Business Information Systems 2T

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Business Information Systems 2T

Study Guide

Copyright © 2013


All rights reserved; no part of this book may be reproduced in any form or by any means, including photocopying machines, without the written permission of the publisher


MANCOSA – BCom ITM Year 2 1


This course in Business Information Systems is intended to provide a comprehensive guide to choosing the appropriate information system for an organization.

It covers, in detail, the software and hardware technologies which form Information Systems, the activities involved in acquiring and building new Information Systems and the elements of strategy required to manage Information Systems effectively.

The prescribed textbook is:

Bocij P., Greasley A. and Hickie S. (2008). Business Information Systems. 4th Edition. Essex. England: Prentice Hall.

How to Use This Module

This module should be studied using the study guide and the prescribed text book. You should read about the topic that you intend to study in the appropriate section of this Study Guide before you start reading in detail in the prescribed textbook. Ensure that you make your own notes/summaries as you work through both the textbook and this Study Guide.

At the commencement of each section of this Study Guide you will find a list of learning outcomes. These learning outcomes outline the key areas of competence which you should develop as a result of working through the section with its supporting chapters in the prescribed textbook.


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In the study guide a set of icons have been designed to communicate certain study process messages for you to participate.

Important information

Further/additional Reading

Answers/solutions. This is used after a self-evaluation exercise, where you receive information about possible answers to the activity you just completed.

As you work through the study guide, you will come also come across:

 Learning outcomes: list describing what readers should learn through reading the chapters  Think point: a think point asks you to stop and think about an issue. Sometimes you are asked

to apply a concept to your own experience or to think of an example  Activity: An activity asks you to carry specific tasks

 Discussions questions: require longer essay-style answers discussing themes from the chapters

 Self assessment questions: short questions which will test your understanding of the chapters  Examination questions: typical short answer questions which would be encountered in an exam


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Module Outcomes

On completion of the Business Information System module, students should:

 have a thorough understanding of the value, use and management of information, information systems and information technology in order to revitalise business processes, improve managerial decision-making and gain a competitive advantage; and

 be able to apply the various principles and techniques in an integrative way to deal with the core dynamics of information management.

The module outcomes imply that any student that has completed this module should:

 understand the fundamental behaviour and technical concepts of information systems management;

 comprehend how information systems solutions to business problems are developed by the use of fundamental problem-solving and development technologies;

 reflect on the major concepts, developments, and managerial issues in computer technology: hardware, software, telecommunications and database management ;

 be familiar with the major applications of information systems in operations, management, and for a competitive advantage of an enterprise; and

 grasp the major management, global and ethical challenges regarding information systems and technology.


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At the end of this study unit, the learner should be able to:

understand the basic concepts related information systems, including the characteristics of a system and components;

explain the vital role information systems play in business operations and managerial decision-making;

discuss the types of decisions taken at different levels of management;

explain how knowledge management relates to information systems;

explain the different types of system; and


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When beginning the study of the use of information systems (IS) in business, it is important to understand a number of concepts drawn from a variety of different fields. In order to create, improve and manage business information systems (BIS) one must combine an understanding of information, systems concepts, business organisations and information technology (IT).

The purpose of this study unit is to introduce the field of information management. The user will gain a basic understanding of the importance of information systems by analysing how information systems relate to the student as a managerial end user. This study unit will also familiarise the user with the important role of information technology in your organisation. This study unit presents an overview of the basic areas of information systems knowledge needed by business professionals, including the conceptual system components and major types of information systems.

Study Chapters 1 and 2 in Bocij et al. (2008) that deal with an introduction to the foundation of information systems in business.


Information systems form an integral part of modern organisations and businesses. Computer-based IS are now used to support all aspects of an organisation’s normal functions and activities. New technology creates new opportunities for forward-thinking companies. Higher levels of automation, high speed communications and improved access to information can all provide significant benefits to a modern business organisation. However, the benefits of new and emerging technologies can only be realised once they have harnessed and directed towards an organisation’ s goals.


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Information systems play a fundamental and ever-expanding role in all organisations. Therefore, an understanding of the effective and responsible use and management of information systems is important for all managers and other business knowledge workers in today’s global information society. A knowledge worker is a person whose primary work activities include creating, using and distributing information. A high portion of workers employed by organisations can be classified as knowledge workers.

Information systems have become a vital component of successful organisations. It constitutes an essential field of study in business administration and management. Information systems are considered a major functional area in business operations and it can play an important role in the success of an organisation. It integrates accounting, finance, marketing, production and human resource management in the organisation. It can provide the information an organisation needs for

efficient operations, effective managerial decision-making and a competitive advantage.

First, a clear understanding of the difference between efficiency and effectiveness is important. This difference is a basic principle in management and it is also applicable to the field of information systems. Efficiency can be defined as doing things right. It is a measure of the consumption of input resources in producing given system outputs. It focuses on productivity. An efficient data processing system can update thousands of employee records per minute. Historically, data processing systems have supported efficiency by automating routine paperwork processing tasks.

Effectiveness can be defined as doing the right things. This means doing things that need to be done

in order to achieve important business results. An effective information system is therefore a system that achieves its objectives. A database housed on a notebook may enable a sales manager to identify high potential sales prospects and to direct his staff’s attention to take advantage of those prospects.

1.4. BASIC CONCEPTS 1.4.1 Data and Information

Much of a manager’s work involves using information to make decisions and ensuring that information flows through the organisation as efficiently as possible.


MANCOSA – BCom ITM Year 2 9 Data

Data are raw facts or observations, typically about physical phenomena or business transactions. More

specifically, data refers to objective measurements of the attributes (characteristics) of entities, such as today’s date, people, places, things, and events. Information

Information is processed data, which has been placed in a meaningful and useful context for an end

user. Data is subjected to a “value-added” process where its form is aggregated, manipulated, and organised, its content analysed and evaluated and placed in a proper context for a human user. Information, therefore, is data that has been made relevant for a specific person to make decisions. Any report given to a foreman or area manager, remains data until it has been assimilated by them to make decisions.

1.4.2 Data Process

A process used to convert data into information. Examples include summarising, classifying and sorting.

1.4.3 Value of Information

It is often possible to measure the value of information directly. The tangible value of information is often measured in terms of financial value, an example can be the use of inventory information to improve stock control procedures.

The intangible value of information is difficult or impossible to quantify, an example can be attempting to measure the extent to which information can improve decision behaviour.

1.4.4. Sources of Information

Information can be gathered through both formal and informal communication. Formal communications can include reports and accounting statements. Informal communications can include conversations and notes. Formal communication


MANCOSA – BCom ITM Year 2 10 Informal communication.

This describes less well-structured information that is transmitted by informal means such as casual conversations between members of staff. Attributes of Information Quality

A group of characteristics by which the quality of information can be assessed, normally grouped into categories of time, content and form.

Table 1.1: Summary of attributes of information quality

TIME CONTENT FORM ADDITIONAL CHARACTERISTICS Timeliness Accuracy Clarity Confidence in source Currency Relevance Detail Reliability

Frequency completeness Order Appropriateness

Time period Conciseness Presentation Received by correct person Scope Media Sent by correct channels (Bocij et al, 2008: 12)

1.4.5 Knowledge

Knowledge can be thought of as the combined result of a person’s experiences and the information they possess.

Knowledge management (KM) describes a range of activities intended to make sure an organisation

uses its information resources as effectively as possible. Applications of KM include data mining, document image processing and business intelligence. Competitive intelligence is an area of knowledge management concerned with helping organisations to respond effectively to competition by gathering and analysing information about competitors.


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In order for an organisation to function effectively all activities must be planned and monitored by managers according to well-informed decisions. The functions of management include forecasting, planning, organising and coordination and control. One of the key management functions that information systems seek to support is managerial decision making. The way in which managers make decisions and the factors that influence those decisions are often described as decision behaviour.

Decisions can be classified as structured or unstructured or semi-structured.

Structured decisions: situations where the rules and constraints governing are known, e.g., How

would we process a sales order?

Unstructured decisions: complex situations where the rules governing the decision are complicated

or unknown, e.g., what should our distribution channels be?

Semi-structured: Many decisions fall somewhere in between the two extremes, e.g., which foreign

market should we target?


Strategic Level: managers are largely concerned with long term organisational planning. Tactical Level: Managers are largely concerned with medium term planning.

Operational Level: Managers are largely concerned with short term planning and the day- to day -


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Table 1.2: Decision characteristics and management level

Management level Type of decision Timescale Impact of organisation

Frequency of decisions


Unstructured Long Large Infrequent TACTICAL LEVEL medium Medium


structured short small Frequent (Bocij et al, 2008: 20)

1.6 The real world of information systems ACTIVITY

Case 1.1: Letters to the dead and other tales of data dereliction that of (Bocij et al., p14).

This case dramatizes just one of the countless examples of the information that are duplicated or out of date.

Read attentively through the Case 1.1: Letters to the dead and other tales of data dereliction that

of (Bocij et al., p14). Answer the case study questions on p. 15 and read through the paragraph Competitive intelligence on page 29. Also answer Discussion Question 4 on p. 30. Do you think that your organisation could also benefit from such a strategy? After you have analysed the case study and answered the questions, consider the suggested answers given at the end of the study unit.

Additional Reading

Turn to pp. 29-30 of Bocij et al. The summary provides an outline of the major areas of information systems knowledge needed by a managerial end user. This includes foundation concepts of information systems, information system technology, and the application, development and management of information systems.


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Systems theory provides a means of analysing and improving business processes within and between


1.7.1. What is a system?

A system can be defined as a collection of interrelated components that work together towards a collective goal. The function of a system is to receive inputs and transform these into outputs.

1.7.2 What is Input?

Input is the raw materials for a process that will produce a particular output

1.7.3 What is process?

Inputs are turned into outputs by a transformation process.

1.7.4 What is output?

A product that is created by a system.

Figure 1.1 illustrates the organisation of the input –process-output model.

(Source: Bocij et al, 2008:36)

When these components are added to the basic model of the system, it can be illustrated in Figure 1.2 as follows

Figure 1.2: A generic model of a system

(Source: Bocij et al, 2008:37) 1.7.5 What is feedback?

Feedback provides information on the performance of a system which can be used to adjust its behaviour.


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1.7.6 What is control mechanism?

If alterations are needed to the system, adjustments are made by a control mechanism.

In business there are familiar phrases such as “I am not part of the system”, “The system is down”,

“He has a good system”, or “Do not interfere with the system”. Phrases like these suggest that

almost everything can be a system. However, the term “system” is often misunderstood because the value and applicability of the systems theory to daily life is underestimated. More specifically, in the field of information systems, the value of the systems theory to solve information management problems is underestimated.

Additional reading

Turn to p 37 of Bocij et al., read the paragraph Systems Components and make sure you can explain all the different system components. Included are the definition of a system, input, processing, output, feedback, control, environment, boundary, subsystems and the interrelations between the components. Take note of Figure 2.1 (p.36) and Figure 2.2 (p.37) for graphical displays of the various system concepts.

Other system concepts that are important to your body of knowledge include the following:

Closed System: A system that does not interact with other systems or its environment, is a

closed system. An example of a closed system is a battery that runs down after a while. This phenomenon of decay is called entropy.

Open System: A system that interacts with other systems in its environment is called an open

system (connected to its environment by exchanges of inputs and outputs).

Adaptive System: A system that has the ability to change itself or its environment in order to

survive is called an adaptive system.

Cybernetic System: A system that includes feedback and control components. These systems

are self-monitoring and self-regulating.

Consider an example that will explain most of the system concepts. A medium sized furniture manufacturing business is used as an example.


MANCOSA – BCom ITM Year 2 15 The organisation is supposed to have a common purpose or goal, for example to make a profit. Furthermore, it consists of various functional departments, such as the Human Resource, Production (manufacturing), Sales, Marketing, and Financial, Research and Development and Information Technology departments. It is important that all the subsystems of this organisation (functional departments), work together to ensure that the organisation attains the common goal. The different subsystems (departments) are interrelated to each other and form a bigger system, in this case the manufacturing business. The business uses inputs (raw materials, labour, capital) and transforms or processes these (manufacturing process) into outputs (chairs, tables). The system, and subsystems, is influenced by the internal environment (business policies, productivity, organisational culture, strikes) and the external environment (government policies and the economic, socio-economical, political and technological environment). There is also a feedback and control process built into the manufacturing process.

It is vital that all the departments work together to attain the common goal of the organisation. Each department (sub-system) may act in the best possible way as a sales system, but the sum of their actions may not be optimal for the organisation. This is the problem of sub-optimisation. An aggressive market strategy could lead to more sales, but if product quality (production) is not of the necessary standard, the organisation will over the long-term fail to be optimal and sales could drop. Therefore, the various subsystems must be aligned to achieve the goals of the system. If the subsystems complement each other, their effectiveness considered collectively as a system may be greater than the sum of the effectiveness of each subsystem considered separately. This phenomenon is called synergism. The effect of synergism must be understood and fostered because it can give an organisation a competitive edge.

Although the systems theory is concerned with a holistic approach, it does not neglect the components of the subsystems. It recognises the activities of the components while also considering the activity of the whole system that contains it. That is important, because the system is only as strong as the individual entities being put together. The weakest link in the chain determines the strength.



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A business information system is a group of interrelated components that work collectively to carry out input, processing, output, storage and control actions in order to convert data into information products that can be used to support forecasting, planning, control, coordination, decision making and operational activities in an organisation (Bocij et al, 2008).


People resources: People resources include the users of an information system and those who

develop, maintain and operate the system.

Hardware resources: The term hardware resources refers to all types of machines, not just computer


Software resources: In the same way, the term software resources do not only refer to computer

programs and the media on which they are stored. The term can also be used to describe the procedures used by people.

Communications resources: Resources are also required to enable different systems to transfer data. Data resources: Data resources describe all of the data that an organisation has access to, regardless

of its form.

Further reading

Read paragraph on Business Information System Resources (Bocij et al., p.43) which provides information on information systems resources and products, which include people, hardware, software, data and network resources.


The components of an Information System are as follows:

• Input device: Hardware used to enter data, information or instructions into a computer-based information system.

• Central processing unit (CPU): The processor found in a computer system that controls all of the computer’s main functions and enables users to execute programs or process data.

• Memory: A temporary means of storing data awaiting processing, instructions used to process data or control the computer system, and data or information that has been processed.

• Storage devices: A permanent means of storing data and programs until they are required.


MANCOSA – BCom ITM Year 2 17 Figure 1.3

(Source: Bocij et al, 2008:67)

Further reading

For further reading on Components of an information system: Turn to pp.66-68 of Bocij et al.


Is there a difference between data and information? If so, what is the difference? Give examples in your organisation to motivate your answer.

Suggested answer


MANCOSA – BCom ITM Year 2 18 The terms data and information are often used interchangeably. Data is raw facts or observations, typically about physical phenomena or business transactions. More specifically, data refers to objective measurements of the attributes (characteristics) of entities, such as people, places, things, and events. Information is processed data, which has been placed in a meaningful and useful context for an end user. Data is subjected to a “value-added” process where its form is aggregated, manipulated, and organised, its content analysed and evaluated and placed in a proper context for a human user. Information, therefore, is data that has been made relevant for a specific person to make decisions. Any report given to a foreman or area manager, remains data until it has been assimilated by them to make decisions. Note, therefore, that one person's information may be another person's data.

The value of information can be directly linked to how it helps decision-makers achieve the organisation’s goals and objectives. For example, the value of information can be measured by the time required to make a decision or by the increased profits of an organisation. Consider a market forecast that predicts a high demand for a new product. If market forecast information is used to develop the new product and the organisation makes an additional profit of one million Rand, the value of the information to the organisation is one million Rand. However, it is in most cases difficult to quantify the value of information to the organisation in monetary terms. There are also intangible gains, such as a growth in market share, lower risk, better safety and a competitive advantage.


Managers must answer the following questions regarding the gathering, processing and dissemination of data/information in an organisation:

Do the team members know what happens to the data he or she gathered?

Does anyone use the data in the decision making or problem solving process?

Is there any feedback regarding the value and possible use of the data?

Do the team members think that the gathering of data is worth the input?

Does the organisation get the right information at the right time?


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1.11 Applications of Business Information systems

The information or data processing activities that occur in an information system include the input of data resources, processing of data into information, output of information products, storage of data resources and the control of system performance.

1.12 Recognising Business information systems

Managers should be able to recognise the fundamental components of information systems encountered in the real world. This means that managers should be able to identify the people, hardware, software and data resources they use, the types of information products they produce and the way they perform input, processing, output, storage and control activities.

To fully understand a business information system, one needs to analyse it by identifying the resources the information system uses, the information processing activities it performs, and the information products it produces. This will enable managers to identify ways to improve the components and thus the performance of the information system. Information systems form part of the total system in an organisation with a common goal, for instance to maximise shareholder wealth. Therefore, a basic understanding of the systems theory and its application to business information systems is vital to any organisation.


Consider the discussion Questions on p. 60 of Bocij et al. and answer questions 4 and 5.


This study unit has given an overview of the basic concepts of information system. It has also shown that much of a manager’s work involves making decision about the best way to achieve the organisation’s objectives. Further, the quality of a manager’s decisions depends upon the quality of the information he or she has access to. Since information influences almost every activity within an organisation, it is an important asset and must be treated accordingly.

Information systems have proved to be important subsystems in any organisation because it contri-butes to the common goal of the organisation. An information system uses the resources of people, hardware, and software to perform input, processing, output, storage, and control activities that convert data resources into information products.


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Suggested answers

Case Study 1.1: Letters to the dead and other tales of data dereliction

1. The case study identifies a number of problems with the way companies store and manages information. Using your own words, identify and describe these problems.

In general, the problems described in the case study point to deficiencies in the data/information management processes and systems used by companies. This is not necessarily a technology issue; it is more to do with the management of information resources and the use of appropriate policies and procedures. Some examples that support this argument are as follows:

 Lazy sales staff’ entering data incorrectly. Staff should be monitored correctly and procedures should be in place to check the accuracy of data as it is entered.

 Advances in technology mean greater quantities of information are available but managers do not organise it properly – information overload?

 There is a tendency to collect large quantities of data without regard for whether or not it is needed/useful. Mention of ‘information management professionals’ suggests that these experts should be involved in (a) deciding what information to collect, (b) making sure it is accurate and (c) storing it in an organised manner.

 Duplication of information caused by allowing individual departments to keep their own copies of records, rather than keeping records centrally.

 Companies do not know what information they have and how it is being used! Information resources cannot be managed correctly if no one knows what they are.

Inaccurate assumptions are being made about the meaning of information (e.g. sales spike), suggesting that it is not being processed/analysed correctly.

 Company systems are unsuitable for handling companies’ data processing needs (e.g. unable to hold separate addresses for joint account holders). Effective management should/would have identified and corrected such a problem before it became an issue.

 Data/information management processes and systems are unable to deal with new requirements (e.g. delivering information more quickly and handling unstructured data).


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2. According to the case study, Bill Gates has claimed that almost a third of information workers’ time is spent searching for data. Why do you think this is?

This question is intended to introduce the notion of information overload in the context of management. Following are some of the reasons why people spend a great deal of time searching for information:

 Too much irrelevant information exists; the required information is ‘buried’.  Time is spent finding out if the information needed actually exists.

 Information is presented in a way that is difficult to understand, so it takes longer to search for and identify the required information.

 Information is badly organised, making it harder to search quickly.

 Information is spread out across a number of locations (e.g. across departments).  Information is stored in different formats or presented in different ways.

3. What are some of the consequences of relying on inaccurate information? Refer to the case study in your answer.


Some examples drawn from the case study:

Negative publicity, loss of customer satisfaction: The families of deceased people would have been

distressed by receiving ‘Dear Mr. Deceased’ letters. Distress also caused by ‘pension leaver’ letters.

Lost business, cost of cleaning data: Listing customers as astronauts would cause insurance company

to lose potential sales. Database records need to be corrected.

Impaired productivity, loss of customer satisfaction. The case study points out that relying on inaccurate

information ‘…damages efficiency; at worst it can destroy relationships and hamper efforts in crucial areas such as fighting fraud’.

Public safety, damage to company image, damages: The safety of some people might be jeopardized

(letter containing the new address of a wife sent to her violent husband); the company would have suffered negative publicity and was forced to pay cost of rehousing the wife.


MANCOSA – BCom ITM Year 2 22 Discussion question 4.

4. ‘Knowledge management is nothing new, it is merely a repackaging of existing information management techniques’. Discuss.

A suggested structure for this answer is:  Definition of knowledge management (KM).

 Explanation of concept of tacit and explicit knowledge.

 Summary of what is new about KM, i.e. focus on making use of information (applying intelligence that is part of managers’ experience and skill set). Use examples of applications (e.g. Hansen et al., 1999 article in chapter references). It is a structured rather than ad hoc approach to capturing and disseminating knowledge.

 Assess whether or not it is repackaging using examples of applications and practice. For example, information on best practice has always been shared, with or without the KM label.  To conclude, discuss whether or not KM has caused a change in practice or change in

perspective. A combination of the two, but mainly in perspective.

Discussion questions on page 60

4. Discuss the following statement with reference to how an organisation should react to the Internet. ‘Is the Internet a typhoon force, a ten times force, or is it a bit of wind? Or is it a force

that fundamentally alters our business?’ (Andy Grove, Chairman of Intel).

Suggested approach:

This statement is useful in that it indicates that the impact of the Internet will vary according to the type of business that an organisation is in. Students should look at a range of industries from those where the impact is high, e.g. media and information services to those where the impact is low, e.g. retailer. Examples can be taken from those that have reacted, e.g. easyJet or General Electric in comparison to those that haven’t. The analogy may also be apt, since the Internet phenomenon may be transitory. This can also be considered.


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5. ‘Enterprise resource planning software is likely to replace packages used in a single area of the organisation, such as accounting, logistics, production and marketing.’ Discuss.


ERP is likely to be restricted to larger organisations due to the cost of customisation of the software for the client. Mass-produced and, thus, cheaper, off-the-shelf packages are likely to be the most suitable option for the small organisation. Enterprise resource planning (ERP) software is a single system that gives applications for all the major business functions discussed in this chapter such as production, distribution, marketing and sales, finance and human resources management.

It is normally purchased as an off-the-shelf package, with modules for each major business process or business function that are tailored by a consultant. A single package typically replaces many different previous packages.

The benefits of this approach include:

 reduced cost of buying from a single supplier;

 better transfer of information within the organisation since all the modules of the system are compatible;

 simplified support and maintenance through a single supplier;  use of ‘best-of-breed solutions’ employed by other companies.

The main disadvantage of the use of ERP systems seems to be the high costs charged by suppliers due to the demand for this type of system. This high demand has also given rise to skills shortages. The other disadvantage of ERP systems is shared with all off-the-shelf systems, namely, that the business often has to change its processes or way of working in order to fit the way the software works. This may not present a problem if a company is looking to reengineer its processes since, then, the ERP software can provide a framework.

Owing to the high cost of ERP solutions, only large companies can afford the cost of the software and the consultants, which will often be measured in millions of pounds. Smaller companies can take advantage of the features of integrated accounting packages that now provide modules beyond those of the basic accounting package.


MANCOSA – BCom ITM Year 2 24 In summary, there is overwhelming evidence that ERP will replace functional applications in large organisations. In smaller organisations, the role of ERP applications is likely to be assumed by integrated accounting packages with similar functions.


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At the end of this study unit, the learner should be able to:

 demonstrate knowledge of the trends and developments in microcomputer, midrange, and mainframe computer systems;

 understand the basic computer hardware concepts, as well as the major types of technologies used in peripheral services for computer input, output, and storage;

 identify the major types and uses of computer peripherals;  identify several major types of system and application software;  explain the benefits and features of network computer systems


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The study unit deals with a managerial overview of computer hardware by reviewing the basic types of computer systems and the major types of computer peripheral devices used for input, output, and storage. An overview will also be given on computer software by analysing the functions, benefits and the limitations of major types of systems and application software packages.

Study Chapter 3 and 4 in Bocij et al. (2008) that deal with the managerial overview of computer hardware and software.


Peripherals is the generic name for all input/output equipment and secondary storage devices that

depend on direct connections or Telecommunications links to the central processing unit (CPU) of a computer system. Thus, all peripherals are on-line devices, that is, separate from, but can be electronically connected to and controlled by a CPU. This is the opposite of off-line devices, which are separate from and not under the control of the CPU.


2.3.1 Input devices: Hardware used to enter data, information or instructions into a computer-based

information system.

2.3.2 Output devices: translate the results of processing – output into a human readable form.

These devices include:

 pointing devices such as electronic mice, trackballs, pointing sticks and touch-sensitive screens;  pen-based computing such as light pens or digitisers;

 video and multimedia input and video output;

 printed output by means of printers and plotters to produce permanent (hard copy) output;  voice recognition and voice response; and


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A Storage device is a permanent means of storing data and programmes until they are required.

Storage devices of computers can be divided into:

1. Primary storage devices: The primary storage of most modern computers consists of the


• Volatile memory: Anything held in memory is lost once the power to the computer system is switched off.

• Non-volatile memory: Non-volatile memory retains its contents until altered or erased.

• Random access memory (RAM): RAM is used as volatile, working storage by a computer, holding instructions and data that are waiting to be processed.

• Read-only memory (ROM): The contents of ROM are fixed and cannot be altered. ROM is non-volatile.

• EPROM (erasable programmable read-only memory): This is a form of ROM memory that retains its contents until changed using a special device known as a ‘burner’.

• Cache memory: Used to improve performance by anticipating the data and instructions needed by the processor. The required data is retrieved and held in the cache, ready to be transferred directly to the processor when required.

2. Secondary storage devices

Secondary storage devices include the following:

• Floppy disk: Consists of a plastic disk, coated with a magnetic covering and enclosed within a rigid plastic case.

• Hard disk: A magnetic medium that stores data upon a number of rigid platters that are rotated at very high speeds.

• Personal video recorder (PVR): A PVR is a sophisticated video recorder that uses a hard disk drive to store programs. The use of a hard disk drive allows a PVR to offer a range of sophisticated features, such as the ability to ‘pause’ live broadcasts.

• Flash drive: A flash drive is a portable storage device that connects to a computer via a standard USB port. Flash drives have no moving parts, so are reliable and robust.


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Additional Reading:

For further reading on Primary and Secondary storage devices, turn to pp. 95-100 of Bocij et al.


Analyse the Case 3.2 Did IT work? How Wall Street is eradicating down time (Bocij et al., p. 106). Analyse the case and answer the questions.

After answering the questions, refer to the suggested answers at the end of the study unit.

2.5 COMPONENTS OF A COMPUTER SYSTEM 2.5.1 What is a Computer System?

A computer system is a number of interrelated components including hardware and software that work together with the aim of converting data into information. The components of a computer system include hardware and software.

2.5.2 Computer Hardware

What is Computer Hardware?

Computer hardware includes the physical components of a computer system: input devices, memory, central processing unit, output devices and storage devices.

• Input devices. Hardware used to enter data, information or instructions into a computer-based information system.

• Central Processing Unit (CPU): The processor found in a computer system that controls all the computer’s main functions and enables users to execute programs or process data.

• Memory: a temporary means of storing data awaiting processing, instructions used to process data or control the computer systems and data or information that has been processed.

• Output devices: translate the results of processing – output into a human readable form. • Storage devices: a permanent means of storing data and programs until they are required.


MANCOSA – BCom ITM Year 2 30

Figure 2.1

(Source: Bocij et al, 2008:67)

Further reading

Read on Components of a computer system: Turn to pp.66-68 of Bocij et al.


There are several major categories of computer systems with a variety of characteristics and capabilities. Thus, computer systems are typically classified as:

 Mainframe computers: powerful computers used for large-scale data processing

 Minicomputers computers: computers that offer an intermediate stage between the power and mainframe systems and the relatively low cost of microcomputer systems.

 Microcomputers: computers that are considered less powerful than minicomputers and mainframes, but are more flexible and relatively inexpensive to purchase.

These categories are attempts to describe the relative computing power provided by different computing platforms or types of computer. Therefore, they are not precise classifications.


MANCOSA – BCom ITM Year 2 31 Some experts predict the merging or disappearance of several computer categories. They feel that many midrange and mainframe systems have been made obsolete by the power and versatility of

client/server networks of microcomputers and servers. Most recently, some industry experts have

predicted that the emergence of network computers and information appliances for applications on the Internet and corporate intranets will replace many personal computers, especially in large organisations and in the home computer market.


To understand better the paragraph above on obsolete computer systems, attempt Discussion Question 3 p. 116 of Bocij et al.

Computer systems are most commonly categorised according to size, processing speed and storage capacity.

Further reading

Turn to the paragraph Major categories of computers (Bocij et al., p. 68), which gives a short overview of the various types of computers, (Figure 3.3 on p. 68).

Figure 2.2: Different forms of computer system.


MANCOSA – BCom ITM Year 2 32


Network computer systems are very important in organisations.

The benefits of network computer systems are:

 Networked computer systems allow end users to communicate electronically and share the use of hardware, software, and data resources.

 Networks of small computers have become a major alternative to the use of larger computer systems, as many organisations downsize their computing platforms. For example, a local area network (LAN) of microcomputers can replace the use of groups of end user terminals connected to a minicomputer or mainframe.

The features of networked computer applications include:

 Networked microcomputer systems are used in place of minicomputers and mainframes;  Are easy to install, use, and maintain; and provide a more efficient, flexible, lower-cost

alternative to large computer systems for many applications; and

 Can share computer power, software, and databases required in time-sharing and resource-sharing applications.

 Networked computers also support work group computing (communicate electronically and share data on joint projects); and

 Are used in transaction processing applications.

Additional Reading

Network computer systems form a vital part of today’s information systems. Increasingly, computers are being networked or interconnected by Telecommunications links with other computer systems. Further reading: Turn to p. 74 of Bocij et al. and read through the paragraph Network Computers.


MANCOSA – BCom ITM Year 2 33


The mini case study on p. 75 of Bocij et al., relates how Panalpina uses network computers to

reduce costs, please study the paragraph and make notes. Then analyse Case 3.1 “When Systems converge but people don’t” and answer the questions on p.81 as well as Essay Question 1

on p. 116. Take note of the use of computer systems.


Work through the following exercises on network computing. Refer to Discussion Question 1 on p 115 of Bocij et al.

Do you think that client/server networks make minicomputers and mainframe computers obsolete? Explain. --- MANAGEMENT RESPONSIBILITY

Managers may argue that it is unnecessary to be an expert on information system technology. Computer hardware and software are vital resources to support business operations, managerial decision making and strategic advantage. Therefore, you need to understand the basic terminology and concepts which are part of the basic literacy of business people and managers in an information era. The responsibility as a manager would be to manage the end users and the effective utilisation of computer technology in the work environment.


MANCOSA – BCom ITM Year 2 34 Additional reading

It is recommended that you refer on a regular basis to the Glossary page for short descriptions of most of the relevant terms as follows. You can also discuss the terms with a computer expert at work or with fellow students.

Refer to the glossary page for the following terms:  Application generator

 Artificial intelligence  Batch processing  Business ethics

 Business Information Systems  Business Process Reengineering  Chip theft

 Client/Server model  Competitive Advantage  Computer criminals  Cost of ownership  Critical Success Factors  Cross licensing agreement  Database

 Data warehouse

 Decision Support Systems  Electronic Data Interchange  Electronic Commerce

 Executive Information Systems  Expert Systems

 Extranet  Groupware  Information  Intelligent Agent


MANCOSA – BCom ITM Year 2 35  Local Area Network

 Management Information System  Neural Networks

 Online Analytical Processing  Prototyping

 Systems analysis


Software can be defined as a series of detailed instructions that control the operation of a computer system. software exists as programmes that are developed by computer


Systems software: this form of software manages and controls the operation of the computer system as it performs tasks on behalf of the user.

Application software directs the processing required for a particular use, or application, that you as an end user want to accomplish. Application software can be divided into two

categories, general purpose programs and application-specific programmes. The various types of application software for end users are discussed in this study unit. General purpose pro-grammes are those that perform common information processing jobs for end users. Examples are word processing programmes, spreadsheets programmes, database management

programmes, integrated packages, and graphics programmes. Application-specific programmes are programmes that support specific applications of end users. Major categories of

application-specific programmes include business application programmes, scientific application programmes, and other application programmes.

The major software trends important to managerial end users are:

 there is a trend away from custom-designed one-of-a-kind programs developed by the professional programmers or end users of an organisation, and

 there is, however, a trend towards the use of “off-the-shelf” software packages acquired by end users from software vendors.


MANCOSA – BCom ITM Year 2 36  There is also a trend towards the use of user-friendly fourth-generation programming languages.

That makes it easier for end users to develop their own applications

You have to take note of these trends in order to use the available technology to the benefit of the organisation.

Additional Reading

For further reading on software: Turn to p. 122-123 of Bocij et al. (Chapter 4).


General-purpose applications are programmes that can be used to carry a wide range of common tasks, for e.g a word processor. It is often referred as productivity software as it helps to improve the efficiency of an individual.

General-purpose software commonly used by end users include:  Software Suites and Integrated Packages ;

 Web-Browsers;  Electronic Mail;

 Word Processing and Desktop Publishing Packages;  Electronic Spreadsheets;

 Database Management Packages;

 Presentation Graphics and Multimedia Packages;  Personal Information Managers;

 Groupware and

 Other business Software.


Application-specific software comprises programs intended to serve a specific purpose such as software in the accounting and marketing function.


MANCOSA – BCom ITM Year 2 37 Further reading

Turn to Bocij et al. p. 125 and read through the paragraph Application Software. The concepts

General-Purpose Application Programmes and Application-Specific Software Packages are



Which application software (also known as software packages) are you familiar with? Do you use it to support your work tasks? Explain.

--- Do you think that these software packages are helpful tools?


Suggested answers

Case Study 3.1: When systems converge but people don’t

1. In brief, what is VoIP? If necessary, use the Internet to carry out any research you need.

VoIP stands for Voice over Internet Protocol. It is a service that is used for transmitting telephone calls over a network, such as the Internet. In order to use VoIP, both users must be connected to the network and both must have an appropriate handset (or a microphone and speakers) and a computer running a suitable software. The very latest systems do not need a computer; they can be connected directly to a router and use wireless handsets.


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2. What are the benefits of VoIP to a business organisation? Refer to the case study in your answer.

 The case study lists a number of significant business benefits as follows:

 Replacing two networks with one reduces the amount of hardware needed to be bought and maintained. In turn, this reduces other costs such as training.

 IP-based phone networks are easier to manage, resulting in time and cost savings.  Call costs are reduced.

 The system can be the basis for new applications e.g. unified messaging.

3. Can you think of any disadvantages associated with this technology?

Some major disadvantages:

 The company becomes reliant on its network system; any failure also means the loss of telephone communications.

 Staff needs to be trained to handle new technologies.

 Adopting this approach can result in conflict between departments (IT and telecoms).

Case Study 3.2 Did IT work? How Wall Street is eradicating downtime

1. Suggest at least three ways virtual computing can help an organisation to reduce costs. Some ways in which virtualisation can reduce costs:

 Virtual machines can be created to emulate legacy systems, removing the need to maintain outdated equipment. Since a virtual machine often runs more quickly than the legacy system being emulated, it can remove the need to migrate to a new, faster system.

 Developers can programme and test applications on several operating systems using only a single PC.

 Snapshots make it quick and easy to deploy new machines and install updates.

 Virtual machines can make use of spare capacity, reducing the need to buy additional hardware.


MANCOSA – BCom ITM Year 2 39  New software can be tested on a virtual machine before being installed on the company’s network. This reduces the possibility of crashing the network and makes it easier to determine the source/cause of any problems.

2. The case study suggests that ‘…when you focus on recovery: the hardware and software you

buy becomes less important.’ How true is this?

 This is only true to the extent that virtual machines can be created using almost any kind of hardware/software platform. However, the following points should be considered:

 Even if emphasis is placed on recovery, hardware and software must still be reliable. Poor quality hardware or buggy software, for example, may cause repeated crashes.

 The text makes it clear that virtual machines run more efficiently when multi-core processors are used. Hardware that is slow or inefficient may make virtual machines unusable. After all, the case study states, ‘If a system is on, but running slowly, it is, in effect, “down”’.

The views of Steve Randich are based on a faulty assumption: ‘…robustness no longer needs to be

engineered, at great expense, into the application or its operating system’. Robustness describes

the ability of a system to carry on working in spite of errors, partial failures or abnormal conditions. In terms of software, this usually means that an application should be able to cope with erroneous data and other, unexpected problems.

 An unstable operating system that crashes frequently will not become more reliable because it runs on a virtual machine – it will remain unreliable and will continue to crash frequently. In this way, it is clear that the software you buy is important.

3. In your own words, explain how virtual machines can ‘…be moved around, backed up, or

diverted to adjacent or remote systems’.

Two features of virtualisation technology allow these actions:

 Virtual machines allow the use of snapshots – disk files containing an exact image of the virtual machine’s memory and the contents of its hard disk at a specific point in time. These files can be used as backups and are easily copied to other machines.

 Software such as VMWare’s Distribution Resource Scheduler (DRS) constantly monitors available computing resources and can automatically set up new VMs using spare resources if it detects a need, such as a sudden increase in web traffic.


MANCOSA – BCom ITM Year 2 40

Discussion questions

1. Will network computers and clients make personal computers obsolete? Using relevant examples, make a case for one side of this argument.

Some of the arguments that might be discussed are given below:

 Network computers are the point at which computer technology and television converge. As interactive television becomes more popular, consumers will begin to see network computers in the same way as video recorders and satellite receivers.

 Compared to a typical personal computer, network computers have limited functionality.

 Since there is sometimes only a small difference in cost, consumers are likely to opt for a more flexible and more powerful personal computer. This argument also applies to thin clients.

 To date, network computers have failed to make an impression on the consumer electronics market. They are still considered expensive luxuries and have yet to deliver a ‘killer app’.

 Network computers are able to deliver some services more effectively and at lower costs than other methods. Video telephony, for example, is awkward and expensive to provide via a personal computer. Such applications will ensure the success of network computers. This argument also applies to thin clients.

 As technology progresses, it becomes possible to build dedicated devices that offer levels of power and sophistication similar to that of a personal computer. Since these devices are often multi-functional and are relatively cheap to buy, they are likely to replace the need for a personal computer for many people. A good example is the mobile telephone; recent models provide the ability to transmit pictures, access the Internet, manage appointments and so on. Although the primary purpose of the telephone is communication, it can also serve other purposes, such as allowing users to play games or access information services.


MANCOSA – BCom ITM Year 2 41

3. Despite still being functional, an obsolete computer system is of little value to a business organisation. Organisations should continually upgrade or replace systems in order to keep abreast of changes in technology. Make a case in favour of or against this argument.

Although this is a relatively complex area, students might consider some of the following points:

 All organisations undertake a cycle of improvement and replacement for their computer systems. In a college or university, for example, all of the institution’s hardware and software might be replaced or renewed during a five-year cycle. In view of this, it could be said that already organisations ‘…continually upgrade or replace systems in order to keep abreast of changes in technology’.

 Changing an existing system or adopting a new one carries a number of risks; for example, a large financial outlay may be required to purchase the new system. Such risks are unacceptable when the potential gains to be made are unclear or uncertain.

 Although the hardware and software used by an organisation may be obsolete, it would be difficult to prove that obsolescence automatically renders a given system worthless. A fully functional system, no matter how old, will have an intrinsic value to an organisation. Consider the following: what expense would be involved in carrying out a given set of tasks without the system? If the system performs such tasks more quickly, more accurately or less expensively, then it has a clear, quantifiable value.

 Although a new system may carry out tasks more quickly or more accurately than an existing system, it may still not be viable in financial terms. The costs associated with implementation may be so high that they outweigh any benefits gained by adopting the system.

 New hardware and software often allow an organisation to maximise the use of its data resources. The ability to use data-mining software, for example, might allow the organisation to realise cost savings or identify new products and new markets.


MANCOSA – BCom ITM Year 2 42 In general, as technology moves forward, the expense involved in purchasing new hardware and software tends to decline. A system that might have cost many thousands of pounds five years ago may be available for just a few hundred pounds today. In many cases, it may be possible to adopt a new system for less than the cost of upgrading an existing one.


MANCOSA – BCom ITM Year 2 43



MANCOSA – BCom ITM Year 2 44

At the end of this study unit, the learner should be able to:

 explain the importance of telecommunications in your organisation;  explain the business benefits and disadvantages of networks;  identify the trends in telecommunication;

 explain the types of telecommunications network

 specify the advantages and disadvantages of the client/server computing  explain how internet is enhancing value to business organisations  describe the models of e-commerce and


MANCOSA – BCom ITM Year 2 45


For the modern organisations to operate effectively, the links connecting its people and their computers are vital. The network links provide the channels for information to flow continuously between people working in different departments of an organisation, or in different organisations. This allows people to collaborate much more efficiently than before the advent of networks when information flow was irregular and unreliable. These links allow hardware such as printers and faxes to be shared more cost-effectively.

This chapter focuses on the use of computer networks from the global network of the internet through to small-scale networks. The benefits of networks are discussed. The basic trends and functions of telecommunications networks are also explained.


A computer network can be defined as: “a communications system that links two or more computers and peripheral devices and enables transfer of data between the components” (Bocij et al, 2008: 184).

Computer networks are themselves constructed on different scales. Small-scale networks within a workgroup or single office are known as local-area networks (LANs). Larger-scale networks which are national or international are known as wide-area networks (WANs). The internet is the best known example of wide-area network.

Further Reading

Turn to p. 184 of Bocij et al and read through the paragraph on Introduction to computer Networks.

3.2.1 What are the business benefits of networks?

Networks are vital to a business. They are important for the cost savings and improved communications that arise from an internal network. Beyond this, they are truly vital, because they help a business reach out and connect with its customers, suppliers and collaborators. Through doing this a company can order new raw materials more rapidly and cheaply from its suppliers and can keep in touch with the needs of its customers.


MANCOSA – BCom ITM Year 2 46 The following figure indicates the links that may exist between different partners.

(Source: Bocij et al, 2008: 185) 3.2.2 Benefits of networks

The benefits that networks provide are as follows

 Reduce cost compared to traditional communications  Reduce time for information transfer

 Enable sharing and dissemination of company information

 Enable sharing of hardware resources such as printers, back up, processing power.  Promote new ways of working

 Operate geographically separate business as one.  Restructure relationships with partners.


MANCOSA – BCom ITM Year 2 47


Further Reading on benefits that networks provide: Turn to p. 186 of Bocij. et al. ALSO The mini case study on page 187 Bocij et al highlights the advantages that executives feel that network-enabled technology such as video conferencing and email deliver. Please study it.

3.2.3 What are the disadvantages of network technology?

To balance against the many benefits, there are, of course, disadvantages with introducing networks. The main disadvantages are:

 Overreliance on networks for mission-critical applications  Cost of initial set-up and maintenance

 Disruptions during initial set up and maintenance

 Reduced security due to more external access points to the networks on wide-area networks and the internet.

Additional Reading

For further reading on disadvantages of network technology: Turn to p. 188 of Bocij et al.

3.3 What is meant by Telecommunications?

The method by which data and information are transmitted between different locations (Bocij et al, 2008:185)

Further Reading

For further reading on benefits that networks provide: Turn to p. 186 of Bocij. et al. ALSO The mini case study on page 187 of Bocij et al highlights the advantages that executives feel that network-enabled technology such as video conferencing and email deliver.