Discussion 4002 - Paper Answers

Read Chapters 1 and 2 in your textbook (Textbook: Principles of Information Systems).
Using the discussion link below, respond to the following questions:
What was the most useful takeaway for you from this workshop’s reading?
What concept from the reading is the most applicable to you now in your profession, and how might you implement it?
300 words minimum.

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An Introduction to
Information Systems

LEARNING OBJECTIVESPRINCIPLES

CHAPTER

• 1 •

n The value of information is directly linked

to how it helps decision makers achieve the

organization’s

goals.

n Discuss why it is important to study and under-

stand information systems.

n Distinguish data from information and describe

the characteristics used to evaluate the quality

of data.

n Computers and information systems help

make it possible for organizations to

improve the way they

conduct business.

n Name the components of an

information

system and describe several

system

characteristics.

n Knowing the potential impact of informa-

tion systems and having the ability to put

this knowledge to work can result in a

successful personal career and in organi-

zations that reach their goals.

n List the components of a computer-based

information system.

n Identify the basic types of

business information

systems and discuss who uses them, how they

are used, and what kinds of benefits they

deliver.

n System users, business managers,

and

information systems professionals must

work together to build a successful

information system.

n Identify the major steps of the systems devel-

opment process and

state the goal of each.

n Information systems must be applied

thoughtfully and carefully so that society,

businesses, and industries can reap their

enormous benefits.

n Describe some of the threats that information

systems and the Internet can pose to security

and privacy.

n Discuss the expanding role and benefits of in-

formation systems in business and industry.

Information Systems in the Global Economy
Braskem S.A., Brazil
The Power of Information in the Petrochemical Industry

You’ve probably heard that “information is power.” In fact, the power of information

depends on how it serves a specific need at a certain time. For example, when you are

deciding which automobile to buy, the fact that the Yankees won the 2009 World Series

is of no value to you. Information is most powerful when it enables strategic decision

making. It must be delivered to the right person at the right time with as little effort

as possible. For businesses, correctly managing strategic information can mean the dif-

ference between success and failure. Consequently, today’s businesses invest a large

percentage of their budgets in systems designed to deliver the right information to the

right people at the right time. Such is the case for Braskem S.A.
Braskem S.A. is the largest petrochemical company in Latin America, with annual rev-

enue of $13 billion (US) and 5,500 employees. Braskem was created in 2002 out of the
merger of six Brazilian companies. Its 13 chemical plants produce basic raw materials su

as ethylene, propylene, and chlorine, which are used in the production of thermoplastic
resins. Braskem then sells the resins to manufacturers of plastic products. Toothbrushes,
baby bottles, backpacks, automotive parts, and computer parts are all made from thermo-
plastic resins produced by Braskem, ExxonMobile, Dow Chemical, and other petrochemi-
cal companies.

Recently, Braskem invested heavily in an information systems (IS) development effort
to provide all of its 4,000 office and production staff access to information from one central
source using one system. In planning and developing the new system, Braskem IS man-
agers needed to consider many factors. The system would handle science and research
information as well as production, business, and financial information. Such enterprise-
wide systems are often referred to as enterprise resource planning systems (ERPs).
Braskem wanted the system to be implemented within a year—a tall order for an ERP.
Braskem executives also wanted the system to help the company’s employees make it one
of the world’s top 10 petrochemical companies.

Although this may seem a lot to ask of an IS, information systems do directly influence
the implementation of smart business processes. An IS can either hamper people from
proper business practices or it can help them establish best practices across an organiza-
tion. “Best practices” refers to insightful business practices that are proven to provide a
competitive advantage. Braskem wanted its new information systems to help establish best
practices and streamline its essential business processes. Braskem’s chief information of-
ficer (CIO), Stefan Lanna Lepecki, investigated what type of information systems the top
global petrochemical companies were using. He soon discovered that 9 of the top 10 com-
panies used information systems developed by SAP.

SAP is a multinational software development and consulting corporation with head-
quarters in Waldorf, Germany. Having worked with major petrochemical companies, SAP
system engineers were well acquainted with the business and with systems that guide best
business practices. After gaining the approval of the steering committee, top executives,
and even the workers in the plant, Braskem hired SAP to build the new system. Rather
than viewing the project as a technology initiative, Braskem embraced it as a business
process transformation. Systems engineers, business managers, and hourly employees
would all be involved.

Braskem’s CIO kept customization requests to a minimum to implement a system
that, for the most part, used the same standard SAP software that other petrochemical
companies used. The system required Braskem to get a new

technology infrastructure

including new hardware, databases, telecommunications equipment, and software. It was

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implemented within one year. In the final stages of development, Braskem instituted a
rigorous training regimen for the 4,000 employees who would be working with the system.
Using simulations, each employee was required to advance through eight skill levels be-
fore being allowed to use the real system. Although training required 63,930 people hours,
it ensured that employees used the best practices and procedures that the system sup-
ported. The result was an improvement of business processes across the enterprise.

Braskem no longer suffers the frustration of working with different systems at differ-
ent sites. Today, information flows freely among Braskem’s plants and offices, with exec-
utives, managers, and employees accessing up-to-the-minute information from any
Braskem location. They can also access the system from mobile devices when they travel.
The company has reduced its maintenance, repair, and operations costs. The improved
efficiency of its systems also allows Braskem to reduce the amount of inventory it keeps
on hand because inventory now ships when it rolls off the production line. In general,
business tasks require fewer people and take less time with the new system. The system
also complies with government regulations such as the Sarbanes-Oxley Act designed to
keep business practices transparent. The new IS puts Braskem in an ideal position to gain
market share and reach its goals.

As you read this chapter, consider the following:

• How might the information system used at Braskem depend on the various
components of a computer-based information system: hardware, software, databases,

telecommunications, people, and procedures?

• How do computer-based information systems like Braskem’s help businesses
implement best practices?

People and organizations use information every day. The components that are used are often
called an information system. An information system (IS) is a set of interrelated components
that collect, manipulate, store, and disseminate data and information and provide a

feedback

mechanism to meet an objective.1 It is the feedback mechanism that helps organizations
achieve their goals, such as increasing profits or improving customer service.2 Businesses can
use information systems to increase revenues and reduce costs. This book emphasizes the
benefits of an information system, including speed, accuracy, increased revenues, and reduced
costs.

We interact with information systems every day, both personally and professionally.
We use automated teller machines at banks, access information over the Internet, select
information from kiosks with touch screens, and scan the barcodes on our purchases at self-
checkout lanes. Major Fortune 500 companies can spend more than $1 billion per year on
information systems. Knowing the potential of information systems and putting this

Why Learn About

Information

Systems?

Information systems are used in almost every imaginable profession. Entrepreneurs
and small business owners use information systems to reach customers around the
world. Sales representatives use information systems to advertise products, commu-
nicate with customers, and analyze sales trends. Managers use them to make multi-
million-dollar decisions, such as whether to build a manufacturing plant or research
a cancer drug. Financial advisors use information systems to advise their clients to
help them save for retirement or their children’s education. From a small music store
to huge multinational companies, businesses of all sizes could not survive without
information systems to perform accounting, marketing, management, finance and
similar operations. Regardless of your college major or chosen career, information
systems are indispensable tools to help you achieve your career goals. Learning about
information systems can help you land your first job, earn promotions, and advance
your career.

This chapter presents an overview of information systems, with each section get-
ting full treatment in subsequent chapters. We start by exploring the basics of
information systems.

information system (IS)

A set of interrelated components
that collect, manipulate, store, and
disseminate data and information
and provide a feedback mechanism
to meet an objective.

4 Part 1 | Overview

knowledge to work can help individuals enjoy a successful career and help organizations reach
their goals.

Information systems are
everywhere. An air traveler

checks

in for a flight using a kiosk, which
sends the check-in information to a
network to verify the traveler’s
reservation and flight information.
The kiosk’s system processes the
information and prints a boarding
pass, speeding airport check-in
times.

(Source: © Tim Boyle/Getty Images)

Today we live in an information economy.3 Information itself has value, and commerce
often involves the exchange of information rather than tangible goods. Systems based on
computers are increasingly being used to create, store, and transfer information. Using in-
formation systems, investors make multimillion-dollar decisions, financial institutions trans-
fer billions of dollars around the world electronically, and manufacturers order supplies and
distribute goods faster than ever before. Computers and information systems will continue
to change businesses and the way we live. To prepare for these innovations, you need to be
familiar with fundamental information concepts.

INFORMATION CONCEPTS

Information is a central concept of this book. The term is used in the title of the book, in
this section, and in almost every chapter. To be an effective manager in any area of business,
you need to understand that information is one of an organization’s most valuable resources.
This term, however, is often confused with data.

Data, Information, and Knowledge
Data consists of raw facts, such as an employee number, total hours worked in a week,
inventory part numbers, or sales orders. As shown in Table 1.1, several types of data can
represent these facts. When facts are arranged in a meaningful manner, they become infor-
mation. Information is a collection of facts organized and processed so that they have
additional value beyond the value of the individual facts. For example, sales managers might
find that knowing the total monthly sales suits their purpose more (i.e., is more valuable)
than knowing the number of sales for each sales representative. Providing information to
customers can also help companies increase revenues and profits. FedEx, a worldwide leader
in shipping packages and products around the world, believes that information about a
package can be as important as the package itself for many of its customers.4 Information
generated by FedEx and other organizations is being placed on the Internet more now than
ever. In another example, many universities place course information and content on the
Internet. Using the Open Course Ware program, Massachusetts Institute of Technology
(MIT) places class notes and contents on the Internet for many of its courses.5

Data represents real-world things. Hospitals and healthcare organizations, for example,
maintain patient medical data, which represents actual patients with specific health situations.
In many cases, hospitals and healthcare organizations are converting data to electronic form.
Some have developed electronic records management (ERM) systems to store, organize, and
control important data. However, data—raw facts—has little value beyond its existence. The
U.S. federal stimulus plan could invest as much as $2 billion into helping healthcare orga-
nizations develop a medical records program to store and use the vast amount of medical

data

Raw facts, such as an employee
number, total hours worked in a
week, inventory part numbers, or
sales orders.

information

A collection of facts organized and
processed so that they have
additional value beyond the value of
the individual facts.

An Introduction to Information Systems | Chapter 1 5

data that is generated each year.6 Medical records systems can be used to generate critical
health-related information, which in turn can save money and lives.

Alphanumeric data

Image data

Audio data

Video data

Data Represented by

Numbers, letters, and other characters

Graphic images and pictures

Sound, noise, or tones

Moving images or pictures

Table 1.

Types of

Data

Here is another example of the difference between data and information. Consider data
as pieces of railroad track in a model railroad kit. Each piece of track has limited inherent
value as a single object. However, if you define a relationship among the pieces of the track,
they gain value. By arranging the pieces in a certain way, a railroad layout begins to emerge
(see Figure 1.1a). Data and information work the same way. Rules and relationships can be
set up to organize data into useful, valuable information.

(a)

(b)

Figure 1.1

Defining and Organizing
Relationships Among Data
Creates Information

The type of information created depends on the relationships defined among existing
data. For example, you could rearrange the pieces of track to form different layouts. Adding
new or different data means you can redefine relationships and create new information. For
instance, adding new pieces to the track can greatly increase the value—in this case, variety
and fun—of the final product. You can now create a more elaborate railroad layout
(see Figure 1.1b). Likewise, a sales manager could add specific product data to sales data to
create monthly sales information organized by product line. The manager could use this
information to determine which product lines are the most popular and profitable.

Turning data into information is a process, or a set of logically related tasks performed
to achieve a defined outcome. The process of defining relationships among data to create
useful information requires knowledge. Knowledge is the awareness and understanding of a
set of information and the ways that information can be made useful to support a specific
task or reach a decision. Having knowledge means understanding relationships in informa-
tion. Part of the knowledge you need to build a railroad layout, for instance, is the
understanding of how much space you have for the layout, how many trains will run on the
track, and how fast they will travel. Selecting or rejecting facts according to their relevancy
to particular tasks is based on the knowledge used in the process of converting data into
information. Therefore, you can also think of information as data made more useful through
the application of knowledge. Knowledge workers (KWs) are people who create, use, and
disseminate knowledge and are usually professionals in science, engineering, business, and
other areas.7 A knowledge management system (KMS) is an organized collection of people,
procedures, software, databases, and devices used to create, store, and use the organization’s
knowledge and experience.8 Research has shown that the success of a KMS is linked to how
easy it is to use and how satisfied users are with it.9

process

A set of logically related tasks
performed to achieve a defined
outcome.

knowledge

The awareness and understanding
of a set of information and ways that
information can be made useful to
support a specific task or reach a
decision.

6 Part 1 | Overview

In some cases, people organize or process data mentally or manually. In other cases, they
use a computer. Where the data comes from or how it is processed is less important than
whether the data is transformed into results that are useful and valuable. This transformation
process is shown in Figure 1.2.

Data

The transformation process

(applying knowledge by

selecting, organizing, and

manipulating data)

Information

Figure 1.2

The Process of Transforming
Data into Information

The Characteristics of Valuable Information
To be valuable to managers and decision makers, information should have the characteristics
described in Table 1.2. These characteristics make the information more valuable to an or-
ganization. Many shipping companies, for example, can determine the exact location of
inventory items and packages in their systems, and this information makes them responsive
to their customers. In contrast, if an organization’s information is not accurate or complete,
people can make poor decisions, costing thousands or even millions of dollars. If an inaccu

rate

forecast of future demand indicates that sales will be very high when the opposite is true, an
organization can invest millions of dollars in a new plant that is not needed. Furthermore, if
information is not relevant, not delivered to decision makers in a timely fashion, or too
complex to understand, it can be of little value to the organization.

Accurate Accurate information is error free. In some cases, inaccurate information is generated because
inaccurate data is fed into the transformation process. (This is commonly called garbage in,
garbage out [GIGO].)

Secure

Simple

Accessible

Information should be simple, not overly complex. Sophisticated and detailed information might not
be needed. In fact, too much information can cause information overload, whereby a decision maker
has too much information and is unable to determine what is really important.

Information should be easily accessible by authorized users so they can obtain it in the right format
and at the right time to meet their needs.

Reliable Reliable information can be trusted by users. In many cases, the reliability of the information depends
on the reliability of the data-collection method. In other instances, reliability depends on the source
of the information. A rumor from an unknown source that oil prices might go up might not be reliable.

Information should be secure from access by unauthorized users.

Relevant Relevant information is important to the decision maker. Information showing that lumber prices
might drop might not be relevant to a computer chip manufacturer.

Complete Complete information contains all the important facts. For example, an investment report that does
not include all important costs is not complete.

Economical

Flexible

Information should also be relatively economical to produce. Decision makers must always balance
the value of information with the cost of producing it.

Flexible information can be used for a variety of purposes. For example, information on how much
inventory is on hand for a particular part can be used by a sales representative in closing a sale,
by a production manager to determine whether more inventory is needed, and by a financial
executive to determine the total value the company has invested in inventory.

Verifiable

Timely

Information should be verifiable. This means that you can check it to make sure it is correct, perhaps
by checking many sources for the same information.

Timely information is delivered when it is needed. Knowing last week’s weather conditions will not
help when trying to decide what coat to wear today.

Characteristics Definitions

Table 1.2

Characteristics of Valuable
Information

An Introduction to Information Systems | Chapter 1 7

Depending on the type of data you need, some of these attributes are more important
than others. For example, with market-intelligence data, some inaccuracy and incompleteness
is acceptable, but timeliness is essential. Getco, a Chicago-based stock-trading company,
requires the most timely market information possible so it can place profitable trades.10 Getco
uses an approach called high-frequency trading that requires powerful and very fast computers
to make its trades. On some days, Getco can account for 10 to 20 percent of the total trading
volume for some stocks. Likewise, some healthcare organizations have developed a real-time
system for their intensive care units (ICUs) that can detect and prevent deadly infections,
saving lives every year and millions of dollars in additional healthcare costs. Similarly, market
intelligence might alert you that competitors are about to make a major price cut. The exact
details and timing of the price cut might not be as important as being warned far enough in
advance to plan how to react. On the other hand, accuracy, verifiability, and completeness
are critical for data used in accounting to manage company assets such as cash, inventory,
and equipment.

The Value of Information
The value of information is directly linked to how it helps decision makers achieve their
organization’s goals. Valuable information can help people in their organizations perform
tasks more efficiently and effectively. Consider a market forecast that predicts a high demand
for a new product. If you use this information to develop the new product and your company
makes an additional profit of $10,000, the value of this information to the company is
$10,000 minus the cost of the information. Valuable information can also help managers
decide whether to invest in additional information systems and technology. A new comput-
erized ordering system might cost $30,000 but generate an additional $50,000 in sales. The
value added by the new system is the additional revenue from the increased sales of $20,000.
Most corporations have cost reduction as a primary goal. Using information systems, some
manufacturing companies have slashed inventory costs by millions of dollars. Other com-
panies have increased inventory levels to increase profits. Walmart, for example, uses
information about certain regions of the country and specific situations to increase needed
inventory levels of certain products and improve overall profitability. In other cases, the value
of information can be realized in cost savings. Shermag, a Canadian furniture manufacturing
company, was able to use a sophisticated computer system to achieve the company’s cost
reduction goal.11 The company was able to reduce total costs by more than 20 percent by
using optimization software to reduce material and manufacturing costs.

SYSTEM CONCEPTS

Like information, another central concept of this book is that of a system. A system is a set
of elements or components that interact to accomplish goals. The elements themselves and
the relationships among them determine how the system works. Systems have inputs, pro-
cessing mechanisms, outputs, and feedback (see Figure 1.3). For example, consider an
automatic car wash. Tangible inputs for the process are a dirty car, water, and various cleaning
ingredients. Time, energy, skill, and knowledge also serve as inputs to the system because
they are needed to operate it. Skill is the ability to successfully operate the liquid sprayer,
foaming brush, and air dryer devices. Knowledge is used to define the steps in the car wash
operation and the order in which the steps are executed.

The processing mechanisms consist of first selecting which cleaning option you want (wash
only, wash with wax, wash with wax and hand dry, etc.) and communicating that to the
operator of the car wash. A feedback mechanism is your assessment of how clean the car is.
Liquid sprayers shoot clear water, liquid soap, or car wax depending on where your car is in
the process and which options you selected. The output is a clean car. As in all systems,
independent elements or components (the liquid sprayer, foaming brush, and air dryer) in-
teract to create a clean car.

system

A set of elements or components
that interact to accomplish goals.

8 Part 1 | Overview

Input Processing Output

Feedback

System Performance and Standards
System performance can be measured in various ways. Efficiency is a measure of what is
produced divided by what is consumed. It can range from 0 to 100 percent. For example,
the efficiency of a motor is the energy produced (in terms of work done) divided by the energy
consumed (in terms of electricity or fuel). Some motors have an efficiency of 50 percent or
less because of the energy lost to friction and heat generation.

Efficiency is a relative term used to compare systems. For example, a hybrid gasoline
engine for an automobile or truck can be more efficient than a traditional gasoline engine
because, for the equivalent amount of fuel consumed, the hybrid engine travels more miles
and gets better gas mileage. Many organizations can reduce their energy usage by investing
in more energy-efficient computer systems.12

Effectiveness is a measure of the extent to which a system achieves its goals. It can be
computed by dividing the goals actually achieved by the total of the stated goals. For example,
a company might want to achieve a net profit of $100 million for the year using a new
information system. Actual profits, however, might only be $85 million for the year. In this
case, the effectiveness is 85 percent (85/100 = 85%). Of course, companies measure effec-
tiveness using different measures. According to the chief information officer (CIO) of Wipro,
a large consulting and outsourcing company, “An important metric for us is when our
people … deliver an improved bottom line. When there’s a reduction in people traveling for
collaborating on projects, that’s an important measure of effectiveness.”13

Evaluating system performance also calls for using performance standards. A system
performance standard is a specific objective of the system. For example, a system performance
standard for a marketing campaign might be to have each sales representative sell $100,000
of a certain type of product each year (see Figure 1.4a). A system performance standard for
a manufacturing process might be to provide no more than 1 percent defective parts (see
Figure 1.4b). After standards are established, system performance is measured and compared
with the standard. Variances from the standard are determinants of system performance.

Figure 1.3

Components of a System

A system’s four components consist
of input, processing, output, and
feedback.

efficiency

A measure of what is produced
divided by what is consumed.

effectiveness

A measure of the extent to which a
system achieves its goals; it can be
computed by dividing the goals
actually achieved by the total of the
stated goals.

system performance standard

A specific objective of the system.

An Introduction to Information Systems | Chapter 1 9

$150,000

125,000

100,000

75,000

50,000

25,000

Good

Standard=$100,000

BadSales

Salesperson

Adams Brown Davis Thomas

Defective

parts (%)

1
2
3

Production day

1 2 3 4 5 6 7 8 9 10 11 12 13

Bad

Standard=1%

Good
(a)
(b)

WHAT IS AN INFORMATION SYSTEM?

As mentioned previously, an information system (IS) is a set of interrelated elements or
components that collect (input), manipulate (process), store, and disseminate (output) data
and information and provide a corrective reaction (feedback mechanism) to meet an objective
(see Figure 1.5). The feedback mechanism is the component that helps organizations achieve
their goals, such as increasing profits or improving customer service.

Figure 1.4

System Performance
Standards

10 Part 1 | Overview

Input Processing Output

Feedback Figure 1.5

The Components of an
Information System

Feedback is critical to the
successful operation of a system.

Input, Processing, Output, Feedback

Input
In information systems, input is the activity of gathering and capturing raw data. In pro-
ducing paychecks, for example, the number of hours every employee works must be collected
before paychecks can be calculated or printed. In a university grading system, instructors
must submit student grades before a summary of grades can be compiled and sent to students.

Processing
In information systems, processing means converting or transforming data into useful out-
puts. Processing can involve making calculations, comparing data and taking alternative
actions, and storing data for future use. Processing data into useful information is critical in
business settings.

Processing can be done manually or with computer assistance. In a payroll application,
the number of hours each employee worked must be converted into net, or take-home, pay.
Other inputs often include employee ID number and department. The processing can first
involve multiplying the number of hours worked by the employee’s hourly pay rate to get
gross pay. If weekly hours worked exceed 40, overtime pay might also be included. Then
deductions—for example, federal and state taxes or contributions to insurance or savings
plans—are subtracted from gross pay to get net pay.

After these calculations and comparisons are performed, the results are typically stored.
Storage involves keeping data and information available for future use, including output,
discussed next.

Output
In information systems, output involves producing useful information, usually in the form
of documents and reports. Outputs can include paychecks for employees, reports for man-
agers, and information supplied to stockholders, banks, government agencies, and other
groups. In some cases, output from one system can become input for another. For example,
output from a system that processes sales orders can be used as input to a customer billing
system.

Feedback
In information systems, feedback is information from the system that is used to make changes
to input or processing activities. For example, errors or problems might make it necessary to
correct input data or change a process. Consider a payroll example. Perhaps the number of
hours an employee worked was entered as 400 instead of 40. Fortunately, most information
systems check to make sure that data falls within certain ranges. For number of hours worked,
the range might be from 0 to 100 because it is unlikely that an employee would work more
than 100 hours in a week. The information system would determine that 400 hours is out
of range and provide feedback. The feedback is used to check and correct the input on the
number of hours worked to 40. If undetected, this error would result in a very high net pay!

Feedback is also important for managers and decision makers. For example, a furniture
maker could use a computerized feedback system to link its suppliers and plants. The

output

from an information system might indicate that inventory levels for mahogany and oak are
getting low—a potential problem. A manager could use this feedback to decide to order more
wood. These new inventory orders then become input to the system. In addition to this
reactive approach, a computer system can also be proactive—predicting future events to avoid

input

The activity of gathering and
capturing raw data.

processing

Converting or transforming data
into useful outputs.

output

Production of useful information,
usually in the form of documents
and reports.

feedback

Output that is used to make changes
to input

or processing activities.

An Introduction to Information Systems | Chapter 1 11

problems. This concept, often called forecasting, can be used to estimate future sales and
order more inventory before a shortage occurs. According to the CIO of Coty Fragrance,
which produces Jennifer Lopez and Vera Wang brands, “If we can’t meet demand, it annoys
the retailers, the consumers lose interest, and we lose sales.”14 Forecasting is also used to
predict the strength and landfall sites of hurricanes, future stock market values, and who will
win a political election. Disappointed with existing weather forecasting systems, Robert
Baron developed a more sophisticated forecasting approach that used radar data along with
other meteorological data to forecast storms and weather. Today, his weather

forecasting

software generates about $25 million in annual revenues. 15

Information systems are
everywhere. An air traveler checks
in for a flight using a kiosk, which
sends the check-in information to a
network to verify the traveler’s
reservation and flight information.
The kiosk’s system processes the
information and prints a boarding
pass, speeding airport check-in
times.
(Source: © Tim Boyle/Getty Images)

Manual and Computerized Information Systems
As discussed earlier, an information system can be manual or computerized. For example,
some investment analysts manually draw charts and trend lines to assist them in making
investment decisions. Tracking data on stock prices (input) over the last few months or years,
these analysts develop patterns on graph paper (processing) that help them determine what
stock prices are likely to do in the next few days or weeks (output). Some investors have made
millions of dollars using manual stock analysis information systems. Of course, today many
excellent computerized information systems follow stock indexes and markets and suggest
when large blocks of stocks should be purchased or sold (called “program trading”) to take
advantage of market discrepancies.

Computer-Based Information Systems
A computer-based information system (CBIS) is a single set of hardware, software, databases,
telecommunications, people, and procedures that are configured to collect, manipulate, store,
and process data into information. Lloyd’s Insurance in London used a CBIS to reduce paper
transactions and convert to an electronic insurance system. The CBIS allows Lloyd’s to insure
people and property more efficiently and effectively. Lloyd’s often insures the unusual, in-
cluding actress Betty Grable’s legs, Rolling Stone Keith Richards’s hands, and a possible
appearance of the Lock Ness Monster (Nessie) in Scotland, which would result in a large
payment for the person first seeing the monster.

The components of a CBIS are illustrated in Figure 1.6. “Information technology (IT)”
refers to hardware, software, databases, and telecommunications. Telecommunications also
includes networks and the Internet. A business’s technology infrastructure includes all the
hardware, software, databases, telecommunications, people, and procedures that are config-
ured to collect, manipulate, store, and process data into information. The technology
infrastructure is a set of shared IS resources that form the foundation of each computer-based
information system.

forecasting

Predicting future events to avoid
problems.

computer-based information

system (CBIS)

A single set of hardware, software,
databases, telecommunications,
people, and procedures that are
configured to collect, manipulate,
store, and process data into
information.

technology infrastructure

All the hardware, software,
databases, telecommunications,
people, and procedures that are
configured to collect, manipulate,
store, and process data into
information.

12 Part 1 | Overview

Hardware

Hardware consists of the physical components of a computer that perform the input, pro-
cessing, storage, and output activities of the computer. Input devices include keyboards, mice,
and other pointing devices; automatic scanning devices; and equipment that can read mag-
netic ink characters. Processing devices include computer chips that contain the central
processing unit and main memory. Advances in chip design allow faster speeds, less power
consumption, and larger storage capacity. New, specialized computer chips will be able to
monitor power consumption for companies and homeowners.16 SanDisk and other compa-
nies make small, portable chips that are used to conveniently store programs, data files, and
more.17 The publisher of this book, for example, used this type of chip storage device to send
promotional material for this book to professors and instructors.

Processor speed is also important. Today’s more advanced processor chips have the same
power as 1990s-era supercomputers that occupied a room measuring 10 feet by 40 feet.
Today, a large IBM computer used by U.S. Livermore National Laboratories to analyze
nuclear explosions is one of the fastest computers in the world at up to 300 teraflops—300
trillion operations per second.18 The super-fast computer, called Blue Gene, costs about $40
million.19 It received the National Medal of Technology and Innovation award from President
Barack Obama. Small, inexpensive computers and handheld devices are also becoming pop-
ular. Inexpensive netbooks are small, inexpensive laptop computers that can cost less than
$500 and be used primarily to connect to the Internet.20 In addition, the iPhone by Apple
Computer can perform many functions that can be done on a desktop or laptop com-
puter.21 The One Laptop Per Child computer costs less than $200.22 The Classmate PC by
Intel will cost about $300 and include some educational software. Both computers are in-
tended for regions of the world that can’t afford traditional personal computers. The country
of Peru, for example, has purchased about 350,000 laptops loaded with about 100 books for
children, who also teach their parents how to use the inexpensive computers.23 According to
the founder of One Laptop Per Child, “If that doesn’t give you goose bumps, I don’t know
what will.”

The many types of output devices include printers and computer screens. Some touch-
sensitive computer screens, for example, can be used to execute functions or complete
programs, such as connecting to the Internet or running a new computer game or word-
processing program.24 Many special-purpose hardware devices have also been developed.
Computerized event data recorders (EDRs) are now being placed into vehicles. Like an air-
plane’s black box, EDRs record vehicle speed, possible engine problems, driver performance,
and more. The technology is being used to document and monitor vehicle operation, deter-
mine the cause of accidents, and investigate whether truck drivers are taking required breaks.
In one case, an EDR was used to help convict a driver of vehicular homicide. In another case,

hardware

The physical components of a
computer that perform the input,
processing, storage, and output
activities of the computer.

People

Telecommunications

Hardware

Software

Databases

Procedures

Figure 1.6

The Components of a
Computer-Based Information
System.

An Introduction to Information Systems | Chapter 1 13

an EDR in a police officer’s car showed that the officer may have run a stop light and accel-
erated to more than 70 miles per hour on a road with a speed limit of 35 miles per hour,
which may have caused an accident that killed two teenagers.25

The One Laptop Per Child computer
costs less than $200, and is
designed for regions of the world
that can’t afford traditional personal
computers.

(Source: Courtesy of AFP/Getty
Images.)

Software
Software consists of the computer programs that govern the operation of the computer. These
programs allow a computer to process payroll, send bills to customers, and provide managers
with information to increase profits, reduce costs, and provide better customer service. Fab
Lab software, for example, controls tools such as cutters, milling machines, and other
devices.26 One Fab Lab system, which costs about $20,000, has been used to make radio
frequency tags to track animals in Norway, engine parts to allow tractors to run on processed
castor beans in India, and many other fabrication applications. SalesForce
(www.salesforce.com) sells software to help companies manage their salesforce and help im-
prove customer satisfaction.27

The two types of software are system software, such as Microsoft Windows Vista and
Windows 7, which controls basic computer operations, including start-up and printing, and
applications software, such as Microsoft Office 2010, which allows you to accomplish specific
tasks, including word processing or tabulating numbers.28 Software is needed for computers
of all sizes, from small handheld computers to large supercomputers. The Android operating
system by Google and Microsoft’s Mobile 6.5, for example, are operating systems for cell
phones and small portable devices.29 Although most software can be installed from CDs,
many of today’s software packages can be downloaded through the Internet.

Sophisticated application software, such as Adobe Creative Suite 4, can be used to design,
develop, print, and place professional-quality advertising, brochures, posters, prints, and
videos on the Internet.30 Nvidia’s GeForce 3D is software that can display images on a com-
puter screen that appear three-dimensional (3D) when viewed using special glasses.

Windows 7 is systems software that
controls basic computer operations,
including start-up and printing.

(Source: Courtesy of Microsoft
Corporation.)

software

The computer programs that govern
the operation of the computer.

14 Part 1 | Overview

Databases
A database is an organized collection of facts and information, typically consisting of two or
more related data files. An organization’s database can contain facts and information on
customers, employees, inventory, competitors’ sales, online purchases, and much more. A
database manager for a large bank, for example, has developed a patented security process
that generates a random numeric code from a customer’s bank card that can be verified by
a computer system through a customer database.32 Once the bank card and customer have
been verified, the customer can make financial transactions.

Most managers and executives consider a database to be one of the most valuable parts
of a computer-based information system. Data can be stored in large data centers, within
computers of all sizes, on the Internet, and in smart cell phones and small computing
devices.33 The New York Stock Exchange (NYSE) and other exchanges are using

database

systems to get better business information and intelligence to help them run successful and
profitable operations.34 The huge increase in database storage requirements, however, often
requires more storage devices, more space to house the additional storage devices, and addi-
tional electricity to operate them.35 Most organizations using database systems have seen
storage requirements increase more than 10 percent every year. An important issue for any
organization is how to keep a vast database secure and safe from the prying eyes of outside
individuals and groups.36

Telecommunications, Networks, and the

Internet

Telecommunications is the electronic transmission of signals for communications, which
enables organizations to carry out their processes and tasks through effective computer net-
works. Telecommunications can take place through wired, wireless, and satellite transmis-
sions.37 The Associated Press was one of the first users of telecommunications in the 1920s,
sending news over 103,000 miles of wire in the United States and over almost 10,000 miles
of cable across the ocean. Today, telecommunications is used by organizations of all sizes and
individuals around the world. With telecommunications, people can work at home or while
traveling. This approach to work, often called “telecommuting,” allows someone living in
England to send work to the United States, China, or any location with

telecommunications

capabilities.

Networks connect computers and equipment in a building, around the country, or
around the world to enable electronic communication. Wireless transmission allows aircraft
drones, such as Boeing’s Scan Eagle, to fly using a remote control system to monitor com-
mercial buildings or enemy positions.38 The drones are smaller and less-expensive versions
of the Predator and Global Hawk drones that the U.S. military used in the Afghanistan and
Iraq conflicts. According to a Navy Rear Admiral, “There are all sorts of levels of stealthiness.
Operators have been deploying it in an undetectable fashion; at a certain low altitude, you
can’t hear it or see it.”

The Internet is the world’s largest computer network, consisting of thousands of inter-
connected networks, all freely exchanging information. Research firms, colleges, universities,
high schools, hospitals, and businesses are just a few examples of organizations using the
Internet. Beth Israel Deaconess Medical Center, for example, allows doctors to use its Internet
site to provide better patient care and reduce costs.39 The doctors pay a monthly service fee
to use the hospital’s Internet site. Increasingly, businesses and people are using the Internet
to run and deliver important applications, such as accessing vast databases, performing so-
phisticated business analyses, and getting a variety of reports. This concept, called cloud
computing, allows people to get the information they need from the Internet (the cloud)
instead of from desktop or corporate computers.40 According to the CIO of Avon Products,
“Today, wherever you are, you can connect to all the information you need.” Some appli-
cations are available to everyone (public cloud computing), while other applications are only
available to corporate employees and managers (private cloud computing).41

database

An organized collection of facts and
information.

telecommunications

The electronic transmission of
signals for communications;
enables organizations to carry out
their processes and tasks through
effective computer networks.

networks

Computers and equipment that are
connected in a building, around the
country, or around the world to
enable electronic communications.

Internet

The world’s largest computer
network, consisting of thousands of
interconnected networks, all freely
exchanging information.

An Introduction to Information Systems | Chapter 1 15

Doctors use cloud computing and
other types of Web sites to provide
better patient care and reduce
costs.

(Source: © B Busco/Getty Images.)

People use the Internet to research information, buy and sell products and services, make
travel arrangements, conduct banking, download music and videos, read books, and listen
to radio programs, among other activities.42 Even some airline companies are offering Internet
access on their flights.43 Bank of America allows people to check their bank balances and pay
their bills on the Internet using Apple’s iPhone and other handheld devices.44 Internet sites
like MySpace (www.myspace.com) and Facebook (www.facebook.com) have become popular
places to connect with friends and colleagues. People can also send short messages of up to
140 characters using Twitter (www.twitter.com) over the Internet.45 Some people, however,
fear that this increased usage can lead to problems, including criminals hacking into the
Internet and gaining access to sensitive personal information.

Large computers, personal computers, and today’s cell phones, such as Apple’s iPhone,
can access the Internet.46 This not only speeds communications, but also allows people to
conduct business electronically. Internet users can create Web logs (“blogs”) to store and
share their thoughts and ideas with others around the world. Using podcasting, you can
download audio programs or music from the Internet to play on computers or music players.
One of the authors of this book uses podcasts to obtain information on information

systems

and technology.

The World Wide Web (WWW), or the Web, is a network of links on the Internet to
documents containing text, graphics, video, and sound. Information about the documents
and access to them are controlled and provided by tens of thousands of special computers
called Web servers. The Web is one of many services available over the Internet and provides
access to millions of documents. New Internet technologies and increased Internet commu-
nications and collaboration are collectively called Web 2.0.47

The technology used to create the Internet is also being applied within companies and
organizations to create intranets, which allow people in an organization to exchange infor-
mation and work on projects. ING DIRECT Canada (www.ingdirect.ca/en), for example,
used its intranet to get ideas from its employees. According to one corporate executive, “Many
of the ideas we’ve been able to implement are from front-line staff who talk to our customers
every day and know what they want.”48 Companies often use intranets to connect their
employees around the globe. An extranet is a network based on Web technologies that allows
selected outsiders, such as business partners and customers, to access authorized resources
of a company’s intranet. Many people use extranets every day without realizing it—to
track shipped goods, order products from their suppliers, or access customer assistance
from other companies. Penske Truck Leasing, for example, uses an

extranet

(www.MyFleetAtPenske.com) for Penske leasing companies and its customers.49 The extranet
site allows customers to schedule maintenance, find Penske fuel stops, receive emergency
roadside assistance, participate in driver training programs, and more. If you log on to the
FedEx site (www.fedex.com) to check the status of a package, for example, you are using an
extranet.

intranet

An internal network based on Web
technologies that allows people
within an organization to exchange
information and work on projects.

extranet

A network based on Web
technologies that allows selected
outsiders, such as business
partners and customers, to

access

authorized resources of a
company’s intranet.

16 Part 1 | Overview

When you log on to the FedEx site
(www.fedex.com) to check the
status of a package, you are using an
extranet.

(Source: www.fedex.com.)

People
People are the most important element in most computer-based information systems. They
make the difference between success and failure for most organizations. Information systems
personnel include all the people who manage, run, program, and maintain the system, in-
cluding the CIO, who manages the IS department.50 Users are people who work with
information systems to get results. Users include financial executives, marketing representa-
tives, manufacturing operators, and many others. Certain computer users are also IS
personnel.

The chief information officer (CIO)
manages the Information Systems
department, which includes all the
people who manage, run, program,
and maintain a computer-based
information system.

(Source: © Ryan McVay/Getty
Images.)

Procedures
Procedures include the strategies, policies, methods, and rules for using the CBIS, including
the operation, maintenance, and security of the computer. For example, some

procedures

describe when each program should be run. Others describe who can access facts in the
database or what to do if a disaster, such as a fire, earthquake, or hurricane, renders the CBIS
unusable. Good procedures can help companies take advantage of new opportunities and
avoid potential disasters. Poorly developed and inadequately implemented procedures, how-
ever, can cause people to waste their time on useless rules or result in inadequate responses
to disasters, such as hurricanes or tornadoes.

Now that we have looked at computer-based information systems in general, we will
briefly examine the most common types used in business today. These IS types are covered
in greater detail in Part 3.

procedures

The strategies, policies, methods,
and rules for using a CBIS.

An Introduction to Information Systems | Chapter 1 17

BUSINESS INFORMATION SYSTEMS

The most common types of information systems used in business organizations are those
designed for electronic and mobile commerce, transaction processing, management infor-
mation, and decision support. In addition, some organizations employ

special-purpose

systems, such as virtual reality, that not every organization uses. Although these systems are
discussed in separate sections in this chapter and explained in greater detail later, they are
often integrated in one product and delivered by the same software package. See Figure 1.7.
For example, some business information systems process transactions, deliver information,
and support decisions. Figure 1.8 shows a simple overview of the development of important
business information systems discussed in this section.

Knowledge

management

and
special-purpose
business information
systems

Management information

and

decision support systems

Enterprise systems

E- and M-commerce

Figure 1.7

Business

information systems

Business information systems are
often integrated in one product and
can be delivered by the same
software package.

TPS

1950s 1960s 1970s 1980s 1990s 2000 and beyond

MIS DSS

Specialized business

information systems

and electronic and

mobile commerce

Figure 1.8

The Development of Important
Business Information Systems

18 Part 1 | Overview

INFORMATION
SYSTEMS @ WORK

Hilton Hospitality in the Palm of Your Hand

With the economy faltering and fewer people traveling, businesses

in the travel industry are struggling to stay afloat. Competition to

win travelers is intense, and companies are turning to information

systems to gain a competitive advantage. Hilton Worldwide, parent

of Hilton hotels, Embassy Suites, and Doubletree hotels, has

recognized a golden opportunity in iPhone apps.

While fewer people are traveling worldwide, people who do

travel rely on their smartphones for information and services. Of

the more than 100,000 applications, or apps, available for the

iPhone, 5 percent are related to travel, making travel apps the fifth

largest category in the iPhone Apps store. Hilton Worldwide

recognized that travelers often need to book a room at the last

minute. Hilton developed a system that uses an iPhone mobile

commerce or m-commerce app to connect to its reservation

system, where users can book rooms.

When you use the Hilton Worldwide iPhone app, it accesses

the GPS in the iPhone to automatically find Hilton hotels near your

current location. Select a specific Hilton hotel from the list

provided to access its reservation system. Fill out the form

including your choice of bed type, pillow type, and other personal

preferences, and provide your credit card number to complete the

transaction. Not only can you make reservations, but you can also

use it to check in within 48 hours in advance of arrival. You can

even use the app to order room service so that dinner is waiting in

your room upon arrival.

While Hilton chose the iPhone platform for its m-commerce

investment, other hotel companies are focusing on other

platforms such as the Blackberry, Palm, and Android.

Intercontinental, which owns Holiday Inn Express and others, and

Marriott International are both investing in making their Web sites

accessible from all mobile Web browsers. Once that is completed,

they may move onto develop their own iPhone apps. Marriott’s

Web site is visited by 500,000 mobile users each month.

One of the most popular iPhone travel apps is the Negotiator

from Priceline.com. This app incorporates Priceline’s well-known

marketing campaign featuring William Shatner in a fun interface

that negotiates the best deal on a nearby hotel room. The app is

especially useful for travelers needing a room at a moment’s

notice. It takes advantage of a hotel’s willingness to drop prices to

fill rooms that would otherwise remain vacant.

Many businesses inside and outside the travel industry are

increasing revenues by expanding their presence to mobile

devices. Providing m-commerce applications to customers

anywhere anytime through mobile devices increases customer

satisfaction and loyalty with better service and availability. Deciding

which mobile platform to pursue can be difficult, since platforms

and software are not always compatible. However, companies

such as Apple, RIM, Google, and Palm are eager to have software

developers choose their platforms and are providing development

tools that minimize the barriers to entry.

Discussion Questions

1. Would you find an app such as Hilton’s or Priceline’s

useful?

Why or why not?

2. How does Hilton’s iPhone app allow it to gain a competitive

advantage over others in the industry?

Critical Thinking Questions

1. Are you comfortable carrying out financial transactions over a

smartphone? If not, what are your concerns? If so, why do you

feel it is safe?

2. Should businesses be moving their IS investment from

e-commerce (computers) to m-commerce (smartphones)?

Will m-commerce eventually make e-commerce obsolete?

Why or why not?

SOURCES: DeLollis, Barbara, “Hilton Hotel Guests Get Handy New Apps,” Top
Tech News Web site, November 10, 2009, www.toptechnews.com/news/
Hilton-Guests-Get-Handy-New-Apps/story.xhtml?story_id=023002AKGXRN;
iTunes Store, accessed November 12, 2009, through iTunes software; O’Neill,
Sean, “iPhone: Priceline’s new app is best for last-minute hotel bids,”
Newsweek, Budget Travel Web page, October 28, 2009, http://
current.newsweek.com/budgettravel/2009/10/
iphone_pricelines_new_app_make.html.

Electronic and Mobile Commerce
E-commerce involves any business transaction executed electronically between companies
(business-to-business, or B2B), companies and consumers (business-to-consumer, or B2C),
consumers and other consumers (consumer-to-consumer, or C2C), business and the public
sector, and consumers and the public sector.51 Some of the stimulus funds in 2009, for
example, were aimed at increasing electronic record keeping and electronic commerce for
healthcare facilities.52 E-commerce offers opportunities for businesses of all sizes to market
and sell at a low cost worldwide, allowing them to enter the global market. Mobile
commerce (m-commerce) is the use of mobile, wireless devices to place orders and conduct
business. M-commerce relies on wireless communications that managers and corporations
use to place orders and conduct business with handheld computers, portable phones, laptop
computers connected to a network, and other mobile devices. Today, mobile commerce has
exploded in popularity with advances in smartphones, including Apple’s iPhone.53 Cus-
tomers are using their cell phones to purchase concert tickets from companies such as
Ticketmaster Entertainment (www.ticketmaster.com) and Tickets (www.tickets.com).54 In
South Korea, cell phones are used 70 percent of the time to pay for digital content, such as
digital music.

E-commerce offers many advantages for streamlining work activities. Figure 1.9 provides
a brief example of how e-commerce can simplify the process of purchasing new office fur-
niture from an office supply company. In the manual system, a corporate office worker must

get approval for a purchase that exceeds a
certain amount. That request goes to the
purchasing department, which generates
a formal purchase order to procure the
goods from the approved vendor. Busi-
ness-to-business e-commerce automates
the entire process. Employees go directly
to the supplier’s Web site, find the item
in a catalog, and order what they need at
a price set by their company. If manage-
ment approval is required, the manager is
notified automatically. As the use of e-
commerce systems grows, companies are
phasing out their traditional systems. The
resulting growth of e-commerce is creat-
ing many new business opportunities.
E-commerce can enhance a company’s
stock prices and market value. Today, sev-
eral e-commerce firms have teamed up
with more traditional brick-and-mortar
businesses to draw from each other’s
strengths. For example, e-commerce cus-

tomers can order products on a Web site and pick them up at a nearby store.
In addition to e-commerce, business information systems use telecommunications and

the Internet to perform many related tasks. Electronic procurement (e-procurement), for
example, involves using information systems and the Internet to acquire parts and supplies.
Electronic business (e-business) goes beyond e-commerce and e-procurement by using in-
formation systems and the Internet to perform all business-related tasks and functions, such
as accounting, finance, marketing, manufacturing, and human resource activities. E-business
also includes working with customers, suppliers, strategic partners, and stakeholders. Com-
pared to traditional business strategy, e-business strategy is flexible and adaptable. See
Figure 1.10.

e-commerce

Any business transaction executed
electronically between companies
(business-to-business, or B2B),
companies and consumers
(business-to-consumer, or B2C),
consumers and other consumers
(consumer-to-consumer, or C2C),
business and the public sector, and
consumers and the public sector.

mobile commerce

(m-commerce)

The use of mobile, wireless devices
to place orders and conduct
business.

With mobile commerce
(m-commerce), people can use cell
phones to pay for goods and services
anywhere, anytime.

(Source: Courtesy of Davie Hinshaw/
MCT/Landov.)

electronic business

(e-business)

Using information systems and the
Internet to perform all business-
related tasks and functions.

20 Part 1 | Information Systems in Perspective

Suppliers

E-procurement

Organization

and its partners

Management

E-BUSINESS

Customers

E-commerce

Figure 1.10

Electronic Business

E-business goes beyond e-
commerce to include using
information systems and the
Internet to perform all business-
related tasks and functions, such as
accounting, finance, marketing,
manufacturing, and human
resources activities.

Enterprise Systems: Transaction Processing Systems and
Enterprise Resource Planning
Enterprise systems that process daily transactions have evolved over the years and offer
important solutions for businesses of all sizes. Traditional transaction processing systems are
still being used, but increasingly, companies are turning to

enterprise resource planning

systems. These systems are discussed next.

Transaction Processing Systems
Since the 1950s, computers have been used to perform common business applications. Many
of these early systems were designed to reduce costs by automating routine, labor-intensive
business transactions. A transaction is any business-related exchange such as payments to
employees, sales to customers, or payments to suppliers. Processing business transactions was
the first computer application developed for most organizations. A transaction processing
system (TPS) is an organized collection of people, procedures, software, databases, and de-
vices used to perform and record business transactions. If you understand a

transaction

processing system, you understand basic business operations and functions.

transaction

Any business-related exchange,
such as payments to employees,
sales to customers, and payments
to suppliers.

transaction processing system

(TPS)

An organized collection of people,
procedures, software, databases,
and devices used to perform and
record business transactions.

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01800

Traditional process for placing a purchase order

Prepare
requisition

Obtain
approval of
requisition

Requisition Purchasing
department

E-commerce process for placing a purchase order

Vendor

Figure 1.9

E-Commerce Greatly Simplifies
Purchasing

An Introduction to Information Systems in Organizations | Chapter 1 21

One of the first business systems to be computerized was the payroll system (see
Figure 1.11). The primary inputs for a payroll TPS are the number of employee hours

worked

during the week and the pay rate. The primary output consists of paychecks. Early payroll
systems produced employee paychecks and related reports required by state and federal agen-
cies, such as the Internal Revenue Service. Other routine applications include sales ordering,
customer billing and customer relationship management, and inventory control.

Hours

worked

Pay

rate

Payroll

transaction
processing
Payroll
checks

Figure 1.11

A Payroll Transaction
Processing System

In a payroll TPS, the inputs
(numbers of employee hours
worked and pay rates) go through a
transformation process to produce
outputs (paychecks).

Enterprise systems help organizations perform and integrate important tasks, such as
paying employees and suppliers, controlling inventory, sending invoices, and ordering sup-
plies. In the past, companies accomplished these tasks using traditional transaction processing
systems. Today, more companies use enterprise resource planning systems for these tasks.

Enterprise Resource Planning
An enterprise resource planning (ERP) system is a set of integrated programs that manages
the vital business operations for an entire multisite, global organization.55 Pick n Pay, a South
African (SA) food retailer, used ERP to reduce costs and the prices paid by customers.
According to the chief executive officer, “We are happy to play our part in ensuring that SA’s
economy continues to perform well, particularly given the pressures being felt globally.”56

An ERP system can replace many applications with one unified set of programs, making
the system easier to use and more effective. Today, using ERP systems and getting timely
reports from them can be done using cell phones and mobile devices.57

Although the scope of an ERP system might vary from company to company, most ERP
systems provide integrated software to support manufacturing and finance. Many ERP sys-
tems also have a purchasing subsystem that orders the needed items. In addition to these core
business processes, some ERP systems can support functions such as customer service, human
resources, sales, and distribution. The primary benefits of implementing an ERP system
include easing adoption of improved work processes and increasing access to timely data for

decision making.

Information and Decision Support Systems
The benefits provided by an effective TPS or ERP, including reduced processing costs and
reductions in needed personnel, are substantial and justify their associated costs in computing
equipment, computer programs, and specialized personnel and supplies. Companies soon
realize that they can use the data stored in these systems to help managers make better
decisions, whether in human resource management, marketing, or administration. Satisfying
the needs of managers and decision makers continues to be a major factor in developing
information systems.

Management Information Systems
A management information system (MIS) is an organized collection of people, procedures,
software, databases, and devices that provides routine information to managers and decision
makers. An MIS focuses on operational efficiency. Manufacturing, marketing, production,
finance, and other functional areas are supported by MISs and are linked through a common
database. MISs typically provide standard reports generated with data and information from
the TPS or ERP (see Figure 1.12). Dell Computer, for example, used manufacturing MIS

enterprise resource planning

(ERP) system

A set of integrated programs
capable of managing a company’s
vital business operations for an
entire multisite, global
organization.

management information

system (MIS)

An organized collection of people,
procedures, software, databases,
and devices that provides routine
information to managers and
decision makers.

22 Part 1 | Information Systems in Perspective

software to develop a variety of reports on its manufacturing processes and costs.58 Dell was
able to double its product variety, while saving about $1 million annually in manufacturing
costs as a result. Today, many hospitals and healthcare facilities are using electronic records
to streamline MIS reports, reduce recordkeeping costs, and save lives by avoiding medical
errors in diagnoses, treatments, and adverse drug interactions.59

SAP AG, a German software
company, is one of the leading
suppliers of ERP software. The
company employs more than 50,000
people in more than 120 countries.

(Source: www.sap.com.)

Marketing

management
information
system

Financial

management
information
system

Other

management
information
systems
management
information
system

Manufacturing

TPS

Common
database

Figure 1.12

Management Information
System

Functional management
information systems draw data from
the organization’s transaction
processing system.

MISs were first developed in the 1960s and typically use information systems to produce
managerial reports. In many cases, these early reports were produced periodically—daily,
weekly, monthly, or yearly. Because of their value to managers, MISs have proliferated
throughout the management ranks.

Decision Support Systems
By the 1980s, dramatic improvements in technology resulted in information systems that
were less expensive but more powerful than earlier systems. People quickly recognized that

An Introduction to Information Systems in Organizations | Chapter 1 23

computer systems could support additional decision-making activities. A decision support
system (DSS) is an organized collection of people, procedures, software, databases, and de-
vices that support problem-specific decision making. The focus of a DSS is on making
effective decisions. Whereas an MIS helps an organization “do things right,” a DSS helps a
manager “do the right thing.”60

Endeca provides Discovery for
Design, decision support software
that helps businesspeople assess
risk and analyze performance. The
data shown here is for electronic
component development.

(Source: Courtesy of Endeca
Technologies, Inc.)

A DSS goes beyond a traditional MIS by providing immediate assistance in solving
problems. Many of these problems are unique and complex, and key information is often
difficult to obtain. For instance, an auto manufacturer might try to determine the best
location to build a new manufacturing facility. Traditional MISs are seldom used to solve
these types of problems; a DSS can help by suggesting alternatives and assisting in final
decision making. A DSS recognizes that different managerial styles and decision types require
different systems. For example, two production managers in the same position trying to solve
the same problem might require different information and support. The overall emphasis is
to support, rather than replace, managerial decision making. The chief executive officer of
Serena, a California software company, gets decision support by using his cell phone to get
rapid feedback on the corporate financial performance of each of his key executives.61 Other
executives might prefer a DSS that provides marketing and sales information on their desktop
computers.

A DSS can include a collection of models used to support a decision maker or user (model
base), a collection of facts and information to assist in decision making (database), and systems
and procedures (user interface or dialogue manager) that help decision makers and other
users interact with the DSS (see Figure 1.13). Software called the database management
system (DBMS) is often used to manage the database, and software called the model man-
agement system (MMS) is used to manage the model base. Not all DSSs have all of these
components.

In addition to DSSs for managers, other systems use the same approach to support groups
and executives. A group support system includes the DSS elements just described as well as
software, called groupware, to help groups make effective decisions. Kraft, for example, uses
iPhones and other mobile devices to help managers and workers stay connected and work
together on important projects.62 An executive support system, also called an executive infor-
mation system, helps top-level managers, including a firm’s president, vice presidents, and

decision support system (DSS)

An organized collection of people,
procedures, software, databases,
and devices used to support
problem-specific decision making.

24 Part 1 | Information Systems in Perspective

members of the board of directors, make better decisions. Healthland and Performance
Management Institute, a healthcare company, has developed an executive information system
to help small community and rural hospital executives make better decisions about delivering
quality health care to patients and increasing the efficient delivery of healthcare services for
hospitals.63 The American Recovery and Reinvestment Act provides funds for qualifying
healthcare companies that invest in better information and decision support systems. An
executive support system can assist with strategic planning, top-level organizing and staffing,
strategic control, and crisis management.

External

database

Database Model base

DBMS MMS

Access to the Internet,

corporate intranets,

extranets, networks,

and other computer

systems
External
database
access

User interface

Dialogue manager

Figure 1.13

Essential DSS Elements

Specialized Business Information Systems: Knowledge
Management, Artificial Intelligence, Expert Systems, and
Virtual Reality
In addition to TPSs, MISs, and DSSs, organizations often rely on specialized systems. Many
use knowledge management systems (KMSs), an organized collection of people, procedures,
software, databases, and devices, to create, store, share, and use the organization’s knowledge
and experience.64 A shipping company, for example, can use a KMS to streamline its trans-
portation and logistics business. Advent, a San Francisco company that develops investment
software for hedge funds, used a KMS to help its employees locate and use critical knowledge
to help its customers.65

In addition to knowledge management, companies use other types of specialized systems.
Experimental systems in cars can help prevent accidents. These new systems allow cars to
communicate with each other using radio chips installed in their trunks. When two or more
cars move too close together, the specialized systems sound alarms and brake in some cases.
Some specialized systems are based on the notion of artificial intelligence (AI), in which the
computer system takes on the characteristics of human intelligence. The field of artificial
intelligence includes several subfields (see Figure 1.14). Some people predict that in the future
we will have nanobots, small molecular-sized robots, traveling throughout our bodies and in
our bloodstream, monitoring our health.66 Other nanobots will be embedded in products
and services.67

artificial intelligence (AI)

A field in which the computer system
takes on the characteristics of
human intelligence.

An Introduction to Information Systems in Organizations | Chapter 1 25

A Nissan Motor Company car
swerves back into its lane on its own
shortly after it ran off the track
during a test of the Lane Departure
Prevention feature, which also
sounds a warning when the car
veers out of its lane.

(Source: © AP Photo/Katsumi
Kasahara.)

Natural language

processing

Neural networks

Expert systems

Vision

systems
Learning

systems

Robotics

Artificial

intelligence

Figure 1.14

The Major Elements of Artificial
Intelligence

Artificial Intelligence
Robotics is an area of artificial intelligence in which machines take over complex, dangerous,
routine, or boring tasks, such

as welding car frames or assembling computer systems and

components. Honda Motor has spent millions of dollars on advanced robotics that allows a
person to give orders to a computer using only his or her thoughts. The new system uses a
special helmet that can measure and transmit brain activity to a computer. 68 A robot used
by a Staples distribution center in the Denver area is able to locate items in a 100,000 square
foot warehouse and pack them into containers to be shipped to other Staples stores.69 Vision
systems allow robots and other devices to “see,” store, and process visual images. Natural
language processing involves computers understanding and acting on verbal or written com-
mands in English, Spanish, or other human languages. Learning systems allow computers to
learn from past mistakes or experiences, such as playing games or making business decisions.
Neural networks is a branch of artificial intelligence that allows computers to recognize and
act on patterns or trends.70 Some successful stock, options, and futures traders use neural
networks to spot trends and improve the profitability of their investments.

26 Part 1 | Information Systems in Perspective

Expert Systems
Expert systems give the computer the ability to make suggestions and function like an expert
in a particular field, helping enhance the performance of the novice user. The unique value
of expert systems is that they allow organizations to capture and use the wisdom of experts
and specialists.71 Therefore, years of experience and specific skills are not completely lost
when a human expert dies, retires, or leaves for another job. The U.S. Army uses the Knowl-
edge and Information Fusion Exchange (KnIFE) expert system to help soldiers in the field
make better military decisions based on successful decisions made in previous military en-
gagements. The collection of data, rules, procedures, and relationships that must be followed
to achieve value or the proper outcome is contained in the expert system’s knowledge base.

Virtual Reality And Multimedia
Virtual reality and multimedia are specialized systems that are valuable for many businesses
and nonprofit organizations. Many imitate or act like real environments. These unique sys-
tems are discussed in this section.

Virtual reality is the simulation of a real or imagined environment that can be experienced
visually in three dimensions.72 One healthcare company, for example, is experimenting with
a virtual reality game designed to help treat cancer in young adults and children. Developed
by HopeLab (www.hopelab.org), the virtual reality game called Re-Mission shows young
adults and children how to combat cancer.

Originally, virtual reality referred to immersive virtual reality, which means the user be-
comes fully immersed in an artificial, computer-generated 3D world. The virtual world is
presented in full scale and relates properly to the human size. Virtual reality can also refer to
applications that are not fully immersive, such as mouse-controlled navigation through a 3D
environment on a graphics monitor, stereo viewing from the monitor via stereo glasses, stereo
projection systems, and others. Boeing, for example, used virtual reality and computer sim-
ulation to help design and build its Dreamliner 787.73 The company used 3D models from
Dassault Systems to design and manufacture the new aircraft. Retail stores are using virtual
reality to help advertise high-end products on the Internet.

A variety of input devices, such as head-mounted displays (see Figure 1.15), data gloves,
joysticks, and handheld wands, allow the user to navigate through a virtual environment and
to interact with virtual objects. Directional sound, tactile and force feedback devices, voice
recognition, and other technologies enrich the immersive experience. Because several people
can share and interact in the same environment, virtual reality can be a powerful medium
for communication, entertainment, and learning.

Multimedia is a natural extension of virtual reality. It can include photos and images, the
manipulation of sound, and special 3D effects. Once used primarily in movies, 3D technol-
ogy can be used by companies to design products, such as motorcycles, jet engines, bridges,
and more.74 Autodesk, for example, makes exciting 3D software that companies can use to
design large skyscrapers and other buildings.75 The software can also be used by Hollywood
animators to develop action and animated movies.

expert system

A system that gives a computer the
ability to make suggestions and
function like an expert in a
particular field.

knowledge base

The collection of data, rules,
procedures, and relationships that
must be followed to achieve value or
the proper outcome.

virtual reality

The simulation of a real or imagined
environment that can be
experienced visually in three
dimensions.

Honda Motor is developing an
advanced robotics system that
allows a person to give orders to a
computer using only his or her
thoughts.

(Source: © Associated Press.)

An Introduction to Information Systems in Organizations | Chapter 1 27

It is difficult to predict where information systems and technology will be in 10 to 20
years. It seems, however, that we are just beginning to discover the full range of their use-
fulness. Some forensics experts are now experimenting with computer software that can draw
images of crime suspects based only on their DNA collected at the crime scene.76 Some
lawmakers, however, are concerned about privacy invasion and the use of DNA to target or
identify possible crime suspects. Technology has been improving and expanding rapidly;
dramatic growth and change are expected for years to come. Without question, having
knowledge of the effective use of information systems will be critical for managers both now
and in the long term. Now, let’s examine how information systems are created.

SYSTEMS DEVELOPMENT

Systems development is the activity of creating or modifying information systems. Systems
development projects can range from small to very large and are conducted in fields as diverse
as stock analysis and video game development. Individuals from around the world are using
the steps of systems development to create unique applications for the iPhone.77 Apple has
special tools for iPhone application developers, including GPS capabilities and audio stream-
ing, to make it easier for people to craft unique applications. Apple is also allowing these
systems developers to charge users in a variety of ways, including fixed prices and subscription
fees. Recall that individuals and companies are developing “cloud computing” applications

systems development

The activity of creating or modifying
business systems.

The Cave Automatic Virtual
Environment (CAVE) is a virtual
reality room that allows users to
completely immerse themselves in
a virtual car interior while operating
a workstation in a factory.

(Source: © Sipa via AP Images.)

Figure 1.15

A Head-Mounted Display

The head-mounted display (HMD)
was the first device to provide the
wearer with an immersive
experience. A typical HMD houses
two miniature display screens and
an optical system that channels the
images from the screens to the
eyes, thereby presenting a stereo
view of a virtual world. A motion
tracker continuously measures the
position and orientation of the user’s
head and allows the image-
generating computer to adjust the
scene representation to the current
view. As a result, the viewer can look
around and walk through the
surrounding virtual environment.

(Source: Courtesy of 5DT, Inc.
www.5dt.com.)

28 Part 1 | Information Systems in Perspective

that can be run from the Internet.78 These applications have additional systems development
challenges, such as making sure that the data and programs on the Internet are safe and secure
from hackers and corporate spies.

People inside a company can develop systems, or companies can use outsourcing, hiring
an outside company to perform some or all of a systems development project. Outsourcing
allows a company to focus on what it does best and delegate other functions to companies
with expertise in systems development. The drug company Pfizer, for example, used out-
sourcing to allow about 4,000 of its busy employees to outsource some of their jobs functions
to other individuals or companies around the globe, allowing them to concentrate on key
tasks.79 Any outsourcing decision should depend on the company and the project being
considered for outsourcing.

Some systems development efforts fail to meet their cost or schedule goals. The state of
Florida, for example, had problems with its $15 billion Medicaid program, making it difficult
or impossible for some beneficiaries to gain access to the system or receive payments.
According to a February statement made by one frustrated state senator, “I’m not looking
for zero errors, but you’re saying it’s going to be into the summer before we can expect our
constituents to be able to get through on the call lines?” 80 Systems development failures can
be a result of poor planning and scheduling, insufficient management of risk, poor require-
ments determination, and lack of user involvement. One strategy for improving the results
of a systems development project is to divide it into several steps, each with a well-defined
goal and set of tasks to accomplish (see Figure 1.16). These steps are summarized next.

SYSTEMS INVESTIGATION

Understand problem

SYSTEMS ANALYSIS

Understand solutions

SYSTEMS DESIGN

Select and plan best solution

SYSTEMS IMPLEMENTATION

Place solution into effect

SYSTEMS MAINTENANCE

AND REVIEW

Evaluate results of solution

Figure 1.16

An Overview of Systems
Development

Systems Investigation and Analysis
The first two steps of systems development are systems investigation and analysis. The goal
of the systems investigation is to gain a clear understanding of the problem to be solved or
opportunity to be addressed. After an organization understands the problem, the next ques-
tion is, “Is the problem worth solving?” Given that organizations have limited resources—
people and money—this question deserves careful consideration. If the decision is to continue
with the solution, the next step, systems analysis, defines the problems and opportunities of

An Introduction to Information Systems in Organizations | Chapter 1 29

the existing system. During systems investigation and analysis, as well as design maintenance
and review, discussed next, the project must have the complete support of top-level managers
and must focus on developing systems that achieve business goals.

Systems Design, Implementation, and Maintenance
and Review
Systems design determines how the new system should be developed to meet the business
needs defined during systems analysis. For some companies, this involves environmental
design that attempts to reduce impact on the environment while still making a profit. Gazelle,
for example, used systems design to develop the software and systems needed to recycle
computer and electronic systems for a profit. According to the company founder, “What
we’re doing here is buying dollars for 80 cents.”81 Systems implementation involves creating
or acquiring the various system components (hardware, software, databases, etc.) defined in
the design step, assembling them, and putting the new system into operation. For many
organizations, this includes purchasing software, hardware, databases, and other IS compo-
nents. The purpose of systems maintenance and review is to check and modify the system so
that it continues to meet changing business needs. Companies often hire outside companies
to do their design, implementation, maintenance, and review functions.

INFORMATION SYSTEMS IN SOCIETY, BUSINESS,
AND INDUSTRY

Information systems have been developed to meet the needs of all types of organizations and
people. The speed and widespread use of information systems, however, opens users to a
variety of threats from unethical people.82 Computer criminals and terrorists, for example,
have used the Internet to steal millions of dollars or promote terrorism and violence. Some
studies report that 50 to 75 percent of corporate security attacks come from people inside
the company.83 Computer-related attacks can come from individuals, groups, companies,
and even countries.84

Security, Privacy, and Ethical Issues in Information
Systems and the Internet
Although information systems can provide enormous benefits, they do have drawbacks. Some
drawbacks are minor, such as receiving unwanted e-mail.85 Others problems can be more
severe, where people’s personal data, including Social Security and credit card numbers, can
be lost or stolen, resulting in credit card fraud and ruined credit. In the United States, the
Privacy Rights Clearinghouse estimates that since early 2005, about 150 million computer
records have been stolen or exposed to fraud. This type of data loss can cost companies
hundreds of dollars per lost record. Some companies have spent millions of dollars to inves-
tigate and counteract stolen computer records.

Computer-related mistakes and waste are also a concern. In Japan, a financial services
firm had trading losses of $335 million due to a typing mistake in entering a trade. Another
computer mistake stranded hundreds of airline flights. Unwanted e-mail, called “spam,” can
also be a huge waste of people’s time. Many individuals and organizations are trying to find
better ways to block spam.

30 Part 1 | Information Systems in Perspective

ETHICAL AND
SOCIETAL ISSUES

Who Is Interested in Your Social Network Updates?

More than two-thirds of the world’s online population use social

networks such as Facebook, MySpace, and Twitter to stay in touch

with friends. It is likely that you are one of them. In 2008, social

networks became more popular than e-mail, with 66.8 percent of

Internet users accessing member communities. Most members of

social networks use a posting feature that allows them to share

their day-to-day thoughts and activities with their circle of friends.

Facebook calls these postings “updates,” while Twitter calls them

“tweets.” Most users do not realize the value of their comments,

updates, or tweets to people outside their circle.

Businesses are flocking to social networks to harvest

consumer sentiment for use in guiding product development. They

are also watching social networks to confront negative publicity.

The broad scale use of social networks and the careful analysis of

billions of messages have made it possible to collect public

sentiment and build customer relations in a manner never done

before. But sifting through the babble to discover comments of

interest is challenging.

A number of information system companies have sprung up to

provide products designed to monitor social media. Companies

such as Alterian, Radian6, Attensity, Visible Technologies,

Conversion, and Nielsen Online provide social media monitoring

systems for businesses and organizations. As a young technology,

there is no standard approach to social media monitoring. Similar

to a search engine, the systems typically traverse the continuous

streams of comments in social networks looking for key terms

related to specified products. AI techniques that automate the

interpretation of user comments make it possible to quickly

identify comments of particular interest. Ultimately, they generate

analytic and performance reports for the human expert to

evaluate. Systems that monitor social media enable useful

information to be drawn from billions of seemingly mundane and

unrelated messages.

Monitoring social media can focus on brand reputation

management, public relations, or even market research.

Companies such as Comcast, a major communications company,

hire full-time social media experts who interact with customers

online to address problems and complaints. For example, if you

complain about Comcast service on Twitter, you might be

contacted by a Comcast employee offering to help you.

The social network service owners are well aware of the value

of the information that flows over their networks. Most of them

intend to build their business through the comments and attention

of their members. Whether through targeted ads or selling access

to user data, social networks can become very lucrative

businesses. Why else would Twitter, a service with apparently no

business model, be worth over a billion dollars? Twitter’s goal is to

grow to one billion members and provide interested parties with

the pulse of the planet.

How do users feel about their “personal” comments being

harvested to make billions for Internet companies? With social

network growth rates in 2009 ranging from 228 percent for

Facebook to 1,382 percent for Twitter, users are either unaware or

unconcerned. Regardless of what users think, it is likely that

businesses will increasingly analyze the continuous flow of data

over social networks to generate insights they can use.

Discussion Questions

1. Do you think it is ethical for social networks to sell access

to user information to businesses for market research

and other uses? Why or why not?

2. What service does the monitoring of social media ulti-

mately provide for consumers?

Critical Thinking Questions

1. What competitive advantage does the monitoring of social

media provide to companies that invest in it?

2. Why is the monitoring of social media considered a CBIS?

SOURCES: Ostrow, Adam, “Social Networking More Popular than Email,”
Mashable, March 9, 2009, http://mashable.com/2009/03/09/social-network-
ing-more-popular-than-email; Zabin, Jeff, “Finding Out What They’re Saying
About You Is Worth Every Penny,” E-Commerce Times, November 12, 2009,
www.ecommercetimes.com/rsstory/68624.html; Bensen, Connie, “Do you
know what people are saying about you?” Reuters UK, September 14, 2009,
http://blogs.reuters.com/great-debate-uk/2009/09/14/do-you-know-what-
people-are-saying-about-you; Schonfeld, Erick, “Twitter’s Internal Strategy
Laid Bare: To Be “The Pulse of the Planet,” TechCrunch, July 16, 2009,
www.techcrunch.com/2009/07/16/twitters-internal-strategy-laid-bare-to-
be-the-pulse-of-the-planet; Reisner, Rebecca, “Comcast’s Twitter Man,”
Business Week, January 13, 2009, www.businessweek.com/managing/con-
tent/jan2009/ca20090113_373506.htm; McCarthy, Carolina, “Nielsen:
Twitter’s growing really, really, really, really fast,” CNET, March 2009, http://
news.cnet.com/8301-13577_3-10200161-36.html; Nielsen Staff, “Social
Networking’s New Global Footprint,” NielsenWire, March 9, 2009, http://
blog.nielsen.com/nielsenwire/global/social-networking-new-global-foot-
print/.

31
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Licensed to:

Ethical issues concern what is generally considered right or wrong. Some IS professionals
believe that computers may create new opportunities for unethical behavior. For example,
a faculty member of a medical school falsified computerized research results to get a
promotion—and a higher salary.86 In another case, a company was charged with using a
human resource information system to time employee layoffs and firings to avoid paying
pensions. More and more, the Internet is associated with unethical behavior. Unethical in-
vestors have placed false rumors or incorrect information about a company on the Internet
and tried to influence its stock price to make money.

Individual privacy is also an important social issue. People can inadvertently disclose
personal information while using the Internet.87 Once private information or photos have

been placed on the Internet, it can be very difficult to
remove them.88 One large drug company agreed to pay
more than $2 million in fines because it didn’t prevent
individual credit card and Social Security numbers from
being disclosed.89 To protect against threats to your pri-
vacy and data, you can install security and control
measures. For example, many software products can de-
tect and remove viruses and spam from computer sys-
tems. Some financial institutions use handheld identity
authorization devices to prevent bank fraud.
You can install firewalls (software and hardware that
protect a computer system or network from outside at-
tacks) to avoid viruses and prevent unauthorized people
from gaining access to your computer system.90 You can
also use identification numbers and passwords. In re-
sponse to possible abuses, a number of laws have been

passed to protect people from invasion of their privacy, including The Privacy Act, enacted
in the 1970s.

Use of information systems also raises work concerns, including job loss through increased
efficiency and potential health problems from making repetitive motions. Ergonomics, the
study of designing and positioning workplace equipment, can help you avoid health-related
problems of using computer systems.

Computer and Information Systems Literacy
Whatever your college major or career path, understanding computers and information
systems will help you cope, adapt, and prosper in this challenging environment. Some colleges
are requiring a certain level of computer and information systems literacy before students are
admitted or accepted into the college. While at school, you might connect with friends and
other students using a social networking Internet site, such as MySpace (www.myspace.com)
or Facebook (www.facebook.com).

F-Secure is a popular virus-
detection program.

(Source: Courtesy of F-Secure
Corporation.)

The Privacy Rights Clearinghouse
estimates that since 2005, about 150
million computer records have been
stolen or exposed to fraud.

(Source: www.privacyrights.org.)

32 Part 1 | Information Systems in Perspective

A knowledge of information systems will help you make a significant contribution on
the job. It will also help you advance in your chosen career or field. Managers are expected
to identify opportunities to implement information systems to improve their business. They
are also expected to lead IS projects in their areas of expertise. To meet these personal and
organizational goals, you must acquire both computer literacy and information systems lit-
eracy. Computer literacy is the knowledge of computer systems and equipment and the ways
they function. It includes the knowledge of equipment and devices (hardware), programs
and instructions (software), databases, and telecommunications.

Information systems literacy goes beyond knowing the fundamentals of computer systems
and equipment. Information systems literacy is the knowledge of how data and information
are used by individuals, groups, and organizations. It includes knowledge of computer tech-
nology and the broader range of information systems. Most important, however, it encom-
passes how and why this technology is applied in business. Knowing about various types of
hardware and software is an example of computer literacy. Knowing how to use hardware
and software to increase profits, cut costs, improve productivity, and increase customer sat-
isfaction is an example of information systems literacy.

Information Systems in the Functional Areas of Business
Information systems are used in all functional areas and operating divisions of business. In
finance and accounting, information systems forecast revenues and business activity, deter-
mine the best sources and uses of funds, manage cash and other financial resources, analyze
investments, and perform audits to make sure that the organization is financially sound and
that all financial reports and documents are accurate. Sales and marketing use information
systems to develop new goods and services (product analysis), select the best location for
production and distribution facilities (place or site analysis), determine the best advertising
and sales approaches (promotion analysis), and set product prices to get the highest total
revenues (price analysis). In manufacturing, information systems process customer orders,
develop production schedules, control inventory levels, and monitor product quality. In
addition, information systems help to design products (computer-assisted design, or CAD),
manufacture items (computer-assisted manufacturing, or CAM), and integrate machines or
pieces of equipment (computer-integrated manufacturing, or CIM). Human resource man-
agement uses information systems to screen applicants, administer performance tests to
employees, monitor employee productivity, and more. Legal information systems analyze
product liability and warranties and help to develop important legal documents and reports.

computer literacy

Knowledge of computer systems
and equipment and the ways they
function; it includes the knowledge
of equipment and devices
(hardware), programs and
instructions (software), databases,
and telecommunications.

information systems literacy

Knowledge of how data and
information are used by individuals,
groups, and organizations.

Connect with friends and other
students using a social networking
Internet site, such as MySpace
(www.myspace.com) or Facebook
(www.facebook.com).

(Source: © Alex Segre/Alamy.)

An Introduction to Information Systems in Organizations | Chapter 1 33

Information Systems in Industry
In addition to being used in every department in a company, information systems are used
in almost every industry or field in business. The airline industry develops Internet auction
sites to offer discount fares and increase revenue. Investment firms use information systems
to analyze stocks, bonds, options, the futures market, and other financial instruments and
provide improved services to their customers. Banks use information systems to help make
sound loans and good investments as well as to provide online check payment for account
holders. The transportation industry uses information systems to schedule trucks and trains
to deliver goods and services at the lowest cost. Publishing companies use information systems
to analyze markets and to develop and publish newspapers, magazines, and books. Healthcare
organizations use information systems to diagnose illnesses, plan medical treatment, track
patient records, and bill patients. Health maintenance organizations (HMOs) use Web tech-
nology to access patients’ insurance eligibility and other information stored in databases to
cut patient costs. Retail companies are using the Web to take orders and provide customer
service support. Retail companies also use information systems to help market products and
services, manage inventory levels, control the supply chain, and forecast demand. Power
management and utility companies use information systems to monitor and control power
generation and usage. Professional services firms have information systems to improve the
speed and quality of services they provide to customers. Management consulting firms use
intranets and extranets to offer information on products, services, skill levels, and past en-
gagements to their consultants. These industries are discussed in greater detail as we continue
through the book.

GLOBAL CHALLENGES IN INFORMATION SYSTEMS

Changes in society as a result of increased international trade and cultural exchange, often
called globalization, have always had a significant impact on organizations and their infor-
mation systems. In his book, The World Is Flat, Thomas Friedman describes three eras of
globalization.91 (See Table 1.3.) According to Friedman, we have progressed from the glob-
alization of countries (Globalization 1.0) to the globalization of multinational corporations
(Globalization 2.0) and individuals (Globalization 3.0). Today, people in remote areas can
use the Internet to compete with and contribute to other people, the largest corporations,
and entire countries. These workers are empowered by high-speed Internet access, making
the world flatter. In the Globalization 3.0 era, designing a new airplane or computer can be
separated into smaller subtasks and then completed by a person or small group that can do
the best job. These workers can be located in India, China, Russia, Europe, and other areas
of the world. The subtasks can then be combined or reassembled into the complete design.
This approach can be used to prepare tax returns, diagnose a patient’s medical condition, fix
a broken computer, and many other tasks.

One way that sales and marketing
departments use information
systems is for place or site analysis.

(Source: © Jeff Greenberg/Alamy.)

34 Part 1 | Information Systems in Perspective

Global markets have expanded. People and companies can get products and services from
around the world, instead of around the corner or across town. These opportunities, however,
introduce numerous obstacles and issues, including challenges involving culture, language,
and

many others.

• Cultural challenges. Countries and regional areas have their own cultures and customs
that can significantly affect individuals and organizations involved in global trade.

• Language challenges. Language differences can make it difficult to translate exact
meanings from one language to another.

• Time and distance challenges. Time and distance issues can be difficult to overcome for
individuals and organizations involved with global trade in remote locations. Large time
differences make it difficult to talk to people on the other side of the world. With long
distance, it can take days to get a product or part from one location to another.

• Infrastructure challenges. High-quality electricity and water might not be available in
certain parts of the world. Telephone services, Internet connections, and skilled
employees might be expensive or not readily available.

• Currency challenges. The value of various currencies can vary significantly over time,
making international trade more difficult and complex.

• Product and service challenges. Traditional products that are physical or tangible, such
as an automobile or bicycle, can be difficult to deliver to the global market. However,
electronic products (e-products) and electronic services (e-services) can be delivered to
customers electronically, over the phone, through networks or the Internet, or by other
electronic means. Software, music, books, manuals, and advice can all be delivered
globally and over the Internet.

• Technology transfer issues. Most governments don’t allow certain military-related
equipment and systems to be sold to some countries. Even so, some believe that foreign
companies are stealing intellectual property, trade secrets, and copyrighted materials and
counterfeiting products and services.

• State, regional, and national laws. Each state, region, and country has a set of laws that
must be obeyed by citizens and organizations operating in the country. These laws can
deal with a variety of issues, including trade secrets, patents, copyrights, protection of
personal or financial data, privacy, and much more. Laws restricting how data enters or
exits a country are often called transborder data-flow laws. Keeping track of these laws
and incorporating them into the procedures and computer systems of multinational and
transnational organizations can be very difficult and time consuming, requiring expert
legal advice.

• Trade agreements. Countries often enter into trade agreements with each other. The
North American Free Trade Agreement (NAFTA) and the Central American Free Trade
Agreement (CAFTA) are examples. The European Union (EU) is another example of a
group of countries with an international trade agreement.92 The EU is a collection of
mostly European countries that have joined together for peace and prosperity. Additional
trade agreements include the Australia-United States Free Trade Agreement (AUSFTA),
signed into law in 2005, and the Korean-United States Free Trade Agreement (KORUS-
FTA), signed into law in 2007. Free trade agreements have been established between
Bolivia and Mexico, Canada and Costa Rica, Canada and Israel, Chile and Korea, Mexico
and Japan, the United States and Jordan, and many others.93

Globalization 1.0 Late 1400–1800

Era Dates Characterized by

Countries with the power to explore
and influence the world

Globalization 2.0 1800–2000 Multinational corporations that have
plants, warehouses, and offices around
the world

Globalization 3.0 Individuals from around the world
who can compete and influence other
people, corporations, and countries
by using the Internet and powerful
technology tools

2000–today

Table 1.3

Eras of Globalization

An Introduction to Information Systems in Organizations | Chapter 1 35

SUMMARY

Principle:
The value of information is directly linked to how it

helps decision makers achieve the organization’s

goals.

Information systems are used in almost every imaginable

career area. Regardless of your college major or chosen

career, you will find that information systems are

indispensable tools to help you achieve your career goals.

Learning about information systems can help you get your

first job, earn promotions, and advance your career.

Data consists of raw facts; information is data

transformed into a meaningful form. The process of defining

relationships among data requires knowledge. Knowledge is

an awareness and understanding of a set of information and

the way that information can support a specific task. To be

valuable, information must have several characteristics: It

should be accurate, complete, economical to produce,

flexible, reliable, relevant, simple to understand, timely,

verifiable, accessible, and secure. The value of information is

directly linked to how it helps people achieve their

organizations’ goals.

Principle:
Computers and information systems help make it

possible for organizations to improve the way they

conduct business.

A system is a set of elements that interact to accomplish a

goal or set of objectives. The components of a system include

inputs, processing mechanisms, and outputs. A system uses

feedback to monitor and control its operation to make sure

that it continues to meet its goals and objectives.

System performance is measured by its efficiency and

effectiveness. Efficiency is a measure of what is produced

divided by what is consumed; effectiveness measures the

extent to which a system achieves its goals. A systems

performance standard is a specific objective.

Principle:
Knowing the potential impact of information systems

and having the ability to put this knowledge to work

can result in a successful personal career and orga-

nizations that reach their goals.

Information systems are sets of interrelated elements that

collect (input), manipulate and store (process), and

disseminate (output) data and information. Input is the activity

of capturing and gathering new data, processing involves

converting or transforming data into useful outputs, and

output involves producing useful information. Feedback is the

output that is used to make adjustments or changes to input

or processing activities.

The components of a computer-based information system

(CBIS) include hardware, software, databases,

telecommunications and the Internet, people, and

procedures. The types of CBISs that organizations use can be

classified into four basic groups: (1) e-commerce and m-

commerce, (2) TPS and ERP systems, (3) MIS and DSS, and

(4) knowledge management and specialized business

information systems. The key to understanding these types of

systems begins with learning their fundamentals.

E-commerce involves any business transaction executed

electronically between parties such as companies (business-

to-business), companies and consumers (business-to-

consumer), business and the public sector, and consumers

and the public sector. The major volume of e-commerce and

its fastest-growing segment is business-to-business

transactions that make purchasing easier for big

corporations. E-commerce also offers opportunities for small

businesses to market and sell at a low cost worldwide, thus

allowing them to enter the global market right from start-up.

M-commerce involves anytime, anywhere computing that

relies on wireless networks and systems.

The most fundamental system is the transaction

processing system (TPS). A transaction is any business-

related exchange. The TPS handles the large volume of

business transactions that occur daily within an organization.

An enterprise resource planning (ERP) system is a set of

integrated programs that can manage the vital business

operations for an entire multisite, global organization. A

management information system (MIS) uses the information

from a TPS to generate information useful for management

decision making.

A decision support system (DSS) is an organized collection

of people, procedures, databases, and devices that help make

problem-specific decisions. A DSS differs from an MIS in the

support given to users, the emphasis on decisions, the

development and approach, and the system components,

speed, and output.

Specialized business information systems include

artificial intelligence, expert systems, multimedia, and virtual

reality systems. Knowledge management systems are

organized collections of people, procedures, software,

databases, and devices used to create, store, share, and use

the organization’s knowledge and experience. Artificial

intelligence (AI) includes a wide range of systems in which the

computer takes on the characteristics of human intelligence.

Robotics is an area of artificial intelligence in which machines

perform complex, dangerous, routine, or boring tasks, such

as welding car frames or assembling computer systems and

components. Vision systems allow robots and other devices

36 Part 1 | Information Systems in Perspective

to have “sight” and to store and process visual images.

Natural language processing involves computers interpreting

and acting on verbal or written commands in English,

Spanish, or other human languages. Learning systems let

computers “learn” from past mistakes or experiences, such

as playing games or making business decisions, while neural

networks is a branch of artificial intelligence that allows

computers to recognize and act on patterns or trends. An

expert system (ES) is designed to act as an expert consultant

to a user who is seeking advice about a specific situation.

Originally, the term “virtual reality” referred to immersive

virtual reality, in which the user becomes fully immersed in

an artificial, computer-generated 3D world. Virtual reality can

also refer to applications that are not fully immersive, such

as mouse-controlled navigation through a 3D environment on

a graphics monitor, stereo viewing from the monitor via stereo

glasses, and stereo projection systems. Multimedia is a

natural extension of virtual reality. It can include photos and

images, the manipulation of sound, and special 3D effects.

Principle:
System users, business managers, and information

systems professionals must work together to build a

successful information system.

Systems development involves creating or modifying existing

business systems. The major steps of this process and their

goals include systems investigation (gain a clear

understanding of what the problem is), systems analysis

(define what the system must do to solve the problem),

systems design (determine exactly how the system will work

to meet the business needs), systems implementation (create

or acquire the various system components defined in the

design step), and systems maintenance and review (maintain

and then modify the system so that it continues to meet

changing business needs).

Principle:
Information systems must be applied thoughtfully

and carefully so that society, business, and industry

around the globe can reap their enormous benefits.

Information systems play a fundamental and ever-expanding

role in society, business, and industry. But their use can also

raise serious security, privacy, and ethical issues. Effective

information systems can have a major impact on corporate

strategy and organizational success. Businesses around the

globe are enjoying better safety and service, greater efficiency

and effectiveness, reduced expenses, and improved decision

making and control because of information systems.

Individuals who can help their businesses realize these

benefits will be in demand well into the future.

Computer and information systems literacy are

prerequisites for numerous job opportunities, and not only in

the IS field. Computer literacy is knowledge of computer

systems, software, and equipment; information systems

literacy is knowledge of how data and information are used by

individuals, groups, and organizations. Today, information

systems are used in all the functional areas of business,

including accounting, finance, sales, marketing,

manufacturing, human resource management, and legal

information systems. Information systems are also used in

every industry, such as airlines, investment firms, banks,

transportation companies, publishing companies,

healthcare, retail, power management, professional services,

and more.

Changes in society as a result of increased international

trade and cultural exchange, often called globalization, have

always had a significant impact on organizations and their

information systems. In his book, The World Is Flat, Thomas

Friedman describes three eras of globalization, spanning the

globalization of countries to the globalization of multinational

corporations and individuals. Today, people in remote areas

can use the Internet to compete with and contribute to other

people, the largest corporations, and entire countries. People

and companies can get products and services from around

the world, instead of around the corner or across town. These

opportunities, however, introduce numerous obstacles and

issues, including challenges involving culture, language, and

many others.

CHAPTER 1: SELF-ASSESSMENT TEST

The value of information is directly linked to how it helps
decision makers achieve the organization’s goals.

1. A(n) _________________ is a set of interrelated compo-
nents that collect, manipulate, and disseminate data and
information and provide a feedback mechanism to meet an
objective.

2. What consists of raw facts, such as an employee number?
a. bytes
b. data
c. information
d. knowledge

An Introduction to Information Systems in Organizations | Chapter 1 37

3. Knowledge workers are usually professionals in science,
engineering, business, and other areas. True or False?

Computers and information systems help make it possible for
organizations to improve the way they conduct business.

4. A(n) _______________ is a set of elements or components
that interact to accomplish a goal.

5. A measure of what is produced divided by what is con-
sumed is known as __________.

a. efficiency
b. effectiveness
c. performance
d. productivity

6. A specific objective of a system is called a performance
standard. True or False?

Knowing the potential impact of information systems and
having the ability to put this knowledge to work can result in
a successful personal career and organizations that reach their
goals.

7. A(n) ______________ consists of hardware, software,
databases, telecommunications, people, and procedures.

8. Computer programs that govern the operation of a com-
puter system are called _____________.

a. feedback
b. feedforward
c. software
d. transaction processing systems

9. Payroll and order processing are examples of a computer-
ized knowledge management system. True or False?

10. What is an organized collection of people, procedures,
software, databases, and devices used to create, store, share,
and use the organization’s experience and knowledge?

a. TPS (transaction processing system)
b. MIS (management information system)
c. DSS (decision support system)
d. KM (knowledge management)

11. _________________ is a set of integrated programs that
manage vital business operations.

System users, business managers, and information systems
professionals must work together to build a successful infor-
mation system.

12. What defines the problems and opportunities of an existing

system?

a. systems analysis
b. systems review
c. systems development
d. systems design

Information systems must be applied thoughtfully and care-
fully so that society, business, and industry around the globe
can reap their enormous benefits.

13. ______________ literacy is a knowledge of how data and
information are used by individuals, groups, and organi-
zations.

CHAPTER 1: SELF-ASSESSMENT TEST ANSWERS

(1) information system (2) b (3) True (4) system (5) a (6) True
(7) computer-based information system (CBIS) (8) c (9) False
(10) d (11) Enterprise resource planning (ERP) (12) a
(13) Information systems

REVIEW QUESTIONS

1. What is an information system? What are some of the ways
information systems are changing our lives?

2. How is data different from information? Information from
knowledge?

3. Describe the various types of data.
4. What is the difference between efficiency and effectiveness?
5. What are the components of any information system?
6. What is feedback? What are possible consequences of inad-

equate feedback?
7. How is system performance measured?
8. What is a knowledge management system? Give an

example.
9. What is a computer-based information system? What are

its components?

10. Describe the characteristics of a decision support system.
11. What is the difference between an intranet and an extranet?
12. What is m-commerce? Describe how it can be used.
13. What are the most common types of computer-based

information systems used in business organizations today?
Give an example of each.

14. Describe three applications of virtual reality.
15. What are computer literacy and information systems liter-

acy? Why are they important?
16. What are some of the benefits organizations seek to achieve

through using information systems?
17. Identify the steps in the systems development process and

state the goal of each.

38 Part 1 | Information Systems in Perspective

DISCUSSION QUESTIONS

1. Why is the study of information systems important to you?
What do you hope to learn from this course to make it
worthwhile?

2. List the ways an information system can be used in a career
area of interest to you.

3. What is the value of software? Give several examples of
software you use at school or home.

4. Why is a database an important part of a computer-based
information system?

5. What is the difference between e-commerce and m-com-
merce?

6. What is the difference between DSS and knowledge man-
agement?

7. Suppose that you are a teacher assigned the task of describ-
ing the learning processes of preschool children. Why

would you want to build a model of their learning pro-
cesses? What kinds of models would you create? Why
might you create more than one type of model?

8. Describe the “ideal” automated class registration system for
a college or university. Compare this “ideal” system with
what is available at your college or university.

9. What computer application needs the most improvement
at your college or university? Describe how systems devel-
opment could be used to develop it.

10. Discuss how information systems are linked to the business
objectives of an organization.

11. What are your career goals, and how can you use a com-
puter-based information system to achieve them?

PROBLEM-SOLVING EXERCISES

1. Prepare a data disk and a backup disk for the problem-
solving exercises and other computer-based assignments
you will complete in this class. Create one folder for each
chapter in the textbook (you should have 14 folders). As
you work through the problem-solving exercises and com-
plete other work using the computer, save your assignments
for each chapter in the appropriate folder. On the label of
each disk or USB flash drive, be sure to include your name,
course, and section. On one disk, write “Working Copy;”
on the other, write “Backup.”

2. Search through several business magazines (BusinessWeek,
Computerworld, PC Week, etc.) or use an Internet search
engine to find recent articles that describe potential social
or ethical issues related to the use of an information system.

Use word-processing software to write a one-page report
summarizing what you discovered.

3. Create a table that lists 10 or more possible career areas,
annual salaries, and brief job descriptions, and rate how
much you would like the career area on a scale from 1 (don’t
like) to 10 (like the most). Print the results. Sort the table
according to annual salaries from high to low and print the
resulting table. Sort the table from the most liked to least
liked and print the results.

4. Do some research to obtain estimates of the rate of growth
of social networking sites like MySpace and Facebook. Use
the plotting capabilities of your spreadsheet or graphics
software to produce a bar chart of that growth over a num-
ber of years. Share your findings with the class.

TEAM ACTIVITIES

1. Before you can do a team activity, you need a team! As a
class member, you might create your own team, or your
instructor might assign members to groups. After your
group has been formed, meet and introduce yourselves to
each other. Find out the first name, hometown, major, e-
mail address, and phone number of each member. Find out
one interesting fact about each member of your team as
well. Brainstorm a name for your team. Put the information

on each team member into a database and print enough
copies for each team member and your instructor.

2. With the other members of your group, use word-process-
ing software to write a one-page summary of what your
team hopes to gain from this course and what you are will-
ing to do to accomplish these goals. Send the report to your
instructor via e-mail.

An Introduction to Information Systems in Organizations | Chapter 1 39

WEB EXERCISES

1. Throughout this book, you will see how the Internet pro-
vides a vast amount of information to individuals and
organizations. We will stress the World Wide Web, or sim-
ply the Web, which is an important part of the Internet.
Most large universities and organizations have an address
on the Internet, called a Web site or home page. The address
of the Web site for this publisher is www.cengage.com. You
can gain access to the Internet through a browser, such as
Microsoft Internet Explorer or Safari. Using an Internet
browser, go to the Web site for this publisher. What did
you find? Try to obtain information on this book. You

might be asked to develop a report or send an e-mail mes-
sage to your instructor about what you found.

2. Go to an Internet search engine, such as www.google.com or
www.bing.com, and search for information about artificial
intelligence. Write a brief report that summarizes what you
found.

3. Using the Internet, search for information on the use of
information systems in a company or organization that
interests you. How does the organization use technology to
help it accomplish its goals?

CAREER EXERCISES

1. In the Career Exercises found at the end of every chapter,
you will explore how material in the chapter can help you
excel in your college major or chosen career. Write a brief
report on the career that appeals to you the most. Do the
same for two other careers that interest you.

2. Research careers in finance, management, information sys-
tems, and two other career areas that interest you. Describe
the job opportunities, job duties, and the possible starting
salaries for each career area in a report.

CASE STUDIES

Case One
Effectively Managing Resources at

Aéroports de Paris

Imagine a busy airport at peak capacity, and then double the

amount of congestion—the result is Aéroports de Paris, a

combination of two Paris airports managed by one central

controlling agency. In 2008, Aéroports de Paris handled 87.1

million passengers and tons of freight flying on more than

1,500 flights per day from 460 different airlines. Congestion,

flight delays, and long lines of frustrated passengers make

the two Paris airports difficult environments to manage.

Each flight arriving at Aéroports de Paris requires a long

list of resources, including gates, parking stands, fuel trucks,

check-in counters, buses, luggage conveyor belts, a variety of

ground equipment, and personnel. Orchestrating the efficient

delivery of these resources is beyond the skills of any person.

Recently, Aéroports de Paris turned to IBM for help.

IBM assisted Aéroports de Paris in developing a

sophisticated resource allocation system that maximizes

efficiencies and reduces the stress at the busy Paris airports.

The new system is based on the following IBM technologies:

• IBM ILOG CP optimization software
• IBM ILOG Views
• IBM ILOG Gantt for .Net visualization products

The resulting system is named SAÏGA. SAÏGA is

responsible for directing the 900 passenger flights arriving

each day to one of 240 parking stands and gates. Gates are

assigned based on considerations such as fuel and luggage

handling, departure and arrival times, security concerns, and

airline preference. Along with gates, the system allocates all

of the primary ground resources. SAÏGA works in real time,

managing unexpected constraints such as flight delays, or it

can allocate resources in advance to manage long-term

scheduling. As a decision support system, SAÏGA provides

useful charts that managers review to spot patterns and

problems in scheduling and resources.

The SAÏGA system took three years to develop, with the

special optimization software requiring only two months.

Among the benefits for Aéroports de Paris are a decline in

flight delays, more appropriate and timely assignment of

resources, faster turnaround time for flights, faster through

time for passengers, and reduced operating costs. Airport

40 Part 1 | Information Systems in Perspective

systems engineers use SAÏGA tools to quickly build interfaces

that provide easy-to-interpret plans and schedules.

Aéroports de Paris executives can use the system to study

operations over time and decide if and where improvements

are needed. For example, are additional flights needed

between Paris and Madrid? Is more time required for

passenger boarding? Using SAÏGA to maximize efficiencies

will help Aéroports de Paris increase profits, while decreasing

airfares and airport stress.

Discussion Questions

1. In what manner does SAÏGA act as an MIS and DSS?

2. Why is scheduling of this scale best left to information

systems such as SAÏGA rather than to human managers?

Critical Thinking Questions

1. What other industries might benefit from an information

system like SAÏGA?

2. Is there any danger in relying on a system like SAÏGA? If

so, how might an organization minimize the risks?

SOURCES: IBM Staff, “Aéroports de Paris reduces congestion at airports,” IBM
Case Studies, accessed June 30, 2009, www-01.ibm.com/software/success/
cssdb.nsf/CS/VCHN-7TCFYU?OpenDocument&Site=wssoftware&cty=en_us;
ILOG Products Web site, accessed November 12, 2009, www.ilog.com;
Aéroports de Paris Web site, accessed November 12, 2009,
www.aeroportsdeparis.fr.

Case Two
Information System as an Effective Force Against

H1N1 Pandemic

Information systems are valuable to businesses for tracking

business activities in real-time, as they occur. They are also

valuable to the medical community for tracking the spread of

viruses such as the H1N1 virus, also known as the swine flu.

New Jersey-based Emergency Medical Associates (EMA)

operates 21 emergency rooms in hospitals across New

Jersey, New York, and Pennsylvania. With information mined

from its diverse locations, EMA is in an ideal position to spot

an outbreak of the flu in its early stages. All it requires is an

information system to provide valuable information in a timely

manner.

EMA’s CIO and information systems specialists applied

proven business information management techniques to their

medical information needs. They understood that tracking

medical statistics across their 21 emergency rooms was

similar to tracking sales statistics across retail outlets. They

required the same business intelligence (BI) and reporting

tools used by successful businesses. Business intelligence or

BI systems are designed to extract, or mine, useful

information out of the data collected by businesses or

organizations into databases. That data may consist of

detailed sales information collected at the time of a sale or

patient symptom information collected at the time of an

examination.

EMA began by installing a database management

system from Oracle. The database was shared by all of its

21 emergency rooms over a high-speed private network. EMA

then contracted with SAP to install its BusinessObjects XI tool

set to function as the company’s BI platform. BusinessObjects

can sort and sift through data in the database to find patterns

and exceptions. Combining the BusinessObjects system with

other software, including Xcelsius and Crystal Reports

(powerful reporting software), and Web Intelligence (providing

a Web interface to the system), EMA created a system that

generates insightful reports and visualizations about medical

conditions on a regular schedule and on demand.

Today, EMA physicians and nurses, depending on their

needs, can access 27 dashboards, which provide statistics

displayed in charts and lists that are updated as information

is entered into the database. They also have access to 30 daily

reports from the system informing them of the current status

in all of their emergency rooms and of any changes in the

status quo. The system allows users to customize their view

of the data to focus on the information that is most important

to their work.

Using its new information system, EMA was the first to

spot the outbreak of H1N1 in the Northeast. Doctors knew that

about 6 percent of patients complain of flu-like symptoms on

any given day. When the EMA BI system reported that 30

percent of patients were arriving with flu symptoms, the

doctors warned the country that H1N1 was on the move. This

alert provided medical professionals and citizens the time

needed to take action.

Discussion Questions

1. What role did business intelligence software play in

catching an H1N1 outbreak in the northeastern United

States.?

2. How does a system such as EMA’s BI system use human

intelligence and machine intelligence to support decision

making?

Critical Thinking Questions

1. How do the BI needs of business professionals and

medical professionals differ? How are they alike?

2. How does this case study reflect the need for standardized

digital medical records systems in the U.S.? How might

such standards influence the country’s ability to keep its

population healthy?

SOURCES: Lai, Eric, “BI helps New York-area hospitals track, fight H1N1,”
Computerworld, October 8, 2009, www.computerworld.com/s/article/
9139121/BI_helps_New_York_area_hospitals_track_fight_H 1N1?
source=rss_news; EMA Web site, accessed November 12, 2009, www.ema-
ed.com; SAP staff, “Emergency Medical Associates Stays Ahead of Swine Flu
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An Introduction to Information Systems in Organizations | Chapter 1 41

Questions for Web Case

See the Web site for this book to read about the Altitude Online

case for this chapter. The following questions cover this Web

case.

Altitude Online: Outgrowing Systems

Discussion Questions

1. Why do you think it’s a problem for Altitude Online to use

different information systems in its branch locations?

2. What information do you think Jon should collect from the

branch offices to plan the new centralized information

system?
Critical Thinking Questions

1. With Jon’s education and experience, he could design and

implement a new information system for Altitude Online

himself. What would be the benefits and drawbacks of

doing the job himself compared to contracting with an

information systems contractor?

2. While Jon is visiting the branch offices, how might he

prepare them for the inevitable upheaval caused by the

upcoming overhaul to the information system?

NOTES

Sources for the opening vignette: SAP staff, “Braskem – Pursuing Growth
and Synergy Through Mergers and Acquisitions,” SAP Customer Refer-
ences Web page, accessed November 12, 2009, www.sap.com/usa/solu-
tions/business-suite/customers; Braskem Web site, accessed November
12, 2009, www.braskem.com.br; Accenture staff, “Braskem: SAP Solu-
tions,” Accenture Client Successes Web page, accessed November 12,
2009, www.accenture.com/Global/Technology/Enterprise_Solutions/
SAP_Solutions/Client_Successes/ Braskem.htm.

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42 Part 1 | Information Systems in Perspective

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An Introduction to Information Systems in Organizations | Chapter 1 43

Ch 1: An Introduction to Information Systems

Information Systems in the Global Economy Braskem S.A., Brazil
Information Concepts
System Concepts
What Is an Information System?
Business Information Systems
Systems Development
Information Systems in Society, Business, and Industry
Global Challenges in Information Systems
Summary
Chapter 1: Self-Assessment Test
Review Questions
Discussion Questions
Problem-Solving Exercises
Team Activities
Web Exercises
Career Exercises
Case Studies
Notes

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