By Paribesh Sapkota

System Concepts: A Foundation

Grasp business processes, information systems, and technology requires a solid grasp of system concepts.

Technology: Computer networks are information processing systems that make use of a range of data management, hardware, software, and telecommunications technologies.
Uses: Networked business information systems are used in e-business and e-commerce.
Development: Designing the fundamental components of information systems is a necessary step in coming up with strategies to employ information technology in business.
Information technology management is concerned with an organization’s information systems’ security, quality, and strategic business value.

What Is a System?

A system is a set of interrelated components with a defined boundary that work together to achieve common objectives by accepting inputs and producing outputs through an organized transformation process.

Three Basic Functions of a System:

  1. Input:
    • Capturing and gathering elements that enter the system for processing.
    • Examples: Raw materials, energy, data, and human effort.
  2. Processing:
    • Transformation processes that convert input into output.
    • Examples: Manufacturing processes, human breathing, mathematical calculations.
  3. Output:
    • Transferring elements produced by the transformation process to their ultimate destination.
    • Examples: Finished products, human services, management information.


  • Manufacturing System: Accepts raw materials as input and produces finished goods as output.
  • Information System: Accepts data as input and processes it into information as output.
  • Business Organization: Transforms human and economic resources into goods and services through various business processes.

Feedback and Control

The system concept becomes even more useful with two additional elements: feedback and control. A system with these functions is sometimes called a cybernetic system, meaning it can self-monitor and self-regulate.


  • Feedback is data about the system’s performance.
  • Examples:
    • Sales performance data for a sales manager.
    • Speed, altitude, attitude, and direction data for an aircraft’s pilot or autopilot.


  • Control involves monitoring and evaluating feedback to determine if the system is achieving its goals.
  • It adjusts the system’s input and processing components to ensure proper output.
  • Examples:
    • A sales manager reassigning salespersons based on their performance.
    • An airline pilot or autopilot making small adjustments based on instrument feedback to keep the plane on course.

Example: Figure below illustrates a familiar example of a self-monitoring, self-regulating, thermostat-controlled heating system found in many homes; it automatically monitors and regulates itself to maintain a desired temperature.

Another example is the human body, which can be regarded as a cybernetic system that automatically monitors and adjusts many of its functions, such as temperature, heartbeat, and breathing. A business also has many control activities. For example, computers may monitor and control manufacturing processes, accounting procedures help control financial systems, data entry displays provide control of data entry activities, and sales quotas and sales bonuses attempt to control sales performance.

System Characteristics

  • Environment: A system does not exist in isolation; it functions within an environment that includes other systems.
  • Subsystem: When a system is a component of a larger system, it is called a subsystem, and the larger system is its environment.
  • Shared Environment: Multiple systems can share the same environment and may be connected through a shared boundary or interface.
  • Adaptive System: A system that can change itself or its environment to survive is known as an adaptive system.

Example: Organizations as Systems

Organizations, like businesses and government agencies, are systems within the broader environment of society. Society encompasses numerous systems, including individuals and their social, political, and economic institutions.

Key Points:

  • Subsystems: Organizations consist of many subsystems, such as departments, divisions, process teams, and workgroups.
  • Open Systems: Organizations are open systems because they interact with other systems in their environment.
  • Adaptive Systems: Organizations can modify themselves to meet the demands of a changing environment.

Information Systems as Interrelated Components:

  • Components: People, hardware, software, peripherals, and networks.
  • Boundaries: Defined by functions, modules, type of application, department, or end-user group.
  • Transformation Process: All components work together to achieve a common goal by accepting inputs and producing outputs, such as using raw materials, hiring new people, manufacturing products for sale, and disseminating information.

Feedback and Control:

  • Information systems use feedback and control to improve effectiveness through error messages, dialog boxes, passwords, and user rights management.
  • Many information systems are adaptive, designed to change in relation to their environments, such as intelligent software agents, expert systems, and highly specialized decision support systems.

Unique Value:

  • Information systems are like any other system in their structure and function, but their value to modern organizations is unparalleled.

Components of Information Systems

Figure above illustrates an information system model that expresses a fundamental conceptual framework for the major components and activities of information systems.
– An information system depends on the resources of people (end users and IS specialists), hardware (machines and media), software (programs and procedures), data (data and knowledge bases), and networks (communications media and network support) to perform
input, processing, output, storage, and control activities that transform data resources into information products.
– This information system model highlights the relationships among the components and activities of information systems.
– It also provides a framework that emphasizes four major concepts that can be applied to all types of information systems:
● People, hardware, software, data, and networks are the five basic resources of information systems.
● People resources include end users and IS specialists, hardware resources consist of machines and media, software resources include both programs and procedures, data resources include data and knowledge bases, and network resources include communications media and networks.
● Data resources are transformed by information processing activities into a variety of information products for end users.
● Information processing consists of the system activities of input, processing, output, storage, and control.

Information System Resources

An information system (IS) is composed of several fundamental resources that collectively enable it to function effectively. These resources include people, hardware, software, and data, each playing a crucial role in the system’s operations.

1. People Resources

a. End Users:

  • End users are individuals who utilize an information system or the information it generates.
  • They encompass a diverse range of roles within organizations, from customers and salespersons to engineers and managers.
  • Most business end users are knowledge workers, heavily involved in team collaboration, information creation, distribution, and utilization.

b. IS Specialists:

  • IS specialists are professionals responsible for developing and operating information systems.
  • Roles include systems analysts, software developers, system operators, and managerial, technical, and clerical IS personnel.
  • Systems analysts design systems based on user requirements, software developers create programs, and system operators manage system operations and networks.

2. Hardware Resources

  • Definition: Includes all physical devices and materials used in information processing.
  • Examples:
    • Computer Systems: From handheld devices to large mainframes, including central processing units (CPUs) and peripheral devices like printers and monitors.
    • Computer Peripherals: Input devices (e.g., keyboard, mouse), output devices (e.g., screens, printers), and storage devices (e.g., disks).

3. Software Resources

  • Definition: Encompasses sets of information processing instructions.
  • Categories:
    • System Software: Controls and supports computer operations (e.g., operating systems like Microsoft Windows).
    • Application Software: Directs specific processing tasks (e.g., sales analysis, payroll software).
    • Procedures: Operational instructions for system users, guiding activities like form filling or software usage.

4. Data Resources

  • Importance: Constitutes valuable organizational assets processed and analyzed using sophisticated software.
  • Types:
    • Alphanumeric Data: Numbers, letters, and characters describing business transactions.
    • Text Data: Sentences and paragraphs used in written communications.
    • Image Data: Graphics, photographs, and video.
    • Audio Data: Sounds and voices.
  • Management:
    • Databases: Structured data repositories.
    • Knowledge Bases: Store knowledge in forms like facts, rules, and case examples, supporting activities such as knowledge management and expert advice systems.

Data versus Information


  • Definition: Raw facts or observations, typically about physical phenomena or business transactions.
  • Example: Measurements from a spacecraft launch or sales records of automobiles.
  • Characteristics:
    • Objective measurements of attributes (characteristics) of entities (people, places, things, events).
    • Context-independent; lacks meaningful interpretation without processing.


  • Definition: Data that have been processed and organized into a meaningful and useful context for specific end users.
  • Transformation:
    • Subjected to a value-added process (data processing or information processing):
      1. Aggregation, manipulation, and organization of data.
      2. Analysis and evaluation of content.
      3. Contextualization for human understanding.
  • Context and Perspective:
    • Context of data and user perspective become crucial for information.
    • Value varies with the relevance and usefulness to specific users.


  • Data: Names, quantities, and dollar amounts on sales forms.
  • Information: Meaningful sales insights like sales by product type, territory, or salesperson.
  • Value: While data exist objectively, information derives value from its relevance and usability to specific users (e.g., sales managers).

Network Resources in Information Systems

Telecommunications technologies and networks play a crucial role in the effective operation of e-business and e-commerce activities across various organizations. These networks are integral components of computer-based information systems, facilitating connectivity and data exchange. Here are the key aspects of network resources:

Definition and Components:

  • Telecommunications Networks: Consist of interconnected computers, communications processors, and devices managed by communications software.


  • Fundamental Resource: Networks and communications technologies are essential components of information systems, supporting efficient data transmission and connectivity.

Components of Network Resources:

  1. Communications Media:
    • Examples include:
      • Twisted-pair wire
      • Coaxial and fiber-optic cables
      • Microwave, cellular, and satellite wireless technologies
  2. Network Infrastructure:
    • Examples include:
      • Communications processors like modems and inter-network processors
      • Communications control software such as network operating systems and Internet browser packages

Role in E-Business and E-Commerce:

  • Enable organizations to conduct business transactions, data exchange, and communication over various network platforms.
  • Support operations across Internet, intranet, and extranet environments, facilitating global connectivity and collaboration.

Network resources are critical for organizations seeking to leverage information systems for enhanced operational efficiency, communication, and business growth in the digital age.

Information System Activities

1. Input of Data Resources

The input activity is responsible for gathering and preparing data on events and business transactions.
– Data entry tasks like recording and editing are commonly used as input.

End users often employ physical media, like paper forms, to record transaction data or enter data straight into computer systems. A range of editing tasks are included in this entry to guarantee that the data has been accurately reported.
– Data can be entered and then stored until it is required for processing on a machine-readable media, such a magnetic disk.

Paper order forms are one type of source document that may include data on sales transactions. An official transaction’s original record is called a source document.

On the other hand, salespeople may use optical scanning equipment or computer keyboards to record sales data; video displays visibly indicate whether data entry is valid. By using this strategy, end users may interact with a computer system more conveniently and effectively through an improved user interface. End users find it simpler to accurately enter data into an information system when techniques like optical scanning and menu, prompt, and fill-in-the-blank styles are shown.

Processing of Data into Information

  • Definition: Data undergo processing activities such as calculation, comparison, sorting, classification, and summarization.
  • Purpose: Organizes and manipulates data to convert it into meaningful information.
  • Quality Maintenance: Includes continuous correction and updating of data to ensure accuracy and relevance.
  • Examples: Data can be processed to update sales records, classify products, and generate summaries for managerial use.

3. Output of Information Products

  • Definition: Transmits information to end users in various forms such as messages, reports, forms, and graphic images.
  • Objective: Produces relevant information products tailored to meet user needs.
  • Formats: Outputs can be delivered via video displays, audio responses, printed documents, or multimedia platforms.
  • Examples: A sales manager might access performance reports via video display, receive alerts via telephone messages, or review printed monthly sales results.

4. Storage of Data Resources

  • Definition: Organizes and retains data in structured formats for future use.
  • Comparison: Similar to organizing text into words, sentences, and paragraphs, data is structured into elements and databases.
  • Purpose: Facilitates efficient retrieval and processing of stored data when needed.

5. Control of System Performance

  • Definition: Monitors and evaluates feedback from input, processing, output, and storage activities.
  • Purpose: Ensures the system meets performance standards by adjusting activities as needed.
  • Example: Identifies discrepancies in sales totals to correct data entry or processing procedures for accurate reporting.


Recognizing Information systems

the fundamental components and activities of information systems is indeed crucial for anyone in a business role. Here’s a breakdown of what you should be able to recognize:

Fundamental Components of Information Systems

  1. People Resources:
    • Users and specialists who interact with and develop information systems.
  2. Hardware Resources:
    • Physical devices like computers, peripherals, and data storage media.
  3. Software Resources:
    • Programs and procedures that control and support information system operations.
  4. Data Resources:
    • Raw facts or observations used as inputs and processed into meaningful information.
  5. Network Resources:
    • Telecommunications technologies and networks facilitating data transmission and connectivity.

Key Activities of Information Systems

  • Input: Capturing and preparing data for processing.
  • Processing: Manipulating and organizing data into useful information.
  • Output: Transmitting information products to end users.
  • Storage: Organizing and retaining data for future use.
  • Control: Monitoring and adjusting system activities to ensure performance and accuracy.

Types of Information Products

  • Messages: Communication of specific information or notifications.
  • Reports: Summaries of processed data for decision-making.
  • Forms: Structured data entry formats.
  • Graphic Images: Visual representations of data or information.


Understanding these components and activities allows you to:

  • Use information systems effectively as an end user.
  • Develop systems that meet organizational needs.
  • Manage systems to optimize performance and alignment with business goals.


Important Questions
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