Learning Objectives

  • Distinguish information technology (IT) from an information system (IS).
  • Distinguish data, information, and knowledge.
  • Explain what the Information Age means for organizations.
  • List the components and activities of an IS and why managers care.
  • Describe how IS supports business functions and strategy.

Later chapters: business in the Information Age, IS and organization, types of IS.

IT versus IS

IT is the toolkit: hardware, software, networks, and data technologies. IS is the organized combination of people, processes, data, and IT that supports decisions and operations. A laptop is IT; a college admission system that staff use to enroll students is an IS.

Data, information, and knowledge

  • Data — raw facts with no context: 85, 72, 91.
  • Information — data processed into a meaningful form: “Average BBA marks in IT 231 this semester: 82.7.”
  • Knowledge — understanding gained from information that guides action: “Sections with weekly lab practice scored higher, so add lab practice to all sections.”

The Information Age

In the Information Age, data is treated as a productive asset, similar to capital or labor. Firms compete on how fast they turn data into information (processed, meaningful) and knowledge (applied in decisions). Knowledge workers—accountants, marketers, analysts—spend most of their day using IS.

Components of an information system

  1. Hardware — servers, PCs, phones, scanners.
  2. Software — applications and the operating system.
  3. Data — records about customers, inventory, marks.
  4. Procedures — rules for how work is done (who approves a payment).
  5. People — users, managers, IT staff.

If any one fails (for example, staff ignore procedures), the IS fails even if the software is excellent.

Activities of an information system

flowchart LR
  I[Input: capture data] --> P[Processing: classify, calculate, sort]
  P --> O[Output: reports, bills, dashboards]
  P <--> S[Storage: database]
  O --> F[Feedback: corrections and decisions]
  F --> I

Example: a supermarket POS inputs barcode scans, processes prices and VAT, stores each sale, outputs a bill and daily sales report, and uses feedback (low-stock alerts) to reorder goods.

IS across business functions

Function How IS supports it
Accounting/finance Ledgers, payroll, tax filing, financial statements
Marketing/sales Customer databases, online ads, sales analysis
Operations Inventory control, production scheduling, supply chain
Human resources Recruitment, attendance, performance records
Management Dashboards and reports for planning and control

IS for strategic advantage

Businesses use IS not only to run operations but to compete:

  • Cost leadership — automation lowers cost per transaction (online banking vs branch counters).
  • Differentiation — unique digital services (a mobile app with live order tracking).
  • Customer intimacy — knowing customers’ preferences from data and personalizing offers.
  • New products and markets — digital wallets created a whole new payment business.

Why this unit matters in Nepal

Banks, digital wallets, IRD e-filing, and campus ERP systems are IS, not “just computers.” A BBA graduate who can name TPS, MIS, and ERP (later in this unit) can talk to both managers and vendors.

Scenario: a hardware wholesaler in Butwal keeps sales in notebooks. It cannot tell which products sell best or which customers owe money. After adopting an accounting and inventory IS, it sees daily sales, overdue payments, and slow-moving stock, and the owner can make decisions from evidence instead of memory.

Key Takeaways

  • IT is technology; IS is technology plus people and processes.
  • Data becomes information when processed, and knowledge when applied to decisions.
  • The Information Age makes data a strategic resource.
  • Five IS components must work together; an IS performs input, processing, storage, output, and feedback.
  • IS supports every business function and can create competitive advantage.

Discussion Questions

  1. Give one campus example of IT and one of an IS.
  2. Why can a firm buy good IT and still have a weak IS?
  3. Who owns “data quality” in a small business?

Exam-Style Questions

Short answer

  1. Differentiate between IT and IS with examples.
  2. Differentiate between data and information.
  3. List the five components of an information system.

Long answer

  1. Explain the components and activities of an information system with a suitable diagram and business example.
  2. How can information systems help a business gain competitive advantage? Illustrate with Nepali examples.