2 Introduction to Business Informatics

This chapter will answer the questions

What is Business Informatics?
The subject of business informatics is described in further detail by looking at its tasks and objectives:
Tasks and Objectives
In order to assess the use of IT in business, the advantages and disadvantages, i.e. the risks and
opportunities are discussed:
Risks and Opportunities of IT
In order to get a more precise understanding of business informatics, key terms are defined:
The Subject of Business Informatics
This chapter summarizes the unique relevance of business informatics, followed by a short description
of job positions for which skills in business informatics are essential:
Relevance and Key Jobs in Business Informatics

2.1 What is Business Informatics?

Business informatics, a subfield of applied informatics, is an interdisciplinary field combining
informatics and business management. It deals with the application of informatics in business contexts.
Applied Informatics
Business informatics is a field of applied informatics that deals with the use of ICT (Information and
Communication Technology) in a business context, i.e. the application of informatics in companies and
organizations, as well as in public administrations. Further examples of applied informatics are
engineering informatics (e.g. application of informatics in mechanical engineering, civil engineering)
medical informatics and informatics in law practice. In all these subfields of applied informatics,
informatics supports the work of professionals in their respective fields. Thus civil engineers will use
software (CAD-software) to design bridges or skyscrapers, doctors will use image analysis software to
assess digital X-rays and lawyers will document their case using word processing software while
accessing legal databases and other information systems.

Informatics
The subject of informatics as taught at German universities since the early 1960s can be subdivided
into theoretical informatics, technical informatics, practical informatics and applied informatics.
Theoretical informatics is concerned with the theory of information systems, such as theory of
computers and theory of programming languages. Technical informatics, which is not to be confused
with engineering informatics, as one of the subfields of applied informatics, deals with the technical
components of computers or computer networks (hardware), thus it is concerned with the
development of processors, storage media, screens and data transfer systems. Practical informatics
deals with the main aspects of informatics that are studied in applied informatics, such as operating
systems, programming languages, computer networks, database systems and software engineering.
Business Informatics
Business informatics has been taught at German universities since the 1970s and is usually associated
with business schools or departments. But a number of universities have created specific study
programs in business informatics. The term business informatics is composed of business (studies) and
informatics and deals with the use of computer supported ICT systems (information and
communication) systems.
Information Systems
Information systems are systems for processing information, i.e., information is retrieved,
transformed (processed), stored, and made visible and accessible to users.
Communication Systems
By means of communication systems information is transferred and analyzed. ICT systems deal with
processing and communicating information (a special subfield of information processing).
Goals and Objectives of Business Informatics
One important goal of business informatics is to set up ICT systems in companies and administrations
in such a way that their application is efficient and profitable.
ICT Systems
Key requirements for this are careful designing and structuring of the ICT systems, i.e. the architecture
and the development or purchase of appropriate hardware and software. Business informatics does
not only consider the technical components, i.e. the hardware and software of computers and
networks, but looks also at the tasks that ICT systems can perform. These include applications in
accounting, in sales/distribution, in HR, or in management and decision making (management tasks).
People are also an important component of ICT systems, as they are the ones undertaking the tasks
and are using the technical components (IT technology) of the ICT systems. To sum up, the question
What is business informatics? can be answered in the following way:
Definition
Business informatics deals with the design and implementation of ICT (Information and
Communication Technology) systems for companies and organizations.

Design means that the ICT systems have to be planned, built and developed. The focus is on the
applications of ICT systems that are to support business processes. The holistic view of ICT systems
also looks at the hardware (computers and networks, see chapters Computer Systems and Computer
Networks) and the people, who are users of the ICT applications and are in charge of them.
Design of Application Software
Designing application software involves developing or writing the software and/or purchasing software
(e.g. standard software packages). The design and creation of software application refers to the whole
process of software development or software engineering, this includes planning, analysis of needs,
draft, implementation and integration of software systems . Maintaining software applications is also
part of software development and planning.
The figure 2.1-1 gives a holistic view of ICT systems as subjects of business informatics.

Figure 2.1-1. ICT System.

Users as part of an ICT system

A companys or organizations employees are the end users of the ICT systems, i.e. word processing
systems, email systems, accounting systems or planning systems that they might use in their daily
work. In addition to these end users, the design of ICT systems also requires IT experts who develop
the software systems, set up computers and build up complex computer network systems. In the last
few years it has been observed that end users tend to have more and more IT knowledge themselves
and are able to be part of the ICT project teams that design their IT applications. This is often the case
for employees who have worked with ICT applications as part of their studies in the field of business
informatics, such as web applications, analysis and modeling of data or business processes, or
formulating IT strategies.
Business Informatics as Interdisciplinary Field
Business informatics is an interdisciplinary field of studies that is closely related to both business
studies and informatics. In the area of business studies the ideas and approaches of management
studies are of particular relevance, while in the field of informatics the practical informatics with
subfields such as computer networks, databases, software engineering and programming languages
are relevant. Business informatics also intersects with other fields, such as mathematics, engineering,

occupational studies and law. Legal issues that are relevant to business informatics are data protection,
i.e. the protection of personal-related data and many IT related issues dealing with e-commerce fraud
or manipulation of computer networks.

2.2 Tasks and Objectives

The main objective of business informatics is to set up ICT systems in such a way that they are of
optimal use to their business or organization.
The development of ICT systems requires both one-time costs, for example for the development of
software or for the purchase of hardware, as well as running costs, e.g. for the maintenance and
support of existing systems. The profitability of ICT systems must therefore be analyzed continuously,
i.e., IT-controlling must always weigh the costs against the benefits.
One key objective for the use of ICT systems is the support of subject experts and management
executives by providing the right information at the right time and the right place (management
requirements). This is to allow for better planning, better decision making and better control. The use
of automation in business processes, and processes in logistics and manufacturing is to allow for more
efficient work in these areas. Furthermore, the use of IT for automated information processing can
have other objectives, such as improving
the work environment for users (ergonomics),
the efficiency of processes and
the performance level of the different functional areas in a company.
ICT objectives also include specific quality management objectives that have to be observed in order
to guarantee high quality of work processes and high quality of offered products and services.

2.3 Risks and Opportunities of IT

The use of IT offers numerous benefits and opportunities. For example, automated and IT supported
logistics systems must be carefully selected and well maintained. The use of IT applications also entails
a number of risks, such as high costs and potential losses if unsuitable hardware and software used.
Tasks of ICT
In order to achieve the objectives of business informatics outlined above, i.e. information must be

retrieved and processed;

transformed, e.g. undergo mathematical and logical operations and systems (programs);
stored, so that it can be retrieved;
presented in graphic form and displayed, i.e. via printout or on the screen;
passed on, e.g. from one department to another or worldwide via networks.

The use of IT offers a number of benefits and opportunities that must be recognized. But there are also
considerable risks and disadvantages that can have negative effects that can be costly. As part of risk
management strategy, risks must also be systematically assessed and analyzed, in order to be able to
take appropriate measures for risk reduction.
Examples
Examples for opportunities of IT use:
improved decision making in production planning due to the use of a computer-supported
production planning system;
reduction of delivery times by using an online ordering system;
more efficient procurement processes by using an efficient software-based supply chain
management system;
more efficient and systematic mass data analysis in distribution with the help of a database
system.
Examples for risks of IT use:

lack of transparency of work processes because of increased automation;

dependency on IT, because of inflexible technology;

high costs and losses due to investment in unsuitable hardware or software;

unauthorized access to information, e.g. personal private data (violation of data protection);

problems with data security, e.g. through manipulation or data theft.

Making use of opportunities creates benefits of IT use, in particular the use of highly efficient IT
systems as well as profitable support of operational processes (increased work satisfaction). Risks can
interrupt work processes, which can create disadvantages for a company and its end users and can
lead to financial problems for the company.

2.4 The Subject of Business Informatics

Business informatics, as an interdisciplinary field between informatics and business management,
deals with the design and implementation of computer supported ICT systems for companies and
organizations and with its three key components, people, tasks and technology.
ICT Systems
Computer-supported ICT systems are at the heart of business informatics with its three key
components, users, tasks and technology. Hardware and software technologies are to support users
in their tasks, which must be designed to be in line with the company's overall objectives. These tasks

can be further subdivided into management tasks (strategic tasks), analysis, planning and controlling
tasks and operative tasks, which are part of the actual value creation, such as manufacturing goods or
providing services. The structure of a company, i.e. the procedures and processes is illustrated by the
organizational chart (see figure 2.4-1).

Figure 2.4-1. Tasks of Business Informatics.

End users, i.e., the employees of a company, use ICT to improve their workflow and their results. In
addition to this group of users, there are also employees that are IT specialists, e.g. business IT
specialists, who give advice on using the technology and design the required ICT systems. They are
responsible for ensuring the accuracy of information processing.
The following section defines key terms.
Definition
Information processing is defined as any process that is concerned with retrieving, storing and
transferring or transforming data (see [HaNe09], p. 9).
Definition
Data presents information (i.e. references to facts and processes) in machine-readable form, based
on known or assumed conventions. A means of storing data is referred to as a data medium.
Data are raw facts and numbers that are processed by ICT systems, usually computers, to produce
usable information that benefit decision makers in organizations.
Definition
A computer is a data processing unit, i.e. for the execution of mathematical operations to transform
data, to transfer data and to store data (see [HaNe09], p. 6).

Computer
There are some other terms that can replace the term computer, such as PC, laptop, tablet etc. In this
book, we will normally use the term computer.
Communication
While the dominant form of computer communication used to be the LAN, (i.e. the local area network
of a company or household) today global connectivity is the main focus. The internet as technical
infrastructure, with all the services and options that are connected to it (email, world wide web, voice
over IP) and all the possibilities for file transfers made possible through the FTP (file transfer protocol),
has become a major focus of our business and private lives.
Mobile Systems
Wireless connected mobile devices such as laptops, tablets, smart phones and smart watches play an
important role in private lives, and they have an increasing relevance for companies (mobile systems).
In addition to global networks and local networks, there are also personal networks that connect
different devices that are in the immediate environment of a person.
Computers offer word processing software, allow data processing, and they allow the use of audio,
image and video material. This means that they are multimedia devices.
Definition
The term multimedia stands for the integrated processing of several different types of information,
such as formatted data, texts, audio and image material (graphs, photos, animations, video clips etc.).
Computers are also referred to as digital data processing systems, as they process data that is in digital
form, as opposed to analogue data.
Definition
Digital data is represented by characters. A character is defined as an element for the display of
information, composed of a finite set of different elements or characters (see [HaNe09], p. 7).
Character
Examples of characters are capital letters and lower case letters (the alphabet), digits (numbers) and
symbols. A sequence of characters can be used to create words, such as the word university, or
numbers, such as the number 1347. There are also the sign characters such as -, +, $, %, and #.
Characters can be used to form texts, but also to create tables or charts and graphs. All data to be
processed are represented as characters that can be transformed by means of technology. The
computer can only differentiate two distinct states, these are binary values that can be represented as
1 and 0. (binary: having only two possible values)
Bit & Byte
A binary character is the smallest information unit and is called a bit (binary digit). A set of eight bits is
called a Byte, and a set of four is called a nibble.

ASCII Code
A sequence of bits creates a character, 8 bits= 1 byte. One byte (8 bit) can create or encode 28=256
different characters (the 8-bit code). One example is the ASCII (American Standard Code for
Information Interchange). You will find more information on this topic in the definitions section of the
chapters Information Management and Computer Systems.
Information Technology
The subject of business informatics deals with a company's computer-based ICT system. In addition to
the users and the tasks, information technology is the focus of our analysis. Information technology
(IT) can be subdivided into hardware technology and software technology (see figure 2.4-2).

Figure 2.4-2. Information Technology: Hardware and Software.

Hardware
Hardware or hardware technology mainly deals with the computer systems and the computer
networks that are explained in the chapters Technical Foundations: Computer Systems and Technical
Foundations: Computer Networks.
Software
Software, i.e. the software technology, is subdivided into systems software and application software
(see chapter Business Applications). In business informatics, the focus is on application software, which
can also be called operational information systems.
Definition
An operational information system supports the processes of a company and supports the exchange
between the company and its environment, i.e. clients and suppliers etc. (see HaNe09, p.132).
Definition
A computer based information system is a system that uses partly automated processes for the
retrieval, the transfer or the transformation of data (see HaNe09, p.133).

Application Software
Business application software or information systems examples include accounting software used to
calculate salaries and wages, or industrial production software used to analyze, control, and plan
production and distribution. Both types require suitable hardware (computer and computer networks)
and application software and, most importantly, require a suitable operating system.

2.5 Relevance and Key Jobs in Business Informatics

Business informatics is highly relevant both in academic study and in practice as a field of applied
informatics, which is the reason for the high demand for business informatics specialists.
Relevance of Informatics
The increased automation and digitalization leads to increased demand for informatics in general and
for business informatics in particular, as it offers a link between the specific requirements of businesses
and the possible solutions provided in the field of IT.
The figure 2.5-1 shows the global distribution of the use of computers and the internet.

Figure 2.5-1. Global Distribution of Personal Computers.

The density of PCs across the globe is represented in the figure 2.5-2.

Figure 2.2-2. Global Computer Density

The figure 2.5-3 shows the use of computers in different fields and business sectors.

Figure 2.5-3. Global Distribution of Personal Computers.

While computers and internet access are more or less globally available, the use of multimedia
applications, such as online information systems, games and learning platforms (e-learning), are
advancing quickly.

Jobs in Business Informatics

The demand for business informatics specialists is high, as the need for IT knowledge increases across
all business sectors. More and more applications are computer-supported, which is the reason why
business informatics experts are needed in many different departments (functional areas) of a
company. Business consultants, who tend to have IT consulting in their service portfolio, are also
experiencing a rise in demand. IT companies themselves also hire more business informatics
specialists. Overall, it can be observed that job candidates whose portfolios of skills and knowledge
include specialist knowledge of different business IT applications such as in the area of accounting,
marketing, production or controlling are very much in demand (see figure 2.5-4).

Figure 2.5-4. Jobs in Business Informatics.