Why information systems are essential to business

Essentials of Information Systems to Business         

     Information Systems is the back bone of today's businesses and critical part of mid-size to large businesses like banks. The massive data and increasing volumes of data needs organized storing and fast and effective processing for variety of purposes from decision making to risk management, from transaction processing to state-the art products. The large-scale businesses are globally distributed across the world which needs stable and reliable infrastructure and network administration and the applications which can run and handle simultaneous, real time and fast processing. The availability of technology has enabled the businesses to offer variety of services which has made Information Technology as part of the businesses today. What seems to be a simple online banking transaction for instance, involves web-based programs which run on a one platform and access the data in another platform like mainframe and tho make there should be network communication and systems which can communicate to each other, available 24 by 7. The more businesses grow the more dependent they become of Information Systems   

    The emergence of a global economy, transformation of industrial economies, transformation of the business enterprise, and the emergence of digital firm make information systems essential in business today. Information system is a foundation for conducting business today. In many businesses, survival and the ability to achieve strategic business goals is difficult without extensive use of information technology. There are six reasons or objectives why businesses use information system: 

    1. Operational excellence.  Information systems are important tools available to managers for achieving higher levels of efficiency and productivity in business operations. A good example is Wal-Mart that uses a RetailLink system , which digitally links its suppliers to every one of Wal-Mart's stores as soon as a a customer purchase an item , the supplier is monitoring the item , knows to ship a replacement to the shelf. 

    2. New products, services, and business models. Information system is a major tool for firms to create new products and services, and also an entirely new business models. A business model describe how a company produces, delivers, and sells a product or service to create wealth. 

    3. Customer/supplier intimacy. When a business serves its customers well, the customers generally respond by returning and purchasing more. This raises revenue and profits. The more a business engage its suppliers, the better the suppliers can provide vital inputs. 

   4. Improved decision making. Many managers operate in an information bank, never having the right information at the right time to make an informed decision. These poor outcomes raise costs and lose customers. Information system made it possible for the managers to use real time data from the marketplace when making decision.

   5. Competitive advantage. When firms achieve one or more of these business objectives( operational excellence, new products, services, and business models, customer/supplier intimacy, and improved decision making) chances are they have already achieved a competitive advantage.

    6. Day to day survival. Business firms invest in information system and technology because they are necessities of doing business. These necessities are driven by industry level changes. Example: Citibank introduced the first automatic teller machine to attract customers through higher service levels, and its competitors rushed to provide ATM's to their customers to keep up with Citibank.

     

     

Business Information Systems

          Business models in thousands of industries throughout the world are

being transformed by technology. Technology helps businesses improve operations,

increase profits, reduce costs, improve decision making, increase competitive

advantages, and insure a business’s survival.

     Figure 1 shows, the three basic dimensions of information systems.

                          Image Credit to Tareq Braiwish

http://www.youtube.com/watch?v=fahqgznAKQ4

Types of Business Information Systems

     Systems from a Functional Perspective

     Each management level has a special type of information system that best serves its needs. Each functional area of a business requires specific pieces of information according to their mission.

     1. Sales and Marketing Systems - As both of these functions have close or direct contact with customers, they usually work hand-in-hand. The marketing mission is to identify customers and their wants and needs. Sales’ mission is to put the product or service into the hands of the customer.

     

     2. Manufacturing and Production Systems -After sales and marketing actually sell a product or service, someone has to make it. That’s where manufacturing and production information systems come into the picture. And there is more to these systems than just the assembly line. Someone has to decide where the manufacturing plants will be located. Someone else has to decide how many raw materials will be needed and then order those materials. Finally, someone will have to make sure the product gets produced on a daily basis.

     

     3. Finance and Accounting Systems - Pity the company without adequate finance and accounting systems. How will they know how much money will be available for future expansion or even for next week’s payroll? Who makes sure the financial assets of the organization are put to the best use? Integration of information throughout the business is most apparent in the finance and accounting systems.

    

     4. Human Resources Systems - Somebody has to hire employees with the right skills and experience and then make sure those employees are utilized to the full benefit of themselves and the organization. How will production even know how many employees are necessary or how many the organization can afford to hire? What is the best ratio of managers to workers for the organization? How can the organization find the employees to begin with? All of these information needs can be fulfilled with human resources information systems. 

  

     

            Figure 2 shows The Four Major Functions of a Business.

                              Image Credit to Tareq Braiwish

References: 

http://wiki.answers.com/Q/Why_are_information_systems_so_important_in_business_today

http://www.mahmoudyoussef.com/aagsb/mba/mis/lec02-03.pdf

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