1.1 Introduction to Information Systems

Components of an Information System

As shown in Figure 1.2, an information system typically consists of five key components: hardware, software, data, people, and procedures.

Figure 1.2 Typically, an information system includes people, as well as hardware, software, data, and procedures. (credit: modification of work from Introduction to Computer Science. attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)

Before looking closely at each component to understand what it entails and why it is important in IS, let’s start with a brief overview of the five components.

• The physical devices, such as computers, servers, networks, and storage devices, that are used to collect, process, and store data are called hardware.
• The programs and applications that run on the hardware, enabling users to perform specific tasks, are called software. Software can range from operating systems and database management systems to specialized business applications.
• The raw facts and figures that are processed and turned into meaningful information are called data. The facts that we use to learn and understand people, places, and things make up information. Information is raw data that have been processed and manipulated to give context and meaning. Once data are processed into information, we can use that information personally and professionally. We read or listen to books, watch videos on social media, stream a television show, follow road signs, browse online shopping sites, and interact with information we find on the internet or in the world around us. We use databases to organize and store this data efficiently.
• A Set of instructions and rules that governs the use of the hardware, software, and data components is known as a procedure. Standard operating procedures ensure consistency and reliability in the use of information systems.
• Individuals who use the information system, including end users who input and retrieve data in the system, as well as information technology (IT) professionals who design, develop, and maintain the system, are the people who make up an information system.

Types of Information Systems

As shown in Figure 1.3, information systems can be categorized into different types based on their scope and functionality. Executive information systems are used by an organization’s executive staff, decision support systems are used by senior managers, management information systems are used by middle managers, and transaction processing systems are used by frontline workers.

Figure 1.3 Information systems include several types of systems with distinct purposes. (credit: modification of work from Introduction to Computer Science. attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)

Let us take a closer look at each type of information system and explore their purposes.

• An executive information system (EIS) supports the strategic information needs of top executives, providing the information needed to handle executive functions, such as developing an organization’s strategic goals and objectives and plans for achieving them. This includes providing the information needed for managers to understand and manage their organization’s supply chain and value chain, which can be helpful to streamline production processes and provide better customer service. Supply chain management is an example of how an EIS can be used as an interorganizational information system, which occurs when two or more organizations use IS to conduct business electronically.
• A decision support system (DSS) assists in decision-making by providing interactive tools and access to data analysis. Typically, senior managers use a DSS to obtain tactical information that helps them make routine, short-term decisions about an organization’s operations. This helps ensure that organizations stay on track to achieve long-term goals and objectives. Interactive tools available through a DSS enhance these efforts by providing information and technology needed for activities such as project management and employee training.
• A management information system (MIS) provides middle managers with reports and summaries to support decision-making and managerial functions. For example, middle managers may use an MIS to generate reports, such as budgeting documents and cash flow statements, to understand an organization’s financial status. In many organizations, this type of system provides the data for an organization’s balanced scorecard (BSC), which is a performance metric used by strategic managers to identify an organization’s various functions and monitor outcomes. By providing the data necessary for the BSC, an organization’s MIS function provides invaluable support.
• A transaction processing system (TPS) handles day-to-day transactions, such as order processing and payroll. For frontline staff, a TPS provides information necessary to handle an organization’s daily operations, such as inventory reports and customer service records.

In addition to these four types of information systems, an enterprise resource planning (ERP) system is a software system that helps an organization manage various types of information systems within the organization, and integrate business processes and functions across the organization. For example, large organizations may rely on an ERP system to handle human resource management throughout the organization. An ERP is also a useful tool for functions such as project management, accounting and financial management including payroll, and tracking customer service.

Application of Information Systems in Business

Think about a visit to a coffee shop, from ordering to receiving the order, through the lens of IS. First, think about how a barista takes an order at the register. That’s the point-of-sale (POS) system at work. The POS system is an information system that streamlines transactions, helping businesses track sales, manage inventory, and even understand customer preferences when tracked with tools such as customer loyalty cards. When a customer switches from their regular black coffee to a caramel macchiato, the system takes note and updates their preferences, contributing to a personalized customer experience.

Now, imagine if the coffee shop had no system to track sales, manage its supplies, and keep track of customer preferences. What do you think might be some of the challenges a business would face if they did not have a way to gather, track, and analyze this data? This is where ERP systems come into play. ERP systems integrate various business processes, ensuring that everything from bean procurement to milk deliveries is synchronized. This not only prevents the coffee shop from running out of their most popular blend, but also helps them manage costs and operate more efficiently.

The POS and ERP systems are not the only information systems in a coffee shop. Most coffee shops have Wi-Fi, which is another information system that includes hardware, software, and the networks that connect them. The coffee shop’s Wi-Fi is a small-scale example of how businesses use IS to stay ahead of the competition, whether it be locally, nationally, or globally.

In essence, information systems are about more than simply computers and gadgets. They are the invisible architects that shape our daily experiences, whether we’re grabbing a coffee or navigating the complexities of a global market.

Evolution of Communication and Information Sharing

The earliest forms of communication evolved from body language, hand signals, and drawings to spoken and written languages. As written language developed around the world, various societies invented ways to print written works that could be shared with others. These earlier means of communication provided essential information without technology components like those we think of today, such as database management systems, data networks, hardware, and software.

For hundreds of years leading up to the twentieth century, early technology laid the foundation for today’s complex information systems. The printing press was the dominant invention that promoted communication and information sharing for centuries before the inventions of the telegraph and the telephone. By the end of the 1800s, the basic design of the telephone, which is still the foundation for today’s landline handsets and cell phones, was in place. The telephone revolutionized communication, allowing real-time conversations for sharing information for both personal and business purposes.

The telephone took another step forward in 1973 when Martin Cooper, an engineer for Motorola, made the first call on a wireless cellular telephone. This launched a revolution as cell phones progressed to eventually become a vital personal resource for individuals around the world. By January 2024, Pew Research Center found that 97 percent of adults in the U.S. owned a cell phone.²

As this information shows, communication has been paramount for humans since the beginning of civilization, and we have strived to find more and better ways to stay connected with one another.

Development of the Internet

The inventions of the computer and the internet have been instrumental in the development of some of the technology necessary for today’s information systems. While societies developed a variety of methods for communication, they also created tools for calculations, establishing the foundation for modern computers. The abacus, which can be traced to at least 1100 BCE, is the oldest known calculating tool. Analog and digital calculators were invented in the 1600s, followed by the Jacquard loom in the early 1800s. The first modern analog computer was developed in 1930, and in the 1940s, IBM produced fully functional computers that evolved over the decades to the laptops and other computers that we have today.

Initially, computers were not linked by data networks and could not be used as communication tools. Rather, their primary purpose was to calculate, process, and store information. For example, the U.S. government used early computers to compile and calculate statistical data gathered from census questionnaires. Businesses first used computers for purposes such as tabulating and storing financial information, and academic institutions relied on these basic computers to organize and analyze research data.

The inventions of the telegraph and telephone laid the foundation for the 1969 introduction of the U.S. Advanced Research Projects Agency Network (ARPANET). This network linked computers to one another and became the forerunner to the internet. Focused on the military and universities, which needed the ability to collaborate and connect project team members in multiple locations, the ARPANET provided a means for professionals in separate locations to share information and computing resources. Using satellite links and packet-switching technology, which transfers data in small pieces as it is routed through a system, computers in the network could communicate with each other. As technology progressed, the ARPANET developed features such as the following:

• telnet, which enables users on one computer to log into other computers using the same network
• FTP protocols, which allow electronic file transfers
• list servers, which send a single message to multiple subscribers
• routers, which handle data packets

Figure 1.4 shows the expanse of the network in 1974.

Figure 1.4 In the 1970s, the Advanced Research Projects Agency’s network consisted of a series of nodes (connectors) and lines that stretched across the continental United States. (credit: modification of work “Arpanet 1974” by “Yngvar”/Wikimedia Commons, Public Domain)

During the 1970s, scientists Vinton Cerf and Robert Kahn developed the communications model for Transmission Control Protocol/Internet Protocol (TCP/IP). This established the standards for transmitting data among multiple networks of computers. In 1983, ARPANET adopted TCP/IP, providing the framework for researchers to create the vast network that evolved into today’s internet.

In 1990, computer scientist Tim Berners-Lee advanced this technology when he invented the World Wide Web, providing users with the ability to access online information through websites and hyperlinks. The internet has made global communication and information sharing commonplace and convenient for anyone with computer access.

As this history shows, the goal of information technology has been to find ways to do things more efficiently, saving time while increasing productivity. The technological advancements in computer science and information technology have provided the additional technology and frameworks needed to develop today’s robust information systems.

Evolution of Computer Hardware and Software

While technology evolved and the internet was launched, computer hardware and software also evolved. Hardware includes the tangible parts of a computer, such as the motherboard, hard disk drive, and central processing unit, as well as accessories such as electrical cords, keyboards, and monitors. Software refers to the programs and instructions that make computers functional, able to follow commands and carry out tasks. Common examples of software include word processing and spreadsheet programs.

To understand how computers developed, consider the Jacquard loom. This 1801 invention helped artists weave cloth. The loom was used to produce patterned cloth, and by using punched pasteboard cards, Jacquard applied binary code to the weaving process, revolutionizing the way fabric was created. The loom itself was constructed of metal and wood, which functioned as the machine’s hardware. The rods in the loom were controlled by pasteboard cards that were stiff and included holes to instruct the rods in the steps needed to weave a specific pattern of cloth (Figure 1.5). The design of the loom helped early computer designers understand the concepts and importance of computer hardware and software by applying binary code.

Figure 1.5 (a) Jacquard’s loom, which performed calculations using a punch card system, was an early development in computing, as was (b) Herman Hollerith’s punch-card tabulating machine, for which he was awarded a patent in 1889. (c) Each hole in a punch card equals a piece of data (called a “bit” today) that the machines read. (credit a: modification of work “Jacquard.loom.cards” by George H. Williams/Wikimedia Commons, Public Domain; credit b: modification of work “Holerith395782Figures1-6” by Herman Hollerith/Wikimedia Commons, Public Domain; credit c: modification of work “2punchCards” by José Antonio González Nieto/Wikimedia Commons, CC BY 3.0)

While the cards’ pasteboard was hardware, the patterns of holes in the cards were software because they provided instructions and determined which patterns would appear in each piece of cloth produced by the loom. This process demonstrated how hardware and software could be coordinated to achieve specific tasks, providing an important framework as computers were developed.

Digital Media and Its Impact on Human Communication

As computers have evolved to become more powerful and offer more features, information sharing experienced the next wave of major advancement through digital media. The term digital media refers to the content developed, stored, and distributed via mobile devices—such as news stories, blogs, videos, and online games—as well as the hardware—flash drives, DVDs, and digital computers—used to store and share this media. Digital media falls into one of six categories: audio, video, social media, advertising, news, and literature.

The impact of digital media is transformative, as it promotes information sharing, enabling people, businesses, and societies around the world to communicate. With digital media, which has included faster network speed and more robust architecture, students can take classes online; organizations can conduct business worldwide; news outlets can research, write, and distribute stories globally; and people can conduct real-time conversations with coworkers, friends, and families around the world. We use digital media to learn, be entertained, and conduct transactions such as ordering takeout food from a local restaurant or streaming a movie. The evolution of digital computers has caused a major disruption to media and publishing industries that create print newspapers, magazines, and books, now that television programming and advertisements are available online twenty-four hours a day, seven days a week.

As the internet developed, users were able to use computers to share information through resources such as emails and online access to news sites. By the late 1970s, online text-based games became popular, and many organizations began using computers to operate online public bulletin boards. Later, files could be uploaded and shared, and by the late 1990s, it was possible to post and share music and videos online. These technological advancements were important to support the evolution of information systems, giving users more options for communication and information sharing.

Web 2.0 and Social Media Platforms

The initial version of the internet is known as Web 1.0, and it featured websites that were static, which means that users could read website content but could not interact with it. Shortly before the beginning of the twenty-first century came the next generation of the internet. Known as Web 2.0, the basic functioning of the internet changed to enable, and even encourage, users to be active participants on the internet by contributing content, such as comments, blogs, photographs, and videos.

No technological improvements or advancements were necessary to move from Web 1.0 to Web 2.0. Rather, this transition was simply a change in the way the internet was perceived and used. This led to the launching of applications and websites that led to the growth of social media. Any type of electronic communication tool that enables users to establish online communities where they share content, including personal messages, ideas, photographs, and videos is considered social media.

Once technology was available to support social media, many new websites were developed. For example, Wikipedia was launched in 2001, providing users with an online encyclopedia that enables information sharing on any topic. Facebook started in 2004 as a way to connect students at Harvard University and later evolved into the social networking service of today that provides users throughout the world with a means to communicate, connect, and share information. In February 2005, YouTube’s online platform to share videos was launched. A few months later, in June 2005, Reddit began, providing users with a means to upload a variety of content—including images, videos, and text posts—that other users could vote up or down. In 2010, Instagram launched, offering a social networking service to share photos and videos. In 2016, China launched TikTok, a social media platform for sharing videos.

The concept of social media, the process of social networking via technology, can be traced back to the telegraph. With the ability to transmit messages electronically over many miles, the telegraph gave people a means to interact socially without being face-to-face. Later, when the ARPANET began, email became a popular form of social media. As the world began to appreciate the convenience and benefits of interacting online, Web 1.0 became Web 2.0. To understand the impact of Web 2.0, consider that by early 2024, 5.04 billion people (62.3 percent of the world’s population) were using social media to communicate and share information.³

Future Trends in Information Systems

Our world is complex, and information helps us make sense of the people, places, things, and events that surround us. Through information systems, we can communicate and share information to learn from each other, solve challenging problems, and explore new opportunities to meet our needs, both personally and professionally.

To ensure that people can continue to communicate and manage the complexities of the world, information systems, including processes to share information, continue to evolve. Emerging technologies, such as artificial intelligence (AI), machine learning (ML), and blockchain, have the potential to provide many benefits to much of the world’s population, but can also raise or expand ethical concerns. As these systems continue to advance, we will need to balance these ethical concerns with the benefits they bring.

Components of Information Systems

The components of information systems all interact closely to make the system function. People are a vital part of information systems, both as developers and as system users. An important aspect of systems development is ensuring that a system is user-friendly. To maximize functionality and promote information sharing, systems must be accessible to individuals without a background in technology.

Hardware provides the necessary foundation and tools that make software operational, and software is necessary to process and store data. In addition to enabling software, hardware such as keyboards and mice provides users with the means to access the system for the purposes of inputting and retrieving data. Without software, the hardware does not have the instructions needed to function appropriately and perform specific tasks. Two types of software—operating systems and applications—are necessary for information systems to function. The operating system (OS) functions as a computer’s manager by operating the computer’s memory and other hardware resources such as disk storage. Additionally, the OS provides the interface for users to work with the computer, and it manages the computer’s application software programs. Examples of an OS include Linux, which is open source, and Microsoft Windows, for which a license must be purchased.

Programs that enable computers to perform specific tasks are called application software. Examples of application software include word processing and spreadsheet programs, as well as web browsers and presentation software. The mobile applications on your mobile phone that enable you to do things like send texts and play games are also examples of application software.

Once hardware and software are in place, the next essential component is data. As noted earlier, the basic concept and purpose of information systems is processing and sharing information, and data are necessary to achieve this objective. This information may include both quantitative and qualitative data. Numerical information is called quantitative data. In IS, this may include statistics, financial information, and other data such as marketing trends that are expressed numerically. Nonnumerical information is called qualitative data. Depending on the needs of the system, information may include a variety of qualitative data, such as customer names and addresses, photographs, videos, descriptive information, individual opinions, and any other nonnumerical information needed to meet the system objectives.

Once a system has hardware, software, and data, procedures are essential to ensure that it functions appropriately. These procedures should be written in detail to provide instructions and policies for the use of the system. These procedures should include information about security, such as who has authorization to use the system and policies for maintaining and updating passwords.

Elements of Information Systems

Once the components are in place, several elements are necessary for the information system to function. These elements include environment, input, processing, output, control, and feedback.

• Factors such as physical location and network capabilities that affect a system and help determine how it operates are referred to as its environment. This also involves the purpose and context of a system, including whether the majority of users are tech savvy or have limited skills in technology. To ensure that a system is set up appropriately, it must be implemented in an environment that will promote its capabilities and meet the goals and objectives. For example, if an information system contains sensitive information that must be protected from unauthorized users, the physical location of the system must be in a secure building, and the system itself must include cybersecurity features that guard against hacking and other unauthorized use.
• The input is the data that are collected and entered into the system by users or automatically when transactions occur, such as when you make a purchase with a debit card and your checking account is automatically charged for the purchase. An information system must include the software needed to handle the types of data required for the system. For example, a system that handles financial data needs spreadsheets, and a system that handles qualitative data such as reports needs word processing capabilities. Typically, an information system needs multiple software applications to handle the diverse types of data required for the system.
• The performance of tasks in order to make data useful in a system is known as processing. For example, once financial data are entered into a spreadsheet, that data must be computed in order to yield useful information such as the costs to produce goods and services, the number of sales per month, and the profits earned per quarter. The calculations to derive this data are tasks performed as part of processing.
• The data and information that a system generates and provides to users is called the output. Data about a business’s costs, sales, and profits are examples of information system outputs. Information system users must be able to retrieve this output in a secure and user-friendly manner whenever data are needed.
• A policy or procedure that ensures a system functions effectively, efficiently, and securely is called a control. Controls typically fall into two categories—application and general.
  • An application control is built into the system and includes features such as firewalls, encryption, and access control.
  • A general control refers to a process that outlines how an information system is to be used and includes requirements such as routine password updates.
• Information that users provide to managers about an information system’s functionality is called feedback. When users report problems with the system or note a procedure that can be improved, this feedback is used to modify and improve the functionality of the information system.

Operations of Information Systems

Information systems operations refer to how the system is used. This includes data capture, processing, storage, retrieval, and dissemination.

• The process of gathering data from various sources such as customers and financial records, and inputting this data into the system is called data capture.
• Using calculations, manipulations, and analysis to transform data into useful information is called data processing. This includes, for example, the processes of adding the number of products sold during a month and calculating the profits earned from these sales.
• The process of maintaining a system’s data and information in a location that is secure, reliable, and accessible to authorized users is called data storage. Location refers to the specific computer hardware and software used for an information system. These must include the tools and capability to store and manage data, such as databases. Location also refers to the physical building that houses the computer hardware and software for the system. This location must be secure, protecting the computer hardware and software from unauthorized users, as well as environmental threats such as earthquakes, fires, and floods.
• The process of retrieving data from storage is called data retrieval. For example, users should be able to load and review applications, such as spreadsheets, that store data. Users should be able to download this information and use it for authorized purposes, such as research and preparing reports.
• The process of distributing and sharing information such as reports, videos, photographs, and other system outputs to users is called data dissemination.

Impact on an Organization’s Operations

Organizations have come to rely on information systems as a critical resource. A well-developed and maintained system offers important benefits to organizations of all types, including businesses, government agencies, and nonprofit associations. Information systems bring interconnectedness to an organization and provide many benefits, such as improved efficiency, more robust decision-making, enhanced communication processes, increased productivity, and competitive advantages.

Information systems improve efficiency by reducing the time, effort, and costs required to perform tasks and conduct transactional business, which may include processes such as inventory management, filling orders, billing, payment processing, shipping, and returns and refunds. Information systems can make certain tasks easier to perform and can automate others. They can also improve accuracy, making an organization’s data more reliable.

To understand how information systems improve an organization’s transactional business, consider a food order through a delivery service. The customer places an order online, the restaurant’s system processes it, and the app collects the payment. Generally, this process is simple and convenient for the customer and the restaurant. Because the customer entered the order online, the restaurant knows exactly what food they want, which should reduce the chance for errors in the order. Later, the customer can use the system to let the restaurant know about any concerns or to provide a positive review. By using information systems, restaurants and delivery services across the nation have streamlined the process of taking and filling takeout delivery orders, improving customer service while creating a better system of recordkeeping.

Information systems help organizations gather reliable data and make better decisions by providing timely information and the option of developing scenarios, using data in mock situations to examine potential problems or opportunities. The decision-making processes that have been improved by information systems include performance evaluations, risk assessment, budgeting, cost analysis, forecasting, resource allocation, strategic planning, investment analysis, and competitive analysis.

Information systems improve organizational communication by making it easier for colleagues and teams to share information and collaborate. This collaboration is enhanced because these systems enable organizations to work with better and more accurate data. Collaborative business processes positively impacted by information systems include group decision-making, conflict resolution, relationship management, and negotiation.

Consider a team of colleagues who are working together to develop a marketing plan for a new product. By using information systems, each member of the team can access and share data about the product to understand its purpose, target market, and options for marketing. By accessing data on the organization’s previous marketing efforts, they can understand and share information about marketing techniques that have worked well for the organization in the past, as well as those that were not as effective. The information system provides the team with the data and tools they need to fully understand the product and the marketing goals, and gives the team the resources they need to communicate and negotiate to develop a successful marketing plan.

An information system also increases an organization’s productivity by enabling users to automate certain tasks and complete others quickly. They streamline workflows, enabling organizations to develop and adhere to workflow processes that are more efficient, thus reducing errors and waste, such as discarded paper.

These improvements generally result in reduced organizational costs and improved quality of an organization’s operations, including the goods and services produced. Information systems enable organizations to provide better customer service, which typically leads to more satisfied customers, increasing the likelihood that customers will rely on the organization again when they need its goods or services.