Chapter 01 – Foundations of Information Systems in Business
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1 Foundations of Information
Systems in Business
CHAPTER OVERVIEW
Chapter 1: Foundations of Information Systems in Business presents an overview of the five basic areas of
information systems knowledge needed by business professionals, including the conceptual system components and
LEARNING OBJECTIVES
After reading and studying this chapter, you should be able to:
1. Understand the concept of a system and how it relates to information systems.
2. Explain why knowledge of information systems is important for business professionals, and identify five areas
of information systems knowledge that they need.
5. Identify several challenges that a business manager might face in managing the successful and ethical
development and use of information technology in a business.
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SUMMARY
• IS Framework for Business Professionals. The IS knowledge that a business manager or professional needs to
know is illustrated in Figure 1.2 and covered in this chapter and text. This knowledge includes (1) foundation
concepts: fundamental behavioral, technical, business, and managerial concepts like system components and
• Business Roles of Information Systems. Information systems perform three vital roles in business firms.
Business applications of IS support an organization’s business processes and operations, business decision making,
and strategic competitive advantage. Major application categories of information systems include operations
• System Concepts. A system is a group of interrelated components, with a clearly defined boundary, working
toward the attainment of a common goal by accepting inputs and producing outputs in an organized transformation
process. Feedback is data about the performance of a system. Control is the component that monitors and evaluates
feedback and makes any necessary adjustments to the input and processing components to ensure that proper
output is produced.
• Information System Model. An information system uses the resources of people, hardware, software, data, and
networks to perform input, processing, output, storage, and control activities that convert data resources into
communicated to their ultimate user (output) according to correct processing procedures (control).
• IS Resources and Products. Hardware resources include machines and media used in information processing.
Software resources include computerized instructions (programs) and instructions for people (procedures). People
Chapter 01 – Foundations of Information Systems in Business
KEY TERMS AND CONCEPTS
1. Computer-Based Information System ():
An information system that uses computer hardware and software to perform its information processing
activities.
2. Control ():
The systems component that evaluates feedback to determine whether the system is moving toward the
achievement of its goal and then makes any necessary adjustments to the input and processing components of
the system to ensure that proper output is produced.
5. Data Resources ():
Data is now thought of as a valuable raw material that should be used, maintained, and secured as such. Data
resources include not only structured information typically found in databases, but also the unstructured
information found in e-mail or other collaborative systems, audio, and video.
6. Developing successful information system solutions ():
Business professionals are responsible for proposing new or improved systems to support their business
8. E-business applications ():
Businesses today are using the Internet, corporate intranets, and inter-organizational extranets to support
business activities with suppliers, partners, customers, accounting, finance, research and development,
manufacturing, marketing, sales, and customer service.
9. E-commerce ():
The buying and selling, marketing and servicing, and delivery and payment of products, services, and
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11. Extranet ():
A network that links selected resources of a company with its customers, suppliers, and other business partners
using internet technologies.
12. Feedback ():
Data or information concerning an information system’s performance.
13. Hardware Resources ():
strips, and memory “sticks”.
14. Information ():
Data that have been converted into a meaningful and useful context for specific end users.
15. Information System ():
The arrangement of all the components and resources necessary to deliver information and functions to the
organization. These resources include hardware, software, and people to perform input, processing, output,
storage, and control activities that transform data resources into information products.
16. Information system activities ():
All information systems (manual or automated) share the same characteristics.
a. Input ():
Data entry.
17. Information System Model ():
The conceptual view of an information system.
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19. Knowledge Workers ():
People whose primary work activities include creating, using, and distributing information.
22. People Resources ():
People are an essential component of an information system. Broadly, this resource includes IS specialists and
end users.
a. IS specialists ():
23. Roles of IS in Business ():
Information systems perform three vital roles in any type of organization.
a. Support of business processes and operations ():
Examples of supported business processes include activities such as sales transactions, inventory ordering,
and payroll processing.
b. Support of business decision making ():
24. Software Resources ():
Software resources comprise all sets of information processing instructions. This includes not only software but
the human procedures associated with managing information systems as well.
a. Programs ():
25. System ():
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.
26. Types of Information Systems ():
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b. Management support systems ():
Information systems that provide information and support for effective decision making by managers.
These types of systems include executive information systems, decision support systems, and management
information systems.
c. Operations support systems ():
f. Process control systems ():
These systems monitor and control physical processes such as production lines, package routing, and
heating and cooling systems.
ANSWERS TO REVIEW QUIZ
Q.
A.
Key Term
Q.
A.
Key Term
1
Knowledge workers
25
People resources
2
Roles of IS in business
26
Input
3
Support of business processes and operations
27
Processing
4
Support of business decision making
28
Output
5
Support of strategies for competitive advantage
29
Storage
6
Information system
30
Control
7
Computer-based information system
31
Types of information systems
8
End users
32
Operations support systems
9
E-business applications
33
Management support systems
10
Electronic commerce
34
systems
11
Enterprise collaboration systems
35
Intranet
12
System
36
Extranet
14
Control
38
Functional business systems
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Data
39
Data resources
16
Information
40
Developing successful information
system solutions
17
Information system activities
41
Information products
18
Information system model
42
19
Hardware resources
43
IS specialists
20
Machines
44
Data or information processing
21
Media
45
Process control systems
22
Software resources
46
Management information systems
23
Programs
47
Transaction processing systems
Procedures
48
Enterprise collaborative systems
ANSWERS TO DISCUSSION QUESTIONS
1. How can information technology support a company’s business processes and decision making and give it
a competitive advantage? Give examples to illustrate your answer.
Support: Information technology can automate manual process such as document transmission. Instead of
writing memos or letters, employees can compose and send e-mails electronically. Information technology can
2. How does the use of the Internet, intranets, and extranets by companies today support their business
processes and activities?
Internet: organization can connect directly with the general public. Opportunities range from giving away
basic product information to automatically updating or patching retail software. Many businesses also conduct
retail operations online.
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3. One major issue in the Real World Challenge outlined in the chapter was the lack of upgrades and new
applications undertaken ever since the company was founded and the original IT infrastructure put in
place. How does a company ever get to the place where Crescent is in the opening to this chapter? What
do you think prevented them from taking action earlier?
A. There could easily be any number of reasons for a failure to upgrade a system, or a combination of several
reasons. One could be a failure if IT management to stay on top of the current state of IT, or a lack of funds to
B. Several things may have prevented them from taking action earlier. One of course would be funding (or rather,
lack thereof). Many firms do not realize the value of their investment in IT until they are woefully out of date,
then suddenly they need to re-invest massively in IT to get back to where they should be as opposed to their
4. Why do big companies still fail in their use of information technology? What should they be doing
differently?
Top Five Reasons for Failure
Lack of user input
Incomplete requirements and specifications
Changing requirements and specifications
Lack of executive support
Technological incompetence
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5. How can a manager demonstrate that he or she is a responsible end user of information systems? Give
several examples.
There are two sides to this answer. First, managers must make good use of information resources placed at their
disposal. Second, managers must not use their information systems irresponsibly. Student’s answers may vary
depending on how they interpret this question.
6. Refer to the Real World Solution in the chapter. Has Crescent Healthcare applied the “three steps for
the upgrading of legacy systems” outlined in the chapter? Which of those have been done in more or less
detail? Can you fill in the blanks for any that you see lacking?
The Crescent Healthcare case, as written, would seem to be a rather textbook case of doing everything correctly
7. What are some of the toughest management challenges in developing IT solutions to solve business
problems and meet new business opportunities?
Challenges:
• Increased competitive pressures resulting from a rapidly changing business environment. Developing large
systems has been often likened to “hitting a moving target.” Projects that take a year or more to implement
Chapter 01 – Foundations of Information Systems in Business
8. Why are there so many conceptual classifications of information systems? Why are they typically
integrated in the information systems found in the real world?
9. In what major ways have information systems in business changed during the last 40 years? What is one
major change you think will happen in the next 10 years? Refer to Figure 1.4 to help you answer.
History:
• Tabulation (pre 1950s)
Future:
• User authentication
• Virtual machines
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10. Refer to the real world example about responsibility and accountability for project failures in the
chapter. Are these IT projects, or business projects with a significant IT component? Who should be
responsible for ensuring their success? Explain.
(the work below has some application to the answer: re-work)
IT Projects
A few projects might be considered solely IT projects. For example, a server upgrade involves only IT people.
Business Projects
In general, IT departments undertake work at the behest of business managers. Such projects require their
Failure:
Failure is never an orphan. Failure can come from many sources.
Managers
• do not fully understand their own business processes
Technology:
• oversold
• implemented by inexperienced technologists
Responsibility
At best, IT managers can only facilitate projects. In most cases, they do not have the all around expertise