Assignment

Why information Technology is needed?

TYPES OF INFORMATION SYSTEMS

Type of Information system

Information systems differ in their business needs. Also depending upon different levels in organization information systems differ.

The information needs are different at different organizational levels. Accordingly the information can be categorized as: strategic information, managerial information and operational information

Type of Information system

Figure - Relation of information systems to levels of organization

Strategic information

Strategic information is the information needed by top most management for decision making. For example the trends in revenues earned by the organization are required by the top management for setting the policies of the organization. This information is not required by the lower levels in the organization. The information systems that provide these kinds of information are known as Decision Support Systems.

Management Control

The second category of information required by the middle management is known as managerial information. The information required at this level is used for making short term decisions and plans for the organization.

Information like sales analysis for the past quarter or yearly production details etc. fall under this category.

Management information system (MIS) caters to such information needs of the organization. Due to its capabilities to fulfill the managerial information needs of the organization, Management Information Systems have become a necessity for all big organizations. And due to its vastness, most of the big organizations have separate MIS departments to look into the related issues and proper functioning of the system

Operation control

The third category of information is relating to the daily or short term information needs of the organization such as attendance records of the employees.

This kind of information is required at the operational level for carrying out the day-to-day operational activities.

Due to its capabilities to provide information for processing transaction of the organization, the information system is known as Transaction Processing System or Data Processing System.

Some examples of information provided by such systems are processing of orders, posting of entries in bank, evaluating overdue purchaser orders etc.

Classification of IS

Information Systems

Operations Support System Management

Support System

Transaction processing systems

Process control systems

Office automation systems

Management information systems

Decision support systems

Executive information systems

Transaction Processing Systems

A Transaction Processing System (TPS) is a type of information system that collects, stores, modifies and retrieves the data, transactions data of an enterprise.

TPS system are designed to process routine transaction efficiently and accurately.

Transaction can be any activity of the organization. Transactions differ from organization to

organization. For example, in a railway reservation system.

Booking, canceling, etc are all transactions. Any query made to it is a transaction.

Transaction Processing Systems

Example of TPS include- Customer billing system Weekly and/or monthly payroll system Production and purchasing system to calculate

raw material requirement. Automatic Teller Machine(ATM)

Features of Transaction Processing Systems

The success of commercial enterprises depends on the reliable processing of transactions to ensure that customer orders are met on time, and that partners and suppliers are paid and can make payment. The field of transaction processing, therefore, has become a vital part of effective business management.Transaction processing systems offer enterprises the means to rapidly process transactions to ensure the smooth flow of data and the progression of processes throughout the enterprise.

Typically, a TPS will exhibit the following characteristics: Rapid Processing

The rapid processing of transactions is vital to the success of any enterprise – now more than ever, in the face of advancing technology and customer demand for immediate action.

TPS systems are designed to process transactions virtually instantly to ensure that customer data is available to the processes that require it.

Features of Transaction Processing Systems

Reliability Similarly, customers will not tolerate mistakes. TPS systems must be designed to ensure that not only do transactions never slip past the net, but that the systems themselves remain operational permanently.

TPS systems are therefore designed to incorporate comprehensive safeguards and disaster recovery systems. These measures keep the failure rate well within tolerance levels.

Standardization Transactions must be processed in the same way each time to maximize efficiency. To ensure this, TPS interfaces are designed to acquire identical data for each transaction, regardless of the customer.

Controlled Access Since TPS systems can be such a powerful business tool, access must be restricted to only those employees who require their use. Restricted access to the system ensures that employees who lack the skills and ability to control it cannot influence the transaction process.

Transactions Processing Qualifiers

In order to qualify as a TPS, transactions made by the system must pass the ACID test. The ACID tests refers to the following four prerequisites: Atomicity Atomicity means that a transaction is either completed in full or not at all. For example, if funds are transferred from one account to another, this only counts as a bone fide transaction if both the withdrawal and deposit take place. If one account is debited and the other is not credited, it does not qualify as a transaction. TPS systems ensure that transactions take place in their entirety.

Transactions Processing Qualifiers

Consistency TPS systems exist within a set of operating rules (or integrity constraints). If an integrity constraint states that all transactions in a database must have a positive value, any transaction with a negative value would be refused.

Isolation Transactions must appear to take place in isolation. For example, when a fund transfer is made between two accounts the debiting of one and the crediting of another must appear to take place simultaneously. The funds cannot be credited to an account before they are debited from another.

Transactions Processing Qualifiers Durability

Once transactions are completed they cannot be undone. To ensure that this is the case even if the TPS suffers failure, a log will be created to document all completed transactions.

These four conditions ensure that TPS systems carry out their transactions in a methodical, standardised and reliable manner

Types of Transactions

While the transaction process must be standardised to maximise efficiency, every enterprise requires a tailored transaction process that aligns with its business strategies and processes. For this reason, there are two broad types of transaction:

Batch Processing Batch processing is a resource-saving transaction type that stores data for processing at pre-defined times. Batch processing is useful for enterprises that need to process large amounts of data using limited resources.

Examples of batch processing include credit card transactions, for which the transactions are processed monthly rather than in real time. Credit card transactions need only be processed once a month in order to produce a statement for the customer, so batch processing saves IT resources from having to process each transaction individually.

Types of Transactions

Real Time Processing In many circumstances the primary factor is speed. For example, when a bank customer withdraws a sum of money from his or her account it is vital that the transaction be processed and the account balance updated as soon as possible, allowing both the bank and customer to keep track of funds.

DIFFERENT TYPES OF FILE IN TPS

In a TPS, there are 5 different types of files. The TPS uses the files to store and organize its transaction data:

Master file: Contains information about an organization’s business situation. Most transactions and databases are stored in the master file.

Transaction file: It is the collection of transaction records. It helps to update the master file and also serves as audit trails and transaction history.

Report file: Contains data that has been formatted for presentation to a user.

Work file: Temporary files in the system used during the processing.

Program file: Contains the instructions for the processing of data.

Application of TPS in Functional Areas

Sales and marketing : system objective is to support the sales and marketing function in an organisation by facilitating the movement of goods and services from manufacturer to the eventual customer. Ex.are

Sales Management Market research Sales support – keep customer record Telemarketing – use phone for selling Order processing – purchase order, produce invoices Point of sale – capture sales data at cash register often by

scanner Improve customer service Maintain customer data Promotion pricing of new products

Application of TPS in Functional Areas

Manufacturing and production system: systems that supply data to operate, monitor and control the production process. Example includes:

Material resource planning system Purchase order control system Engineering system Quality control system Inventory management Resource management

Application of TPS in Functional Areas

Accounting and finance system: system that maintains financial records and are concerned with the flow of funds within and outside the organisation and produce necessary reports like income statements, balance sheet, general ledger etc. example include:

Cash management system Payroll system Accounts receivable and payable system Loan management system Tax calculation system Fund management system

Application of TPS in Functional Areas

Human resource system: System that deals with employee management related process like recruitment, performance evaluation etc. examples include:

Compensation management Training and development system Personnel record keeping system Employee tracking system

Management Information Systems

MIS supports the information needs of middle level or tactical level managers in an organisation.

A MIS is mainly concerned with internal source of information .

MIS usually takes data from the TPS and summarize or aggregate or analyse the data into a series of management reports.

Basic purpose of these information systems is to monitor and control day to day operation and to allocate resources effectively. Ex. Of MIS

Monthly sales report Regional or departmental reports Product level Inventory.

MIS reports

The major MIS reports that are generated by organisations include Periodic reports, Exception reports, Demand reports and Push reports.

Periodic reports are generated at regular intervals like payroll summery report at the end of very month.

Exception reports are control report used by tactical level managers to monitor their business activities.

Demand reports are the ad hoc reports that are generated as per the need of a specific manager, which are not part of periodic reports.

Push reports are the reports that are periodic reports meant for a set of mangers, but are pushed to other managers for necessary action.

MIS reports

Management Information System

Reports

Periodic Reports

Exception Reports

Push ReportsDemand Reports

DSS

Decision Support System

A Decision Support System (DSS) is a class of information systems (including but not limited to computerized systems) that support business and organizational decision-making activities. A properly designed DSS is an interactive software-based system intended to help decision makers compile useful information from a combination of raw data, documents, personal knowledge, or business models to identify and solve problems and make decisions.

Decision support system are specifically designed to help the top level or strategic level managers to take decision.

DSS supports the decision making process of these managers but do not take decision.

DSS is widely used for structured, semi structured and unstructured decision situation.

Decision Support System

It is more useful in the situation where there is uncertainty about the possible outcome of those decisions.

DSS comprise modeling tools and techniques to help gather relevant information for analysis to generate alternatives .

DSS often involve use of mathematical, statistical and financial model using various decision modeling software's.

Any spreadsheet software like Microsoft excel or SPSS is the best example of DSS.

Example of DSS

Insurance companies use DSS for customer buying patterns, fraud detection

Banks use is for analyzing customer profiles. Fast moving Consumer Goods(FMCG) companies

use DSS for pricing, advertising, promotions, selection.

Railways use DSS for train dispatching and routing.

Airline use DSS for flight scheduling, passenger demand forecasting.

Categories of DSS

Broadly DSS are categorised as Data Driven DSS and Model Driven DSS.

Data Driven DSS are those that help manager to take decision with the help of data extractions from large database.

This technique is used only if large amount of data is available for extraction purpose which help in decision making. Ex: Determine the buying behavior of the customer.

The Model Driven DSS approaches uses most scientific modeling techniques for pattern identification.

Again Model Driven approach is also dependent on rich database.

This approach helps in doing what-if, sensitivity analysis etc. Ex: Forecast future sales demand

DSS MODELS

Behavioural Models Management Science Models Operation Research(OR) Models

Behavioural Models

These models are useful in understanding the behaviour amongst the business variables.

The decision maker can then make decisions giving due regards to such behavioural relationship.

The trend analysis, forecasting, and the statistical analysis models belong to this category.

The trend analysis indicates how different variables behave in trend setting in the past and hence in the future.

A regression model shows the correlation between one or more variables.

It also helps in identifying the influence of one variable on another. These type of model largely used in process control,

manufacturing, agricultural sciences, medicines, psychology and marketing.

This can be used to set the points for alert, alarm and action for the decision maker.

Management Science Models

These models are developed on the principle of business management, accounting and econometrics.

In many areas of management, the proven methods of management control are available which can be used for the management decision

Ex: The budgetary system, the cost accounting system.

Operation Research(OR) Models

The Operation Research(OR) Models are mathematical models.

These models represent a real life problem situation in terms of the variables, constants and parameters expressed in algebraic equations.

Since the models are mathematical, there are solutions to these problems.

In arriving the solution, methods of calculus, matrix algebra, probability and set theory are used.

These models have a clarity to the extent that each of them has a set of assumptions which must be true in real life.

Further if the assumptions are valid, the solution offered are realistic and practical, the model represents the real life problem situations.

Benefits of DSS

Ability to view data / information in different dimensions and sensing the problem, trend, pattern through different views.

Ability to understand and assess business performance and various results in terms of cause and effect and enabling to define the problem.

Ability to understand the problem and its ramifications, and ability to judge the impact on business.

Ability to assess the impact of any change in the business performance and enabling to focus on the areas where impact is negative.

Ability to view a complex scenario or problem and to design a model to analyse the problem, develop alternative to solve the problem, test the solution and to conduct sensitivity analysis.

Ability to make better decision due to quick analysis, modelling , developing alternatives and testing for solution.

Ability to control the risk exposure in decision.

Benefits of DSS

Improves personal efficiency Expedites problem solving (speed up the progress of

problems solving in an organization) Facilitates interpersonal communication Promotes learning or training Increases organizational control Generates new evidence in support of a decision Creates a competitive advantage over competition Encourages exploration and discovery on the part of

the decision maker Reveals new approaches to thinking about the

problem space Helps automate the managerial processes.

Summary of Information Systems

Categories of Information System

Characteristics

Transaction Processing System Substitutes computer-based processing for manual procedures.

Deals with well-structured processes. Includes record keeping applications.

Management information systemProvides input to be used in the managerial decision process. Deals with supporting well structured decision situations. Typical information requirements can be anticipated.

Decision support system Provides information to managers who must make judgments about particular situations. Supports decision-makers in situations that are not well structured.

EXECUTIVE INFORMATION SYSTEM

ESS/EIS

An Executive Information System is designed to help top level or strategic level managers in an organization.

ESS are designed to take strategic decisions by sing and analyzing the key internal and external information used in the business.

Sometime, it is also referred as an Executive Information System (EIS), as it provides executive information in a readily accessible, interactive format.

They are a form of MIS intended for top level executive use.

An ESS/EIS helps in generating summery report of the entire organisation and if desired, one can drill the report to specific level of detail.

EIS IS …..

A computer-based system that serves the information needs of top executives

Provides rapid access to timely information and direct access to management reports

Very user-friendly, supported by graphics Provides exceptions reporting and "drill-down" capabilities Easily connected to the Internet Drill down

EIS IS …..

Corporate-wide system Provides holistic information From a corporate view Part of enterprise resource planning (ERP) systems For business intelligence Leading up to enterprise information portals and knowledge

management systems

CHARACTERISTICS OF EIS

Serves the strategic level Address unstructured decisions and involve a

generalized computing and communication environment rather than fixed application

Dependent on internal and external information Make less use of analytical models Are more oriented towards external events More graphic oriented Suggests nature of business to be undertaken Gives information about the activities of

competitors

Benefits of EIS

Facilitates the attainment of organizational objectives.

Facilitates access to information Allows the user to be more productive Increase the quality of decision making Provide a competitive advantage Saves time for the user Increase communication capacity Increase communication quality Provides better control in organisation Allow planning Allows a search for the cause of a problem Meets the needs of executive

Future of Executive and Enterprise Support Systems

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Toolbox for customized systems Multimedia support Better access (via PDFs and cell phones) Virtual Reality and 3-D Image Displays Merging of analytical systems (OLAP / multidimensional

analysis)) with desktop publishing Client/server architecture Web-enabled EIS Automated support and intelligent assistance Integration of EIS and Group Support Systems Global EIS Integration and deployment with ERP products