How does the organizations goals drive the selection of an information system?

From an economic point of view, information systems technology can be seen as a factor of production that can be freely substituted for capital and labor. As information systems technology automates the production process, less capital and labor are required to produce a specified output.

Transaction cost theory states that organizations grow in size because they can obtain certain products or services internally at lower cost than by using external firms in the marketplace. By lowering the cost of market participation (transaction costs) information technology allows firms to obtain goods and services more cheaply from outside sources than through internal means. Information systems can thus help firms increase revenue while shrinking in size.

Figure 3-6

FIGURE 3-6 THE TRANSACTION COST THEORY OF THE IMPACT OF INFORMATION TECHNOLOGY ON THE ORGANIZATION
Firms traditionally grew in size to reduce transaction costs. IT potentially reduces the costs for a given size, shifting the transaction cost curve inward, opening up the possibility of revenue growth without increasing size, or even revenue growth accompanied by shrinking size.

Agency theory views the firm as a nexus of contracts among self- interested individuals, who must be carefully supervised to ensure they pursue the interests of the organization. Information technology can help reduce agency costs, the costs of coordinating many different people and activities, so that each manager can oversee a larger number of employees.

Figure 3-7

FIGURE 3-7 THE AGENCY COST THEORY OF THE IMPACT OF INFORMATION TECHNOLOGY ON THE ORGANIZATION
As firms grow in size and complexity, traditionally they experience rising agency costs. IT shifts the agency cost curve down and to the right, enabling firms to increase size while lowering agency costs.

Behavioral researchers have theorized that information technology facilitates flattening of hierarchies by broadening the distribution of information to empower lower-level employees and increase management efficiency.

Figure 3-8

FIGURE 3-8 FLATTENING ORGANIZATIONS
Information systems can reduce the number of levels in an organization by providing managers with information to supervise larger numbers of workers and by giving lower-level employees more decision-making authority.

Postindustrial theories also support the idea that IT should flatten hierarchies by allowing professionals to be self-managing, by decentralizing decision making, and by encouraging formation of ad-hoc, temporary "task forces" that address specific tasks.

Because information systems potentially change an organization's structure, culture, business processes, and strategy, there is often considerable resistance to them when they are introduced. In one model describing organizational resistance, the only way to bring about change is to change the technology, tasks, structure, and people simultaneously.

Figure 3-9.

FIGURE 3-9 ORGANIZATIONAL RESISTANCE AND THE MUTUALLY ADJUSTING RELATIONSHIP BETWEEN TECHNOLOGY AND THE ORGANIZATION
Implementing information systems has consequences for task arrangements, structures, and people. According to this model, to implement change, all four components must be changed simultaneously.
Source: Leavitt (1965).

The Internet and World Wide Web are increasing the accessibility, storage, and distribution of information and knowledge for organizations, dramatically lowering transaction and agency costs. Businesses are rapidly rebuilding some key business processes based on Internet technology.

To deliver genuine benefits, information systems must be built with a clear understanding of the organization in which they will be used, and consideration of the firm's environment, structure, culture, politics, organization and leadership, business processes, as well as the principle interest groups affected by the system.

Any business can be successful only when there is a consistent management of organizational and financial data with efficient information systems. Most of the companies have seen a drift in the process of workflow due to the accuracy and reliability. There is no alternative for the right information at the required time in the world of business where every industry revolves round the "Internet of Things"

This raised the need to innovate and develop the systems that can be implemented to make information accurate, that can be quickly accessed on demand. An effective information system can entitle an organization with better planning, decision-making and hence desired results.

How does Modern Business influence Information Systems?

With the constant change and evolution of customer preferences and requirements – businesses that can bring about new methods and innovative techniques can survive the market and continue to function as per the customer demands. The implementation of information system can benefit a lot in businesses and helps in controlling the internal and external processes.

Following are the benefits of information system

New Products and Services

Any business striving to enhance and to give a strong hold on the future has to instill a well organized Business Information System. An IS can help in analyzing independent processes and enables organized work activities. Hence an information system entitles the companies to understand how the company generates, develops and sells the services or products.

Information Storage

Keeping a log of activities is important for all the organizations, to understand the reason for the problems and so to provide solution to the same. Business Information System makes it simple to store operational data, revision histories, communication records and documents. The storing of data manually involves a lot of time and money. A sophisticated Information system stores the information in the database which simplifies the process of finding the data easily.

Simplified Decision Making

Business Information System, eases the process of decision making and simplifies the process of delivering the required information and hence assists in taking better decisions instantly.

Behavioral Change

Business Information System can be effectively implemented to help communication better between the employers and the employees. Information Systems work better as it stores documents and files in folders that can be accessed and shared by the employees. This ensures to oversee the flow of information between the management and the lower-level employees. This also allows the the front-line employees to be a part of the decision making process and hence feel motivated and committed towards doing a task.

How does information system help organizations to achieve their goals?

How organizations use information systems for decision

What are some of the benefits organization seeks to achieve through information system?

How is information systems important in organizations?