Information Systems for Business

Posted on Feb 4, 2025 in Business Administration and Innovation Management

Information Systems in Business

An information system (IS) comprises interrelated components that perform input, processing, storage, output, and control actions. It converts data into usable information for forecasting, planning, control, coordination, decision-making, and operational activities within an organization.

Four Categories of IS Supporting Business Processes

  • Finance and Asset Management
  • Human Capital Management (HCM)
  • Supply Chain Management (SCM)
  • Customer Relationship Management (CRM)

What’s New in IS?

  • IT innovations (e.g., big data)
  • New business models
  • E-commerce expansion
  • Management changes
  • Evolving firms (more collaborative, skills-focused, customer-centric)

Six Strategic Objectives for IT Investment

  1. Operational excellence
  2. New products/services
  3. Customer and supplier intimacy
  4. Improved decision-making
  5. Competitive advantage
  6. Survival

The Importance of Accurate Information for Decision-Making

Inaccurate information leads to poor decisions, resulting in over/under production, misallocation of resources, slow response times, increased costs, and lost customers. Real-time data is crucial for effective decision-making.

Dimensions of Information Systems

  1. Organizational Levels: Senior, middle, and operational management
  2. Management’s Role: Setting organizational strategies, fostering creativity, developing new products, and organizational restructuring.
  3. Technology: Computer hardware and software, IT infrastructure, and networking technology

Human Capital Management (HCM)

HCM encompasses activities and IS that support effective human capital management. It leverages data for improved strategies.

IS for HCM

  1. Human Resource Core System: Tracks employee demographics, salary, tax data, etc.
  2. Workforce Applications: Tracks time and attendance, sick leave, and project assignments.
  3. Talent Management Applications: Focuses on the employee lifecycle, from recruitment to performance evaluations.

Supply Chain Management (SCM)

SCM strategies optimize the flow of products/services from source to customer, encompassing the entire supply chain. Its goal is to align supply with demand.

SCM Reference Model

Plan-Source-Make-Deliver-Return

SCM Software

  • Supply chain planning
  • Warehouse management
  • Transportation management
  • Manufacturing execution

IS for SCM

  1. Collaboration: Internal/external, EDI
  2. Sensing: RFID, GPS

Customer Relationship Management (CRM)

CRM involves strategies, processes, and IS used to build and maintain customer relationships. It improves customer service and reduces costs.

IS for CRM

  • Customer retention
  • Profitability analysis
  • Customer feedback mechanisms

Technology: Email marketing, sales force automation, customer support, mobile CRM.

Enterprise Resource Planning (ERP)

ERP provides a solid, integrated back-end system supporting core functional requirements. Three integration strategies exist:

  1. Engineered Suites: Built from the ground up with consistent interfaces and a single database. Pros: High data integrity. Cons: High cost, all modules must be implemented together.
  2. Suites with Synchronized Modules: Middleware synchronizes systems on different platforms. Pros: Improved consistency. Cons: Fragile integrations.
  3. Best-of-Breed Suites: Separate systems with weak integration. Pros: Reduced risk through individual module implementation. Cons: Inconsistent data, potential for errors.

Systems Development

Systems development involves creating or improving an IS. Six core activities are:

  1. System Analysis: Creates a roadmap of existing systems. Steps include problem analysis, feasibility study, systems proposal report, and information requirements definition.
  2. System Design: Models how the system will meet information requirements.
  3. Programming: Translates system specifications into code.
  4. Testing: Ensures correct results (unit, system, acceptance testing).
  5. Conversion: Transition from old to new system (parallel, direct cutover, pilot study, phased approach). Requires end-user training.
  6. Production and Maintenance: System review and potential revisions. May include a post-implementation audit.

Network Types

Centralized Network: All users connect to a central server. Benefits: Lower costs, easier IT management, improved information flow.

Decentralized Network: Multiple peer-to-peer user groups with separate servers. Benefits: Departmental control, faster response to IT trends, backups in case of failure.

Recentralization: Driven by high decentralization costs, IS demographic changes, and the need for effective integration.

IS Support Mode: Low IT needs, primarily for back-office functions.

IS Strategic Mode: High IT needs for competitive advantage.

Chief Information Officer (CIO)

The CIO is a high-level IT manager who aligns IT resources with business goals, ensuring IT integration for strategic advantage. Responsibilities include communication, operations, and application software maintenance.