Foundations of Information Systems (IS) in Business

By Paribesh Sapkota

The real world of information system

Information systems (IS) and information technologies (IT) have become fundamental components of modern businesses, playing roles as critical as traditional business functions like accounting, finance, operations management, marketing, and human resource management. Their integration into everyday business activities has revolutionized how companies operate and compete in today’s dynamic global environment. Here’s a deeper look at how IS and IT contribute to business success:

The actual information system world The integration of information systems into our everyday company operations has reached the same level as that of accounting, finance, operations management, marketing, and human resource management.

or any other significant commercial task.
– Information technologies are becoming more and more important in business, particularly Internet-based information systems.
– Businesses of all stripes may benefit from information technology by increasing the efficacy and efficiency of their managerial decision-making, workgroup cooperation, and business processes. This enhances their competitive positions in quickly evolving markets.
– Information systems and technologies are, in essence,

What Is an Information System?

Any structured arrangement of personnel, hardware, software, communications networks, data resources, rules, and procedures that is used by an organization to store, retrieve, alter, and distribute information is known as an information system (IS).

The framework that describes the key areas of information systems expertise required of business professionals is shown in the following figure.

Fig: A framework that outlines the major areas of information systems knowledge needed by business professionals.

Foundation Concepts: Basic management, technological, commercial, and behavioral ideas on the elements and functions of information systems.
Information Technologies: Key ideas, advancements, and managerial concerns in

Hardware, software, networks, data management, and several Internet-based technologies are all included in information technology.
Business Applications: These are the main ways that information systems are used to improve a company’s competitiveness, operations, and management.
Development Processes: The methods used by information experts and business professionals to design, create, and execute information systems in response to business possibilities.
Management Challenges: The difficulties in efficiently and morally overseeing IT at the enterprise, end-user, and worldwide levels of an organization.

The fundamental Roles of IS in Business

Information systems (IS) are crucial for the success and sustainability of business enterprises, performing three fundamental roles:

a. Support of Business Processes and Operations

IS streamline daily operations, improving efficiency and effectiveness by:

  • Automating Routine Tasks: Reducing manual intervention and minimizing errors in tasks like data entry and inventory management.
  • Process Integration: ERP systems ensure seamless information flow and coordination across departments.
  • Real-time Monitoring: Tracking production, supply chains, and customer interactions for timely adjustments.
  • Enhanced Customer Service: CRM systems improve customer interactions and satisfaction.

b. Support of Decision Making by Employees and Managers

IS provide essential support for decision-making through:

  • Data Collection and Storage: Storing vast amounts of data for analysis and decision-making.
  • Data Analysis and Reporting: BI tools generate reports and dashboards to identify trends and opportunities.
  • Decision Support Systems (DSS): Providing models and analytics for evaluating scenarios and making informed decisions.
  • Collaboration Tools: Facilitating better communication and collaboration among team members.

c. Support of Strategies for Competitive Advantage

IS help businesses gain and sustain a competitive edge by:

  • Innovation and Product Development: Providing tools for research, development, and testing new products.
  • Market Analysis and Customer Insights: Using analytics to understand market trends and customer behavior for targeted strategies.
  • Operational Efficiency and Cost Reduction: Optimizing processes and reducing costs, including supply chain and resource allocation.
  • Strategic Planning and Competitive Intelligence: Tools for identifying opportunities, assessing threats, and formulating strategies.
  • Customer Relationship Management: Building strong customer relationships through personalized marketing and improved service.

The Role of E-Business in Modern Business

E-business encompasses a broad range of activities and processes that involve online exchanges of value. It includes any online exchange of information, money, resources, services, or any combination thereof. E-business has become integral to how companies operate and interact with their stakeholders. The Internet and Internet-like networks, such as intranets and extranets, form the primary IT infrastructure supporting e-business applications. These networks enable seamless connectivity within and between enterprises, enhancing various business functions. Here’s how e-business applications are utilized by companies:

Reengineering Internal Business Processes

E-business applications allow companies to reengineer and streamline their internal processes. By digitizing workflows and automating routine tasks, businesses can:

  • Increase Efficiency: Automation of processes like order processing, inventory management, and customer service reduces manual effort and error rates.
  • Enhance Data Management: Digital systems provide better ways to collect, store, and analyze data, leading to more informed decision-making.
  • Improve Flexibility and Responsiveness: Real-time data and process integration enable businesses to quickly adapt to changing market conditions and internal needs.

Implementing E-Commerce Systems

Companies use e-business applications to develop and enhance e-commerce systems that facilitate transactions with customers and suppliers:

  • Customer Engagement: E-commerce platforms provide customers with a seamless online shopping experience, including browsing, purchasing, and customer support.
  • Supplier Collaboration: Digital systems enable better coordination and communication with suppliers, streamlining procurement and supply chain management.
  • Secure Transactions: E-business ensures secure financial transactions through robust cybersecurity measures, enhancing trust and reliability.

Promoting Enterprise Collaboration

E-business applications foster collaboration within and between business teams and workgroups:

  • Intranets: Internal networks (intranets) enable employees to share information, collaborate on projects, and communicate effectively, enhancing productivity and innovation.
  • Extranets: External networks (extranets) connect businesses with their trading partners, facilitating better coordination and joint ventures.
  • Collaboration Tools: E-business leverages tools like video conferencing, shared workspaces, and project management software to improve teamwork and project execution.


Fig: Operations and management classifications of information systems.

  1. Operation support systems: Operations support systems provide a wide range of information products for both internal and external users, but they don’t focus on the particular products that managers may utilize most effectively.
    – Usually, additional processing by management information systems is needed.
    – The operations support systems of a company organization are responsible for processing transactions, managing industrial processes, facilitating enterprise communications and teamwork, and effectively updating corporate databases.
    ● Transaction processing systems: Generate business papers, update operational databases, and process data from business transactions. Accounting systems and the processing of sales and inventories are two examples.
    Process control systems are used to keep an eye on and manage industrial operations.
    Steel production systems, electricity generating, and petroleum refining are a few examples.
    ● Enterprise collaboration systems: Facilitate communications and collaborations among teams, workgroups, and enterprises.
  2. Management support systems: 

Management support systems (MSS) are information system applications designed to aid managers in effective decision-making. MSS include management information systems (MIS), decision support systems (DSS), and executive information systems (EIS), each serving distinct roles in enhancing managerial decision-making and strategic planning.

Management Information Systems (MIS)

MIS provide regular, structured information in the form of prespecified reports to support business decision-making and operational control.

  • Sales Analysis Systems: Generate reports on sales performance to identify trends.
  • Production Performance Systems: Track production metrics to improve efficiency.
  • Cost Trend Reporting Systems: Analyze cost data to optimize budgets.

Decision Support Systems (DSS)

DSS offer interactive, ad hoc support for complex, non-routine decision-making.

  • Product Pricing Systems: Analyze market conditions and competitor pricing to determine optimal strategies.
  • Profitability Forecasting Systems: Project future profitability under various scenarios.
  • Risk Analysis Systems: Evaluate potential risks to assess their impact and likelihood.

Executive Information Systems (EIS)

EIS provide high-level analyses and summaries tailored to executives’ needs, aiding strategic planning.

  • Business Performance Analysis Systems: Consolidate KPIs and metrics to assess business health.
  • Competitor Analysis Systems: Offer insights into competitor strategies.
  • Economic Development Systems: Monitor economic trends for long-term planning.

3. Other Classifications of Information Systems (IS)

In addition to management support systems, there are several other types of information systems that serve specific purposes within an organization. These include expert systems, knowledge management systems, functional business systems, and strategic information systems.

Expert Systems

Expert systems are knowledge-based systems that provide expert advice and act as consultants to users. They use a knowledge base of human expertise and inference rules to solve specific problems.

  • Examples:
    • Credit Application Advisor: Assesses creditworthiness and provides loan recommendations.
    • Process Monitor: Monitors industrial processes and suggests corrective actions.
    • Diagnostic Maintenance Systems: Diagnoses equipment issues and recommends maintenance procedures.

Knowledge Management Systems

Knowledge management systems support the creation, organization, and dissemination of business knowledge within the enterprise. They facilitate knowledge sharing and collaboration among employees.

  • Examples:
    • Intranet Access to Best Practices: Provides employees with access to documented best practices.
    • Sales Proposal Strategies: Helps sales teams develop effective proposals based on past successful strategies.
    • Customer Problem Resolution Systems: Offers solutions to customer service issues based on historical data and expertise.

Functional Business Systems

Functional business systems support various operational and managerial applications related to the basic business functions of a company. They are tailored to specific departments and their needs.

  • Examples:
    • Accounting Systems: Manage financial transactions, reporting, and auditing.
    • Finance Systems: Handle investment management, budgeting, and financial planning.
    • Marketing Systems: Support market research, advertising, and sales promotion.
    • Operations Management Systems: Optimize production, logistics, and inventory management.
    • Human Resource Management Systems: Manage employee records, recruitment, and performance evaluations.

Strategic Information Systems

Strategic information systems support operations or management processes that provide a firm with strategic products, services, and capabilities for competitive advantage.

  • Examples:
    • Online Stock Trading: Enables customers to trade stocks online, offering a strategic service.
    • Shipment Tracking: Provides real-time tracking of shipments, enhancing customer service.
    • E-commerce Web Systems: Facilitate online sales and transactions, expanding market reach and improving competitiveness.

Managerial Challenges of Information Technology (IT)

In today’s business environment, leveraging Internet-based technologies and web-enabled systems is crucial but comes with significant challenges:

  1. Integration Complexity: Implementing and integrating diverse IT systems can be complex and costly, requiring strategic planning and robust infrastructure.
  2. Cybersecurity Risks: Protecting business information and customer data from sophisticated cyber threats demands ongoing investment in robust cybersecurity measures.
  3. Data Management: Managing large volumes of data requires effective strategies for storage, processing, and ensuring data integrity and privacy.
  4. Adapting to Technological Change: Rapid advancements in IT necessitate continuous updates to infrastructure and skills to stay competitive.
  5. Privacy Compliance: Meeting data protection regulations such as GDPR and CCPA while addressing customer privacy concerns is critical.
  6. Cost Control: Balancing IT investments with budget constraints requires careful financial planning and resource allocation.
  7. Strategic Alignment: Aligning IT initiatives with business objectives is essential for maximizing their impact on operational efficiency and growth.
  8. Skill Shortages: Recruiting and retaining skilled IT professionals remains a challenge, necessitating investment in talent development and retention strategies.
  9. Vendor Management: Managing relationships with external IT vendors requires effective negotiation and oversight to ensure quality service delivery and mitigate risks.

IT Success and Failure: An information system’s effectiveness in reducing expenses, time, and information resource usage should not be the sole determinant of its success.

– The efficiency with which information technology supports an organization’s business strategy, facilitates its business operations, improves its organizational structures and culture, and raises the enterprise’s customer and business value should also be used to gauge success. It is crucial to understand, nonetheless, that information systems and technology can be misused and mishandled to the point that IS performance issues lead to both business and technological failures.

Creating IS solutions: A systematic development process is used in the conception, design, and implementation of the majority of computer-based information systems. During this development process, information experts and end users analyze an organization’s business needs to construct information system applications.
– Additional tasks include, but are not limited to, determining if a proposed application is technically or economically feasible, obtaining and training on any software required for the new system’s implementation, and making adjustments to preserve a system’s commercial value.

Ethical Dimensions of Information Systems

Ethical considerations in information systems encompass a range of issues, from responsible use of technology to protecting individuals and society from harm. Here are insights into addressing these ethical dimensions:

Improper Uses of Information Technology

Certain uses of IT can be considered improper, irresponsible, or harmful:

  • Privacy Violations: Unauthorized access to personal or sensitive information.
  • Cybercrime: Activities like hacking, phishing, or spreading malware that harm individuals or organizations.
  • Misuse of Data: Manipulating or misusing data for personal gain or to deceive others.
  • Intellectual Property Violations: Unauthorized use or distribution of copyrighted material.
  • Bias in AI: Developing AI systems that perpetuate biases or discriminate against certain groups.

Proper Business Use of IT Resources

The proper business use of the Internet and IT resources involves:

  • Compliance: Adhering to laws and regulations governing data privacy, security, and intellectual property.
  • Transparency: Being clear about how data is collected, used, and protected.
  • Security: Implementing robust cybersecurity measures to protect organizational and customer data.
  • Ethical Decision Making: Ensuring that IT initiatives and practices align with ethical standards and organizational values.

Responsibilities of End Users

Being a responsible end user of information technology entails:

  • Awareness: Understanding the risks and ethical implications of using IT systems.
  • Adherence to Policies: Following organizational policies and guidelines regarding IT usage.
  • Data Integrity: Ensuring the accuracy and integrity of data input and output.
  • Respect for Others: Respecting the privacy and rights of others in online interactions.

Protecting Against Risks

To protect yourself from computer crime and other risks:

  • Cybersecurity Practices: Use strong passwords, enable two-factor authentication, and keep software updated.
  • Awareness Training: Stay informed about common threats and how to avoid them.
  • Data Backup: Regularly back up important files and data to prevent loss due to cyber incidents.
  • Vigilance: Be cautious of phishing attempts, suspicious links, and unknown attachments.

[infringement: the action of breaking the terms of a law, agreement, etc.; violation.]
[collusion: secret or illegal cooperation or conspiracy in order to deceive others.]

Challenges of IT Careers

The landscape of IT careers presents both opportunities and challenges:

  • Economic Downturns: Like other sectors, IT is affected by economic downturns, impacting job stability and growth in certain regions.
  • Global Outsourcing: Outsourcing of basic software programming functions to regions like India and Asia-Pacific due to rising labor costs in North America and Europe has become prevalent.
  • Strong Employment Opportunities: Despite outsourcing trends, the demand for IT professionals remains robust, with new and exciting job roles emerging daily as organizations expand their IT use.
  • Human Resource Challenges: Organizations face ongoing challenges in managing and retaining qualified IT personnel due to frequent shortages.
  • Changing Job Requirements: Rapid developments in business and technology continually reshape job requirements in IT, ensuring a positive and dynamic long-term job outlook.


The Function of IS
Business managers and professionals have significant obstacles in effectively managing information systems and technology. Consequently, the role of information systems represents:

● A significant functional area of business that is just as crucial to the success of the company as the accounting, finance, operations management, marketing, and human resource management departments.

● A major factor in operational efficiency, employee morale and productivity, and customer service and satisfaction.

● A valued source of information for the company.

● A major source of information and support that managers and business professionals need to make effective decisions.

● An essential component of creating competitive products and services that give an organization a strategic advantage in the global marketplace.

● A vibrant, fulfilling, and demanding career opportunity for millions of men and women.

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