Information Systems in Organisations

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What are Information Systems?

Information systems are collections of computers, networks, software, and people who create, store, modify, and distribute data and information in any organization. Computers and information technology (IT) are key ingredients of modern information systems (IS). Information technology includes computing devices such as personal computers, notebook computers, personal digital assistants, mobile phones, and various types of networks that allow computing devices to connect and communicate.

Let us distinguish between information technology (IT) and information systems (IS). It is understood as the artifacts such as computing devices, software, and network devices that constitute the material aspects of IS. However, information systems are constituted by the artifacts of technology as well as the people and organizations that use them.

This distinction between IT and IS is important and has to be .emphasised. It is what people buy and configure and use, whereas IS is how we understand, conceptually, the use of IT in organizations and by people. Here is an example to understand the difference.

Any organization may buy IT components such as printers that are provided to offices for their printing needs. The printer itself is an artifact of IT, which is a tangible object or a tool. Its function is well-defined and limited: it has to print text or images on paper in a manner defined by the user of the printer.

In this example, the printer is part of the IS of the organization and plays a role in preparing reports and memos. It becomes relevant and useful for the organization when it prints properly and in the manner required by the users (and becomes a problem when it cannot print due to some malfunction).

In other words, the role and relevance of the printer are determined by the needs of the organization, the people who are using the IS, and the purpose for which they are using it. In this larger context, the printer is a component of the IS of the organization and helps to serve its goals.

Modern Organisation

The world today consists of many organizations that have collections of people with shared goals. Examples of organizations are private companies that have a goal of making and selling some product or a department in a government office that has some specific goals to fulfill.

The organization is given a name and usually has a physical location by which it is identified. The most important aspect of the organization is that it has within its fold members, that is, people who are engaged in activities that are meant to serve the organization’s purpose.

Organizations have many purposes, ranging from making profits from commercial activities to providing information to citizens about their elected representatives and enabling millions of commuters to use rail services in India.

The following sections discuss some essential features of modern organizations.

IT-Enabled Organisation

The organizations discussed above are modern in the sense that they have built into their structure the elements of information technology (IT) that enable them to function in a manner appropriate to the demands of the environment. This is a fundamental difference between a modern organization and its older, pre-modern incarnation.

Tata Motors, for instance, upon its initiation in 1945 would also have put in place built-in mechanisms to respond to its environment and to function in a manner appropriate to that time. However, what distinguishes Tata Motors’ functioning then and now is the difference in the current use of IT to shape its functioning and responsiveness.

Networked Organisation

Modern organizations function in a world of digital networks in addition to the physical world that was the same for old organizations. The organizations are linked as nodes on the network where they receive and transmit information. Remaining on the network requires sensing and responding to this flow of information.

The digital network consists of the Internet and telecommunication networks that rely on digits (ones and zeros) to carry information across large distances. Sensing the world means frequent monitoring of the news and information that becomes available. This information is in the form of text, audio, or video. Organizations such as Tata Motors have to constantly monitor their digital environment to learn about the markets, their competition, their partners, and the business they operate in.

Responding to the digital information available to organizations is also a modern challenge. Information is widely available instantly and in multiple forms. Responding means taking those actions that will move the organization toward its goals. The response could be in the form of further transfer of information on the digital networks, say, by issuing messages or by taking action in the physical world. Responses are shaped by the context of the situation that the organization operates in and by the nature of the sensed information.

For example, when Tata Motors launched its widely popular Nano car, it anticipated a huge demand for information from its website by prospective customers. Therefore, it designed the site in such a manner that it could handle the rush adequately.

Dispersed Organisation

Another key aspect of many large modern organizations is that they are highly dispersed. Tata Motors, for instance, has operations in many cities in India and other parts of the world. The companies disperse their operations to best meet customer needs or to locate functions where resources such as skilled labor or raw materials are available.

Multinational organizations are well known to seek out new destinations for their operations and also new markets. They can do this owing to laws and facilities that are created by host nations, as it benefits their economy. The challenge for multinational organizations is to fully use the opportunities thus created and manage work and organizational issues in a new environment.

Knowledge Organisation

Modern organizations rely on knowledge workers to a much larger extent than old organizations. These workers differ from blue-collar workers as their work responsibilities involve accessing and dealing with knowledge about the work and the environment, as opposed to repetitive manual labor related to production. Knowledge workers enjoy greater autonomy in their work and the variety of work they have to perform. Consequently, they are better educated and more informed about the business they are working in.

A major function of modern organizations is to process information. They create information about goods and services, accumulate it within the organization, and use it to achieve their goals. Information is like a glue that binds the organization and its functions together. For commercial organizations, it is a key component for competing in the market.

Information is stored, processed, and converted into forms that make it an integral part of an organization. This is referred to as the organization’s knowledge base. Knowledge stored and accessed in this manner enables the organization to drive action and shape its understanding of the world.

Managing Information Systems in Organisations

Managing IS in organizations is a highly challenging and complex task. One reason for this complexity is that neither organizations nor the IS they use remains static over time – both change continuously, and it is the job of the management to ensure that the systems remain useful and relevant for their organizational goals at all times.

Organizations change to respond to the needs of the business and economic environment in which they thrive. They may have to change their services, their products, their internal structure, and how they do their business to meet the challenges of the environment. Organizations also change as their employees gain more experience and learn and adjust to their work environment. The employees change how they work, including how they work with IS, and with this, they change the way processes within organizations are carried out.

One way to understand IS and organizations is to see how these two entities interact. When organizations introduce new IS they expect certain changes to happen. These changes are related to the functions that IS are supposed to perform.

For example, if the IS is supposed to process the monthly payroll for employees, then the organization may have implemented this IS to increase the speed at which the payroll is processed and also the accuracy of the calculations. These are positive changes the organization wants as it has spent time and money in implementing this new IS.

If the changes the organization expects are realized then this may turn out to be a positive outcome for it. For a commercial organization, this may lead to increased profits, which is the very goal of the organization. The new IS could also lead to better employee satisfaction and an improved ability to manage employee benefits and remuneration. These outcomes are what the organization would have planned for and would welcome them.

However, it is also possible that these benefits are not realized. It is possible that the IS may not perform as expected and there is not much improvement either in the organization’s profits or in employee satisfaction.

This possibility could arise if the implementation of the system was not according to the needs of the organization or if it was implemented in a faulty manner and had many problems in delivering its desired results. Or it could be that even though the system was implemented properly, there were employees in the organization who were opposed to its implementation and did not want to use it in an intended manner. Such situations are known to happen and are often referred to as resistance to change in an organization.

IT Interaction Model

First-order and Second-order Effects

The outcome of the implementation of a new IS could be positive or not, and this will depend on the situation in the organization. The outcomes that arise as a direct consequence of the introduction of an IS are known as first-order effects. They are usually visible in organizations in the form of increased speed of processing of data or increased volume of processing and these are what any organization would have intended to gain from the IS that it has implemented.

The first-order effects can be positive or negative depending on how the organization adapts to the new system. In the case of KRCL, for example, the first-order effects are visible in the increased efficiency of moving files, where users moved over 20,000 files in a few months, a number that was much lower using the manual method.

The increased use of the IS could lead to further changes in the organization, not all of which may have been anticipated. In the payroll system example, with the increased use the organization may find that its hiring, transfer, and promotion processes are easier to manage, and further, it can create new and innovative incentive schemes to motivate its employees.

This may improve its ability over time to retain and attract better employees, which would further lead to the organization’s standing in the market and improve its overall profitability. Such effects would not be immediately visible as they may require years to become visible or measurable. These outcomes are known as second-order effects.

In the case of KRCL, the second-order effects arose from the management’s ability to see how and when files moved, and make institutional changes accordingly.

When any particular firm in a competitive industry implements an IS for a particular application and realizes benefits from it, it is quite likely that its competitors will follow its example. This is likely because the competing firms would not want to lose out on an advantage that their competitor has, which could result in losing their market share and profits in the future.

This competitive pressure may force all firms in the industry to adopt such an IS to retain their competitive position. As the adoption of the IS grows in the industry as a whole, it presents opportunities for industry bodies or other agencies to use these facilities.

For example, if a payroll system is used by all firms in an industry located in a given city, the city government may be able to provide special incentives to the employees of these firms to adopt certain practices, such as carpooling to reduce city traffic congestion. The city government could obtain data about where employees live and where they usually work from the IS used by the organizations. Such large-scale consequences of implementing systems are called third-order effects.

Effects of Competition and Organisational Traits

Whether an IS is successful and can meet its intended effects is largely dependent on the organization it is being implemented and on the competitive environment, culture, structure, the processes the organization follows, and the IT infrastructure already in place in the organization.

The competitive environment is the competition that the firm faces in the market in which it operates. Often the decision for adopting an IS is based on what competitors are doing and how one can keep up or get ahead of the competition. In the late 1990s, many firms across the world adopted e-commerce because that was how they could remain competitive in a rapidly changing environment.

Information systems are often driven by a particular competitive strategy that a firm adopts. Firms can often compete by being the lowest-cost provider of a good or service. This is a conscious strategy of the firm and they use it to gain market share from their competitors. In such a situation, IS are often used to further strengthen their competitive position by reducing the cost of their product compared to that of others in the industry.

The culture or work culture of any organization is understood as the shared set of values and beliefs within the organization. The work culture of the organization shapes how the IS is both implemented and used and determines what the eventual outcomes of the systems will be.

For example, many organizations maintain a competitive culture, where even for internal tasks different groups and departments are expected to compete for assignments. This creates a strong competitive culture within the organization. Other organizations may follow a different approach, where departments cooperate in team building to tackle the task assignment.

The implementation of IS in an organization with a competitive culture will have different implications than one in which a cooperative culture exists. In the former, departments or divisions may demand autonomy in using the IS to help them compete better, whereas in the latter a shared, possibly central IS would be welcome.

Effects of Organisational Structure

The structure of an organization is how employees are constituted or grouped within the organization. Many government departments, for instance, are structured as a hierarchy where the highest level person has the greatest authority and those reporting to that person are delegated responsibility and authority. For example, in a government department, the person at the top of the hierarchy would be a Minister, and reporting to him/her would be Secretaries.

Below the Secretaries would be Joint Secretaries and so on, down to the lowest level consisting of office workers. Along with authority, the functions of different people in the hierarchy would also be different, and these functional differences are used to create divisions, departments, and groups within the larger department.

Moreover, many modern organizations use a matrix structure where strict hierarchies are not present. Employees are assigned to groups based on projects and tasks they are working on and a reporting structure is established within the group for the duration of the project. As the project terminates, the employees are reassigned to other groups and divisions within the organization.

For information systems to be successful they have to support the existing structure in the organization. For example, many government departments have implemented workflow systems that enable documents to proceed from person to person within a department. These documents may need modification or approvals, and so they are moved among personnel who may make changes to them or simply approve their content.

The workflow systems move the documents among pre-specified people in the department, according to the structure present in the department. The last person whose approval is usually required for the processing to be complete may be the Minister, and so the system will move the document to the Minister’s location only towards the end. The system thus maintains the authority hierarchy of the organization.

Support for Organisational Processes

Some organizations use information systems to change or challenge the existing hierarchy in place. Workflow systems may alter how employees receive and process documents, thus helping to introduce efficiencies in the process.

All organizations have internal processes in place to get routine work done. A process is a set of steps required to accomplish a task. For example, many organizations that discharge a marketing function have processes by which they receive and record an order.

When an order is received from a customer or placed by a customer, the organization may record the time and date at which it has received, the kind and number of goods ordered by the person who has initiated the order, and the department within the organization, which has to deal with servicing the order. This process is followed for all orders received.

Organizations create and use processes for all the functions that they form, such as materials procurement, manufacturing, storage, distribution, marketing, service, etc. Process steps are carefully designed to achieve the goals of a function. The challenge that most managers face is that of having efficient processes that enable them to achieve their goals in the best possible manner.

Information systems (IS) are widely used in organizations to support processes. In the early years of IS use in organizations, the most that IS did was automate many manual processes. For example, the processes related to keeping accounts in an organization were implemented using the software.

This enabled the people in the accounting department to simply enter the correct data and the system would do the needed calculations. Furthermore, the system could also produce reports on various aspects of the accounts, such as balance statements or cost statements, whenever they were needed.

Today modern organizations use IS both to automate existing processes and to add or eliminate processes that will lead to improved overall functioning. Some IS are available for purchase that have pre-built processes and that can be suitably used by organizations. The challenge is to ensure that processes in the purchased IS suit the needs of the organization.

It is quite likely that when a new system is introduced in an organization, it has to blend with the already existing IT infrastructure of the organization. The IT infrastructure consists of the existing hardware, software, and network technologies that are being used by the organization. The infrastructure also includes the set of policies and practices that the organization follows while using its IT infrastructure. The new IS has to be designed and implemented in such a manner that it functions within the existing IT infrastructure.

For example, if an organization chooses to introduce a new customer relationship management (CRM) system, it has to consider how this system will fit with its existing systems. CRM systems are used widely to maintain details about customers, like their interactions with the organization, their purchasing and payment details, their service needs, and other similar details. These systems help in managing customers as all the information related to customers is maintained in a single place. Such systems are very complex and need careful analysis before they are introduced.

They would have to work with existing systems such as financial systems, marketing and sales systems, e-commerce systems, email system, and many others. How the data in these systems is stored and used has to match that of the new system, and how the new system would use and modify the data in the existing legacy systems also has to be carefully designed.

Choosing and Implementing Information Systems

The task of building and implementing information systems (IS) is a difficult and complex one. One of the first decisions organizations have to make is whether to buy the IS from a vendor or whether to build the IS in-house. For many organizations, the second choice does not exist as they do not have an in-house team of IS professionals who can build software. They have to rely on vendors who can take an existing system product from the market and implement it directly or implement it with some modifications to suit the organization.

The IS implementation process begins with an initiation, or the recognition of a need for an IS. This need arises in the context of a specific problem faced by the organization or a need to address a future problem. The expressed need is usually based on the competitive position of the organization, its current structure and culture as well as its current IT infrastructure.

For example, an organization may consider implementing a CRM system because a close competitor has implemented one. The organization would have to weigh the implications of getting a CRM system in the context of its culture, structure, current processes, and infrastructure.

If the initial need is validated, then this is followed by a detailed process of analysis, where the organization closely examines the specifics of what it could do with such a system, the cost implications, and the effects that the system could provide. This is followed by a detailed assessment of how the system can be integrated with the current systems already in use, what new training is required, and how processes within the organization have to be changed to take advantage of the new system.

The system is then procured and modified for the needs identified. The next step is to introduce the system to the organization’s users through training. If there are problems with the new system, as there would invariably be, these are remedied. The system is then slowly integrated with the routine functions of the organization.

As the new IS are integrated into the processes of the organization, it must invariably change its structure, culture, and function. As the IS are adopted by the people in the organization it begins to have first-order effects, that is, changes in the manner and scope of doing work, and these effects prompt people to imagine how they could further modify the system to better suit their needs. They adjust to the new system along with creating space for more systems.

Information systems and organizations interact in a manner that is dynamic and evolving. Managers in organizations must understand the nature of this interaction and prepare to manage in a changing and emerging context.

Management Information Systems

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