet was used, lifted
restrictions on its commercial use. The year 1994
saw the establishment of both eBay and Registered trademark of Amazon Technologies,
Amazon.com, two true pioneers in the use of the Inc.
new digital marketplace. A mad rush of
investment in Internet-based businesses led to the dot-com boom through the late 1990s, and
then the dot-com bust in 2000. While much can be learned from the speculation and crazy
economic theories espoused during that bubble, one important outcome for businesses was that
thousands of miles of Internet connections were laid around the world during that time. The
world became truly “wired” heading into the new millennium, ushering in the era of globalization,
which we will discuss in chapter 11.

As it became more expected for companies to be connected to the Internet, the digital world
also became a more dangerous place. Computer viruses and worms, once slowly propagated
through the sharing of computer disks, could now grow with tremendous speed via the Internet.
Software written for a disconnected world found it very difficult to defend against these sorts of
threats. A whole new industry of computer and Internet security arose. We will study information
security in chapter 6.
Web 2.0
As the world recovered from the dot-com bust, the use of technology in business continued to
evolve at a frantic pace. Websites became interactive; instead of just visiting a site to find out
about a business and purchase its products, customers wanted to be able to customize their
experience and interact with the business. This new type of interactive website, where you did
not have to know how to create a web page or do any programming in order to put information
online, became known as web 2.0. Web 2.0 is exemplified by blogging, social networking, and
interactive comments being available on many websites. This new web-2.0 world, in which
online interaction became expected, had a big impact on many businesses and even whole
industries. Some industries, such as bookstores, found themselves relegated to a niche status.
Others, such as video rental chains and travel agencies, simply began going out of business as
they were replaced by online technologies. This process of technology replacing a middleman in
a transaction is called disintermediation.
As the world became more connected, new questions arose. Should access to the Internet be
considered a right? Can I copy a song that I downloaded from the Internet? How can I keep
information that I have put on a website private? What information is acceptable to collect from
children? Technology moved so fast that policymakers did not have enough time to enact
appropriate laws, making for a Wild West–type atmosphere. Ethical issues surrounding
information systems will be covered in chapter 12.
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Bunawan, Agusan del Sur
website: http://asscat.edu.ph
email address: asscat_op@yahoo.com
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College of Engineering and Information Sciences (CEIS)

The Post-PC World
After thirty years as the primary computing device used in most businesses, sales of the PC are
now beginning to decline as sales of tablets and smartphones are taking off. Just as the
mainframe before it, the PC will continue to play a key role in business, but will no longer be the
primary way that people interact and do business. The limited storage and processing power of
these devices is being offset by a move to “cloud” computing, which allows for storage, sharing,
and backup of information on a massive scale. This will require new rounds of thinking and
innovation on the part of businesses as technology continues to advance.

Era Hardware Operating System Applications

Mainframe Terminals connected Time-sharing Custom-written
(1970s) to mainframe (TSO) on MVS MRP software
computer.

PC IBM PC or MS-DOS WordPerfect,

(mid-1980s) compatible. Lotus 1-2-3
Sometimes
connected to
mainframe computer
via
expansion card.
Microsoft
Client-Server IBM PC “clone” on a Windows for
Word, Microsoft
(late 80s to early 90s) Novell Network. Workgroups
Excel
World IBM PC “clone” Microsoft
Wide Web (mid-90s connected to Windows XP Office, Internet
to early 2000s) company intranet. Explorer
Web 2.0 (mid-2000s Laptop connected to Microsoft
Windows 7
to present) company Wi-Fi. Office, Firefox
Post-PC Apple iPad iOS Mobile-friendly
(today and beyond) websites, mobile
apps

Can Information Systems Bring Competitive Advantage?

It has always been the assumption that the implementation of information systems will, in and of
itself, bring a business competitive advantage. After all, if installing one computer to manage
inventory can make a company more efficient, won’t installing several computers to handle even
more of the business continue to improve it?
In 2003, Nicholas Carr wrote an article in the Harvard Business Review that questioned this
assumption. The article, entitled “IT Doesn’t Matter,” raised the idea that information technology
has become just a commodity. Instead of viewing technology as an investment that will make a
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Bunawan, Agusan del Sur
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email address: asscat_op@yahoo.com
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College of Engineering and Information Sciences (CEIS)

company stand out, it should be seen as something like electricity: It should be managed to
reduce costs, ensure that it is always running, and be as risk-free as possible.
As you might imagine, this article was both hailed and scorned. Can IT bring a competitive
advantage? It sure did for Walmart (see sidebar). We will discuss this topic further in chapter 7.

Sidebar: Walmart Uses Information Systems to Become the World’s Leading Retailer
Walmart is the world’s largest retailer, earning $15.2
billion on sales of $443.9 billion in the fiscal year that
ended on January 31, 2012. Walmart currently serves
over 200 million customers every week, worldwide.[5]
Walmart’s rise to prominence is due in no small part to
their use of information systems.
Registered trademark of Wal-Mart Stores, Inc.

One of the keys to this success was the implementation of Retail Link, a supply-chain
management system. This system, unique when initially implemented in the mid-1980s, allowed
Walmart’s suppliers to directly access the inventory levels and sales information of their
products at any of Walmart’s more than ten thousand stores. Using Retail Link, suppliers can
analyze how well their products are selling at one or more Walmart stores, with a range of
reporting options. Further, Walmart requires the suppliers to use Retail Link to manage their
own inventory levels. If a supplier feels that their products are selling out too quickly, they can
use Retail Link to petition Walmart to raise the levels of inventory for their products. This has
essentially allowed Walmart to “hire” thousands of product managers, all of whom have a vested
interest in the products they are managing. This revolutionary approach to managing inventory
has allowed Walmart to continue to drive prices down and respond to market forces quickly.
Today, Walmart continues to innovate with information technology. Using its tremendous market
presence, any technology that Walmart requires its suppliers to implement immediately
becomes a business standard.
Summary
In this chapter, you have been introduced to the concept of information systems. We have
reviewed several definitions, with a focus on the components of information systems:
technology, people, and process. We have reviewed how the business use of information
systems has evolved over the years, from the use of large mainframe computers for number
crunching, through the introduction of the PC and networks, all the way to the era of mobile
computing. During each of these phases, new innovations in software and technology allowed
businesses to integrate technology more deeply.
We are now to a point where every company is using information systems and asking the
question: Does it bring a competitive advantage? In the end, that is really what this book is
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Bunawan, Agusan del Sur
website: http://asscat.edu.ph
email address: asscat_op@yahoo.com
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College of Engineering and Information Sciences (CEIS)

about. Every businessperson should understand what an information system is and how it can
be used to bring a competitive advantage. And that is the task we have before us.

Review Questions

1. What are the five components that make up an information system?

2. What are three examples of information system hardware?
3. Microsoft Windows is an example of which component of information systems?
4. What is application software?
5. What roles do people play in information systems?
6. What is the definition of a process?
7. What was invented first, the personal computer or the Internet (ARPANET)?
8. In what year were restrictions on commercial use of the Internet first lifted? When were
eBay and Amazon founded?
9. What does it mean to say we are in a “post-PC world”?
10. What is Carr’s main argument about information technology?

Review Exercises
1. Suppose that you had to explain to a member of your family or one of your closest
friends the concept of an information system. How would you define it? Write a one-
paragraph description in your own words that you feel would best describe an
information system to your friends or family.

2. Of the five primary components of an information system (hardware, software, data,

people, process), which do you think is the most important to the success of a business
organization? Write a one-paragraph answer to this question that includes an example
from your personal experience to support your answer.

3. We all interact with various information systems every day: at the grocery store, at work,
at school, even in our cars (at least some of us). Make a list of the different information
systems you interact with every day. See if you can identify the technologies, people,
and processes involved in making these systems work.

4. Do you agree that we are in a post-PC stage in the evolution of information systems?
Some people argue that we will always need the personal computer, but that it will not
be the primary device used for manipulating information. Others think that a whole new
era of mobile and biological computing is coming. Do some original research and make
your prediction about what business computing will look like in the next generation.

5. The Walmart case study introduced you to how that company used information systems
to become the world’s leading retailer. Walmart has continued to innovate and is still
looked to as a leader in the use of technology. Do some original research and write a
one-page report detailing a new technology that Walmart has recently implemented or is
pioneering
AGUSAN DEL SUR STATE COLLEGE OF AGRICULTURE AND TECHNOLOGY
Bunawan, Agusan del Sur
website: http://asscat.edu.ph
email address: asscat_op@yahoo.com
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College of Engineering and Information Sciences (CEIS)