Introduction to IS (Information System)
What comes to mind when you think about information systems? In what ways do you think they affect your life? You might be surprised to find out that information systems have an impact on your life and career whether you realize it or not.
In general, an information system is a set of components that helps gather, analyze, maintain, and distribute data. The components of information systems include people, the system’s hardware and software, networks, data, and the procedures used to process the data and maintain the system.
The fields of information systems (IS) and information technology (IT) overlap, and sometimes the terms are used interchangeably. However, the sole focus of the field of IT is technology, meaning the processes necessary to establish and maintain computer systems, networks, and applications. Although the field of IS is concerned with technology, the focus is broader to include the people who are part of system processes. It is a vital tool used by all types of organizations to conduct business and participate in the marketplace, whether local or global.
It’s helpful to understand the relationship between information systems and related fields. Computer science is the discipline that provides foundations for the theories and technology necessary for computing systems. Information technology (IT) implements and maintains those computer systems. Information systems, our area of focus, uses those systems to process and manage information.
Definition:
An information system is a set of interconnected components that integrate the collection, processing, storage, and distribution of data, information, and digital products in order to support decision-making, coordination, control, analysis, and visualization in an organization. These systems play an important role in managing and facilitating various business processes and can also be used in individuals’ personal lives.
field of information systems (IS)
The field of information systems (IS) is a dynamic industry, evolving and depending on technological advancements. It intersects with business, computer science, and management, playing a critical role in enhancing organizational efficiency, productivity, and competitiveness. When organizations have robust information systems, they are more capable of planning strategically to gain a competitive edge and achieve success.
Core Components of Information System
1.Hardware:
The physical devices, such as computers, servers, networks, and storage devices, that are used to collect, process, and store data are called hardware.
2.Software:
The programs and applications that run on the hardware, enabling users to perform specific tasks, are called software. Software can range from operating systems and database management systems to specialized business applications.
3.Data:
The raw facts and figures that are processed and turned into meaningful information are called data.
Information: The facts that we use to learn and understand people, places, and things make up information. Information is raw data that have been processed and manipulated to give context and meaning. Once data are processed into information, we can use that information personally and professionally. We read or listen to books, watch videos on social media, stream a television show, follow road signs, browse online shopping sites, and interact with information we find on the internet or in the world around us. We use databases to organize and store this data efficiently.
4.Procedure:
A Set of instructions and rules that governs the use of the hardware, software, and data components is known as a procedure. Standard operating procedures ensure consistency and reliability in the use of information systems.
5.User:
Individuals who use the information system, including end users who input and retrieve data in the system, as well as information technology (IT) professionals who design, develop, and maintain the system, are the people who make up an information system.
Types of Information System:
Information systems can be categorized into different types based on their scope and functionality. Executive information systems are used by an organization’s executive staff, decision support systems are used by senior managers, management information systems are used by middle managers, and transaction processing systems are used by frontline workers.
Let us take a closer look at each type of information system and explore their purposes.
1.Executive Information System (EIS):
An executive information system (EIS) supports the strategic information needs of top executives, providing the information needed to handle executive functions, such as developing an organization’s strategic goals and objectives and plans for achieving them. This includes providing the information needed for managers to understand and manage their organization’s supply chain and value chain, which can be helpful to streamline production processes and provide better customer service. Supply chain management is an example of how an EIS can be used as an interorganizational information system, which occurs when two or more organizations use IS to conduct business electronically.
2.Decision Support System (DSS):
A decision support system (DSS) assists in decision-making by providing interactive tools and access to data analysis. Typically, senior managers use a DSS to obtain tactical information that helps them make routine, short-term decisions about an organization’s operations. This helps ensure that organizations stay on track to achieve long-term goals and objectives. Interactive tools available through a DSS enhance these efforts by providing information and technology needed for activities such as project management and employee training.
3.Management Information System (MIS):
A management information system (MIS) provides middle managers with reports and summaries to support decision-making and managerial functions. For example, middle managers may use an MIS to generate reports, such as budgeting documents and cash flow statements, to understand an organization’s financial status. In many organizations, this type of system provides the data for an organization’s balanced scorecard (BSC), which is a performance metric used by strategic managers to identify an organization’s various functions and monitor outcomes. By providing the data necessary for the BSC, an organization’s MIS function provides invaluable support.
4.Transaction Processing System (TPS):
A transaction processing system (TPS) handles day-to-day transactions, such as order processing and payroll. For frontline staff, a TPS provides information necessary to handle an organization’s daily operations, such as inventory reports and customer service records.
5.Enterprise Resource Planning (ERP) System:
In addition to these four types of information systems, an enterprise resource planning (ERP) system is a software system that helps an organization manage various types of information systems within the organization, and integrate business processes and functions across the organization. For example, large organizations may rely on an ERP system to handle human resource management throughout the organization. An ERP is also a useful tool for functions such as project management, accounting and financial management including payroll, and tracking customer service.
Application of Information Systems in Business
Think about a visit to a coffee shop, from ordering to receiving the order, through the lens of IS. First, think about how a barista takes an order at the register. That’s the point-of-sale (POS) system at work. The POS system is an information system that streamlines transactions, helping businesses track sales, manage inventory, and even understand customer preferences when tracked with tools such as customer loyalty cards. When a customer switches from their regular black coffee to a caramel macchiato, the system takes note and updates their preferences, contributing to a personalized customer experience.
Now, imagine if the coffee shop had no system to track sales, manage its supplies, and keep track of customer preferences. What do you think might be some of the challenges a business would face if they did not have a way to gather, track, and analyze this data? This is where ERP systems come into play. ERP systems integrate various business processes, ensuring that everything from bean procurement to milk deliveries is synchronized. This not only prevents the coffee shop from running out of their most popular blend, but also helps them manage costs and operate more efficiently.
The POS and ERP systems are not the only information systems in a coffee shop. Most coffee shops have Wi-Fi, which is another information system that includes hardware, software, and the networks that connect them. The coffee shop’s Wi-Fi is a small-scale example of how businesses use IS to stay ahead of the competition, whether it be locally, nationally, or globally.
In essence, information systems are about more than simply computers and gadgets. They are the invisible architects that shape our daily experiences, whether we’re grabbing a coffee or navigating the complexities of a global market.
The Historical Evolution of Information Systems
The basic purpose of information systems—processing and sharing information—has been part of our communication practices since the beginning of civilization, evolving from simple cave drawings to the complex technology we have today. Understanding the background and history of IS helps us appreciate the importance of IS, how it has helped shaped civilizations across the ages, and why it continues to be a vital part of our lives, both personally and professionally.
Evolution of Communication and Information Sharing
The earliest forms of communication evolved from body language, hand signals, and drawings to spoken and written languages. As written language developed around the world, various societies invented ways to print written works that could be shared with others. These earlier means of communication provided essential information without technology components like those we think of today, such as database management systems, data networks, hardware, and software.
For hundreds of years leading up to the twentieth century, early technology laid the foundation for today’s complex information systems. The printing press was the dominant invention that promoted communication and information sharing for centuries before the inventions of the telegraph and the telephone. By the end of the 1800s, the basic design of the telephone, which is still the foundation for today’s landline handsets and cell phones, was in place. The telephone revolutionized communication, allowing real-time conversations for sharing information for both personal and business purposes.
The telephone took another step forward in 1973 when Martin Cooper, an engineer for Motorola, made the first call on a wireless cellular telephone. This launched a revolution as cell phones progressed to eventually become a vital personal resource for individuals around the world. By January 2024, Pew Research Center found that 97 percent of adults in the U.S. owned a cell phone.2
As this information shows, communication has been paramount for humans since the beginning of civilization, and we have strived to find more and better ways to stay connected with one another.
Review Questions
1.
What
type of information system is used by everyone in an organization to integrate
various business processes and functions across an organization?
- management information system (MIS)
- enterprise resource planning (ERP)
- transaction processing system (TPS)
- decision support system (DSS)
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