Chapter 01: An Introduction to

Information Systems

Stair, Reynolds and Chesney: Principles of Business Information Systems, Fourth edition (9781473774605)
© Cengage Learning 2021
 Principles

• The value of information is directly linked to how it helps decision

makers achieve the organization’s goals
• Computers and information systems are constantly making it
possible for organizations to improve the way they conduct
business
• Knowing the potential impact of information systems and having the
ability to put this knowledge to work can result in a successful
personal career, organizations that reach their goals, and a
society with a higher quality of life
• System users, business managers, and information systems
professionals must work together to build a successful information
system
• Information systems must be applied thoughtfully and carefully so
that society, business, and industry can reap their enormous benefits

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 Defining an Information System 1

What is a system?

• A system is a set of elements or components that

interact to accomplish goals
• Systems have inputs, processing mechanisms,
outputs, and feedback
• A system processes the input to create the output
• Examples of systems are everywhere – an automatic car
wash, the heating in a building, the human body; you
should be able to think of many more

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 Defining an Information System 2

What is information?

• Information is a collection of facts (Processed data)

• It can take many forms – text, numbers, images, audio
clips and video clips are all examples
• A closely related term is data
• These two terms are often used interchangeably

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 Defining an Information System 3

Therefore…
• an information system (IS) is a set of interrelated
components that collect (input), manipulate & store
(process), and disseminate (output) information, and
provide a feedback mechanism to meet an objective
• In information systems, input is the activity of gathering
and capturing data
• Processing means converting or transforming this input
into useful outputs
• Output involves producing useful information, usually in
the form of documents and reports
• Feedback is information from the system that is used to
make changes to input or processing activities

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 The Characteristics of Valuable
Information

To be useful to managers, information should have some

or possibly all of the following characteristics (Pg 9):

Accessible Accurate
Complete Economical
Flexible Relevant
Reliable Secure
Simple Timely
Verifiable

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 Self-Test Questions

1. What are two characteristics of valuable information?

2. Which type of data includes noises, sounds, or tones?

3. Name some other formats for information.

4. Name the essential elements of a system.

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 Self-Test Answers

1. What are two characteristics of valuable information?

ANSWER: Accessible, accurate, complete, economical, flexible,
relevant,
reliable, secure, simple, timely, and verifiable

2. Which type of data includes noises, sounds, or tones?

ANSWER: Audio data

3. Name some other formats for information.

ANSWER: Video and text

4. Name the essential elements of a system.

ANSWER: Input, processing, output and feedback

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 Manual and Computerized
Information Systems

• An information system can be manual, for

example paper-based, or computerized
• 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

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 Hardware

• Hardware consists of computer equipment used to

perform input, processing, and output activities
• Input devices include keyboards, mice and other pointing
devices, automatic scanning devices, and equipment that
can read magnetic ink characters
• Processing devices include computer chips that contain
the central processing unit and main memory
• Output devices include computer screens and printers
• Storage devices
• Communication (internal/external)

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 Software

• Software consists of the computer programs that

govern the operation of the computer
• There are two types of software*:
System software controls basic computer
operations, including start-up, input and output.
An example is Microsoft Windows
Applications software allows you to accomplish
specific tasks, including word processing and
drawing charts. An example is Microsoft Excel

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 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
information on customers, employees, inventory,
competitors’ sales, online purchases, and much
more
o Rows - Records
o Columns – Attributes

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Telecommunications, Networks, and
the Internet

• Telecommunication is the electronic transmission of

signals for communications, which enables organizations
to carry out their processes and tasks through computer
networks
• Networks connect computers and equipment in a
building, around the country, or around the world to enable
electronic communication (LAN, WAN, MAN)
• The Internet is the world’s largest computer network,
actually consisting of thousands of interconnected
networks, all freely exchanging information

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 People

• People are the most important element in most

computer-based information systems
• The people involved include users of the system
and information systems personnel, including all
the people who manage, run, program, and
maintain the system

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 Procedures

• Procedures include the strategies, policies, methods, and

rules for using the CBIS, including the operation,
maintenance, and security of the computer
• Good procedures can help companies take advantage of
new opportunities and avoid potential disasters
• Poorly developed and inadequately implemented
procedures can cause people to waste their time or result
in inadequate responses to disasters

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 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 information, and decision support*
• These systems help employees in organizations
accomplish routine and special tasks
• They are often integrated in one product and delivered by
the same software package
• For example, some enterprise resource planning
packages process transactions, deliver information, and
support decisions
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 Electronic and Mobile Commerce

• E-commerce involves any business transaction executed

electronically
• Some types of e-commerce are:
– B2B (business-to-business): commerce between companies
– B2C (business-to-consumer, B2C): commerce between companies
and consumers
– C2C (consumer-to-consumer): commerce between consumers and
other consumers
• B2B represents the major volume of e-commerce, and its fastest-
growing segment
• Mobile commerce (m-commerce) refers to transactions conducted
anywhere, anytime
• 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

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 Enterprise Resource Planning

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

of integrated programs that manage the vital business
operations for an entire multi-site, global organization
• The scope of an ERP system might vary from company to
company
• An ERP might do the job of some or all of the other types of
Business Information Systems, particularly the Transaction
Processing System, Management Information System and
Decision Support System
• They are used to schedule inventory purchases and the
manufacturing process, so that the right number of products
are built at the right time, to meet customer demand

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 Transaction Processing Systems

• A Transaction Processing System is an ‘Operational

System’
• Operational systems help organizations perform and
integrate important tasks, such as paying employees and
suppliers, controlling inventory, sending out invoices, and
ordering supplies
• A transaction processing system (TPS) is an
organized collection of people, procedures, software,
databases, and devices used to record completed
business transactions
• A transaction is any business-related exchange such as
payments to employees, sales to customers, or payments
to suppliers

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 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 (e.g., running out stock)
• An MIS focuses on operational efficiency
• The output of a TPS is the input to a MIS
• MIS typically provide standard reports generated
with data and information from the TPS
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 Decision Support System

• A decision support system (DSS) is an organized

collection of people, procedures, software, databases, and
devices that support problem-specific decision-making
• A human being is still in charge of making the decision,
unlike in a system with Artificial Intelligence (Q)
• Decision support systems are used when the problem is
complex and the information needed to make the best
decision is difficult to obtain and use (Q)

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 Specialized Business Information
Systems

• Knowledge management systems (KMS): an

organized collection of people, procedures, software,
databases, and devices to create, store, share, and use
the organization’s knowledge and experience
• Artificial Intelligence: attempts to have the computer
system take on the characteristics of human intelligence.
Applications include robotics and natural language
processing
• Virtual reality: simulation of a real or imagined
environment that can be experienced visually in three
dimensions (10 Best Examples of Virtual Reality by Bernard
Marr - https://www.youtube.com/watch?v=zcEFGV7JT18)
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 Systems Development

Systems development is the activity of creating or

modifying business systems. The main stages are as follows:
– Systems investigation, where a clear understanding of the problem
to be solved is developed
– Systems analysis, where the problems and opportunities of the
existing system are defined
– Systems design, which determines how the new system will work to
meet the business needs defined during systems analysis
– Systems implementation, which 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
– Systems maintenance and review checks and modifies the
system so that it continues to meet changing business needs

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Security, Privacy, and Ethical Issues

• Security and privacy fears persist with computer users

• Many people experience ‘cyberbullying’ at home, school or
work
• Many criminal gangs are trying to steal financial information
online
• Some IS professionals believe that computers may create new
opportunities for unethical behaviour – unethical investors
have placed false rumours or incorrect information about a
company on the Internet and tried to influence its stock price
to make money
• To protect against these and other threats, security and
control measures can be installed
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 Security and control measures

• Firewalls
• Anti virus software
• Password protection
• Physical protection – a security guard outside the
room where the servers are located for instance
• Security procedures – users must change
passwords every month, for instance

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 Global Challenges in IS 1

Changes in society as a result of increased international trade and

cultural exchange, often called globalization, has always had a big
impact on organizations and their information systems:
• Cultural challenges: countries and regional areas have their own
cultures
• Language challenges
• Time and distance challenges
• 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 different currencies can vary
significantly over time, making international trade more difficult and
complex

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 Global Challenges in IS 2

• Product and service challenges: traditional products that are

physical or tangible, such as a car or bicycle, can be difficult to deliver
to the global market
• Technology transfer issues: most governments don’t allow certain
military-related equipment and systems to be sold to some countries.
• National laws: all countries have a set of laws that must be obeyed
by citizens and organizations operating in the country. Laws restricting
how data enters or exits a country are often called trans-border data-
flow laws. Keeping track of these laws and incorporating them into the
procedures and computer systems of multinational and trans-national
organizations can be very difficult and time consuming, requiring
expert legal advice
• Trade agreements: countries often enter into trade agreements with
each other

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 Summary

• Information: collection of facts organized in

such a way that they have value beyond the facts
themselves
• System: a set of elements that interact to
accomplish a goal
• Components of an information system:
input, processing, output, and feedback

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 Summary (continued)

• 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
• Transaction processing system (TPS): an
organized collection of people, procedures,
software, databases, and devices used to record
completed business transactions

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 Summary (continued)

• Management information system (MIS): an organized

collection of people, procedures, software, databases, and
devices that provides routine information to managers and
decision makers
• Decision support system (DSS): an organized
collection of people, procedures, software, databases, and
devices used to support problem-specific decision making
• Systems development: creating or modifying existing
business systems

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