Chapter 1 – Introduction to Information Systems

HISTORY OF INFORMATION SYSTEMS

A review of the history of information systems includes a look back at the hardware and how it has been applied. In the
half century since the first general-purpose digital computer was installed in a business organization, the hardware has
experienced many-fold increases in speed and capacity along with dramatic reductions in size. Concurrently, the computer
applications have evolved from relatively straightforward accounting processes to systems designed to support managers and
other problem solvers.

THE EVOLUTION IN COMPUTER HARDWARE

 ENIAC (Electronic Numerical Integrator and Calculator) – developed in 1946 by John W. Mauchly and J. Presper Eckert
 UNIVAC by Remington Rand – first installed in a government organization, the U.S. Census Bureau, 1951
–Three years later, the same type of machine was installed in the first business organization, General Electric
performing 2,000 calculations per second – extremely slow compared to the 2 billion or more instructions per second
that are common for todays smallest and least expensive microcomputers.
–Also known as mainframes.
 IBM Systems – International Business Machines ; the first that could concurrently perform multiple tasks from multiple
users
 Minicomputers – or mini, the first small-scale systems
–Smaller and less powerful computer than the larger mainframe, with an ability to handle the processing of small
organizations at a more affordable cost
–Enjoyed immediate success, especially for scientific rather than business applications because business firms were
hesitant to use them to process their data, and a main reason for this was the fact that IBM had not entered the
minicomputer market.
 Microcomputers – or micro, whereas the mini had been intended for small organizations, the micro was seen as a
computer that could be owned and operated by an individual. Apple pioneered this market, as did the Tandy Corporation
 PC – Personal Computer; introduced by IBM
–Both the IBM product and its name were universally adopted and today the PC is used, along with microcomputer,
to describe the small, relatively inexpensive, and powerful systems used for both business and personal applications.

MOORE’S LAW
States that the power of a computer doubles about every 18 months
 Named for Gordon Moore who was one of the founders of Intel
 Coined in the 1960s and stated that the storage density of integrated circuits on a silicon chip doubled about every year.
By the 1970s, the rate of doubling took about 18 months but that pace has continued until today.

**The computer you could purchase 15 years from today would be 1,024 times as powerful, yet would cost the same as today’s
model. Fifteen years divided by 1 ½ (18 months equals 1 ½ years) yields 10, and 1,024 is 2 raised to the 10 th power. In 30 years
the power would be 1,024*1,024, which equals 1,048,576 times as powerful.

INTRODUCTION TO COMPUTER ARCHITECTURE

When we think of computers, we think of the collection of the computer processor and such input and output devices. But
the largest mainframe computer and the personal computer on your desk have a similar architecture. The computer hardware is
controlled by the operating system. Application software performs tasks for the user such as word processing, calculations for
spreadsheets, manipulating information via databases, and more.

Processor – at the core of the computer

- controlled by an operating system such as Windows XP or Vista, manages the input and output devices, data storage
devices, and operations on the data
Central Processing Unit (CPU) – controls all the other components
Random Access Memory – acts as the temporary workspace for the CPU; the greater the work area, then the more quickly the
CPU can accomplish its tasks
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Department of Information Technology
Motherboard – the single circuitry board that all other devices plug into; it is where the CPU and RAM reside
Storage Devices – permanent data storage and not temporary; examples are CD/DVD ROM, floppy drive, and hard disk (also
known as the hard drive)

**Together with a keyboard, monitor, mouse, and a printer, the microcomputer can be used to support managerial decision-making.

Modem – a hardware device that modulates the digital signals from a computer (either on or off like a light switch) into an analog
signal (a continuous wave such as the sound of a voice), and vice versa.

THE EVOLUTION IN COMPUTER APPLICATIONS

Information systems are conceptual systems that enable management to control the operations of the physical systems of
the firm.

The physical system of the firm consists of tangible resources – materials, personnel, machines, and money. A
conceptual system, on the other hand, consists of the information resources that are used to represent the physical system. For
example, an inventory storeroom containing inventory items is a physical system and the computer-based inventory master file is a
conceptual system that represents the physical system. The physical system of the firm is an open system, interacting with its
environment by means of physical resource flows. An information system is also an open system. A closed system is one that does
not communicate with its environment. A truly closed system would not interact with customers or managers or anyone else, and
is not of interest to developers and users of information systems.

A. Transaction Processing Systems

Before the computer came on the scene, the firm’s conceptual systems were a combination of manual processes, key-
driven bookkeeping machines, and punched card systems that processed the firm’s data. Data consists of facts and figures that
are generally unusable due to their large volume and unrefined nature. The precomputer system processed such as data as that
relating to payroll, inventory, billing, and general ledger transactions. It was only natural that these same applications would be the
first computer applications.
The first computer-based systems were called electronic data processing (EDP) systems. Later the name accounting
information system (AIS) was coined. Today, the term transaction processing system is common. These systems share a
common bond in that all process data that reflects the activities of the firm.

B. Management Information Systems

With the TPSs up and running, both the firm’s information specialist and the computer manufacturers wanted to keep the
computer activity growing, so they sought new application areas. It did not take them long to realize that the informational output of
the TPSs left much to be desired. The systems were generally incapable of transforming the volumes of data into aggregated,
sorted, organized, and processed information needed by managers.
It looked like the development of a management information system would be easy. The firms that attempted to introduce
the first management information systems learned otherwise. The big barrier turned out to be the managers, but the information
specialist added to the problem as well. As a group, the managers knew nothing about how computers worked. They knew their
jobs, and they had developed approaches to solving problems, but they had not given much formal thought of the role of
information in their activities. As a result, it was difficult for the managers to articulate exactly what they needed from the
management information system.
Over time, as managers learned about the computer, they became aware of the underlying logic of the processes that
they followed in solving problems, and they were better able to describe their information needs. Information specialists, in turn,
learned the basics of management and how to work with managers in designing information systems. The management
information systems eventually became established as a major computer application area.
We define a management information system (MIS) as a computer-based system that makes information available to
users with similar needs. Information is processed data that is meaningful; it usually tells the user something that she or he did not
already know. The MIS users usually compose a formal organizational entity – the firm or a subsidiary subunit. The information
describes the firm or one of its major systems in terms of what has happened in the past, what is happening now, and what is likely
to happen in the future.
The output information is used by organizational problem solvers (both managers and professionals) as they make
decisions to solve the firm’s problems.

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Department of Information Technology
 The environment becomes involved when the firm interacts with other organizations such as suppliers to form an
interorganizational information system (IOS). In that case, the MIS supplies information to the other members of the IOS as well
as the firm’s users.

C. Virtual Office Systems

In 1964, computer technology was applied to office tasks when IBM introduced an electric typewriter with a magnetic tape
capability. The typewriter could store typed material on the magnetic tape and retrieve the material when it was needed. The
application was called word processing. This was the beginning of office automation, the use of electronics to facilitate
communication. Additional applications include email, voice mail, electronic calendaring, audio conferencing, video conferencing,
computer conferencing, and facsimile transmission. Today, these applications account for a major portion of a firm’s use of the
computer as a communication vehicle.
These systems came from modest, clerical beginnings. But today they are generally referred to as personal productivity
systems and they have important impacts on managers. Thus, technology has not burned managers with clerical tasks.
The ability of the office automation applications to be performed anywhere gave birth to the concept of a virtual office –
performance of office activities free from dependence on a particular physical location.

D. Decision Support Systems

The MIS failures had convinced information scientists that there must be another way to help problem solvers make
decisions. It was not until 1971, however, that the term “decision support system” was coined by G. Anthony Gorry and Michael S.
Scott Morton, both MIT professors. They felt that systems should be tailored to specific problem solvers and specific problems. A
decision support system (DSS), therefore, is a system that is developed to assist a single manager or small group of managers
solve a single problem.
The most recent additions have featured artificial intelligence and on-line analytical processing. Artificial Intelligence (AI)
is the activity of providing such machines as computers with the ability to display behavior similar to that of an intelligent human.

E. Enterprise Resource Planning Systems

The TPSs, MISs, and DSSs, all developed without an overall master plan. Essentially, each sprang up individually in
response to a different need. During the 1990s firms began to see the value of integrating all of these systems so that they would
function as a coordinated unit. Software vendors responded by developing standardized software packages aimed at meeting the
needs of practically all types of organizations. The vendors named their product an enterprise resource planning (ERP) system
and defined it as a computer-based system that enables the management of all of the firm’s resources, on an organization-wide
basis.

The tremendous growth in ERP software during the late 1990s can be attributed to several factors, including the Y2K
problem, the difficulty in achieving enterprise-wide systems, the flurry of corporate merger activity, and a “follow the leader”
competitive strategy. The Y2K (the year 2000) problem was the difficulty faced by computer programs that had stored years in a
two-digit format such as storing the year 2000 as 00. When an application subtracted the year 2000 from 1998 it would actually
compute 00 – 98 and give a result of -98 that could cause the application to abort.

INFORMATION SYSTEM USERS

The first users of computer output were clerical employees in the accounting area. Some information was also made available to
managers – but as byproduct of the accounting applications. When firms embraced the MIS concept, emphasis shifted from data to information
and from clerical employees to problem solvers. Systems were developed specifically for problem-solving support.

MANAGERS AS INFORMATION SYSTEM USERS

Since managers are individuals, their information needs are, for all practical purposes, unique. However, some useful frameworks
have been developed that make it possible to address the role of information in problem solving.

Where Managers Are Found

Managers can exist on various managerial levels and within various business areas of the firm.

MANAGEMENT LEVELS. Management theorist Robert N. Anthony coined names for the three primary management levels – top, middle, and
lower.

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Department of Information Technology
 Strategic Planning Level – top of the organizational hierarchy, such as the president, vice president
Management Control Level – or tactical level; middle managers include regional managers, product directors, and division heads
Operational Control Level – lowest level; department heads, supervisors, and project leaders

BUSINESS AREAS. The three traditional areas are marketing, manufacturing, and finance. Recently, two additional areas have assumed major
importance – human resources and information services.

What Managers Do

Despite the obvious differences that exist between management levels and between business areas, all managers perform the same functions
and play the same roles.

MANAGEMENT FUNCTIONS. Around 1914, the French management theorist Henri Fayol recognized that managers perform five major
management functions. First managers plan what they are to do. Then, they organize to meet the plan. Next, they staff their organization with
the necessary resources. With the resources in place, they direct them to execute the plan. Finally, they control the resources, keeping them on
course.

MANAGERIAL ROLES. Henry Mintberg, a professor at McGill University in Montreal, decided that Fayol’s functions did not tell the whole story.
He developed amore detailed framework consisting of ten managerial roles that managers play, involving interpersonal (Figurehead, Leader,
Liaison), informational (Monitor, Disseminator, Spokesperson), and decisional (Entrepreneur, Disturbance handler, Resource allocator,
Negotiator) activities.

THE ROLE OF INFORMATION IN MANAGEMENT PROBLEM SOLVING

It would be an oversimplication to say that problem solving is the most important activity that a manager performs. The job is more
complex than that. Other activities, such as communications, are also important. However, it is safe to say that problem solving is the key
activity – often spelling the difference between a successful and unsuccessful management career.

Problem Solving and Decision Making

It is easy to get the idea that a problem is always something bad because the subject of opportunity seizing receives relatively little
attention. We incorporate opportunity seizing into problem solving by defining a problem as a condition or event that is harmful or potentially
harmful to a firm in a negative way, or is beneficial or potentially beneficial in a positive way. The outcome of the problem-solving is a solution.

During the process of solving problems, managers engage in decision making, which is the act of selecting from alternative courses
of action. A decision is a particular selected course of action. Usually, it is necessary to make multiple decisions in the process of solving a
single problem.

Problem-Solving Phases

Herbert A. Simon, a Nobel prize-winning management scientist, is credited with defining four basic phases of problem solving that are
universally recognized. According to Simon, problem solvers engage in:
 Intelligent Activity – Searching the environment for conditions calling for a solution
 Design Activity – Inventing, developing, and analyzing possible courses of action.
 Choice Activity – Selecting a particular course of action from those available
 Review Activity – Assessing past choices

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Department of Information Technology