Learning Objectives: * To understand the importance of information systems for business professionals * To identify five areas of information systems knowledge business professionals need. * To illustrate how the business applications of information systems can support firm’s business processes, managerial decision-making, and strategies for competitive advantage. * To provide examples of several types of information system from experiences with business organizations in the real world. To identify several challenges that a business manager might face in managing the successful and ethical development and use of information technology in a business. * To understand the importance and application of informational technology in different departments of business. * To identify the different ways of using information technology in different departments of business. INTRODUCTION Information technology is a wide field, and has enabled organizations across the world to work in an efficient manner. It plays a very important role in effective management and running of a business.
The use of information technology in organizations is inevitable, be it any type of company like manufacturing or medicinal sector. It has contributed largely to the process advancements in organizations. Basic Elements of Information Technology Software and Applications Software is an important part of information technology which relates to computer applications that enable a company to generate, store, program, and retrieve data as and when needed. There are many software’s developed for different purposes. All operations in the business sector are carried out by software that is assigned for executing specific tasks.
Without these computer applications the businesses wouldn’t have been able to carry out their functions in a proper and efficient manner. Operating systems, ERPs, special purpose applications, and web browsers are some examples of different software’s. There are some software’s which are exclusively built to contribute to the proper collaborative working of all sections of the businesses, which are known as Enterprise Resource Planning (ERP). These are complex applications which enable people to efficiently manage all functions and operations of all processes in the businesses. Hardware Devices hese are various computer equipments that house the software’s. Devices like microcomputers, mid-size servers, and huge mainframe systems are some examples of hardware. Businesses have to maintain a huge collection of important data. For this purpose, they employ these devices which are responsible for storing confidential company data and retrieving it back when required. Other hardware devices include network devices that are used for providing Internet access to the businesses to work and communicate expeditiously. There are even devices which enable manufacturing tools and equipments to work accurately in the industrial sector.
Running Businesses with Information Technology Small scale businesses need to buy software packages that would cater to their specific management, operational, and functional needs. For this purpose, they need to approach firms and IT manufacturers who deal in such software applications. Other IT services include Internet marketing and email marketing, web hosting and promotions, and maintaining client networks. Larger businesses on the other hand have their own operational and functional employees who develop software applications and work on several IT needs of the businesses.
They usually purchase ERP software’s to coordinate different processes and functions into a single application, which is actually more convenient. Manufacturing businesses may make use of servers and databases to store their vast data regarding inventory, B2B, B2C, FMCG (in the retail business sector), etc. Automobile manufacturers use computers to guide manufacturing and designing tools to function in a precise manner, ruling out the possibilities of any human error. Businesses all around the globe have to take the aid of information technology in some way or the other to keep themselves in sync with the market and the world.
There are several departments in business organizations such as HR and recruitment, finance and payroll, administration, and security. All these departments utilize IT to carry out their respective operations in a productive and efficient manner. Applications of ICT – Introduction IT is now part of everyday life for many, if not most, businesses. These revision notes set out the key IT applications that one needs to know about. Many of these applications will be familiar from own experiences, whereas others will not be. The key uses of IT have been separated into the following convenient heading. * Customer Service Workplace efficiency * Planning ; controlling operations * Marketing * Finance and accounting * E-commerce * Collaboration ; Outsourcing * Banking and payments * Data Protection Act 1998 * HRM Types of Information Systems: Information Systems perform important operational and managerial support roles in businesses and other organizations. Therefore, several types of information systems can be classified conceptually as either: • Operations Support Systems •Management Support Systems 1. Operations Support Systems Information systems are needed to process data generated by and used in business operations.
Such operations support systems (OSS) produce a variety of information products for internal and external use. However, they do not emphasize producing the specific information products that can best be used by managers. Further processing by management information systems is usually required. The role of a business firm’s operations support systems is to: • Effectively process business transactions • Control industrial processes • Support enterprise communications and collaboration • Update corporate databases a. Transaction Processing Systems (TPS)
Focus on processing the data generated by business transactions and operations. Transaction processing systems record and process data resulting from business transactions (sales, purchases, inventory changes). TPS also produce a variety of information products for internal or external use (customer statements, employee paychecks, sales receipts etc. ). TPS process transactions in two basic ways: •Batch Processing- Transactions data is accumulated over a period of time and processed periodically. • Real-time (or online) processing – data is processed immediately after a transaction occurs. . Process Control Systems (PCS) – Process control systems are systems, which make use of computers to control ongoing physical processes. These computers are designed to automatically make decisions, which adjust the physical production process. Examples include petroleum refineries and the assembly lines of automated factories. c. Enterprise Collaboration Systems – Enterprise collaboration systems are information systems that use a variety of Information technologies to help people work together. Enterprise collaboration systems help us: * Collaborate- to communicate ideas Share resources * Co-ordinate our cooperative work efforts as members of the many formal and informal process and project teams The goal of enterprise collaboration systems is to use information technology to enhance the productivity and creativity of teams and workgroups in the modern business enterprise. 2. Management Support Systems (MSS) – Management support systems focus on providing information and support for effective decision making by managers. They support the decision-making needs of strategic (top) management, tactical (middle) management, and operating (supervisory) management.
Conceptually, several major types of information systems support a variety of decision-making responsibilities: * Management Information Systems (MIS) * Decision Support Systems (DSS) * Executive Information Systems (EIS) a. Management information systems are the most common form of management support systems. They provide managerial end users with information products that support much of their day-to-day decision-making needs. MIS provide a variety of pre specified information (reports) and displays to management that can be used to help them make more effective, structured types of day-to-day decisions.
Information products provided to managers include displays and reports that can be furnished: * On demand * Periodically, according to a predetermined schedule * Whenever exceptional conditions occur b. Decision support systems provide managerial end users with information in an interactive session on an ad hoc (as needed) basis. Managers generate the information they need for more unstructured types of decisions in an interactive, computer-based information system that uses decision models and specialized databases to assist the decision-making processes of managerial end users. . Executive information systems provide top and middle management with immediate and easy access to selective information about key factors that are critical to accomplishing a firm’s strategic objectives. EIS are easy to operate and understand. Other Classifications of Information Systems: Several other categories of information systems that support either operations or management applications include: * Expert Systems * Knowledge Management Systems * Functional Business Information Systems * Strategic Information Systems * Cross-functional Information System
THE FUNDAMENTAL ROLES OF IT APPLICATIONS IN BUSINESS Information systems perform three vital roles in any type of organization. That is, they support an organization’s: * Business processes and operations * Decision making by employees and managers * Strategies for competitive advantage Analyzing Royal Caribbean International We can learn a lot about the challenges of revitalizing and redirecting information technology in a company from the Real World Case of Royal Caribbean International. Three major roles of the business applications of information systems include: Business Processes – involves dealing with information systems that support the business processes and operations in a business. • Support Decision Making – help decision makers to make better decisions and attempt to gain a competitive advantage. • Support Competitive Advantage – help decision makers to gain a strategic advantage over competitors requires innovative use of information technology. The explosive growth of the Internet and related technologies and applications is revolutionizing the way businesses are operated and people work, and how information technology supports business operations and end user work activities.
Businesses are becoming e-business enterprises. The Internet and Internet like networks inside the enterprise (intranets), and between an enterprise and its trading partners (extranets) – have become the primary information technology infrastructure that supports the business operations of many companies’-business enterprises rely on such technologies to: • Reengineer and revitalize internal business processes. • Implement electronic commerce systems among businesses and their customers and suppliers. • Promote enterprise collaboration among business teams and workgroups.
E-business is defined as the use of Internet technologies to internetwork and empower business processes, electronic commerce, and enterprise communication and collaboration within a company and with its customers, suppliers, and other business stakeholders. Enterprise collaboration systems involve the use of groupware tools to support communication, coordination, and collaboration among the members of networked teams and workgroups. An internetworked e-business enterprise depends on intranets, the Internet, extranets, and other networks to implement such systems.
Electronic commerce is the buying and selling, and marketing and servicing of products, services, and information over a variety of computer networks. An internetworked e-business enterprise uses the Internet, intranets, extranets, and other networks to support every step of the commercial process. Applications of IT in Different departments of business 1. Finance and accounting a. Accounting records Most firms have accounting software packages to help produce statutory accounts and reports for bankers and management, as well as to help with the day-to-day control of its finances.
One very popular package amongst small to medium UK businesses is Sage, which also has modules to manage, for example, payroll and debt factoring facilities. The main components of an accounting system would include modules such as: * Invoicing * Bought ledger (trade creditors) * Sales ledger (trade debtors) * Bank reconciliation * Cash flow forecasts * Producing draft accounts and trial balances b. Spreadsheets Widely used by finance departments to help manage cash flow, for bank reconciliations and in credit control.
Any department holding a budget for expenses and/or revenues would typically use a spreadsheet to help create the budget in the first place, and then to monitor incomes and expenditure and any variances. c. Credit control Much of the credit control work can be made much more efficient with computerized credit control. As businesses typically buy from and sell to other businesses on credit terms, it is essential to have up to date and accurate information about which creditors need to be paid, and when money is due from debtors. d.
Banking ; payments Businesses are able to take advantage of electronic banking which allows them to check their bank account records in real time – saving time and helping ensure that payments due have been made and received, and also to operate the bank account within any agreed overdraft limit. Large and overseas payments can be made quickly and securely with on-line banking, as long as the business has its own security checks to protect against theft by staff or by anyone else who managed to obtain account details and passwords. . EFTPOS Electronic Funds Transfer at Point Of Sale is familiar to most of us in the form of card readers that swipe credit and debit cards for payments. This has the advantage of avoiding the expense and risk of handling cash and in generally a much more efficient payment method. Again, even quite small businesses are now using this technology, and portable EFTPOS devices have made it feasible to use in places such as taxis and restaurants. 2. Marketing a. Market research
Customer databases, a useful mine of information for marketing and operational purposes – NB this would be a form of secondary market research, as the data has not been gathered for the purpose of market research. In fact, sophisticated analysis of these databases is often known as data mining. IT can be useful in helping with primary market research, such as on-line surveys and questionnaires. Firms that run Ecommerce websites can request customers to participate and often offer some kind of incentive for doing so, such as a code that can be entered for a discount at their next visit. b. Targeted marketing promotion
Customer data can provide marketing with a very powerful means of closely targeting * Direct mail * Email and * Telemarketing Campaigns can be refined to choose only people meeting the right criteria for a given product or service, hopefully improving the response rates to the campaign. One reason that consumers find ‘junk mail’ so irritating is that much of it is poorly targeted; whereas many do buy as a result of receiving information about products they are actually interested in. c. On-line advertising Many businesses advertise through ‘banners’ and similar advertisements on other websites.
This offers potential customers a quick and easy way to respond to an advertising message. Of course there is so much on-line advertising that careful targeting is essential, otherwise effort is wasted. The good news is that large popular websites such as Google (and Tutor2U!! ) have very sophisticated systems to help ensure that advertisements on their websites are presented according to what the particular ‘surfer’ seems to be looking for on that website. Payment for web advertising tends to include an element linked to the number of ‘click-troughs’ – in other words the number of surfers who actually click on the advertiser’s link. . Corporate websites Most medium to large business, and many small businesses, maintain a website. This would usually include basic contact information as well as key marketing messages about the business and its products. The website offers a good place to keep public relations information such as press releases and other announcements. Many websites are also an electronic store. e. Geo-demographics This is a software package that overlays demographic data over a map. For example, a retailer might choose its location partly on the basis of the demographic make-up of the local population.
This could help them to place their store in the most convenient place for a suitable size of target market. Demographics is all about measuring and classifying populations according to criteria such as; age, sex, income, level of education, household composition, car ownership and so on. f. Web Hosting There are many Web hosting companies that offer the hosting of Web sites. A Web host provides space on the internet for a Web site. Many Web hosting companies also offer additional Web services in conjunction with the Web hosting service. g. ————————————————- Customer and market knowledge databases
To support the use of information and analysis as a marketing tool, there is a need to build databases to hold information, so that they can be analyzed easily and allow for information to be shared and sorted, for instance to support customer knowledge activities. We develop bespoke market knowledge databases for the collection and dissemination of customer and competitor knowledge. Typically these are web-based systems based around a browser interface and industry standard applications. This allows us to collect and disseminate information through a wide variety of devices allowing for access and use outside the office environment.
A demonstration will be available shortly from this site. One specialist design is self-maintaining databases. For these type of databases, customers have access to and can manage and update their own information. This has the benefit of reducing the chances of data entry error, whilst allowing customers to tell you information from their perspective. h. ————————————————- On-line communities and web-sites Web-site development and e-commerce need to be in place as another arm of your channels of distribution.
The most effective web-sites are those that provide customers with a space to communicate and share information among themselves and with your employees. These on-line communities can be an extension of your loyalty programmers or customer feedback programmer, or they can just be autonomous in their own right. Some companies worry that by providing a forum for customers to talk to each, problems will be highlighted. But the evidence suggests that open and honest communication is the single most effective way of generating loyalty, particularly if you are taking steps to fix problems.
We have in-house skills in all the major web-technologies and can help you generate your own on-line community. Field Share was entirely developed in-house including the database and discussion forum elements. ————————————————- IT tools for marketing In addition to bespoke software development (for example our Questionnaire), we are also able to configure and supply specialist tools for marketing project management and automated competitive intelligence gathering.
In addition we can advise on the selection of data analysis tools for the statistical analysis of market research and database data and can provide training if necessary. One example is Geographic Information Systems (GIS). It is simply a mechanism for plotting database information on maps. Much existing business-to-business information contains geographic components and it can be incredibly useful to look at customers and orders by geography both to help with sales management and to provide key analysis to support marketing through seminars for instance. For instance, if you knew that early half of corporate businesses have their headquarters in London and the South East; this would help you focus your marketing to look at solutions local to this area. 3. OPERATIONS MANAGEMENT Increasingly, businesses use real time data from EPOS, on-line stores and electronic sales ledgers to drive their re-order processes. a. EDI (Electronic Data Interchange) Facilitates exchange of orders between different businesses and allows Just in Time stock ordering. Other businesses place orders electronically once production schedules have been set for the next period.
With computerized stock control, businesses should be able to check stock levels almost on a real-time basis. Stock checks are still required to reconcile stock levels that may be incorrect due to faults in scanning or because of pilferage or other wastage. b. CAD/CAM – Computer Aided Design/Computer Aided Manufacture Computer Aided Design and Computer Aided Manufacture are two systems that tend to work together. Computer Aided Design helps design products on computers, rather than having to create endless drawings. The system can create realistic 3D images of the finished product.
CAD also allows virtual testing of the product before it is actually made, dramatically reducing lead times and minimizing waste in new product development. As CAD acts together with CAM, its outputs are designed to optimize designs for efficient manufacture with CAM systems. CAM uses computers to control tooling such as CNC and other robotized machinery. Benefits would be expected to include; improved quality, reduced wastage, faster production and less reliance on labor, in other words, it is more capital intensive. In many cases, CAM facilitates the manufacture of designs that would have been impossible without this technology. . Project management The key Project Management tool is Critical Path Analysis (CPA), also known as Network Analysis Project Planning software, such as Microsoft Project, allows project managers to enter tasks, lead times, dependencies and staff skills and availability, even allowing for holiday, and the system will produce an optimized work schedule. The system produces regular reports for project managers to check progress and take any corrective action. Networked versions enable different people to query the system and keep it up to date.
MRP/ERP – Management Resource Planning/Enterprise Resource Planning These are names for computer systems that attempt to manage the whole company and draw together all aspects of its operations and administration. In practice, this is a considerable challenge and the software firms that offer this service tend to do so by integrating a number of existing systems to allow them to ‘talk’ to one another by exchanging data. Workplace Efficiency Many of the key uses of ICT in the office in particular, the Microsoft Office ® suite of software including; word processor, database, spreadsheet, presentation, email etc.
Offices and many other workplaces typically have networked PCs with centralized databases and high-speed Internet connections. Email Increasingly, the majority of office workers have company email accounts available on their desktop PC. This provides a cheap and fast means of communication within the company and with customers and suppliers. Word processing and Desktop Publishing (DTP) Word processing has taken over from typing in most workplaces and means that many – if not most – office workers now create their own letters and documents, rather than pass written notes or a voice recording to typists.
More sophisticated DTP software with graphics capability means that brochures, newsletters, pricelists and other official documents can easily be produced ‘in-house’, rather than having to pass the work to an outside agency. ‘Teleworking’ Some of the above solutions, combined with relatively cheap desktop and notebook PCs and widely available broadband connections, mean that many workers can do at least part of their job remotely. In some cases, this means workers working from home or when away on business (or ‘holiday’! ). Teleworking can help provide practical ways of offering more flexible working conditions.
This means that many people can work who would find it hard to manage regular office hours. In turn, this can widen the available pool of experienced and qualified staff – such as people with childcare commitments, other careers and the disabled. Teleworking is also the key to outsourcing call centre and other office work to overseas centre’s such as India, where there is an abundance of low cost, well-qualified staff and a good infrastructure. Document archives Rather than storing correspondence and other documents in paper form, they can be scanned and stored electronically for instant retrieval from anywhere on a company’s network.
This can dramatically reduce the cost of storing and managing paper files, although one only has to visit a typical office to see that we are a long way from being ‘paperless’. 5. Personnel management – employee databases (HRM) Human Resources (or Personnel) Departments use employee databases to help with areas such as: * Payroll, * Benefits, * Holidays, * Pensions and * General administrative purposes 6. Customer Relationship Management (CRM) a. Evaluation – FLEXIBILITY For businesses and for workers, IT in the office undoubtedly offers scope for more flexibility in the location and time at which work is done.
For many people, this makes the difference between working, and not working, and so it has a positive effect on the economy, allowing more people to contribute. However IT enables the easy transfer of work to other countries, and so it has been a cause of UK job losses too. Nevertheless, in the UK, there has been rising employment as workers have been concentrating on service and other jobs with greater added value. Combined with mobile telephones, this technology means that many people, especially senior managers, are never really able to enjoy any holiday or leisure time.
Many families lose out due to a poor ‘work-life balance’, and managers can suffer ill health through excessive stress. b. Customer Service The real key to the application of IT to Customer Service is in the use of customer databases. Customer databases are electronic repositories of all manner of customer information including: * Contact information – name, address, telephone, email address etc. * Security information to help confirm identity * Buying history; products bought, times, days of week etc * Payment information * Policy renewal dates … And so on
Whenever a customer logs on, makes a telephone call or presents a loyalty card for swiping, the customer service representative – or even the form’s website – has a wealth of information available to offer products and services that the customer is likely to be interested in. Every time the customer makes a purchase or has an interaction with the business, more information can be added. When data is gathered at the ‘checkout’, this is done through EPOS (Electronic Point of Sale) – usually based on barcode scanners. As these databases are electronic and centralized, it is no longer necessary to hold customer data in a local branch.
This is the key to a move to on-line banking and to call centers, including offshore call centers, and the data can be accessed anywhere. Modern customer databases are relationship centered, that is to say that the key is the customer himself or herself. If a member of the customer service staff makes a query about the customer, they would expect to be able to see all the related accounts and/or orders. In the early days of customer databases, information was usually held according to individual products or account numbers. Data was primarily used for accounting purposes and had limited use for customer service, marketing, sales etc.
Electronic customer service Customer databases allow many organizations to offer customer service through new channels, such as telephone and on-line, via the Internet. Although some customers bemoan the loss of personal contact, many organizations find that massive cost savings can be made and in many cases, service hours can be extended – sometimes 24 hours a day. Some new organizations have been able to build their entire operations through electronic customer service – good examples include: Direct Line, Amazon, eBay, Dell, and Esure.
CRM systems attempt to bring all of the above – and more – together in one system customer-centric system. For example, a business like Amazon uses CRM to do things like: * Email customers with recommended purchases * Recognize the customer as soon as he/she logs in * Present customer-targeted web pages, promoting items likely to be of interest * Be ready to accept orders without having to re-enter all the payment details * Offer promotions and incentives * Manage loyalty programs * Manage prices – not all customers have the same pricing * Contact customers for feedback and surveys
Although CRM systems have tended to be the preserve of major companies, systems are becoming available that are affordable by smaller businesses. 7. Corporate Social Responsibility: Corporate Social Responsibility (CSR) has come to the forefront of Corporate and economic concerns because of the increasingly globalize nature of business and the so-called New Economy, a knowledge-based, technology-driven environment that has, among other things, affected an increase in stakeholders access to information. Corporate social responsibility:
Corporate Social Responsibility (CSR) has come to the forefront of Corporate and economic concerns because of the increasingly globalize nature of business and the so-called New Economy, a knowledge-based, technology-driven environment that has, among other things, affected an increase in stakeholders access to information. The Impact of Information Technology on Corporate Social Responsibility in examining this concept itself, it is to be understood that CSR is having both internal and external dimensions. 1.
As regard the internal dimension the project deals with the socially responsible practices primarily involve employees and relate to issues such as investing in human capital, health and safety, and managing change, while environmentally responsible practices relate mainly to the management of natural resources used in the production within the company. They open a way of managing change and reconciling social development with improved competitiveness. The impact of IT on the internal CSR includes: * Changes in information management * Director duties * Duty of care Monitoring the affairs of the company * Reliance on experts * Changes in auditing responsibilities * Investor involvement * Disclosure * Minority protection * Impact on regulatory bodies * Determination of control 2. With regard to the external dimension of CSR, the project notes that: Corporate social responsibility extends beyond the doors of the company into the local community and involves a wide range of stakeholders in addition to employees and shareholders: business partners and suppliers, customers, public authorities and NGOs representing local communities, as well as the environment.
Conclusion: Thus, the information technology role in business sector certainly is of a great importance, which enables businesses to, effectively and successfully, plan, manage, execute strategies which lead to profit. Moreover, the impact of information technology on business is on the rise, as several advancements are focused on to be implemented in various business processes. And in a way it can be concluded that the businesses are dependent on information technology.