A third flow of information depicted in Figure 1-1 represents exchanges between the organization and users in the external environment. External users fall into two groups: trading partners and stakeholders. Exchanges with trading partners include customer sales and billing information, purchase information for suppliers, and inventory receipts information. Stakeholders are entities outside (or inside) the organi- zation with a direct or indirect interest in the firm. Stockholders, financial institutions, and government agencies are examples of external stakeholders. Information exchanges with these groups include finan- cial statements, tax returns, and stock transaction information. Inside stakeholders include accountants and internal auditors.
All user groups have unique information requirements. The level of detail and the nature of the infor-
mation these groups receive differ considerably. For example, managers cannot use the highly detailed in- formation needed by operations personnel. Management information is thus more summarized and oriented toward reporting on overall performance and problems rather than routine operations. The infor- mation must identify potential problems in time for management to take corrective action. External stake- holders, on the other hand, require information very different from that of management and operations users. Their financial statement information, based on generally accepted accounting principles (GAAP), is accrual based and far too aggregated for most internal uses.
WHAT IS A SYSTEM?
For many, the term system generates mental images of computers and programming. In fact, the term has much broader applicability. Some systems are naturally occurring, whereas others are artificial. Natural systems range from the atom—a system of electrons, protons, and neutrons—to the universe—a system of galaxies, stars, and planets. All life forms, plant and animal, are examples of natural systems. Artificial systems are man-made. These systems include everything from clocks to submarines and social systems to information systems.
Elements of a System
Regardless of their origin, all systems possess some common elements. To specify:
A system is a group of two or more interrelated components or subsystems that serve a common purpose.
Let’s analyze the general definition to gain an understanding of how it applies to businesses and infor- mation systems.
MULTIPLE COMPONENTS. A system must contain more than one part. For example, a yo-yo carved from a single piece of wood and attached to a string is a system. Without the string, it is not a system.
RELATEDNESS. A common purpose relates the multiple parts of the system. Although each part func- tions independently of the others, all parts serve a common objective. If a particular component does not contribute to the common goal, then it is not part of the system. For instance, a pair of ice skates and a vol- leyball net are both components; however, they lack a common purpose, and thus do not form a system.
SYSTEM VERSUS SUBSYSTEM. The distinction between the terms system and subsystem is a mat- ter of perspective. For our purposes, these terms are interchangeable. A system is called a subsystem when it is viewed in relation to the larger system of which it is a part. Likewise, a subsystem is called a system when it is the focus of attention. Animals, plants, and other life forms are systems. They are also subsystems of the ecosystem in which they exist. From a different perspective, animals are systems com- posed of many smaller subsystems, such as the circulatory subsystem and the respiratory subsystem.
PURPOSE. A system must serve at least one purpose, but it may serve several. Whether a system pro- vides a measure of time, electrical power, or information, serving a purpose is its fundamental justifica- tion. When a system ceases to serve a purpose, it should be replaced.
A third flow of information depicted in Figure 1-1 represents exchanges between the organization and users in the external environment. External users fall into two groups: trading partners and stakeholders. Exchanges with trading partners include customer sales and billing information, purchase information for suppliers, and inventory receipts information. Stakeholders are entities outside (or inside) the organi- zation with a direct or indirect interest in the firm. Stockholders, financial institutions, and government agencies are examples of external stakeholders. Information exchanges with these groups include finan- cial statements, tax returns, and stock transaction information. Inside stakeholders include accountants and internal auditors.
All user groups have unique information requirements. The level of detail and the nature of the infor-
mation these groups receive differ considerably. For example, managers cannot use the highly detailed in- formation needed by operations personnel. Management information is thus more summarized and oriented toward reporting on overall performance and problems rather than routine operations. The infor- mation must identify potential problems in time for management to take corrective action. External stake- holders, on the other hand, require information very different from that of management and operations users. Their financial statement information, based on generally accepted accounting principles (GAAP), is accrual based and far too aggregated for most internal uses.
WHAT IS A SYSTEM?
For many, the term system generates mental images of computers and programming. In fact, the term has much broader applicability. Some systems are naturally occurring, whereas others are artificial. Natural systems range from the atom—a system of electrons, protons, and neutrons—to the universe—a system of galaxies, stars, and planets. All life forms, plant and animal, are examples of natural systems. Artificial systems are man-made. These systems include everything from clocks to submarines and social systems to information systems.
Elements of a System
Regardless of their origin, all systems possess some common elements. To specify:
A system is a group of two or more interrelated components or subsystems that serve a common purpose.
Let’s analyze the general definition to gain an understanding of how it applies to businesses and infor- mation systems.
MULTIPLE COMPONENTS. A system must contain more than one part. For example, a yo-yo carved from a single piece of wood and attached to a string is a system. Without the string, it is not a system.
RELATEDNESS. A common purpose relates the multiple parts of the system. Although each part func- tions independently of the others, all parts serve a common objective. If a particular component does not contribute to the common goal, then it is not part of the system. For instance, a pair of ice skates and a vol- leyball net are both components; however, they lack a common purpose, and thus do not form a system.
SYSTEM VERSUS SUBSYSTEM. The distinction between the terms system and subsystem is a mat- ter of perspective. For our purposes, these terms are interchangeable. A system is called a subsystem when it is viewed in relation to the larger system of which it is a part. Likewise, a subsystem is called a system when it is the focus of attention. Animals, plants, and other life forms are systems. They are also subsystems of the ecosystem in which they exist. From a different perspective, animals are systems com- posed of many smaller subsystems, such as the circulatory subsystem and the respiratory subsystem.
PURPOSE. A system must serve at least one purpose, but it may serve several. Whether a system pro- vides a measure of time, electrical power, or information, serving a purpose is its fundamental justifica- tion. When a system ceases to serve a purpose, it should be replaced.
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