CHAPTER 2

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Information Systems Concepts and Management

Opening Case

Electronic records to transform healthcareThere are about 2,000 health-based activities every minute in Canada. These activities could be a visit to a family doctor, an emergency tooth extraction, taking of x-rays, or many other such activities.

The Business ProblemHow do doctors access a patient’s health record if the person has been to many different providers in the last few years? What if an x-ray negative is sent to a hospital for viewing but is lost or damaged in transit? Even within a single hospital, information about a patient can easily be unavailable as the patient moves to different departments to receive tests and treatment.

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Opening Case

Discussion What are some of the reasons that doctors or

hospitals might purchase information systems that do not meet their needs?

Describe additional information systems that could be used by doctors or hospitals to meet the needs of their patients or employees.

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Opening Case

What we learned from this case? The opening case illustrates the ambitious desire to

have electronic records available for the Canadian health care system. Some provinces and hospitals have been able to implement such systems (for example, the province of Alberta and the London Health Services Centre in Ontario), but there have also been financial disasters, such as happened with e-health in Ontario.

These problems show why it is important to effectively manage information systems, our first topic in this chapter.

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Agenda

2.1 Information Technology (IT) Governance and Management

Corporate Governance

IT Governance

2.2 Types and Purposes of Information Systems

2.2.1 Computer-based information systems

2.2.2 Application programs

2.2.3 Breadth of support of information systems

2.2.4 Support for organizational employees

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Agenda

2.3 Competitive Advantage and Strategic Information Systems

2.3.1 Definition

2.3.2 Porter’s competitive forces model

2.3.3 Porter’s value chain model

2.3.4 Strategies for competitive advantage

2.4 The Importance of Information Systems and the Management 2.4.1 IT affects employees

2.4.2 IT provides quality of life improvement

2.4.3 Managing information resources

2.4.4 The role of the IS department

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LEARNING OBJECTIVES

1. Define IT governance and explain why information systems need to be effectively managed.(2.1)

2. Describe the components, types, and purposes of information systems. (2.2)

3. Describe Porter’s competitive forces model and his value chain model, explaining five strategies companies can use to improve their competitive positions.(2.3)

4. Explain the importance of information systems to organizations and society and describe how information resources are managed.(2.4)

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CHAPTER OVERVIEW

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2.1 Information Technology (IT) Governance and Management

Corporate governance IT governance

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As described in our first chapter, many organizations have business strategies that then drive the information systems strategies. These strategies take account of risks or potential problems that could occur and the opportunities that organizations have to serve their customers better or create more value for their stakeholders.

Large organizations expect the board of directors and executives to effectively manage the organization, which is called corporate governance.

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IT governance, is “a structure of relationships and processes to direct and control the enterprise in order to achieve the enterprise’s goals by adding value while balancing risk versus return over IT and its processes.”

IT governance is about managing IT throughout the organization. This includes planning, acquisition, implementation, and ongoing support, as well as monitoring and evaluation so that decisions can be made about potential changes.

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2.2 Types and Purposes of Information Systems

2.2.1 Computer-based information systems 2.2.2 Application programs 2.2.3 Breadth of support of information

systems 2.2.4 Support for organizational employees

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2.2.1 Computer based information systemsDefinition

A computer-based information system (CBIS) is an information system that uses computer technology to collect, process, store, analyze, and disseminate information for a specific purpose.

Basic Components of Information Systemso Hardwareo Softwareo Databaseo Networko Procedureso People

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Hardware is a device such as the processor, monitor, keyboard, and printer. Together these devices accept data and information, process it, and display it.

Software is a program or collection of programs that enables the hardware to process data.

A database is a collection of related files or tables containing data.

A network is a connecting system (wire or wireless) that permits different computers to share resources.

Procedures are the set of instructions about how to combine the above components in order to process information and generate the desired output.

People are those individuals who use the hardware and software, interface with it, or use its output.

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2.2.2 Application programs

An application program is a computer program designed to support a specific task or business process. Each functional area or department within a business organization uses dozens of application programs. Note that application programs are synonymous with applications.

For instance, the human resources department sometimes uses one application for screening job applicants and another for monitoring employee turnover.

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2.2.3 Breadth of support of information systems

Functional area information systems (FAIS)Transaction processing systems (TPS)Electronic commerce systems (B2B,B2C,etc)

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Functional area information systems (FAIS) support particular functional areas in an organization.

Transaction processing systems (TPS) support the monitoring, collection, storage, and processing of data from the organization’s basic business transactions.

Electronic commerce systems are another type of inter-organizational information system. These systems enable organizations to conduct transactions, called business-to-business (B2B) electronic commerce, and customers to conduct transactions with businesses, called business-to-consumer (B2C) electronic commerce. They are typically Internet-based. 17

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2.2.4 Support for organizational employeesOffice automation systemsBusiness intelligence systemsExpert systemsDashboards

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Office automation systems (OASs) typically support the clerical staff, lower and middle managers, and knowledge workers. These people use OASs to development documents, schedule resources, and communicate.

Business intelligence systems (BIS) provide computer-based support for complex, non-routine systems, primarily for middle managers and knowledge workers.

Expert systems (ES) attempt to duplicate the work of human experts by applying reasoning capabilities, knowledge, and expertise within a specific domain.

Dashboards or Digital Dashboards support all managers by providing rapid access to timely information and direct access to structured information in the form of reports.

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2.3 Competitive Advantage and Strategic Information Systems

2.3.1 Definition 2.3.2 Porter’s competitive forces model

2.3.3 Porter’s value chain model2.3.4 Strategies for competitive advantage

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2.3.1 Definition

A competitive strategy is a statement that identifies a business’s strategies to compete, its goals, and the plans and policies that will be required to carry out those goals.

Through its competitive strategy, an organization seeks a competitive advantage in an industry. That is, it seeks to outperform its competitors in some measure such as cost, quality, or speed.

Competitive advantage helps a company control a market and generate larger-than-average profits. 23

2.3.2 Porter’s competitive forces model

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The bargaining power of buyers is high when buyers have many choices and low when buyers have few choices.

The threat of substitute products or services is high when there are many substitutes for an organization’s products or services and low where there are few substitutes.

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The bargaining power of buyers is high when buyers have many choices and low when buyers have few choices.

The threat of substitute products or services is high when there are many substitutes for an organization’s products or services and low where there are few substitutes.

The rivalry among firms in an industry is high when there is fierce competition and low when there is not.

A barrier to entry is a product or service feature that customers expect from organizations in a certain industry.

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2.3.3 Porter’s Value Chain modelThis model identifies specific activities whereorganizations can use competitive strategies forgreatest impact.

◦ Support activities

◦ Primary activities

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Primary activities are those business activities that relate to the production and distribution of the firm’s products and services, thus creating value for which customers are willing to pay for. These primary business activities include inbound logistics, operations, outbound logistics, marketing and sales, and customer service.

Support activities do not add value directly to a firm’s products and services, but support the primary activities. Support activities include accounting, finance, management, human resources management, product and technology development (R&D), and procurement.

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2.3.4 Strategies for competitive advantageCost LeadershipDifferentiation InnovationOperational EffectivenessCustomer-orientation

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Cost Leadership. Produce products and/or services at the lowest cost in the industry.

Differentiation. Offer different products, services or product features.

Innovation. Introduce new products and services, add new features to existing products and services or develop new ways to produce them.

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Operational Effectiveness. Improve the manner in which internal business processes are executed so that a firm performs similar activities better than its rivals.

Customer-orientation. Concentrate on making customers happy.

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2.4 The Importance of Information Systems and Management

2.4.1 IT affects employees2.4.2 IT provides quality of life improvement 2.4.3 Managing information resources2.4.4 The role of the IS department

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2.4 The Importance of Information Systems and their Management IT will reduce the number of middle

managers. IT will change the manager’s job. IT impacts employees at work. IT provides quality-of-life improvements.

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Honda’s ASIMO robotSee video of ASIMO in action

DeLaval Voluntary Milking System (p. 47)

2.4.2 IT Provides Quality of Life Improvements

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A roving robot camera that can be steered remotely and wirelessly. It can move through the throat, esophagus, stomach, and small andlarge intestines.

The Pill Cam: Wireless endoscopy

The daVinci robot in use

Improvements in Health Care

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Medical SimulationTwo physicians perform a procedure on a simulated human (mannequin)

Enabling people with disabilities to work with computersa) Computer for visually-impaired userb) Computer for hearing-impaired userc) Computer for motor-impaired user

2.4.3 Managing Information Resources Which IT resources are managed and by whom?

◦ During the early 1950s, Information Systems Department (ISD) managed ALL of the only computing resource, the mainframe.

◦ Today, computing resources are located through the organization and almost all employees use computers in their work. This system is known as end user computing.

The role of the IS department◦ The ISD is responsible for corporate-level and

shared resources and for using IT to solve end users’ business problems.

◦ End users are responsible for their own computing resources and departmental resources.

◦ ISD and end users work together as partners to manage the IT resources. 36

2.4.4 The Role of the IS DepartmentTraditional Major IS Functions Managing systems development and systems project

management Managing computer operations Staffing, training, developing IS skills Providing technical services Infrastructure planning, development, control

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New (Consultative) IS Functions Initiating and designing strategic information systems Incorporating the Internet and e-commerce into the

business Managing system integration Educating non-IS managers about IT Educating IS staff about the business Supporting end-user computing Partnering with executives Managing outsourcing Innovate Ally with vendors and IS departments in other

organizations

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Closing Case

Letting the computer read to you…The Business Problem

As an employer, you would like to be inclusive and hire employees who have special needs, such as difficulty reading. Or, you have an aging workforce that is having trouble reading fine print on documents and regular size print on computer screens. Unfortunately, your most senior executive has experienced macular degeneration (a problem with the back of the eyes that is more common for individuals who have had cataract surgery) that has rendered him almost legally blind.

 

Currently, an executive assistant works full-time with the executive, assisting with reading and writing and resorting to dictation for many documents and memos that are typed up. A second assistant is responsible for reading and transcribing documents so that they can be played by digital players that can readily navigate through large volumes of text.

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Closing Case

Discussion1. Is the Intel Reader a strategic information system for

the company that employs the visually impaired executive? Why or why not? Support your answer.

2. How would a company like Intel use information technology to develop, produce, and market the Intel Reader? For each use of information technology, identify the type of technology and how it would be used.

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Closing Case

The Results In our hypothetical example above, rather than hiring two assistants to transcribe documents and read aloud, the executive could make do with a single assistant to move large amounts of documents rapidly into machine readable and verbal form.

The reader can also be used as a portable device, taken to meetings and other locations to be able to rapidly convert documents onsite. Individuals with borderline visual problems can use the reader to reduce eye strain and help prevent more rapid visual degeneration.

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