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Information Systems in Organisations TodayLesson 1
Major Features of a business
A business’s main purpose is the for-profit production of products or the provision of
services. As long as the organisation is capable of selling its products or services for a
price above the production costs, it will be able to stay in business. The costs of
production include the purchase of resources and value-adding labour to create the
final product or service at a price that customers are willing to pay. Not all
organisations operate following the profit motive; government and non-profit
organisations can also produce products and services but do not need to generate a
profit to continue providing the same. From the point of view of the information
systems used by government and non-profit organisations, it is not always possible
to identify a stark difference with respect to those of the private sector.
Basic business processes and functions
Sales and Marketing: sales and marketing processes include operations, activities,
processes and techniques involved in (for sales) supporting sales and (for marketing)
the sale and distribution of a product or service.
Finance and Accounting: the finance and accounting functions deal with the
summarising, analysis and conveying of business transactions in financial statements.
Manufacturing and Production: the manufacturing and production functions are
concerned with the creation of finished products from raw materials.
Human Resources: the human resources department is engaged with several
processes relating to the employees of an organisation, including employee benefits
and compliance with labour legislation.
Legal Services: the legal services department provides legal advice in all relevant
matters pertaining to the organisation and ensures that all its activities comply with
relevant legislation.
Logistics: the logistics function covers the transportation and warehousing of
materials and packaging for manufacturing and production and of finished products
to customers.
Estates and Security: the estates and security department is in charge of the
protection of the assets, property and personnel of the organisation.
Business processes describe the typical steps as well as the logically related set of
tasks and activities involved in the organisation of work, information and knowledge
management in a business organisation. Some business processes may be encircled
in larger processes; however, they are typically linked to a specific operational area.
For instance, the sales and marketing function would be in charge of identifying and
acquiring customers whereas the human resources function would be responsible
for employees’ processes (i.e. hiring, training, etc.).
,Some business processes can cross functional areas and therefore require cross-
departmental coordination. Fulfilling a customer order may at first be considered a
simple business process. In practice, it involves coordination between the sales
department (who receives a sales order) and finance and accounting for credit
verification or request for immediate payment prior to shipping. After the relevant
functions have agreed on the feasibility of fulfilling the order, the production
department is notified and then their task will be to haul the item from their stock or
to produce it.
Information systems and business processes
Typically, information systems automate business processes and transform manual
tasks and processes into digital activities. Consider, for example, the previous
example about fulfilling a customer order and the possibilities to automate the
activities involved with checking available credit, the generation of an invoice,
automation of production processes and finally shipping. The information related to
each one of the previous activities can be made available to be accessed from a
single point where progress on each step can be monitored. Because making
information available from a single point on each of the activities involved in the
fulfilment of a customer order essentially creates a new information flow, it can
,replace the standard sequence involved in each step with simultaneous tasks, in turn
potentially eliminating waste and delays.
Although downloading a music track from iTunes and ordering a book from
Amazon.com are not entirely new business processes, they are based on business
models that are inconceivable without information technology, and that were
inconceivable until a few years ago. The transformations that information
technology introduced to business processes are nowadays of absolute importance
to understand how business processes and information systems actually work
together to deliver business objectives. An important part of this module will be
dedicated to the study and examination of business processes in view of
understanding how information technology may be introduced to make them more
efficient or effective as well as to achieve innovation and customer satisfaction.
Business management groups and firm hierarchies
Business organisations are comprised of business management groups and firm
hierarchies. The typical hierarchical levels that information systems serve consist of:
senior management (involved in long-term strategic decisions), middle management
(responsible for carrying forward senior management’s programmes and plans) and
operational management (which monitor the business’s day-to-day activities).
Scientists and knowledge workers (i.e. engineers, architects, etc.) often work in
research and development and/or with middle management. Data workers were
once primarily considered to perform secretarial work, clerical tasks and
administrative work, but new roles in data management and science have recently
emerged, including data analysis and data scientists.
Firms have many divisions to co-ordinate employees’ work. Under each division
there will be two or more departments with specific goals and business processes
and where hierarchies concentrate authority, responsibility and accountability at the
top. For each department, division and business unit, managers are hired to ensure
all the various parts of an organisation work together and that the business as a
whole succeeds.
, The business operating environment
The business operating environment is constantly changing and the business is
heavily dependent upon it for resources, labour, customers demanding services and
products, as well as influences deriving from new technological breakthroughs; but
the organisation’s operating environment also includes markets as well as the legal,
political and educational systems, producing changes that the firm must constantly
monitor and adapt to.
For example, the introduction of Apple’s iTunes almost obliterated the time-
honoured music industry’s distribution model built on distributing music via pre-
recorded instruments (i.e. CDs, cassettes, vinyl). Consider also the recent
transformations in the photography business. Eastman Kodak, a dominant firm in the
photography business for almost a century, was slow to adapt to digital photography
and had to downscale and take steps towards digital cameras and Internet
photography services because demand for traditional cameras with film plummeted.
Information systems in a business
Until the mid 1950s, firms managed all of their information and information flow
using paper records. During the past 60 years, increasingly, business information
management and information flows have been computerised. Businesses continue
to invest in information systems to drive managerial efficiency and effectiveness in
internal production and to cope with customers’ demands.
According to Laudon and Laudon (2018, p.43), firms invest in information systems to
achieve the following business objectives:
• operational excellence (productivity, efficiency, agility)
• new products, services and business models
• customer and supplier intimacy and service (continuous marketing, sales, and
service; customisation and personalisation)
• improve decision-making (accuracy and speed)
• competitive advantage
• Survival.
Business information systems types
Organisations have different interests, specialties and levels, and for each there will
be a specific type of information system. Now we will look at the business
information systems types used to achieve these goals.
Until recently, functional systems were gradually becoming replaced by large-scale
cross-functional systems integrating related business processes and organisational
units such as sales and marketing, manufacturing and production, finance and
accounting and human resources. Although the trend is still prevalent, new models
of information systems development and integration are emerging involving
collaboration with start-ups and in-house resources. In this section, we will briefly
review functional systems operating independently for the purpose of facilitating
your learning and compare these with recent developments later in the module.
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