Importance Of Information Systems In Organizations

Published Date: 02 Nov 2017

In the course of this paper, a lot of case studies were used to illustrate the role and importance of information systems, also it views Information systems as a competitive strategy and the other types of strategy information systems use in organizations.

Importantly, an evaluation was made on organizations with case studies on the organization’s information system implementation to find out whether or not systems are actually needed and to understand if the systems yielded the value they were built for.

Keywords: Information systems, sustainability, value, organization, strategy, management.

SECTION A: A critical evaluation on the importance of information systems in organizations.

The role of information systems in organizations is very substantial; it is used to plan and systematize all the organization’s strategic processes. To fully grasp the functionality of information systems in organizations a few terminologies have to be explained and some questions need to be asked and answered: what is data? What is information? What is an organization and what does it do? What is an information system?

Firstly, data has little or no value until processed, according to Hussain (2013), described data as raw facts or observations that are considered to have little or no value until they have been processed and transformed into information.

Secondly, information is processed data, according to SEI; an information system is any combination of information technology and people’s activities that support operations management and decision making. An organization is a structure of related items to pursue collective goals, such as banks, schools, hospitals, shops etc. (SEI, 2007)

Having grasped the concept of these terminologies it can be said that, Systems assist organizations by means of organizing data through a range of tools for data extraction and view data records. They are built to yield value to the organizations, they undermine the functions of organizations and help the organization to automate many of the main operational processes hence providing efficiency and without systems organization cannot function properly.

Organizations comprises of various departments and these departments have sub- divisions or departments that are embedded with different information systems at each level; which all function and communicate with each other to make the organization effective and successful. Below is a structure of an organization with different departments and another is an organizational structure embedded with the different IS.

Organization

Process

Input from environment

Output from environment

Finance

Admin

Customer service

Operations

Marketing

Sales

HR

Manufacturing

Logistics

Fig1- organizational structure

According to system thinking, everything around us is made up of systems and all systems take in input from the environment like raw materials and generate output in terms of product and services; these input are processed according to pre-defined rules. All organizations have environmental factors and these are local, national and international environments. Organizations are in competition and they push and contract each other, they also have boundaries and these boundaries let the organizations have what it needs and meets quality standards; these boundaries can also be from the government, litigation rules and legislative laws.

All output is monitored using feedback method and this helps to check faults and problems of an output; all systems in an organization have control and feedback. Every system has a purpose and that is where the objectives of the organizations come in. Emergent property is the essence of the system, for example the emergent property of the University of Bradford is to educate, transfer knowledge and make changes to business using its graduates.

Kinds of system

Sales/Management

Manufacturing

Accounting

Finance

HR

Groups

Decision support (ESS)

Sales trend forecasting

Operating planning

Budget forecasting

Profit planning

Personal planning

Senior manager

Management level (MIS)

Sales management

Inventory control

Annual budgeting

Capital analysis

Relocation analysis

Middle manager

Knowledge level (KWS)

Sales data collection

Operations data

Accounting sheets

Cash data

Employee data

Data worker

Operational support level (TPS)

Order Processing

Material movement

Account receivable

Cash management

Employee records

Operational manager

Fig2- information system hierarchy

Above is a diagram of information system hierarchy in different sub-division or departments in an organization and the role of these systems in the various departments, all integrated together for the growth and easy processes of the organization. Having explained all these, a system can also be defined as a compilation of organized mechanism which functions together towards collective goal; the purpose of a system is to obtain input and transform these into groups (Hussain, 2008).

The basic importance of information system is to promote a sturdy information management environment and can be lengthened in accordance to an organization’s strategy plan for information processing. In other words it supports the functional areas of business or organizations, the table in fig2 shows that each department has its own information system to match the departments’ specific activities and all the systems are integrated to form ERPs.

Information systems are built to yield value to the organization and to the customers’ as well both tangible and intangible values and if the system isn’t yielding value then it is not fulfilling its purpose (Renkema, 2000). Tangible values are considered as benefits that can be measured directly, usually in monetary terms and intangible value is the benefit that is difficult or impossible to quantify e.g. customer’s satisfaction also the replacement of e-mails from letter writing is another good example of an intangible value (Hussain, 2008).

Fig 3- Value Chain. Source: http://www.thinkfastsolutions.com/valuechain.html

According to an article by Chris Mayers, the author explained that the role of IS focuses more on customers rather than inwards to procedures; services are important as products. For example the cash-out tilts at Tesco serves customers more because it saves time instead of manually packing and calculating the items (Mayers, 1995) a further instance involves Wal-mart’s continual record replacement system; it makes use of sales data acquired at the checkout tilt to convey instructions to replenish products straight to its supplier. The system facilitates Wal-Mart keep low costs while enhancing its products to meet consumer satisfaction (Laudon, 2006).

It is seen with these two examples that the information systems of the two organizations is actually yielding value both tangible and intangible value; because it facilities quick working progress, customer satisfaction, assures the quality of information, work is been run faster and it reduces the number of levels in the organization by providing executives with information to oversee larger number of employees and by enhancing lower-level employees with added decision making ability, hence less people (Laudon, 2006).

IT SUCCESS/FAILURE CASE STUDIES:

As stated previously, if systems are not yielding value or functioning as expected organizations have to eradicate the system or decide which systems are not needed. Analysis and study have shown that most systems do not function and yield expected value, examples are discussed below:

IT FAILURE Case Studies:

The NHS SYSTEM

The record management system was estimated to have cost £12 billion but failed because the key components were behind schedule. It was to link 30,000 GP’s to just about 300 hospitals across the United Kingdom; granting NHS staff with immediate access to the medical records of about 50,000 patients. The project was finally cancelled and marked as a failure in 2011 because of data management issues, Patient confidentiality problems, numerous missed deadlines and multi-sourcing. (The Guardian, 2009)

The FBI VCF SYSTEM FAILURE

Inadequate IT contributed to the sept 11 2001 crisis, the FBI decided to upgrade their database. The new IT project was named VCF- Virtual Case File, a trilogy to enable FBI agents efficiently share data about cases in progress especially terrorist investigation, an evidence management system and a records management system. It cost about $170 Million and was considered a failure in 2005 due to lack of strong blueprint from the outset, repeated changes in specification, multiple management and multi-sourcing. (Washington post, 2006)

The US CENSUS BUREAU: FIELD DATA COLLECTION AUTOMATION (FDCA)

The initial attempt was to do an in-house project field testing in 2004; this verified that the project was more complicated than imagined. Due to the outcome the agency altered the course and hired an exterior supplier to finalize the plan; time was of the essence as it took another year for the request for proposal to be approved.

Issues facing the scheme were persistent even after hiring an external provider to finalize the job. Due to lack caution from the Bureau and unsuccessful establishment in communications with the provider resulted in a substantial amount of misplaced requirements; regardless of prior notice from auditors the issues continue and eventually time ran out.

Once time ran out the Bureau was left with no other option or alternative than to go back to the drawing board and revert their plan; due to the lack of success, a supplementary $3 billion was requested by the Bureau in order to conclude the project using the initial manual procedures. Some other factors of failure were lack of communication between the Bureau and suppliers and underestimation of complexity. (WPF, 2012)

Some successful IT projects:

BLACKBOARD:

Blackboard Learn works together with consumers or registered clients across the world in the development and implementation of technology that helps to enhance every area of education. Blackboard brings all the information that is required for students and teachers to succeed in their various fields of education in one place. It assists individuals all over the globe achieve an unimaginable learning and teaching experience.

There are lots of successful IT projects from integrating students email, easy access to POS systems in shops and stores; although about 70-90% of systems fail to meet the expected value and it takes about 4-5 years to make the money back from systems. Most organisations do not need all the systems they use, in most cases the organizations have to consider fixed, variable and consulting cost. For example it costs a lot of money for schools to subscribe to Blackboard.

DeLone & McLean (2003) modified their model of IS success and value, the model describes what a successful Information System is to attain.

System Quality

Intention to Use

Use

Information Quality

Net Benefits

User Satisfaction

Service Quality

Fig4: IS Success Model. Source: DeLone & McLean 1992

From this model it is safe to deduce that information systems are imperative to organizations because information system put information in the needs of those who need it, provides information and not just data, it maintains the quality of information and removes duplication of effort and activities that do not add value.

In other words, information systems are the basis of innovative knowledge-based goods and services in knowledge financial system and assist organizations in managing their knowledge resources; they provide the possibility for organizations to adapt to change and implement more decentralized structures and more flexible arrangements of employees and management.

According to Sedera et al., 2004 there are measures or components for IS success and a table is shown below to identify these measures:

System Quality

Information Quality

Individual Impact

Organizational Impact

Ease of use

Ease of learning

System Features

User requirement

Integration

Customization

Availability

Usability

Understandability

Relevance

Learning

Awareness

Decision effectiveness

Organizational costs

Staff requirement

Business process

Cost reduction

Improved outputs

Table 1: IS Success Measures/Component. Source: Sedera et al, 2004

Information systems help organizations address economical changes and the business enterprise; it provides organizations with communication and analytic tools for performing trade and controlling businesses on a global scale. Organizations tend to more competitive and efficient by transforming their organization into digital firms where almost all main business procedures and relationship with customers, suppliers, and employees are digitally enabled.

SECTION B: How Sustainability Agendas Can Be Incorporated into an Organization’s Information Based Strategy

Sustainability is potential for long term maintenance therefore sustainability agenda begins with making a commitment incorporating the 3 pillars which are social, environmental and ethical factors into a company’s strategic decision making. Sustainability agenda evaluates how the 3 pillars have an impact on organizations and their stakeholders plus the risks and benefits involved. It asks business or organization to adopt measures to mitigate risks and take advantage of the benefits.

There has been a lot of speculation and emphasis on the impact information systems would have on organizations and their structure, this relationship is increasingly complicated by both the rapidly changing the nature of Information system and increasing environmental turbulence faced by organizations (Leavitt & Whisler, 1958). When it comes to technology there are a lot of risks involved due to rapid pace of innovation, a major risk is landfills/ disposal sites because a lot of technological gadgets have some toxic materials used in making them. Another risk is the energy intensity; thus can cause or create regulatory and cost risks.

A sustainable agenda will best enhance the organizations’ long-term survivability and imbibe the organization with its various stakeholders. The sustainability agenda has to be incorporated into the organizations’ strategies; IS strategy, IT strategy and IM strategy (Michael, 1998).

The organization strategy is the future direction and scope of an organization over the long term, the strategic plan involves the vision, mission objectives and goals of the organization.

Information system strategy achieves advantage for the organization through its configuration of resources within a changing environment to meet the needs of markets and to fulfil stakeholders’ expectations (Johnson, et al, 2011); information system strategy facilitates the flow of information an example is blackboard.

An Information Technology strategy binds all aspect of technology management, including cost management, capital management, hardware and software management, risk management and all other considerations in the enterprise IT environment; executing an IT strategy requires strong IT leadership. Information Technology strategy is making sure technology is available an example is the technology for blackboard; the servers (Hicks, 1990).

Information management strategy treats the information assets of an organization as a resource which must be structured and controlled through managing people, resources and technology resources. Managed together the three resources must support the organizational strategy.

There are five (5) stages of strategy process and they are:

Where are we now?

Where do we want to be?

How are we going to get there?

How do we introduce the changes?

How are we doing?

In other to implement a good sustainable agenda into organizations the organization has to put the five processes mentioned into consideration. Illustrated below is a structure of the strategy process.

Current Status Desired Status

Innovation (Qn£) (Sustainable Use of IT)

Activities & Planning

CASE STUDY OF A SUSTAINABLE AGENDA INCORPORATED IN AN ORGANIZATION: ECOVERSITY (UNIVERSITY OF BRADFORD)

Ecoversity is the university’s programming of embedding sustainable development across everything that is been done in the university.

This project started in 2004/2005; it involves how sustainable developments of formal and informal learning of students are embedded with the organizations strategy. The agenda started small but over time it expanded into a wide scale project or scheme.

Achievement:

The university created its own sector leading sustainable building specification.

Tackled waste hierarchy with 70% recycling onsite rocket composting, furniture and computer re-use and paper reduction.

Reduced carbon emission by 20% through combined heat and power, renewable and building management.

Reduction in single occupancy car commuting by one third in both staff and student through offering a range of options around active travel like introducing or implementing virtual meeting technology.

All courses have to have sustainable projects like computer re-use and use of blackboard to reduce paper usage. In 2005 the university met the requirement of ESD (Education Sustainable Development); ESD was embedded into learning of all students irrespective of disciple.

Based within the schools of EDT (Engineering, Design & Technology), Social and International Studies and Life Sciences collaborated to meet contemporary environmental challenges.

Future Development:

The university tends to do some more work to push some boundaries like:

Reduction on carbon by the year 2020 to an 80% cut from the 2005/2006 emission.

Utilization of EDD; e-metering to save or converse energy.

Phase 3

Whole Institutional Charge

Phase 1

Environmental Management

Phase 2

A move to sustainable Development

Ecoversity has really helped the university facilitate change in ways of management and development; new policies had to be incorporated with the university’s strategy to ensure that sustainability is at the heart of operations and these have helped to significantly reduce the impact the university operations had on the environment (Bradford, 2009).

CASE STUDY 2: MIRCOSOFT GREEN AGENDA

Microsoft is a multinational corporation that deals in software and hardware and started in the late 1980’s; due to environmental issues Microsoft incorporated a green/ sustainable agenda into their corporate strategy.

Its sustainability agenda is as follows:

Accelerating software for climate research.

Focusing on making Microsoft’s data centre more efficient.

Reduce energy that technology uses to save money and lessen environmental impact.

Manage technology environment to become efficient.

Rethink business processes to use technology to reduce paper and travel.

Achievement:

Consolidation of servers with virtualization technologies and optimization of desktop power setting with windows 7 profound impact on power consumption.

Making cities energy smart by cloud computing.

Recycling hardware.

Carbon Neutral (Microsoft, 2013)

Another good example is that of Siemens; according to Siemens sustainability is the guiding principle of the organization. The company aims to create sustainable added value to their corporate strategy. The organization focuses on innovation-driven growth market with long term growth potential to gain value, money, sustainability and customer satisfaction; their environmental portfolio has helped to reduce carbon emission by 40% (Siemens, 2011).

Siemens also gives specific guidelines, processes, procedures and efficient work methods to their external suppliers that help meet sustainability standards as well as increase productivity. They also give sustainability seminars with suppliers in china with the objective and aim of sharpening awareness for sustainability and promote its active implementation in the supply chain (Siemens, 2012).

In 2011, Siemens generated revenue of about €30 million with its environmental portfolio, an amount equal to 40% of the company’s total sales in 2010. It is one of the world’s largest suppliers of eco-friendly technology. The company targeted to cut annual co2 (carbon) emission at its customers but undoubtedly exceeded its target. It has implemented its sustainability strategy along its entire value chain; for example the Siemens gas turbine production facility in North Carolina has set new standards for quality, productivity, sustainability and flexibility. Siemens has also developed the new ICx train for German rail setting new standards for reliability, comfort and not to mention environmental friendliness; it consumes up to 30% less energy per seat than its predecessor (Siemens, 2011).

CONCLUSION:

Cloud computing has been of great help in the sustainability agenda as it reduces the energy consumption on servers, computers and network gears. From the research carried out on Microsoft in reference to virtualization; it is realised that virtualization reduces the number of servers that organizations as well as individuals use, consolidation of several machines can be achieved through virtualization and virtualization also causes a reduction in the need of hardware, space and energy usage.

As technology develops there is a lot of concerns about sustainability, a lot of companies and organizations have resulted in cost savings and pollution reduction schemes based on cooling optimization. Hewlett Packard offers a cooling technology called Dynamic Smart Cooling that uses sensors to control the temperature in specific areas of the data centers.

Raised floors is another way data centers and server rooms use to optimize the cooling needs of the centers; the higher the floor level the more air that can be distributed under the floor and the more air that can be used by the cooling system. The University of Bradford has also implemented this in their server rooms; but this can also hinder day to day operations because the higher the floor the closer one gets to the ceiling and this can be a hindrance for the flow of air over the top of the equipment.

Due to the amount of electricity needed to power and cool data centres many organizations such as google and other technological based organizations are planning to move their data centres to cooler regions like Iceland and the Netherlands, this will help in the reduction of energy and carbon and also help to reduce cost.

As individuals we can also play our respective parts in sustainability by saving energy as best as we can and this includes; switching off the light when not in use, turning off laptops and desktops when done with them, proper asset disposal can eliminate toxic waste from entering landfill systems, recycling old equipments when possible decreases waste and can offer potential cost savings. As humans we must help our environment by making it sustainable.