ISM/U1 Topic 1 Information Systems in Global Business
It’s not business as usual in America anymore, or the rest of the global economy. In 2009, more wireless cell phone accounts were opened than telephone land lines installed. Eighty-nine million people in the United States access the Internet using mobile devices in 2010, nearly half the total Internet user population. Despite the recession, e-commerce and Internet advertising continue to expand. Google’s online ad revenues surpassed $25 billion in 2009, and Internet advertising continues to grow at more than 10 percent a year, reaching more than $25 billion in revenues in 2010.
Now federal security and accounting laws, requiring many business to keep e-mail messages for five years, coupled with existing occupational and health laws requiring firms to store employee chemical exposure data for up to 60 years, are spurring the growth of digital information at the estimated rate of 5 exabytes annually, equivalent to 37,000 new Libraries of Congress.
New in Management Systems
In the technology area there are three interrelated changes:
(1) the emerging mobile digital platform
(2) the growth of online software as a service, and
(3) the growth in “cloud computing” where more and more business software runs over the Internet.
Managers are increasingly using these devices to coordinate work, communicate with employees, and provide information for decision making. We call these developments the “emerging mobile digital platform.” Managers routinely use so-called “Web 2.0” technologies like social networking, collaboration tools and wikis in order to make better, faster decisions. Collaboration spaces are where employees meet one another — even when they are separated by continents and time zones. The strength of cloud computing and the growth of the mobile digital platform allow organizations to rely more on telework, remote work, and distributed decision making.
The Emerging Digital Firm
A digital firm is one in which nearly all of the organization’s significant business relationships with customers, suppliers, and employees are digitally enabled and mediated. Core business processes are accomplished through digital networks spanning the entire organization or linking multiple organizations.
Business processes refer to the set of logically related tasks and behaviors that organizations develop over time to produce specific business results and the unique manner in which these activities are organized and coordinated. Key corporate assets – intellectual property, core competencies, and financial and human assets are managed through digital means.
Strategic Business Objectives of Information Systems
Specifically, business firms invest heavily in information systems to achieve six strategic business objectives: operational excellence; new products, services and business models; customer and supplier intimacy; improved decision making; competitive advantage; and survival.
Businesses continuously seek to improve the efficiency of their operations in order to achieve higher profitability. Information systems and technologies are some of the most important tools available to managers for achieving higher levels of efficiency and productivity in business operations, especially when coupled with changes in business practices and management behavior.
Fig. The Interdependence Between Organizations and Information Systems
New Products, Services, and Business Models
Information systems and technologies are a major enabling tool for firms to create new products and services, as well as entirely new business models. A business model describes how a company produces, delivers, and sells a product or service to create wealth.
Customer and Supplier Intimacy
When a business really knows its customers, and serves them well, the customers generally respond by returning and purchasing more. This arises revenues and profits. Likewise with suppliers: the more a business engages its suppliers, the better the suppliers can provide vital inputs. this lowers costs.
Improved Decision Making
Information systems and technologies have made it possible for managers to use real-time data from the marketplace when making decisions.
When firms achieve one or more of these business objectives — operational excellence; new products, services, and business models; customer/supplier intimacy; and improved decision making — chances are they have already achieved a competitive advantage. Doing things better than your competitors charging less for superior products, and responding to customers and suppliers in real time all add up to higher sales and higher profits that your competitors cannot match.
Business firms also invest in information systems and technologies because they are necessities of doing business. Sometimes these “necessities” are driven by industry-level changes.
Perspectives on Information Systems
Information technology (IT) consists of all the hardware and software that a firm needs to use in order to achieve its business objectives. “Information systems” are more complex and can be best be understood by looking at them from both a technology and a business perspective.
What is an Information System
An information system can be defined technically as a set of interrelated components that collect (or retrieve), process, store, and distribute information to support decision making and control in an organization. In addition, information systems may also help managers and workers analyze problems, visualize complex subjects, and create new products.
Information systems contain information about significant people, places, and things whitin the organization or in the environment surrounding it. By ifnormation we mean data that have been shaped into a form that is meaningful and useful to humand beings. Data, in contrast, are streams of raw facts representing events occuring in organizations or the physical environment before they have been organized and arranged into a form that people can understand and use. Input captures or collects raw data from within the organization or from its external environment. Processing convers this raw intput into a meaningful form. Output transfers the processed information to the people who will use it or to the activities for which it will be used. Information systems also require feedback, which is output that is returned to appropriate members of the organization to help them evaluate or correct the input stage.
Dimensions of Information Systems
To fully understand information systems, you must understand the broader organization, management, and information technology dimensions of systems.
Fig. Information Systems are more than computers
Information systems are an integral part of organizations. Organizations have a structure that is composed of different levels and specialities. Senior management makes long-range strategic decisions about products and services as well as ensures financial performance of the firm. Middle management carries out the programs and plans of senior management and operational management is responsible for monitoring the daily activities of the business.
Fig. Business Organizations Hierarchies
Management’s job is to make sense out of the many situations faced by organizations, make decisions, and formulate action plans to solve organizational problems.Managers perceived business challenges in the environment; they set the organizational strategy for responding to those challenges; and they allocate the human and financial resources to coordinate the work and achieve success. Throughout, they must exercise responsible leadership.
Information technology is one of many tools managers use to cope with change. Computer hardware is the physical equipment, computer software consists of the detailed, preprogrammed instructions that control and coordinate the computer hardware components in an information system, Data management technology consists of the software governing the organization of data on physical storage media, Networking and telecommunications technology consists of both physical devices and software, Network links two or more computers to share data or resourcs such as a printer, Intranets are internal corporate networks based on Internet technology while extranets are private intranets extended to authorized users outside the organizations, and World Wide Web is a service provided by the internet that uses universally accepted standards for storing, retrieving, formatting, and displaying information in a page format on the Internet. All of these technologies, along with the peopel required to run and manage them, represent resources that can be shared throughout the organization and constitute the firm’s information technology (IT) infrastructure.
A Business Perspective On Information Systems
Managers and business firms invest in information technology and systems because they provide real economic value to the business. Every business has an information value chain. The value of an information system to a business, as well as the decision to invest in any new inforamtion system is in large part, determined by the extent to which the system will lead to better management decisions, more efficient business processes, and higher firm profitability. Although there are other reasons why systems are built, their primary purpose is to contribute to corporate value.
Fig. The Business Information Value Chain
Contemporary Approaches to Information Systems
Information systems are sociotechnical systems. Though they are composed of machines, devices, and “hard” physical technology, they require substantial social, oranizational, and intellectual investments to make them work properly.
Fig. Contemporary Approaches To Information Systems
The Technical approach to information systems emphasizes mathematically based models to study information systems, as well as the physical technology and formal capabilities of these systems. The disciplines that contributes to the technical approach are computer science, management science, and operations research.
An important part of the information systems field is concerned with behavioral issues that arise in the development and long-term maintenance of information systems. Issues such as strategic business integration, design, implemenation, utilization, and management cannot be explored usefully with the models used in the technical approach. Other behavioral disciplines contribute important concepts and methods.
The study of management information systems (MIS) arose to focus on the use of computer-based information systems in business firms and government agencies. MIS combines the work of computer science, management science, and operations research with a practical orientation toward developing system solutions to real-world problems and managing information technology resources. It is also concerned with behavioral issues surrounding the development, use, and impact of information systems, which are typically discussed in the fields of sociology, economics, and psychology.
Fig. A Sociotechnical Perspective on Information Systems