Chapter 2 – Information Systems:
Concepts and Management
TYPES OF INFORMATION SYSTEMS –
Computer-Based information systems – the IT architecture and infrastructure provide the
basis for all information systems in an organization. CBIS uses computer technology for a
specific purpose. IS is used synonymously with CBIS. The basic components of IS are:
• Hardware – devices such as motherboard, processor etc.
• Software – program that enable hardware to process data
• Database – collection of related files
• Network – a connecting system that permits computers to share resources
• Procedures – set of instructions how to combine above components to get desired
• People – users of hardware and software
Computer based IS:
• Perform high speed, high volume, numerical computations
• Provide fast, accurate communication
• High storage, small space and ease of access
• Quick, inexpensive access to information worldwide
• Quick interpretation of data
• Increased effectiveness and efficiency of people
• Automate both semiautomatic and manual tasks
Application programs – a computer program used for a specific purpose. HR application
programs are called HRIS. Collection of application systems for a certain department is called
department information system.
Breadth of support of information systems – IS can support parts, groups, or entire
organizations. For different departments there are different IS and are called functional area
information systems. These can be accounting IS, finance IS, production/operations IS,
marketing IS, and human resource IS. These are for functional areas. Just below these are ones that support the entire organization: ERP, or enterprise resource
planning are used to correct a lack of communication among the functional area IS. TPS are
transaction processing systems. Most ERPs are TPS but the vice versa case is not true. TPS
support the monitoring, collection, storage and processing of data from the organization’s basic
transactions, for e.g. a checkout counter at Wal-Mart.
IS connecting two or more organizations are interorganizational information systems (IOSs).
Supply chain management is an example of its processes. Electronic commerce systems are
another interorganizational information system. These conduct B2B and B2C electronic
commerce and are internet based.
Support for organizational employees – IS supports clerical workers, lower-level managers,
and middle managers. Knowledge workers are professionals who are expert in a certain field.
Executives use IS too for decision making. Clerical, middle and knowledge workers are
supported by office automation systems (OASs). FAIS or Functional area information
systems summarize data and prepare reports for middle and lower-level managers. Business
Intelligence (BI) systems are for complex, non-routine decisions for middle managers and
knowledge workers. Expert systems (ESs) duplicate the work of human experts by applying
reasoning capabilities, knowledge, and expertise within a specific domain. Dashboards, or
digital dashboards support all managers of the organization. Dashboards tailored for executives
are called executive dashboards. These provide information in the form of reports.
COMPETITIVE ADVANTAGE AND STRATEGIC INFORMATION SYSTEMS – a company
seeks competitive advantage through its competitive strategy. Strategic information systems,
SISs help companies implement strategic goals. Any IS that helps a firm in gaining competitive
advantage is an SIS.
Porter’s competitive forces model – companies use this model to develop strategies. The
internet has changed competition and each force is analyzed against the web for today’s
• Threat of entry of new competitors – depends on the easiness of barriers to entry. The
internet reduces the entry barrier, eliminating the need for storefronts, for e.g. the music
industry and stock brokers.
• Bargaining power of suppliers – when buyers have few choices, the supplier power is
high. The internet allows to find alternatives but run the risk of locking in.
• Bargaining power to buyers – when market has a lot of choices, the buyers have high
power. Example is student buying textbooks online and have more options than they did
before the advent of internet. Internet can also reduce switching costs.
• Threat of substitutes – this threat is high if there are substitutes to a product. Examples
are books, music etc. available online instead of physically increasing the threat • Rivalry among existing fi