CHAPTER 1
Introduction
Welcome to the world of information systems, a world that
seems to change almost daily. Over the past few decades information systems
have progressed to being virtually everywhere, even to the point where you may
not realize its existence in many of your daily activities. Stop and consider
how you interface with various components in information systems every day
through different electronic devices. Smartphones, laptop, and personal
computers connect us constantly to a variety of systems including messaging,
banking, online retailing, and academic resources, just to name a few examples.
Information systems are at the center of virtually every organization,
providing users with almost unlimited resources.
Have you ever considered why businesses invest in technology?
Some purchase computer hardware and software because everyone else has
computers. Some even invest in the same hardware and software as their business
friends even though different technology might be more appropriate for them.
Finally, some businesses do sufficient research before deciding what best fits
their needs. As you read through this book be sure to evaluate the contents of
each chapter based on how you might someday apply what you have learned to
strengthen the position of the business you work for, or maybe even your own
business. Wise decisions can result in stability and growth for your future
enterprise.
Information systems surround you almost every day. Wi-fi
networks on your university campus, database search services in the learning
resource center, and printers in computer labs are good examples. Every time
you go shopping you are interacting with an information system that manages
inventory and sales. Even driving to school or work results in an interaction
with the transportation information system, impacting traffic lights, cameras,
etc. Vending machines connect and communicate using the Internet of Things
(IoT). Your car’s computer system does more than just control the engine –
acceleration, shifting, and braking data is always recorded. And, of course,
everyone’s smartphone is constantly connecting to available networks via Wi-fi,
recording your location and other data.
Can you think of some words to describe an information
system? Words such as “computers,” “networks,” or “databases” might pop into
your mind. The study of information systems encompasses a broad array of
devices, software, and data systems. Defining an information system provides
you with a solid start to this course and the content you are about to
encounter.
Defining Information Systems
Many programs in business require students to take a course
in information systems. Various authors have attempted to define
the term in different ways. Read the following definitions, then see if you can
detect some variances.
- “An
information system (IS) can be defined technically as a set of
interrelated components that collect, process, store, and distribute
information to support decision making and control in an
organization.” [1]
- “Information
systems are combinations of hardware, software, and telecommunications
networks that people build and use to collect, create, and distribute
useful data, typically in organizational settings.”[2]
- “Information
systems are interrelated components working together to collect, process,
store, and disseminate information to support decision making,
coordination, control, analysis, and visualization in an organization.”[3]
As you can see these definitions focus on two different ways
of describing information systems: the components that make up
an information system and the role those components play in an
organization. Each of these need to be examined.
The Components of Information Systems
Information systems can be viewed as having five major
components: hardware, software, data, people, and processes. The first three
are technology. These are probably what you thought of when
defining information systems. The last two components, people and processes,
separate the idea of information systems from more technical fields, such as
computer science. In order to fully understand information systems, you will
need to understand how all of these components work together to bring value to
an organization.
Technology
Technology can be thought of as the application of scientific
knowledge for practical purposes. From the invention of the wheel to the
harnessing of electricity for artificial lighting, technology has become
ubiquitous in daily life, to the degree that it is assumed to always be
available for use regardless of location. As discussed before, the first three
components of information systems – hardware, software, and data – all
fall under the category of technology. Each of these will be addressed in an
individual chapter. At this point a simple introduction should help you in your
understanding.
Hardware
Hardware is the tangible, physical portion of an information
system – the part you can touch. Computers, keyboards, disk drives, and flash
drives are all examples of information systems hardware. How these hardware
components function and work together will be covered in Chapter 2.
Software
Software comprises the set of instructions that tell the
hardware what to do. Software is not tangible – it cannot be
touched. Programmers create software by typing a series of instructions
telling the hardware what to do. Two main categories of software are: Operating
Systems and Application software. Operating Systems software provides the
interface between the hardware and the Application software. Examples of
operating systems for a personal computer include Microsoft Windows and Ubuntu
Linux. The mobile phone operating system market is dominated by Google Android
and Apple iOS. Application software allows the user to perform tasks such as
creating documents, recording data in a spreadsheet, or messaging a friend.
Software will be explored more thoroughly in Chapter 3.
Data
The third technology component is data. You can think of data
as a collection of facts. For example, your address (street, city state, postal
code), your phone number, and your social networking account are all pieces of
data. Like software, data is also intangible, unable to be seen in its
native state. Pieces of unrelated data are not very useful. But aggregated,
indexed, and organized together into a database, data can become a powerful
tool for businesses. Organizations collect all kinds of data and use it to make
decisions which can then be analyzed as to their effectiveness. The analysis of
data is then used to improve the organization’s performance. Chapter 4 will
focus on data and databases, and how it is used in organizations.
Networking Communication
Besides the technology components (hardware, software, and
data) which have long been considered the core technology of information
systems, it has been suggested that one other component should be added:
communication. An information system can exist without the ability to
communicate – the first personal computers were stand-alone machines that did
not access the Internet. However, in today’s hyper-connected world, it is an
extremely rare computer that does not connect to another device or to a enetwork. Technically,
the networking communication component is made up of hardware and software, but
it is such a core feature of today’s information systems that it has become its
own category. Networking will be covered in Chapter 5.
People
When thinking about information systems, it is easy to focus
on the technology components and forget to look beyond these tools to fully
understand their integration into an organization. A focus on the people
involved in information systems is the next step. From the front-line user
support staff, to systems analysts, to developers, all the way up to the chief
information officer (CIO), the people involved with information systems are an
essential element. The people component will be covered in Chapter 9.
Process
The last component of information systems is process. A
process is a series of steps undertaken to achieve a desired outcome or goal.
Information systems are becoming more integrated with organizational processes,
bringing greater productivity and better control to those processes. But simply
automating activities using technology is not enough – businesses looking
to utilize information systems must do more. The ultimate goal is to
improve processes both internally and externally, enhancing interfaces with
suppliers and customers. Technology buzzwords such as “business process
re-engineering,” “business process management,” and “enterprise resource
planning” all have to do with the continued improvement of these business
procedures and the integration of technology with them. Businesses hoping to
gain a competitive advantage over their competitors are highly focused on this
component of information systems. The process element in information
systems will be discussed in Chapter 8.
The Role of Information Systems
You should now understand that information systems have a
number of vital components, some tangible, others intangible, and still others
of a personnel nature. These components collect, store, organize, and
distribute data throughout the organization. You may have even realized that
one of the roles of information systems is to take data and turn it into
information, and then transform that information into organizational knowledge.
As technology has developed, this role has evolved into the backbone of the
organization, making information systems integral to virtually every business.
The integration of information systems into organizations has progressed over
the decades.
The Mainframe Era
From the late 1950s through the 1960s, computers were seen as
a way to more efficiently do calculations. These first business computers
were room-sized monsters, with several machines linked together. The primary
work was to organize and store large volumes of information that were tedious
to manage by hand. Only large businesses, universities, and government agencies
could afford them, and they took a crew of specialized personnel and dedicated
facilities to provide information to organizations.
Time-sharing allowed dozens or even hundreds of users to
simultaneously access mainframe computers from locations in the same building
or miles away. Typical functions included scientific calculations and
accounting, all under the broader umbrella of “data processing.”
In the late 1960s, Manufacturing Resources Planning (MRP)
systems were introduced. This software, running on a mainframe computer, gave
companies the ability to manage the manufacturing process, making it more
efficient. From tracking inventory to creating bills of materials to scheduling
production, the MRP systems gave more businesses a reason to integrate
computing into their processes. IBM became the dominant mainframe company.
Continued improvement in software and the availability of cheaper hardware
eventually brought mainframe computers (and their little sibling, the
minicomputer) into most large businesses.
Today you probably think of Silicon Valley in northern
California as the center of computing and technology. But in the days of the
mainframe’s dominance corporations in the cities of Minneapolis and St. Paul
produced most computers. The advent of the personal computer resulted in the
“center of technology” eventually moving to Silicon Valley.
The PC Revolution
In 1975, the first microcomputer was announced on the cover
of Popular Mechanics: the Altair 8800. Its immediate popularity
sparked the imagination of entrepreneurs everywhere, and there were soon dozens
of companies manufacturing these “personal computers.” Though at first just a
niche product for computer hobbyists, improvements in usability and the
availability of practical software led to growing sales. The most prominent of
these early personal computer makers was a little company known as Apple Computer,
headed by Steve Jobs and Steve Wozniak, with the hugely successful “Apple II.”
Not wanting to be left out of the revolution, in 1981 IBM teamed with
Microsoft, then just a startup company, for their operating system software and
hurriedly released their own version of the personal computer simply called the
“PC.” Small businesses finally had affordable computing that could provide them
with needed information systems. Popularity of the IBM PC gave legitimacy to
the microcomputer and it was named Time magazine’s “Man of the
Year” for 1982.
Because of the IBM PC’s open architecture, it was easy for
other companies to copy, or “clone” it. During the 1980s, many new computer
companies sprang up, offering less expensive versions of the PC. This drove
prices down and spurred innovation. Microsoft developed the Windows operating
system, with version 3.1 in 1992 becoming the first commercially successful
release. Typical uses for the PC during this period included word processing,
spreadsheets, and databases. These early PCs were standalone machines, not
connected to a network.
Client-Server
In the mid-1980s, businesses began to see the need to connect
their computers as a way to collaborate and share resources. Known as
“client-server,” this networking architecture allowed users to log in to the
Local Area Network (LAN) from their PC (the “client”) by connecting to a
central computer called a “server.” The server would lookup permissions for
each user to determine who had access to various resources such as printers and
files. Software companies began developing applications that allowed multiple
users to access the same data at the same time. This evolved into software
applications for communicating, with the first popular use of electronic mail
appearing at this time.
This networking and data sharing all stayed mainly within the
confines of each business. Sharing of electronic data between companies was a
very specialized function. Computers were now seen as tools to collaborate
internally within an organization. These networks of computers were becoming so
powerful that they were replacing many of the functions previously performed by
the larger mainframe computers at a fraction of the cost. It was during this
era that the first Enterprise Resource Planning (ERP) systems were developed
and run on the client-server architecture. An ERP system is an application with
a centralized database that can be used to run a company’s entire business.
With separate modules for accounting, finance, inventory, human resources, and
many more, ERP systems, with Germany’s SAP leading the
way, represented the state of the art in information systems integration.
ERP systems will be discussed in Chapter 9.
The Internet, World Wide Web and E-Commerce
The first long distance transmission between two computers
occurred on October 29, 1969 when developers under the direction of Dr. Leonard
Kleinrock sent the word “login” from the campus of UCLA to Stanford Research
Institute in Menlo Park, California, a distance of over 350 miles. The United
States Department of Defense created and funded ARPA Net (Advanced Research
Projects Administration), an experimental network which eventually became known
as the Internet. ARPA Net began with just four nodes or sites, a very humble
start for today’s Internet. Initially, the Internet was confined to use by
universities, government agencies, and researchers. Users were required to type
commands (today we refer to this as “command line”) in order to communicate and
transfer files. The first e-mail messages on the Internet were sent in the
early 1970s as a few very large companies expanded from local networks to the
Internet. The computer was now evolving from a purely computational device into
the world of digital communications.
In 1989, Tim Berners-Lee developed a simpler way for
researchers to share information over the Internet, a concept he called
the World Wide Web.[4] This
invention became the catalyst for the growth of the Internet as a way for
businesses to share information about themselves. As web browsers and Internet
connections became the norm, companies rushed to grab domain names and create
websites.
Registered trademark of Amazon.com,
Inc.
In 1991 the National
Science Foundation, which governed how the Internet was used, lifted
restrictions on its commercial use. Corporations soon realized the huge
potential of a digital marketplace on the Internet and in 1994 both eBay and
Amazon were founded. A mad rush of investment in Internet-based businesses led
to the dot-com boom through the late 1990s, and then the dot-com bust in 2000.
The bust occurred as investors, tired of seeing hundreds of companies reporting
losses, abandoned their investments. An important outcome for businesses was
that thousands of miles of Internet connections, in the form of fiber optic
cable, were laid around the world during that time. The world became truly
“wired” heading into the new millenium, ushering in the era of globalization,
which will be discussed in Chapter 11. This TED Talk video focuses on
connecting Africa to the Internet through undersea fibre optic cable.
The digital world also became a more dangerous place as
virtually all companies connected to the Internet. Computer viruses and worms,
once slowly propagated through the sharing of computer disks,
could now grow with tremendous speed via the Internet. Software and
operating systems written for a standalone world found it very difficult to
defend against these sorts of threats. A whole new industry of computer and
Internet security arose. Information security will be discussed in Chapter 6.
Web 2.0
As the world recovered from the dot-com bust, the use of
technology in business continued to evolve at a frantic pace. Websites became
interactive. Instead of just visiting a site to find out about a business and
then purchase its products, customers wanted to be able to customize their
experience and interact online with the business. This new type of interactive
website, where you did not have to know how to create a web page or do any
programming in order to put information online, became known as Web 2.0. This
new stage of the Web was exemplified by blogging, social networking, and
interactive comments being available on many websites. The new Web 2.0 world,
in which online interaction became expected, had a major impact on many
businesses and even whole industries. Many bookstores found themselves
relegated to a niche status. Video rental chains and travel agencies simply
began going out of business as they were replaced by online technologies. The
newspaper industry saw a huge drop in circulation with some cities such as New
Orleans no longer able to support a daily newspaper.
Disintermediation is the process of technology replacing a
middleman in a transaction. Web 2.0 allowed users to get information and news
online, reducing dependence of physical books and newspapers.
As the world became more connected, new questions arose.
Should access to the Internet be considered a right? Is it legal to copy a song
that had been downloaded from the Internet? Can information entered into a
website be kept private? What information is acceptable to collect from
children? Technology moved so fast that policymakers did not have enough time
to enact appropriate laws. Ethical issues surrounding information systems will
be covered in Chapter 12.
The Post-PC World, Sort of
Ray Ozzie, a technology visionary at Microsoft, stated in
2012 that computing was moving into a phase he called the post-PC world.[5] Now
six years later that prediction has not stood up very well to reality. As you
will read in Chapter 13, PC sales have dropped slightly in recent years while
there has been a precipitous decline in tablet sales. Smartphone sales have
accelerated, due largely to their mobility and ease of operation. Just as the
mainframe before it, the PC will continue to play a key role in business, but
its role will be somewhat diminished as people emphasize mobility as a central
feature of technology. Cloud computing provides users with mobile access to
data and applications, making the PC more of a part of the communications
channel rather than a repository of programs and information. Innovation in the
development of technology and communications will continue to move businesses
forward.
|
Eras of Business
Computing |
|||
|
Era |
Hardware |
Operating System |
Applications |
|
Mainframe |
Terminals connected
to mainframe computer |
Time-sharing |
Custom-written |
|
PC |
IBM PC or
compatible. Sometimes connected to mainframe computer via |
MS-DOS |
WordPerfect, |
|
Client-Server |
IBM PC “clone” on
a Novell Network. |
Windows for
Workgroups |
Microsoft |
|
World |
IBM PC “clone”
connected to company intranet. |
Windows XP |
Microsoft |
|
Web 2.0
(mid-2000s – present) |
Laptop connected
to company Wi-Fi. |
Windows 10 |
Microsoft |
|
Post-PC |
Smartphones |
Android, iOS |
Mobile-friendly |
Can Information Systems Bring Competitive Advantage?
It has always been the assumption that the implementation of
information systems will bring a business competitive advantage. If installing
one computer to manage inventory can make a company more efficient, then it can
be expected that installing several computers can improve business processes
and efficiency.
In 2003, Nicholas Carr wrote an article in the Harvard
Business Review that questioned this assumption. Entitled “I.T.
Doesn’t Matter.” Carr was concerned that information technology had become just
a commodity. Instead of viewing technology as an investment that will make a
company stand out, Carr said technology would become as common as electricity –
something to be managed to reduce costs, ensure that it is always running, and
be as risk-free as possible.
The article was both hailed and scorned. Can I.T. bring a
competitive advantage to an organization? It sure did for Walmart (see
sidebar). Technology and competitive advantage will be discussed in Chapter 7.
Sidebar: Walmart Uses Information Systems to Become the
World’s Leading Retailer
Registered Trademark of Walmart, Inc.
Walmart is the world’s largest retailer, earn 8.1
billion for the fiscal year that ended on January 31, 2018. Walmart
currently serves over 260 million customers every week worldwide through its
11,700 stores in 28 countries.[6]In 2018 Fortune magazine
for the sixth straight year ranked Walmart the number one company for annual
revenue as they again exceeded $500 billion in annual sales. The next closest
company, Exxon, had less than half of Walmart’s total revenue.[7] Walmart’s rise
to prominence is due in large part to making information systems a high
priority, especially in their Supply Chain Management (SCM) system known as
Retail Link.ing $14.3 billion on sales of $30
This system, unique when initially implemented in the
mid-1980s, allowed Walmart’s suppliers to directly access the inventory levels
and sales information of their products at any of Walmart’s more than eleven
thousand stores. Using Retail Link, suppliers can analyze how well their
products are selling at one or more Walmart stores with a range of reporting
options. Further, Walmart requires the suppliers to use Retail Link to manage
their own inventory levels. If a supplier feels that their products are selling
out too quickly, they can use Retail Link to petition Walmart to raise the
inventory levels for their products. This has essentially allowed Walmart to
“hire” thousands of product managers, all of whom have a vested interest in the
products they are managing. This revolutionary approach to managing inventory
has allowed Walmart to continue to drive prices down and respond to market
forces quickly.
Today Walmart continues to innovate with information
technology. Using its tremendous market presence, any technology that Walmart
requires its suppliers to implement immediately becomes a business standard.
For example, in 1983 Walmart became the first large retailer to require
suppliers to the use Uniform Product Code (UPC) labels on all products.
Clearly, Walmart has learned how to use I.T. to gain a competitive advantage.
Summary
In this chapter you have been introduced to the concept of
information systems. Several definitions focused on the main components:
technology, people, and process. You saw how the business use of information
systems has evolved over the years, from the use of large mainframe computers
for number crunching, through the introduction of the PC and networks, all the
way to the era of mobile computing. During each of these phases, new
innovations in software and technology allowed businesses to integrate technology
more deeply into their organizations.
Virtually every company uses information systems which leads
to the question: Does information systems bring a competitive
advantage? In the final analysis the goal of this book is to help you
understand the importance of information systems in making an organization more
competitive. Your challenge is to understand the key components of an
information system and how it can be used to bring a competitive advantage to
every organization you will serve in your career.
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