Business Information Systems

Business Information Systems MIS 202 Jeffrey Anderson Information Technology • Information Technology (IT) includes not only computer technology (hardware and software) for processing and storing information, but also communications technology for transmitting information. • Managing IT involves managing delivery of IT applications to workers, managing voice mail, electronic mail, and GroupWare systems enabling shared information. The Information Revolution The Industrial Age has given way to the Information Age. “The emergence of the Information Age and the sudden ubiquity of information technology are among the biggest - no, they are the biggest - stories of our time. -Thomas Stewart, 1997 Speed of Change • About 1 decade after the introduction of IBM‟s PC, local area networking of desktop computers became commonplace. • It took less than 1/2 decade for more than 50 million users worldwide to become networked to the internet. • The federal government has implemented radical reforms for US telecommunications twice in the last two decades. Technology Factiods • A greeting card playing “Happy Birthday” holds more computing power than existed in the entire world before 1950. • Today‟s home video cameras wield more processing power than the IBM 360 mainframe computer. • The internet has grown from 2 computers in 1969 to a “network of networks” connecting 20 million users from over 100 countries One More Factoid • The party gift you give is a system called Saturn, made by Sega, the gamemaker. It runs on a higher-performance processor than the original 1976 Cray supercomputer, which in its day was accessible to only the most elite physicists. -John Huey “Wake Up to the New Economy Fortune, June 27, 1994 Smaller, Faster... • ENIAC, commonly thought of as the first modern computer, was built in 1944. It took up more space than an 18-wheeler‟s trailer, weighed more than 17 Chevrolet Cameros, and consumed 140,000 watts of electricity. ENIAC could execute up to 5,000 basic arithmetic operations per second. • One of today‟s popular microprocessors is build on a piece of silicon about the size of a dime. It weighs less than a pack of Sweet‟N Low, and uses less than 2 watts of electricity. Incredible Change Rate • Computer power is now 8,000 times less expensive than it was 30 years ago. • “If we had similar progress in automotive technology, today you could buy a Lexus for about $2. It would travel at the speed of sound, and go about 6,000 miles on a thimble of gas.” – John Naisbitt Global Paradox IT MISPREDICTIONS • “This telephone has too many shortcomings to be seriously considered as a means of communications.” Western Union internal memo 1876 • “There is no reason anyone would want a computer in their home.” Ken Olson founder of Digital Equipment 1977 Information System • An information system is a set of interrelated components that work together to collect, process, store, and disseminate information to support decision making, coordination, control, analysis, and visualization in an organization. Why Information Systems? Two major trends have altered the environment of business: • The emergence of the global economy • Transformation of Industrial Economies The Global Marketplace “The new global economy cannot be understood if it is thought to be merely more and more trade among 160 countries; it must be viewed as the world moving from trade among countries to a single economy. One economy, one marketplace.” John Naisbit, Megatrents 2000 Threats of Globalization • Because of global communication and management systems, customers can now shop in a worldwide marketplace, obtaining price and quality information reliably, 24 hours per day. • This phenomenon heightens competition and forces firms to play in open, unprotected worldwide markets. • To compete, firms need powerful information and communication systems Transformation of Industrial Economies 60 50 40 30 20 10 0 1910 1930 1950 1970 1992 Blue Collar Farm White Collar Today, most people no longer work in farms or factories, but instead are found in sales, education, health care, banks, insurance firms, or business services. Knowledge and information work accounts for 75% of the US GNP and 70% of the workforce. Global Changes • As recently as the 1960‟s, almost 1/2 of all workers in the industrialized countries were involved in making (or helping to make) things. • By the year 2000, no developed country will have more than 1/6 or 1/8 of its workforce in the traditional roles of making and moving goods. • Already an estimated 2/3 of U.S. employees work in the services sector, and knowledge is becoming our most important product. • This calls for different organizations, as well a different kinds of workers. – Peter Drucker Size Doesn‟t Guarantee Success • Look at a roster of the 100 largest U.S. companies at the beginning of the 1900s. You‟ll find that only 16 are still in existence. • Consider Fortune magazine‟s first 500 list, published in 1955. Only 14 out of the top 100 firms can still be found in the top 100 today. • During the decade of the 1980s, a total of 230 companies (46%), disappeared from the “Fortune 500”. • Obviously size doesn‟t guarantee success, neither does a good reputation. Increased Productivity • Productivity of employees will depend upon the quality of the systems serving them so decisions about IT are critically important to the prosperity and survival of a firm. • Consider that the growing power of IT makes possible new services like credit card use, overnight package delivery, and worldwide reservation systems. • IT has become a strategic asset for business. Data Vs. Information • The terms data and information don‟t mean the same thing. • Data is the plural of the Latin datum, literally meaning “given” or fact. • Information is data that has meaning within a context. Information can be raw data, or data that has been manipulated through an operation that leads to greater understanding. Data and Information Defined • Data is streams of raw facts representing events occurring in organizations or in the physical environment before they have been organized and arranged into a form that people can understand and use. • Information is data that has been shaped into a form that is meaningful and useful. Data Manipulation • Imagine a survey of thousands of customers. Answers to questions are data. Reading through all of the data would be extremely time-consuming. • If complaints about products were categorized by topic and totaled for each product, the results could provide valuable information to engineering or manufacturing. PROCESSING INPUT Classify OUTPUT Arrange Calculate Three basic activities: input, processing, and output, produce the information organizations need Input-Process-Output Raw Material Data Process Process Output Information Systems • A system is an array of components that work together to achieve a common goal, or multiple goal, by accepting input, processing input, and producing output in an organized manner. – Example: a sound system consists of a CDplayer, amplifier, tuner, speakers, equalizer, etc. Subsystems • Consider a manufacturing business – Engineering Dept. designs new products – Finance Dept. plans the budget – Marketing Dept. promotes sales of products • Each department is a subsystem with its own goal, which is a subgoal of a larger system (the company), whose goal is to maximize profit. Human Computer Synergy • Computers can only carry out instructions that are given to them by humans. Computers can process data accurately at speeds far greater than people can, yet they lack common sense. • Synergy is the 2+2=5 effect. The human computer combination allows the results of human thought to be translated into efficient processing of large amounts of data. The Four Stages of Processing • Input - entering data • Output - getting information out • Data Processing - changing and manipulating data • Storage - storing data and information Input and Transaction Processing • The first step in the production of information is the collection and introduction of data into the IS. • Most data is collected within the organization as a result of business transactions. • A transaction is a business event: a sale, a purchase, the hiring of a new employee, etc. Recording Transactions • Transactions can be recorded on paper then later entered into a computer system, or they may be directly recorded through the terminals of transaction processing systems (TPSs), such as cash registers and order entry terminals. • A TPS is any system, such as a computer, that records transactions. Processing • The computer‟s greatest contribution to IS is the efficient processing of data. • The computer‟s speed and accuracy allow organizations to process millions of pieces of data in several seconds. - This is due to the astronomical growth in the speed and affordability of computing. Output • Output is information processed by an IS and displayed on an output device in a useful format. • The most common type of output device is the video display. Storage • One of the benefits of a computer is it‟s ability to store vast amounts of data and information. • The computer‟s internal memory stores data for the duration of the processing. • For longer periods of storage, devices such as magnetic tapes and magnetic disks are used, allowing fast retrieval. PROCESSING STORAGE INPUT OUTPUT Elements of A CBIS • A Computer Based Information System includes: – hardware - equipment or devices that perform input, processing and output functions – software - programmed sequences of instructions for the computer – databases - organized collection of data – telecommunications - components that link computer systems together into networks – procedures - strategies, policies, methods and rules Hardware • Computer hardware - is the physical equipment used for input, processing, and output activities in an information system. • Hardware includes: the computer processing unit; various input, output, and storage devices; and physical media to link these devices together. Software • Computer software - consists of the detailed, preprogrammed instructions that control and coordinate the computer hardware components in an information system. • Software includes operating systems, spreadsheets, word processing programs, web browsers and others. Telecommunications Technology • Telecommunications Technology consisting of both physical devices and software, links the various pieces of hardware and transfers data from one physical location to another. • Computers can be connected in networks to share voice, data, images, sound or even video. Standard Operating Procedures • Standard Operating Procedures (SOPs) are formal rules for accomplishing tasks that have been developed over time. • Most procedures are formalized and written down. • Many of a firm‟s SOPs are incorporated into information systems - such as how to pay a supplier or correct an erroneous bill. The Evolution of Computers • First generation computers (19461959). The first largescale computer (ENIAC) used 18,000 vacuum tubes and weighed more than 3 tons. Early production computers included the Sperry Rand Univac, and the IBM 701 (above) and 650. Second Generation Computers • Second generation computers were smaller, more reliable, and less expensive due to their use of transistors. • Memory sizes increased by a factor of 20. IBM dominated this era with machines like the 7020 (above) Third Generation Computers • Began April 7, 1964 with the introduction of the IBM System 360. These machines were based on integrated circuits. Semiconductor memories replaced magnetic cores. Memories sizes continued to grow and IBM continued to lead the industry. Fourth Generation • Unfortunately, there is no dividing line between 3rd and 4th generation computers. • Changes since the IBM 360 have been evolutionary rather than revolutionary. • The integrated circuits of the 3rd generation have become multiple processors or Large Scale Integrated Circuits (LSI). Minicomputers • Parallel with 3rd and 4th generations, there was a splintering in the industry. • Firms like Digital Equipment Corporation and Hewlett-Packard developed small machines aimed at market niches like smaller businesses and scientific applications. • Minicomputer vendors developed easy-touse software applications. Microcomputers • In the „70s and „80s, Apple and other companies pioneered the microcomputer, finding a market niche for home use, education and small businesses. • IBM entered the market in 1981. Above - Apple IIc PC‟s Widespread Acceptance • Other vendors “cloned” IBM‟s Personal Computer and (PCs) have become the standard. • Subsequent developments have dramatically increased the speed and capabilities of PCs. Working the Information Age • A Knowledge Worker is a new category of laborer for which information and knowledge are the new raw materials for their work. They usually hold university degrees and may be engineers, doctors, lawyers, and scientists. • It is now standard to note experience with personal productivity tools such as word processing, spreadsheets, and presentation software on personal resumes and application forms. Teamwork • IT has brought about a new emphasis on collaborative work, usually by teams of workers. • Because of IT, many US firms have empowered teams of workers to make operational decisions. • The diffusion of IT has brought about measurable gains in productivity. Flatter Organizations TOP MGT MIDDLE MGT MIDDLE MGT MIDDLE MGT IT has allowed organizations to abandon traditional bureaucratic structures and reduce the number of management levels allowing more efficiency and quicker response to customer needs. Example - Caterpillar produces the same output as 15 years ago with 40,000 fewer employees. Teamwork Across Continents • IT has made teamwork across thousands of miles a reality. • Ford adopted a cross-continental collaborative model with the design of the 1994 Mustang. Designers from England, Japan, Australia and Michigan worked together to produce a full-sized physical model. The Virtual Organization • “Virtual Organizations” use networks to link people, assets, and ideas, allying with suppliers, customers and even competitors to create and distribute new products and services without being limited by traditional organizational boundaries or physical location. • Companies work on their core competencies and take advantage of the capabilities of others. Virtual Organization Example • Calyx and Corolla, created a networked organization to sell fresh flowers directly to customers bypassing the traditional flower shop. • Orders are collected via phone and transmitted directly to growers who ship them via Federal Express within 2 days. • The product is weeks fresher than those provided by traditional florists Anytime, Anywhere • We can communicate with others and access organizational information anytime (24 hours per day, 7 days per week). • Many organizations have implemented an infrastructure to provide managers with company e-mail from a remote location over telephone lines. • Most Fortune 500 companies provide laptop computers to their sales force. Strategic Advantages of IT In 1980, Michael Porter identified two ways to achieve a competitive advantage: • By Cost - by being a low-cost producer of a good or service • By Differentiation - by competing on customer perceptions of produce quality and customer support services Cost Advantages • IT has played a significant role in enabling firms to compete on low cost. • Computers have automated transaction processing, shortened cycle times, and provided operational data for decision making. • CAD-CAM has shortened the time to develop new products Low Cost Producer • Wal-Mart uses point of sale terminals to track transactions and transmit orders to suppliers. This drastically reduces their inventories. • Wal-Mart‟s overhead is 15% of sales compared to 30% for Sears and 21% for K-Mart. IT and Differentiation • During the 1980s, IT began to play a more important role in differentiation. • For example, firms began to develop software applications that provided sales personnel with customer information. • New services, such as cash management accounts or drug interaction information for pharmacists. Six Major Types of Systems Executive Support Systems - strategic level Management Information Systems - mgt level Decision Support Systems - mgt level Knowledge Work Systems - knowledge level Office Automation Systems - knowledge level Transaction Processing Systems - operational level Transaction Processing Systems • Transaction Processing Systems (TPS) are the basic business systems that serve the operational level of the organization. They are computerized systems that perform and record the daily transactions necessary to the conduct of the business. • Examples are sales order entry, hotel reservation systems, payroll, employee record keeping and shipping. Knowledge Work Systems • Knowledge Work Systems (KWS), such as scientific or engineering design workstations, promote the creation of new knowledge and ensure that technical expertise is integrated into the business. • Example - computer aided design systems. Office Automation Systems • Office Automation Systems (OAS) are used by data workers (managers, secretaries, and clerks) whose job is principally to use, manipulate , or disseminate information. • Typical OAS handle and manage documents through word processing, desktop publishing , digital filing, voice mail, e-mail, scheduling and videoconferencing. Management Information Systems • Management Information Systems (MIS) provide managers with reports and on-line access to the organization‟s current performance and historical records. • Typically, they are oriented towards internal, not environmental or external events. • Typically they serve the functions of planning, controlling, and decision making at the management level. MIS • MIS are generally dependent on underlying TPS for their data. They are report and control oriented • MIS usually serve managers interested in weekly, monthly, or yearly results, not dayto-day activities. Decision Support Systems • Decision Support Systems (DSS) help managers make semi-structured or unique decisions. • While DSS uses information from TPS and MIS, it often brings information from external sources, such as current stock prices or competitors pricing. • Clearly DSS have more analytical power than other systems. DSS Example • A shipping company carries bulk cargoes of coal, oil, ores and finished products. It owns some vessels and charters others. • They use a voyage-estimating system to calculate financial and technical voyage details with information such as ship/time costs, freight rates, port expenses, cargo capacity, speed, distances, fuel consumption, loading patterns and others. Voyage Estimating System • This DSS can answer questions like: “ What is the maximum speed at which a particular vessel can optimize its profits and still meet it‟s delivery schedule” Executive Support System • Executive Support System (ESS) helps senior managers address unstructured decisions. They are designed to incorporate data about external events, such as new tax laws or competitors but also draw information from MIS and DSS. Often they use external databases such as Dow Jones News or the Gallup Poll • They filter, compress, and track critical data. Different from DSS • ESS differs from DSS in that it is less analytical. Instead, ESS provides a generalized computing and telecommunications capacity that can be applied to an array of changing problems. • ESS can help answer questions like “What business should we be in?” or “What acquisitions will protect us from business cycle swings?” A Joke?? • “The factory of the future will only have two employees, a man and a dog. The man will be there to feed the dog. The dog will be there to keep the man from touching the equipment.” – Warren Bennis Professor of Business Administration University of Southern California Summary • IT has become a critical strategic asset for business in today‟s competitive environment. • Advances in technology have had a major impact on both business and society. • Change in technology has been rapid and will likely continue to accelerate over time.