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Unit 1 : Lesson - 1
Information Systems in Business
Unit 1: INFORMATION SYSTEMS IN BUSINESS
Information system - Systems concepts - Classification and Types of
Information Systems - Information Systems components:
Hardware, Software, Network, Database, People and Procedure -
Translating business objectives into Information System
Architecture.
MS613
MANAGEMENTlNFORMATlON
SYSTEMS
T. Subramanaian M.A., M.B.A., M.C.A., PMP., {PhD)
Associate Professor,
Department of Management Studies
2
PrinciplesandLearningObjectives PrinciplesandLearningObjectives PrinciplesandLearningObjectives PrinciplesandLearningObjectives
Identify the major steps of the systems
development process and state the goal of
each.
Discuss why it is important to study and
understand information systems.
System users, business managers, and
information systems professionals must
work together to build a successful
information system.
Identify the basic types of business
information systems and discuss who uses
them, how they are used, and what kind of
benefits they deliver.
Knowing the potential impact of information
systems and having the ability to put this
knowledge to work can result in a
successful personal career, organizations
that reach their goals, and a society with a
higher quality of life.
Name the components of an information
system and describe several system
characteristics.
Identify four basic types of models and
explain how they are used.
Models, computers, and information systems are
constantly making it possible for
organizations to improve the way they
conduct business.
Distinguish data from information and
describe the characteristics used to
evaluate the quality of data.
The value of information is directly linked to
how it helps decision makers achieve the
organizations goals.
Learning Objectives Principles
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lnformationConcepts lnformationConcepts lnformationConcepts lnformationConcepts
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lnformationsystemsandtheirroleina
businessenterprise
The objective of any management is to achieve the
organizational goal, in the process we will be
utilizing the scarce resources viz. men, material,
machines, money; effectively and efficiently.
This is possible through proper planning and
efficient Decision Naking. Nanagement !nformation
is another resource which is provided by
!nformation Technology to the modern manager in
aiding decision making process.
Latest tools provided by the information
technology, not only aid the manager in the
process of decision making, but also suggest
alternative solutions and guide him in taking
decisions.
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lnformationSystem
An !nformation System is a collection of
components that work together to provide
information to help in the operations and
management of an organization.
!nformation Technology is the integration of
computers, communications equipment, and
other technology used in information
systems.
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Datavs.lnformation Datavs.lnformation Datavs.lnformation Datavs.lnformation
Data: raw facts
Information: collection of facts organized
in such a way that they have value beyond
the facts themselves
!nformation is one of the organization's
valuable resource.
Good decisions require good information.
!nformation is derived from raw data
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Data: Streams of raw facts representing events such
as business transactions
!nformation: Clusters of facts that are meaningful
and useful to human beings in the processes such as
making decisions
Data and Information
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Characteristics of valuable !nformation
Accurate, timely, relevant information is the key
for good decision making
The value of !nformation
Good decision making is the key to
organizational survival.
lnformation:lmportantResource
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TheCharacteristicsofValuable TheCharacteristicsofValuable TheCharacteristicsofValuable TheCharacteristicsofValuable
lnformation lnformation lnformation lnformation
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TheCharacteristicsofValuable TheCharacteristicsofValuable TheCharacteristicsofValuable TheCharacteristicsofValuable
lnformation lnformation lnformation lnformation
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PrinciplesandLearningObjectives PrinciplesandLearningObjectives PrinciplesandLearningObjectives PrinciplesandLearningObjectives
Identify the major steps of the systems
development process and state the goal of
each.
Discuss why it is important to study and
understand information systems.
System users, business managers, and
information systems professionals must
work together to build a successful
information system.
Identify the basic types of business
information systems and discuss who uses
them, how they are used, and what kind of
benefits they deliver.
Knowing the potential impact of information
systems and having the ability to put this
knowledge to work can result in a
successful personal career, organizations
that reach their goals, and a society with a
higher quality of life.
Name the components of an information
system and describe several system
characteristics.
Identify four basic types of models and
explain how they are used.
Models, computers, and information systems
are constantly making it possible for
organizations to improve the way they
conduct business.
Distinguish data from information and
describe the characteristics used to evaluate
the quality of data.
The value of information is directly linked to
how it helps decision makers achieve the
organizations goals.
Learning Objectives Principles
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SystemandModeling SystemandModeling SystemandModeling SystemandModeling
Concepts Concepts Concepts Concepts
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System System System System
A set of elements or components that
interact to accomplish goals
Input
Processing mechanism
Feedback
Output
System boundary
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ComponentsofaSystem ComponentsofaSystem ComponentsofaSystem ComponentsofaSystem
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SystemConcepts
A system is a set of related elements that
collectively work together to achieve some
common purpose or goal.
A system is an interrelated set of business procedures used
within one business unit, working together for some purpose
for example - !nventory systems keeps track of purchases and
supplies. The systems takes input from outside, process it and
sends the resulting output back to its environment.
System has certain key features, such as
environment, boundaries, !nput, Output,
transformation process, interrelated
components, interfaces and purpose
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Components
Interrelation
Boundary
Purpose
Environment
Interfaces
Constraints
Input
Output
keyfeaturesofSystem
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SystemandModelingConcepts SystemandModelingConcepts SystemandModelingConcepts SystemandModelingConcepts
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SystemsClassification SystemsClassification SystemsClassification SystemsClassification
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Systemsthinking
viewing organization in terms of
suborganizations or subsystems
A framework for problem solving and
decision making
Nanagers focus on overall goals and
operations of business
Understand data and information flow
within an organization
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Notes:Systems
A typical system is arranged or configured within a system boundary
thus distinguishing it from its environment. !t is normally classified
along numerous dimensions and among these are:
Simple or Complex
Open or Closed
Stable or Dynamic
Adaptive or Nonadaptive
Permanent or Temporary
System performance can be measured in terms of effectiveness, a
measure of the extent to which a system meets its goals, and
efficiency, a measure of what is produced divided by what is
consumed. !ts evaluation also requires the use of performance
standards, which are stated objectives used in determining system
performance levels. Once standards are established, system
performance is measured and compared. variances are then used as
determinants of system performance.
A system variable is a quantity or item that can be controlled by the
decision maker. The price a company charges for its product is a
system variable because it can be controlled. A system parameter is a
value or quantity that cannot be controlled, such as the cost of a raw
material.
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WhatlsAnlnformation WhatlsAnlnformation WhatlsAnlnformation WhatlsAnlnformation
System? System? System? System?
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WhatisanlnformationSystem?
An !nformation System is a collection of
components that work together to
provide information to help in the
operations and management of an
organization.
Thus it is a set of interrelated components
that collect (input), manipulate (process)
and disseminate data and information
(output) and provide feedback mechanism
to meet an objective.
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lnformationSystemsFunctions
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Notes:lnformationSystem
An information system is a set of interrelated elements or components that
collect (input), manipulate (process), and disseminate (output) data and
information, and provide a feedback mechanism to meet an objective.
!nput refers to the act of gathering and capturing raw data. !t can be a
manual or automated process but regardless of the method used, the
accuracy of the input is critical in order to achieve the desired output.
Processing involves the conversion or transformation of data into useful
outputs
while the term output refers to the production of useful information,
usually in the form of documents and reports. !n information systems, the
term feedback is used to describe the output used to make changes to
input or processing activities.
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Computer-BasedlnformationSystem
A Computer-Based !nformation System is
a set of hardware, software, database,
telecommunication, people and
procedures that are configured to collect,
manipulate, store and process data into
information.
For example, a company's payroll
system, order entry system and
inventory control system are examples of
CB!Ss.
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TheBenefitsofHuman-ComputerSynergy
Synergy: combined
resources produce
output exceeding the
sum of the outputs of
the same resources
employed separately
Translates human
thought into efficient
processing of large
amounts of data
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ComponentsofanlnformationSystem
Components
Hardware - Equipment such as computers
Software - !nstructions for the equipment
Stored Data - Facts stored in the system
Personnel - People who operate the system
Procedures for the people to follow
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ComponentsofanlnformationSystem
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Whatcouldhappenifpersonneland
proceduresareignoredwhenanewlSis
developedforabusiness
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Notes:Computerbasedlnformation
System
The term hardware is used to describe the physical computer
equipment used in a CB!S while software is defined as the set
of programs that govern the operation of the computer.
A database is an organized collection of facts and information,
and most managers and executives believe that it is one of the
most valuable and important parts of a CB!S.
Telecommunications is the electronic transmission of signals
for communications and enables organizations to carry out
their processes and tasks through effective computer
networks.
People are called the most important element in a CB!S
because they manage, run, program, and maintain the system.
Finally, the term procedures refer to the strategies, policies,
methods, and rules for using the CB!S.
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PrinciplesandLearningObjectives PrinciplesandLearningObjectives PrinciplesandLearningObjectives PrinciplesandLearningObjectives
Identify the major steps of the systems
development process and state the goal of
each.
Discuss why it is important to study and
understand information systems.
System users, business managers, and
information systems professionals must
work together to build a successful
information system.
Identify the basic types of business
information systems and discuss who uses
them, how they are used, and what kind
of benefits they deliver.
Knowing the potential impact of information
systems and having the ability to put this
knowledge to work can result in a
successful personal career, organizations
that reach their goals, and a society with
a higher quality of life.
Name the components of an information
system and describe several system
characteristics.
Identify four basic types of models and
explain how they are used.
Models, computers, and information systems are
constantly making it possible for
organizations to improve the way they
conduct business.
Distinguish data from information and
describe the characteristics used to evaluate
the quality of data.
The value of information is directly linked to
how it helps decision makers achieve the
organizations goals.
Learning Objectives Principles
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BusinesslnformationSystems BusinesslnformationSystems BusinesslnformationSystems BusinesslnformationSystems
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TypesoflSs:
Types of !Ss are distinguished from each other
on the basis of what the system does or by the
technology used to construct the systems. You
will work with at least four classes of information
systems.
- Transaction processing systems (TPS)
- Nanagement !nformation systems (N!S).
- Decision Support systems (DSS).
- Expert systems (ES).
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Transaction Processing Systems (TPS)
Automates the handling of data about business
activities or transactions. For example, a bank's TPS
would capture information about withdrawals from
and deposits to customer accounts.
Nanagement !nformation Systems (N!S)
Converts raw data from transaction processing
system into meaningful form.
Where as TPS keeps track of sales, a N!S can
pinpoint which items are selling slowly and which are
selling quickly. The N!S can therefore direct the
manufacturing department on what to produce and
when.
TypesoflSs
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TypesoflSs
Decision Support Systems (DSS)
is designed to help decision makers with decisions.
Operations that often answer what if?" questions.
Whereas an N!S produce a report, a DSS provides an
interactive environment in which decision makers can
quickly manipulate data and models of business
Expert Systems (ES)
!f-then-else rules or other knowledge representation
forms describe the way an expert would approach
situations in a specific domain of problems. The ES asks
questions (which an expert would ask) and the end
users supplies the answers. The answers are then used
to determine which rules apply and the ES provides a
recommendation based on the rules.
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FewotheroflSs
Group Decision Support Systems
(GDSS)
Generate ideas, establish priorities, and
reach decisions in group environment
Geographic !nformation Systems (G!S)
Represents local conditions or features
Allows planning, decision-making, and
monitoring of local conditions or activities
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The geographical locations,
population density,
culture of people,
areas served,
competitor existence,
distance from warehouse,
location of production centers and warehouse,
shortest routes to move products from one center to another etc are all
going to be seen in Naps rather than tables to visualize the situation better.
This will definitely aid better decisions in sales promotion.
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TransactionProcessingSystems TransactionProcessingSystems TransactionProcessingSystems TransactionProcessingSystems
A transaction processing system (TPS) is an
organized collection of people, procedures,
software, databases, and devices used to record
completed business transactions.
Process business exchanges
Naintain records about the exchanges
Handle routine, yet critical, tasks
Perform simple calculations
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PayrollTransactionProcessing PayrollTransactionProcessing PayrollTransactionProcessing PayrollTransactionProcessing
System System System System
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ManagementlnformationSystems(MlS) ManagementlnformationSystems(MlS) ManagementlnformationSystems(MlS) ManagementlnformationSystems(MlS)
Routine information for routine decisions
Operational efficiency
Use transaction data as main input
Databases integrate N!S in different
functional areas
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ManagementlnformationSystems(MlS) ManagementlnformationSystems(MlS) ManagementlnformationSystems(MlS) ManagementlnformationSystems(MlS)
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MlSOutputs MlSOutputs MlSOutputs MlSOutputs
Scheduled reports
Demand reports
Exception reports
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DecisionSupportSystems(DSS) DecisionSupportSystems(DSS) DecisionSupportSystems(DSS) DecisionSupportSystems(DSS)
DSS- A decision support system is an organized
collection of people, procedures, software,
databases, and devices used to support
problem-specific decision making.
!nteractive support for non-routine decisions or
problems
End-users are more involved in creating a DSS than
an N!S
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EssentialDSSElements EssentialDSSElements EssentialDSSElements EssentialDSSElements
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Special Special Special Special- -- -PurposeBusinesslnformation PurposeBusinesslnformation PurposeBusinesslnformation PurposeBusinesslnformation
Systems Systems Systems Systems
Artificial !ntelligence (A!) Systems
virtual Reality Systems
Expert Systems
Other Special-Purpose Business !nformation
Systems
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TheMajorElementsofArtificial TheMajorElementsofArtificial TheMajorElementsofArtificial TheMajorElementsofArtificial
lntelligence lntelligence lntelligence lntelligence
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VirtualReality VirtualReality VirtualReality VirtualReality
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DataGlove DataGlove DataGlove DataGlove
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Notes:BusinesslnformationSystems Notes:BusinesslnformationSystems Notes:BusinesslnformationSystems Notes:BusinesslnformationSystems
Businesses utilize information systems to improve their operations at all levels. Nearly all
workers, from top management to production line employees, come in contact with
computerized systems on a daily basis. This results in a variety of systems functioning in
different areas.
First one of business information systems is the transaction processing system (TPS).
This is used to manage and facilitate common business transactions such as sales to
customers, and payments to employees and suppliers. Related to the TPS are workflow
systems, which are rule-based, management software used to direct, coordinate, and
monitor the execution of an interrelated set of tasks arranged to form a business
process. Also related to TPSs are enterprise resource planning (ERP) systems. These
are a set of integrated programs that are capable of managing a company's vital
business operations for an entire multisite, global organization. Although the scope of an
ERP system may vary from company to company, most provide integrated software to
support the manufacturing and finance business functions of an organization.
The information collected using a TPS can be transformed into routine information for
managers and decision-makers through the use of a management information system
(N!S). These systems are designed to provide a variety of reports including scheduled
and demand reports. Decision support systems (DSS) use the data collected by a TPS to
support problem-specific decision-making. A DSS operates from a managerial
perspective and is often designed to take managerial decision-making styles into
consideration. Whereas an N!S helps an organization "do things right," a DSS helps a
manager "do the right thing."
Newer technologies and specialized systems are also used by businesses. Among these
are artificial intelligence (A!) systems, which attempt to take on the characteristics of
human intelligence.
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PrinciplesandLearningObjectives PrinciplesandLearningObjectives PrinciplesandLearningObjectives PrinciplesandLearningObjectives
Identify the major steps of the systems
development process and state the goal of
each.
Discuss why it is important to study and
understand information systems.
System users, business managers, and
information systems professionals must
work together to build a successful
information system.
Identify the basic types of business
information systems and discuss who uses
them, how they are used, and what kind of
benefits they deliver.
Knowing the potential impact of information
systems and having the ability to put this
knowledge to work can result in a
successful personal career, organizations
that reach their goals, and a society with a
higher quality of life.
Name the components of an information
system and describe several system
characteristics.
Identify four basic types of models and
explain how they are used.
Models, computers, and information systems are
constantly making it possible for
organizations to improve the way they
conduct business.
Distinguish data from information and
describe the characteristics used to evaluate
the quality of data.
The value of information is directly linked to
how it helps decision makers achieve the
organizations goals.
Learning Objectives Principles
52
SystemsDevelopment SystemsDevelopment SystemsDevelopment SystemsDevelopment
Systems development is the act of creating or
modifying existing business systems.
Developing information systems to meet
business needs is highly complex, so much so
that it is common for information systems
projects to overrun budgets and exceed
scheduled completion dates. System
development can be viewed as a series of
steps as described in the next slide.
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SystemsDevelopment SystemsDevelopment SystemsDevelopment SystemsDevelopment
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lnformationSystemsinFunctional lnformationSystemsinFunctional lnformationSystemsinFunctional lnformationSystemsinFunctional
AreasofBusiness AreasofBusiness AreasofBusiness AreasofBusiness
Accounting
Finance
Narketing
Production
Human Resource Nanagement
Other functions
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Benefitsoflnformation
Systems
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BenefitsoflnformationSystems
Better information
information system process data and they produce information,
which is the basis for good decision making.
!mproved service
computer information system operates at any time of the day or
night and process data faster than humans
!ncreased productivity
With computer information system people can do more in a
period of time than they would be able to do if they did not have
such systems.
Reduced cycle time
Source of Sustainable Competitive Advantage
"customer integration" help the business to reduce the cost
of production
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Notes:WhyLearnAboutlnformationSystems? Notes:WhyLearnAboutlnformationSystems? Notes:WhyLearnAboutlnformationSystems? Notes:WhyLearnAboutlnformationSystems?
Studies have shown that the involvement of managers and decision makers in all aspects of
information systems is a major factor for organizational success, including higher profits and
lower costs. A knowledge of information systems will help you make a significant contribution on
the job and will also help you advance in your chosen career or field.
You must acquire both computer literacy and information systems literacy in order to be able to
use information systems to meet personal and organizational goals. Computer literacy refers to
knowledge of computer systems and equipment and the ways they function. !t stresses
equipment and devices (hardware), programs and instructions (software), databases, and
telecommunications.
!nformation systems are used in all functional areas and operating divisions of business. !n
finance and accounting, information systems are used to forecast revenues and business activity,
determine the best sources and uses of funds, manage cash and other financial resources,
analyze investments, and perform audits to make sure the organization is financially sound and
that all financial reports and documents are accurate. !n sales and marketing, it is used to
develop new goods and services (product analysis), determine the best location for production
and distribution facilities (place or site analysis), determine the best advertising and sales
approaches (promotion analysis), and set product prices to get the highest total revenues (price
analysis)
!nformation systems are used in almost every industry or field. The airline industry employs
!nternet auction sites to offer discount fares and increase revenue. !nvestment firms use
information systems to analyze stocks, bonds, options, the futures market, and other financial
instruments, as well as to provide improved services to their customers. Banks use information
systems to help make sound loans and good investments. The transportation industry uses
information systems to schedule trucks and trains to deliver goods and services at the least cost.
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Summary Summary Summary Summary
Data - raw facts
Information - data transformed into a
meaningful form
System - set of elements that interact to
accomplish a goal
Systems development - creating or
modifying existing business systems
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Annexure
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TransactionProcessingSystem(TPS)
TPS automates routine and repetitive tasks that are
critical to the operation of the organization, such as
preparing a payroll, billing customers, Point-of-Sale and
Warehouse operations.
Data collected from this operation supports the N!S and
DSS systems employed by Niddle Nanagement
Computerizes the primary and most of the secondary
activities on the value Chain.
Primary purpose to perform transactions and collect
data.
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ManagementlnformationSystems(MlS)
These systems access, organize, summarize, and
displayed information for supporting routine
decision making in the functional areas. Geared
toward middle managers, N!S are characterized
mainly by their ability to produce periodic reports
such as a daily list of employees and the hours they
work, or a monthly report of expenses as compared
to a budget
Typical uses would be in Replenishment, Pricing
Analysis (Narkdowns) and Sales Nanagement
Decisions supported are more structured.
Primary purpose to process data into information
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DecisionSupportSystems(DSS)
These systems support complex non-routine
decisions.
Primary purpose to process data into information
DSS systems are typically employed by tactical
level management whose decisions and what-if
analysis are less structured.
This information system not only presents the
results but also expands the information with
alternatives.
Some DSS methodologies
Nathematical Nodeling
Simulation
Queries
What-!f (OLAP-Cubes)
Data mining
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lntelligentSupportSystems(lSS)
Essentially, artificial intelligence (A!) these systems
perform intelligent problem solving.
One application of A! is expert systems. Expert systems
(ESs) provide the stored knowledge of experts to
nonexperts, so the latter can solve difficult or time-
consuming problems. These advisory systems differ from
TPS, which centered on data, and from N!S and DSS,
which concentrated on processing information. With DSS,
users make their decisions according to the information
generated from the systems. With ES, the system makes
recommended decisions for the users based on the built-
in expertise and knowledge.
6+
ExecutiveSupportSystems(ESS)
ESS systems or Enterprise !nformation Systems (E!S) originally
were implemented to support Senior management. These
systems have been expanded to support other managers within
the enterprise.
At the senior management level they support Strategic activities
which deal with situations that significantly may change the
manner in which business is done.
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OfficeAutomationSystems(OAS)
Electronic communication is only one aspect of what
is now known as an office automation system (OAS).
Other aspects include word processing systems,
document management systems and desktop
publishing systems.
OAS systems are predominantly used by clerical
workers who support managers at all levels. Among
clerical workers, those who use, manipulate, or
disseminate information are referred to as data
workers.
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KnowledgeManagementSystems(KMS)
An additional level of staff support now exists between
top and middle management. These are professional
people, such as financial and marketing analysts that act
as advisors and assistants to both top and middle
management. They are responsible for finding or
developing new knowledge (External Content) for the
organization and integrating it with existing knowledge
(!nternal Content).
KNS that support these knowledge workers range
from !nternet search engines and expert systems, to
Web-based computer-aided design and sophisticated
data management systems