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Foundation of information
System in businessModule -01
Ptd By Mr.Lokesh K N
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What is Information System
Information System plays a crucial role in themanagement of enterprise
In this fast changing world quality, timeliness,
innovation, customer orientation is moreimportant to translate demand into realizablegoals.
Thus large portion of world has its stake
information system.
Information system is a centre stage of modernmanagement.
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What is Information System
Management emphasize the effective use of
information system for managerial decision
making rather than merely stressing on
technology
Information highlight on processed data
rather than raw data
Systems emphasizing a fair degree of
integration & a holistic view
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Information System Defined
As an integrated system of man & machine
for providing the information to support the
operation, the management & decision
making function in the organization
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Definition emphasizes
Organization wide information
Decision support
Managerial emphasis
Computer based systems.
So basic knowledge of information system is
almost becoming a generic skill needed by
every professional.
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Uses of IS
Gaining competitive advantage
Balancing market strength
Increasing market shares Acquire more attractive finance
Introducing new products & services
Loyal customers
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Data vs. Information
Data
Raw facts
Distinct pieces of information, usually formatted in a
special way
Information
A collection of facts organized in such a way that they
have additional value beyond the value of the facts
themselves
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Examples
Data thermometer readings of temperature
taken every hour:
16.0, 17.0, 16.0, 18.5, 17.0,15.5.
Informationtodays high: 18.5todays low: 15.5
Transformation
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Types of Data
Data Represented by
Alphanumeric data Numbers, letters, and other characters
Image data Graphic images or pictures
Audio data Sound, noise, tones
Video data Moving images or pictures
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Data Information
Data InformationTransformation
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Characteristics of Information Timeliness: Information must reach the user ina timely manner, just when it is needed; not too
early, not too late Appropriateness: Information must be relevant
to the person who is using it.
Accuracy: Accuracy costs. We don't always need100% accurate information so long as we knowthe degree of accuracy it represents (eg: + or -5%). (Remember the value of information).
Conciseness: Information should always containthe minimum amount of detail that isappropriate for the user. Too much detail causesinformation overload.
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Frequency: Frequency is related to timeliness.How often the information required. Itsfrequency should be synchronized with the
timing of the decision making of the user. Understandability: The format and presentation
of information are very important.
Complete: All the relevant parts are included.E.g. marketing data about household incomesmay lead to bad decisions, if not accompanied byconsumption habits of the target population.
Current: Decisions are often based on thelatest information available.
Economical: The costs of gathering informationshould be justified by the overall benefits
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Nature of Modern Business
Large size
Oligopolistic character
Diversified Global reach
Technology oriented
Change Govt control
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System
A set of interconnected elements toachieve a common objective
Elements are interrelated andinterdependent
Composed of sub-systems, which in turnmay be made up of other subsystems
The set of elements may be: Input(s),
Process(es), or output(s)
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A system cannot exist in vacuum
It exists and functions in an environment,
separated by its boundary Open system: interacts with its environment,
exchanges inputs and outputs
Closed systems: do not interact, or exchange anyinputs or outputs with its environment
Info system converts data into information
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Information Systems
An information system(IS) is typically considered to bea set of interrelated elements or components that
collect(input), manipulate(processes), and disseminate
(output) data and information and provide a feedback
mechanism to meet an objective.
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Ir. Muhril Ardiansyah, M.Sc., Ph.D. 18
What Is A System?
Systems have three basic functions:
1. Input:
Involves capturing and assembling elementsthat enter the system to be processed.
Example: - raw materials,
- energy,- data.
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Ir. Muhril Ardiansyah, M.Sc., Ph.D. 19
What Is A System? (continued)
Systems have three basic functions (continued):
2. Processing:
involves transformation processes that convert input
into output.
Example: - manufacturing process,
3. Output:
involves transferring elements that have been
produced by a transformation process to their
ultimate destination.
Example: - finished products,
- human services
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Chapter 1 Foundations of
Information Systems in
Business
20
A Business as a System
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Organization Structure
Development of good information system call fordeep understanding of the structure & dynamicsof the organization.
Organization is an arrangement of people in aninstitution based on concept of division of labour,authority, responsibility & decision making withthe objective of attaining corporate goals.
Mr. Anthony, a mgmt theorist classified
organization management into 3 levels Strategic
Tactical
operational
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Operational level
Making routine day to day decisions
Address well structured problem
Information internal to the organization
Processing of large data
Primary attribute is efficiency
Tactical level
Decision taken by middle mgmt staff & have medium &long term impact
E.g. performance analysis, budget analysis, vendor rating.
Summarized organization wide information required ( bothinternal & external)
Need is quality of information
Less structured, flexible & critical data
Mix of effectiveness & efficiency
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Strategic level
Long term implication
E.g. diversification, new plant location, techacquisition, strategic alliance.
Strategic decision enable organization to reach
zenith of success or destruction Calls for unstructured, uncertain external
information
Information should be extremely adaptive,
flexible & insightful.
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What Is An Information System?
An Information System can be
any organized combination Of:
- people,
- hardware,- software,
- communications networks,
- policies.
This system
Stores, retrieves,
transforms, and
disseminates information
in an organization
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Figure 1.6 Components of an information system
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Fundamental Roles of IS in Business
There are three fundamental role:
Support of its business
processes and operations.
Support of decision
making by its employees
and managers. Support of its strategies
for competitive advantage.
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Trends in Information Systems
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Trends In Information Systems:
1. Data processing: 1950s 1960s
- electronic data processing systems
-- transaction processing, record keeping,
and traditional accounting applications.
2. Management reporting: 1960s 1970s
- management information systems-- management reports of pre specified
information to support decision making.
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Trends In Information Systems (continued):
3. Decision support: 1970s 1980s
- decision support systems
4. Strategic and User Support: 1980s 1990s
- end user computing systems
- executive information systems
- expert systems
- strategic information systems
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Trends In Information Systems (continued):
4. Electronic Business and Commerce: 1990s
2000s
- internet based e business and e
commerce systems
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The IS (Information System) Functions:
A major functional area of business equally as
important to business success, as the function
of:
- accounting,
- finance,
- operations management,
- marketing,
- human resource management.
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Chapter 1 Foundations of
Information Systems in
Business
33
The IS Function
The IS function is A major functional area of business
An important contributor to operational efficiency,
employee productivity, morale, customer service and
satisfaction A major source of information and support for decision
making
A vital ingredient in developing competitive products
and services in the global marketplace A key component of todays networked business
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Chapter 1 Foundations of
Information Systems in
Business
34
Purposes of Information Systems
l f f
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Classification of IS
Information Systems
Operations Support
System
Management Support
System
Transactionprocessing
systems
Officeautomation
systems
Management
information
systems
Decisionsupport
systems
Executiveinformation
systems
Expert
System
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1) Transaction processing systems
1) Process business exchanges
2) Maintain records about the exchange
3) Handle routine, yet critical, tasks
4) Perform simple calculations
2) Office automation systems automate officeprocedures and enhance office communicationsand productivity.
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Management information systems
Routine information for routine decisions
Operational efficiency Use transaction data as main input
Databases integrate MIS in different functionalareas
Decision Support System
Interactive support for non-routine decisions orproblems
End-users are more involved in creating a DSSthan an MIS
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Executive information systems
provide critical information tailored to the
information needs of executives
Expert Systems
are knowledge-based systems that providesexpert advice and act as expert consultants to theusers
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MIS Characteristics:
System approach Takes Comprehensive view in the light of its
objective
Management oriented Top down approach followed
Derived from the overall business objectives
Need based Caters to info needs at different levels
Exception based
Exception based reporting principle
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Futuristic
On the basis of projections
Integrated Blends info from several operational areas
Common data flows
Should avoid data duplication and redundancy Long term basis
Strive to be futuristic
Divide and conquer
Use partitioning into subsystems
Central database
Let subsystems access the master data
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MIS Functions:
Data capturing
Processing of data
Storage
Retrieval
Dissemination of MI finished product of
MIS