Importance of information systems
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Published: Mon, 5 Dec 2016
The following paper explains the importance of information systems in E-business and the limitations of information systems on the E-business. The report explicates different information systems used in E-business. Also the report gives the advantages and limitations of E-business and its resultant architectures. The discussion in the paper is limited to the information systems architectures, Advantages, Limitations and does not include the strategies in it. (http://www.aeablogs.org/eakd/files/Zachman_s_Original_1987_Paper.pdf)
An Information system (IS) is a combination of computing systems used in a organisation and the activities performed on them in order to support the organisation and also help in decision making process. In other terms IS is used to “collect, process, store, analyze and disseminate information for specific purpose” (Turban 2008, pg 13). Information systems have large role in the implementation of E-business in the past decade. Due to the increased complexity in the designs and the level of complexity in the systems (Information Technology) used on Online markets are forcing E-business to use some logical architecture of Information systems in order to make the design, functionality and processes look simpler and ease. Information systems has not only provided the level of cost-effective solutions but also helped in terms of human work force i.e., combination of Information technology and human involvement reduced the risk of failures in E-business. For example EBay and Amazon are some of the E-business organizations that are successfully using Information systems in their daily business activities. Information architecture is a physical plan of how the information assets in an organization are arranges which includes the physical designs of the buildings, hardware and other physical assets of the company. Information and Communication Technologies (ICT) is another area of study that helps in processing and transfer of data and information electronically that is used for information system and also provides the infrastructure for intra- and inter-organisational information systems.(http://www.turningcourse.com/ukais/isdefn.pdf) Below shown is the sample figure of the architecture of an organization.
The above figure illustrates the Information infrastructure in an Online Airline Company. The picture also explains how the process in that organization takes in their day to day activities. Whether running an airline or an airport, the right information systems can have a critical impact in the operating costs, operating effectiveness, and customer satisfaction. Some of the potential features of Information Systems are:
- Combine resources and collaborate with each other anytime, anywhere.
- Increase the efficiency and effectiveness of people working in a group in several locations.
- Effective decision-making.
- Reach global market efficiently.
Information Systems in E-business:
In order to understand E-business, we must first learn the definition of E-commerce. It is nothing but buying and selling of products and services over electronic networks (Internet). While E-business focuses on the strategies, that gives more importance and to the functionalities that evolve are determined as potential features of the Information systems in E-business. So, E-commerce is a subset of E-business (Wikipedia, E-business). E-business can also be described as integration of business strategies, processes and technologies. Some of the application areas of E-business are Customer Relationship Management (CRM), Enterprise Resource Planning (ERP), Supply Chain Management (SCM) and Human Resource Management (HRM). The two basic strategies conducted over internet are business to customer (B2C) and business to business (B2B). For an effective and efficient E-business, Information systems are very crucial. Information systems simplifies the business process involved, whether it is the transactions, decision making, customer relationships or the managerial issues (http://springerlink.metapress.com/content/ptgfbtkj67d8wwr6/fulltext.pdf?page=1). Information systems are widely used in E-businesses these days.
Electronic business is a wide area where IS can be used in many processes. IS are used in the transactions, services and strategies in the E-business thus stating them as a backbone for any business process. IS architecture are well understood but the conceptual specification of information systems for business process integration remains an open methodology in terms of managerial perspective. Some of the advantages of E-business are:
- Worldwide Presence: One of the biggest advantages of promoting E-business online is its presence in the global market. For example, IBM was one of the initial companies to adapt E-business in the areas of servicing customers and collaborating with different business organization around the globe. Dell on the other hand has an efficient business selling their products all over the globe through telephone and the Internet.
- Cost Effective Marketing and Promotions: Buy being in the global market on the web enables the organizations to reach their customers at normal prices or even discounted prices as the middle man costs are reduces in this process. Advertising techniques like pay per click advertising ensure that the advertiser only pays for the advertisements that are actually viewed. Affiliate marketing, is another technique where the consumers are directed to the required business sites and in turn these site owners receive compensations which benefits both the parties. Organizations involved in e-business have to use cost effective online advertising strategies to their advantage.
- Developing a Competitive Strategy: By being on the online market, many organizations can analyse their data and develop a strategy to compete with other companies in the market with an effective strategy by using some of the information systems such as ERP.
- Better Customer Service: By using the CRM application has improves the customer service. For example, on visiting a site there is a pop up window that enables chat window. So the customer can clear any doubts that he has. Also by paying the product cost online the customer may not have to leave their house in order to receive to product.
Disadvantages of E-Business
- Sectoral Limitations: One of the major disadvantages of E-business is growth in some sectors such as food industry for example. Customers do not want to buy food products particularly which are unpreserved because they have a fear of contamination of the product. Likewise, some other sectors are large constructional equipments; Automobile and pharmacy are some of the sectors that E-business has limitations.
- You may not receive what you believe you have purchased.
- Security – Some of the ricks that a customer or supplier could face in E-business is the security. The customer faces risks such as financial records, personal privacy and viruses whereas the supplier face risks such as viruses and hackers.
But it is apparent that the advantages of E-business outsmart its limitations. Thus concluding that every business have to change their mode of operation and adopt E-business for its success and global reach.
Information Systems Architecture in E-business:
Information systems architecture is in nothing but the organization development, system structure, technical support, and product delivery mechanisms for a business information system. Information architecture explains the physical design (Hardware, Buildings and software processes) involved in it. E-business uses many information systems in order to improve their business effectively and efficiently.
The information systems used in E-business architecture are explained more detailed in the following report.
Transaction Processing systems(TPS):
TPS supports the monitoring the transactions and also cooling, storing, processing and sub-categorizing the business transactions. The primary mechanism of this system is to provide the information needed by the organization in order to run the business more effectively. Generally information systems are designed within each functional area (Support systems, External Systems) thus increasing its effectiveness though proper integration of information systems. The following diagram explains the flow of information among the function areas within the information systems through integration. Integration is an important component in TPS.
For example An E-business organization such as eBay has many transactions and if an electronic payment is made, the amount must be either both withdrawn from one account and added to the other account. In case of a failure preventing transaction completion, the partially executed transaction must be rolled back by the TPS.
Management Information Systems (MIS):
MIS is the system or method that delivers information needed in an organization. This information is used in decision making processes and other important functional areas. It covers each and every aspect of the organization such as reports, technical information (sales reports, analyst’s reports) in a business to solve problems such as product costs, services and business strategies. Some of the features of MIS are:
- Processes data into information.
- Directed towards middle managers.
- Information achieved is categorized accordingly so that it is easy to analyze the data when used in decision making.
Executive Support Systems (ESS):
ESS is also called as Enterprise Information System (EIS) that is mainly used by the senior level managers. At the top level management EIS supports strategic planning that may sometimes change the nature of the business process. The EIS information is generally Decision support system for the whole organization that helps the senior executives to analyze and monitor the data in the decision making process.
Knowledge Management Systems(KMS):
KMS is a kind of support systems between top level and middle level management. KMS is nothing but additional staff in organizations who act as advisors for senior and middle management. The concept of KMS is to help employees in the company to readily access the documents, information sources and solution.KMS is also responsible for finding new knowledge for the organization and integrating it with existing knowledge.
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