because they are an integral part of a modern organisation
Why do information systems exist?
firms are established because it is profitable to do so; firms organise to reduce the transaction costs of repeated and complicated activities involved in creating, selling & distributing goods & services - Coase (1937)
Theory of the Firm
system of interdependence between supply of a good or service and its price. It generally sends the price up when supply is below demand, & down when supply exceeds demand. Price mechanism also restricts supply when suppliers leave the market due to low prevailing prices, & increases it when more suppliers enter the market due to high obtainable prices.
a theory explaining the relationship between principals (shareholders) and agents (company's executives). In this relationship the principal delegates or hires an agent to perform work.
1) the goals of the principal and agent are not in conflict (agency problem) 2) the principal & agent reconcile different tolerances for risk
Two problems that the Agency Theory addresses?
x-axis: Number of transactions y-axis: Costs top: Total costs +ve: Organising costs -ve: Transaction costs
Transaction costs & costs of organising graph
a system of collection, storage & processing of financial & accounting data that is used by decision makers
Accounting Information Systems (AIS)
Pressures on business -> Organisational response -> Contracting relationships -> Information systems ERP, intranet, extranet -> Demand for technologies -> Network/internet advances -> (back to beginning)
Business pressures and responses
- Globalisation - Deregulation - Advances in technology - Outsourcing & downsizing
Drivers of business & information system change?
application of computers & telecommunications equipment to store, retrieve, transmit & manipulate data, often in the context of a business or enterprise
Information technology (IT)
Metcalfe's Law & Moore's Law
What two laws best describe the impact of technological change?
the value of a network doubles with every new connection (node - n). The more interconnected people are, the more valuable the network
argues that chip density doubles every 18 months
Metcalfe's Law is often cited as a description of the rapid growth of the World Wide Web. Together with Moore's Law about the rate at which computer power is accelerating. Metcalfe's Law can be used to explain the rising wave of IT that we are riding through the 21st century.
What do Metcalfe's Law & Moore's Law mean?
Integrates all aspects of an organisation's activities into one system, (including traditional AIS); integrates internal & external management information across an entire organisation - embracing finance/accounting, manufacturing, sales & service, customer relationship management, etc.
Enterprise resource planning (ERP)
the process of inventing objects or items that display a new physical order in response to function
1) determine objectives (not always an easy task) 2) determine what needs to be done to achieve those objectives 3) choose the 'best' components to execute the actions needed to achieve objectives
Three components of good design?
a set of two or more interrelated components that interact to achieve a goal. Most systems are composed of smaller subsystems that support the larger system - E.g. a faculty of business is a system composed of various departments, each of which is a subsystem. Moreover, a faculty itself is a subsystem of a university.
to achieve one or more organisational goals
What is each subsystem designed to do?
when a subsystem is inconsistent with the goals of another system or with the system as a whole
When does goal conflict occur in a system?