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ICT for strategic Advantage


Information Systems are a tool for building successful organisations. They can help
companies improve their customer relations, provide better information for decision making,
strengthen productivity and promote global competitiveness.
Effective IS can help businesses provide improved customer service, can add value, and in
that way lead to a greater market share. sed effectively, Information !ommunication
Technologies may give an organisation strategic advantage.
"usinesses need to learn how to use computers and the related technology to achieve and
sustain success for society, organisation and the individual.
#ou are re$uired to work through the subse$uent Study %uide sections, reading the !hapter
and pages of &obson as indicated. #ou are also re$uired to read the articles, indicated within
the sections of the workbook, which have been provided for you as a start to your research.
%roup discussions are encouraged as they will assist you in answering the S'(s.
' number of ma)or articles have been supplied. #ou are to read and further research the
topic introduced by the article designated to you. *n a specified date you are to lead a group
discussion session on your designated article.
ICT for strategic Advantage
't the end of this Topic you will be able to+

,ifferentiate between IS and IT
,escribe the different categories which make up an IS
E-plain the differences between data and information
,iscuss the different levels of decision.making / operational0tactical0strategic
E-plain the need for $uality in data
,iscuss the three sources of data
Information Technolo! 1IT2 34ardware, software, telecommunications, database
management, and other information processing technologies used in computer.based
information systems.3
Information "!#tem# 1IS2 are systems that deliver information to individuals and
organisations. They consist of hardware, software, data, telecommunications, business
processes and rules, people, and environmental factors.
$ata and information% The terms data and information are often used interchangeably in
discussions of data processing 1,52 and information systems. There is, however, a key
difference between the two terms which is fundamental to understanding the role and
operation of information systems within organi6ations.
$ata% The term data refers to the complete range of facts, events, measurements, opinions
and value )udgements, etc. that e-ist both within and outside the organi6ation. ,ata can be
classified in an organi6ational conte-t into a number of different categories or levels. i.e data
recorded in organisation7 data available to organisation7 data potentially available to
The data information con&er#ion 'roce## (fi )*
The data conversion function
may be viewed schematically
as shown 1fig 82. The first
stage in the process is the
capture and recording of the
basic or raw data. The term
ra+ data is used to refer to
data that has not been
modified or processed by the
organi6ation. ,ata capture
and storage today can still
be in a written form, although
other methods of data
capture are increasingly
being used.
9hat other methods of data capture can be used:
ICT for strategic Advantage
The ne-t stage is the processing of the data into a more convenient form for the users, which
may include conversion into other units of measurement, sorting, summari6ing, storing, and
so on. The third stage involves the communication of the processed data to the users, which
may involve te-tual, graphical or oral methods of communication. p to this point, the
process is still only concerned with data, although the process is developing the data into a
form in which it can potentially become information. The general term applied to these
activities is data processing.
Information can be viewed as a sub.set of the data held within the organi6ation. This
indicates that although the data processing system delivers data to the user in a processed
form, only a part of this data will be converted into information7 the remainder will be
discarded by the particular user. In other words, all members of an organi6ation will receive a
stream of data inputs in the form of instructions, letters, statistics, internal memoranda, and
so on. ' proportion of this data will be either filed away automatically and never referred to or
alternatively deposited in the wastepaper bin. *nly a proportion of the data received will be
read, used or acted on by the receiver. This will then be classified as information rather than
Information is that part of the total data available which i# a''ro'riate to the re-uirement#
of a 'articular u#er or rou' of u#er#. 'n effective information system will, therefore, be
one which minimises the amount of data passing through the hands of the user without
becoming information, that is, one which reduces or eliminates the contents of the data bo-
and increases the contents of the information bo- 1fig 82.
!ertain parts of the data may be appropriate to
only one user in the organisation 1fig ;2, or
alternatively 'art# of the data are appropriate or
common to a number of users, with other parts
specific to each individual 1,E<2
ser 4 re$uires only part of the information that
user % re$uires.
i.e the chief accountant 142 and the payroll clerk
ser 4 also relies on both formally recorded and
unrecorded data from other sources outside the
accounting function.
Fiure .
Pre#entation of data
This may be differentiated according to their different need. !hief accountant may re$uire
only summarised statements of salary and wage e-penditure, whereas the payroll clerk will
re$uire details of each member of staff.
An item of data i# onl! information to #ome of the 'eo'le #ome
of the time and not all of the 'eo'le all of the time/
In the beginning, computers were all rather limited, highly speciali6ed machines which
re$uired a dedicated environment and specialist personnel to make them function correctly.
Such machines were called mainframes and the organi6ation needed a computer
department to provide the necessary data processing services or to produce reports. The
,ata available within
,ata recorded in
ICT for strategic Advantage
systems which these computer installations supported were called data processing 1,52 or
transaction processing systems. Some e-amples of ,5 systems in a typical organi6ation
a payroll system
a stock control system
an order entry system.
'll these system types have one thing in common. They involve repetitive tasks using well.
defined information which is easy to capture and to store. In a word, they are operational
systems. 9hile they may have helped the business to run efficiently, they probably did little
to support the decision.making process or to help manage the business more effectively.
Some other features of ,5 systems include the following+
the computer programs are written in a third.generation language 1=%>2
and are capable only of carrying out the task for which they are designed
the data storage files are structured to suit one particular application 1e.g.
payroll2 and are not easily changed to cater for new re$uirements
there is an identifiable gap 1organi6ational and cultural2 between the
specialist data processors and the users.
These factors led to a lot of frustration between the users 1accountants, production and sales
people2 and the computing specialists. Typical reasons for such frustration include+
the fact that the ,5 department seemed to have different ob)ectives from
the user departments. There were fre$uent arguments over who owned
the data and complaints that the ,5 department only wants to develop
systems which are technically interesting
the limitations of the technology. ntil the 8?@As many ,5 systems were
still running important applications in batch mode 1the overnight run2 and
simple re$uests for changes to programs could take months to achieve
the computer specialists lack of understanding of the users problems.
Information systems seemed to take years to develop and, when
completed, often did not do what the users wanted.
!learly, there was a need for systems which were more fle-ible, which could put information
into the hands of the user and which could support the processes of tactical and especially
strategic management.
"usiness Information Systems 1"IS2 can be divided into two broad categories+ systems that
support an organisations business activities, and systems that support managerial decision
O'eration# information #!#tem# are generally concerned with process control,
transaction processing, communication 1internal and e-ternal2 and productivity.
Manaement information #!#tem# provide feedback on organisational activities
and help to support managerial decision making.
Tran#action Proce##in (TP*
Involves recording and processing the data that results from an organisations business
transactions. Transaction processing can be carried out by batch processing or real.time

ICT for strategic Advantage
1atch Proce##in
In 1atch processing identical product items are processed as a group through each of the
processing stages. The products in each batch may be associated with the same
customers order or may relate to orders for several different customers. The usual reason
advanced for batch processing is that there may be variations in the production operations
re$uired to produce either completely different products or variations on the same product
design. The costs associated with preparing the machinery for each new product type or
variation may make it more efficient to process a number of similar items before ad)usting
the machinery for the ne-t type of product. <or e-ample, in a car plant it is clearly more
efficient to paint all the batched blue cars consecutively before spending time in cleaning
the spray gun and changing the paint supply to paint the red cars, as opposed to
undertaking these operations separately after each car is sprayed in the re$uired colour.
The data on the costs of resources used in the production operations are collected and
charged to each batch of items processed. The cost of individual items would normally be
assessed from the average cost of the batch produced.
' good e-ample of batch processing is the production of bills for utilities and other services.
Typically, customer data is collected and prepared for processing during the day. The
processing itself takes place during the night, when the demand on an organisations
computer resources are lowest.

On2line Proce##in
In real.time processing 1sometimes known as on.line processing2, transaction data is
processed immediately. 'n e-cellent e-ample of real.time processing is a cashpoint
system, where balance en$uiries and cash withdrawals are processed almost instantly.
On2line systems re$uire $uick response times and necessitate a high degree of security
and data integrity
9hat is the difference between a batch system and an on.line system: 9hat would be most
appropriate for the following+
' periodic update of a data warehouse from an operational database
" capturing information on customer sales transactions.
ICT for strategic Advantage
.% Manaement Information "!#tem# (MI"#*
If the first phase of business computing was to automate the manual and clerical processes
of business with the aim of increasing efficiency, the second phase was to emphasi6e the
role of information.
Early management information systems sought to use the output from e-isting ,5 systems
1and the ,5 department2 in some form which made it more suitable for middle management
to understand. 4ere are two e-amples+
a stock control system used to automate the capture, verification, collation and
storage of information about goods may produce potential information about
purchasing patterns, stock replenishment and the profitability of certain product lines
or outlets
airline booking systems may provide spin.off information to management about
customer preferences, route patterns and reactions to world events.
It soon became apparent that BISs had considerable potential for the firms that were
prepared to develop them. <orecasting, reporting and budgeting0control systems were
developed and for the first time managers began to be affected 1sometimes positively,
sometimes negatively2 by computeri6ation pro)ects. It also became apparent that BISs
would re$uire ma)or technological and organi6ation changes.
The corporate database containing all the information that a company owned about
its products, customers, suppliers, and so on, could be accessed in a number of
different ways and could be changed in format without re$uiring ma)or programming
The BIS function was seen as part of a service to management. 4ence the profile of
computing tended to be raised within the organi6ation and often the ,5 department
became part of a management services department. *ther, complementary functions
such as operations research were therefore to be found alongside the information
systems specialists.
Buch new technology 1or old technology which previously e-isted only in an
academic or scientific environment2 came to be offered for commercial use.
The ob)ective of an BIS is to provide the operational and tactical 1lower and middle2
managers of an organi6ation with the information which they need to carry out their function.
BISs are based on report.producing software which draw data from the same source as the
data processing system C usually the corporate database. If the ,5 system is said to carry
out the companys day.to.day business processes, then the BIS is the feedback loop which
monitors the system. It is possible to form some generali6ed facts about BISs+
BIS reporting structures are relatively rigid 1the software and procedures
are not fle-ible2 and therefore BISs are more suitable for monitoring a
stable environment
the analytical powers of a BIS are limited. BISs tend to rely on information
being e-tracted in a routine way and presented in a form 1usually
management reports2 that makes it more meaningful than raw data
BISs cope best with well.structured decision situations, such as ratio
analysis or stock control calculations. 's such they do not directly support
the decision.making process, but make available information on which a
decision may be based
the information which BISs produce is usually internally gathered and
deals with the reporting of past performance rather than pro)ecting the
there are fre$uent time delays in BISs between an event occurring and it
being reported.
ICT for strategic Advantage
!omputer.generated reports are clearly a very important part of a BIS. The designers of
BISs often go to great lengths to limit the amount of information to which managers are
sub)ected. The principle of responsibility reporting applies+ managers are informed only
about things that are under their direct control. Specific types of report include the following+
E3ce'tion re'ort#4 which are another method of preventing information
overload by causing the software to produce a report only when a
significant event occurs C for instance, when specific control conditions
are broken. 'n e-ample would be a report which listed only the customer
orders which had not been delivered within five days. If no orders were
overdue by this length of time, no report would be produced.
4owever, consider what happens if the e-ception was a sudden, une-pected rise in
profit, or in sales. 9ould this event have been input into the system for flagging:
!an it be considered a noteworthy event:
On2demand re'ort#4 which enable managers to re$uest reports on a
particular fact or part of the organi6ation on an as and when basis. Such a
reporting system re$uires fle-ible technology, such as a relational database
and D%> system.
"cheduled re'ort# are produced automatically on a daily, weekly or
monthly basis, usually to a fi-ed format. E-perience shows that such
reports may lose their news value and may be ignored as, unless they are
presented in minimal summary form, they contain much information which
re$uires no management action.
4owever, data can be formal, as seen above, and informal 1i.e. grapevine2 this can be
termed unprocessable data.
Un'roce##a5le data
Hard or ,uantitati&e data
This includes the use of figures, such as statistics. 'lso known as hard data, often collected
in order to measure or $uantify an ob)ect or situation.
"oft data or ,ualitati&e data
,escribes without the use of figures, the $ualities or characteristics of an ob)ect or situation.
'lso known as soft data.
Formal and in formal information #!#tem#
'll organi6ational information systems are a mi-ture of formal and informal elements. The
differences are as follows+
<ormal information systems use reports, meetings and pre.defined data to process
data around the organi6ation. Buch of what goes on in a formal information system
ICT for strategic Advantage
will be well structured, routine and capable of being defined with precision. <or this
reason formal systems are sometimes called hard systems and are relatively easy
to computeri6e.
Informal information systems consist of less well.defined e-changes of information,
using less structured channels of communication. Telephone conversations, memos
and discussions over lunch are all informal. Bost managers rely far more on
informally obtained information than they do on formally produced reports. *pinions,
feeling and hunches are all important factors in decision making and are central to
an approach to information analysis called soft systems which has links with
operations research and general systems theory.
It is impossible to state whether one type of information system is more important to an
organi6ation than another. ' good system will take both elements into account and will seek
to allow the users some fle-ibility in how they use the information.
<ormal communication often ignores group and social mechanisms. ' formal report, for
e-ample, might marginalise or ignore staff opinions, causing offence and leading to reduced
Informal communication
In general, very little of the information transmitted by word of mouth is retained by the
recipient. ' number of factors, for e-ample noise, can reduce the amount of information
retained to as little as ;A per cent. In the conte-t of communication, noise refers to any factor
that serves to hinder the transmission of information or distort its meaning.
Informal communication is always present in an organisation, regardless of its si6e or nature.
Information of this kind can be considered a valuable resource and can be harnessed to
work for the benefit of the organisation. 5erhaps the most common means by which informal
communication takes place is by word of mouth. In a sales organisation, for e-ample, a
casual conversation between a salesperson and a client might yield information that can be
used to enhance a product or find new ways of making it more attractive to customers.
Attri5ute# of data
"ummar! of Attri5ute# of Information ,ualit!
Timeline## Accurac! Granularit! Additional Characteri#tic#
!onfidence in source
&eceived by correct person
Sent by correct channels
ICT for strategic Advantage
The three attributes that we are interested in are timeliness, accuracy and granularity.
The time dimension describes the time period with which the information deals and the
fre$uency with which the information is received. Information that contains errors,
omissions, or which is inappropriate has limited value to an organisation.
The correct level of detail is essential, for some a summary is all that is re$uired for others
highly detailed information is necessary.
,ualitati&e dimen#ion# of information
It is possible to differentiate categories of information on the basis of $uality. The term $uality
in this conte-t refers to the dimensions which enhance the value of the information to the
user. The figure below illustrates a number of the more important $ualitative dimensions of
<our key points need to be stressed in relation to these $uality dimensions+
not all the dimensions will be relevant in any given decision situation
each dimension may be represented by a range of potential levels of $uality
even where there are several relevant dimensions, certain dimensions may be more
important than others. In the case of financial accounting information, for e-ample, a
high degree of accuracy may be more important than the timeliness or currency of
the information received
the importance of a particular dimension in a given decision situation is a reflection of
the decision situation, the nature of the problem faced, and the skills of individual
decision.makers. In the case of a decision.maker with strong analytical abilities, the
provision of detailed and comprehensive information as opposed to summari6ed and
partial information may enhance the decision taken. 4owever, if the decision.makers
analytical abilities are less well developed, a more summari6ed version of the
information may yield higher value.
4ighly accurate
,egree of
&eadily available
<ully comprehensive
'ppropriate to current
!learly e-pressed
,elayed availability
5artial outline
Inappropriate to current
Fo means of checking
Fot amenable to numeric
4ighly uncertain
,ualitati&e dimen#ion# of information%
ICT for strategic Advantage
Co&erae of an orani#ation6# I"
E-pert System i.e.
!redit !ontrol System
Investment 'ppraisal
ITEM $"" E"
*rganisational >evel Banagement 'll
*b)ective ,ecision aid Spread E-pertise
,omain Farrow / Simple "road / !omple-
Interface ser (ueries system System (ueries ser
E-planation >imited !onsiderable
) >ocate at least two different e-amples of information. <or each e-ample determine
whether the information is of good or poor $uality. E-plain your reasoning with
reference to the three attributes of information described above.
. Information can be transmitted via formal and informal means. sing specific
e-amples, you are re$uired to+
a describe the advantages and disadvantages of each method
b discuss each method in terms of the attributes of information $uality that
are likely to be present.
T!'e of "!#tem Le&el of Manaement
ICT for strategic Advantage
The Le&el# of Manaement
5lanning and !ontrol of *verall
*rganisational ,irection by top
5lanning and !ontrol of
*rganisational sub.units by middle
5lanning and !ontrol of ,ay.to.
,ay *perations by supervisory
<reedom from error. 4opefully the data capture and data edit processes will detect and
re)ect inaccurate data. This should not be confused with level of accuracy.
*f data is re$uired to ensure that valid information is derived from the data
The data must pertain to the decision at hand to be useful
,ecisions can involve rapidly changing conditions. Fot to be confused with level of
'bility to verify the accuracy and completeness of data.
There are three sources
The organisation3s own internal operations, activities and plans
<orecast future sales and plan deployment of sales force
The data that describes the business transactions that flow into the firm from e-ternal
sources. These sources are Invoices from suppliers and orders from customers, E,I
Insight about the market, industry and other elements of the environment in which the firm
Tactical Manaement
O'erational Manaement
ICT for strategic Advantage
,ata Banagement is an abstract concept that serves to group a number of related activities
directed at managing data as a resource. The ob)ective is to ensure that data needed to
solve business problems or e-ploit opportunities are made available to the right people at
the right time and in the proper form to be used.
,ata is a vital resource of the enterprise and must be managed as an important asset. In
increasingly competitive global markets, the availability of more powerful computers and
literacy of employees there is a need or rather a demand for more and better data. 'dded to
this we now have more empowered end.users.