Generating Information In the examples just cited, calculating totals and averages of different complaint s or purchasers’

Generating Information In the examples just cited, calculating totals and averages of different complaint s or purchasers’

ages may reveal trends in buying habits. These calculations are processes. A process is any manipulation of data, usually with the goal of producing information. Hence, while data is essentially raw materials, information is output. Just as raw materials are processed in manufac- turing to create useful end products, so raw data is processed in information systems to create useful information (see Figure 1.1). Some processes, however, produce yet another set of data.

FIGURE 1.1

Input-process-output 1

Input Process Output

Raw Material Process Product

Data Process Information

Sometimes, data in one context is considered information in another context. For example, if an organization needs to know the age of every person attending a basketball game, then a list of that data is actually information. But if that same organization wants to know the average price of tickets each age group purchases, the list of ages is only data, which the organization must process to generate information.

PART 1 THE INFORMATION AGE PART 1 THE INFORMATION AGE

FIGURE 1.2

Characteristics of useful information 2

Information must pertain to the problem at hand. For example,

Relevant

the total number of years of education might not be relevant to a person’s qualifications for a new job. Relevant information might

be that the person has so many years of education in mechanical engineering and so many years of experience. The information must also be presented in a way that helps a person understand it in a specific context.

Complete

Partial information is often worse than no information. For example, marketing data about household incomes might lead to bad decisions if not accompanied by vital information on the consumption habits of the targeted population.

Accurate

Erroneous information might lead to disastrous decisions. For example, an inaccurate record of a patient’s reaction to penicillin might lead a doctor to harm the patient while believing that she is helping him.

Current Decisions are often based on the latest information available, but what was a fact yesterday might no longer be one today. For example,

a short-term investment decision to purchase a stock today based

on yesterday’s stock prices might be a costly mistake if the stock’s price has risen in the interim.

Economical In a business setting, the cost of obtaining information must be considered as one cost element involved in any decision. For example, demand for a new product must be researched to reduce risk of marketing failure, but if market research is too expensive, the cost of obtaining the information might diminish profit from sales.

What Is a System?

Simply put, a system is an array of components that work together to achieve a common goal, or multiple goals, by accepting input, processing it, and producing output in an organized manner. Consider the following examples:

• A sound system consists of many electronic and mechanical parts, such as a laser head, an amplifier, an equalizer, and so on. This system uses input in the form of electrical power and sound recorded on a medium such as a CD or DVD, and processes the input to reproduce music and other sounds. The components work together to achieve this goal.

• Consider the times you have heard the phrase “to beat the system.” Here, the term “system” refers to an organization of human beings —a government agency, a commercial company, or any other bureaucracy. Organizations, too, are systems; they consist of components —people organized into departments and divisions —that work together to achieve common goals.

Systems and Subsystems Not every system has a single goal. Often, a system consists of several subsystems — components of a larger system —with subgoals, all contributing to meeting the main goal. Subsystems can receive input from, and transfer output to, other systems or subsystems.

Chapter 1 Business Information Systems: An Overview □ 11 Chapter 1 Business Information Systems: An Overview □ 11

own goal, which is a subgoal of a larger system (the company), whose goal is to maximize profit. Now consider the goals of a manufacturing organization’s information system, which stores and processes operational data and produces information about all aspects of company operations. The purpose of its inventory control subsystem is to let managers know what quantities of which items are on hand and which may soon have to be reordered. The purpose of the production control subsystem is to track the status of manufactured parts. The assembly control subsystem presents the bill of material (a list of all parts that make up a product) and the status of assembled products. The entire system’s goal is to help deliver finished goods at the

lowest possible cost within the shortest possible time.

Figure 1.3 shows an example of a system found in every business: an accounting system. An accounting system consists of several subsystems: accounts payable, records information about money that the organization owes to suppliers and service providers; accounts receivable, records sums owed to the organization and by whom; a general ledger, records current transactions; and

a reporting mechanism, generates reports reflecting the company’s financial status. Each sub- system has a well-defined goal. Together, the subsystems make up the organization’s accounting system.

All professionals must understand systems, both organizational and physical. They need to understand their position in an organization so they can interact well with coworkers, employees of business partners, and customers. They need to understand information systems so that they can utilize them to support their work and interactions with other people.

FIGURE 1.3 Several subsystems make up this corporate accounting system.

Sigma Co. Accounting System

Accounts Payable General Ledger Accounts Receivable

Whom do we owe? Our assets and

Who owes us?

liabilities

Report Generator Status, problem areas

Closed vs. Open Systems Systems are closed or open, depending on the nature of the information flow in the system. A closed system stands alone, with no connection to another system: nothing flows in from another system, nothing flows out to another system. For example, a small check-producing

PART 1 THE INFORMATION AGE PART 1 THE INFORMATION AGE

Information Systems With an understanding of the terms “information” and “system,” the definition of an informa- tion system is almost intuitive: an information system (IS) consists of all the components that work together to process data and produce information. Almost all business information systems consist of many subsystems with subgoals, all contributing to the organization’s main goal.