Business Information Systems Overview

This week we take an overview look at business information systems (BIS). These notes are intended as an outline upon which we can base our discussions. This material also corresponds to chapter 1 of the MIS text cited in the syllabus.

Objectives

• identify terms and acronyms used for some common MIS systems (such as CRM, ES, DSS, etc.)
• define basic MIS terms (such as data, system, etc.)
• describe common business functions (such as accounting, human resources, etc.)
• discuss career opportunities in the IT field
• explain the difference between digital and analog
• differentiate between data and information
• describe characteristics of useful information
• list the four primary functions of a computer system
• list the four stages of processing
• list the components of an information system
• explain why information systems are essential to business
• list some ethical issues of IS

Important acronyms

• IS: Information System; all the components that work together to process data and produce information
• BIS: Business Information System; an IS devoted to business purposes
• MIS: Management Information Systems; information systems used to help manage a business
• IT: Information Technology; all technologies that collectively facilitate the construction and maintenance of information systems (IS)
• TPS: Transaction Processing System; a system used to record transactions
• SCM: Supply Chain Management; a large IS that helps manage the numerous activities involved in a "supply chain", perhaps including purchasing, manufacturing, assembly, marketing, packing, shipping, etc.
• SaaS: Software as a Service; applications are provided to customers on an as-needed basis over the Internet
• ERP: Enterprise Resource Planning; similar to and overlapping SCM; ERP systems are used to monitor and support planning of all kinds of resources from personnel to cash, from vehicles to inventory
• CRM: Customer Relationship Management; a system designed to help maintain and foster relationships with customers; this type of system may remind a car dealership to call a customer a few days after repairs have been made to a customer's car to make sure the customer is satisfied with the work done
• BI: Business Intelligence; BI systems try to discern relationships and trends that could help make business decisions based on input data
• DSS: Decision Support System; used by management to ask what-if type questions, manipulate data, and support the decision making process; this type of system is based on predefined models and formulas
• AI: Artificial Intelligence; computer hardware and software that tries to mimic some forms of thought; generally limited to very specific tasks
• ES: Expert System; uses AI to provide expertise within a particular field
• GIS: Geographic Information System; an information system integrated with and using geographic data
• POS: Point of Sale; this term used to mean a cash register, but they do much more now, and are especially important as transaction processing systems and for updating inventory, checking prices, keeping track of employee sales activity, etc.
• GIGO: Garbage in, Garbage Out; inaccurate and/or incomplete information/data coming in to a system can lead to bad decisions coming out of a system [not in text]

Important terms

• data: a given; a fact; the raw material in the production of information; please note that fact does not necessarily mean true in this context
• information: facts or conclusions that have meaning within a context; processed data
• BIS process: any manipulation of data, usually with the goal of producing information
• system: an array of components that work together to achieve a common goal (or multiple goals) by accepting input, processing it, and producing output (and possibly storing and/or transmitting it) in an organized manner
• subsystems: components of a larger system with its own subgoals
• closed system: a system that stands alone; not connected to other systems; closed systems lose the benefits of networking such as easy access and shared resources, but gain the benefit of increased security
• open system: a system that interfaces and interacts with other systems; open systems gain the benefits of networking such as easy access and shared resources, but security becomes much more difficult
• systems thinking: thinking of an organization in terms of its suborganizations or subsystems
• cloud computing: computer processing resources provided by some remote bank of computers across a network
• database: a collection of records; databases allow large amounts of data and data with complex relationships to be stored; databases often employ special rules and tools that make working with large data sets more reliable, safer, and more productive
• data warehouse: a specialized type of database designed to store massive amounts of information in a way that makes it quick and easy to retrieve and manipulate; data warehouses may not follow all the normal rules imposed on more typical databases
• e-commerce: business transactions conducted over the Internet
• information map: description of the data and information flow within an organization
• synergy: when working together produces more or better output than the sum of all the resources working separately
• transaction: any business event, such as selling a product, hiring an employee, etc.
• supply chain: the sequence of activities involved in producing a product or service

Does IT Matter?

A debate is ongoing concerning the strategic value of IT in the business world. An example of that debate comes from the pages of the Harvard Business Review in an article titled Does IT Matter? An HBR Debate. Some people point out that the development of transformational IT systems is costly and carries great risk of failure, while the potential benefits of such a system are less and less likely to create a significant competitive advantage for any significant length of time. Is it better to watch what competitors are doing, let them take the risks, and then invest in new systems to copy what they have successfully done?

It should be noted that neither side of this argument suggests that business should stop investing in IT. There is general agreement that IT has become a vital part of the business infrastructure. This debate is primarily about whether an organization should spend considerable resources developing new IT systems in an attempt to gain a competitive advantage or whether spending on IT should be done more defensively - purchasing what is needed to support normal business functions and keep the existing infrastructure updated, and only spending on expensive new systems when competitors have shown the value of the new systems.

Why is learning about IT important?

There are many reasons why learning about IT might be important to you. The reasons are obvious if you get a job that primarily requires IT skills. Even if you get a job that is not primarily about working with IT, many jobs will still involve working with IT at least some of the time. It is also valuable to know what IT systems are available and what their capabilities are so you can find new opportunities to take advantage of IT systems within your organization. For example, you may be assigned to add up numbers from a spreadsheet using a calculator. This may be an opportunity to use the formulas or programming in the spreadsheet to make the process automatic and instantaneous. Knowing what is possible can be a great advantage.

You should be willing to make mistakes and learn new things. Whatever you learn in school, in books, or online usually starts becomes outdated even before you get to access it. One problem is that software features and interfaces are constantly changing. You may learn how to do everything in Microsoft Word 2010, but then find some things aren't where you expect them to be in Microsoft Word 2013. To be a top contributor in an organization, you have to learn to adapt to these types of changes. You can usually use search tools like Google to help if you don't quickly find the answer on your own.

The text presents an example at the end of the first chapter which describes customer service at FedEx. The example details how call centers help customers with problems, questions, and changes. It also describes how purchasing new customer relationship management (CRM) software has made the FedEx call center more efficient, and points out that the FedEx website is being used by some customers to handle many of the questions the call center could handle, but doing it more cost effectively. Some one at FedEx had to have enough working knowledge of IT to recognize that there were tools available that could improve call center operations. This is one reason why it is useful to know about the capabilities of IT and IS beyond just having the skills to use the tools you currently have.

Digital vs. analog

Analog signals are continuous and usually have a wide range. Analog signals can be difficult to process and quality is lost as copies are made. Analog signals are usually converted into digital signals for processing on modern computers. Digital signals are just a set of numbers used to describe the analog signal. The more numbers we use to represent the analog signal, the better the representation gets, but using more numbers uses more digital memory and processing power - so tradeoffs are made. Beyond a certain point, more precise representations of an analog signal consume considerably more memory and processing power without much (if any) discernible difference in the result.

The numbers that digital systems use end up being just a stream of 0s and 1s. Digital devices can represent those 0s and 1s with almost anything that can be recognized as two different states. Inside the computer, it could be a high voltage and a low voltage. On a hard drive, it could be a magnetized or a non-magnetized area. Optical disks use a highly reflective spot (called a "land") for one value and a less reflective spot (called a "pit") for the other value. In the old days, paper tape and cards had a hole for one value and no hole for the other value. In any case, they all represent a stream of 0s and 1s, and that in turn represents everything the computer can process - sound, text, graphics, programs, etc. One really useful quality of digital signals is that you can quickly make as many perfect copies of that signal as you want.

Listening to a concert and old vinyl LPs are examples of analog signals. CD and MP3 recordings of that same music are examples of digital signals. Keep in mind that information is usually lost when converting an analog signal into a digital signal - sometime a great deal of information. Once a signal is in digital form, it becomes easy to make copies of it, process it with digital computers, and transfer it quickly over great distances without any loss of quality. Analog signals may start off with better quality, but they suffer quality loss when making copies and are harder to store, process, and transfer.

Data vs. information

The difference involves more than just semantics. Data is raw facts. Data is processed to become information. The processing helps to place the data in context. An example of data is knowing that a business had $40,000 in sales in the previous month. Processed and placed in context, it can become useful information. For example, if that figure referred to a small restaurant that just opened, then that number probably indicates an incredibly good start to the new business. If the figure refers to the sales leading up to Christmas for a major company such as Apple, then it indicates big problems.

Characteristics of useful information

There are more characteristics of useful information than are shown on the following list. Can you think of others?

• relevant: must apply to problem at hand and be in context to be useful
• complete: incomplete information can quickly lead to incorrect decisions
• accurate: inaccurate information can also lead to to incorrect decisions
• current: old information is often not accurate any longer since situations change
• economical: the cost of obtaining the information must be weighed against the benefit of having the information

Trends fostering the use of IT

• computer power has grown tremendously while prices have dropped
• more and more of the workforce is computer literate
• the variety and utility of software has increased greatly
• fast, cheap, relatively reliable worldwide communication has increased the effectiveness, power, and productivity of computer systems
• the Internet has spurred global competition and opened up opportunities worldwide

Four stages of processing

These are also the four primary functions of a computer system. An additional function is often added when discussing computer systems - networking/communication. Although this can be thought of as a fifth primary computer system function, it may also be thought of as a combination of some of the other functions. For a computer sending a message, networking is just another form of output. For a computer receiving a message, networking is just another form of input. To the network itself, which functions like a computer, the messages traveling back and forth are input and output which must be processed and temporarily stored.

• input
• processing
• output
• storage

Components of an information system

• data
• hardware
• software
• telecommunications
• people
• procedures

Synergy

Synergy is the phenomenon of working together as a team to produce more or better output than the sum of all the individual resources working separately.

A good example of synergy is a team made up of people with different talents. The team can display synergy when the team works well together and the individual members of the team are each utilized for their specific strengths. This is sometimes seen in sports when a team that has no real standout players on the roster learns to work well together and starts to dominate their competition.

People often use the example of using a tool as an example of synergy, but this is not accurate and misses the point. Another bad example is stating that five people can get more work done than four. That isn't synergy - it's just more workers. Synergy would be if you could get that group of four people to work together so well that they out-performed all other groups of four people doing the same job.

Some business functions which depend on IS

• Accounting: needs IS to report on transactions, calculate and report on financial state, accounts payable (what you owe), accounts receivable (what is owed to you), profit and loss, payroll, etc.
• Finance: uses IS to keep track of financial state and make decisions regarding financial planning and business transactions; this overlaps with accounting, and both may be carried out by the same department; finance is usually more concerned with the "bigger picture" while accounting has to pay close attention to details
• Marketing: uses IS to identify target audience for advertising, spot trends in product sales, forecast future sales, differentiate products/services by geographic or demographic differences, etc.
• Human Resources: the HR department uses IS to keep track of employee records, tax status, payroll, etc.

Some careers in IS

• The programmer/analyst develops and maintains software to support IS functions.
• The systems analyst operates at a higher level than the programmer/analyst. He or she analyzes and develops requirements for new or existing systems, documents current and proposed systems and development efforts, and provides specifications to programmers so they can implement the new systems (or modify existing systems).
• The DBA (database administrator) is responsible for guaranteeing the accuracy and availability of data in the database. He or she maintains the database and helps create the processes for adding new data when needed. The DBA must also be able to fulfill requests by preparing reports based on data in the database. One of the most challenging aspects of the job now is making access to authorized users easy, while protecting customer and employee privacy and database security.
• The network administrator has to make sure that the communication links both within the company and external to the company are sufficient for needs, and that they are secure.
• The webmaster is responsible for developing and maintaining the organization's website.
• The CSO (chief security officer) is responsible for making sure that an organization's data and IS are secure.
• The CIO (chief information officer) is responsible for all aspects of a company's IS.
• The CTO (chief technology officer) is responsible for determining what technologies to use. This is often the same position as the CIO with a different name.

Ethical issues

A number of ethical and societal issues have risen due to having information systems recording and processing almost every aspect of our life. Some of the major issues discussed in the text are:

• privacy: It has become relatively easy for organizations and governments to track much of what is done online. Purchases at stores are also routinely tracked. Can rules and laws realistically protect this type of privacy?
• employer monitoring: Monitoring of employees on the job has become more and more common. Employers often take video of the workplace, record online activity and email, and record phone calls. The monitoring may be for safety purposes, such as security cameras at convenience stores, banks, and ATMs. Phone calls are sometimes recorded for quality control purposes when businesses rely heavily on the phone for sales and/or support. Email is often required to be retained for a certain amount of time by law. In other cases, the monitoring is done because employers don't trust their employees to do their jobs if they are not monitored. That lack of trust doesn't usually generate an enthusiastic workforce.
• phishing: Phishing is when people are lured into divulging confidential information to imposters. A phishing attack often starts as an email which directs the unsuspecting victim to a fraudulent website. The victim then enters information such as account numbers, logins, passwords, or social security numbers into the fake website.
• freedom of speech: Online conversations can easily get out of control since some people are more prone to saying inflammatory things when hiding behind a veil of anonymity. Another problem is that many "free" cultures have started to become hyper-sensitive on a number of issues, even to the point where many words are now considered unspeakable. At the same time, many "non-free" cultures have very strict rules on speech in general. Is it ironic that we have one of the greatest tools for free speech available at the same time that free speech is starting to come under attack? Perhaps the attacks on free speech are a reaction to how open the Internet is.
• identity theft: The Internet makes identity theft easier - see the item on phishing earlier in this list. Another problem is that almost everything is connected to the Internet. That includes organizations which keep a lot of information about the people they deal with. As a general rule, if you have confidential information on a computer system and that computer system is connected to a network, then that information is vulnerable to anyone who can connect to that network. We also have to keep in mind that identity theft does not require the Internet. One of the most common places to get your credit card information stolen that does not require the Internet is in restaurants. Restaurants also happen to more vulnerable to online attacks than a lot of other businesses, so using a credit card at a restaurant is somewhat risky.
• advertising: A lot of services are provided for "free" on the Internet with the hope of making money through advertising. Google is the best example of this. Most people use Google products and accept the collection of their online activity data and exposure to advertisements in return for the services Google provides. Some online advertising is more annoying than just having ads in your search results or on every web page you visit. Some websites use pop-up ads that interrupt your web browsing. Many people are bothered by unsolicited commercial email (spam) - especially since there can be so much of it that it makes reading your real email less productive. This raises a couple of questions. Are you willing to pay for services in order to eliminate advertising? How can you differentiate between spam and desired email?