UNIT 1 : Managing the digital firm

Information system
Information systems (IS) are formal, sociotechnical, organizational systems
designed to collect, process, store, and distribute information. In
a sociotechnical perspective, information systems are composed by four
components: task, people, structure (or roles), and technology.

A computer information system is a system composed of people and

computers that processes or interprets information. The term is also sometimes
used in more restricted senses to refer to only the software used to run a
computerized database or to refer to only a computer system.
Information Systems is an academic study of systems with a specific reference
to information and the complementary networks of hardware and software that
people and organizations use to collect, filter, process, create and also
distribute data. An emphasis is placed on an information system having a
definitive boundary, users, processors, storage, inputs, outputs and the
aforementioned communication networks.[7]
Any specific information system aims to support operations, management
and decision-making. An information system is the information and
communication technology (ICT) that an organization uses, and also the way in
which people interact with this technology in support of business processes.
Some authors make a clear distinction between information systems, computer
systems, and business processes. Information systems typically include an ICT
component but are not purely concerned with ICT, focusing instead on the end
use of information technology. Information systems are also different from
business processes. Information systems help to control the performance of
business processes.
Alter argues for advantages of viewing an information system as a special type
of work system. A work system is a system in which humans or machines
perform processes and activities using resources to produce specific products or
services for customers. An information system is a work system whose
activities are devoted to capturing, transmitting, storing, retrieving,
manipulating and displaying information.
As such, information systems inter-relate with data systems on the one hand and
activity systems on the other. An information system is a form
of communication system in which data represent and are processed as a form
of social memory. An information system can also be considered a semi-formal
language which supports human decision making and action.
Information systems are the primary focus of study for organizational
informatics.
The six components that must come together in order to produce an information
system are:

1. Hardware: The term hardware refers to machinery. This category includes

the computer itself, which is often referred to as the central processing
unit (CPU), and all of its support equipment. Among the support,
equipment are input and output devices, storage devices and
communications devices.
2. Software: The term software refers to computer programs and the
manuals (if any) that support them. Computer programs are machine-
readable instructions that direct the circuitry within the hardware parts of
the system to function in ways that produce useful information from data.
Programs are generally stored on some input/output medium, often a disk
or tape.
3. Data: Data are facts that are used by programs to produce useful
information. Like programs, data are generally stored in machine-
readable form on disk or tape until the computer needs them.
4. Procedures: Procedures are the policies that govern the operation of a
computer system. "Procedures are to people what software is to
hardware" is a common analogy that is used to illustrate the role of
procedures in a system.
5. People: Every system needs people if it is to be useful. Often the most
overlooked element of the system are the people, probably the
component that most influence the success or failure of information
systems. This includes "not only the users, but those who operate and
service the computers, those who maintain the data, and those who
support the network of computers.
6. Feedback: it is another component of the IS, that defines that an IS may
be provided with a feedback (Although this component isn't necessary to
function).
Data is the bridge between hardware and people. This means that the data we
collect is only data until we involve people. At that point, data is now
information.

Importance of Information Systems in an Organization :

To gain the maximum benefits from your company's information system, you
have to exploit all its capacities. Information systems gain their importance by
processing the data from company inputs to generate information that is useful
for managing your operations. To increase the information system's
effectiveness, you can either add more data to make the information more
accurate or use the information in new ways.
Business Communication Systems

Part of management is gathering and distributing information, and information

systems can make this process more efficient by allowing managers to
communicate rapidly. Email is quick and effective, but managers can use
information systems even more efficiently by storing documents in folders that
they share with the employees who need the information. This type of
communication lets employees collaborate in a systematic way.

Each employee can communicate additional information by making changes

that the system tracks. The manager collects the inputs and sends the newly
revised document to his target audience.

Business Operations Management

How you manage your company's operations depends on the information you
have. Information systems can offer more complete and more recent
information, allowing you to operate your company more efficiently. You can
use information systems to gain a cost advantage over competitors or to
differentiate yourself by offering better customer service. Sales data give you
insights about what customers are buying and let you stock or produce items
that are selling well. With guidance from the information system, you can
streamline your operations.
Company Decision-Making

The company information system can help you make better decisions by
delivering all the information you need and by modeling the results of your
decisions. A decision involves choosing a course of action from several
alternatives and carrying out the corresponding tasks. When you have accurate,
up-to-date information, you can make the choice with confidence.

If more than one choice looks appealing, you can use the information system to
run different scenarios. For each possibility, the system can calculate key
indicators such as sales, costs and profits to help you determine which
alternative gives the most beneficial result.

Company Record-Keeping

Your company needs records of its activities for financial and regulatory
purposes as well as for finding the causes of problems and taking corrective
action. The information system stores documents and revision histories,
communication records and operational data. The trick to exploiting this
recording capability is organizing the data and using the system to process and
present it as useful historical information. You can use such information to
prepare cost estimates and forecasts and to analyze how your actions affected
the key company indicators.

CONTEMPORARY APPROACHES TO INFORMATION SYSTEMS

The study of information systems is a multidisciplinary field. No single theory
or perspective dominates. Figure 1.9 illustrates the major disciplines that con-
tribute problems, issues, and solutions in the study of information systems. In
general, the field can be divided into technical and behavioral approaches.
Information systems are sociotechnical systems. Though they are composed of
machines, devices, and “hard” physical technology, they require substantial
social, organizational, and intellectual investments to make them work properly.
TECHNICAL APPROACH The technical approach to information systems
emphasizes mathematically based models to study information systems, as well
as the physical technology and formal capabilities of these systems. The
disciplines that contribute to the technical approach are computer science,
management science, and operations research.

Computer science is concerned with establishing theories of computability,

methods of computation, and methods of efficient data storage and access.

Management science emphasizes the development of models for decision-

making and management practices.

Operations research focuses on mathematical techniques for optimizing

selected parameters of organizations, such as transportation, inventory control,
and transaction costs.

BEHAVIORAL APPROACH An important part of the information systems

field is concerned with behavioral issues that arise in the development and
long-term maintenance of information systems. Issues such as strategic business
integration, design, implementation, utilization, and management cannot be
explored usefully with the models used
in the technical approach. Other behavioral disciplines contribute important
concepts and methods.

For instance, sociologists study information systems with an eye toward how
groups and organizations shape the development of systems and also how
systems affect individuals, groups, and organizations.

Psychologists study information systems with an interest in how human

decision makers perceive and use formal information.

Economists study information systems with an interest in understanding the

production of digital goods, the dynamics of digital markets, and how new
information systems change the control and cost structures within the firm. The
behavioral approach does not ignore technology. Indeed, information systems
technology is often the stimulus for a behavioral problem or issue. But the focus
of this approach is generally not on technical solutions. Instead, it concentrates
on changes in attitudes, management and organizational policy, and behavior
developing system solutions to real-world problems and managing information
technology resources. It is also concerned with behavioral issues surrounding
the development, use, and impact of information systems, which are typically
discussed in the fields of sociology, economics, and psychology. Our
experience as academics and practitioners leads us to believe that no single
approach effectively captures the reality of information systems. The successes
and failures of information are rarely all technical or all behavioral. Our best
advice to students is to understand the perspectives of many disciplines. Indeed,
the challenge and excitement of the information systems field is that it requires
an appreciation and tolerance of many different approaches. The view we adopt
in this book is best characterized as the sociotechnical view of systems. In this
view, optimal organizational performance is achieved by jointly optimizing both
the social and technical systems used in production. Adopting a sociotechnical
systems perspective helps to avoid a purely technological approach to
information systems. For instance, the fact that information technology is
rapidly declining in cost and growing in power does not necessarily or easily
translate into productivity enhancement or bottom-line profits. The fact that a
firm has recently installed an enterprise wide financial reporting system does
not necessarily mean that it will be used, or used effectively. Likewise, the fact
that a firm has recently introduced new business procedures and processes does
not necessarily mean employees will be more productive in the absence of
investments in new information systems to enable those processes

Although information systems are a collection of electrical and mechanical

devices, they require the organization, and the people that work within the
organization for them to be successful.

Technical Approach

• The technical approach uses mathematical models to test the capabilities of

information systems.
These disciplines include:
• Computer Science - concerned with methods of computability,
computation,and data storage and access.
• Management Science - emphasized the development of models for decision
making, and management practices.
Operations Research - focuses on mathematical techniques for optimizing
selected parameters of organizations.(inventory control, transaction costs).
Behavioral Approach
• Deals with behavioral issues that arise in the development, and long term
maintenance of the information system.
• Different disciplines, such as psychologists, sociologists, Economists, study
information systems, and the impacts they have in the organizational
environment.
Behavioral changes can occur within the organization during, and after
information system development. The key to this approach is to find the
solution to the behavior, which is not a technical issue.