Managers and business organizations invest in information technology and systems because such strategies provide real economic value to the business. The decision to implement or sustain an information system presumes that the profits on this investment will be higher than that of other assets (Laudon & Laudon, 2006). In this light, a proper information system that meets the organizational requirements should be developed or acquired to support a firm’s business process. In addition, information systems do not appear randomly in business; their development is a time-consuming and cost-bearing experience that should only be undertaken after careful analysis and consideration of the objectives of an organization. The goals of an information system are essential in determining the scope, shape and nature of the organization. The following paragraphs explain how information systems support the business process in an organization.
Business processes refers to the set of logically linked duties and behaviors that companies develop during their existence in order to produce specific business results and the unique way in which these tasks are organized and coordinated (Stair & Reynolds, 2006). It is therefore important that managers embrace information systems in order to achieve the corporate goal of a business strategy. Since an information system is comprised of hardware, software, people, network, and procedures used by organizations to provide information for decision making, the information requirements of a business is based on the managerial decision that has to be made on different levels. Haag, Cummingz, and McCubbery (2002) assert that information systems are the foundation of doing business; business activities depend on the type and quality of information systems in an organization.
The main levels of management are operational, tactical and strategic. In a business organization like ABC Company – a food product manufacturer, the operational level requires information for maintaining business records and facilitating the flow of work in the firm. The information systems used at this level include Data Processing Systems (DPS) and Transaction Processing Systems (TPS). Secondly, the tactical level requires information for comparing results of the operations with plans and adjusting plans and operations. Management Information Systems (MIS) mostly support these functions. Thirdly, the strategic level requires information for long-term planning and policy decisions for future commitments of the organization. Thus, the information systems required at this level are Decision Support Systems (DSS) and Executive Information Systems (EIS); both support planning of business processes (Haag et al., 2002).
Consequently, information systems support capital management of a firm. Capital is a major requirement for introducing and maintaining a business process within an organization. In that case, information technology is presumed to be the largest component of capital investment for firms. Hardware like computer systems, and networking equipments, software like database management systems and spreadsheet applications, and telecommunication equipments such as mobile phones help companies similar to ABC to improve their manufacturing processes through efficient business operations. More so, information systems enhance productivity within a firm. DSS like spreadsheet software used within ABC Company assist the management to make decisions that are less structured; the company can estimate their average sales and annual profits, and even make future plans using spreadsheet models. In supporting this view, Elliot and Starkings (1998) state, “what the organization would like to do depends on what its systems will permit it to do”.
Another support for business process is in line with strategic opportunity and advantage. To realize opportunities such as: 1. New markets, which are the fundamental of product positioning and gaining market share for the ABC’s food products. 2. New products, which present customers with many choices and hence satisfaction. And 3. New services, to gain customer loyalty and re-purchase, ABC have been able to make substantial investment in information technology. These include an e-commerce system for performing its online business operations. Thus, the organization is able to reduce business intermediaries in its supply chain, to reduce transaction costs, to enhance access to data, and to enter new market segments in regard to customer responses.
However, the TPS used by ABC have some strengths and weaknesses. The main transactions carried by the organization include processing customer orders, placing orders for raw materials, and processing payment of products. Thus, its online system enables it to meet all these functions. Nevertheless, the drawback of this information system is that most private information is not secure over the internet. Sometimes the company faces a responsibility and control challenge. The decision of designing applications that can be used in an ethically and socially responsible manner seems to bring about controversial thoughts. Furthermore, the security of information is a major issue that contributes to loss of privacy and loss of availability (Laudon & Laudon, 2006). In assessing the information system’s performance, the company needs to restructure and re-engineer its business operations by ensuring that proper intranet and extranet with security mechanisms i.e., firewalls or virtual private networks (VPNs) are set up. This shall enhance the business operations performed by the business.
In conclusion, companies need to have a clear understanding of their long-term and short-term information requirements through the incorporation of appropriate information systems in their business processes. Thus, information systems matter because of the following: foundation of doing business, productivity, capital management, and strategic opportunity and advantage. However, information systems investment challenge, globalization challenge, and ethics should be considered in maintaining a good IT system.
References
Elliot, G., & Starkings, S. (1998). Business Information Technology: Systems, Theory and Practice. Essex: Pearson Education.
Haag, S., Cummingz, M., & McCubbrey, D.J. (2002). Management information Systems for the Information Age. (3rd Ed.). New York: McGraw-Hill.
Laudon, K. C., & Laudon, J. P. (2006). Management information Systems: Managing the Digital Firm. (9th Ed).Upper Saddle River, NJ: Pearson Prentice Hall.
Stair, R.M., & Reynolds, G. W. (2006). Fundamentals of information systems. (3rd Ed.). Boston: Thompson Course Technology.