Foundational Concepts in MIS

.CHAPTER TWO
FOUNDATIONAL CONCEPTS IN MIS

It seems reasonable that we focus our attention on exactly what a system is. A System can be
simply defined as a group of interrelated or interacting elements forming a unified whole.
Information System concepts underlie all business processes as well as our understanding of
information systems and technologies. That’s why we need to discuss how generic system
concepts apply to business firms. Understanding system concepts will help you understand many
other concepts in the technology, applications, development, and management of information
systems.
For example, system concepts help us understand:
 Technology. That computer networks are systems of information processing components
that use a variety of hardware, software, data management, and telecommunications
network technologies.
 Applications. That electronic business and commerce applications involve
interconnected business information systems.
 Development. That developing ways to use information technology in business includes
designing the basic components of information systems.
 Management. That managing information technology emphasizes the quality, strategic
business value, and security of an organization’s information systems.

Systems have three basic functions: Input, Processing, and Output. The system concept
becomes even more useful by including two additional elements: feedback and control. A system
with feedback and control functions is sometimes called a cybernetic system, that is, a self-
monitoring, self-regulating system.

A system exists and functions in an environment containing other systems. If a system is one of
the components of a larger system, it is a subsystem, and the larger system is its environment.
Open system is a system that interacts with other systems in its environment but not closed
system. Adaptive system has the ability to change itself or its environment in order to survive.
æ More appropriate framework for describing IS: A system is a group of interrelated
components working together toward a common goal by accepting inputs and producing outputs in an
organized transformation process.

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 Foundational Concepts in MIS

1.2 Components of Information System

An information system (IS) can be any organized combination of people, hardware, software,
communications networks, data resources, and policies and procedures that stores, retrieves,
transforms, and disseminates information in an organization. People rely on modern information
systems to communicate with each other using a variety of physical devices (hardware),
information processing instructions and procedures (software), communications channels
(networks), and stored data (data resources).
Figure 2.1 components of information system

Figure 2.1 illustrates an information system model that expresses a fundamental conceptual
framework for the major components and activities of information systems. An information
system depends on the resources of people (end users and IS specialists), hardware (machines
and media), software (programs and procedures), data (data and knowledge bases), and networks

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(communications media and network support) to perform input, processing, output, storage, and
control activities that convert data resources into information products. The framework
emphasizes on four major concepts that can be applied to all types of information systems:
 People, hardware, software, data, and networks are the five basic resources of
information systems.
 People resources include end users and IS specialists, hardware resources consist of
machines and media, software resources include both programs and procedures, data
resources can include data and knowledge bases, and network resources include
communications media and networks.
 Data resources are transformed by information processing activities into a variety of
information products for end users.
 Information processing consists of the system activities of input, processing, output,
storage, and control.
Information System Resources
An information system consists of five major resources: people, hardware, software, data, and
networks.
People Resources
People are the essential ingredient for the successful operation of all information systems. These
people resources include end users and IS specialists.
 End users (also called users or clients) are people who use an information system or the
information it produces. They can be customers, salespersons, engineers, clerks,
accountants, or managers and are found at all levels of an organization.
 IS specialists are people who develop and operate information systems. They include
systems analysts, software developers, system operators, and other managerial, technical,
and clerical IS personnel.
Hardware Resources
Hardware resources include all physical devices and materials used in information processing.
Specifically, it includes not only machines, such as computers and other equipment, but also all
data media, that is, tangible objects on which data are recorded, from sheets of paper to magnetic
or optical disks.
Machines ® Computers, Monitors, Printers, Scanners

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Media ® Floppy disks, Magnetic tape, Paper forms

Software Resources
Software resources include all sets of information processing instructions. This generic concept
of software includes not only the sets of operating instructions called programs, which direct
and control computer hardware, but also the sets of information processing instructions called
procedures that people need.
Programs ® Operating systems, Spreadsheet, Word processing
Procedures ® Data entry procedures, Error correction procedures
Data Resources
Data are more than the raw material of information systems. Data constitute valuable
organizational resources. Data can take many forms such as alphanumeric data, text data, image
data and audio data.
Communications Networks
Telecommunications technologies and networks like the Internet, intranets, and extranets are
essential to the successful electronic business and commerce operations of all types of
organizations and their computer-based information systems.
Communications media- Twisted-pair wire, Coaxial cable, Fiber optics
Network infrastructure- communications processors such as modems and internetwork
processors, and communications control software such as network
operating systems and Internet browser packages.

Information System Activities

Regardless of the type of information system, the same basic information system activities
occur. You should be able to recognize input, processing, output, storage, and control activities
taking place in any information system you are studying.
Input of data resource
Data about business transactions and other events must be captured and prepared for processing
by the input activity. Input typically takes the form of data entry activities such as recording and
editing. End users typically enter data directly into a computer system or record data about
transactions on some type of physical medium such as a paper form. This usually includes a
variety of editing activities to ensure that they have recorded the data correctly. Once entered,

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data may be transferred onto a machine-readable medium such as a magnetic disk until needed
for processing.

Processing of Data into Information

Data are typically subjected to processing activities such as calculating, comparing, sorting,
classifying, and summarizing. These activities organize, analyze, and manipulate data, thus
converting them into information for end users. The quality of any data stored in an information
system must also be maintained by a continual process of correcting and updating activities.

Output of Information Products

Information in various forms is transmitted to end users and made available to them in the output
activity. Goal of IS is the production of appropriate information products for end users. Common
information products include messages, reports, forms, and graphic images, which may be
provided by video displays, audio responses, paper products, and multimedia.
Storage
Storage is a basic system component of information systems. Storage is the information system
activity in which data and information are retained in an organized manner for later use.

Control of system performance

An important information system activity is the control of system performance. An information
system should produce feedback about its input, processing, output, and storage activities. This
feedback must be monitored and evaluated to determine if the system is meeting established
performance standards. Then appropriate system activities must be adjusted so that proper
information products are produced for end users.

Business Processes and Information Systems

The new digital firm business environment requires companies to think more strategically about
their business processes. Business processes refer to sets of logically related activities for
accomplishing a specific business result. Business processes also refer to the unique ways in
which organizations and management coordinate these activities. A company’s business
processes can be a source of competitive strength if they enable the company to innovate better
or to execute better than its rivals. Business processes can also be liabilities if they are based on
outdated ways of working that impede organizational responsiveness and efficiency. Information

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systems help organizations achieve great efficiencies by automating parts of processes. It also
contributes to completely rethinking processes.
Some business processes support the major functional areas of the firm, others are cross-
functional. Table 2-1 describes some typical business processes for each of the functional areas.
Table 2-1 Examples of Functional Business Processes

Many business processes are cross-functional, transcending the boundaries between sales,
marketing, manufacturing, and research and development. These cross-functional processes cut
across the traditional organizational structure, grouping employees from different functional
specialties to complete a piece of work. For example, the order fulfillment process at many
companies requires cooperation among the sales function (receiving the order, entering the
order), the accounting function (credit checking and billing for the order), and the manufacturing
function (assembling and shipping the order).

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Figure 2-2 illustrates how this cross-functional process might work. Information systems support
these cross-functional processes as well as processes for the separate business functions.

FIGURE 2.2 The order fulfillment process

Generating and fulfilling an order is a multistep process involving activities performed by the
sales, manufacturing and production, and accounting functions.

Systems for Enterprise-Wide Process Integration

Today’s firms are finding that they can become more flexible and productive by coordinating
their business processes more closely and, in some cases, integrating these processes so they
focus on efficient management of resources and customer service. Enterprise applications are
designed to support organization-wide process coordination and integration. These enterprise
applications consist of enterprise systems, supply chain management systems, customer
relationship management systems, and knowledge management systems. Each of these enterprise
applications integrates a related set of functions and business processes to enhance the
performance of the organization as a whole.

Generally, these more contemporary systems take advantage of corporate intranets and Web
technologies that enable the efficient transfer of information within the firm and to partner firms.
These systems are inherently cross-level, cross-functional, and business process oriented.
Enterprise applications encompasses processes spanning the entire organization and, in some

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cases, extending beyond the organization to customers, suppliers, and other key business
partners.

Business Process Reengineering (BPR)

BPR can be defined as the fundamental rethinking and radical redesign of business processes to
achieve dramatic improvements in critical, contemporary measures of performance such as cost,
quality, service and speed.
Key words in this BPR definition are:
 Fundamental: What is the company's basic style of working?
 Radical: All existing procedures and structures must be forgotten and new styles of working
must be discovered. Superficial changes are not useful. Changes must be made at the very
root.
 Processes: Redesign must be fixed on the processes not on the tasks, jobs, people, or
structures.
How IT can Help Reengineer Business Processes
® IT is used to restructure work by transforming business processes to improve cost, quality,
service, and speed.
®IT promotes changes in organizations, mainly changes in the nature of the work, the integration of
business functions, and the transformation of competitive forces. IT can help make the
changes promoted by reengineering, and it can be considered as an enabler of BPR.

= Old Rule: Managers make all decisions

®IT: Decision support tools
< New Rule: Decision making is part of everyone’s job

= Old Rule: Only experts can perform complex work

®IT: Expert systems
< New Rule: A generalist can do the work of an expert

= Old Rule: Information can appear in only one place at one time
®IT: Shared database
< New Rule: Information can appear in as many places as it is needed

= Old Rule: Field personnel need office where they can receive, store, retrieve, and transmit
information

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®IT: Wireless data communication and portable computers

< New Rule: Field personnel can send and receive information wherever they are

Process of Management and IS

In IS management is the process of planning, organizing, staffing, coordinating and controlling
the efforts of the members of the organization to achieve sated goals of the organization.
Information Systems support all these management functions by providing accurate, timely and
relevant information.

Data, Information, Knowledge and Wisdom

Data Vs Information
Data Information
• Data are raw facts about physical • Information is data that has been
phenomena or business converted into meaningful and useful
transactions context for end users
Example: Example:
• Sales data is names, quantities, • Sales information is amount of sales
and dollar amounts by product type, sales territory, or
• A student grade in a class is a salesperson
data item • A student’s grade point average is
information

Attributes of Quality Information

What characteristics would make information products valuable and useful to you? One way to
answer this important question is to examine the characteristics or attributes of information
quality. Information that is outdated, inaccurate, or hard to understand would not be very
meaningful, useful, or valuable to you or other end users. People want information of high
quality, that is, information products whose characteristics, attributes, or qualities help to make

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information more valuable to them. It is useful to think of information as having the three
dimensions of time, content, and form. These dimensions are summarized as follows

Time Dimension: deals with the when aspect of information

Timeliness: Information should be provided when it is needed
Currency: Information should be up-to-date when it is provided
Frequency: Information should be provided as often as needed
Time period: Information can be provided about past, present, and future time Periods

Content Dimension: deals with the what aspect of information

Accuracy: Information should be free from errors
Relevance: Information should be related to the information needs of a specific recipient for a
specific situation
Completeness: All the information that is needed should be provided
Conciseness: Only the information that is needed should be provided
Scope: Information can have a broad or narrow scope or an internal or external focus
Performance: Information can reveal performance by measuring activities accomplished,
progress made, or resources accumulated

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Form Dimension: deals with how aspect of information

Clarity: Information should be provided in a form that is easy to understand
Detail: Information can be provided in detail or summary form
Order: Information can be arranged in a predetermined sequence
Presentation: Information can be presented in narrative, numeric, graphic or other form
Media: Information can be provided in the form of printed paper documents, video displays, or
other media.

Knowledge Vs Wisdom
Knowledge
• Knowledge consists of data and/or information that have been organized and processed
to convey understanding, experience, accumulated learning, and expertise as they apply
to a current problem or activity.
Knowledge is the appropriate collection of information, such that it's intent is to be useful.
Knowledge is a deterministic process. When someone "memorizes" information (as less aspiring
test-bound students often do), then they have amassed knowledge. This knowledge has useful
meaning to them, but it does not provide for, in and of itself, integration such as would infer
further knowledge. For example, elementary school children memorize, or amass knowledge of,
the "times table". They can tell you that "2 x 2 = 4" because they have amassed that knowledge
(it being included in the times table). But when asked what is "1267 x 300", they can not respond
correctly because that entry is not in their times table. To correctly answer such a question
requires a true cognitive and analytical ability that is only encompassed in the next level...
understanding. In computer parlance, most of the applications we use (modeling, simulation,
etc.) exercise some type of stored knowledge.

Wisdom
Wisdom is an extrapolative and non-deterministic, non-probabilistic process. It calls upon all the
previous levels of consciousness, and specifically upon special types of human programming
(moral, ethical codes, etc.). It beckons to give us understanding about which there has previously
been no understanding, and in doing so, goes far beyond understanding itself. It is the essence of
philosophical probing. Unlike the previous levels, it asks questions to which there is no (easily-
achievable) answer, and in some cases, to which there can be no humanly-known answers
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period. Wisdom is therefore, the process by which we also discern, or judge, between right and
wrong, good and bad. Many scientists believe that computers do not have, and will never have
the ability to posses' wisdom. Wisdom is a uniquely human state, requires one to have a soul, for
it resides as much in the heart as in the mind.

The following diagram represents the transitions from data, to information, to knowledge, and
finally to wisdom.

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The Information Needs and Sources of Managers

Operational management
• Operational managers deal with the day-to-day operations of an organization, such as
assigning employees to tasks and recording the number of hours they work.
• Operational activities are short-term in nature
• The information systems that support them are mainly TPSs
• Operational systems are used by supervisors (first-line managers)
Tactical management
• Tactical managers deal with activities such as mid-range planning, organizing, and
control.
• MISs are designed to summarize data and prepare reports
• Middle managers also can get quick answers to queries from such systems as the need for
answers arises.
Strategic management
• Strategic activities are basically decisions that deal with situations that may significantly
change the manner in which business is done.
• Strategic decisions involved only long-range planning.
Example, introducing a new product line, expanding the business, and moving operations to a
foreign country
• Strategic response activities can react quickly to a major competitor’s action or to any
other significant change in the enterprise’s environment.
• IT is often used to support the response or to provide the response itself.

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A framework for Information Systems

The framework outlines the major areas of information systems knowledge needed by business
professionals.

An IS Knowledge Framework for Business Professionals

Business Systems
A business is an example of an organizational system where economic resources (input) are
transformed by various business processes (processing) into goods and services (output).
Information systems provide information (feedback) on the operations of the system to
management for the direction and maintenance of the system (control) as it exchanges inputs and
outputs with its environment.

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E-Business
Electronic commerce (e-commerce) describes the process of buying, selling, transferring, or
exchanging products, services, and/or information via computer networks, including the Internet.
Some people view the term commerce as describing only transactions conducted between
business partners. When this definition of commerce is used, some people find the term
electronic commerce to be fairly narrow. Thus, many use the term e-business instead. E-business
refers to a broader definition of e-commerce, not just the buying and selling of goods and
services, but also servicing customers, collaborating with business partners, conducting e-
learning, and conducting electronic transactions within an organization. Others view e-business

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as the “other than buying and selling” activities on the Internet, such as collaboration and intra-
business activities. However, mostly the two terms are used interchangeably.

Types of E-Commerce Transactions

E-commerce transactions can be done between various other parties, as follows:
 Business-to-business (B2B)
 Collaborative commerce (c-commerce)
 Business-to-consumers (B2C)
 Consumers-to-businesses (C2B)
 Consumer-to-consumer (C2C)
 Intra-business (intra-organizational) commerce
 Government-to-citizens (G2C) and to others
 Mobile commerce (m-commerce)
To execute these applications, companies need the right information, infrastructure, and support
services.

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