Module 1: What Is an Information System?

Learning Objectives
Upon successful completion of this chapter, you will be able to:
• define what an information system is by identifying its major components;
• describe the basic history of information systems; and
• describe the basic argument behind the article “Does IT Matter?” by Nicholas Carr.

Introduction
Welcome to the world of information systems, a world that seems to change almost daily. Over the past
few decades information systems have progressed to being virtually everywhere, even to the point
where you may not realize its existence in many of your daily activities. Stop and consider how you
interface with various components in information systems every day through different electronic
devices. Smartphones, laptop, and personal computers connect us constantly to a variety of systems
including messaging, banking, online retailing, and academic resources, just to name a few examples.
Information systems are at the center of virtually every organization, providing users with almost
unlimited resources.
Have you ever considered why businesses invest in technology? Some purchase computer hardware
and software because everyone else has computers. Some even invest in the same hardware and
software as their business friends even though different technology might be more appropriate for them.
Finally, some businesses do sufficient research before deciding what best fits their needs. As you read
through this book be sure to evaluate the contents of each chapter based on how you might someday
apply what you have learned to strengthen the position of the business you work for, or maybe even
your own business. Wise decisions can result in stability and growth for your future enterprise.
Information systems surround you almost every day. Wi-fi networks on your university campus,
database search services in the learning resource center, and printers in computer labs are good
examples. Every time you go shopping you are interacting with an information system that manages
inventory and sales. Even driving to school or work results in an interaction with the transportation
information system, impacting traffic lights, cameras, etc. Vending machines connect and communicate
using the Internet of Things (IoT). Your car’s computer system does more than just control the engine
– acceleration, shifting, and braking data is always recorded. And, of course, everyone’s smartphone
is constantly connecting to available networks via Wi-fi, recording your location and other data.
Can you think of some words to describe an information system? Words such as “computers,”
“networks,” or “databases” might pop into your mind. The study of information systems encompasses
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a broad array of devices, software, and data systems. Defining an information system provides you
with a solid start to this course and the content you are about to encounter.
Defining Information Systems
• “An information system (IS) can be defined technically as a set of interrelated components that
collect, process, store, and distribute information to support decision making and control in an
organization.”
• “Information systems are combinations of hardware, software, and telecommunications
networks that people build and use to collect, create, and distribute useful data, typically in
organizational settings.”

• “Information systems are interrelated components working together to collect, process, store,
and disseminate information to support decision making, coordination, control, analysis, and
visualization in an organization.”
As you can see these definitions focus on two different ways of describing information systems:
the components that make up an information system and the role those components play in an
organization. Each of these need to be examined.

The Components of Information Systems

Information systems can be viewed as having five major components: hardware, software, data,
people, and processes. The first three are technology. These are probably what you thought of when
defining information systems. The last two components, people and processes, separate the idea of
information systems from more technical fields, such as computer science. In order to fully understand
information systems, you will need to understand how all of these components work together to bring
value to an organization.

Technology
Technology can be thought of as the application of scientific knowledge for practical purposes. From
the invention of the wheel to the harnessing of electricity for artificial lighting, technology has become
ubiquitous in daily life, to the degree that it is assumed to always be available for use regardless of
location. As discussed before, the first three components of information systems – hardware, software,
and data – all fall under the category of technology. Each of these will be addressed in an individual
chapter. At this point a simple introduction should help you in your understanding.

Hardware
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Hardware is the tangible, physical portion of an information system – the part you can touch.
Computers, keyboards, disk drives, and flash drives are all examples of information systems hardware.
How these hardware components function and work together will be covered in Chapter 2.
Software

Software comprises the set of instructions that tell the hardware what to do. Software is not tangible –
it cannot be touched. Programmers create software by typing a series of instructions telling the
hardware what to do. Two main categories of software are: Operating Systems and Application
software. Operating Systems software provides the interface between the hardware and the Application
software. Examples of operating systems for a personal computer include Microsoft Windows and
Ubuntu Linux. The mobile phone operating system market is dominated by Google Android and Apple
iOS. Application software allows the user to perform tasks such as creating documents, recording data
in a spreadsheet, or messaging a friend. Software will be explored more thoroughly in Chapter 3.

Data
The third technology component is data. You can think of data as a collection of facts. For example,
your address (street, city state, postal code), your phone number, and your social networking account
are all pieces of data. Like software, data is also intangible, unable to be seen in its native state. Pieces
of unrelated data are not very useful. But aggregated, indexed, and organized together into a database,
data can become a powerful tool for businesses. Organizations collect all kinds of data and use it to
make decisions which can then be analyzed as to their effectiveness. The analysis of data is then used
to improve the organization’s performance. Chapter 4 will focus on data and databases, and how it is
used in organizations.

Networking Communication
Besides the technology components (hardware, software, and data) which have long been considered
the core technology of information systems, it has been suggested that one other component should
be added: communication. An information system can exist without the ability to communicate – the
first personal computers were stand-alone machines that did not access the Internet. However, in

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today’s hyper-connected world, it is an extremely rare computer that does not connect to another device
or to a enetwork. Technically, the networking communication component is made up of hardware and
software, but it is such a core feature of today’s information systems that it has become its own
category. Networking will be covered in Chapter 5.

People
When thinking about information systems, it is easy to focus on the technology
components and forget to look beyond these tools to fully understand their
integration into an organization. A focus on the people involved in information
systems is the next step. From the front-line user support staff, to systems analysts,
to developers, all the way up to the chief information officer (CIO), the people
involved with information systems are an essential element. The people component
will be covered in Chapter 9.
Jeff Bezos, Amazon CEO

Process s

The last component of information systems is process. A process is a series of steps undertaken to
achieve a desired outcome or goal. Information systems are becoming more integrated with
organizational processes, bringing greater productivity and better control to those processes. But
simply automating activities using technology is not enough – businesses looking to utilize information
systems must do more. The ultimate goal is to improve processes both internally and externally,
enhancing interfaces with suppliers and customers. Technology buzzwords such as “business process
re-engineering,” “business process management,” and “enterprise resource planning” all have to do
with the continued improvement of these business procedures and the integration of technology with
them. Businesses hoping to gain a competitive advantage over their competitors are highly focused on
this component of information systems. The process element in information systems will be discussed
in Chapter 8.

The Role of Information Systems

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You should now understand that information systems have a number of vital components, some
tangible, others intangible, and still others of a personnel nature. These components collect, store,
organize, and distribute data throughout the organization.
You may have even realized that one of the roles of
information systems is to take data and turn it into
information, and then transform that information into
organizational knowledge. As technology has developed,
this role has evolved into the backbone of the organization,
making information systems integral to virtually every
business. The integration of information systems into
organizations has progressed over the decades.

IBM 704 Mainframe (Copyright: Lawrence

Livermore National Laboratory)

The Mainframe Era

From the late 1950s through the 1960s, computers were seen as a way to more efficiently do
calculations. These first business computers were room-sized monsters, with several machines linked
together. The primary work was to organize and store large volumes of information that were tedious
to manage by hand. Only large businesses, universities, and government agencies could afford them,
and they took a crew of specialized personnel and dedicated facilities to provide information to
organizations.
Time-sharing allowed dozens or even hundreds of users to simultaneously access mainframe
computers from locations in the same building or miles away. Typical functions included scientific
calculations and accounting, all under the broader umbrella of “data processing.”
Registered trademark of International Business Machines
In the late 1960s, Manufacturing Resources Planning
(MRP) systems were introduced. This software, running on
a mainframe computer, gave companies the ability to
manage the manufacturing process, making it more
efficient. From tracking inventory to creating bills of
materials to scheduling production, the MRP systems gave more businesses a reason to integrate
computing into their processes. IBM became the dominant mainframe company. Continued
improvement in software and the availability of cheaper hardware eventually brought mainframe
computers (and their little sibling, the minicomputer) into most large businesses.
Today you probably think of Silicon Valley in northern California as the center of computing and
technology. But in the days of the mainframe’s dominance corporations in the cities of Minneapolis and

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St. Paul produced most computers. The advent of the personal computer resulted in the “center of
technology” eventually moving to Silicon Valley.
The PC Revolution
In 1975, the first microcomputer was announced on the cover of Popular Mechanics: the Altair 8800.
Its immediate popularity sparked the imagination of entrepreneurs everywhere, and there were soon
dozens of companies manufacturing these “personal computers.” Though at first just a niche product
for computer hobbyists, improvements in usability and the availability of practical software led to
growing sales. The most prominent of these early personal computer makers was a little company
known as Apple Computer, headed by Steve Jobs and Steve Wozniak, with the hugely successful
“Apple II.” Not wanting to be left out of the revolution, in 1981 IBM teamed with Microsoft, then just a
startup company, for their operating system software and hurriedly released their own version of the
personal computer simply called the “PC.” Small businesses finally had affordable computing that could
provide them with needed information systems. Popularity of the IBM PC gave legitimacy to the
microcomputer and it was named Time magazine’s “Man of the Year” for 1982.
IBM PC
Because of the IBM PC’s open architecture, it was easy for other
companies to copy, or “clone” it. During the 1980s, many new computer
companies sprang up, offering less expensive versions of the PC. This
drove prices down and spurred innovation. Microsoft developed the
Windows operating system, with version 3.1 in 1992 becoming the first
commercially successful release. Typical uses for the PC during this
period included word processing, spreadsheets, and databases. These
early PCs were standalone machines, not connected to a network.

Client-Server
In the mid-1980s, businesses began to see the need to connect their computers as a way to collaborate
and share resources. Known as “client-server,” this networking architecture allowed users to log in to
the Local Area Network (LAN) from their PC (the “client”) by connecting to a central computer called a
“server.” The server would lookup permissions for each user to determine who had access to various
resources such as printers and files. Software companies began developing applications that allowed
multiple users to access the same data at the same time. This evolved into software applications for
communicating, with the first popular use of electronic mail appearing at this time.

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 Registered Trademark of SAP
This networking and data sharing all stayed mainly within
the confines of each business. Sharing of electronic data
between companies was a very specialized function.
Computers were now seen as tools to collaborate
internally within an organization. These networks of
computers were becoming so powerful that they were replacing many of the functions previously
performed by the larger mainframe computers at a fraction of the cost. It was during this era that the
first Enterprise Resource Planning (ERP) systems were developed and run on the client-server
architecture. An ERP system is an application with a centralized database that can be used to run a
company’s entire business. With separate modules for accounting, finance, inventory, human
resources, and many more, ERP systems, with Germany’s SAP leading the way, represented the state
of the art in information systems integration. ERP systems will be discussed in Chapter 9.

The Internet, World Wide Web and E-Commerce

ARPANet, 1969
The first long distance transmission between two computers
occurred on October 29, 1969 when developers under the direction
of Dr. Leonard Kleinrock sent the word “login” from the campus of
UCLA to Stanford Research Institute in Menlo Park, California, a
distance of over 350 miles. The United States Department of
Defense created and funded ARPA Net (Advanced Research
Projects Administration), an experimental network which eventually
became known as the Internet. ARPA Net began with just four nodes
or sites, a very humble start for today’s Internet. Initially, the Internet
was confined to use by universities, government agencies, and
researchers. Users were required to type commands (today we refer
to this as “command line”) in order to communicate and transfer files.
The first e-mail messages on the Internet were sent in the early
1970s as a few very large companies expanded from local networks
to the Internet. The computer was now evolving from a purely
computational device into the world of digital communications.
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In 1989, Tim Berners-Lee developed a simpler way for researchers to share information over the
Internet, a concept he called the World Wide Web.[4] This invention became the catalyst for the growth
of the Internet as a way for businesses to share information about themselves. As web browsers and
Internet connections became the norm, companies rushed to grab domain names and create websites.
Registered trademark of [Link], Inc.

In 1991 the National Science Foundation, which

governed how the Internet was used, lifted restrictions on its commercial use. Corporations soon
realized the huge potential of a digital marketplace on the Internet and in 1994 both eBay and Amazon
were founded. A mad rush of investment in Internet-based businesses led to the dot-com boom through
the late 1990s, and then the dot-com bust in 2000. The bust occurred as investors, tired of seeing
hundreds of companies reporting losses, abandoned their investments. An important outcome for
businesses was that thousands of miles of Internet connections, in the form of fiber optic cable, were
laid around the world during that time. The world became truly “wired” heading into the new millenium,
ushering in the era of globalization, which will be discussed in Chapter 11. This TED Talk video focuses
on connecting Africa to the Internet through undersea fibre optic cable.
The digital world also became a more dangerous place as virtually all companies connected to the
Internet. Computer viruses and worms, once slowly propagated through the sharing of computer disks,
could now grow with tremendous speed via the Internet. Software and operating systems written for a
standalone world found it very difficult to defend against these sorts of threats. A whole new industry of
computer and Internet security arose. Information security will be discussed in Chapter 6.
Web 2.0
As the world recovered from the dot-com bust, the use of technology in business continued to evolve
at a frantic pace. Websites became interactive. Instead of just visiting a site to find out about a business
and then purchase its products, customers wanted to be able to customize their experience and interact
online with the business. This new type of interactive website, where you did not have to know how to
create a web page or do any programming in order to put information online, became known as Web
2.0. This new stage of the Web was exemplified by blogging, social networking, and interactive
comments being available on many websites. The new Web 2.0 world, in which online interaction
became expected, had a major impact on many businesses and even whole industries. Many
bookstores found themselves relegated to a niche status. Video rental chains and travel agencies
simply began going out of business as they were replaced by online technologies. The newspaper
industry saw a huge drop in circulation with some cities such as New Orleans no longer able to support
a daily newspaper.
Disintermediation is the process of technology replacing a middleman in a transaction. Web 2.0 allowed
users to get information and news online, reducing dependence of physical books and newspapers.
As the world became more connected, new questions arose. Should access to the Internet be
considered a right? Is it legal to copy a song that had been downloaded from the Internet? Can
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information entered into a website be kept private? What information is acceptable to collect from
children? Technology moved so fast that policymakers did not have enough time to enact appropriate
laws. Ethical issues surrounding information systems will be covered in Chapter 12.
The Post-PC World, Sort of
Ray Ozzie, a technology visionary at Microsoft, stated in 2012 that computing was moving into a phase
he called the post-PC world.[5] Now six years later that prediction has not stood up very well to reality.
As you will read in Chapter 13, PC sales have dropped slightly in recent years while there has been a
precipitous decline in tablet sales. Smartphone sales have accelerated, due largely to their mobility and
ease of operation. Just as the mainframe before it, the PC will continue to play a key role in business,
but its role will be somewhat diminished as people emphasize mobility as a central feature of
technology. Cloud computing provides users with mobile access to data and applications, making the
PC more of a part of the communications channel rather than a repository of programs and information.
Innovation in the development of technology and communications will continue to move businesses
forward.

Eras of Business Computing

Era Hardware Operating System Applications

Time-sharing
Mainframe Terminals connected to mainframe (TSO) on Multiple Custom-written
(1970s) computer Virtual Storage MRP software
(MVS)

IBM PC or compatible. Sometimes

PC connected to mainframe computer WordPerfect,
MS-DOS
(mid-1980s) via Lotus 1-2-3
network interface card.

Client-Server Microsoft
Windows for
(late 80s to early IBM PC “clone” on a Novell Network. Word, Microsoft
Workgroups
90s) Excel

World
Microsoft
Wide Web (mid- IBM PC “clone” connected to
Windows XP Office, Internet
90s to early company intranet.
Explorer
2000s)

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 Web 2.0 (mid- Microsoft
Laptop connected to company Wi-Fi. Windows 10
2000s – present) Office

Post-PC Mobile-friendly
(today and Smartphones Android, iOS websites, mobile
beyond) apps

Can Information Systems Bring Competitive Advantage?

It has always been the assumption that the implementation of information systems will bring a business
competitive advantage. If installing one computer to manage inventory can make a company more
efficient, then it can be expected that installing several computers can improve business processes and
efficiency.
In 2003, Nicholas Carr wrote an article in the Harvard Business Review that questioned this
assumption. Entitled “I.T. Doesn’t Matter.” Carr was concerned that information technology had become
just a commodity. Instead of viewing technology as an investment that will make a company stand out,
Carr said technology would become as common as electricity – something to be managed to reduce
costs, ensure that it is always running, and be as risk-free as possible.
The article was both hailed and scorned. Can I.T. bring a competitive advantage to an organization? It
sure did for Walmart (see sidebar). Technology and competitive advantage will be discussed in Chapter
7.

Sidebar: Walmart Uses Information Systems to Become the World’s Leading Retailer
Registered Trademark of Walmart, Inc.
Walmart is the world’s largest retailer, earn 8.1 billion for the
fiscal year that ended on January 31, 2018. Walmart currently
serves over 260 million customers every week worldwide through its 11,700 stores in 28 countries. In
2018 Fortune magazine for the sixth straight year ranked Walmart the number one company for annual
revenue as they again exceeded $500 billion in annual sales. The next closest company, Exxon, had
less than half of Walmart’s total revenue.] Walmart’s rise to prominence is due in large part to making
information systems a high priority, especially in their Supply Chain Management (SCM) system known
as Retail [Link] $14.3 billion on sales of $30
This system, unique when initially implemented in the mid-1980s, allowed Walmart’s suppliers to
directly access the inventory levels and sales information of their products at any of Walmart’s more
than eleven thousand stores. Using Retail Link, suppliers can analyze how well their products are
selling at one or more Walmart stores with a range of reporting options. Further, Walmart requires the
suppliers to use Retail Link to manage their own inventory levels. If a supplier feels that their products
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are selling out too quickly, they can use Retail Link to petition Walmart to raise the inventory levels for
their products. This has essentially allowed Walmart to “hire” thousands of product managers, all of
whom have a vested interest in the products they are managing. This revolutionary approach to
managing inventory has allowed Walmart to continue to drive prices down and respond to market forces
quickly.
Today Walmart continues to innovate with information technology. Using its tremendous market
presence, any technology that Walmart requires its suppliers to implement immediately becomes a
business standard. For example, in 1983 Walmart became the first large retailer to require suppliers to
the use Uniform Product Code (UPC) labels on all products. Clearly, Walmart has learned how to use
I.T. to gain a competitive advantage.

Summary
In this chapter you have been introduced to the concept of information systems. Several definitions
focused on the main components: technology, people, and process. You saw how the business use of
information systems has evolved over the years, from the use of large mainframe computers for number
crunching, through the introduction of the PC and networks, all the way to the era of mobile computing.
During each of these phases, new innovations in software and technology allowed businesses to
integrate technology more deeply into their organizations.
Virtually every company uses information systems which leads to the question: Does information
systems bring a competitive advantage? In the final analysis the goal of this book is to help you
understand the importance of information systems in making an organization more competitive. Your
challenge is to understand the key components of an information system and how it can be used to
bring a competitive advantage to every organization you will serve in your career.
Study Questions
1. What are the five major components that make up an information system?
2. List the three examples of information system hardware?
3. Microsoft Windows is an example of which component of information systems?
4. What is application software?
5. What roles do people play in information systems?
6. What is the definition of a process?
7. What was invented first, the personal computer or the Internet?
8. In what year were restrictions on commercial use of the Internet first lifted?
9. What is Carr’s main argument about information technology?
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Exercises
1. Suppose that you had to explain to a friend the concept of an information system. How would
you define it? Write a one-paragraph description in your own words that you feel would best
describe an information system to your friends or family.
2. Of the five primary components of an information system (hardware, software, data, people,
process), which do you think is the most important to the success of a business organization?
Write a one-paragraph answer to this question that includes an example from your personal
experience to support your answer.
3. Everyone interacts with various information systems every day: at the grocery store, at work, at
school, even in our cars. Make a list of the different information systems you interact with daily.
Can you identify the technologies, people, and processes involved in making these systems
work.
4. Do you agree that we are in a post-PC stage in the evolution of information systems? Do some
original research and cite it as you make your prediction about what business computing will
look like in the next generation.
5. The Walmart sidebar introduced you to how information systems was used to make them the
world’s leading retailer. Walmart has continued to innovate and is still looked to as a leader in
the use of technology. Do some original research and write a one-page report detailing a new
technology that Walmart has recently implemented or is pioneering.

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