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According to Kenneth C. Laudon and Jane Price Laudon in their book Management
Information Systems: A Contemporary Perspective, an information system is "a set
of procedures that collects (or retrieves), processes, stores, and disseminates
information to support decision making and control." In most cases, information
systems are formal, computerbased systems that play an integral role in
organizations. Although information systems are computerbased, it is important to
note that any old computer or software program is not necessarily an information
system. "Electronic computers and related software programs are the technical
foundation, the tools and materials, of modern information systems, " Laudon and
Laudon wrote. "Understanding information systems, however, requires one to
understand the problems they are designed to solve, the architectural and design
solutions, and the organizational processes that lead to these solutions."
SYSTEMS DEVELOPMENT
Despite the challenges inherent in systems development, however, MIS also offer
businesses a number of advantages. "Today, leading companies and organizations
are using information technology as a competitive tool to develop new products and
services, forge new relationships with suppliers, edge out competitors, and radically
change their internal operations and organizations, " Laudon and Laudon explained.
For example, using MIS strategically can help a company to become a market
innovator. By providing a unique product or service to meet the needs of customers,
a company can raise the cost of market entry for potential competitors and thus gain
a competitive advantage. Another strategic use of MIS involves forging electronic
linkages to customers and suppliers. This can help companies to lock in business and
increase switching costs. Finally, it is possible to use MIS to change the overall basis
of competition in an industry. For example, in an industry characterized by price
wars, a business with a new means of processing customer data may be able to create
unique product features that change the basis of competition to differentiation.
The impetus to develop a new information system can grow out of end-user
demands, the availability of new technology, or management strategy. A variety of
tools exist for analyzing a company's information needs and designing systems to
support them. The basic process of systems development involves defining the
project, creating a model of the current system, deriving a model for the new system,
measuring the costs and benefits of all alternatives, selecting the best option,
designing the new system, completing the specific programming functions, installing
and testing the new system, and completing a post-implementation audit.
KNOWLEDGE MANAGEMENT
Knowledge management (KM) is a relatively new form of MIS that expands the
concept to include information systems that provide decision-making tools and data
to people at all levels of a company. The idea behind KM is to facilitate the sharing of
information within a company in order to eliminate redundant work and improve
decision-making. KM becomes particularly important as a small business grows.
When there are only a few employees, they can remain in constant contact with one
another and share knowledge directly. But as the number of employees increases and
they are divided into teams or functional units, it becomes more difficult to keep the
lines of communication open and encourage the sharing of ideas.