The Critical Role Of Information Systems Essay

, Research Paper

The Critical Role of Information Systems

Today s information systems are both technical and social in nature. Management must understand the importance of information within the organization. It is management s job to understand how information is collected, processed, and distributed. We are all extremely affected by information systems and must be willing to understand and work with them. Our global economy does not allow us to depend on face to face transactions like in the 1980 s. Today, few managers can ignore the importance and impact of how information is handled by their organization. Information systems play a critical role in today s business organization and society (Laudon 5).

Since the emergence of the global economy, the success of firms today and in the future depends on their ability to operate globally. The American economy depends on imports and exports. Foreign trade, both imports and exports accounts for a little over 25 percent of goods and services produced in the United States, and even more in countries like Japan and Germany. This percentage is currently and will continue to grow in the future (5).

Globalization of the world s industrial economies greatly enhances the value of information to the firm and offers new opportunities to businesses. Today, information systems provide the communication and analytic power that firms need to conduct trades and manage businesses on a global scale. Globalization and information technology also brings new threats to domestic business firms. This is brought on by the customer s ability to shop in a worldwide marketplace, obtaining the price and quality information reliably, 24 hours a day. The worldwide market place brings competition to a higher level than ever before, forcing all businesses to play a part in this global economy. In order to become a profitable player in a worldwide market firms, need powerful information and communication systems (5).

Many countries are experiencing the third economic revolution. These countries include the United States, Japan, Germany and other major industrial powers. This revolution, which is now in progress, is transforming itself into a knowledge and information based service economy. This revolution began at the turn of the century and by 1976 the number of white-collar workers employed in offices surpassed the number of farm workers, service workers, and blue-collar workers employed in manufacturing. Today, most people no longer work in farms or factories, but instead are found in sales, education, health care, banks, insurance firms, computer technology, and law firms. In addition, they provide business services like copying, computer software, or deliveries. These jobs primarily involve working with, distributing, or creating new knowledge and information. In fact, knowledge and information fields now account for 75 percent of the American gross national product (GNP), and nearly 70 percent of the labor force (7).

In a knowledge and information based economy, information technology and systems take on great importance. For instance, information technology constitutes for more than 70 percent of the invested capital in service industries like finance, insurance, and real estate. This means that managers decisions about information technology will be the most common investment decision (7).

Productivity of employees depends greatly on the quality of information systems serving them. Management decisions about information technology are critically important to the survival of a firm. Consider also that the growing power of information technology makes possible new services of great economic value. Consider that credit cards, overnight package delivery, and worldwide reservation systems are examples of services that are based on new information technologies. Information systems have many uses. They not only help you track inventory but also help you make decisions on where to open another store and assist in forecasting how much money it will cost to maintain it (7).

There are six major types of information systems. The first is the Executive Support Systems (ESS). This is a strategic level system that allows senior managers to tackle and address five-year trends, operating plans, budget forecasting, profit planing, and manpower planning. The second is Management Information Systems (MIS). This is a management system and is directed at middle managers in assisting them make decisions on sales management, inventory control, annual budgeting, and capital investment analysis. Another management level system is the Decision Support System (DSS) and is also directed at middle managers. This system is directed for the managers that are crippled by their, Paralysis of Analysis . The fourth and fifth, are knowledge level systems called Knowledge Work Systems (KWS) and Office Automation Systems (OAS) directed at knowledge and data workers. The KWS is a system that assists highly educated professional and technical staff. This system is used as engineering, graphics, and managerial workstations. The OAS is used for word processing, image storage, and electronic calendars. This system is directed toward clerical workers. The last system is an operational level system called Transaction Processing Systems (TPS) directed towards operational personnel and supervisors. This system has many uses. The TPS is used