UNIT 1

INFORMATION SYSTEMS AND ITS APPLICATIONS

1.1. Data, Information, Knowledge, and Wisdom

1.1.1 Data
Data is defined as a collection of raw facts. It consists of raw facts that cannot give meaning on
their own. It is a representation of what we see and perceive, utilizing things like letters and
numbers.

A key characteristic of data is that it does not provide any meaning unless it is connected or
related to other data. Data serves as the foundation for generating information and knowledge.

Representation and Examples

Data is recorded and stored using various forms, including numbers, texts, and images. The
most effective form of data representation depends on the type of data and the specific context.

Examples of raw facts considered as data include:

 Numbers and words like 100, 250, age, and Ethiopia.

 The raw sequence 010101 or a partial phone number like +251********* are data.
 Some data are better represented by certain forms; for example, age is better represented
by numbers than texts, while names are only represented by text.
 Images have become a popular form of data representation, especially with the
development of satellite technology.

For instance, the fact 100 alone is ambiguous; it could mean the weight of a person or the
measurement of a distance. Similarly, the word Ethiopia could be a country name or a person's
name without further context.

Data can be thought of as unprocessed ingredients: raw numbers, text fragments, or isolated
measurements. Just as flour and sugar sitting separately hold potential but offer no meal, data
elements like '100' or 'Ethiopia' lack definitive meaning until they are combined and processed
into something coherent, which is then called information.

1.1.2 Information
Information is defined as data processed in a meaningful way to the end users,. It is data that
has been processed, analysed, and structured in a meaningful way to become useful.

Key points regarding information include:

 Contextualization: Information can be viewed as data put into context. It is an

organized form of data that is structured to provide meaning.
 Purpose: Information is processed data that is specifically used to answer certain
questions.
 Value Generation: Unlike raw facts (data), information provides meaning. By asking
relevant questions (e.g., ‘who’, ‘what’, ‘when’, ‘where’, etc.), valuable information can
be derived from the data, making it more useful for users.

Examples and Representation

Information can be represented in various forms, similar to data.

 Forms of Representation: Information can be represented in the form of a table, line

graph, bar graph or formulas.
 Processing Example (Sales Data): Registering raw daily sales data may not provide
meaning, but when that data is aggregated by weeks of the month, it transforms into
information because it shows whether the sales are increasing or decreasing.
 Contextual Example (Phone Number): Raw data like +251********* becomes
information** when placed into context, such as stating that it is a person’s phone
number.

Information acts as the refined product derived from raw data. If data elements are like
individual census entries (a name, an address, a number), information is the statistical summary
table created from those entries, revealing patterns about population distribution or average age.

1.1.3 Knowledge
Knowledge is an understanding that is acquired by further processing and integrating
different sets of information. It encompasses both understanding and skill.

Key characteristics of knowledge include:

 Acquisition: Knowledge emerges from the further processing and integration of

information. It is acquired by integrating information from various sources, such as
reading books, engaging in different activities, discussing with other people, and
observing when something happens.
 Application: Knowledge is the capability to think and act to solve a problem or
accomplish a given task. It is considered more complex than information and shapes
and guides our actions.
  Possession: Knowledge is more of a personal possession that one retrieves and applies
when needed.

Examples

The process of acquiring knowledge can be illustrated through an example involving a child
learning to ride a bicycle:

 Initially, telling a child how to ride a bicycle provides them with information, which
helps the child understand the process.
 When the child actually applies the information in riding a bicycle, they acquire the
skills necessary to properly ride it. At this point, the initial information becomes
knowledge.

Other examples of knowledge provided include:

 The ability to read this textbook.

 The ability to maintain a computer.

Knowledge serves as the practical expertise derived from refined information. If raw data is like
individual bricks, and information is like a blueprint showing how to arrange those bricks, then
knowledge is the builder's actual skill and experience used to successfully construct a wall,
enabling them to apply the blueprint (information) to achieve the goal (accomplishing a task).

1.1.4 Wisdom
Wisdom is defined as the ability to make wise decisions and judgments using one’s
knowledge. It is considered the highest level of human understanding. Wisdom is associated
with good judgment and actions that contribute to living well.

Key points regarding wisdom include:

 Foundation: Wisdom is achieved through the practical application and guidance

provided by knowledge.
 Highest Level: Data, information, knowledge, and wisdom can be arranged
hierarchically, forming a pyramid where wisdom is placed at the top, representing the
highest level of human intelligence.
 Components: Wisdom includes various types of thought, such as intuitive thinking,
logical thinking, creative thinking, and collective thinking.
 Value: Wisdom is described as being like positive qualities such as love, intelligence,
and politeness, in that the more we have it, the better we become.
Examples

The overall hierarchy illustrates how wisdom is derived:

1. Data (raw facts) is processed into Information (meaningful data).

2. Information is integrated into Knowledge (understanding and skill).
3. Knowledge is used to achieve Wisdom (the ability to make wise decisions and
judgments).

Wisdom is the culmination of the data processing hierarchy. If data is a pile of raw facts,
information is a summarized report, and knowledge is the learned ability to act on that report,
then wisdom is the seasoned insight to know when and how to apply that knowledge ethically
and effectively to achieve the best long-term outcome.

1.1.5 The Difference between Data, Information, Knowledge, and Wisdom

Hierarchical Arrangement and Value

Data, information, knowledge, and wisdom are arranged in a hierarchy, often visualized as a
pyramid. Data is placed at the bottom of this pyramid, and wisdom is placed at the top. The
value obtained increases as one moves up in this hierarchy,. The process involves data being
enriched with meaning and context to derive more knowledge and insights. The pinnacle of
the pyramid is reached when knowledge and insights are transformed into wisdom, which is
considered the highest level of human intelligence.

The distinction between the four concepts is further explained by their nature:

Data

 Data consists of raw facts that cannot give meaning on their own,. It is a representation using
numbers, texts, and images,. Data serves as the foundation for generating information and
knowledge.
 Examples: Examples of raw data are 010101 or the sequence +251*********. The fact 100
alone is ambiguous, as it could represent a person's weight or a distance measurement.

Information

 Information is data processed in a meaningful way to the end users,. It is an organized form of
data to provide meaning. Information is data that has been processed, analyzed, and
structured to become useful. It can be viewed as data put into context.
 Examples: When the raw data +251********* is stated as a person’s phone number**, it
becomes information because it has been put into context. Processing raw daily sales data and
 aggregating it by the week transforms it into information because it reveals whether sales are
increasing or decreasing.

Knowledge

 Knowledge is an understanding acquired by further processing and integrating different sets of

information,. It includes both understanding and skill. Knowledge is considered more complex
than information and is primarily a personal possession that shapes and guides one's actions,. It
refers to understanding patterns, rules, or other mechanisms that guide future actions.
 Examples: The ability to read this textbook or maintain a computer is knowledge. When a child
applies the instruction (information) of how to ride a bicycle, they acquire the necessary skills,
and the information becomes knowledge.

Wisdom

 Wisdom is the ability to make wise decisions and judgments using one’s knowledge,. It is the
highest level in human intelligence,. Wisdom involves the capability to think and act using
knowledge. It is associated with good judgment and actions that contribute to living well.
 Examples: Wisdom includes intuitive thinking, logical thinking, creative thinking, and collective
thinking. The statement, "Think many times before you act” refers to wisdom,.

The distinction highlights that the process begins with raw Data, which is organized into
Information, which is then used to acquire Knowledge (skill and understanding), and finally,
Knowledge is applied to achieve Wisdom (wise judgment and actions).

1.2.1 Information systems

An Information System (IS) is fundamentally a set of integrated components for collecting,
storing, processing data, and providing information. More specifically, it is a set of
interrelated components working together to collect, process, store, and disseminate
information to potential users.

Information systems are considered an integral part of organizations. Their primary function is
to capture data and generate summarized reports for decision making. The system generates
various types of reports or information that are used by employees to accomplish different
organizational tasks.

Examples

Information systems are widely used across various organizational contexts:

 Managerial Decision Making: Managers utilize information generated by the IS to

make decisions, such as determining the selling price of a product.
 School Administration: A school information system provides a clear example of data
processing:
 o It captures student data concerning different types of assessments, including
quizzes, assignments, and final examinations.
o All this assessment data is then summarized to show a student’s overall
performance.
o The mark from each subject is used to calculate the average mark of students
and rank them accordingly.
o This resulting information is vital for schools to effectively organize their
regular activities.

An Information System acts like a complex water filtration plant: it takes raw, unstructured input
(data), subjects it to various mechanical processes (interrelated components working together to
process and store), and produces clean, useful output (information) ready to be consumed and
acted upon by users (managers and employees).

1.2.2 Components of IS
Major Components of an Information System

An Information System (IS) is viewed as having five major components: hardware, software,
data/information, people, and procedure.

1. Hardware

Definition and Explanation: Hardware includes digital devices required to perform core IS
functions such as data storage, data processing, and communication. Communication among
different parts of an IS is facilitated through telecommunication networks, which include both
wired and wireless networks.

Examples: Server computers, desktop computers, laptops, and networks are infrastructural
resources used in a Human Resource Information System (HRIS).

2. Software

Definition and Explanation: Software is a set of instructions that commands the computer
hardware to do something. Various software types must be in place for the IS to operate
properly.

Examples: Software includes the operating system, the Database Management System (DBMS),
application software, and anti-virus software. In an HRIS, software components might include
Recruitment software, Time and attendance software, Performance management software, and
Training and development software.

3. Data and Information

Definition and Explanation: Data and information are considered a critical resource or asset
that the information system must properly manage. Organizations generate different types of data
when they interact with customers and suppliers. This data is stored in a computer database for
later use. The data is then used to prepare reports for decision making.

Examples: A digital device selling company generates data when it sells products like
computers and printers, and must keep track of its daily sales data. This data is used to prepare
reports such as monthly sales reports for managers.

4. People

Definition and Explanation: Information systems require qualified or trained people with
knowledge to operate the technologies and identify new data that must be captured and stored.
These technical people, who have specialized knowledge of the IS, are integral parts of the
organization's IS. They are responsible for creating and managing an IS that supports the
organization’s daily activities.

Examples: Technical people who manage the information system are integral components.
Employees use available computers in systems like HRIS to access data and generate
information.

5. Procedure

Definition and Explanation: A procedure is a component of information systems defined as a

series of steps followed to achieve a desired outcome or goal. Procedures are the policies and
methods followed in using, operating, and maintaining an IS. Clear procedures are necessary to
clarify crucial details.

Examples: Procedures clarify what data should be captured by the IS, who should have
access to the data, and who should have the privilege to modify data. Effective procedures help
organizations maximize benefits from their IS.

These five components work together much like an orchestra: The Hardware (instruments)
provides the physical means; the Software (musical score) directs the processes; the
Data/Information (the notes) is the resource being transformed; the People (musicians) operate
and manage the system; and the Procedure (conducting rules) ensures everything runs smoothly
to produce the final outcome.

1.3. Applications of Information System

Information systems have become the primary mechanism through which organizations provide
different IT-enabled services. These services are generally referred to as e-services, which are
defined as the provision of public services using technology as a mode of service delivery.

Types of E-Services and Examples

The sources detail several key applications of information systems:

1.3.1 E-Government
Electronic government (e-Government) is defined as the use of information systems to
provide electronic services to citizens.

The primary objectives of e-Government include:

 Increasing efficiency, transparency, and citizen participation in governmental tasks.

 Achieving higher levels of effectiveness and efficiency in governmental tasks.
 Improving the efficiency of communication among different governmental offices.

Governmental bodies facilitate e-Government services by establishing an organizational portal,

which is a web-based information system that aggregates data from different sources into a
single user interface, enabling users to access electronic services easily.

Examples of Services

E-Government solutions automate various public services, which can be accessed through
organizational portals:

 Business registrations.
 Auto registry.
 Payment of taxes.
 Issuance of birth certificates.
 Issuance and renewal of identification cards.
 Citizens can use mobile phones to access services, such as paying their monthly electric
bill.
 The portal of the Ethiopian Ministry of Health is cited as an example providing various
health-related services to citizens.

Benefits

The adoption of e-Government solutions provides several benefits:

 Establishing trust between governments and citizens.

 Facilitating sharing of information and ideas between government agencies and
departments.
  Allowing citizens to easily get government decisions and policies through institutional
web portals.
 Reducing cost of running government services because the services are delivered
online.
 Improving convenience of service delivery, as citizens can access services using their
mobile phones.

1.3.2 E-banking
Electronic banking (e-banking) is a form of technology-based banking service that avoids
the exchange of cash, checks, or other types of paper documents. It is facilitated by banks
making their information systems accessible over the Internet to provide Internet banking
services.

E-banking contrasts with traditional banking services, which require customers to go to a

physical bank branch in person to withdraw money, transfer money to families, and pay
utility bills. Traditional banking is often inconvenient and inefficient as it requires in-person
visits and waiting times, creating an unnecessary burden on the bank.

Examples of Services

In the banking sector, Information Technology (IT) is primarily associated with services such as:

 Internet banking
 Automated Teller Machine (ATM)
 Mobile banking

Other commonly known e-banking services include:

 Credit cards
 Debit Cards
 Smart Cards
 Electronic Funds Transfer (EFT) System

Internet banking allows customers to make payments online, transfer money from their
account to other accounts, and get other banking services from wherever they are.

Benefits

E-banking provides several benefits to both banks and customers:

 For Banks: The cost of operation per unit of services is lower.

 For Customers:
o They can withdraw cash any time using services like ATM.
o They can make payments from wherever they are.
o They can easily check their account balance.
 o They can receive immediate messages about transactions related to their
accounts.

Challenges

Despite its benefits, e-banking faces several challenges:

 Digital theft.
 Exclusion of the digitally illiterate citizen from e-banking services.
 Lack of access to IT infrastructure in remote areas.
 Unaffordable cost to acquire IT devices like smart phones for low-income citizens.

E-banking is like replacing a trip to the physical marketplace with an online order: instead of
expending time and effort traveling to a physical location to exchange paper documents or cash
(traditional banking), customers use a digital interface (the Information System) to complete
transactions remotely, making the process faster and more cost-effective for both the user and the
institution.

1.3.3 E-learning
E-learning is a form of learning that is delivered through the use of digital devices. It is also
referred to by various other terms, including online learning, virtual learning, distributed
learning, and computer-based learning. Despite subtle differences among these terms, they
generally refer to the use of information and communication technologies (ICT) to facilitate the
teaching-learning process. If e-learning is specifically provided over the Internet, it is known as
online learning.

E-learning is presented as an alternative form of educational delivery that addresses some

limitations of face-to-face education, such as inflexibility in class schedules and the inability for
students to learn at their own pace.

Components

The main components necessary for e-learning include:

 The Internet.
 Computers or mobile phones (digital devices).
 Digital learning resources.
 Content developers (e.g., teachers and graphic editors).
 Learners.

Benefits and Examples

E-learning offers several advantages to learners:

 Flexibility in learning time: Learners can access and study at any time or any day.
 Implementation of student-centered learning: Learners can progress at their own pace.
 Access to a variety of educational resources from different schools or universities.
 Rich multimedia learning resources: The multimedia content engages learners,
encouraging them to be active learners.
 Reduced educational costs: There are no costs associated with travel and
accommodation.

Disadvantages

The main disadvantages associated with e-learning are:

 Physical isolation of students from their teachers and peers.

 Limited control for teachers to monitor the progress of students' learning.
 Technology related costs that can make access to e-learning difficult for students from
low-income families.

E-learning is the digital classroom: instead of a fixed physical location (face-to-face education),
the learning environment exists through technology (digital devices, Internet, and content),
offering students the flexibility to learn at their own pace, much like having a library of
multimedia lessons available 24/7.

1.3.4 E-commerce
E-commerce (electronic commerce) is the buying and selling of goods and services over the
Internet,. Fundamentally, e-commerce is a website deployed over the Internet to handle
online transactions.

Process and Actors

In an e-commerce transaction, buyers use their smartphones or computers to make an order

for a product or service over the Internet. Once the merchant receives the order, the payment is
processed through a Bank. After the successful completion of the transaction, the order is
delivered to the buyer.

The transactions involve multiple parties, including:

 Merchants
 Buyers or customers
 Banks
  Transporters

Examples and Context

E-commerce is currently at its infancy stage in Ethiopia. However, small businesses selling
various products online have mushroomed recently. This growth is attributed to the flexibility
customers have in browsing products, comparing prices, and buying the cheapest offerings.

 Merchant perspective: Business owners benefit because they do not need to have
physical stores and hire salespersons, allowing them to attract more customers.
 Infrastructure needs: For e-commerce to develop further, there is a need to improve the
e-commerce infrastructure, including Internet access in all places, an efficient
transport system, and appropriate regulations for e-commerce transactions.

Advantages

The advantages of e-commerce include:

 Avoiding intermediaries: Customers can purchase products directly from

manufacturers at a cheaper price, bypassing wholesalers and retailers.
 Convenience: Customers can order products from where they are.
 Increased bargaining power for the customer: Customers can easily browse the
prices of different merchants and choose the least price.
 Global reach: The Internet allows merchants to expand their customers outside their
local area, though this also increases competition with global rivals.

E-commerce functions like a global digital marketplace: instead of confining transactions to

physical boundaries, it uses a website (the information system) to allow buyers and sellers to
interact remotely, facilitating the exchange of goods and money and expanding the reach of
merchants worldwide,.

1.3.5 Telemedicine
Telemedicine is defined as the practice of caring for patients remotely without the caregiver
and the patient being in the same physical location.

 Original Purpose: It was initially developed to treat patients in remote places, far from
local health facilities, or in areas facing shortages of medical professionals. For
example, people in rural areas of Ethiopia often lack access to quality health services.
 Current Role: Today, telemedicine serves both as a tool for creating access and as an
alternative mode of health service for convenient medical care.
Examples and Mechanism

There are now various telemedicine companies that provide online treatment:

 Online Consultation: A patient can come online, request a visit with a doctor, and get
treatment, paying the service fee online through their bank account. This online medical
consultation has been implemented in Ethiopia, where people can meet online doctors by
browsing the Internet.
 Mobile-based Services: New mobile-based services allow patients to monitor and
track their health conditions. Simple home-use medical devices gather necessary
medical information for doctors, such as body temperature, glucose levels, and blood
pressure, without the patient needing to go to clinics. This encourages patients to be
proactive about using technology to manage their health.

Advantages and Limitations

Advantages of telemedicine for patients include:

 Overcoming geographical barriers to accessing health care services.

 Reduced cost due to the avoidance of expenses like travel and hotel services.
 Access to specialized physicians for people who live in remote locations.

Limitations of telemedicine include:

 The requirement for technical trainings and equipment, which may not be readily
available in the rural areas of developing countries.

Telemedicine functions like a remote house call for healthcare: it uses digital connections and
devices to bridge the physical gap between a patient and a medical professional, allowing for
diagnosis and care delivery without the time, expense, and geographical constraints of
traditional, in-person visits.

1.3.6 Teleconference
A teleconference is defined as a meeting of two or more people who are separated by
distance using electronic communication. It serves as a generic term for connecting people
from different locations electronically.

Forms and Examples

The two popular forms of teleconferencing are audio conferencing and video conferencing:
 1. Audio conference (Conference call):
o This is a voice-only communication that connects people from remote locations via
telephone lines.
o An example is when meetings can be conducted via audio conference.
2. Video conference:
o This combines both voice communications and video images.
o It supports two-way video conferencing and creates a social presence that resembles
face-to-face meetings.
o It allows participants to see the facial expressions and physical appearance of others at
remote sites.
o Zoom, Google Meet, and Microsoft Teams are some examples of video conferencing
software.

Benefits

Teleconference provides many benefits for participants:

 It saves time and travel costs.

 Participants can attend the meeting from home or office.
 It reduces conference hosting costs.
 It can accommodate more people, as the cost for each additional participant is minimal.

Teleconference is essentially a virtual meeting room: it uses electronic communication (like

telephone lines or video software) to eliminate the need for physical travel, allowing
geographically separated individuals to communicate instantly, thereby saving resources like
time and travel costs.

1.4. IT for Entrepreneurship

Entrepreneurship is defined as the process of designing, launching, and running a new
business,. An entrepreneur is an individual who creates a new business, accepts most of the
risks, and receives most of the rewards, serving as an innovator and a source of new ideas,
goods, services, and businesses.

IT-enabled business is defined as a business that uses IT as a platform to run a business. IT is

fundamentally transforming the world of work and generating new opportunities for
business people.

Key reasons why IT must be included in youth employment and entrepreneurship strategies are:

1. More jobs and businesses now require IT skills.

2. IT is transforming the way young digital entrepreneurs do business.
 3. There is an explosion of online learning opportunities and resources for job seekers
and digital entrepreneurs.

A significant advantage of IT-based businesses is that they generally do not require large
capital to start compared to traditional businesses. An innovative mind with minimal resources,
such as a laptop, can create viable business ideas.

Examples

IT provides platforms for various business models:

 Types of IT-enabled businesses include online training, providing data entry and
processing services, Internet Café service, and online product sells.
 Mobile-based applications have created new job opportunities for small- and medium-
sized enterprises (SMEs) in many regions, including developing countries like India and
Kenya.
 Individuals competent in IT can establish businesses as application developers, game
developers, and service providers using platforms like social network websites.
 In Ethiopia, examples of flourishing IT-based services include Internet cafes and online
sales.

Specific Example (RIDE): The story of Samrawit Fikru, the founder of RIDE, serves as a
strong example in Ethiopia. RIDE initially began as an SMS-based service and has since
become a popular Internet-based taxi-hailing service used by thousands. This venture has
contributed significantly to job creation while offering an alternative taxi service.

IT for entrepreneurship is like having a low-cost, globally connected storefront: instead of

needing massive upfront capital for a physical shop (traditional business), entrepreneurs use
digital tools (IT) to quickly design and launch services or products worldwide, allowing
innovation and job creation to flourish with minimal physical overhead.