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What is an Information System and Why Does it Matter?

what is an information system and why does it matter

Businesses have faced several challenges over the years that have made it more difficult to maintain a competitive edge. From globalization to increased regulations to COVID-19-based restrictions, companies have no choice but to evolve, adapt, and get creative.

Saving money and resources while finding new ways to streamline operations is critical. Using an optimized software solution to gather internal and external data is a common solution to these problems, but many don't make the best use of the information they have.

Companies that implement an information system to collect, store, and transfer information can improve operational decision-making, problem-solving, resource planning. Read ahead for an overview of an information system and why effectively managing computer information is a critical component to a company's success.

What Are Information Systems?

An information system encompasses a variety of technology systems used to collect, process, store, and administer software data to business users.

An IS has several different components that work together to help employees and managers perform their jobs. These operating system components include hardware, software solutions, the IS's housing infrastructure, and all of the users involved with the system.

The use of cases of information systems is endless. From supply chain management to performing payroll to fostering customer interactions, organizations use an IS to automate repetitive processes and increase knowledge management. With greater access to relevant data, business users can communicate to streamline business processes and meet key objectives.

1. Pinpoints Growth Opportunities

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Growing companies need a strong infrastructure to manage all of their data and extract valuable insights. An information system can generate reports, pinpoint inefficiencies, identify cost savings opportunities, and streamline activities. All of which improve internal operations.

Because a management system automates manual processes, departments are free to focus on achieving their goals rather than working on repetitive tasks. This allows business owners to have more resources, time, and knowledge to focus on building their business and developing new products/services.

2. Stores Valuable Information

A log of transaction data helps users pinpoint the root cause of problems and delivers the insight necessary to identify the solutions to those problems.

Examples of information system data stored by an IS include records of interactions, operational information, and valuable documents. Manually storing information is costly and ineffective, while an information system stores and manages all relevant data in one centralized location that is easily accessible to business users.

3. Optimizes Decision-Making

Before the digital age, business owners had to use a lot of guesswork to make important decisions. While instinct can be helpful in certain circumstances, using statistical evidence can help others feel confident in managements' choices.

It also provides data analysis and recommendations that pinpoint the best solutions. Furthermore, an information system is accessible to authorized individuals, with new data inputs updated immediately in the system. Employees can rest assured that their decisions are made on the most relevant information.

4. Improves Business Communication

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Proper communication is essential to any company's success. An information system improves business communication by making data accessible to everyone in customized formats. Users can easily share, upload, and transfer data without flooding an email inbox.

Because data inputs are updated immediately, workers can view the changes without ever speaking to the other person. Externally, businesses can optimize customer relationships by maintaining accurate records of client interactions, offering self-service options that answer client questions, or providing automatic updates for a customer order.

Organizations can optimize customer relationship management by sharing data with clients when needed (shipping information, billing data, etc.) In summary, an information support system optimizes communicationwhile minimizing all of the factors that harm it, such as irrelevant data, human error, or overwhelmed email boxes.

5. Saves Money

Though it can be expensive to invest in a management information system, the cost savings opportunities provide a return on investment. Manual processes require more workers, drive up costs, and take up valuable resources.

Traditional data management in the form of file cabinets or extra office space not only cost more money but provide ripe opportunities for theft and fraud. Compliance is also a growing concern among organizations, as regulations evolve and penalties increase.

Utilizing a systems management network can ensure that business processes are following all of the rules and regulations required by federal/local regulators. In summary, using an information system can save money, pinpoint cost savings opportunities, and help workers allocate resources more effectively.

  • Helps an organization analyze stocks and check previous performance levels to mitigate against disaster
  • Track profits and margins so business has all information required to mitigate a crisis
  • Reduces transaction costs and search costs and yields a greater flexibility of production

Key Takeaways

  • An information system encompasses a variety of technology systems used to collect, process, store, and optimize data process management.
  • An information system can generate reports, pinpoint inefficiencies, identify cost savings opportunities, and streamline activities all of which improve overall operations.
  • Manually storing information is costly and ineffective, while an information system stores and manages all relevant data in one centralized location that is easily accessible to business users.
  • Businesses can use transaction processing systems to ensure decisions are based on the most relevant information because they don't have to worry about outdated or inaccurate inputs.
  • Management systems optimize communication while minimizing all of the factors that harm it, such as irrelevant data, human error, or overwhelmed email boxes.
  • Information systems help save money, pinpoint cost savings opportunities, and help workers allocate resources more effectively.