1.7: Information Systems in an Organization

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In the early years of computing, the information-systems function (generally called “data processing”) was placed in the finance or accounting department of the organization. As computing became more important, a separate information-systems function was formed, but it still was generally placed under the Chief Financial Officer (CFO) and considered to be an administrative function of the company. By the 1980s and 1990s, when companies began networking internally and then connecting to the internet, the information systems function was combined with the telecommunications functions and designated as the Information Technology (IT) department. As the role of information technology continued to increase, its place in the organization became more important. In many organizations today, the Chief Information Officer (CIO) or Chief Technology Officer (CTO) is the head of IT and reports directly to the head of the company – the Chief Executive Officer (CEO).

Before the advent of the personal computer, the information systems function was centralized within organizations to maximize control over computing resources. When the PC began proliferating, many departments created their own internal IS group dedicated to their needs, providing quicker turnaround and higher levels of service than a centralized IT department. However, having several IS groups within an organization leads to inefficiency, as several people perform the same jobs in different departments. Decentralization also leads to company data being stored in several places all over the company.

In some organizations a matrix reporting structure is utilized in which IT personnel are placed within a department and report to both the department management and the functional management within IS. The advantages of dedicated IS personnel must be weighed against the need for more control over the strategic information resources of the company. For many companies, these questions are resolved by the implementation of an ERP system (see discussion of ERP in Chapter 11) as an ERP system consolidates data into a single database.

Outsourcing

An organization may need a specific skill for a limited period of time. Instead of training existing employees or hiring new staff, it may make more sense to outsource the job. Outsourcing can be used in many different situations within the information systems function, such as the design and creation of a new website or the upgrade of an ERP system. Some organizations see outsourcing as a cost-cutting move, contracting out a whole group or department.

New Models of Organizations

The integration of information technology has influenced the structure of organizations. The increased ability to communicate and share information has led to a “flattening” of the organizational structure due to the removal of one or more layers of management. The network-based organizational structure is another changed enabled by information systems. In a network-based organizational structure, groups of employees can work somewhat independently to accomplish a project. People with the right skills are brought together for a project and then released to work on other projects when that project is over. These groups are somewhat informal and allow for all members of the group to maximize their effectiveness.