Http cashproonline bankofamerica com welcome

Reflection Essay

Introduction to Information Systems
CHAPTER OUTLINE LEARNING OBJECTIVES
1.1 Why Should I Study Information Systems? 1.1 Identify the reasons why being an informed user of information

systems is important in today’s world.

1.2 Overview of Computer-Based Information 1.2 Describe the various types of computer-based information Systems systems in an organization.

1.3 How Does IT Impact Organizations? 1.3 Discuss ways in which information technology can affect

managers and nonmanagerial workers.

1.4 Importance of Information Systems to 1.4 Identify positive and negative societal effects of the increased Society use of information technology.

Opening Case

CHAPTER 1

FanDuel and DraftKings

POM MKT

FanDuel ( www.fanduel.com ), founded in 2009, and DraftKings (www

.draftkings.com), founded in 2012, operate web-based daily fantasy sports (DFS) games. The two companies began operations by taking advantage of an exclusion in the 2006 Unlawful Internet Gambling En­ forcement Act. This statute bans credit card issuers and banks from working with poker and sports-betting websites, effectively prevent­ ing U.S. customers from participating in those industries. The federal statute, however, exempts fantasy sports because they are considered games of skill, not luck. To maintain legal status, the operator of a fan­ tasy sports business must follow four rules: (1) publish prize amounts before the games begin, (2) make prize amounts independent of the number of players in the game, (3) level the playing field by allowing anyone in a league to draft any player they want, and (4) disregard point spreads and game scores.

FanDuel and DraftKings deliver simple and fast fantasy betting. After paying an entry fee, players become eligible to win daily cash pay­ outs based on the statistical performance of athletes in games played that day. Traditional fantasy sports often frustrate players because the

experience lasts for an entire season. If a player drafts a bad team, then he or she is stuck with that team for several months. Serious fantasy league players also analyze large amounts of statistics, roster changes, and injury reports. Many casual players do not have time for such anal­ yses. In contrast to these leagues, FanDuel and DraftKings allow cus­ tomers to play for just a day, a weekend, or a week.

The companies allow players to participate for free or bet up to $5,000 to draft a team of players in the National Football League (NFL), the National Basketball Association (NBA), Major League Base­ ball (MLB), and the National Hockey League (NHL). Players can com­ pete head-to-head against another individual or in a league with up to 125,000 teams. The winner is the one with the best player statistics, which translate into fantasy points. The companies take an average of 9 percent of each prize.

MIS

FanDuel and DraftKings spend millions of dollars on com­ puting power from Amazon Web Services and other cloud computing providers. Cloud computing (discussed in Technology Guide 3) enables the companies to manage, as only one example, the increase in web traffic just before Sunday’s NFL kickoff. At that time, the firms must manage hundreds of thousands of simultaneous users, who make a

1

2 CHAPTER 1 Introduction to Information Systems

myriad of roster changes per hour. The companies also provide mil­ lions of live scoring updates per minute during games, meaning that they must manage almost 10 terabytes of network traffic during game day. (A terabyte equals 1 trillion bytes.)

Professional sports have noted that FanDuel and DraftKings, with their easy-to-use apps, appeal to young and mobile sports fans. Fur­ thermore, these fans have money at stake, so they are more inclined to watch games on television than they otherwise would. An increase in viewers leads to an increase in advertising rates for the teams. In fact, in 2015, FanDuel signed multiyear sponsorship agreements with 15 NFL teams. These deals generally include stadium signage, radio and digital advertising, and other promotions. Interestingly, the NBA owns an equity stake in FanDuel.

The two companies had tremendous success. In 2015, they processed a combined $3 billion in player-entry fees and realized a combined revenue of $280 million. By the fall of 2016, the companies claimed to have almost 60 million players in the United States.

Despite their success, FanDuel and DraftKings faced serious prob­ lems. Their first problem is that they can operate only as long as the federal government and state governments allowed them to do so. At the federal level, the government could close the fantasy loophole in the 2006 statute at any time. At the state level, each state can decide that DFS constitutes gambling and prohibit DFS in that state.

Significantly, the federal statute does not give daily fantasy sports businesses immunity from state laws. In November 2015, New York Attorney General Eric Schneiderman sent cease-and-desist letters to both companies, declaring that their games constituted illegal gam­ bling under state law and ordering both to stop accepting bets from New York residents.

Shortly thereafter, the two companies agreed on a strategy to push for legislation clarifying daily fantasy sport’s legality in each state. On June 18, 2016, the DFS bill passed the New York state leg­ islature and on August 3, New York Governor Andrew Cuomo signed it into law. FanDuel and DraftKings immediately began allowing New York residents to play again.

Their second problem involves litigation. Three federal grand ju­ ries—in Boston, New York, and Tampa, Florida—have notified one or both companies that they are under criminal investigation. Further­ more, a class-action lawsuit, consolidated in Massachusetts, alleges conspiracy, fraud, negligence, and other claims. The lawsuit repre­ sents losing DFS players from 25 states and the District of Columbia.

Their third problem is that industry analysts estimate that 60 per­ cent of the firms’ revenue comes from approximately 15,000 high- volume players wagering at least $10,000 per year. Some 50 players who are analytics-driven professionals each wager at least $1 million per year. These figures underscore the fact that the vast majority of DFS players lose.

As of the fall of 2016, FanDuel and DraftKings are conducting expensive state-by-state campaigns seeking regulatory and legal clarity on the gambling issue. To be permitted to operate in various states, the two companies had to make needed improvements in their

operations. Specifically, they now provide areas for players of all skill levels, particularly to make beginning players feel comfortable and welcome. Both companies’ employees are prohibited from competing on rival sites. The firms have created tiers of players so that beginning players can avoid playing against professional players. Along these lines, FanDuel introduced “Experienced Player Indicators” and Draft­ Kings introduced “Experienced Player Badges.”

Interestingly, in the spring of 2016, FanDuel suspended contests on college sports in all states as part of a negotiation with the National Collegiate Athletic Association.

As a result of their problems, the companies’ market values have decreased markedly and neither company was profitable in 2016. As of fall 2016, some 20 states have pending legislation permitting DFS.

And the unanswered question? Why have the two DFS companies not yet merged?

Sources: Compiled from D. Van Natta, “Welcome to the Big Time,” ESPN, August 24, 2016; A. Carr, “The Most Dangerous CEO in Sports,” Fast Company, May 2016; D. Purdum, “DraftKings, FanDuel to Stop Offering College Fantasy Games,” ESPN.com , March 31, 2016; A. Berzon, “Fantasy Sports Industry Mounts Lobbying Blitz,” Wall Street Journal, February 15, 2016; M. Brown, “FanDuel Lays Off Workers as Legal Pressure Mounts,” Forbes, January 20, 2016; J. Brustein, “New York Gambles on a Daily Fantasy Ban,” Bloomberg BusinessWeek, November 23–29, 2015; R. Axon, “Facing Threat from N.Y. Attorney General, FanDuel Suspends Entries in State,” USA Today, November 17, 2015; L. Baker, “FanDuel, DraftKings Vow to Fight New York’s Halt on Bets,” Reuters, November 12, 2015; D. Alba, “DraftKings and FanDuel Scandal Is a Cautionary Startup Tale,” Wired, October 9, 2015; D. Roberts, “Flight of Fantasy,” Fortune, October 1, 2015; D. Roberts, “Are DraftKings and FanDuel Legal?” Fortune, September 24, 2015; J. Brustein and I. Boudway, “Just a Fantasy,” Bloomberg BusinessWeek, September 14–20, 2015; K. Wagner, “DraftKings and FanDuel Are Battling over Your Favorite Teams,” www

.recode.net, July 17, 2015; R. Sandomir, “FanDuel and DraftKings, Leaders in Daily Fantasy Sports, Are Quickly Gaining Clout,” New York Times, July 13, 2015; S. Rodriguez, “Yahoo Enters World of Daily Fantasy Sports, Takes on DraftKings and FanDuel,” International Business Times, July 8, 2015; B. Schrotenboer, “FanDuel Signs Deals with 15 NFL Teams, Escalating Daily Fantasy Integration,” USA Today, April 21, 2015; D. Primack, “DraftKings and FanDuel Close in on Massive New Investments,” Fortune, April 6, 2015;

R. Bertoni, “Fantasy Sports, Real Money,” Forbes, January 19, 2015; B. Schrotenboer, “Fantasy Sports Debate: Gambling or Not Gambling?” USA Today, January 12, 2015; www.fanduel.com, www.draftkings.com, accessed September 20, 2016.

Questions

1. Describe how information technology is essential to the compa­ nies’ operations.

2. Is information technology one of the companies’ problems? Ex­ plain your answer.

3. Describe the companies’ information technology infrastructure. Now discuss possible technological problems that the companies might have.

4. The companies face serious problems that are not related to in­ formation technology. Can information technology help them ad­ dress these problems? Why or why not? Explain your answer.

Introduction

Before we proceed, we need to define information technology and information systems. Infor­ mation technology (IT) refers to any computer-based tool that people use to work with infor­ mation and to support the information and information-processing needs of an organization.

Introduction 3

An information system (IS) collects, processes, stores, analyzes, and disseminates informa­ tion for a specific purpose.

IT has far-reaching effects on individuals, organizations, and our planet. Although this text is largely devoted to the many ways in which IT has transformed modern organizations, you will also learn about the significant impacts of IT on individuals and societies, the global economy, and our physical environment. IT is also making our world smaller, enabling more and more people to communicate, collaborate, and compete, thereby leveling the competitive playing field.

This text focuses on the successful applications of IT in organizations. That is, how orga­ nizations can use IT to solve business problems and gain a competitive advantage in the mar­ ketplace. However, as you see in this chapter’s opening case, not all business problems can be solved with IT. This situation means that you must continue to develop your business skills!

When you graduate, you either will start your own business or you will work for an organi­ zation, whether it is public sector, private sector, for-profit, or not-for-profit. Your organization will have to survive and compete in an environment that has been radically transformed by information technology. This environment is global, massively interconnected, intensely com­ petitive, 24/7/365, real-time, rapidly changing, and information-intensive. To compete success­ fully, your organization must use IT effectively.

As you read this chapter and this text, keep in mind that the information technologies you will learn about are important to businesses of all sizes. No matter what area of business you major in, what industry you work for, or the size of your company, you will benefit from learning about IT. Who knows? Maybe you will use the tools you learn about in this class to make your great idea a reality by becoming an entrepreneur and starting your own business! In fact, as you see in the chapter opening case and IT’s About Business 1.1, you can use information technol­ ogy to help you start your own business.

The modern environment is intensely competitive not only for your organization, but for you as well. You must compete with human talent from around the world. Therefore, you per­ sonally will have to make effective use of IT.

Accordingly, this chapter begins with a discussion of why you should become knowledge­ able about IT. Next, it distinguishes among data, information, and knowledge, and differenti­ ates computer-based information systems from application programs. Finally, it considers the impacts of information systems on organizations and on society in general.

IT’s About Business 1.1

New Delivery Services Use Information Technology and delivery fleets in their attempt to serve customers who are will­

ing to pay a bit extra to have things done quickly. These companies

POM

also often do not hire their workers. Rather, they use independent Webvan, an online grocery business that went bankrupt in 2001, is contractors who are willing to forgo benefits packages (e.g., health considered to be the largest dotcom failure in history. The compa­ insurance, 401(k) plans) for jobs they can perform whenever they ny’s business model was to deliver products to customers’ homes want to.

within 30 minutes of a time the customer chose. The delivery services differ from more established grocery

Today, busy consumers are increasingly looking for the con- delivery companies such as FreshDirect ( www.freshdirect.com ), venience of having many items delivered on demand, with food Peapod ( www.peapod.com ), and AmazonFresh (https://fresh being the largest category. In fact, despite the well-known failure of .amazon.com) because they do not actually sell groceries directly Webvan, many same-day, third-party delivery services are emerg­ to you. Instead, you select what you want online or through an app ing to compete in the delivery industry, which is worth about $70 and choose a delivery time. The service then sends a contractor to billion a year. Delivery services are an excellent strategy for small the store to pick up your order and deliver it to your door. Let’s take businesses to differentiate themselves from their competitors and a look at some of these services.

to compete with giant online retailers.

Delivery service providers include some of the largest firms Instacart. Instacart ( www.instacart.com ) delivers items from in technology and retail, as well as specialized startups. The major chains such as Safeway, Whole Foods, and Costco as well as local challenge facing these companies is how to deliver groceries and markets. Instacart has no physical infrastructure. In fact, the com­ other items door-to-door without incurring unmanageable costs. pany consists of two grocery-delivery smartphone apps.

These companies use information technology, such as apps Customers place orders using Instacart’s website or mobile on GPS-enabled smartphones, to bypass the need for warehouses app. A separate app, used by more than 4,000 personal shoppers

10 CHAPTER 1 Introduction to Information Systems

Why Should I Study Information Systems? 5

whom Instacart has hired across 15 cities, guides the shoppers to stores from which they buy goods. The app can actually identify the aisle and the shelf where an item is located. The goal is to deliver orders within one hour of the order being placed.

Personal shoppers fill several orders at once as they go from store to store. The app suggests the optimal driving route to a cus­ tomer’s home, taking into account weather, traffic, sporting events, and local construction. Instacart charges a premium based on the size of each purchase. The company also offers a $99-per-year membership that waives the delivery fee for orders greater than

$35.

Postmates. Postmates ( https://postmates.com ) works like this: The company’s 13,000 couriers receive orders on their smart- phones. For example, a customer wants 18 pounds of crushed ice, and Postmates offers the courier $4.80 to pick up the ice and deliver it. When the courier accepts the job, his phone guides him to the grocery store and then to the customer.

The majority of deliveries made by Postmates are hot meals. The company analyzes data such as food-preparation times to be­ come more effective at stacking—as their couriers drop off one or­ der, their next pickup is already assigned and being prepared.

Although roughly 80 percent of Postmates’ orders are pre­ pared food, the company is expanding to deliver other commodi­ ties; for example, healthcare and beauty products. Postmates has also reached a deal with Apple to deliver MacBooks and other prod­ ucts the same day that customers purchase them online.

Uber. In 2015, Uber ( www.uber.com ) launched an option on its app, called UberEats, in New York and Chicago. UberEats delivers meals from local restaurants, with the “menu” items changing daily. UberEats is displayed on the Uber app only when a user is in an area that is covered.

GrubHub/Seamless. GrubHub/Seamless ( www.grubhub.com ) is a top online ordering provider, partnering with more than 45,000 restaurants. The app allows customers to flip through menus, place orders, and pay for delivery through the web or a mobile app. In 2015, the company bought out competitors Restaurants on the Run and DiningIn. These acquisitions enable GrubHub/Seamless to own the “last mile” of the supply chain and become a one-stop shop for food, from ordering to delivery.

Ola Cabs. Ola Cabs (Ola; https://www.olacabs.com ) provides different types of cab service in India. Customers can reserve a cab through a web browser or a mobile app. The company commands about 60 percent of the market share in India. In 2015, Ola launched a grocery delivery service, Ola Store, that offers customers a choice of 12,000 items in 13 categories, everything from fruits and vegeta­ bles to baby items.

These companies do experience challenges. To begin with, the workforce that is essential to this business model may present a problem. That is, their labor costs will probably rise. Also, several on-demand companies are being sued for classifying their couriers as independent contractors rather than as employees to avoid pro­ viding them with benefits packages. In June 2015, California’s labor commissioner ruled that a driver for Uber should be classified as a company employee.

Another challenge is that convenience can be expensive be­ cause delivery charges can vary greatly. For example, Instacart of­ fers flat rates, whereas Postmates’ fees depend on the distance of the delivery. Besides delivery costs, Instacart charges a premium

for items from some of the stores it delivers from. Another down­ side is that shoppers may miss out on using coupons or browsing for cheaper alternatives in the store. Also, the orders do not always go according to plan. For example, if an item is sold out, then the delivery person has to call the customer for instructions on what to do.

Perhaps the most serious challenge in the delivery market is competition from many large, established companies that offer de­ livery services. Consider these examples:

· Amazon ( www.amazon.com ) was looking into crowdsourc­ ing (see Chapter 6) to use a mobile app to hook up individuals to deliver packages and existing brick-and-mortar stores to warehouse them.

· Walmart, which gets half of its sales from groceries, is explor­ ing the online food business ( http://grocery.walmart.com ). Customers order online and Walmart employees select and bag the products. When customers arrive at the store, em­ ployees load the groceries into the customers’ cars.

· Safeway grocery stores ( https://shop.safeway.com ) offers its “fresh to your door” delivery service.

· Starbucks (www.starbucks.com ) offers a delivery service.

With the intense competition in the delivery services market, it is too early to predict any results. However, the companies dis­ cussed in this case are receiving large amounts of venture capital funding.

Sources: Compiled from B. Solomon, “Why GrubHub Is Building What Its CEO Calls ‘A S***** Business,’” Forbes, April 20, 2016; J. Russell, “India’s Ola Takes a Leaf Out of Uber’s Book with New Grocery-Delivery Service,” TechCrunch, July 21, 2015; L. Rao, “Instacart Is Asking Its Customers to Do Something New,” Fortune, June 26, 2015; K. Kokalitcheva, “Why On- Demand Delivery Startup Postmates Really Raised $80 Million,” Fortune, June 25, 2015; M. Kosoff, “$2 Billion Grocery Delivery Startup Instacart Is Reclassifying Some of Its Workers as Employees,” Business Insider, June 22, 2015; G. Bensinger, “Amazon’s Next Delivery Drone: You,” Wall Street

Journal, June 16, 2015; A. Connolly, “Amazon Considers Copying Postmates with New Crowdsourced Delivery Service,” The Next Web, June 16, 2015;

L. Heller, “Amazon’s Uber-Like Delivery Service Could Be Coming Soon,” Forbes, June 16, 2015; P. Vasan, “Tech Giants Serving Up Real Compe­ tition for FreshDirect,” CNBC, June 12, 2015; J. Pinsker, “What Does the

On-Demand Workforce Look Like?” The Atlantic, May 20, 2015; L. Jennings, “New Services Disrupt Restaurant Delivery Landscape,” Nation’s Restaurant News, May 18, 2015; K. Taylor, “We Tested Chipotle and McDonald’s New Delivery Services. Here’s What Happened,” Entrepreneur, May 6, 2015;

R. Paley, “Watch Out Seamless: New Delivery Services Are Invading Your Turf,” Yahoo!, May 1, 2015; A. Stevenson, “Death to Amazon? Postmates’ Boost to Small Business,” CNBC, April 29, 2015; P. Sawers, “Uber Launches a Curated Meal-Delivery Service in New York and Chicago,” Venture Beat, April 28, 2015; K. Steinmetz, “Go Fetch,” Time, March 16, 2015; B. Solomon, “America’s Most Promising Company: Instacart, the $2 Billion Grocery App,” Forbes, January 21, 2015; D. Matthews, “Watch Out, Seamless and Grub­ Hub—Amazon Is Coming for You,” Fast Company, December 3, 2014.

Questions

1. Describe the information technology used and developed by the entrepreneurs who founded Instacart, Postmates, GrubHub/Seamless, Uber, and Ola Cabs. What is the impact of these technologies on the costs of starting a business?

2. What are the advantages and disadvantages of being an in­ dependent contractor for a company?

3. Would you consider a job as a courier for one of these com­ panies? Why or why not?

Why Should I Study Information Systems?
1.1

You are part of the most connected generation in history: You have grown up online; you are, quite literally, never out of touch; you use more information technologies (in the form of digital devices), for more tasks, and are bombarded with more information, than any generation in history. The MIT Technology Review refers to you as Homo conexus. Information technologies are so deeply embedded in your lives that your daily routines would be almost unrecognizable to a college student just 20 years ago.

Essentially, you practice continuous computing, surrounded by a movable information network. This network is created by constant cooperation between the digital devices you carry (for example, laptops, tablets, and smartphones); the wired and wireless networks that you access as you move about; and web-based tools for finding information and communicating and collaborating with other people. Your network enables you to pull information about vir­ tually anything from anywhere, at any time, and to push your own ideas back to the web, from wherever you are, through a mobile device. Think of everything you do online, often with your smartphone: register for classes; take classes (and not just at your university); access class syl­ labi, information, PowerPoints, and lectures; research class papers and presentations; conduct banking; pay your bills; research, shop, and buy products from companies and other people; sell your “stuff”; search for, and apply for, jobs; make your travel reservations (hotel, airline, rental car); create your own blog and post your own podcasts and videocasts to it; design your own page on Facebook and LinkedIn; make and upload videos to YouTube; take, edit, and print your own digital photographs; stream music and movies to your personal libraries; use RSS feeds to create your personal electronic newspaper; text and tweet your friends and family throughout your day; send Snaps; and many other activities. (Note: If any of these terms are unfamiliar to you, don’t worry. You will learn about everything mentioned here in detail later in this text.)

The Informed User—You!
So, the question is: Why you should learn about information systems and information technol­ ogies? After all, you can comfortably use a computer (or other electronic devices) to perform many activities, you have been surfing the web for years, and you feel confident that you can manage any IT application that your organization’s MIS department installs.

The answer lies in you becoming an informed user; that is, a person knowledgeable about information systems and information technology. There are several reasons why you should become an informed user.

MIS

In general, informed users tend to get more value from whatever technologies they use. You will enjoy many benefits from being an informed user of IT, including:

· You will benefit more from your organization’s IT applications because you will under­ stand what is “behind” those applications (see Figure 1.1); that is, what you see on your computer screen is brought to you by your MIS department, who is operating behind your screen.

· You will be in a position to enhance the quality of your organization’s IT applications with your input.

· Even as a new graduate, you will quickly be in a position to recommend—and perhaps help select—the IT applications that your organization will use.

· Being an informed user will keep you abreast of both new information technologies and rapid developments in existing technologies. Remaining on top of things will help you to anticipate the impacts that new and improved technologies will have on your organization and to make recommendations on the adoption and use of these technologies.

FIGURE 1.1 MIS provides what users see and use on their computers.

· You will understand how using IT can improve your organization’s performance and team­ work as well as your own productivity.

@ Slaomir Fajer/iStockphoto

· If you have ideas of becoming an entrepreneur, then being an informed user will help you use IT when you start your own business.

Going further, managing the IS function within an organization is no longer the exclusive responsibility of the IS department. Rather, users now play key roles in every step of this pro­ cess. The overall objective in this text is to provide you with the necessary information to con­ tribute immediately to managing the IS function in your organization. In short, the goal is to help you become a very informed user!

IT Offers Career Opportunities
Because IT is vital to the operation of modern businesses, it offers many employment opportunities. The demand for traditional IT staff—programmers, business analysts, systems analysts, and designers—is substantial. In addition, many well-paid jobs exist in areas such as the Internet and electronic commerce (e-commerce), mobile commerce (m-commerce), net­ work security, telecommunications, and multimedia design.

MIS

The IS field includes the people in various organizations who design and build information systems, the people who use those systems, and the people responsible for managing those systems. At the top of the list is the chief information officer (CIO).

The CIO is the executive who is in charge of the IS function. In most modern organizations, the CIO works with the chief executive officer (CEO), the chief financial officer (CFO), and other senior executives. Therefore, he or she actively participates in the organization’s strategic plan­ ning process. In today’s digital environment, the IS function has become increasingly strategic within organizations. As a result, although most CIOs still rise from the IS department, a grow­ ing number are coming up through the ranks in the business units (e.g., marketing or finance). Regardless of your major, you could become the CIO of your organization one day. This is an­ other reason to be an informed user of information systems!

TABLE 1.1

Information Technology Jobs

Position

Job Description

Chief Information Officer

Highest-ranking IS manager; responsible for all strategic planning in the organization

IS Director

Manages all systems throughout the organization and the day-to-day operations of the entire IS organization

Information Center Manager

Manages IS services such as help desks, hot lines, training, and consulting

Applications Development Manager

Coordinates and manages new systems development projects

Project Manager

Manages a particular new systems development project

Systems Analyst

Interfaces between users and programmers; determines information requirements and technical specifications for new applications

Operations Manager

Supervises the day-to-day operations of the data or computer center

Programming Manager

Coordinates all applications programming efforts

Social Media Manager

Coordinates all social media development efforts and all social media monitoring and response efforts

Business Analyst

Focuses on designing solutions for business problems; interfaces closely with users to demonstrate how IT can be used innovatively

Systems Programmer

Creates the computer code for developing new systems software or maintaining existing systems software

Applications Programmer

Creates the computer code for developing new applications or maintaining existing applications

Emerging Technologies Manager

Forecasts technology trends; evaluates and experiments with new technologies

Network Manager

Coordinates and manages the organization’s voice and data networks

Database Administrator

Manages the organization’s databases and oversees the use of database-management software

Auditing or Computer Security Manager

Oversees the ethical and legal use of information systems

Webmaster

Manages the organization’s website

Web Designer

Creates websites and pages

Table 1.1 provides a list of IT jobs, along with a description of each one. For further details about careers in IT, see www.computerworld.com/careertopics/careers and www.monster.com .

Career opportunities in IS are strong and are projected to remain strong over the next 10 years. In fact, the U.S. News & World Report listed its “100 best jobs of 2016,” Money listed its “best jobs in America for 2016,” and Forbes listed its “10 best jobs” for 2016. Let’s take a look at these rankings. (Note that the rankings differ because the magazines used different criteria in their research.) As you can see, jobs suited for MIS majors rank extremely high in all three lists. The magazines with their job rankings are as follows:

U.S. News & World Report (out of 100)

3: Computer systems analyst 13: Software developer

20: Web developer

29: IT manager

Money

1: Software engineer

7: IT Analyst

Forbes (out of 10)

3: Information security analyst 7: Software engineer

8: Computer systems analyst

Not only do IS careers offer strong job growth, the pay is excellent as well. The Bureau of Labor Statistics, an agency within the Department of Labor that is responsible for tracking and analyzing trends relating to the labor market, notes that the median salary in 2016 for “com­ puter and information systems managers” was approximately $130,000, and predicted that the profession would grow by an average of 15 percent per year through 2022.

Managing Information Resources
Managing information systems in modern organizations is a difficult and complex task. Several factors contribute to this complexity. First, information systems have enormous strategic value to organizations. Firms rely on them so heavily that, in some cases, when these systems are not working (even for a short time), the firm cannot function. (This situation is called “being hostage to information systems”). Second, information systems are very expensive to acquire, operate, and maintain.

A third factor contributing to the difficulty in managing information systems is the evo­ lution of the management information systems (MIS) function within the organization. When businesses first began to use computers in the early 1950s, the MIS department “owned” the only computing resource in the organization, the mainframe. At that time, end users did not interact directly with the mainframe.

In contrast, in the modern organization, computers are located in all departments, and al­ most all employees use computers in their work. This situation, known as end user computing, has led to a partnership between the MIS department and the end users. The MIS department now acts more as of a consultant to end users, viewing them as customers. In fact, the main function of the MIS department is to use IT to solve end users’ business problems.

MIS

As a result of these developments, the responsibility for managing information resources is now divided between the MIS department and the end users. This arrangement raises several important questions: Which resources are managed by whom? What is the role of the MIS department, its structure, and its place within the organization? What is the appropriate relationship between the MIS department and the end users? Regardless of who is doing what, it is essential that the MIS department and the end users work in close cooperation.

There is no standard way to divide responsibility for developing and maintaining informa­ tion resources between the MIS department and the end users. Instead, that division depends on several factors: the size and nature of the organization, the amount and type of IT resources, the organization’s attitudes toward computing, the attitudes of top management toward com­ puting, the maturity level of the technology, the amount and nature of outsourced IT work, and even the countries in which the company operates. Generally speaking, the MIS department is responsible for corporate-level and shared resources, and the end users are responsible for departmental resources. Table 1.2 identifies both the traditional functions and various new, consultative functions of the MIS department.

So, where do the end users come in? Take a close look at Table 1.2. Under the traditional MIS functions, you will see two functions for which you provide vital input: managing systems development and infrastructure planning. Under the consultative MIS functions, in contrast, you exercise the primary responsibility for each function, while the MIS department acts as your advisor.

Before you go on. . .
1. Rate yourself as an informed user. (Be honest; this isn’t a test!)

2. Explain the benefits of being an informed user of information systems.

3. Discuss the various career opportunities offered in the IT field.

The Changing Role of the Information Systems Department

TABLE 1.2

Traditional Functions of the MIS Department

Managing systems development and systems project management

· As an end user, you will have critical input into the systems development process. You will learn about systems development in Chapter 13.

Managing computer operations, including the computer center Staffing, training, and developing IS skills

Providing technical services

Infrastructure planning, development, and control

· As an end user, you will provide critical input about the IS infrastructure needs of your department.

New (Consultative) Functions of the MIS Department

Initiating and designing specific strategic information systems

· As an end user, your information needs will often mandate the development of new strategic information systems.

You will decide which strategic systems you need (because you know your business needs better than the MIS department does), and you will provide input into developing these systems.

Incorporating the Internet and electronic commerce into the business

· As an end user, you will be primarily responsible for effectively using the Internet and electronic commerce in your business. You will work with the MIS department to accomplish this task.

Managing system integration including the Internet, intranets, and extranets

· As an end user, your business needs will determine how you want to use the Internet, your corporate intranets, and extranets to accomplish your goals. You will be primarily responsible for advising the MIS department on the most effective use of the Internet, your corporate intranets, and extranets.

Educating the non-MIS managers about IT

· Your department will be primarily responsible for advising the MIS department on how best to educate and train your employees about IT.

Educating the MIS staff about the business

· Communication between the MIS department and the business units is a two-way street. You will be responsible for educating the MIS staff on your business, its needs, and its goals.

Partnering with business-unit executives

· Essentially, you will be in a partnership with the MIS department. You will be responsible for seeing that this partnership is one “between equals” and ensuring its success.

Managing outsourcing

· Outsourcing is driven by business needs. Therefore, the outsourcing decision resides largely with the business units (that is, with you). The MIS department, working closely with you, will advise you on technical issues such as communications bandwidth and security, as well as other issues.

Proactively using business and technical knowledge to seed innovative ideas about IT

· Your business needs will often drive innovative ideas about how to effectively use information systems to accomplish your goals. The best way to bring these innovative uses of IS to life is to partner closely with your MIS department. Such close partnerships have amazing synergies!

Creating business alliances with business partners

· The needs of your business unit will drive these alliances, typically along your supply chain. Again, your MIS department will act as your advisor on various issues, including hardware and software compatibility, implementing extranets, communications, and security.

Overview of Computer-Based Information Systems
1.2

Organizations refer to their management information systems functional area by several names, including the MIS Department, the Information Systems (IS) Department, the Infor­ mation Technology (IT) Department, and the Information Services Department. Regardless of the name, however, this functional area deals with the planning for—and the development,

10 CHAPTER 1 Introduction to Information Systems

Overview of Computer-Based Information Systems 11

FIGURE 1.2 Data, Information, and Knowledge

management, and use of—information technology tools to help people perform all the tasks related to information processing and management. Recall that information technology re­ lates to any computer-based tool that people use to work with information and to support the information and information-processing needs of an organization.

As previously stated, an information system collects, processes, stores, analyzes, and disseminates information for a specific purpose. The purpose of information systems has been defined as getting the right information to the right people at the right time in the right amount and in the right format. Because information systems are intended to supply useful informa­ tion, we need to differentiate between information and two closely related terms: data and knowledge (see Figure 1.2).

Data items refer to an elementary description of things, events, activities, and transac­ tions that are recorded, classified, and stored but are not organized to convey any specific meaning. Data items can be numbers, letters, figures, sounds, and images. Examples of data items are collections of numbers (e.g., 3.11, 2.96, 3.95, 1.99, 2.08) and characters (e.g., B, A, C, A, B, D, F, C).

Information refers to data that have been organized so that they have meaning and value to the recipient. For example, a grade point average (GPA) by itself is data, but a student’s name coupled with his or her GPA is information. The recipient interprets the meaning and draws conclusions and implications from the information. Consider the examples of data provided in the preceding paragraph. Within the context of a university, the numbers could be grade point averages, and the letters could be grades in an Introduction to MIS class.

Knowledge consists of data and/or information that have been organized and processed to convey understanding, experience, accumulated learning, and expertise as they apply to a current business problem. For example, suppose that a company recruiting at your school has found over time that students with grade point averages over 3.0 have experienced the greatest success in its management program. Based on this accumulated knowledge, that company may decide to interview only those students with GPAs over 3.0. This example pre­ sents an example of knowledge because the company uses information—GPAs—to address a

business problem—hiring successful employees. As you can see from this example, organiza­ tional knowledge, which reflects the experience and expertise of many people, has great value to all employees.

Consider this example:

Data Information

Knowledge

[No context] [University context]

3.16 3.16 + John Jones = GPA

· Job prospects

2.92 2.92 + Sue Smith = GPA

· Graduate school prospects

1.39 1.39 + Kyle Owens = GPA

· Scholarship prospects

3.95 3.95 + Tom Elias = GPA

Data Information

Knowledge

[No context] [Professional baseball pitcher context]

3.16 3.16 + Ken Rice = ERA

2.92 2.92 + Ed Dyas = ERA

· Keep pitcher, trade pitcher, or

send pitcher to minor leagues

1.39 1.39 + Hugh Carr = ERA

· Salary/contract negotiations

3.95 3.95 + Nick Ford = ERA

GPA = Grade point average (higher is better).

ERA = Earned run average (lower is better); ERA is the number of runs per nine innings that a pitcher surrenders.

You see that the same data items, with no context, can mean entirely different things in different contexts.

Now that you have a clearer understanding of data, information, and knowledge, let’s shift our focus to computer-based information systems. As you have seen, these systems process data into information and knowledge that you can use.

A computer-based information system (CBIS) is an information system that uses com­ puter technology to perform some or all of its intended tasks. Although not all information systems are computerized today, most are. For this reason the term “information system” is typically used synonymously with “computer-based information system.” The basic compo­ nents of computer-based information systems are listed further on. The first four are called information technology components. Figure 1.3 illustrates how these four components in­ teract to form a CBIS.

· Hardware consists of devices such as the processor, monitor, keyboard, and printer. To­ gether, these devices accept, process, and display data and information.

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

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

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

· Procedures are the instructions for combining the preceding components to process in­ formation and generate the desired output.

· People use the hardware and software, interface with it, or use its output.

Figure 1.4 illustrates how these components are integrated to form the wide variety of information systems found within an organization. Starting at the bottom of the figure, you see that the IT components of hardware, software, networks (wireline and wireless), and databases form the information technology platform. IT personnel use these components to develop information systems, oversee security and risk, and manage data. These activities cumulatively are called information technology services. The IT components plus IT services comprise the

FIGURE 1.3 Computer-based information systems consist of hardware, software, databases networks, procedures, and people.

FIGURE 1.4 Information technology inside your organization.

organization’s information technology infrastructure. At the top of the pyramid are the var­ ious organizational information systems.

Computer-based information systems have many capabilities. Table 1.3 summarizes the most important ones.

Information systems perform these various tasks through a wide spectrum of applications. An application (or app) is a computer program designed to support a specific task or business process. (A synonymous term is application program.) Each functional area or department within a business organization uses dozens of application programs. For example, the hu­ man resources department sometimes uses one application for screening job applicants and

TABLE 1.3

Major Capabilities of Information Systems

Perform high-speed, high-volume numerical computations.

Provide fast, accurate communication and collaboration within and among organizations. Store huge amounts of information in an easy-to-access, yet small space.

Allow quick and inexpensive access to vast amounts of information, worldwide. Analyze and interpret vast amounts of data quickly and efficiently.

Automate both semiautomatic business processes and manual tasks.

another for monitoring employee turnover. The collection of application programs in a single department is usually referred to as a departmental information system (also known as a functional area information system). For example, the collection of application programs in the human resources area is called the human resources information system (HRIS). There are collections of application programs—that is, departmental information systems—in the other functional areas as well, such as accounting, finance, marketing, and production/ operations.

The importance of information systems cannot be understated. In fact, a 2016 report from the Software Alliance shows that information systems added more than $1 trillion of value to the United States gross domestic product.

Types of Computer-Based Information Systems
Modern organizations employ many different types of information systems. Figure 1.4 illus­ trates the different types of information systems that function within a single organization, and Figure 1.5 shows the different types of information systems that function among multiple organizations. You will study transaction processing systems, management information sys­ tems, and enterprise resource planning systems in Chapter 10. You will learn about customer relationship management (CRM) systems in Chapter 11, and supply chain management (SCM) systems in Chapter 11.

FIGURE 1.5 Information systems that function among multiple organizations.

In the next section you will learn about the numerous and diverse types of information sys­ tems employed by modern organizations. You will also read about the types of support these systems provide.

Breadth of Support of Information Systems. Certain information systems support parts of organizations, others support entire organizations, and still others support groups of organizations. This section addresses all of these systems.

Recall that each department or functional area within an organization has its own col­ lection of application programs, or information systems. These functional area information systems (FAISs) are supporting pillars for the information systems located at the top of Fig­ ure 1.4, namely, business intelligence systems and dashboards. As the name suggests, each FAIS supports a particular functional area within the organization. Examples are accounting IS, finance IS, production/operations management (POM) IS, marketing IS, and human resources IS.

ACCT FIN

Consider these examples of IT systems in the various functional areas of an organization. In finance and accounting, managers use IT systems to forecast revenues and business activity, to determine the best sources and uses of funds, and to perform audits to ensure that the organization is fundamentally sound and that all financial reports and docu­ ments are accurate.

MKT

In sales and marketing, managers use information technology to perform the following functions:

· Product analysis: Developing new goods and services.

· Site analysis: Determining the best location for production and distribution facilities.

· Promotion analysis: Identifying the best advertising channels.

· Price analysis: Setting product prices to obtain the highest total revenues.

Marketing managers also use IT to manage their relationships with their customers. In manufacturing, managers use IT to process customer orders, develop production schedules, control inventory levels, and monitor product quality. They also use IT to design and manu­ facture products. These processes are called computer-assisted design (CAD) and computer- assisted manufacturing (CAM).

POM

HRM

Managers in human resources use IT to manage the recruiting process, analyze and screen job applicants, and hire new employees. They also employ IT to help employees manage their careers, to administer performance tests to employees, and to monitor employee productivity. Finally, they rely on IT to manage compensation and benefits packages.

Two information systems that support the entire organization, enterprise resource plan­ ning systems (ERPs) and transaction processing systems, are designed to correct a lack of communication among the functional area ISs. For this reason Figure 1.4 shows ERP systems spanning the FAISs. ERP systems were an important innovation because the various functional area ISs were often developed as standalone systems and did not communicate effectively (if at all) with one another. ERP systems resolve this problem by tightly integrating the functional area ISs through a common database. In doing so, they enhance communications among the functional areas of an organization. For this reason, experts credit ERP systems with greatly increasing organizational productivity.

A transaction processing system (TPS) supports the monitoring, collection, storage, and processing of data from the organization’s basic business transactions, each of which gen­ erates data. When you are checking out at Walmart, for example, a transaction occurs each time the cashier swipes an item across the bar code reader. Significantly, within an organiza­ tion, different functions or departments can define a transaction differently. In accounting, for example, a transaction is anything that changes a firm’s chart of accounts. The information system definition of a transaction is broader: A transaction is anything that changes the firm’s database. The chart of accounts is only part of the firm’s database. Consider a scenario in which a student transfers from one section of an Introduction to MIS course to another section. This move would be a transaction to the university’s information system, but not to the university’s accounting department (the tuition payment would not change).

The TPS collects data continuously, typically in real time—that is, as soon as the data are generated—and it provides the input data for the corporate databases. TPSs are considered critical to the success of any enterprise because they support core operations. Significantly, nearly all ERP systems are also TPSs, but not all TPSs are ERP systems. In fact, modern ERP sys­ tems incorporate many functions that previously were handled by the organization’s functional area information systems. You study both TPSs and ERP systems in detail in Chapter 10.

ERP systems and TPSs function primarily within a single organization. Information sys­ tems that connect two or more organizations are referred to as interorganizational informa­ tion systems (IOSs). IOSs support many interorganizational operations, of which supply chain management is the best known. An organization’s supply chain is the flow of materials, infor­ mation, money, and services from suppliers of raw materials through factories and warehouses to the end customers.

Note that the supply chain in Figure 1.5 shows physical flows, information flows, and fi­ nancial flows. Digitizable products are those that can be represented in electronic form, such as music and software. Information flows, financial flows, and digitizable products go through the Internet, whereas physical products are shipped. For example, when you order a computer from www.dell.com , your information goes to Dell through the Internet. When your transaction is completed (that is, your credit card is approved and your order is processed), Dell ships your computer to you. (We discuss supply chains in more detail in Chapter 11.)