Unit 2.3

The Relationship Between Information Systems and Organization

IT 231: IT and Application

Learning Objectives

By the end of this chapter, you will be able to:

✅ Describe the two-way relationship between information systems and organizations.
✅ Explain how an organization's strategy and culture influence its IS.
✅ Provide examples of how IS can shape an organization's structure and processes.

The Core Concept: A Two-Way Street

Information systems and organizations have a mutual, two-way relationship.

Organization вплив Information Systems

Information Systems вплив Organization

It's a mistake to think of IS as just a technical tool. It's a deeply integrated partnership.

Part 1: How Organizations Affect IS

The organization's "DNA" shapes the technology it builds.

🎯 Strategy

A low-cost leader (e.g., a budget airline) will build systems for maximum efficiency and cost-cutting.

An innovation leader (e.g., a design firm) will build systems for collaboration and creativity.

🤝 Culture & People

An open, collaborative culture will successfully adopt social tools.

A rigid, hierarchical culture may resist them.

Employee skills and training determine how effectively any new system is used.

Example: Strategy's Influence

Accounting Firm vs. Advertising Agency

📊 Large Accounting Firm

Strategy: Accuracy, security, efficiency.

Resulting IS:

Highly structured databases
Secure, access-controlled systems
Automated auditing tools

🎨 Creative Ad Agency

Strategy: Creativity, collaboration, speed.

Resulting IS:

Cloud-based file sharing (e.g., Figma, Google Drive)
Project management tools (e.g., Slack, Asana)
Digital asset management systems

Part 2: How Information Systems Affect Organizations

Technology is not just a tool; it's a force for change.

⚡ IS can fundamentally alter an organization's structure, processes, and even its core business model.

1. Organizational Structure

Changes who reports to whom.

2. Business Processes

Changes how work gets done.

3. Business Models

Changes what the company sells and how it makes money.

Effect 1: Flattening Organizations

IT empowers employees and reduces bureaucracy.

Before IT

Information is slow and flows up and down a rigid hierarchy.

CEO
  |
VP -- VP
  |    |
MGR--MGR--MGR
  |    |    |
EMP--EMP--EMP

After IT

Information is widely available, empowering lower-level employees with decision-making authority.

CEO
  |
-----------------
|       |       |
EMP --- EMP --- EMP
(with data access)

Result: Fewer middle managers are needed, leading to a "flatter," more agile organization.

Effect 2: Streamlining Business Processes

Making work faster, cheaper, and more accurate.

Example: Enterprise Resource Planning (ERP) Systems

Before ERP, departments worked in silos with separate systems:

Sales System 🧱 Finance System 🧱 Warehouse System

After ERP, a single integrated system connects the entire organization:

Sales ↔️ Finance ↔️ Warehouse ↔️ HR

This automation and integration makes processes like "order-to-cash" incredibly efficient.

Effect 3: Enabling New Business Models

IT as the foundation for digital disruption.

Many of today's largest companies would be impossible without sophisticated information systems.

E-Commerce

Global marketplace, recommendation engines, logistics networks.

Sharing Economy

Real-time matching of supply (drivers) and demand (riders).

Digital Subscriptions

Streaming content on-demand, personalized recommendations.

Practical Application: The Nepali Context

How IS is transforming business in Nepal.

🔍 Case Study: Digital Transformation in Nepal

Digital Payments (eSewa, Khalti)

Enabled a new business model for cashless transactions, utility payments, and mobile top-ups, changing how people and businesses handle money.

Ride-Sharing (Pathao, inDrive)

Created a new "sharing economy" model for transportation, using GPS and matching algorithms to connect riders and drivers efficiently.

These companies did not just introduce new technology; they introduced entirely new ways of operating that reshaped their respective industries in Nepal.

Summary & Key Takeaways

Remember the two-way relationship.

Information systems and organizations mutually influence each other. One does not exist in a vacuum.
An organization's strategy, culture, and people will dictate the kind of systems it builds and how they are used.
In turn, information systems can flatten organizational structures, streamline core processes, and reduce costs.
Most importantly, IT is a powerful enabler of new, disruptive business models that can redefine entire industries.

Discussion Questions

How might the information systems at a creative advertising agency differ from those at a large accounting firm? (Think culture and strategy).
Explain in your own words what is meant by IT "flattening" an organization. What is the role of middle managers in this new structure?
Can a company successfully implement a new information system (like an ERP) without changing its business processes? Why or why not?

Thank You

Any Questions?

Next Topic: Unit 2.4 - Porter's Competitive Forces Model and IT Strategy

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