8/8/2019 Inf Sys-1

1/16

AZAD College

1

INFORMATION SYSTEMSBy: M Rafeeq

Chapter- I

OVERVIEWOFINFORMATION SYSTEMS

I. Concepts of Systems and Organizations:

Purpose:

The role of MIS is to inform management, whether the limits have been exceeded or arelikely to be exceeded.

The initial concept of MIS was to process data from the organization and present in theform of reports at regular intervals.

E.g.: sales expenses, Attendance or laborhours of employee.The following are the basic roles of MIS:

1. Hardware administration2. Database administration3. Software development4. Software training and support5. Establish corporate computing standards6. Provide access to corporate data7. Support end-user development8. Chief Information Officer (CIO)

Definitions:

Data: A data is a collection of number of related observations or raw facts. (Or) Individualelements of a transaction. [Data is raw material of information]

The data can be text, audio, video, number, images or any combination of these.

E.g.: item number, item quantity, price on sales order transaction.Information: Information is data placed in meaningful and useful context for an end user.

System: A system is a group of interrelated components working together towards a common

goal by accepting inputs and producing output in an organized transformation process.A system is an integrated set of components or entities that interact to achieve a particularfunction or goal.

Management: It is the art of getting things done through and with the people in formallyorganized groups.

Information system: A set of people, procedures and resources that collects, transforms anddisseminates information in an organization.

A computer-based information system uses hardware, software and people resources to

transform data resources into information products for end-users.

Data

Information

Systems(Aggregate,

summarize,

analyze, etc)

Information

Knowledge

Systems(Interpret,

relate,

synthesize,etc)

Knowledge

8/8/2019 Inf Sys-1

2/16

AZAD College

2

Fig: - An Information system model

Management Information System: An information system that provides information to

support managerial decision-making.E.g.: Information reporting system, Executive information system, or Decision support

system.The MIS is defined as an integrated system of man and machine for providing the

information that supports the operation, the management and the decision-making functions inthe organization.

The MIS is designed to provide information for effective planning and tactical decision-making.

End User: Any one who uses an information system or the information it produces.

Information systems can be formal or informal.

1.Formal Systems:

These are designed and developed using a set of well-established organizational policies,

procedures, and principles to co-ordinate and facilitate communication between differentfunctional units and the process they support and to meet the over all information needs ofthe business. These systems can be manual or automated.

2.Informal Systems:These systems do not follow any formal or pre-established rules for collecting,

processing, storing or disseminating data.

Successful IS managers are effective at both the:- General management component- Technical componentIS mangers job are interrelated in 3 different ways:

1. Th

rough

formal job description.2. Through the day-to-day tasks and activities.3. Through the real job-making good, timely decisions.

Users ofInformation

1) Users of information within the organization:1.Accounting - This department creates and maintains qualitative data of cash flow, payroll,

profit or loss, current financial position of firm and control of expenses.2.Finance - This department is in charge related to borrowing, funding, data related to capital

structure, shareholders.

8/8/2019 Inf Sys-1

3/16

AZAD College

3

3.Personnel - This department is related to service contracts, fringe benefits, andhourly/monthly rates. Management seeks information pertaining to the number of full-time

and part-time employees, supervisor reports and manpower.4.Public relations - This bridges the gap between the outside world and the organization.

E.g.: Union contract negotiations.5.Sales - This department produces information pertaining to sales of regional, total sales

forecast, actual sales and periodic sales reports.

6.Market research - This department gather information pertaining to the firms marketpotential consumer behavior and competitive circumstances.7.Production - Data is maintained to utilization, scheduling priority, number of machines,

equipments and facilities.8. Purchasing - This is responsible for receiving a constant flow of raw material, machinery,

equipment, and office supplies.

2) Users of information outside the organization:1)Government - Government requires various informations regarding income-tax matters

and other regulations.2)Auditor - A certified public accountant is responsible for determining the validity of the

firms financial statements.3)Shareholders - Shareholders are interested in information relating to the annual earnings

and projection of future expansion.4)Customer - Requires unlimited amounts of information depending upon the type of

business firm with which they deals.

Types ofInformation Systems (Classification ofInformation Systems): -

Fig: - A Conceptual view of Information systems

1.Operations Information Systems: -

These Information Systems process the data used in business operations.

1) Transaction-Processing Systems (TPS) record and process data resulting from business transactions, update databases and produces a variety of documents andreports.

OperationsInformation

SystemsManagementInformation

Systems

Transaction

Processing

SystemsProcess

control

SystemsOffice

Automation

SystemsInformation

Reporting

SystemsDecision

Support

SystemsExecutive

Information

SystemsProcessingBusiness

TransactionsControl

Of physical

ProcessOffice

communication

& productivityPrespecifiedReporting

InteractiveDecision

Support

InformationFor top

Management

Supports forBusiness

operations

Supports forManagementdecision-

making

Information

Systems

8/8/2019 Inf Sys-1

4/16

AZAD College

4

2) Operational decisions that control physical process are produces by Process controlsystems (PCS).

3) Office communications and productivity are supported Office automation systems(OAS).

2. Management Information Systems: -These ISs provide information to support management decision Making.

1) Prescribed and preplanned reporting to managers is accomplished by Information

reporting systems (IRS).2) Interactive and Ad hoc support for decision-making by managers is accomplished byDecision support systems (DSS).

3) Critical information for top management is provided by Executive informationsystems (EIS).

Information support forDecision-making, Planning and Control: -Management Information System has two components:

1.Internal data Processing2.Externally Organizing Information

1. Internal data Processing: -Internal information arises from the routine data processing activity in the

organization and it summarizes the organizations operations. This informationcontributes for formulation of policies and making decisions for managers.

The management has total control on internal data and has a high degree ofaccuracy.

2. Externally OrganizingInformation: -The reliability of the information source is a major concern in external

information. If the source is reliable the information is supposed to be accurate, yet it iscritical for long-term decisions.

The management has little control on external information and cannot be sure of

its accuracy.

Levels of management: -

TopLevel Strategic planning

Middle level Tactical planning

First-line Management OPerational planning

a) Top-level - Senior executives. [CEO]- Play important role in establishing goals of organization.

- Interact with external environment i.e., financial institutions, politicalfigures, important suppliers and demands.

Activities of an organization

8/8/2019 Inf Sys-1

5/16

AZAD College

5

Strategic Information: -The strategic level management is mostly concerned with planning information

and control of information is very limited.Strategic information environs about population changes, natural resources, new

technologies, new products, competitors, political, legal and economic changes. Topmanagement needs strategic information for is long-term planning, which affects the

whole or a significant part of the organization over a long period of time.

b) Middle level Responsible for allocating resources.- Implement plans by supervising lowerlevel managers under

responsibility.E.g.: - Allocating money to trading, establishments, budgets to achieve sales.

Tactical Information: -

Tactical information is required for short-term planning by middle levelmanagers. Sales analysis, forecasts, budgeting, etc are tactical information. This

information arises mostly from current internal activities and from externally such ascompetitor information. Its impact is short term and affects only a department.

c) First line supervisors -Responsible for day-to-day operations.

E.g.: - Order entry, credit checking, inventory control and preventive maintenance.

Operational Information: -Operational level management requires a large amount of control information and

small amount of planning information.Operational information relates to very short period that may be a few hours to a

few weeks. It may be about current stock levels inventory, outstanding orders, workschedule for next shift, etc. This information can be generated from current activity data

arising from internal sources. This information is of immediate use and covers only a

limited area of operation of the organization.

System concept:

Fig: Parts of a System

A system may have single input and multiple outputs or may have several inputs andoutputs.

All the systems operate in an environment.

The environment may influence t

hesystem in its design and performance.

Input Process Output

Input Process Output

Envir nment

8/8/2019 Inf Sys-1

6/16

AZAD College

6

Definition:

A system is an integrated set of components, or entities, that interact to achieve aparticular function or goal.

Systems are composed of interrelated and interdependent subsystems.

E.g.: College class (consists of instructor, students, text books & facilities).or

A system is a group of interrelated components working together towards a common

goal by accepting inputs and producing outputs in an organized transformation process.A system (also called Dynamic system) has basic interacting components or

functions.

1. Input: Involves capturing and assemblingelements that enter the system to be processed.E.g.: Raw materials, data.

. 2. Processing: Involves transformation processing that converts input into output.E.g.; manufacturing process, data calculation.

3. Output: Involves transferring elements that have been produced by the transformationprocess to the ultimate destination.

E.g.: finished products, human services.

Feedback signals Feedback signals

Control signals Control signals

Fig.: Fundamental components and characteristics of a system.

Input Process Output

Control

System Boundary

E VIR ME T

OTHER SYSTEMS

ENVIRONMENT

SYSTEM

8/8/2019 Inf Sys-1

7/16

AZAD College

7

Fig: A system has one or more subsystems and an environment.

The boundaries separating are logical, not physical boundaries.

System boundaries:Every system has a boundary that defines its scope of activities.

E.g.: -Responsibility in handling class, & responsibility in managing, motivatingand evaluating the performance etc.

System boundaries are also established within a business system.Sub system:

Systems may consist of numerous subsystems, each of whichhas elements, interactionsand objectives.

Subsystems perform specialized tasks related to the overall objectives of the totalsystem. E.g.: - An education system consists of individual courses that are subsystems and

each gains different knowledge.In business system, various functions are subsystems.

E.g.: Marketing, personnel, production and finance are subsystems.Each subsystem uses its resources to meet specific objectives.

Interface:

An interface is a connection of system or subsystem boundaries.An interface serves as medium to convey the output from our system to the input of anothersystem.

E.g.: Interface between inventory control and purchasing.

SYSTEMS AND THEIRENVIRONMENT:The systems environment consists of people, organizations and other systems that supply

data or receive data from the system.Various kinds of systems may interact with the environment in different ways.

1) Open systems:( All living organisms)Operate in external environment and exchange information and material with that

environment.Open systems need to receive feedback to change and to continue to exist in its

environment.E.g.: - Marketing system operates in an environment of competition.

2) Closed systems :(All non living organisms)It is relatively self-contained and doesnt exchange information with its

environment.Closed systems do not get the feedback, as they need from the external

environment.

Subsystem

Accounting

Department

Business org.

Society at large

Logical

Boundaries

8/8/2019 Inf Sys-1

8/16

AZAD College

8

E.g.: - Training programs to graduates --- not able to get jobs --- go else wheretraining.

Differences of closed and open systems:Closed systems Open systems

1. All non-living organisms2. These systems have no interaction

with the environment.

3. These are self-contained and self-maintaining as they do not interactwith environment.

4. These are rigid & static5. These are generally mechanical6. There is no feed back mechanism

1. All living organisms2. Have interaction with the environment.3. As they interact, they import and export

output.4. Dynamic & flexible5. There are effected by environmental

factors and they have to be adjusted

according to environment.6. Feed back mechanism help to maintain a

equilibrium

System feedback:

Feedback is an indicator of current performance rates when compare to a set of

standards with effective feedback, continuing adjustments in the activities of a system canbe made to assure that the system achieves its goals.

Measuring performance against a standard is an effective control mechanism.

Feedback usually increases efforts.E.g.: Feedback of new products fare in certain markets.

Feedback of students from the examination

Input process output

Feedback

The information systems providing feedback can be used to allocate resourceseffectively, such as inventory and personnel are called tactical system.

System Entropy:

It is a state/condition that occur without maintenance.E.g.: - Employees not having opportunities to learn new concept and techniques.

The process of maintaining system means entropy is to be reduced.

System Stress and Change:Every time systems change because of new business opportunities, new technologies

and identified problems.

Systems may also change as a result of stresses. It is easier to deal wit

hchange, butstress requires rethinking existing work methods and organization.

E.g.: - To get profitability of sales manager should develop effective procedures.

E.g.: - Training and orientation programs for new employees helps to minimize the stress.

Control:

Systems have internal standards to make sure that data is processed accurately.Password security procedure is a type of control designed to protect against

authorized access and up date of data.

8/8/2019 Inf Sys-1

9/16

AZAD College

9

With out controls the data printed out on reports may be inaccurate, and managersmay not be able to trust the information system to provide valid results.

WORKINGOF A SYSTEM:

E.g. Cricket team.To achieve its objectives i.e., to win.

Manager recruit players, organizes training Programmes.

Accepts feedback from external environment to organize its resources moreeffectively. Feedback can be from sports writers, team manager, fans, and coachs givesabout their performance

Goal is to win. So recruit highly talented players New players have to be brought to fill critical positions and others need to be

retrained.Purpose of this system is to become competitive in its environment

System concepts in business:System is divided into interrelated parts called subsystems, designed to accomplish

goals.Each subsystem is a self-contained and a part of a larger system

For E.g.: -Marketing research subsystem obtains information from customers, about modification

of products and services. This Marketing Research subsystem transmits this information tomanufacturing subsystem that builds product design in its processes. Finally the marketing

subsystem sells the finished products to customer.If technical problem occurs service subsystem is need to provide follow-up support.

The interactions are below:

Market Research subsystem:

Manufacturing subsystem:

Marketing subsystem:

Service subsystem:

SYSTEM APPROACH TO PROBLEM SOLVING:E.g.:(Dealers of Micro computers)

The system approach is a valuable method of problem solving that takes into

accounts the goals, environment and internal working of the system.

Input Process Output

Input Process Output

Input Process Output

Input Process Output

Customer

Needs

Finished

Goods

Product

In use

8/8/2019 Inf Sys-1

10/16

AZAD College

10

Following are the steps for problem solving.1.Define the problem.2.Gather data describing the problem.3. Identify alternative solutions.4.Evaluate these alternatives.5.Select and implement the best alternative.6.Follow up to determine where the solution is working.

1.Define the problem:-A problem well defined is half solved.

-Wrong problem is identified and important parts of the system study.[Sales people not meeting the sales quota] Problem identified.

2.Gather data describing problem:

-Collecting more information about the identified problem.-Input resources should be analyzed.

-Work methods and procedure also need to be studied.-Identify competitors environment.

[Competitors are charging lower prices].... Gathered data.

3.Identify alternative solutions:Alternative 1: Investigate alternative manufactures of microcomputers to obtain product

at a lower cost/unit.Alternative 2: Decrease cost of sales by introducing mail order.

Use sales persons for large accounts only.Each alternative supports different strategy. Find lower cost manufactures goods.

4.Evaluate the alternatives:

-Evaluate each alternative so that organization to achieve its objectives.

-Owners objective is to increase sales, lower cost products.-Final alternative would offer customers additional levels of service and technicalsupports that add value to the firms product.

5. Select and implement the best alternative:

Owner decides to develop and implement a program to reduce the cost of salesoverhead. Also provide billing and authorizing credit transactions.

6. Follow up to determine whether the solution is working:

-Last step is follow up-Owner needs to determine whether the system is meeting its goals or not. If not,

make changes in management standard resources and procedures to ac

hieve t

heobjectives.

-Every manager needs feedback to determine whether the goals of the system arebeing achieved or not.

USINGINFORMATION SYSTEMS FORFEEDBACK: -

Business environment is making it necessary to use Information Systems to providefeedback.

8/8/2019 Inf Sys-1

11/16

8/8/2019 Inf Sys-1

12/16

AZAD College

12

2.Mental models: It includes biases, predispositions and prejudices that get in the wayof clear communications, open inquiry and learningful conversations.

3.Building shared vision: It binds people together around a common identity and asense of destiny; where there is a vision people bind together not because they are

told to, but because they want to.4.Team learning: Teams are the fundamental learning units in most of the

organizations. Unless teams can learn the organization cannot learn.

5.Systems thinking: It is essential to achieve the vision of the organization. The visionof the future cannot be achieved without an understanding of the forces that must bemastered to achieve these goals, and the systems approach provides this

understanding.

II.Frame workforInformation Systems: -

1.Operational Systems: -- Primary concern to collect, validate and record transactional data describing

acquisition.

E.g.: - Financial data like accounts receivable, payable, payroll and receipts.- For sales invoice is generated- Involves in order processing, inventory and billing. (Original transactions)

Characteristics ofOperational Information Systemsa) Repetitiveness Information is generated at periodic intervals, such as daily,

weekly or monthly.b) Predictability Information usually does not contain any surprises or unexpected

results. E.g.: - Customers are billed for what they purchased during the month.c) Emphasis on the past Information describes past activities of the organization.

E.g.: - Pay roll system, stock reports, invoices, etc.d) Detailed nature Information with all necessary data.

E.g.: - Customers invoices (consists of data ordered, purchased, quantity, price etc.)e) Internal data Data on internal sources i.e., internal documents.

E.g.: - Time cards, employee master records.f) Structured form Data input is generally structuredg) Great accuracy Input and output information is highly accurate and carefully

checked.

2.Tactical Systems: -

Strategic

Planning

(Long-range

Plans)

Tactical(Budget

Plans)

Operations

(Day-to-day

transactions)

Support for

decisions

Demandreports

Scheduled

reports

8/8/2019 Inf Sys-1

13/16

AZAD College

13

For middle level managers the information need is to monitor and controloperations and to allocate their resources effectively.

Tactical systems generate a variety of reports. They are:

1) Summary reports Provide management with important total, averages onthe activities of the organization.

E.g.: - Total weekly sales, by person, by product, by region, etc.

2) Exception reports Warns managers when results from a particularoperation exceeds or likely to exceed.E.g.: - Overtime hours, sales personnels sales are decreased.

3) Adhoc reports Reports that managers need, usually quickly, that maynever be needed again. This is to solve a unique problem.

E.g.: - Total number of employees absent during the week.

Characteristics of Tactical Information Systems: -a) Periodic nature Information produced periodically.

E.g.: Weekly reports- Can also produce information when it is needed, i.e., Adhoc reports.

b) Unexpected findings - Produce unexpected information.E.g.: Difficulty is due to the relationship with the type of position and type of

employer ---- for creditc) Comparative Nature - Information is comparative rather than merely descriptive.

E.g.: feed back of any system, comparing last month sales with this month.d) Summary form - Not detailed, but in a limited form

E.g.: Reports on credit balances that are over due.

3.Strategic planning systems: -These provide by top managers to make long-range planning decisions for the

organizations.

Characteristics of Strategic Planning Systemsa)Adhoc basis Information may be produced either regularly or periodically.

E.g.: Balance Sheet, Income Sheet.b)Unexpected informationUnexpected information produced by a system.

E.g.: Economic forecast.c)Predictive nature - Information is usually of future events rather than descriptive of

past events.d)Summary form - Long-range planners are not usually interested in detailed

information.e)External Data - Data used for input to the system maybe acquired from sources

external to the organization.E.g.: Rates of borrowed Capital, political, Govt., customers, suppliers

f) Unstructured format - Data used for input to the system may contain data that areunstructured in format.

E.g.: Opinion of Sales people, store buyers.

III.Evolution ofData ProcessingInformation Systems: -

8/8/2019 Inf Sys-1

14/16

AZAD College

14

Data processing was introduced to automate specific tasks. The evolution of dataprocessing was given by Nolan in his article Managing the crises in Data Processing.

The growth of Data Processing involves:1. Growth in technology and application development.2. Growth in planning and control strategies.3. Changes in user involvement.The evolution of data processing depends on achieving a balance among technology,

application development, user involvement and organizational control.Nolan has given a Six-stage theory in order to experience the growth characteristics in

the organization.1. Initiation2. Contagion3. Control4. Integration5. Data administration6. Maturity

1.Initiation: In this stage cost effective transaction processing systems like accountsreceivable and payroll are introduced. It requires technical specialists from accounting

department. This stage has few controls over data processing expenditure and usershave hands off attitude.

2.Contagion: In this stage a proliferation of applications occurs and data processingspecialists will be given the go-ahead to pursue different automation opportunities. In

this stage expenditures will be increased (i.e., for computers and personnel) socorporate management is concerned about the benefits for the investment in

information systems.3.Control: To control data processing expenditures management organizes steering

committees with representatives from user areas, who become responsible for setting

priorities for application development projects. MIS controls all its internal activities;makes project development plans and system development activities.

4.Integration: Existing information systems are integrated by using database andtelecommunications technologies.

5.Data administration: Introduction of data base technologies shifts from traditionalfiles supporting one application to design logical database supporting multipleapplications.

6.Maturity: Due to arriving new technologies and competitors a number of changes willoccur

IV. STRATEGIC USES OFINFORMATION SYSTEMS:

These are goal oriented i.e., t

hese systems are designed to support organizationalgoal and direction setting.

Decisions that will impact on organization for more than a year are often viewed asstronger.

E.g.: Long term forecasting, market research and technology, planning and assessment

1. To improve operational efficiency --- cut cost and improve the quality and deliveryof its products or services. E.g.: Computerized.

8/8/2019 Inf Sys-1

15/16

AZAD College

15

2. To promote business innovation --- production of new products, services (ATM)and processes (CAD).

3. To build strategic information resources --- to meet challenges from thecompetitive forces to confront any organization.

UsingInformation Technology for Competitive Advantage: -

Due to increasing development in Information Technology (E.g.: -

Telecommunications, computer-aided design and office automation) organizations arelooking for new business opportunities and strategies.

Gregory parsonshave given three-level framework to help managers to assess the

current and potential effect of Information Technology.The three levels that affect IT are:

1.Industry level2.Firm level

3.Strategy level1. Industry level: IT changes the nature of the industry, where the firm competes

with other firms. IT at Industry level effect on:a) Products and Services: IT changes the nature of the product and services by

altering the product development cycle or by increasing the speed of thedistribution.

E.g.: - Videoconferencing --- used in chain hotels.Computer based word processing

b) Production economics: IT changes the nature of the production economics.E.g.: - National wide Inventory tracking

c) Markets: IT changes the nature of markets, as many consumers are computerliterate.

E.g.: - ATMs (Automated Teller Machine)POS systems (Point Of Sale)

2. Firm level: There are five competitive forces, which determine the effect of

InformationT

echnology.

a)Buyers: This force reduces industrys profit, which can be controlled byinformation technology using introducing switching costs.

E.g.: - Analyze buyer profitabilityAnalyze the profitability of specific market groups

b)Suppliers: Firms can compete more effectively if there are able to control thepower of suppliers.

E.g.: - Robots used in productionc)Substitute products: Customer finding cost-effective substitute products and

services will hurt the firms profits. So, firm should reduce cost in order not togo to substitute products.

d)New entrants:New entrants can draw profits from firms in an industry, if theycreate effective entry barriers by constructing on-line telecommunication

systems networks.E.g.: - Airline industry with on-line reservation systems.

e)Rivals: All industries have competitors, and are valuable because it enables toestablish profits from successful firms.

E.g.: - ATM network, on-line reservation systems

3. Strategy level: The three generic strategies to achieve competitive edge are:

8/8/2019 Inf Sys-1

16/16

AZAD College

16

a)Low-cost leadership: It is the ability to reduce costs or to improveproductivity with out incurring additional costs.

E.g.: -Office automation, Inventory Control SystemsProduction control systems

b)Product differentiation: It is an added value orhaving unique features to aproduct to improve its image, quality or service.

E.g.: - Computer-aided Design is used in shoe, automobiles for better

quality product designs.c)Market specialization: It is achieved by concentrating on a particular market

(Niche product) i.e. it provides information about the profitability of specific

market segments, which enables manufactures to address these specific needs.E.g.: - Electronic library access

The Strategic Impact of the Internet and Electronic Commerce: -Internet is a worldwide entity, which is defined as network of networks, communicating

among all computers connected to these networks.It provides the infra structure for a variety of functions such as e-mail, web access and

file transfer to the World Wide Web.E-Commerce is associated with the buying and selling of information, products and

services via computer networks (Internet).Electronic commerce is a modern business methodology, which addresses the need of

organizations, merchants, and consumers to cut costs for improving the quality of goods andservices and increasing the speed of service delivery. Using these computer networks corporate

people can retrieve information for decision-making.

Business uses of the Internet (Electronic Market place): -1. Globalization: -

As companies move into the international market place, the Internet provides a

global communications network i.e., creating a global business.Th

e Internet allowscompanies of any size to interact customers on a worldwide basis.

2. Competitive advantage: -

Using Internet as a marketing tool, businesses can provide up-to-dateinformation about products, technological developments and research of prospective

customers of users.3. Information access: -

Businesses can access information, including government databases, industrystatistics and competitors.

4. Cost containment: -Doing business electronically is much less expensive than using paper

communications, phone contact and information by mail.5. Sales and marketing: -

Customers can obtain information about products, services, advertisements,prices, schedules, contact persons, service capabilities and business opportunities.

6. Electronic communications: -Business accesses to an international electronic communications network that

facilities communications and interactions among customers, vendor and competitors.