Chapter one

1.An Introduction to Information Systems in organizations

1.1. What Is an 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 one another using a variety of physical devices (hardware) ,
information processing instructions and procedures (software) , communications channels
(networks) , and stored data (data resources). Although today’s information systems are typically
thought of as having something to do with computers, we have been using information systems
since the dawn of civilization. Even today we make regular use of information systems that have
nothing to do with a computer. Consider some of the following examples of information systems:
• Smoke signals for communication were used as early as recorded history and can account for the
human discovery of fire. The pattern of smoke transmitted valuable information to others who
were too far to see or hear the sender.
• Card catalogs in a library are designed to store data about the books in an organized manner that
allows readers to locate a particular book by its title, author name, subject, or a variety of other
approaches.
• Your book bag, day planner, notebooks, and file folders are all part of an information system
designed to help you organize the inputs provided to you via handouts, lectures, presentations, and
discussions. They also help you process these inputs into useful outputs: homework and good exam
grades.
• The cash register at your favorite fast-food restaurant is part of large information system that
tracks the products sold, the time of a sale, inventory levels, and the amount of money in the cash
drawer; it also contributes to the analysis of product sales in any combination of locations
anywhere in the world.
• A paper-based accounting ledger as used before the advent of computer-based accounting
systems is an iconic example of an information system. Businesses used this type of system for

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centuries to record the daily transactions and to keep a record of the balances in their various
business and customer accounts.

1.2. Components of an Information System

We have noted that an information system is a system that accepts data resources as input and
processes them into information products as output. How does an information system accomplish
this task? What system components and activities are involved?
Figure 1.1 illustrates an information system model that expresses a fundamental conceptual
framework for the major components and activities of information systems.

FIGURE 1.1 The components of an information system.

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 (communications media and network support) to perform input, processing, output,
storage, and control activities that transform data resources into information products.
This information system model highlights the relationships among the components and activities
of information systems. It also provides a framework that emphasizes four major concepts that can
be applied to all types of information systems:

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• 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 include data
and knowledge bases, and network resources include communications media and networks.
Our basic IS model shows that an information system consists of five major resources: people,
hardware, software, data, and networks. Let’s briefly discuss several basic concepts and examples
of the roles these resources play as the fundamental components of information systems. You
should be able to recognize these five components at work in any type of information system you
encounter in the real world.

1.3. The technology side of information system

Hardware Resources
The concept of hardware resources includes 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. Examples of hardware in computer-based information systems are:
• Computer systems, which consist of central processing units containing microprocessors and a
variety of interconnected peripheral devices such as printers, scanners, monitors, and so on.
Examples are handheld, laptop, tablet, or desktop microcomputer systems, midrange computer
systems, and large mainframe computer systems.
• Computer peripherals, which are devices such as a keyboard, electronic mouse, trackball, or
stylus for the input of data and commands, a video screen or printer for the output of information,
and magnetic or optical disk drives for the storage of data resources.
Software Resources
The concept of software resources includes 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.
It is important to understand that even information systems that do not use computers have a
software resource component. This claim is true even for the information systems of ancient times

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or the manual and machine-supported information systems still used in the world today. They all
require software resources in the form of information processing instructions and procedures to
properly capture, process, and disseminate information to their users.
The following are examples of software resources:
• System software, such as an operating system program, which controls and supports the
operations of a computer system. Microsoft Windows and Unix are two examples of popular
computer operating systems.
• Application software, which are programs that direct processing for a particular use of
computers by end users. Examples are sales analysis, payroll, and word processing programs.
• Procedures, which are operating instructions for the people who will use an information system.
Examples are instructions for filling out a paper form or using a software package.
Data Resources
Data are more than the raw material of information systems. The concept of data resources has
been broadened by managers and information systems professionals. They realize that data
constitute valuable organizational resources. Thus, you should view data just as you would any
organizational resource that must be managed effectively to benefit all stakeholders in an
organization.
The concept of data as an organizational resource has resulted in a variety of changes in the modern
organization. Data that previously were captured as a result of a common transaction are now
stored, processed, and analyzed using sophisticated software applications that can reveal complex
relationships among sales, customers, competitors, and markets. In today’s wired world, the data
to create a simple list of an organization’s customers are protected with the same energy as the
cash in a bank vault. Data are the lifeblood of today’s organizations, and the effective and efficient
management of data is considered an integral part of organizational strategy.
Data can take many forms, including traditional alphanumeric data, composed of numbers, letters,
and other characters that describe business transactions and other events and entities; text data,
consisting of sentences and paragraphs used in written communications; image data, such as
graphic shapes and figures or photographic and video images; and audio data, including the human
voice and other sounds.
The data resources of information systems are typically organized, stored, and accessed by a
variety of data resource management technologies into:

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• Databases that hold processed and organized data.
• Knowledge bases that hold knowledge in a variety of forms, such as facts, rules, and case
examples about successful business practices.
For example, data about sales transactions may be accumulated, processed, and stored in a Web-
enabled sales database that can be accessed for sales analysis reports by managers and marketing
professionals. Knowledge bases are used by knowledge management systems and expert systems
to share knowledge or give expert advice on specific subjects. We explore these concepts further
in subsequent chapters.

1.4. Data versus Information

The word data is the plural of datum, though data commonly represents both singular and plural
forms. Data are raw facts or observations, typically about physical phenomena or business
transactions. For example, a spacecraft launch or the sale of an automobile would generate a lot of
data describing those events. More specifically, data are objective measurements of the attributes
(the characteristics) of entities (e.g., people, places, things, events).
Example Business transactions, such as buying a car or an airline ticket, can produce a lot of data.
Just think of the hundreds of facts needed to describe the characteristics of the car you want and
its financing or the intricate details for even the simplest airline reservation.
People often use the terms data and information interchangeably. However, it is better to view
data as raw material resources that are processed into finished information products. Then we can
define information as data that have been converted into a meaningful and useful context for
specific end users. Thus, data are usually subjected to a value-added process ( data processing or
information processing ) during which (1) their form is aggregated, manipulated, and organized;
(2) their content is analyzed and evaluated; and (3) they are placed in a proper context for a human
user.
The issue of context is really at the heart of understanding the difference between information and
data. Data can be thought of as context independent: A list of numbers or names, by itself, does
not provide any understanding of the context in which it was recorded. In fact, the same list could
be recorded in a variety of contexts. In contrast, for data to become information, both the context
of the data and the perspective of the person accessing the data become essential. The same data

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may be considered valuable information to one person and completely irrelevant to the next. Just
think of data as potentially valuable to all and information as valuable relative to its user.
Example Names, quantities, and dollar amounts recorded on sales forms represent data about sales
transactions. However, a sales manager may not regard these as information. Only after such facts
are properly organized and manipulated can meaningful sales information be furnished and
specify, for example, the amount of sales by product type, sales territory, or salesperson.
Network Resources
Telecommunications technologies and networks like the Internet, intranets, and extranets are
essential to the successful e-business and e-commerce operations of all types of organizations and
their computer-based information systems. Telecommunications networks consist of computers,
communications processors, and other devices interconnected by communications media and
controlled by communications software.
The concept of network resources emphasizes that communications technologies and networks are
fundamental resource components of all information systems.
Network resources include:
• Communications media. Examples include twisted-pair wire, coaxial and fiber optic cables, and
microwave, cellular, and satellite wireless technologies.
• Network infrastructure. This generic category emphasizes that many hardware, software, and
data technologies are needed to support the operation and use of a communications network.
Examples include communications processors, such as modems and internetwork processors, and
communications control software, such as network operating systems and Internet browser
packages.
The people side of information system (People Resources)

People are the essential ingredient for the successful operation of all information systems.
These people resource includes 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. In fact, most of us are information system
end users. Most end users in business are knowledge workers, that is, people who spend most of
their time communicating and collaborating in teams and workgroups and creating, using, and
distributing information.

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• 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. Briefly, systems analysts design information systems based on the information
requirements of end users, software developers create computer programs based on the
specifications of systems analysts, and system operators help monitor and operate large computer
systems and networks.
The dual nature of information systems

1.5. The future of information system function within the

firm
Figure 1.2 illustrates the new relationship between organizations and information systems. There
is a growing interdependence between business strategy, rules, and procedures on the one hand,
and information systems software, hardware, databases, and telecommunications on the other. A
change in any of these components often requires changes in other components. This relationship
becomes critical when management plans for the future. What a business would like to do in five
years often depend on what its systems will be able to do. Increasing market share, becoming the
high-quality or low-cost producer, developing new products, and increasing employee productivity
depend more and more on the kinds and quality of information systems in the organization.

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Figure 1.2. The Interdependence between Organizations and Information Systems
A second change in the relationship between information systems and organizations results from
the growing reach and scope of system projects and applications. Building and managing systems
today involves a much larger part of the organization than it did in the past. As firms become more
like "digital firms," the system enterprise extends to customers, vendors, and even industry
competitors.
Where early systems produced largely technical changes that affected only a few people in the
firm, contemporary systems have been bringing about managerial changes (who has what
information about whom, when, and how often) and institutional "core" changes (what products
and services are produced, under what conditions, and by whom). As companies move toward
digital firm organizations, nearly all the firm's managers and employees—as well as customers
and vendors—participate in a variety of firm systems, tied together by a digital information web.
For instance, what a customer does on a firm's Web site can trigger an employee to make an on-
the-spot pricing decision or alert a firm's suppliers of potential "stock out" situations.