PrinciplesofInformationSystems13thed_.pdf

PART 1 Information Systemsin Perspective

Chapter 1
An Introduction to Information
Systems

Chapter 2
Information Systems in Organizations

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1
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

CHAPTER

1
An Introduction to
Information Systems

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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

Know?Did Yo
u

• The number of smartphones sold worldwide in 2015
exceeded 1.4 billion—over twice the combined sales of
desktop, laptop, and tablet computers. The smartphone
is increasingly becoming the device of choice for
accessing the Internet and corporate databases.

• Although the success rate has improved over time with
improved methods, training, and tools, 94 percent of
very large software projects fail or are challenged. For
example, Federal officials badly managed the develop-
ment of a Web site to sell health insurance under the

Affordable Care Act, costing taxpayers hundreds of
millions of dollars in cost overruns.

• Financial losses from cybercrime and the cost of hard-
ware, software, and various countermeasures imple-
mented to fight cybercrime are estimated to be as high
as $400 billion annually worldwide. A data breach at
Target exposed personal information about 110 million
customers, led the CEO to resign, and cost the com-
pany an estimated $148 million.

Principles Learning Objectives

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

• Information systems are composed of fundamen-
tal components that must be carefully assembled
and integrated to work well together.

• Managers have an essential role to play in the
successful implementation and use of information
systems—that role changes depending on which
type of IS system is being implemented.

• An organization’s infrastructure technology forms
the foundation upon which its systems and appli-
cations are built.

• Organizations employ a variety of information
systems to improve the way they conduct busi-
ness and make fact-based decisions.

• Many challenges and potential benefits are asso-
ciated with harnessing the rapid growth of data
within organizations.

• Strategic planning and project management are
keys to ensuring that the organization is working
effectively on the right projects.

• Information systems must be applied thoughtfully
and carefully so that society, organizations, and
individuals around the globe can reap their enor-
mous benefits.

• Distinguish data from information and knowl-
edge, and describe the characteristics of
quality data.

• Identify the fundamental components of an
information system and describe their
function.

• Identify the three fundamental information system
types and explain what organizational comple-
ments must be in place to ensure successful
implementation and use of the system.

• Identify and briefly describe the role of each
component of an organization’s technology
infrastructure.

• Identify the basic types of business information
systems, including who uses them, how they are
used, and what kinds of benefits they deliver.

• Describe how organizations are using business
intelligence and business analytics to capitalize
on the vast amount of data becoming available.

• Discuss why it is critical for business objectives
and IS activities to be well aligned through system
planning, development, and acquisition.

• Identify several major IT security threats as well as
some of the legal, social, and ethical issues
associated with information systems.

Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

Why Learn about Information Systems?
We live in an information economy. Information itself has real value, and in to stay competitive,
organizations require a steady flow of information about their business partners, competitors,
customers, employees, markets, and suppliers. Information systems are increasingly being used to
gather, store, digest, analyze, and make sense out of all this information. Indeed, information systems
are even embedded in and control many of the products we use on a daily basis. Using information
systems, individuals communicate instantaneously with one another; consumers make purchases online
using mobile devices; project members dispersed globally and across multiple organizations collaborate
effectively; financial institutions manage billions of dollars in assets around the world; and
manufacturers partner with suppliers and customers to track inventory, supplies, and distribute
goods faster than ever before.

Information systems will continue to change businesses and the way we live. Indeed, many
corporate leaders are using technology to rework every aspect of their organization from product and
service creation through production, delivery, and customer service. To prepare to participate in and
lead these innovations, you must be familiar with fundamental information concepts. Regardless of your
college major or chosen career, knowledge of information systems is indispensable in helping you land
your first job. The ability to recognize and capitalize on information system opportunities can make you
an even more valuable member of your organization and will ultimately help advance your career.

As you read this chapter, consider the following:

• How are organizations using information systems to accomplish their objectives and meet ever-changing
business needs?

• What role might you have in identifying the need for, acquiring, or using such systems?

This chapter presents an overview of the material covered in the text. The
chapter is divided into five major sections corresponding to the five sections
of the text. The chapters included in each section of the text are highlighted
as a subsection and briefly summarized. The essential material will receive
fuller treatment in subsequent chapters.

Part 1: Information Systems in Perspective

We begin by examining the topics covered in “Part 1: Information Systems in
Perspective,” which includes an “An Introduction to Information Systems”
and a discussion of “Information Systems in Organizations.”

An Introduction to Information Systems
Information is a central concept of this book. The term is used in the title of
the book, in this section, and in 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. Information is not the same thing as
data, and knowledge is different from both data and information. These con-
cepts will now be explained.

Data, Information, and Knowledge
Data consists of raw facts, such as an employee number, total hours worked
in a week, an inventory part number, or the number of units produced on a
production line. As shown in Table 1.1, several types of data can represent
these facts. Information is a collection of data organized and processed so
that it has additional value beyond the value of the individual facts. For exam-
ple, a sales manager may want individual sales data summarized so it shows
the total sales for the month. Providing information to customers can also

data: Raw facts such as an employee
number or total hours worked in a
week.

information: A collection of data
organized and processed so that it has
additional value beyond the value of the
individual facts.

4 PART 1 • Information Systems in Perspective

Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

help companies increase revenues and profits. For example, social shopping
Web site Kaboodle brings shoppers and sellers together electronically so they
can share information and make recommendations while shopping online.
The free exchange of information stimulates sales and helps ensure shoppers
find better values.

Another way to appreciate the difference between data and information is
to think of data as the individual items in a grocery list—crackers, bread,
soup, cereal, coffee, dishwashing soap, and so on. The grocery list becomes
much more valuable if the items in the list are arranged in by the aisle
in which they are found in the store—bread and cereal in aisle 1, crackers
and soup in aisle 2, and so on. Data and information work the same way.
Rules and relationships can be set up to organize data so it becomes useful,
valuable information.

The value of the information created depends on the relationships defined
among existing data. For instance, you could add specific identifiers to the items
in the list to ensure that the shopper brings home the correct item—whole
wheat bread and Kashi cereal in aisle 1, saltine crackers and chicken noodle
soup in aisle 2, and so on. By doing so, you create a more useful grocery list.

Turning data into information is a process, or a set of logically related
tasks performed to achieve a defined outcome. The process of defining rela-
tionships among data to create useful information requires knowledge,
which is the awareness and understanding of a set of information and the
ways in which that information can be made useful to support a specific task
or reach a decision. In other words, information is essentially data made
more useful through the application of knowledge. For instance, there are
many brands and varieties of most items on a typical grocery list. To shop
effectively, the grocery shopper needs to have an understanding of the needs
and desires of those being shopped for so that he knows to purchase one can
of Campbell’s (not the store brand!) low-sodium chicken noodle soup for the
family member who is diabetic along with two cans of Campbell’s regular
chicken noodle soup for everyone else.

In some cases, people organize or process data mentally or manually.
In other cases, they use a computer. This transformation process is shown
in Figure 1.1.

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 per-
form tasks more efficiently and effectively. Many businesses assume that
reports are based on correct, quality information, but, unfortunately, that is
not always true. For example, Experian (a global information services firm
that provides credit services, marketing services, decision analytics, and con-
sumer services) estimates that on average, 22 percent of an organization’s cus-
tomer contact data is wrong.1 Companies can easily waste over $100 per
inaccurate customer contact data record on things like direct-mail marketing
sent to wrong addresses and the inability to properly track leads. For an

TABLE 1.1 Types of data
Data Represented By

Alphanumeric data Numbers, letters, and other characters

Audio data Sounds, noises, or tones

Image data Graphic images and pictures

Video data Moving images or pictures

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

knowledge: 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.

CHAPTER 1 • An Introduction to Information Systems 5

Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

organization with 100,000 customers and a 22 percent error rate, that projects
to a loss of $2.2 million.2

Characteristics of Quality Information
Fundamental to the quality of a decision is the quality of the information used
to reach that decision. Any organization that stresses the use of advanced infor-
mation systems and sophisticated data analysis before information quality is
doomed to make many wrong decisions. Table 1.2 lists the characteristics that
determine the quality of information. The importance of each of these charac-
teristics varies depending on the situation and the kind of decision you are try-
ing to make. For example, with market intelligence data, some inaccuracy and
incompleteness is acceptable, but timeliness is essential. Market intelligence
data may alert you that a competitor is about to make a major price cut. The
exact details and timing of the price cut may not be as important as being
warned far enough in advance to plan how to react. On the other hand, accu-
racy and completeness are critical for data used in accounting for the manage-
ment of company assets, such as cash, inventory, and equipment.

What Is an Information System?
Another central concept of this book is that of an information system. People and
organizations use information systems every day. An information system (IS)
is a set of interrelated components that collect, process, store, and disseminate
data and information; an information system provides a feedback mechanism to
monitor and control its operation to make sure it continues to meet its goals and
objectives. The feedback mechanism is critical to helping organizations achieve
their goals, such as increasing profits or improving customer service.

A computer-based information system (CBIS) is a single set of hard-
ware, software, databases, networks, people, and procedures that are config-
ured to collect, manipulate, store, and process data into information.
Increasingly, companies are incorporating computer-based information systems

FIGURE 1.1
Process of transforming data
into information
Transforming data into information
starts by selecting data, then orga-
nizing it, and finally manipulating
the data.

Select data

Organize data

Data (2,1)

Data (3,1)

Data (n,1)

Data (2,2)

Data (3,2)

Manipulate data

Total 1 Total 2 Total 3

Data (2,3)

Data (3,3)

Data (n,2) Data (n,3)

Data
Data

Data

Data (1,1) Data (1,2) Data (1,3)

information system (IS): A set of
interrelated components that collect,
process, store, and disseminate data
and information; an information system
provides a feedback mechanism to
monitor and control its operation to
make sure it continues to meet its goals
and objectives.

computer-based information
system (CBIS): A single set of
hardware, software, databases, net-
works, people, and procedures that are
configured to collect, manipulate, store,
and process data into information.

6 PART 1 • Information Systems in Perspective

Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

into their products and services. Investment companies offer their customers a
wide range of powerful investment tools, including access to extensive online
research. Automobiles are available with advanced navigation systems that not
only guide you to your destination but also incorporate information regarding
the latest weather and traffic conditions to help you avoid congestion and traf-
fic delays. Watches, digital cameras, mobile phones, music players, and other
devices rely on CBIS to bring their users the latest and greatest features.

The components of a CBIS are illustrated in Figure 1.2. An organization’s
technology infrastructure includes all the hardware, software, databases,
networks, people, and procedures that are configured to collect, manipulate,

TABLE 1.2 Characteristics of quality information
Characteristic Definition

Accessible 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.

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.

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

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

Flexible 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 amount of money the company has invested in inventory.

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

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 may not be
reliable.

Secure Information should be secure from access by unauthorized
users.

Simple Information should be simple, not complex. Sophisticated and
detailed information might not be needed. In fact, too much
information can cause information overload, whereby a deci-
sion maker has too much information and is unable to deter-
mine what is really important.

Timely 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.

Verifiable 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.

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

CHAPTER 1 • An Introduction to Information Systems 7

Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

store, and process data into information. The technology infrastructure is a set
of shared IS resources that form the foundation of each computer-based infor-
mation system.

People make the difference between success and failure in all organiza-
tions. Jim Collins, in his book, Good to Great, said, “Those who build great
companies understand that the ultimate throttle on growth for any great com-
pany is not markets, or technology, or competition, or products. It is one
thing above all others: the ability to get and keep enough of the right
people.”3 Thus, it comes as no surprise that people are the most important
element in computer-based information systems.

Good systems can enable people to produce extraordinary results. They
can also boost job satisfaction and worker productivity.4 Information systems
personnel include all the people who manage, run, program, and maintain
the system, including the chief information officer (CIO), who leads the IS
organization. End users are people who work directly with information sys-
tems to get results. They include financial executives, marketing representa-
tives, and manufacturing line operators.

A procedure defines the steps to follow to achieve a specific end result,
such as enter a customer , pay a supplier invoice, or request a current
inventory report. Good procedures describe how to achieve the desired end
result, who does what and when, and what to do in the event something
goes wrong. When people are well trained and follow effective procedures,
they can get work done faster, cut costs, make better use of resources, and
more easily adapt to change. When procedures are well documented, they
can greatly reduce training costs and shorten the learning curve.

Using a CBIS involves setting and following many procedures, including
those for the operation, maintenance, and security of the system. For

Software

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FIGURE 1.2
Components of a computer-based information system
Hardware, software, networks, people, and procedures are part of a business’s technology infrastructure.

procedure: A set of steps that need
to be followed to achieve a specific end
result, such as enter a customer ,
pay a supplier invoice, or request a
current inventory report.

8 PART 1 • Information Systems in Perspective

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example, some procedures describe how to gain access to the system
through the use of some log-on procedure and a password. 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 lengthy business disruptions in the event of natural disasters. Poorly
developed and inadequately implemented procedures, however, can cause
people to waste their time on useless rules or result in inadequate
responses to disasters.

Information Systems in Organizations
Most organizations have a number of different information systems. When
considering the role of business managers in working with IS, it is useful to
divide information systems into three types: personal IS, group IS, and enter-
prise IS.

Personal IS includes information systems that improve the productivity
of individual users in performing stand-alone tasks. Examples include per-
sonal productivity software, such as word-processing, presentation, and
spreadsheet software.

In today’s fast-moving, global work environment, success depends on our
ability to communicate and collaborate with others, including colleagues, cli-
ents, and customers. Group IS includes information systems that improve
communications and support collaboration among members of a workgroup.
Examples include Web conferencing software, wikis, and electronic corporate
directories.

Enterprise IS includes information systems that organizations use to
define structured interactions among their own employees and/or with
external customers, suppliers, government agencies, and other business part-
ners. Successful implementation of these systems often requires the radical
redesign of fundamental work processes and the automation of new pro-
cesses. Target processes may include purely internal activities within the
organization (such as payroll) or those that support activities with external
customers and suppliers ( processing and purchasing). Three examples
of enterprise IT are transaction processing, enterprise, and interorganiza-
tional systems.

For each type of IS, certain key organizational complements must be in
place to ensure successful implementation and use of the system. These com-
plements include:

● Well-trained workers. Employees must be well trained and understand
the need for the new system, what their role is in using or operating the
system, and how to get the results they need from the system.

● System support. Trained and experienced users who can show others
how to gain value from the system and overcome start-up problems.

● Better teamwork. Employees must understand and be motivated to work
together to achieve the anticipated benefits of the system.

● Redesigned processes. New systems often require radical redesign of
existing work processes as well as the automation of new processes.

● New decision rights. Employees must understand and accept their new
roles and responsibilities including who is responsible for making what
decisions. Roles and responsibilities often change with introduction of a
new system.

Managers have an essential role to play in the successful implementation
and use of information systems. That role changes depending on which type
of IS system is being implemented, as shown in Table 1.3, which also high-
lights other characteristics and provides examples of each type.

personal IS: An information system
that improves the productivity of indi-
vidual users in performing stand-alone
tasks.

group IS: An information system that
improves communications and support
collaboration among members of a
workgroup.

enterprise IS: An information sys-
tem that an organization uses to define
structured interactions among its own
employees and/or with external custo-
mers, suppliers, government agencies,
and other business partners.

organizational complement: A
key component that must be in place to
ensure successful implementation and
use of an information system.

CHAPTER 1 • An Introduction to Information Systems 9

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Critical
Thinking
Exercise

Kroger’s QueVision System Improves Customer Service
Kroger has annual sales in excess of $100 billion and operates stores across the
United States under various names, including Kroger’s, Ralph’s, and Harris Teeter.
In surveys, Kroger’s customers have consistently rated waiting at the checkout
lane as the worst part of the grocery shopping experience. In response, Kroger
developed its QueVision computer-based information system, which relies on
real-time data feeds from point-of-sale systems as well as infrared sensors over
store doors and cash registers to count customers entering the store and standing
at checkout lanes. The system also uses historical point-of-sale records to forecast
the number of shoppers that can be expected and, therefore, the number of cash-
iers that will be needed. All this was done to achieve the goal of ensuring that
customers never have more than one person ahead of them in the checkout lane.
The system provides feedback by displaying customer checkout time on a screen
that both employees and customers can see—delivering a visible measure of how
well the whole system is working. The system is now deployed at over 2,300
stores in 31 states and has cut the average time a customer must wait to begin
checkout from four minutes to 30 seconds.5

You are a new store manager at a Kroger store where the QueVision system has
been deployed for two years. Unfortunately, since you took charge of this store two
weeks ago, you have received numerous complaints about the system from store cash-
iers and baggers. These employees are requesting that you either turn off the screen
that displays customer checkout time or add more cashiers and baggers to each shift
to reduce checkout times, which are currently averaging over six minutes.

Review Questions
1. Would you classify the QueVision system as a personal, group, or enterprise

system?
2. Four key organizational complements must be in place to ensure successful

implementation and use of a new system. Which two of these components
seem to be missing at your store?

TABLE 1.3 Examples and characteristics of each type of information system
Personal IS Group IS Enterprise IS

Examples Personal productivity soft-
ware, decision-support
system

Email, instant messaging,
project management
software

Transaction processing
systems, enterprise sys-
tems, interorganizational
systems

Benefits Improved productivity Increased collaboration Increased standardization
and ability to monitor work

Organizational comple-
ments (including well-
trained workers, better
teamwork, redesigned
processes, and new
decision rights)

● Does not bring com-
plements with it

● Partial benefits can be
achieved without all
complements being in
place

● At least some comple-
ments must be in place
when IS “goes live”

● Allows users to imple-
ment and modify com-
plements over time

● Full complements must
be in place when IS
“goes live”

Manager’s role ● Ensure that employees
understand and con-
nect to the change

● Encourage use
● Challenge workers to

find new uses

● Demonstrate how
technology can be
used

● Set norms for
participation

● Identify and put into
place the full set of
organizational comple-
ments prior to adoption

● Intervene forcefully
and continually to
ensure adoption

10 PART 1 • Information Systems in Perspective

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Critical Thinking Questions
1. Employees are requesting that you turn off the screen that displays customer

checkout time or add more cashiers and baggers to each shift to reduce wait
times. What action would you take to address the concerns of the cashiers
and baggers?

a. Turn off the QueVision system now.
b. Add more cashiers and baggers to each shift as soon as possible.
c. Observe the checkout process and performance of cashiers and baggers

for a few days before taking action.
d. Tell the cashiers and baggers their performance is unacceptable and to

“step it up.”

2. Provide a brief rationale for your recommended course of action.

Part 2: Information Technology Concepts

…