CHAPTER ONE:

MANAGEMENT INFORMATION SYSTEM

1.1 INTRODUCTION TO MANAGEMENT INFORMATION SYSTEM

What is management information system?
Dear learners! Have you ever learned of what management information system is? Or have you
ever used the term in your work environment? If so, in what context, and what do you expect is
the difference between what you know and the definition given below. Just take a rough paper
and try to list what you know so that you could make better understanding. Good! Now let us see
the definitions of management information system together.
Before we define what management information system is, it is better to look at the common
statement information age or the 21st century which is a common tip of every body’s speech.
What does it mean? Why it is termed like that? Of course, it is true that information exchange is
more rapid and accessible in this period than the past ages. In addition to this, the value of
information as a resource is more known these days than ever in the human civilization. This is
because firstly, 21st century is characterized by the exploitations of information technologies
such as computers, telecommunications, audio-visuals etc unlike that of the periods industrial
ages which was characterized by extensive utilization on factors of productions .Secondly, in the
information age ,the society is moving towards a new economy system which is called service
economy; basically consists of insurance, banking , fast food delivery ,tourism and lodging to the
expanded population of the world. Therefore, all the above in one way or the other are depend
upon the availability, reliability and accessibility of information to join the business sectors
explained above and hence information plays as the source of life blood in all areas.
Learning objectives:
After learning this chapter, you should be able to;
 Identify the meaning and definitions of management information system.

 Explain why knowledge of information system is important for managerial end users.

 Identify information system and system activities.

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  Give examples of how information systems can provide support for firm’s business
operations, managerial decision makings and the strategic advantage of information.

Definitions of Management information system:

Dear learners! Now it is time to make a cross check between what you have defined about
management information system in the previous page and the definitions given below. We hope
you have defined the term management information system in the previous pages. Good! Now
read the following definition and see if you have defined it correctly. Dear learners before one
can explain management information system he/ she must be cognizant of the terms
management, information and system since management information system is a combinations
of these phrases. These are stated as follows:

Management – is usually defined as the process of planning, organizing, directing, and

controlling of the given business operation (Fayol, 1900). This definition is probably more
appropriate to define what management is rather than what a manager does. Thus, management
is the process of allocating an organization’s inputs, including human and economic resources,
through the application of managerial functions for the purpose of producing goods and/ or
services desired by customers so that organizational objectives are accomplished. If management
has the knowledge of planning, organizing, directing and controlling of the business, then
decisions can be made on the basis of facts, and decisions are more accurate, reliable and timely.
Therefore, management groups and other end users of such information are depending up on the
reliability, accuracy, timeliness and availability of processed information.

Information On the other hand, is what is used in the act of informing or the state of being
informed. Information includes knowledge acquired by some means. Furthermore, there are
some differences between information and data. Data are raw facts and figures that are not yet
currently being used in a decision making process and usually take the form of historical records.
Thus, data cannot be used for immediate use of decisions before it is processed and transformed.
Data are also collection of facts or events represented in the form of symbols, such as digits,
alphabets, pictures, graphs etc .Where as information consists of data that has been processed

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and retrieved to be used for informative or inference purpose or as a basis for forecasting or
decision making.

Therefore, information is knowledge that someone derives from facts and placed in the right
context with the purpose of reducing uncertainties .Hence from the manager‟s point of view,
information serves as a key tool in reducing such uncertainties by indicating the best alternative
courses of action to be taken so that risk could be minimized.

Dear learners! We hope that you have understood the definition of Management and
Information. Good! Now try to answer the following questions.

Dear learner! Have you successfully completed the above exercise? We hope you have. Now let
us discuss the characteristics of good information.

Characteristics of Good information

Dear learners, the types of data and information which are collected determine the quality of
decision. Therefore, it is only good and selective information or data leads us to make
appropriate decisions by managers or end users. Thus, the data or information said to be good
and selective when they have the following characteristics:-
 Should give insight- good information have to provide insight in to situations rather than
describing and characterizing the situation.

 Should be accurate and complete- good information should not only be indicative but also
be exact and able to provide complete information about a certain issue under consideration.

 Relevance-it should be specific and within the limitation of the scope so that it will avoid
those information which are irrelevant.

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 Timeliness- information may be good enough in full filling all those characteristics yet if it
is not available at the right place and person in the right time its goodness will be lost since
decision makers and end users need it on time to make appropriate decision.

System – which is the 3rd important phrase is defined as a combination or arrangement of parts
which are an integrated and interdependent to form sum whole. System includes an orderly
arrangement according to some common principles or rules .A system is a scientific method of
inquiry, that is, observation, the formulation of an idea, the testing of that idea, and the
application of such idea in the real situation. For example, one of the scientific approaches,
problem solving, works within the context of system though it is more border than a system
itself. Another good example of a system is human body system, computer system, etc.

Therefore, management information systems – are those systems that allow managers to make
decisions for the successful operation of their businesses. Management information system uses
different resources and procedures in modern business to come up with the right track of
business operations. Sometimes management information system – is defined as an
organizational resource center in developing and maintaining of most or all of the computer
systems and timely usage of information for the enterprise in decision making. Thus the goal of
management information system is to deliver information systems to various levels of corporate
managers.

Dear learners! Management Information System –can also be defined as the set of hardware,
soft ware, procedures and rules which provide flexible and speedy access to accurate data for
managers and end users in their decision makings. Therefore, in the actual management
information system process, it involves collection, organization, distribution, and storage of
organization wide information for managerial analysis and control. Many management
information systems are widely use by the management at operational, middle and senior levels.
Since much of management involves decision making and decisions have to be supported by
accurate data.
Dear learners! Have you understood the definition of a management information system? Good!
Now check your progress by the following exercise.

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 1.2 WHY INFORMATION SYSTEMS ARE IMPORTANT FOR MANAGERIAL END
USER
Dear learners! Have you understood what management information system is? Good now let us
proceed to the importance of information from the manager’s perspective.

Why do we study information systems? That is the same as asking why anyone should study
accounting, finance, operations management, marketing, human resource management, or any
other major business function. Information systems have become a vital component of successful
business firms and other organizations. They thus constitute an essential field of study in
business administration and management. That is the reason why most business majors must take
a course in information systems. Since you probably intend to be a manager, entrepreneur, or
business professional, it is just as important to have a basic understanding of information systems
as it is to understand any other functional area in business.

A Managerial End User Perspective

An information system from the managerial perspectives, therefore is, an organized combination
of people, hardware, software, communication networks, procedures, and data resources that
collects, transforms, and disseminates information in an organization. Today’s managers rely on
many types of information systems (IS). They might include simple manual (paper-and-pencil)
information systems and informal (word-of-mouth) information systems. However, in this
module, we will focus on computer-based information systems that use computer hardware,
software, telecommunications networks, and other forms of information technology (IT) to
transform data resources into a variety of information products. In particular, we will discuss
several types of management information systems (MIS) that provide information for decision
making by managers. Anyone who uses an information system or the information it produces is
an end user. This usually applies to most people in an organization, as distinguished from the
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smaller number of people who are information system specialists, such as systems analysts or
professional computer programmers.

However, managerial end user is a manager, entrepreneur, or managerial-level professional

who personally uses information systems. So most managers are managerial end users and this
reference material is written for potential managerial end users like you and other students of
business administration and management. Information systems can play a vital role in business
success. They can provide the information a business needs for efficient operations, effective
management, and competitive advantage. However, information systems can fail. If information
systems do not properly support the strategic objectives, business operations, or management
needs of an organization, they can seriously damage its prospects for survival and success. So,
the proper management of information systems is a major challenge for managers. Thus, for
managerial end users, the information systems function represents:
 A major functional area of business that is as important to business success as the functions
of accounting, finance, operations management, marketing, and human resource
management.
 A major part of the resources of an organization and its cost of doing business, thus posing
a major resource management challenge.
 An important factor affecting operational efficiency, employee productivity and morale,
and customer service and satisfaction.
 A major source of information and support needed to promote effective decision making by
managers.
 An important ingredient in developing competitive products and services that give an
organization a strategic advantage in the global marketplace.
 A vital, dynamic, and challenging career opportunity for millions of men and women.
Dear learner! We expect that you have grasped the importance of information system from the
managerial perspectives? Good! Now let us do the following exercise.

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Dear Learners! We hope you have attempted the above questions.
Now Let us take a moment to bring the real world case into our discussion of the importance of
information systems. Read the Real World Case of Wear Guard, Incorporated given below. Then
let us analyze it together.

Dear learners! Have you seen the real world case given in the above table? What can you
observe from the wear guard incorporated managements investment? And try to analyze how
important is investment in information systems first by you then take a look at the following
analysis’s given below.

Analyzing the real world case above

Dear learners! We can learn a lot about the importance of computers and information systems
from the Real World Case of Wear Guard, Incorporated. Marketing, distribution, and order-entry
information systems have been computerized with a network of six minicomputers and 300 PC
workstations. Wear Guard can provide fast, intelligent responses to customer orders and
questions, derived from detailed records on their 2 million customers in the customer database
stored on magnetic disk drives. It is this capability which allows them to provide the high-quality
customer service that is the hallmark of their business.

Computer-based management information systems also provide Wear Guard managers with sales
analysis reports which help them “monitor how well we keep the promises made to customers.”
The combination of great customer service and an informed management helps Wear Guard
build repeat sales from present customers and attract new business. Is it worth the $6 million to
$7 million price tag over the last few years? At $150 million per year in sales revenue, an
investment in information system of about one and half percent of sales over three years has paid
big dividends in business growth at Wear Guard. That’s why CEO Richard Salem can say that
“the computer is truly that heart of the company.”

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1.3 INTERNATIONAL AND ETHICAL DIMENSIONS OF INFORMATION SYSTEM
Dear learners! What do you know about ethics especially in information areas? Have you
attempted? Good! As we have stated above, since information is one of the basic resource it has
to be used in proper utilization and ethical manner.

Information is a basic resource in today’s society. We are living in a global Information society,
with a global economy that is increasingly dependent on the creation, management, and
distribution of information resources. People in many nations no longer live in agricultural
societies, composed primarily of farmers, or even industrial societies, where a majority of the
work force consists of factory workers. Instead, the work force in many nations consists
primarily of workers in service occupations or knowledge workers, that is, people who spend
most of their workday creating, using, and distributing information.

Knowledge workers include executives, managers, and supervisors; professionals such as

accountants, engineers, scientists, stockbrokers, and teachers; and staff personnel such as
secretaries and clerical office personnel. Most of them are end users who make their living using
information systems to create, distribute, manage, and use information resources. Thus,
information systems help them manage the human, financial, material, energy, and other
resources involved in their work responsibilities. This brings up the question of what your
responsibilities are in the ethical use of information technology. As a prospective managerial end
user and knowledge worker, you should begin to think about what ethical responsibilities are
generated by the use of information systems.

Information and information systems, then, are valuable resources for knowledge workers, their
organizations, and society. A major challenge for our global information society is to manage its
information resources to benefit all members of society while meeting the strategic goals of
organizations and nations. This means, for example, using information systems to find more
efficient, profitable, and socially responsible ways of using the world’s limited supplies of
material, energy, and other resources.

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Since the information systems of so many organizations are interconnected by local, regional,
and global telecommunications networks, knowledge workers can now access and distribute
information and manage resources all over the world. For these reasons, information systems
play an increasingly vital role in our global economy. Read the Real World Case of United
Parcel Service given in the following table. Then let’s analyze how it proves this point.

1.4. CONTEMPORARY APPROACHES OF INFORMATION SYSTEMS.

In the previous section we have tried to discuss about the definition of management information
system and its relative importance especially from the managerial and end users perspectives.
Next let us discuss the different approaches of information system perspectives with the
contemporary disciplines .In information system study no single theory or perspective
dominates since information system is a multidisciplinary field. However, some writers have
classified these approaches in to three major classes as; Technical, Behavioral and Socio-
technical approaches.

1. Technical Approach to Information Systems.

The technical approach to information system emphasizes mathematically based, normative
models to study information systems, as well as the physical technology and formal capabilities
of these systems. Computer science, engineering, and mathematics are discipline that contributes
to the technological aspects of information systems in business. It is these disciplines, along with
the information systems discipline, whose research drives developments in computer hardware,
software, telecommunications, database management, and other information technologies.

2. The Behavioral Approaches to information system.

A growing part of the information systems field is concerned with behavioral problems and
issues. Many behavioral problems, such as system utilization, implementation and creative
design, cannot be expressed with the normative models used in the technical approach. Such
major behavioral approaches include; psychology, sociology, and political science which
contribute to the behavioral aspects of information systems in organizations. The research
findings of these behavioral disciplines and the discipline of information systems shed light on
how individuals and organizations can effectively use and manage information technology. The

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behavioral side of management information systems focuses on adjusting information
technology to support individual and organizational goals, as well as helping individuals and
organizations take advantage of the benefits of information systems.
Both of these aspects, the technological and the behavioral, are important for managerial end
users. That’s because computer-based information systems, though heavily dependent on
information processing technologies, are designed, operated, and used by people in a variety of
organizational settings. Thus, for managerial end users, the success of an information system
should be measured not only by its efficiency in the use of information technologies, but also by
its effectiveness in meeting the goals of end users and their organizations.

3. Socio-technical Approach of Information System: The third dimension in the study of

Management Information System arose in the 1960s to focus on computer based information
systems aimed at managers. Management Information System combines the theoretical work of
computer science, management science, and operations research with practical orientations
toward building systems and application. It also pays attention to behavioral issues.
A socio-technical systems perspective helps to avoid a purely technological approach to
information systems. For instance, the fact that information technology is rapidly declining in
cost and growing in power does not necessarily or easily translate into productivity enhancement
or bottom line profits.

Technology must be changed and designed in such a way as to fit organizational and individual
needs. At times, the technology may have to be “de-optimized” to accomplish this fit.
Organization and individuals must also be changed through training, learning and planned
organizational change in order to allow the technology to operate and prosper.

Dear Learners! Now, respond to the following questions.

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Dear Learners! Have you completed the above exercise? We hope you did it well.
Dear Learners! The real world examples of Wear Guard and UPS shown in above should
convince you that managerial end users need to know how information systems can be
employed successfully in a global business environment. That is why this module contains real
world Cases and Problems describing actual situations (not fictional stories) occurring in real
companies and organization throughout the world. Business firms and other organizations need
people who can help them manage their information resources. Knowledgeable managerial end
users can play a major role in information resource management. That is, they can learn to
manage information system hardware, software, data, and information resources so they are
used for the efficient operation, effective management, and strategic success of their
organizations.

What exactly does a managerial end user need to know about information systems? The answers
are as diverse and dynamic as the area itself. As we have just mentioned, the field of information
systems, like other area such as management and business administration, is based on a variety
of academic disciplines and encompasses a great amount of technological and behavioral
knowledge. The information system field is constantly changing and expanding as dramatic
technological developments and behavioral research findings push back the frontiers of this
dynamic discipline.

1.5. INFORMATION SYSTEMS FRAMEWORK

“Most of our top management team really does not have a clue what to do about Information
Technology (IT). They are at the mercy of the techies. They just nod their heads and hope they
don’t show their ignorance.”
Dear Learners! The above statement was a comment from a senior manager of a large bank that
is a leader in the use of information technology! So even top executives can feel overwhelmed by
the complex technologies, abstract behavioral concepts, and specialized applications involved in
the field of information systems. However, most managers and other end users do not have to
absorb all of this knowledge. Figure 1.1 below illustrates a useful conceptual framework that
outlines what a managerial end user needs to know about information systems. It emphasizes that

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you should concentrate your efforts in five areas of knowledge: foundation concepts, technology,
applications, development, and management.

What are information systems, and why are they important to end users and their organizations?
In order to answer this question, you need to understand what the basic components and
properties of information systems are. This requires an understanding of some fundamental
concepts in general systems theory and information processing. However, you should also
appreciate the vital roles played by information systems in businesses and other organizations.
For example, you should learn some fundamental behavioral and technical concepts that will
help you understand how information systems can support the business operations, managerial
decision making, and strategic advantage of business firms and other organizations.

The following framework outlines the major areas of information systems knowledge needed by
managerial end users.

FIGURE 1.1 Conceptual Frameworks of Information Systems

1.5.1 Foundation Concepts of Information System
What is a system? A system can be simply defined as a group of interrelated or interacting
elements forming a unified whole. Many examples of systems can be found in the physical and

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biological sciences, in modern technology, and in human society. Thus, we can talk of the
physical system of the sun and its planets, the biological system of the human body, the
technological system of an oil refinery, and the socioeconomic system of a business
organization. However, the following generic system concept provides a more appropriate
framework for describing information systems: A system is a group of interrelated components
working together toward a common goal by accepting inputs and producing outputs in an
organized transformation process.

Therefore, Information System (IS) is defined as a set of people, procedures and resources that
collects, transforms and disseminates Information in an organization. And hence, mangers
depend on many types of Information Systems such as simple manual, informal or computer
based systems. However, any information system involves the following activities.

1. Input of data resources activities: - Data about business transaction and other events must
be captured and prepared for processing by data entry activities such as recording and
editing.
2. Processing of data into information activities: - Data is typically manipulated by such
activities as calculating, comparing, storing, classifying and summarizing. Thus, the
processed data will converted into information for end users.
3. Output of information product activities: - Information in various forms is transmitted to
end users and made available them in the output activity.
 The goal of information system is the production of appropriate information products
such as the common products of video displays, paper documents, and audio responses
that provide us with messages forms, reports, listings and graphic displays.
4. Storage of data and information activities: - Storage is a basic system component of
information system. It is the information system activity in which data and information are
retained in an organized manner for later use.
 It will be stored in the form of field, files and data bases.
Example: Dear Learners! Now using the following example let us see how the system activities
work.

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Dear Learners! Based on the above diagram and illustration, can you distinguish the difference
among the terms such as field, records, file and database? Good, now let us discuss them in
detail.
As we have stated, a field is a group of characters thus the name MULATU KEBEDE in the
above example is a field. The group of fields Mulatu Kebede, ID No 57532, and Salary of 10,000
ETB are considered as Records while entire records about employees like Mulatu Kebede and
others in a given organization are called File. And in this case, the file is called Payroll file.

5. Feedback and Controlling activities

An information system should produce feedback about its input, processing, output, and storage
activities. This feedback must be monitored and evaluated to determine if the system is meeting
established performance standards or must be adjusted so that proper confirmed products are
produced for users. Therefore, the systems concept can be made even more useful by including
these two additional components that are feedback and control. A system with feedback and
control components is sometimes called a “cybernetic” system, that is, a self-monitoring, self-
regulating system.

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 Feedback is data about the performance of a system. For example, data about sales
performance is feedback to a sales manager.

 Control involves monitoring and evaluating feedback to determine whether a system is

moving toward the achievement of its goal. The control function then makes necessary
adjustments to a system’s input and processing components to ensure that it produces proper
output.

Feedback is frequently included as part of the concept of the control function because it is such a
necessary part of its operation. Figure 1.2 shows the relationship of feedback and control to the
other components of a system. The flow of feedback data to the control component and the
resulting control signals to the other components are shown as dashed arrows. This emphasizes
that the role of feedback and control is to ensure that other system components properly
transform inputs into outputs so a system can achieve its goal.

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A system performing properly generates positive feedback, which signals the control function to
maintain the system’s current course toward its goals. A system whose performance is
deteriorating-deviating from the attainment of its goal-generates negative feedback. In the real
world, the performance of most systems tends to deteriorate over time. This characteristic is
called entropy – the tendency of a system to lose its homeostasis, that is, a relatively stable state
of equilibrium. Thus, the function of control is to reverse the entropy and maintain the
equilibrium of a system through a variety of corrective actions.

Dear Learners! Have you understood how a system is going to monitor and control? Good!
Dear Learners, a system however, is not always self regulating and controlling and hence it
may interact with other system, subsystems or in general external factors.

The diagram below points out several other system characteristics which are important to a
proper understanding of information systems. Note that a system does not exist in a vacuum;
rather, it exists and functions in an environment containing other systems.

If a system is one of the components of a larger system, it is called a subsystem, and the larger
system is its environment. Also, a system is separated from its environment and other systems by
its system boundary.

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Several systems may share the same environments. Some of these systems may be connected to
one another by means of a shared boundary, or interface. System Interface is the point at which
the system meets with its environment. Figure 1.3 also illustrates the concept of an open system,
which is a system that interacts with other systems in its environment. In this diagram, the
system exchanges inputs and outputs with its environment. Thus, we could say that it is
connected to its environment by input and output interfaces. Finally if a system has the ability to
change itself or its environment in order to survive, it is known as an adaptive system.

EXAMPLE
Organizations such as businesses and government agencies are good examples of the subsystems
of society, which is their environment. Society contains a multitude of such systems, including
individuals and their social, political, and economic institutions. Organizations themselves
consist of many subsystems, such as departments, divisions, and other work groups.
Organizations are examples of open systems, since they interface and interact with other systems
in their environment. Finally, organizations are examples of adaptive systems, since they can
modify themselves to meet the demands of a changing environment.

Dear Learner! We hope that you have identified the major activities of Information System.
Which of the activities are you familiar with? Have you ever participated in such activities?
Check your progress by answering the following questions.

Exercise 1.5
Answer the following questions.
1. List the activities involved in an information system
2. Describe a system that is found in your work environment, according to its characteristics.
3. Differentiate system boundary and system interface.

Dear Learner! We hope you have attempted all of these questions. Next, we will discuss about
factors for success of entrepreneurs.
We are now ready to apply the systems concepts we have learned. It helps us to understand better
how an information system works. For example, we have said that an information system is a

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system that accepts data resources as input and processes them into information products as
output. How does an information system accomplish this? What system components and
activities are involved?

1.5.2 Technological aspect of Information System

What should managerial end users know about the technologies used in computer based
information systems? The answer to this question is that they should have an understanding of
major concepts, developments, and management issues in information technology, that is,
hardware, software, telecommunications, database management, and other information-
processing technologies. Technology is so dynamic in this field that a factual knowledge that
concentrates on detailed characteristics and capabilities would soon be outdated. Instead, you
should focus on generic capabilities, major developmental trends, and management challenges in
the use of information, major developmental trends, and management challenges in the use of
information systems technology. Moreover, in this module particularly in the second chapter you
will be more familiar with what a hardware, software, and system applications are.
1.5.3. Application part of Information System
In the above two cases we have seen the founding concepts of information system and its
technological implications for end users. Now let us discuss the third major framework of
Information System. In what ways can information systems assist end user and organizations in
accomplishing their work activities and in meeting their strategic objectives? To answering this
question, it requires knowledge of the major applications of information systems for end user
activities and the operations, management, and strategic advantage of organizations. You should
gain a basic understanding of information systems concepts and applications. Particularly in
areas such as end user computing, office automation, transaction processing, and the functional
areas of business, management reporting, decision support, executive support, and Artificial
Intelligence. All of these are going to be discussed in detail in the last chapter of this course.

1.5.4. Developing Information System

How should managerial end users or information specialists develop information systems
solutions to business problems? To answer this question, you should learn some fundamental
problem-solving and developmental concepts. You should understand how methodologies such

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as the systems approach, the systems development life cycle, and prototyping can be used to
construct information systems applications that successfully meet end user and organizational
needs.
You will gain such knowledge and begin applying it to simple business problems in the second
Module. The goal of this chapter is to help you give the major information system frameworks to
managerial end users and decision makers.

1.5.5. Management Aspect of Information Systems

Managers perceive business challenges in the environment; they set the organization strategy for
responding and allocating the human and financial resources to achieve the strategy and
coordinate the work. Throughout, they must exercise responsible leadership. The business
information systems described in this book reflect the hopes, dreams and realities of real-world
managers. These are managers‟ conventional responsibilities.
Dear Learners! Have you understood how the framework of information system is vital to the
managers, end users and decision makers in understanding of information system? We hope so.
Now let us proceed to the next subsequent topic.

1.6 ROLE OF INFORMATION SYSTEM IN AN ORGANIZATION

Information is a basic resource in today’s society, as we are living in a global information
society, with a global economy which is increasingly dependent on the creation, management
and distribution of Information resources. Therefore, organization being part of society needs of
applications of Management Information Systems for the achievement of organizational
objectives.

In any organization three distinct levels of management are there which are operational, middle
and top level management. Hence, to be successful, Management Information Systems in an
organization should explicitly take into account this classification of management levels. Let us
see the roles in the three levels of management in detail.
At the operational level – This level is mainly concerned with making routine day to day
decisions, which do not have long term implications. Decisions at this level deals with situations
about which one is fairly certain and address well structured problems, they use information

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largely internal or local to the organization such as attendance, production daily cash flows and
sales data.

At tactical (Middle) level – The nature of decisions is quite different at the tactical level.
Generally, the middle Management staff takes such decision and these decisions have medium to
long term impact. Typical plant decisions include plant wide performance analysis, budget
analysis, vendor rating, staff promotion, capacity planning etc. Information support for such
decisions needs summarized organization wide data which is both internal and external in
content. Errors at this level in decision making are likely to have considerable impact on the
profitability of the organization; hence the quality of decisions and data are critical. The data
needs are also much different like it is less structure, more uncertain, more uncontrollable as it
pertains to the environment around the system and not just the system. The emphasis at this level
is on both the mix of efficiency and effectiveness.

At the strategic (top) level – Strategic level are concerned with the long term business like,
diversification, new plant location, new technology acquisition, exploring new markets etc. So
information support for such decisions would call for mainly external information arising from
the environment in which the organization operates. Errors at this level are likely to be
disastrous, so the information should be collected from multiple sources. Such variations in
information may be reconciled, through several analyses before the information is utilized.

Generally, one can have a mapping between the organization pyramid and informational
pyramid. But, as we go up the pyramid the quantity of Information decreases and the value of
information and the demand for quality of information increases.

CHAPTER SUMMARY
 In the first chapter we have discussed about concepts and definitions behind management
information systems, basic activities of information systems, and significance of information
system for end users and decision makers. Moreover, we have seen the founding frameworks
of information system, and contemporary approaches to information.

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 The importance of information systems thus, creates understanding of the effectiveness and
responsible use and management of information systems for managerial end users in today’s
global information society. Information systems play a vital role in the operations,
management and strategic success of businesses and other organizations and they become a
major functional area of business administrations.
 System concept is another important issue raised in this chapter. A system is a group of
interrelated components working toward the attainment of a common goal by accepting
inputs and producing outputs in an organized transformation process. Feedback is data about
the performance of a system. Control is the component that monitors and evaluates feedback
and makes any necessary adjustments to the input_ out put processing components to ensure
that proper output is produced.
 Information System Concept uses the resources of hardware, software, data and people to
perform inputs, storage, and control activities that converted to a form of knowledge that is
suitable for decision making. Then the data is manipulated and converted into information
(processing), stored for future use (storage), or communicated to its ultimate user (output)
according to correct processing procedures (control)

CHAPTER TWO
INFORMATION SYSTEM RESOURCES
2.1. INTRODUCTION
Dear Learners! In the first chapter we discussed basic issues regarding management
information systems. Now in this chapter will see the information system resources that support
the flow of information in the organizations. An information system uses the resources of people
(end users and IS specialists), hardware (machines and media), and software (programs and
procedures), to perform input, processing, output, storage and control activities that convert data
resources into information products.

Learning objectives:

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Up on the completion of this chapter you should able to:
 Identify the basic information system resources
 Differentiate hardware and software resources
 Define data and information process.

2.2. Information System Resources Components

This information system model highlights the relationships among the components and activities
of information systems. It provides a framework that emphasizes four major concepts that can
be applied to all types of information systems. People, hardware, software, and data are the four
basic resources of information systems.
 People resources include end users and Information System specialists,
 Hardware resources consist of machines and media,
 Software resources include both programs and procedures, and data resources can include
data, model, and knowledge bases.
 Data resources are transformed by information processing activities into a variety of
information products for end users.

Information processing consists of input, processing, output, storage, and control activities.

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FIGURE 2.1: The resources of an information system
All information systems use people, hardware, and software resources to perform input,
processing, output, storage, and control activities that transform data resources into information
products.

So, no matter what kind of information system you use, these four basic concepts are at work.
And there are many kinds of information systems, where people use tools such as pencils and
paper, or even machines such as calculators and typewriters, to convert data into information.
Others are computer-based information systems that use one or more types of computers and a
variety of computer devices to process data automatically. However, whether they are manual or
computer-based, you should be able to use this information system model and other system
concepts to help you understand the information systems you encounter in the real world.

Our basic Information System model shows an information system which consists of four major
resources: people, hardware, software, and data. Let us briefly discuss several basic concepts and
examples of the roles these resources play as the fundamental components of information
systems. You should be able to recognize these four components at work in any type of
information system. Now, let us see the components in detail.

2.3 People Resources

People are required for the operation of all information systems. These people resources include
end users and Information System specialists.
 End users (also called users or clients) are people who use an information system or the
information it produces. They can be accountants, salespersons, engineers, clerks,
customers, or managers. Most of us are information system end users.

 Information System specialists are people who develop and operate information systems.
They include systems analysts, programmers, computer operators, and other managerial,
technical, and clerical IS personnel. Basically, systems analysts design information
systems based on the information requirements of end users; programmers prepare
computer programs based on the specifications of systems analysts; and computer
operators operate computer systems.
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2.4 Hardware Resources
The concept of hardware resources includes all physical devices and materials used in
information processing. Specifically, it includes not only machines, such as computers and
calculators, but also all data media, that is, all tangible objects on which data is recorded from
sheets of paper to magnetic disks. Examples of hardware in computer-based information systems
are:
 Computer systems, which consist of central processing units (CPUs) and a variety of
interconnected peripheral devices. Examples are large mainframe computer systems,
minicomputers, and microcomputer systems.

 Computer peripherals, which are devices such as a keyboard or electronic mouse for input of
data and commands, a video screen or printer for output of information, and magnetic or
optical disks for storage of data resources.

 Telecommunications networks, which consist of computers, communications processors,

and other devices, interconnected by a variety of telecommunications media to provide
computing power throughout an organization.

2.5 Software Resources

The concept of software resources includes all sets of information processing instructions. This
generic concept of software includes not only the sets of operating instructions called programs,
which direct and control computer hardware, but also the sets of information processing
instructions needed by people, called procedures. So even information systems that don’t use
computers have a software resource component. The following are basic of software resources:
 System software, such as an operating system program, which controls and supports the
operations of a computer system.
 Application software, which are programs that direct processing for a particular use of
computers by end users. Examples are a sales analysis program, a payroll program, and a
word processing program.
 Procedures, which are operating instructions for the people who will use an information
system. Examples are instruction for filling out a paper form or using a software package.

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2.6 Data Resources
Data is more than the raw material of information systems. The concept of data resources has
been broadened by managers and information systems professionals to realize that data constitute
valuable organizational resources. Thus, you should view data as data resources which must be
managed effectively to benefit all end users in an organization.
Data can take many forms, including traditional alphanumeric data, composed of numbers and
alphabetical and other characters that describe business transactions and other events and
entities. On the other hand, text data, consisting of sentences and paragraphs are used in written
communications. Image data, such as graphic shapes and figures, and audio data the human
voice and other sounds, are also important forms of data.
The data resources of information systems are typically organized into
 Databases, which hold processed and organized data.
 Model bases, which hold conceptual, mathematical, and logical models that express
business relationships, computational routines, or analytical techniques.
 Knowledge bases, which hold knowledge in a variety of forms such as facts and rules of
inference about various subjects.
For example, data about sales transactions may be accumulated and stored in a sales database for
subsequent processing, which yields daily, weekly, and monthly sales analysis reports for
management. Decision support systems, on the other hand, are information systems that rely on
model bases to help managers explore and evaluate decision alternatives. Knowledge bases are
used by information systems called expert systems to give end users expert advice on specific
subjects. We will explore these concepts further in later chapters.

2.6.1 Data versus Information

Dear Learners! We hope you recall that the difference between data and information as we have
tried to see at the beginning of this chapter. The word data is the plural term for datum, though
data is commonly used to represent both singular and plural forms. Data are raw facts or
observations, typically about physical phenomena or business transactions. For example, a
spacecraft launch or the sale of an automobile would generate a lot of data describing those

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events. More specifically, data are objective measurements of the attributes (the characteristics)
of entities (such as people, places, things, and events).
EXAMPLE 1
A spacecraft launch generates vast amounts of data. Electronic transmissions of data (telemetry)
from thousands of sensors are converted to numeric and text data by computers. Voice and
image data are also captured through video and radio monitoring of the launch by mission
controllers. Of course, buying a car or an airline ticket also produces a lot of data. Just think of
the hundreds of facts needed to describe the characteristics of the car you want and its financing,
or the details for even the simplest airline reservation.

Figure 2.2. Data versus information. Note that information is processed data placed in its proper context
to give it value for specific end users.
The terms data and information are often used interchangeably. However, it is better to view data
as raw material resources that are processed into finished information products. Information can
then be defined as data that has been converted into a meaningful and useful context for specific
end users.
Thus data is usually subjected to a “value-added” process (we call data processing or information
processing) where
 Its form is aggregated, manipulated, and organized;
 Its content is analyzed and evaluated;
 It is placed in a proper context for a human user.
So, you should view information as processed data placed in a context that gives it value for
specific end users. See Figure 2.2.

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You should always recognize Information Systems as a managerial end user and be able to
remember the fundamental components of information systems you encounter in the real world.
This means that you should be able to identify:
The people, hardware, software, and data resources they use.
The types of information products they produce.
The way they perform input, processing, output, storage, and control activities.
This kind of understanding will help you be a better user, developer, and manager of information
systems. And that, as we have pointed out in this chapter, is important to your future success as a
manager, entrepreneur, or professional in business.

Analyzing Wear Guard’s Information Systems

Earlier in the first chapter, in real world case one we analyzed the importance of computer-
based information systems to the success of Wear Guard, Incorporated. Now let’s analyze the
resources used, activities performed, and information products produced by their information
systems.

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Figure 2.3 illustrates some of the components you might see in WearGuard’s information
systems. People resources include the managers, order takers, and customer service personnel
who use the system. Hardware resources include machines such as the 300 microcomputers
and 6 prime minicomputers, their video monitors and magnetic disk drives, as well as media
such as magnetic disks. Software resources include order entry, inventory, and sales analysis
programs, and the procedures followed by their order takers. Data resources are contained in
customer, inventory, and sales databases. Information products include video displays for order
entry and customer service and sales analysis reports for managers.

Order entry data and sales analysis inquiries and entered into the system as input through the
keyboards of employees and managers. Processing is accomplished by microcomputers and
minicomputers executing programs to accomplish order entry, customer service, sales analysis,
video displays and reports. Storage of data and software resources is provided by magnetic disk
drives on which data are stored about customer, inventory, and sales databases and order
processing, inventory, and sales analysis programs. Control is accomplished by order processing
and inventory programs and procedures which ensure quick and accurate order entry and
customer service.

Dear Learners! You can see that analyzing an information system to identify its basic
components is not a difficult task. Just identify the resources that the information system uses,
the information processing activities it performs, and the information products it produces. Then
you will be better able to identify ways to improve these components, and thus the performance
of the information system itself. That’s a goal that every managerial end user should strive to
attain.

Dear Learners! Now, it is time to do exercise.

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CHAPTER SUMMARY
 Information System resources and product includes basically people, hard ware, soft ware
and data. Hardware resources include machines and media used in information possessing.
Software resources include computerized instructions (programs) and instructions for people
(procedures). People resources include information systems specialists and users. Data
resources include alphanumeric, text, image, video, audio, tactile, and sensor data.
Information products produced by an information system and take a variety of forms
including paper reports, visual displays, documents, messages, graphics and audio responses.

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 CHAPTER THREE
COMPUTER HARDWARE AND SOFTWARE
3.1 INTRODUCTION
Dear student! Now a day computers become a common tool on managers‟ desks. That is to say
that most managers use computer system. Many managers rely on computer-generated
information to help them make decisions. Moreover, decision regarding the acquisition and use
of computer systems, especially small computer systems, are increasingly being made at the
department level of organizations. Because rapid change in computer technology is ongoing,
acquisition decisions are always made in a very dynamic environment. To help departmental
managers make rational decisions about computer systems in such a complex and dynamic
environment, they need a basic understanding of computer systems.

Learning objectives
Upon the completion of this chapter, you should be able to:
 Identify the components and functions of a computer system.
 Outline the major differences and uses of microcomputers, minicomputers, mainframe,
and networked computers.
 Identify the major types and uses of computer peripherals for input, output, and storage.
 Identify several major types of system and application software.
 Outline the functions of operating systems and operating environments.

3.2. COMPUTER HARDWARE

Dear student! This section reviews micro, mini, mainframe, and networked computer systems,
and the major types of peripheral devices used for computer input, output, and storage by the end
users.

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3.2.1. Computer Systems: Micros, Minis, Mainframe, and Networked Computers
Dear student! Before we examine the major types of computers in use today, we should review
what the term computer system means. A computer is more than a processing “box” or a
collection of electronic devices performing a variety of information processing chores. A
computer is a system – an interrelated combination of components that performs the basic
system functions of input, processing, output, storage, and control, thus providing end users
with a powerful information processing tool. Understanding the computer as a computer system
is vital to the effective use and management of computers. You should be able to visualize any
computer this way, from a microcomputer to a large computer system whose components are
interconnected by a telecommunications network and spread throughout a building or a
geographic area.

Computer hardware refers to the physical components of the computer system which are input
devices, output devices, storage devices, and parts that are inside the system unit (like RAM,
CPU, etc.)

Figure 3.1 illustrates that a computer is a system of hardware devices organized according to the
following system functions:
 Input. The input devices of a computer system include keyboards, touch screens, pens,
electronic “mice”, optical scanners, and so on. They convert data into electronic machine-
readable form for direct entry or through telecommunications links into a computer system.
 Processing. The central processing unit (CPU) is the main processing component of
computer system. (In microcomputers, it is the main microprocessor.) In particular, the
arithmetic-logic unit, one of the CPU‟s major components, performs the arithmetic and logic
functions required in computer processing.
 Output. The output devices of a computer system include video display units, printers, audio
response units, and so on. They convert electronic information processed by the computer
system into human-intelligible form for presentation to end users.
 Storage. The storage function of a computer system takes place in the computer’s primary
storage unit or memory, and in the secondary storage devices such as magnetic disk and tape
units. These devices store data and program instructions needed for processing.

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 Control. The control unit of the CPU is the control component of a computer system. It
interprets computer program instructions and transmits directions to the other components of
the computer system.
The central processing unit is the most important hardware component of a computer system. It
is also known as CPU, the central processor or instruction processor, and the main
microprocessor in a microcomputer. Conceptually, the CPU can be subdivided into two major
subunits: the arithmetic-logic unit and the control unit. The CPU also includes specialized
circuitry devices such as registers for high speed, temporary storage of instruction and data
elements, and various subsidiary processors such as those used for arithmetic operations,
input/output, and telecommunications support. (Conceptually, a computer’s primary storage unit
or memory is sometimes shown as part of a CPU).

The control unit obtains instructions from those stored in the primary storage unit and interprets
them. Then it transmits directions to the other components of the computer system, ordering
them to perform required operations. The arithmetic-logic unit (ALU) performs required
arithmetic and comparison operations. A computer can make logical changes from one set of
program instructions to another (for example, overtime pay versus regular pay calculations)
based on the results of comparison made in the ALU during processing.

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 Figure 3.1. The computer system concept
The primary storage unit (also called main memory) holds data and instructions between
processing steps and supplies them to the control unit and arithmetic-logic unit during
processing. The primary storage unit is also used to hold data and program instructions between
processing steps, and after processing is completed but before output. In modern computers, the
primary storage unit consists of microelectronic semiconductor memory chips. Most of memory
is also known as RAM (random access memory). The contents of these memory chips can be
instantly changed to store new data. Other more permanent memory chips are called ROM (read
only memory).

Data and programs are also stored in secondary storage devices, such as magnetic disk and tape
units, which greatly enlarge the storage capacities of computer systems. Also, since memory
circuits typically lose their contents when electric power is turned off, most secondary storage

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media provide a more permanent type of storage. However, the contents of secondary storage
devices cannot be processed without first being brought into the primary storage unit..
Dear student! Do you know how the size of a data is represented? Or storage capacity is
represented? If no, don’t worry! The following description will give you an overview.

The smallest element of data is called a bit, or binary digit, which can have a value of either zero
or one. The capacity of memory chips is usually expressed in terms of bits. A byte is a basic
grouping of bits that the computer operates as a single unit. It typically consists of eight bits and
is used to represent one character of data in most computer coding schemes. Thus, the capacity
of a computer’s memory and secondary storage devices is usually expressed in terms of bytes.
Computer codes such as ASCII (American Standard Code for Information Interchange) and
EBCDIC (Extended Binary Coded Decimal Interchange Code) use various arrangements of bits
to form bytes that represent the numbers zero through nine, the letters of the alphabet, and many
other characters.

Table 3.1. Examples of the ASCII computer code

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Storage capacities are frequently measured in kilobytes (KB) or megabytes (MB). Although
“kilo” means “one thousand” in the metric system, the computer industry uses “KB” to represent
1,024 (or 210) storage positions.
1 Byte = 8 bits
1 Kilobyte (1 KB) = 1024 bytes
1 Megabyte (1 MB) = 1024 KB
1 Gigabyte (1 GB) = 1024 MB
1 Terabyte (1 TB) = 1024 GB
Dear student! Do you know how fast the computer system is? Computer operating speeds that
were formerly measured in milliseconds (thousandths of a second) are now being measured in
the microsecond (millionth of a second) and nanosecond (billionth of a second) range, with
picosecond (trillionth of a second) speed being attained by some computers. Such speeds seem
almost incomprehensible. For example, an average person taking one step each nanosecond
would circle the earth about 20 times in one second!

As a prospective managerial end user, it is important to you to recognize several major trends in
computer systems. These trends have developed in the past during each major stage, or
generation, of computers, and they are expected also to be continuing in the future. The first
generation of computers began in the early 1950s; the second generation in the late 1950s; the
third generation in the mid-1960s; and the fourth generation began in the early 1970s and
continue to the present. A fifth generation of computers is expected to arrive in the near future.
Figure 2.3 highlights trends in the characteristics and capabilities of computers. Notice that
computers continue to become smaller, faster, more reliable, and less costly to purchase and
maintain.

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Table 3.2 Major trends in computer characteristics and capabilities
Dear student! Now, check your progress by attempting the following questions.

Dear student! Have you grasped the basic system functions that a computer performs? Well
done! Now let’s see the brief descriptions of computer classifications. Today’s computer systems
display striking differences as well as basic similarities. Differing end user needs and
technological discoveries have resulted in the development of several major categories of
computer systems with a variety of characteristics and capabilities. Thus, computer systems are
typically classified as microcomputers, minicomputers, and mainframe computers. However, as
figure 3.2 illustrates, these are not precise classifications. For example, variations of these
categories include superminicomputers; small, medium, and large mainframe computers; and
supercomputers. Also, a variety of application categories, which describe major uses for various

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types of computers are common. Examples are host computers, network servers, and technical
workstations.

Microcomputers are the smallest but they are the most important category of computer systems
for end users. A microcomputer is typically referred to as a personal computer, or PC. However,
microcomputers are much more used by individual persons than small computers. Their
computing power now exceeds that of the mainframes of previous computer generations at a
fraction of their cost. For this reason, they have become powerful professional workstations for
use by end users in business and other organizations. Microcomputers come in a variety of sizes
and shapes for a variety of purposes. Microcomputers categorized by size include handheld,
notebook, laptop, portable, desktop, and floor-standing microcomputers. Or, based on their use,
they include home, personal, professional, workstation, and multiuser computers and special-
purpose categories such as telecommunications network servers.

Microcomputers are used for many information processing jobs by end users. These end user
computing applications are directly related to the wide variety of software packages available for
microcomputers. The most popular types of microcomputer applications include word
processing (automated, electronic typing and editing), decision support, (computerized
worksheet analysis and modeling), database management (electronic record keeping,
interrogation, and report generation), graphics (generation of charts and other graphic images),
communications (telecommunications with other end users, computers, and data banks),
application development (computer-supported systems and software development), engineering
(computer-aided design and analysis), and personal and home use (entertainment, home
management, personal finance, education, and so on).
Minicomputers are midrange systems that are larger and more powerful than most
microcomputers but are smaller and less powerful than most large mainframe computer systems.
However, this is not a precise distinction. High-end models of microcomputer systems
(supermicros) are more powerful than some minicomputers, while high-end models of
minicomputers (superminis) are more powerful than some smaller models of mainframe

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computers. Consequently, a controversy exists on the prospects of minicomputers remaining as a
separate computer category, since microcomputers and mainframes provide a wide range of
computer models with similar capabilities.

Mainframe computers are large, powerful computers that are physically larger than micros and
minis and usually have one or more central processors with faster instruction processing speeds.
For example, they may be able to process from 10 to 200 million instructions per second (MIPS).
Mainframes have large primary storage capacities. For example, their main memory capacity can
range from about 32 megabytes to over 500 megabytes of storage. Many mainframe models have
the ability to service hundreds of users at once. For example, a single large mainframe can
process hundreds of different programs and handle hundreds of different peripheral devices
(terminals, disk and tape drives, printers, etc.) for hundreds of different users at the same time.

The term supercomputer has been coined to describe a category of extremely powerful
mainframe computer systems especially designed for high-speed numeric computation. A small
number of large supercomputers are built each year for government research agencies, military
defense systems, national weather forecasting agencies, large time-sharing networks, and major
corporations.

Networked Computer Systems: Solitary computer systems are becoming a rarity in corporate
computing. From the smallest microcomputers to the largest mainframe, computers are being
networked, or interconnected by telecommunications links with other computer systems. This
distribution of computer power throughout an organization is called distributed processing. It
frequently takes the form of client/server approach, with networks of end user microcomputers
(clients) and network servers tied together, sometimes with minicomputers or mainframes acting
as superservers. Networked computer systems allow end users to communicate electronically
and share the use of hardware, software, and data resources. For example, end users in an office
local area network (LAN) of microcomputers can share the use of software packages, laser
printers, and workgroup databases.
Dear student! Now, do the following exercise.

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3.2.2. Computer Peripherals: Input, Output, and Storage Devices
Dear student! In the previous section we have discussed different categories of computers and
overviews about the basic functions that a computer performs. Now, let’s discuss a category of
computer’s hardware which is used to accomplish some of the functions of a computer system, in
particular peripherals.

Peripherals is the generic name given to all input/output equipment and secondary storage
devices that depend on direct connections or telecommunications link to the central processing
unit of a computer system.
Input/output Hardware Trends
There are many hardware devices for input and output at the user interface between computer
systems and end users. There is a major trend toward the increased use of a variety of direct
input/output devices to provide a more natural user interface. More and more, data and
instructions are entered into a computer system directly, through input devices such as
keyboards, electronic mice, pens, touch screens, and optical scanning wands. These direct
input/output devices drastically reduce the need for paper source documents and their conversion
to machine-readable media. Direct output of information through video displays of text and
graphics and voice response device is increasingly becoming the dominant form of output for
end users.

Input Devices
Keyboards are the most widely used devices for entering data and text into computer systems.
However, pointing devices are a better alternative for issuing commands, making choices, and
responding to prompts displayed on your video screen. For example, pointing devices such as
electronic mice and trackballs allow you to easily choose from menu selections and icon displays
using point-and-click or point-and-drag methods. Icons are small figures that look like familiar

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devices, such as a file folder (for accessing a file), a wastebasket (for deleting a file), a calculator
(for switching to a calculator mode), and so on.
Electronic mouse is a pointing device used to move the cursor on the screen, as well as to issue
commands and make icon and menu selections. Some mice contain a roller ball, which moves
the cursor in the direction the ball is rolled. A mouse contains two buttons: primary button (left
button) and secondary button (right button). Pressing a button on the mouse begins the activity
represented by the icon selected.

Trackball is another pointing device and a variant of the mouse. It contains a rotating ball on top
of the stationery device. On rotating the ball, the cursor moves on the screen. The trackball also
contains two buttons and the operations are as similar as for the mouse. It requires less desk
space when compared to the mouse.

Joystick is a pointing device that consists of a vertical handle mounted on a base containing one
or two buttons. The vertical handle of the joystick can be rotated around 360 degrees. As the
handle is rotated, the cursor also moves on the screen. Joystick is often used for playing games.

In touchpad the cursor is controlled with the fingers. About the same size as a mouse, touchpad
is a flat, rectangular device.
The light pen is a light sensitive stylus or pen like device, connected by a wire to the computer.
There is a button in the light pen. It is mainly used for CAD (Computer Aided Design)
applications.

Digitizing tablet is an electronic device with a flat surface and specially designed stylus. A user
can draw or write anything over the flat surface using the stylus. It is used mainly for CAD and
graphics applications in designing cars, buildings, medical devices and robots.

Optical scanners are other types of input devices that read text or graphics and convert them
into digital input for a computer. They include optical character recognition (OCR) equipment
that can read special-purpose characters and codes. Thus, optical scanning provides a method of
direct input of data from source documents into a computer system.

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Output Devices
Video displays are the most common type of computer output. Most video displays use cathode
ray tube (CRT) technology similar to the picture tubes used in home TV sets.
Liquid crystal displays (LCD), such as those used in electric calculators and watches, are also
being used to display computer output.

Printers: Most computer systems use printers to produce permanent (hard copy) output in
human-readable form. End users need printed output if they want copies of output to take away
from the computer and to share with others. Hard copy output is also frequently needed for legal
documentation. Plotters, which draw graphics displays on paper, also produce printed paper
output.
Storage Devices
Bytes, or characters of data, are composed of bits. Records, such as customer accounts, are made
up of bytes. Files, such as customer files, consist of records. Because, the number of records
within a file can become large, and because the number of files you want to work with can also
be large, the amount of main memory you have in your computer system may not be large
enough to hold all the necessary data. Two of the most common devices used for secondary
storage are disk drives and tape drives.

Disk dive storage devices are called direct access storage devices (DASD) because they permit
data to be stored and retrieved directly; it is not necessary to scan all the other data on the
medium sequentially. Like main memory, direct access storage devices achieve direct access by
dividing the available storage space into discrete locations and giving each location a unique
address.

Tape drive storage devices are called sequential access storage devices (SASD) because they
permit data to be stored and retrieved only sequentially. Thus, if you wished to read record
number 1,056 in a file of 3,000 records, the system would have to scan the file starting with
record number 1 until it reached the record you wanted, number 1,056.
Disk drives are of two types:

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 i. Floppy drives. They use flexible diskettes, or floppy diskettes, as storage media, which
commonly has sizes 5¼-inch and 3½-inch diameter. Common floppy capacities are 360
KB, 720 KB, 1.2 MB, and 1.44 MB.
ii. Hard drives. They use polished metal platters as a storage media. Hard disk drives allow
you to access data faster and usually hold much more data than floppy disk drives. But, as
you might expect, they cost more. Capacities of hard drives range from 40GB to several
gigabytes of storage.
Magnetic tape is another widely used secondary storage medium. Data is recorded in the form
of magnetized spots on the iron oxide coating of the plastic tape by the read/write heads of
magnetic tape drives. Magnetic tape comes in the form of tape reels and cartridges for
mainframes and minicomputers, and small cassettes or cartridges for microcomputers.
Mainframe magnetic cartridges are replacing tape reels and can hold over 200 GB. Small
cartridges can store over 100 GB and are a popular means of providing backup capabilities for
microcomputer hard disk drives.
Dear student! Now, do the following exercise to check your progress.

3.3 COMPUTER SOFTWARE

Dear student! Are you aware of the fact that computer hardware is operational only in the
presence of computer software? We hope so! It is the software that breathes life to the hardware.
This section reviews the basic features and functions of major types of system and application
software packages used to support traditional and end user computing. It discusses their
characteristics and purposes, and gives examples of their uses.
Information systems depend on software resources to help end users use computer hardware to
transform data resources into a variety of information products. Software is needed to

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accomplish the input, processing, output, storage, and control activities of information systems.
Computer software is typically classified into two major types of programs:
 System software. Programs that manage and support the resources and operations of a
computer system as it performs various information processing tasks.
 Application software. Programs that direct the performance of a particular use, or
application, of computers to meet the information processing needs of end users.

Figure 3.3 An overview of computer software.

Dear student! Have you carefully realized the software classification and corresponding
examples given in the above diagram? Well done! Brief descriptions are given next.

3.3.1. System Software

System software consists of programs that manage and support a computer system and its
information processing activities. These programs serve as a vital software interface between
computer system hardware and the application programs of end users. Note that such programs
can be grouped into three major functional categories:

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i) System management programs. Programs that manage the hardware, software, and data
resources of the computer system during its execution of the various information processing jobs
of users. Examples of these include:
 Operating systems. The most important system software package for any computer is its
operating system. An operating system is an integrated system of programs that manages
the operations of the CPU, controls the input/output and storage resources and activities of
the computer system, and provides various support services as the computer executes the
application programs of users. The primary purpose of an operating system is to maximize
the productivity of a computer system by operating it in the most efficient manner. An
operating system minimizes the amount of human intervention required during processing.
It helps your application programs perform common operations such as entering data,
saving and retrieving files, and printing or displaying output.

 Operating environments. The ease with which you can use an operating system is important
to the manager. Clearly, easy-to-use operating systems allow managers and other end-users
to save learning and operating time. The operating system features by which the user
interacts, or interfaces with the operating system is called the operating environment.
Example: command-line operating environments, graphical-user interface (GUI)
environments.

 Database management systems. In mainframe and minicomputer systems, a database

management system (DBMS) is viewed as a system software package that controls the
development, use, and maintenance of the databases of computer-using organizations. A
DBMS program helps organizations use their integrated collections of data records and files
known as databases. It allows different user application programs to easily access the same
database.

 Telecommunications monitors. Modern information systems rely heavily on

telecommunications networks to provide electronic communication links between end user
workstations, other computer systems, and an organization’s databases. This requires system
software called telecommunications monitors. These programs are used by the main
computer in a network (called the host), or in telecommunications control computers such as
front-end processor and network servers.

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ii) System support programs. Programs that support the operations and management of a
computer system by providing a variety of support services. Examples of these include:

 System utilities. These programs are often designed to handle repetitive functions such as
sorting records in files, finding data and programs on a hard disk, listing the data files and
programs stored on hard disks, merging one group of data with another, copying data and
programs from one secondary storage device to another, making copies of data and
programs, diagnosing system performance, formatting magnetic media so that the media can
be used, compressing files, and providing system security.
 Performance monitors. These are programs that monitor the performance and usage of
computer systems to help its efficient use.

 Security monitors. These are packages that monitor and control the use of computer systems
and provide warning messages and record evidence of unauthorized use of computer
resources

iii) System development programs. Programs that help users develop information system
programs and procedures and prepare user programs for computer processing. Examples of these
include:

 Programming language translators. These are programs that translate other programs into
machine language instruction code the computer can execute. They also allow you to write
your own programs by providing program creation and editing facilities. Programming
language translators are known by a variety of names. An assembler translates the symbolic
instruction codes of programs written in an assembly language into machine language
instructions, while a compiler translates high-level language statements. An interpreter is a
special type of compiler that translates and executes each program statement at a time,
instead of first producing a complete machine language program, like compilers and
assemblers do.

 Programming tools. The programming interface of many language translator programs is

being enhanced by a variety of built-in capabilities or add-on packages. Language translators
have always provided some editing and diagnostic capabilities to identify programming
errors or bugs. However, many language translator programs now include powerful graphics-

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 oriented editors and debuggers. These programs help programmers identify and avoid errors
while they are programming. Such programming tools provide a computer-aided
programming environment or workbench. Their goal is to decrease the drudgery of
programming while increasing the efficiency and productivity of programmers.
 Computer-aided software engineering (CASE) packages. Major changes are occurring in the
traditional process of systems development. That’s because the system development life
cycle (SDLC) process has often been too inflexible, time-consuming, and expensive. In many
cases, end user requirements are defined early in the process, and then end users are locked
out until the system is implemented. Also, the backlog of unfilled user requests has grown to
two to five years in many companies. Therefore, a computer-aided systems engineering
(CASE) process has emerged due to the availability of a variety of software packages for
systems and software development.

Dear student! Now, do the following exercise to check your progress.

Operating System Functions

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 Figure 3.4: The basic functions of an operating system
A. The user Interface
The user interface is the part of the operating system that allows you to communicate with it so
you can load programs, access files, and accomplish other tasks. Three main types of user
interfaces are the command-driven, menu-driven, and graphical-user interfaces. The trend in
user interfaces for operating systems, operating environments, and other software is moving
away from the entry of brief end user commands, or even the selection of choices from menus of
options. Instead, the trend is toward an easy-to-use graphical-user interface (GUI) which uses
icons, bars, buttons, boxes, and other images. GUIs rely on pointing devices like the electronic
mouse to make selections that help you get things done.
B. Resource Management
An operating system uses a variety of programs to manage the hardware resources of a computer
system, including its CPU, memory, secondary storage devices, and input/output peripherals.
C. File Management
An operating system contains file management programs that control the creation, deletion, and
access of files of data and programs.
D. Task Management
The task management programs of an operating system manage the accomplishment of the
computing tasks of end users. They give each task a slice of a CPU‟s time and interrupt the CPU
operations to substitute other tasks. Task management may involve a multitasking capability
where several computing tasks can occur at the same time. Multitasking may take the form of
multiprogramming, where the CPU can process the tasks of several programs at the same time,
or time-sharing, where the computing tasks of several users can be processed at the same time.
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3.3.2. Applications Software
Application software consists of programs that direct computers to perform specific information
processing activities for end users. These programs are called application packages because they
direct the processing required for a particular use, or application, that end users want
accomplished. Application software includes a variety of programs that can be subdivided into
two:
i. General-purpose programs: - These are programs that perform common information
processing jobs for end users. Examples include:
 Word processing programs. These are programs that computerize the creation, editing,
and printing of documents (such as letters, memos, and reports) by electronically
processing text data (words, phrases, sentences, and paragraphs).

 Spreadsheet programs. These are application programs used for analysis, planning, and
modeling. They provide an electronic replacement for more traditional tools such as
paper worksheets, pencils, and calculators.
 Database management programs. These are programs that allow users to prepare
reports based on data found in more than one file. Most DBMS packages can perform
four primary tasks: database development (define and organize the content,
relationships, and structure of the data needed to build a database), database
interrogation (access the data in a database for information retrieval and report
generation), database maintenance (add, delete, update, correct, and protect the data in
a database), application development (develop prototypes of data entry screens, queries,
forms, reports, and labels for a proposed application).
 Graphics programs. These convert numeric data into graphics display such as line
charts, bar graphs, and pie charts. Many other types of presentation graphics displays
are possible. Draw and paint graphics packages support freehand drawing, while desk-
top publishing programs provide predrawn clip art graphics for insertion into
documents. Images are displayed on your video monitor or copies can be made on your
system printer or plotter..
 Integrated packages. These combine the abilities of several general-purpose
applications in one program. Integrated packages were developed to solve the

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 problems caused by the inability of individual programs to communicate and work
together with common files of data.
ii) Application-specific: Thousands of application-specific package are available to support
specific application of end users. Major categories of such application-specific programs are:
 Business application programs. Programs that accomplish the information processing
tasks of important business functions or industry requirements. Examples of such
business functions and their corresponding applications are accounting (general ledger),
marketing (sales analysis), finance (capital budgeting), etc.
 Scientific application programs. Programs that perform information processing tasks
for the natural, physical, social, and behavioral sciences; and for mathematics,
engineering, and all other areas involved in scientific research, experimentation, and
development.

 Other application programs. There are so many other application areas of computers
that we lump them all into this category. Thus, we can talk of computer applications in
education, entertainment, music, art, law enforcement, medicine, and so on.
Dear student! Now, check your progress by attempting the following questions.

CHAPTER FOUR
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 DATABASE MANAGEMENT AND TELECOMMUNICATIONS
4.1. INTRODUCTION
Dear student! One way to improve managerial decision making is to provide managers with the
right information at the right time. The information, which helps the manager to make decisions,
should be relevant and the manager needs to know where useful information is stored, how to
access it, and how to use it in his decision making.

Once a time, communications technology was the purview of telephone companies and small
groups of technical people located in very large firms. This state of affairs is no longer exists.
The communication of voice, data, text, and images pervades computer information systems
regardless of the size of manager’s computer resources.
Learning objectives
After completion of this chapter, you should be able to:
 Explain the importance of data resource management.
 Outline the advantages of the database management approach versus file processing
methods.
 Describe concepts like logical data elements, fundamental database structures, major types
of databases, and database development.
 Use examples to illustrate how businesses and end users benefit from using
telecommunications networks.
 Identify the basic components, functions, and types of telecommunications networks.
 Explain the functions of major types of telecommunications network hardware, software,
and media.

4.2. DATABASE MANAGEMENT

Dear student! This section emphasizes management of data resources of computer-using
organizations. It outlines the managerial implications of basic concepts and applications of
database management in organizational information systems.

4.2.1. A Manager’s View of Database Management

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Data is a vital organizational resource, which needs to be managed like other important business
assets. Most organizations could not survive or succeed without quality data about their internal
operations and external environment. That is why organizations and their managers need to
practice data resource management – a managerial activity that applies information systems
technology and management tools to the task of managing an organization’s data resources.

Dear student! How do you feel if you were an executive of a computer-using company and if
you were told that the information you wanted about your employees was too difficult and costly
to obtain? Suppose the vice president of information services gave you the following reasons:
 The information you want is in several different files, each organized in a different way.
 Each file has been organized to be used by different application programs, none of which
produces the information you want in the form you need.
 No application program is available to help get the information you want from these files.
As a company executive, you would probably be frustrated and disappointed with computer-
based processing if it could not provide you with information for such a simple request. Well,
that is how end users can be frustrated when an organization relies on file processing systems in
which data are organized, stored and processed in independent files of data records. In the
database management approach, on the other hand, files are consolidated into a common pool,
or database, of records available to many different application programs. Moreover, an
important software package called a database management system (DBMS) serves as a software
interface between users and databases.
Management Problems of File Processing
For many years, information systems had a file processing orientation. Data needed for each user
application was stored in independent data files. Processing consisted of using separate computer
programs that updated these independent data files and used them to produce the documents and
reports required by each separate user application.
Data duplication: Independent data files include a lot of duplicated data; the same data (such as
a customer’s name and address) is recorded and stored in several files. This data redundancy
causes problems when data has to be updated, since separate file maintenance programs have to
be developed and coordinated to ensure that each file is properly updated. Of course, this proves
difficult in practice, so a lot of inconsistency occurs among data stored in separate files. File

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maintenance is a time-consuming and costly process, and it increases the secondary storage
space requirements of computer systems.

Lack of data integration: Having data in independent files makes it difficult to provide end
users with information for ad hoc requests that require accessing data stored in several different
files. Special computer programs have to be written to retrieve data from each independent file.
This is so difficult, time-consuming, and costly for some organization.
Data dependence: In file processing systems, major components of a system – the organization
of files, their physical locations on storage hardware, and application software used to access
those files – depend on one another in significant ways.
Other problems: In file processing systems, it is easy for data elements such as stock numbers
and customer addresses to be defined differently by different end users and applications. This
causes serious inconsistency problems in the development of programs to access such data. In
addition, the integrity (that is, the accuracy and completeness) of the data is suspect because
there is no control over their use and maintenance by authorized end users.
The database management solution: The concepts of database and database management
were developed to solve the problems of file processing systems. A database is an integrated
collection of logically related records and files. It consolidates records previously stored in
independent files so that it serves as a common pool of data to be accessed by many different
application programs. Database management involves the control of how databases are created,
interrogated, and maintained to provide information needed by end users and the organization.
The database approach: Common databases are developed in the database management
approach. A data dictionary, which describes the data contents and relationships of the
databases, is established to ensure integrity, consistency, and reliability. This data can be
consolidated into a common customer database rather than being kept in separate files for each
of those applications.
Database processing: File processing involves updating and using independent data files to
produce information needed for each user’s application. However, database processing consists
of three basic activities:
 Updating and maintaining common databases to reflect new business transactions and other
events requiring changes to an organization’s records.

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 Providing information needed for each user’s application by using computer programs that
share the data in common databases. This is accomplished through a common software
interface provided by a database management system package.
 Providing an inquiry/response and reporting capability through a DBMS package.
Database development: Database management packages allow end users to easily develop the
databases they need. However, a DBMS allows organizations to place control of organization-
wide database development in the hands of database administrators (DBAs) and other
specialists. This improves the integrity and security of organizational databases. The database
administrator uses a data definition language (DDL) to develop and specify the data contents,
relationships, and structure of each database.

Types of Databases
In general there are six major types of databases that may be found in computer-using
organizations. Thus;
 Operational databases. These databases store detailed data needed to support the
operations of the entire organization. They are also called subject area databases (SADB),
transaction databases, and production databases.
 Management databases. These databases store data and information extracted from
selected operational and external databases. They consist of summarized data and
information most needed by the organization’s managers and other end users. Management
databases are also called information databases.
 Information warehouse databases. An information warehouse stores data from current
and previous years that has been extracted from the various operational and management
databases of an organization. It is a central source of data that has been standardized and
integrated so it can be used by mangers and other end user professionals from throughout an
organization.
 Distributed databases. These are databases of local work groups and departments at
regional offices, branch offices, manufacturing plants, and other work sites.
 End user databases. These databases consist of a variety of data files developed by end
users at their workstations.

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 External databases. Access to external, privately owned online databases or data banks is
available for a fee to end users and organizations from commercial services.
 Text databases are a natural outgrowth of the use of computers to create and store
documents electronically.

Benefits and Limitations of Database Management

The database management approach provides managerial end users with several important
benefits such as reduced data redundancy, improved data integrity, and data independency.
Database management reduces the duplication of data and integrates data so that they can be
accessed by multiple programs and users. Programs are not dependent on the format of the data
and the type of secondary storage hardware being used. Users are provided with an
inquiry/response and reporting capability that allows them to easily obtain information they need
without having to write computer programs. Computer programming is simplified, because
programmers are not dependent on either the logical format of the data or their physical storage
location. Finally, the integrity and security of the data stored in databases can be increased since
access to data and modification of the database are controlled by database management system
software, a data dictionary, and a database administrator function.

The limitations of database management arise from its increased technological complexity. Thus,
a database management approach can pose problems in data resource management. Developing a
large database and installing a DBMS can be difficult and expensive. More hardware capability
is required, since storage requirements for the organization’s data, overhead control data, and the
DBMS programs are greater. Longer processing times may result from high-volume transaction
processing applications since an extra layer of software (the DBMS) exists between application
programs and the operating system. Finally, if an organization relies on centralized databases,
their vulnerability to errors, fraud, and failures is increased. Yet problems of inconsistency of
data can arise if a distributed database approach is used. Therefore, the security and integrity of
an organization’s databases are major concerns of an organization’s data resource management
effort.
Dear student! Now, do the following exercise to check your progress.

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4.2.2. Technical Foundations of Database Management
Dear student! Just imagine how difficult it would be to get any information from an information
system if data were stored in an unorganized way, or if there was no systematic way to retrieve
it. Therefore, in all information systems, data resources must be organized and structured in
some logical manner so that they can be accessed easily, processed efficiently, retrieved quickly,
and managed effectively. Thus, data structures and access methods ranging from simple to
complex have been devised to efficiently organize and access data stored by information
systems. In this section, we will explore these and other more technical concepts of database
management.

Logical Data Elements

A hierarchy has been devised that differentiates between the most simple groupings, or elements,
of data, and more complex data elements. Thus, data are logically organized into characters,
fields, records, files, and databases, just as writing can be organized in letters, words,
sentences, paragraphs, and documents.

Character: The most basic logical data element is the character, which consists of a single
alphanumeric, numeric, or other symbol.
Field. The next higher level of data is the field or data item. A field consists of a grouping of
characters. For example, the grouping of alphabetic characters in a person’s name forms a name
filed. Specifically, a data field represents an attribute (a characteristic or quality) of some entity
(object, person, place, or event). For example, a person’s age could be a data field that represents
one of the many attributes of an individual.
Record. Related fields of data are grouped to form a record. Thus, a record presents a collection
of attributes that describe an entity.

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File. A group of related records is known as a data file. Thus, an employee file would contain the
records of the employees of a firm. Files are frequently classified by the application for which
they are primarily used, such as payroll file or an inventory file.
Database. A database is an integrated collection of logically related records or files.

Dear student! Is it clear about the logical data elements? That is great!

Accessing Files and Databases

Once we had our database at hand, how can we access it? Databases and files are stored on
various types of storage media and they are organized in a variety of ways to make it easier to
access the data record they contain. In database and file maintenance, records have to be
continually added, deleted, or updated to reflect business transactions. Data must also be
accessed so information can be produced in response to end user requests. Thus, efficient access
to data is important.
All data records usually contain one or more identification fields or keys, which identify the
record so it can be located. For example, the social security number of person is often used as a
primary key field which uniquely identifies the data records of individuals in student, employee,
and customer files and databases. Other methods can be used to identify and link data records
stored in several different database files. For example, hierarchical and network databases may
use pointer fields. These are fields within a record that indicate (point to) the location of another
record that is related to it in the same file, or in another file. Hierarchical and network database
management systems use this method to link records so they can retrieve information from
several different database files.

One of the basic ways to access data is to use a sequential organization, in which records are
physically stored in a specified order according to a key field in each record. For example,
payroll records could be placed in a payroll file in a numerical order based on employee social
security numbers. Sequential access is fast and efficient when dealing with large volumes of
data that need to be processed periodically. However, it requires that all new transactions be
stored into the proper sequence for sequential access processing. Also, most of the database or

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file may have to be searched to locate, store, or modify even a small number of data records.
Thus, this method is too slow to handle applications requiring immediate updating or responses.

When using direct access methods, records do not have to be arranged in any particular
sequence on storage media. However, the computer must keep track of the storage location of
each record using a variety of direct organization methods so that data can be retrieved when
needed. New transactions data do not have to be sorted, and processing that requires immediate
responses or updating is easily handled.

Dear student! Now, do the following exercise to check your progress.

4.3. TELECOMMUNICATIONS
This section presents you an overview of major trends, concepts, applications, and technical
alternatives in telecommunications. The implications of telecommunications for managerial end
users and the strategic success of organizations are emphasized.

4.3.1. A Manager’s View of Telecommunications

Dear student! Do you know why telecommunication is important? If not, don’t worry! It is going
to be discussed below.
End users need to communicate electronically to succeed in today’s global information society.
Mangers, end users, and their organizations need to electronically exchange data and information
with other end users, customers, suppliers, and other organizations. It is only through the use of
telecommunications that they can perform their work activities, manage organizational resources,
and compete successfully in today’s fast-changing global economy. Thus, many organizations
today could not survive without interconnected networks of computers to service the information

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processing and communications needs of their end users. As a managerial end user, you will be
expected to make or to participate in decisions regarding a great variety of telecommunications
options. That is the reason why we need to study the applications, technology, and managerial
implications of telecommunications.
Telecommunications is sending of information in different forms (e.g., voice, data, text, and
images) from one place to another using electronic or light-emitting media. Data
communications is more specific term that describes the transmitting and receiving of data over
communication links between one or more computer systems and a variety of input/output
terminals. The terms teleprocessing and telematics may also be used since they reflect the
integration of telecommunications and computer-based information processing technologies.
However, all forms of telecommunications now rely heavily on computers and computerized
devices. For this reason, the broader term of telecommunications is used as a synonym for data
communications activities. Therefore, in this text, we will use these terms interchangeably.
A Telecommunications Network Model
A communications network is an arrangement where a sender transmits a message to a receiver
over a channel consisting of some type of medium. A simple conceptual model of
telecommunications network consists of the following basic components:
 Terminals, such as video display terminals and other end user workstations. Of course, any
input/output device that uses telecommunications networks to transmit or receive data is a
terminal, including microcomputers, telephones, office equipment, and transaction terminals.
 Telecommunications processors. They are devices which support data transmission and
reception between terminals and computers. Those devices, such as modems, multiplexers,
and front-end processors, perform a variety of control and support functions in a
telecommunications network.
 Telecommunications channels and media. These are materials over which data are
transmitted and received. Telecommunications channels use combinations of media, such as
copper wires, coaxial cables, fiber optic cables, microwave systems, and communications
satellites, to interconnect the other components of a telecommunications network.
 Computers of all sizes and types are interconnected by telecommunications networks so that
they can carry out their information processing assignments.

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 Telecommunications control software consists of programs that control
telecommunications activities and manage the functions of telecommunications networks.
This includes telecommunications monitors for mainframe host computers, network
operating systems for microcomputer network servers, and communications package for
microcomputers.

4.3.2 Types of Telecommunications Networks

There are many different types of telecommunications networks. However, from an end user’s
point of view, there are two basic types: wide area and local area networks.
Wide area networks (WANs): Telecommunications networks covering a large geographic area
are called remote networks, long distance networks, or, more popularly, wide area networks
(WANs). Networks that cover a large city or metropolitan area (metropolitan area networks) can
also be included in this category. Such large networks have become necessity for carrying out the
day-to-day activities of many business and government organizations and their end users. Thus,
WANs are used by manufacturing firms, banks, retailers, distributors, transportation companies,
and government agencies to transmit and receive information with their employees, customers,
suppliers, and other organizations across cities, regions, countries, or the world.
Local area networks (LANs): connect information processing devices within a limited physical
area, such as an office, building, manufacturing plant, or other work site. LANs have become
commonplace in many organizations for providing telecommunications network capabilities to
end users in offices, departments, and other workgroups.
LANs use a variety of telecommunications media, such as ordinary telephone wiring, coaxial
cable, (or even wireless radio systems to interconnect microcomputer workstations) and
computer peripherals. Most LANs use a powerful microcomputer which has a large hard disk
capacity called a file server or network server. Network server contains a network operating
system program that controls telecommunications and the use of network resources. For example,
it distributes copies of common data files and software packages to the other microcomputers in
the network and controls access to laser printers and other network peripherals. Local area
networks are connected to the computing resources and databases of wide area networks by
communications processors forming a common interface called a gateway. LANs allow end
users in a workgroup to communicate electronically; share hardware, software, and data

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resources; and pool their efforts when working on group projects. For example, a project team of
end users whose microcomputer workstations are part of a LAN can send each other electronic
mail messages and share the use of laser printers and hard magnetic disk units, copies of
electronic spreadsheet or word processing packages, and project databases. Thus LANs have
become a more popular alternative to the use of terminals connected to minicomputers or smaller
mainframes for end user computing in many organizations.

4.3.3 Strategic Telecommunications Criteria

The telecommunications strategy of a firm must be designed to meet several fundamental
criteria. As it has been indicated in figure 3.6, there are seven major criteria that managers should
use to evaluate the adequacy or inadequacy of their organization’s telecommunications strategy
and its implementation. These criteria can also be used to evaluate the success or failure of the
organization’s current use of telecommunications technology.
Integrability: Can we deliver many types of services to each end user workstation through our
present or proposed telecommunications network? For example, can we provide voice, data,
image, and video communications to each workstation? Without such capabilities, an
organization will be crippled by the opportunities lost because it is not able to meet the present
and future end user needs, and the high costs of future efforts to rectify this situation.
Connectivity: Can our end users, customers, suppliers, and others access our
telecommunications system cheaply and simply, without having special equipment? Connectivity
is the most popular term used in the information systems industry to describe the degree to which
hardware, software, and databases can be linked together in a telecommunications network.

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Table 4.1: Strategic criteria for telecommunications
Shareability: Can our information systems share hardware, software, and data resources with
each other? For example, can our sales transaction processing system easily share data with our
market research system and with our manufacturing planning system? The proper use of
telecommunications technology can help to provide more efficient and effective systems for end
users and managers when data and other computing resources are shared.
Phaseability: Can we build an integrated telecommunications system with a high degree of
connectivity and shareability using an incremental process? Can we extend the range of
telecommunications services to end users in stages? Or must we scrap what we have and start all
over again in one giant step? This capability is crucial in helping a firm finance expensive
telecommunications technology with a minimum of disruption to end users and customers.
Availability: Are the telecommunications hardware, software, services, and standards we need
to support our business objectives available now or in the near future? Telecommunications is
notorious for its lack of established and accepted standards (though standard protocols and
network architectures are being developed).
Reliability and Security: Is our present or proposed telecommunications architecture reliable
and secure? Telecommunications networks frequently “are complex to design, implement, and
operate. They often do not quite work. New ones may work, but horrendously inefficiently”. If a
telecommunications system is not reliable, how can vital business services such as online
customer access be possible? If it is not secure, how can sensitive business services such as

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electronic funds transfer or electronic document interchange (EDI), for example, be
implemented? As these questions indicate, reliability and security are important to the survival
and success of a business that is dependent on telecommunications.
Manageability: Can present information system personnel manage our telecommunications
efforts? Networks need a lot of managing to operate efficiently and effectively. That’s why the
quality of an organization’s telecommunications managers and staff is a vital concern. Acquiring,
training, and retaining good network managers or administrators should be a top priority. So
manageability is a key managerial concern in any decision involving an organization’s
telecommunications activities.

4.3.4 Telecommunications Network Topologies

Network topologies are structures in telecommunications networks. Three of the basic topologies
used in wide area and local area telecommunications network are star, ring, and bus topologies.
A star network ties end user computers to a central computer.
In a ring network, local computer processors are tied together in a ring on a more equal basis.
A bus network is a network in which local processors share the same bus, or communications
channel. In many cases, star networks take the form of hierarchical networks. In hierarchical
networks, a large headquarters computer at the top of the company’s hierarchy is connected to
medium-size computers at the divisional level, which are connected to small computers at the
departmental or workgroup level. A variation of the ring network is the mesh network. This uses
to direct communications lines to connect some or all of the computers in the ring to each other.
Another variation is the tree network, which joins several bus networks together.

In most cases distributed processing systems use the combination of star, ring, and bus
approaches. Obviously, the star network is more centralized, whereas ring and bus networks have

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a more decentralized approach. However, this is not always the case. For example, the central
computer in a star configuration may be acting only as a switch, or message-switching computer,
that handles the data communications between autonomous local computers.

Star, ring, and bus networks differ in their performances, reliabilities, and costs. A pure star
network is less reliable than a ring network since the other computers in the star are heavily
dependent on the central host computer. If the central computer fails, there is no backup
processing and communications capability, and the local computers will be cut off from the
corporate headquarters and from each other. Therefore, it is essential that the host computer be
highly reliable. Having some type of multiprocessor architecture to provide a fault tolerant
capability is a common solution.

Star network variations are common because they can support the chain of command and
hierarchical structures of most organizations. Ring and bus networks are the most common in
local area networks. Ring networks are considered more reliable and less costly for the type of
communications in such networks. If one computer in the ring goes down, the other computers
can continue to process their own work as well as to communicate with each other.

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 Bus topology Ring topology

Star topology Mesh Topology

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 Tree topology
Figure 4.1: Different network topologies.

4.3.6. Electronic Commerce (E-Commerce)

Dear student! What do you mean by e-commerce? It is an application of telecommunications
network. Let’s see an overview of e-commerce.
What is Electronic Commerce?
Electronic commerce, commonly known as e-commerce or e-commerce, consists of the buying
and selling of products or services over electronic systems such as the Internet and other
computer networks. The amount of trade conducted electronically has grown dramatically since
the spread of the Internet. A wide variety of commerce is conducted in this way, spurring and
drawing on innovations in electronic funds transfer, supply chain management, Internet
marketing, online transaction processing, electronic data interchange (EDI), inventory
management systems, and automated data collection systems. Modern electronic commerce
typically uses the World Wide Web at least at some point in the transaction's lifecycle, although
it can encompass a wider range of technologies such as e-mail as well.
A small percentage of electronic commerce is conducted entirely electronically for "virtual"
items such as access to premium content on a website, but most electronic commerce involves
the transportation of physical items in some way. Online retailers are sometimes known as
e-tailers and online retail is known as e-tail.

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What Are the Advantages of E-commerce? Some of the advantages of e-commerce are:
 Increases sales, decreases cost
o Allows small businesses to have global customer base
o Reduced cost through electronic sales enquires, price quotes and order taking
 Provides purchasing opportunities for buyers (businesses can identify new suppliers and
partners)
 Increase speed and accuracy for exchanged information, thus reducing cost
 Business can be transacted 24 hours a day
 The level of detail of purchase information is selected by user
 Digital products can be delivered instantly
 Tax refunds, public retirement and welfare support costs less when distributed over the
Internet
 Allows products and services to be available in remote areas, e.g. remote learning

What Are the Disadvantages of E-commerce? Some of the disadvantages of e-commerce are:
 Inability to sell some products (e.g. high cost jewelry and perishable foods, although
supermarkets like www.Tesco.com delivers to your home)
 The newness and evolution of the current technology
 Many products require a large number of people to purchase to be viable
 High capital investment
 Difficulty in integrating current databases and transaction processing systems into e-
commerce solutions
 Cultural and legal obstacles
o Transmission of credit card details
o Some consumers resistant to change
o Laws are unclear
 Shipping profile: Products with a low value-to-weight ratio that can not be efficiently packed
and shipped are unsuitable (use traditional commerce)

E-commerce Categories
There are five general e-commerce categories:

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Business to Consumer (or B2C) e-commerce: Businesses sell products or services to individual
customers (consumers).
Business to Business (or B2B) e-commerce (sometimes called e-procurement): Businesses sell
products or services to other businesses.
Business processes that support buying and selling activities: Businesses and other organisations
maintain and use information to identify and evaluate customers, suppliers and employees (and
to support buying, selling, hiring, planning and other activities). More and more this information
is being shared.
Consumer-to-consumer (or C2C) e-commerce: Participants in an online marketplace can buy
and sell goods with each other.
Business-to-government (or B2G) e-commerce: Businesses sell goods or services to
governments and government agencies.

CHAPTER FIVE:
APPLICATION OF MANAGEMENT INFORMATION SYSTEMS IN BUSINESS
ORGANIZATIONS
5.1 INTRODUCTION TO INFORMATION SYSTEMS IN BUSINESS
There are many ways to use information systems in business as there are business activities to be
performed, business problems to be solved and business opportunities to be pursued. As a
perspective managerial end user, you are expected to have a general understanding of the major
ways information systems are used to support each of the functions of business. We will use the
term business information systems to describe a variety of types of information systems
(transaction processing, information reporting, decision support, etc.) that support a business
function such as accounting, finance, marketing or human resource management. Thus,
applications of information systems in the functional areas of business are called accounting

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information systems, marketing information systems, human resource information systems, and
so on.

Dear learners! From business and management perspective, information systems are far more
than just input-process-output machines operating in a vacuum. Therefore, in business
perspective, an information system is an organizational and has management solution, based on
information technology to a challenge posed by the environment. Thus, in this chapter we focus
on relevance of information system in business.

Learning objectives; After completing this chapter, you should be able to:
 Understand how to use information systems to support the major functional areas in
business
 Identify major business functions, such as marketing, manufacturing, human resource,
accounting, and financing.
 Give examples of information system support for each business functions
 Relate computer aided business activity with managerial activity

As a managerial end user, you should also have a specific understanding of how information
systems affect a particular business function such as marketing, production, finance, accounting
and human resource management or a particular industry. For example banking is directly related
to your career objectives. In other words, someone whose career objective is a marking position
in banking should have a basic understanding of how information systems are used in baking and
how they support the marketing activities of banks and other firms.

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Figure 5.1.Examples of business information systems. Note how they support the major
functional areas of business.

Figure 5.1 illustrates how information systems can be grouped into business function categories.
Information systems in this section will be analyzed according to the business function they
support to give you an appreciation of how such systems support a variety of managerial end
users. However, you should remember that information systems in the real world are typically
integrated combinations of functional information systems. There is a strong emphasis in many
organizations to develop such composite or cross-functional information systems. These
organization view cross-functional information systems as a strategic way to share information
resources and improve the efficiency and effectiveness of a business, thus helping it attain its
strategic objectives.
Dear learners! We hope that you have understood the concepts of basic business function and
information systems which support each business function. Good! Answer the following
exercise.

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5.2 MARKETING INFORMATION SYSTEMS
Dear Learners! We hope you came across marketing function. Thus, the business function of
marketing is concerned with the planning, promotion, and sale of existing products in existing
markets, and the development of new products and new markets to serve better present and
potential customers.

Figure 5.2: Marketing information systems provide information for the planning and control of
major components of the marketing function.

As it is shown in the above figure, strategic, tactical, and operational information systems assist
marketing managers in products planning, pricing decision, advertising and sales promotion
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strategies and expenditures, forecasting market potential for new and present products, and
determining channels of distribution. Control reporting systems support the efforts of marketing
managers to control the efficiency and effectiveness of the selling and distribution of products
and services. Analytical reports provide information on a firm’s actual performance versus
planned marketing objectives.

A. Sales management
Sales managers must plan, monitor, and support the performance of the salespeople in their
organizations. So in most firms, computer-based systems produce sales analysis reports, which
analyze sales by product, product line, and customer, type of customer, salesperson, and sales
territory. Such reports help marketing managers monitor the sales performance of products and
salespeople and they help them to develop sales support programs to improve sales results.

B. Sales Force Automation

However, sales analysis is only one aspect of the use of computers for sales management and
support. Increasingly, computer-based information systems are providing the basis for sales force
automation. In many companies, the sales force is being outfitted with laptop computers, hand-
held Personal Computers or even complicated technologies like the pen-based tablet computers.

Dear Learners! To make this clear let us see the following example; salespeople use their
Personal Computers (PC) to record sales data as they make their calls on customers and
prospects during the day. Then each night sales representatives in the field can connect their
computers by modem and telephone links to the mainframe computer at company headquarters
and upload (send) information on sales orders, sales, and other sales statistics. And they also
send electronic mail messages and other queries.

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FIGURE 5.3: Examples of important computer-based information systems in marketing.

Look at the figure above it summarizes some important ways that how computer-based
information systems support the marketing function.

C. Product Management: On the other hand, product management and product managers need
information to plan and control the performances of specific products, product lines, and brands.
Computers can help to provide price, revenue, cost, and growth information for existing products
and new product development.
D. Advertising and Promotion
In similar manner, marketing managers need information to help them to achieve sales objectives
at the lowest possible costs for advertising and promotion. Computers use market research
information and promotion models to (1) select media and promotional methods, (2) to allocate
financial resources, and (3) to control and evaluate results of various advertising and promotion
campaigns.

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E. Sales forecasting
The basic functions of sales forecasting can be grouped into two categories; short-range
forecasting and long-range forecasting. Short-range forecasting deals with forecasts of sales for
periods up to one year, whereas long-range forecasting is concerned with sales forecasts for a
year or more into the future.
F. Market research
The market research information system provides marketing intelligence to help managers make
more effective marketing decisions. It also provides marketing managers with information to
help them plan and control the market research projects of the firm. Computers help the market
research activity collect, analyze, and maintain an enormous amount of information on a wide
variety of market variables that are subject to continual change.
G. Marketing Managers
Marketing managers use computer-based information systems to develop short-and long-range
plans outlining product sales, profit, and growth objectives. They also provide feedback and
analysis concerning performance-versus-plan for each area of marketing.
Generally, important functions of marketing supported by information system should work
interdependently since we are working with the concept of system in business. However, to
differentiate the specific activities in marketing, it is better to have the following short term
descriptions;
Sales Management
 Plan, monitor, and support the performance of salespeople and sales of products and
services.
Sales Force Automation
 Automate the recording and reporting of sales activity by salespeople and the
communications and sales support from sales management.
Product Management
 Plan, monitor, and support the performance of products, product lines, and brands.
Advertising and Promotion
 Help select media and promotional methods and control and evaluate advertising and
promotion results.

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Sales Forecasting
 Produce short-and long-range sales forecasts.
Market Research
 Collect and analyze internal and external data on market variable, developments, and
trends.
Marketing Management
 Develop marketing strategies and plans based on corporate goals and market research and
sales activity data, and monitor and support marketing activities.

5.3 MANUFACTURING INFORMATION SYSTEMS

5.3. Manufacturing information systems

Dear Learners! In marketing information system we have discussed how a computerized
information system can increase the efficiency and speed of sales activity and promotion. Now,
let us see the second basic business function which is manufacturing or production function.
Manufacturing information systems support the production or operations function, which
includes all activities concerned with the planning and control of the processes that produce
goods or services. Thus, the production or operations function is concerned with the management
of the operational systems of all business firms.
Examples of computer-based systems in manufacturing
Computer-Aided Design Creates designs for products and manufacturing processes.
Computer-Aided Manufacturing Fabricates metals, plastics, and other materials by molding,
machining, welding, etc
Assembly and Packaging Uses robots to put together parts fabricated on-site or purchased from
outside

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Logistics and Storage Purchases and distributes materials, inventory control, removal of
materials, and management of supplies.
Maintenance
Monitors equipment and processes, makes adjustments when needed, fault diagnosis preventive
and corrective maintenance.
Quality Control
Tests incoming materials and outgoing products, tests of process in progress, quality assurance
Factory Management
Coordinates incoming orders, requests components and material, planning and scheduling,
overseeing cost control, arranges deliveries.

A. Computer Integrated Manufacturing

Computer-based manufacturing information systems use several major techniques to support
computer integrated manufacturing (CIM). CIM is an overall concept that stresses the goals of
computer use in factory automation must be to:
 Simplify production processes, product designs, and factory organization as a vital
foundation to automation and integration.
 Automate production processes and the business functions that support them with
computers and robots.
 Integrate all production and support processes using computers and telecommunications
network.

Thus, computers are simplifying, automating, and integrating many of the activities needed to
produce products of all kinds. For example, computers are used to help engineers design better
products using both computer-aided engineering (CAE) and computer-aided design (CAD), and
better production processes with computer-aiding processing planning (CAPP). They are also
used to help plan the types of material needed in the production process, which is called material
requirements planning (MRP), and to integrate MRP with production scheduling and shop floor
control, which is known as manufacturing resource planning (MRPII). Computer-aided
manufacturing (CAM) may be used to help manufacture products. This could be accomplished
by monitoring and controlling the production process in a factory (shop floor control) or by

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directly controlling a physical process (process control), a machine tool (machine control), or a
machine with some humanlike capabilities (robots).
Dear Learners! As we have seen in the previous topics, Computer Aided Manufacturing
provides many strategic advantages for a given company. Of these, the three major dimensions
of computer integrated manufacturing are simplification, automation, and integration efforts on:
 The three basic manufacturing functions to be performed: engineering, manufacturing
administration, and factory operations.
 The workplace environment, from the entire enterprise, factory, and shop floor to small
work cells, individual workstations, and equipment.
 The manufacturing resources available, which are people, computers, telecommunications
networks, factory floor equipment, and databases of manufacturing information.

B. Process Control
Process control is the use of computers to control an ongoing physical process. Process control
computers are used to control physical processes in petroleum refineries, cement plants, steel
mills, chemical plants, food product manufacturing plants, pulp and paper mills, electric power
plants, and so on. Many process control computers are special-purpose minicomputer systems. A
process control computer system requires the use of special sensing devices that measure
physical phenomena such as temperature of pressure changes. These continuous physical
measurements are converted to digital form by analog-to-digital converters and relayed to
computers for processing.
C. Machine Control: Machine control on the other hand, is the use of a computer to control the
actions of a machine. This is popularly called numerical control. The control of machine tools in
factories is a typical numerical control application though it also refers to the control of
typesetting machines, weaving machines, and other industrial machinery.
Numerical control computer programs for machine tools convert geometric data from
engineering drawings and machining instructions from process planning into a numerical code of
commands that control the actions of a machine tool. Machine control may involve the use of
special-purpose microcomputers called Programmable Logic Controllers (PLCs).

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D. Robotics
Robotics is another important development in machine control and computer-aided
manufacturing is the creation of smart machines and robots. These devices directly control their
own activities with the aid of microcomputers. Robotics is the technology of building and using
machines (robots) with computer intelligence and computer controlled humanlike physical
capabilities (dexterity, movement, vision, and so on.) Robotics has become a major thrust of
research and development efforts in the field of artificial intelligence.

E. Computer-Aided Engineering
Computer-Aided Engineering is also the latest dimension of computer aided manufacturing in
this world. Manufacturing engineers use computer-aided engineering to simulate, analyze, and
evaluate the models of product designs they have developed using computer-aided design
methods.

Computer-aided design packages and engineering workstations are the software and hardware
resources that make computer-aided engineering possible. Engineers use these high-powered
computing and advanced graphics workstations for the design and testing of products, facilities,
and processes.
Dear Learner! We hope that you have identified the major activities of Manufacturing
Information System. Have you ever participated in such activities? Anyway, before you are
going to the next section try to answer the following questions.

Dear Learner! We hope you have attempted questions. Next, we will discuss about human
resource information systems

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5.4 HUMAN RESOURCE INFORMATION SYSTEMS
The human resource management (or personnel) function involves the recruitment, placement,
evaluation, compensation, and development of the employees of an organization. Originally,
businesses used computer-based information systems to
(1) Produce paychecks and payroll reports,
(2) Maintain personnel records, and
(3) Analyze the use of personnel in business operations.
Many firms have gone beyond these traditional functions and have developed human resource
information systems (HRIS), which also support
 Recruitment, selection, and hiring,
 Job placement,
 Performance appraisals,
 Employee benefits analysis,
 Training and development, and
 Health, safety, and security.

Human resource information systems support the concept of human resource management. This
business function emphasizes
 Planning to meet the personnel needs of the business,
 Development of employees to their full potential and
 Control of all personnel policies and programs.

The goal of human resource management is the effective and efficient use of the human
resources of a company. Some of the major applications of information systems that support
human resource management are summarized as follows; Human resource information systems
support the four major functions of human resource Management
Staffing
Record and track human resources through personnel record-keeping, skills inventories, and
personnel requirements forecasting

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Training and Development
Plan and monitor employee recruitment, training, performance appraisals, and career
development
Compensation
Analyze, plan, and monitor policies for employee wages, salaries, incentive payments, and fringe
benefits
Governmental Reporting
Reporting to government agencies concerning equal opportunity policies and statistics,
employee health, workplace accidents and hazards, safety procedures, and so on

Dear Learners! In our context, that is in Ethiopian civil code and labor proclamation with
respect to human resources and employee administration system, compensation analysis,
employee profile and other related issues are discussed thus you can make your own reference.

Dear learner! We expect that you have grasped the importance of information system from the
managerial perspectives? Good! Now let us do the following exercise.

Dear Learners! We hope you have attempted the above questions.

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5.5 ACCOUNTING INFORMATION SYSTEMS
Accounting information systems are the oldest and most widely used information systems in
business. They record and report business transactions and other economic events. Accounting
information systems are based on the double-entry bookkeeping concept, which is hundreds of
years old, and other, more recent accounting concepts such as responsibility accounting and
profitability accounting. Computer-based accounting systems record and report the flow of funds
through an organization on a historical basis and produce important financial statements such as
balance sheets and income statements. Such systems also produce forecasts of future conditions
such as projected financial statements and financial budgets. A firm’s financial performance is
measured against such forecasts by other analytical accounting reports.
Operational accounting systems emphasize legal and historical record-keeping and the
production of accurate financial statements. Typically, these systems include transaction
processing systems such as order processing, inventory control, accounts receivable, accounts
payable, payroll, and general ledger systems. Management accounting systems focus on the
planning and control of business operations. They emphasize cost accounting reports, the
development of financial budgets and projected financial statements, and analytical reports
comparing actual to forecasted performance.

Dear Learners! The following list of summarization states the purpose of six common,
important, accounting information systems.
Order Processing Captures and processes customer orders and produces customer invoices.
Inventory Control Process data reflecting changes in inventory and provides shipping and
reorder information.
Accounts Receivable
Records amounts owed by customers and produces monthly customer statements and credit
management reports.
Accounts payable
Records purchases from, amounts owed to, and payments to suppliers, and produces cash
management reports.

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Payroll
Records employee work and compensation data and produces paychecks and other payroll
documents and reports.
General ledger
Consolidates data from other accounting systems and produces the periodic financial statements
and reports of the business.

Dear Learners! Now, in order to see your progress, answer the following questions.

Have you answered the above exercise? Good! Now, let us see the last topic of this chapter that
is financial information system.

5.6 FINANCIAL INFORMATION SYSTEMS

Dear Learners! Another important business information system is financial information system.
Computer-based financial information systems support financial managers in decisions
concerning the financing of a business and the allocation and control of financial resources
within a business. Major financial information system categories include cash and financial
planning. Accounting information systems are frequently included as a vital category of financial
information systems.
Some examples of important financial information systems include the following:
Cash and Securities Management
Record data and produce forecasts of cash receipts and disbursements and manage investment
in short-term securities.
Capital Budgeting
Evaluate the profitability and financial impact of proposed capital expenditures.

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Financial Forecasting
Forecast business and economic trends and financial developments.
Financial Planning
Evaluate the present and projected financial performance and financing needs of the business.

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 CHPTER SIX
INFORMATION MANAGEMENT AND DECISION MAKING
6.1. INFORMATION AND MANAGEMENT
Dear learners this chapter is the continuous part of the last chapter in module one of same
course. The purpose of this chapter is to give you an understanding of the decision- making
needs of the managers of organizations, and how decision support system, executive information
system and other information support system are important for effective decision making.
Learning Objectives,
After learning this chapter, you should be able to;
 Give examples of how information system can support the basic functions of management.
 Explain how information can support each of the four stages of decision making process.
 Describe the levels, types, and stages of decision making.
 Identify models for describing individual and organizational decision making.
 Explain how information systems can assist managers and improve managerial decision
making.
 Identify the major components of a decision support system and explain the role of its
model with applications of computers.

In order to understand what information a manager needs, we need to review what management
means. Management is traditionally described as a process of leadership involving the
management functions of planning, organizing, directing and controlling .These functions of
management give us a valuable way of thinking about what managers do. Thus, a manager
should plan the activities of his or her organization, organize its personnel and their activities,
direct its operations, and control its directions by evaluating feedback and making necessary
adjustments.

Therefore, the responsibilities of managers might range from making decisions, to arranging
birthday parties, two writing reports, to attending meetings. To determine how information
systems can benefit managers, we must first examine what managers do and what information
they need for decision making. We must also understand how decisions are made and what kinds
of decisions can be supported by formal information systems.

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In our description of what managers do, we should consider also the difference between “big
business” and small entrepreneurial firms. For example in the U.S., only 20% of the labor force
are employed by the 500 largest corporations, 80% of the labor force work in firms with fewer
than 100 employees; 50% of the labor force work in firms with less than 50 employees. While
management in huge firms is no doubt different than management in small firms, there are many
commonalities. In small firms, managers could be expected to perform many diverse functions
which in larger firms could be dispersed over a number of specialists.

6.2 INFORMATION SYSTEMS AND MANAGEMENT FUNCTION

Classical model of management traditionally describes management as that focused on its formal
functions of planning, organizing, coordinating, deciding, and controlling.

Planning-involves the development of long and short range plans requiring the formation of
goals, objectives, strategies, policies, procedures, and standards .Planning also involves the
perception and analysis of opportunities, problems, and alternative courses of actions and the
design of programs to achieve selected objectives.
Organizing –involves making assignments for the accomplishments of tasks of individuals and
groups by delegating authority, assigning responsibility, and requiring accountability.
Directing- is the leadership of an organization through communication, inspiration, and
motivation of organizational personnel.
Controlling –involves observing and measuring organizational performance and environmental
activities and modifying the plans and activities of the organization when necessary.

Information systems still can help managers in directing their organizations. For instance, the
electronic mail capabilities of office automation systems make it easier for managers to
communicate with people in their organizations. Finally, information systems play a major role
in control functions of management. Through such information products as exception reports,
they help managers recognize deviations in performance from standards, forecasts and budgets.
This kind of feedback helps managers adjust a firm’s operations to meet organizational
objectives.

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Dear learners! Have you understood the relationship between information system and
management functions? Anyway, before you are going to the next section try to answer the
following questions.

Therefore, a manager has the authority and status to play the following roles.
A. Interpersonal Roles. Managers act as figureheads for the organization when they represent
their companies to the outside world and perform symbolic duties such as giving out
employee awards. Managers act as leaders, attempting to motivate, counsel, and support
subordinates. Lastly, managers act as a liaison between various levels of the organization;
within each of these levels, they serve as a liaison among the members of the management
team. Managers provide time, information, and favors, which they expect to be returned.

B. Informational roles. Managers act as the nerve centers of their organization, receiving the
most concrete, up-to-date information and redistributing it to those who need to be aware of
it. Managers are therefore disseminators and spokespersons for their organization.

Table 6.1 Managerial Roles and Supporting Information Systems Role Behavior Support
Systems
Interpersonal Roles
Figurehead ------------------------------------------------------- None exist
Leader -------------------------- Interpersonal ----------------- None exist
Liaison---------------------------------------------------------- Electronic communication systems
Informational Roles
Never center -------------------------------------------------- Management information systems
Disseminator -------------------Information --------------- Mail, office systems
Spokesman ---------------------processing ---------------- Office and professional systems

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Workstations
Decisional Roles
Entrepreneur -------------------------------------------------- None exist
Disturbance handler -----------Decision ------------------- Nine exist
Resource allocator ------------- making -------------------- DSS systems
Negotiator ----------------------------------------------------- None exist
Source: Authors and Henry Mintzberg, “Managerial work: Analysis from Observation,”
management Science 18 (October 1971). .

C. Decisional roles. Managers make decisions. They act as entrepreneurs by initiating new kings
of activities; they handle disturbances arising in the organization; they allocate resources to staff
members who need them; and they negotiate conflicts and mediate between conflicting groups in
the organization.

Figure 6.1 showing the Roles of Management

In the area of interpersonal roles, information systems are extremely limited and currently can
make only indirect contributions. The systems act largely as a communications aid with some of
the newer office automation and communication-oriented applications. These systems contribute
more to the field of informational roles: A manager’s presentation of information is significantly
improved with large-scale Management Information System systems, and professional
workstations. In the area of decision making, DSS and microcomputer-based systems are starting
to make important contributions in the contemporary managerial activities which we will see in

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the subsequent topics later. However, one may ask that what information managers exactly need
to perform these roles. How can information systems help in accomplishing their roles?

Mintzburg’s studies of top–level executives showed that they did not get much help from
computer –based information systems. Instead, they relied primarily on verbal information
gathered from telephone calls, personal contacts, and meetings. However, improvements in
office automation systems and executive information systems have been aimed at making
information systems more attractive, easy to use, and helpful to top executives and other
managers. For example, electronic mail systems allow electronic messages to be sent, stored, and
forwarded among managerial and staff workstations .Executive information systems can make it
easy for executives to gather critical information about organizational performance.

Another point to remember is that many of the ten roles management can be related to the four
managerial functions. For example, the interpersonal roles of a leader is directly related to the
management functions of organizing, staffing, and directing .The information roles of a monitor
and disseminator are directly related to the functions of directing and controlling. The decisional
roles elements of an entrepreneur and resource allocation are directly related to the planning
function. So, since information systems can support these managerial functions, they can also
supply the information needed to perform the diverse roles of management.

Dear Learner! We hope that you have identified the major managerial roles. Now, before
you are going to the next section try to answer the following questions.

Dear Learner! We hope you have tried the above questions. Good.

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6.3 INFORMATION AND THE LEVELS OF MANAGEMENT
Dear learners! Just managerial functions and managerial roles need appropriate information in
managerial activities managerial hierarchies or managerial levels also need proper information at
each level according to their activity. Thus, the information requirements of management depend
heavily on the management involved.
Figure 6.2 Showing managerial levels and information needs.

The above figure indicates that the activities of management can be subdivided in to three major
levels;
1. Strategic management level.
2. Tactical management level.
3. Operational management level.
These levels are related to the traditional management levels top management, middle
management, and operating or supervisory management. This “managerial pyramid” model of
management was popularized in the 1960s by Robert N. Anthony, another pioneer of
management theory. It answers the question “what does a manager do?” by emphasizing that
management consists of planning and controlling activities determined by the manager’s specific
level in an organization.

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Strategic levels-management at top executive levels develop over all organizational
goals ,strategies, policies and objectives through long –range strategic planning . They also
monitor the strategic performance of the organization and its overall direction.
Tactical levels- middle managers develop short- range and medium – range plans and budgets
and specify the policies, procedures, and objectives for subunits of the organization. They also
acquire and allocate resources and monitor the performance of organizational subunits, such as
departments, divisions, and other work groups.
Operational levels-supervisory managers develop short –range planning devices such as
production schedules .They direct the use of resources and the performance of tasks according to
established procedures and within budgets and schedules established for the work groups of the
organization.
Dear learners! Our major concern in this course is to know the kind of information used for
managerial decision based on the levels as well as the basic nature of each information
characteristics.

Thus, information requirements by management levels can be seen from the above diagram more
properly moreover the type of information required by managers is directly related to their level
of management and the structure of decision situation they face.
Dear learner! We expect that you have grasped the importance of information system from the
managerial level perspectives? Good! Now let us do the following exercise.

Dear Learners! We hope you have attempted the above questions. Good now let us see the
subsequent topics.

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6.4 Information and decision making.
The classical management theorists viewed decision making as the center of managerial
activities. Although we now know that this is not exactly the case, decision making remains one
of a manager’s more challenging roles. Information systems have helped managers communicate
and distribute information; however, they have provided only limited assistance for management
decision making. Because decision making is an area that systems designers have sought most of
all to affect (with mixed success), we now turn our attention to this issue. In this section we
introduce the process; in the next two sections we examine models of individual and
organizational decision making.
Differences in decision making can be classified by organizational level. Anthony (1965)
grouped decision making in an organization into three categories: strategic, tactical and
operational control. We include an additional category for knowledge-level decision making
because Anthony did not envision the prominent role now played by knowledge work in
organizations. These categories of decisions correspond to the strategic, tactical, knowledge, and
operational levels of the organization introduced in the previous sub topic of information nature
and levels of managements.
A. Strategic decision making; strategic decision making involves the process of determining
the long-term objectives, resources, and policies of an organization. It determines the objectives,
resources, and policies of the organization. A major problem at this level of decision making is
predicting the future or the organization and its environment and matching the characteristics of
the organization to the environment. This process generally involves a small group of high-level
managers who deal with very complex, non-routine problems.
B. Tactical Decision making ;decision making for middle level or sometimes decision making
for management control is principally concerned with how efficiently and effectively resources
are utilized and how well operational units are performing. Management control requires close
interaction with those who are carrying out the tasks of the organization; it takes place within the
context of broad policies and objectives set out by strategic decision making; and, as the
behavioralists have described, it requires an intimate knowledge of operational decision making
and task completion.

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C. Knowledge-level decision making; this kind of decision making deals with evaluating new
ideas for products and services; ways to communicate new knowledge; and ways to distribute
information throughout the organization.
D. Operational level Decision making; operational decision making is most commonly used for
operational controlling in determining of how to carry out the specific tasks set forth by strategic
and middle management decision makers.

Dear learners. Have you understood tried the above exercise well? Good.

6.4.1 TYPES OF DECISIONS

Types of decisions within each of these levels of decision making can be classified decisions as
being either programmed or none programmed. Other researchers refer to these types of
decisions as structured and unstructured, as we do in this module.
A. Unstructured decision or non- programmed decisions; are those in which the decision
maker must provide judgment, evaluation, and insights into the problem definition. These
decisions are novel, important, and non-routine, and there is no well-understood or agreed-upon
procedure for making them (Gorry and Scott-Morton, 1971). More over this kind of decisions
involves situations where it is not possible or desirable to specify in advance most of the decision
procedures to follow. Many decision situations in the real world are unstructured because they
are subjects to too many unknown factors or relationships. At most, many decision situations are
semi structured. That is, some decisions procedures can be per specified, but not enough to lead
to a definite recommended decision. Most common example of unstructured or non-
programmed decision making is when accompany wants to introduce new product line or

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making major changes to employees benefits would probably range from unstructured to semi
structured. The many unknown or changeable factors involved would require ales structured
approach leading to subjective judgments by managers. Information systems can support such
decisions by providing (1) the ability to make ad hoc inquiries for information in accompany
databases and (2) the ability to reach a decision in an interactive process using a decision
support system.
B. Structured decision or programmed decisions; these types of decisions by contrast, are
repetitive, routine, and involve a definite procedure for handling so that they do not have to be
treated each time as if they were new. Some decisions are semi structured decisions; in such
cases, only part of the problem has a clear-cut answer provided by an accepted procedure. They
are also made in a situation which involves procedure to follow when a decision is needed or
made can be specified in advance. Therefore, such decisions are structured or programmed by
the decision procedures, or decision rules, developed for them. A structured decision may
involve what is known as deterministic or algorithmic decision. In this case, a decision’s
outcome can be determined with certainty if a specified sequence of activities (an algorithm) is
performed. Or a structured decision may involve a probabilistic decision situation. In this case,
enough probabilities about possible outcomes are known that a decision can be statistically
determined with an acceptable probability of success.
For example, the inventory reorder decisions faced by most businesses are frequently quantified
and amounted. Inventory control software includes decision algorithms that out line the
computations to perform and the steps to take when quantities in inventory are running low.
Computing economic order point is a typical example. Thus, one way that information system
can support structured decision is by quantifying and automating a decision making processes.
In other cases, pre specified
Information products such as periodic reports can provide most of the information needed by a
decision maker faced with a structured decision situation.
Generally information systems can be used through models of business operations developed
with the support of software, including advanced statistical, management science, and modeling
packages or less complex spread sheets programs. These packages and models can then be used
to manipulate information collected in the different stages of decision making.

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Dear learners! Have you understood the difference between programmed decision and non-
programmed decisions? Good we hope so. Now check your progress by the following activity.

6.4.2 RELATION BETWEEN TYPES OF DECISIONS AND INFORMATION SYSTEMS.

In general, operational control personnel face fairly well-structured problems. In contrast,
strategic planners tackle highly unstructured problems. Many of the problems encountered by
knowledge workers are fairly unstructured as well. Nevertheless, each level of the organization
contains both structured and unstructured problems.
In the past, most of the success in modern information systems came in dealing with structured,
operational and management control decisions. But now most of the exciting applications are
occurring in the management, knowledge, and strategic planning areas, where problems are
either semi structured or are totally unstructured. Examples include general decision support
system (DSS), which are microcomputer-based decision-making systems including spreadsheets
and other packages; professional design workstations; and general planning and simulation
systems

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Figure 6.3 Different kinds of information systems at the various organization levels support
different types of decisions. Source: (Gorry and Scott-Morton (1971).

6.5. COMPARISION BETWEEN DECISION SUPPORT SYSTEM (DSS)

AND EXECUTIVE SYUPORT SYSTEM (ESS)
We have seen the kind of decision models and their implications for the system designers. Now
let us see what are decision support system and executive support systems.
In the 1970s, a number of companies began developing information systems that were quite
different from traditional management information systems. These new systems were smaller in
terms of labor and cost. They were interactive, unusual at the time and were designed to help end
users utilize data and models to discuss and decide (not solve) semi structured and problems
(Henderson and Schilling, 1985). By the late 1980s, these early efforts to assist individual
decision making were extended to groups and entire organizations.

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6.5.1 What is decision support system (DSS)?
These systems are called decision-support systems (DSS) as we noted in this module , decision-
support systems (DSS) assist management decision making by combining data, sophisticated
analytical models, and user-friendly software into a single powerful system that can support
semi- structured or unstructured decision making. The decision support system is under user
control from early inception to final implementation and daily use.
Decision support system is also a Philosophy, Stated simply; the philosophy of decision support
system is to give users the tools necessary to analyze important blocks of data, using easily
controlled sophisticated models in a flexible manner. Decision support system (DSS) is designed
to deliver capabilities, not simply to respond to information needs (Keen and Morton, 1982;
Sprague and Carlson, 1982).
Decision support system is more targeted than management information system (MIS) systems.
Management information systems provide managers with routine flows of data and assist in the
general control of the organization. In contrast, decision support system is tightly focused on a
specific decision or classes of decisions such as routing, queuing, evaluating, and so forth. In
philosophy, decision support system promises end-user control of data, tools, and sessions.
Management information system is still largely dominated by professionals: Users receive
information from a professional staff of analysts, designers, and programmers. In terms of
objectives, Management information system focuses on structured information flows to middle
managers. Decision support system is aimed at top managers and middle managers, with
emphasis on change, flexibility, and a quick response: with decision support system there is less
of an effort to link users to structured information flows and a correspondingly greater emphasis
on models, assumptions, and display graphics. Both decision support system and management
information system rely on professional analysis and design. However, whereas management
information system usually follows a traditional systems development methodology, freezing
information requirements before design and throughout the life cycle, decision support systems
are consciously iterative, are never frozen, and in a sense are never finished.
In this essence, a decision support system is a decision-making scratch pad, backed up by
databases that decision makers can use to support many decision-making processes. It can be
applied to problems with quantifiable dimensions that provide criteria for the evaluation of
alternative solutions. The decision support system helps the decision maker identify the best

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alternative. This approach to decision support system as a set of core capabilities goes to the
heart of the decision support system philosophy and provides a benchmark against which we can
compare and critique any decision support system in the marketplace. Therefore, for the sake of
simplicity and understanding how decision support system works it would be necessary to see it
by breaking down in to its components as follow diagrammatically.
Figure 6.4. below illustrates the components present in any decision support system. Note the
hardware, software, data, model, and people resources needed to provide interactive decision
support for managers. Let’s first outline the functions of these components and then discuss DSS
model and software requirements in more detail.
Figure 6.4 showing the decision support system concept. Note that hardware, software, data,
model, and people resources provide interactive decision support for managers.

Hardware resources. Personal computer workstations provide the primary hardware resource
for a decision support system. They can be used on a stand-alone basis, but are typically
connected by wide area or local area networks to other computer systems for access to other
decision support system software, model, and data resources.
Software resources. Decision support system software packages (DSS generators) contain
software modules to manage decision support system databases, decision models, and end
user/system dialogue.
Data resources. A decision support system database contains data and information extracted
from the databases of the organization, external databases, and manager’s personal databases. It
includes summarized data and information most needed by managers for specific types of
decisions.

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Model resources. The model base includes a library of mathematical models and analytical
techniques stored as programs, subroutines, spreadsheets, and command files.
People resources. A decision support system can be used by managers or their staff specialists
to explore decision alternatives. Decision support systems can also be developed by such end
users. However, the development of large or complex decision support systems and decision
support system generator software packages is typically left to information systems specialists.

6.6. Executive Information Systems (EIS)

Dear learners! Executive information system, which is another decision making information
system, is a Computer Based Information System used to assist senior-level executives within
the organization.
Executive information systems, which combine many of the features of information reporting
systems and decision support systems, however, their focus is on meeting the strategic
information needs of top management. As we said in this chapter, top executives need
information to support their strategic planning and control responsibilities. Thus, the goal of
executive information systems is to provide top management with immediate and easy access to
information about a firm’s critical success factor, that is, key factors that are critical to
accomplishing an organization’s strategic objectives. For example, the executives of a
department store chain would probably consider factors such as its sales promotion efforts and its
product line mix to be critical to its survival and success.
Studies have shown that top executives get the information they need from many sources. These
include letters, memos, periodicals, and reports produced manually or by computer systems. As
we said in strategic decision making information requirement, other major sources of executive
information are meetings, telephone calls, and social activities. Thus, much of top executive’s
information comes from non computer sources. Computer-generated information has not played
a major role in meeting many top executives‟ information needs.
Therefore, computer-based executive information systems have been developed which meet the
information needs of top management that are not being met by other forms of management
information system (MIS). Executives and information system (IS) specialists have capitalized
on advances in computer technology to develop attractive, easy-to-use ways to provide

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executives with the information they need. Software packages are now available that support EIS
on mainframe, minicomputer, and networked microcomputer systems.

Executive information systems (EIS) is still faced with resistance by some executives, plagued
by high costs, and have had many publicized failures. However, the use of executive information
systems is growing rapidly. Executive information systems are even spreading into the ranks of
middle management as more executives come to recognize their feasibility and benefits, and as
less expensive microcomputer-based Executive information system for local area networks
become available. Also, more features, such as decision support system and expert system
capabilities, electronic mail, and personal productivity aid such as electronic calendars, are being
added to many EIS to make them more attractive to executives. That is why the term executive
support system (ESS) is being used to describe such executive information system.

Figure.6.5 showing the executive information system concept. Note the hardware, software, and
data resources involved.

6.6.1 Components of an Executive information system (EIS).

Dear learners! As figure 6.5 illustrates, executive workstations in an Executive information
system are typically networked to mainframe or minicomputer systems or local area net work
servers for access to executive information system software. The executive information system

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package works with database management and telecommunication software to provide easy
access to internal, external, and special databases with almost instantaneous response times.
Executive information systems provide information about the current status and projected trends
in company’s critical success factors, as determined by its top executives. An analytical
modeling capability to evaluate alternatives for decision support is also being provided by newer
executive information system packages, as are some expert system features, such as an explain
capability.
Of course, in executive information systems, information is presented in forms tailored to the
preferences of the executives using the system. For example, most executive information systems
stress the use of a graphical user interface and graphics displays that can be customized to the
information preferences of executives using the EIS. Other information presentation methods
used by an EIS include exception reporting and trend analysis. The ability to “drill down,” which
allows executives to quickly retrieve displays of related information at lower levels of detail, is
another important capability of an executive information system.
Examples of an executive information system (EIS) are indicated by table5.6 below that shows
actual displays provided by the Commander executive information system. Notice how simple
and brief these displays are. Also note how they provide executives with the ability to drill down
quickly to lower levels of detail in areas of particular interest to them. This drill-down capability
is related to the hypertext technology which allows end users to interactively retrieve related
pieces of information from text databases. That is why many executive information system
packages for microcomputers are based on hypertext systems besides the drilling. Thus, an
executive can quickly discover the direction key factors are heading and the extent to which
critical factors are deviating from expected results.
6.6.2 Group Decision –support system (GDSS)
The early working in decision support system focused largely on supporting individual decision
making. However, because so much work is accomplished in groups within organizations, during
the late 1980s system developers and scholars began to focus on how computers can support
group and organizational decision making. This work followed even earlier efforts to develop
electronic aids to community and societal decision making in the 1970s, based largely on
mainframes (see Loudon, 1977). As a result of the focus on computer support of group decision

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making, a new category of systems developed, known as group decision-support systems
(GDSS).

Dear Learners! Did you try to grasp the concepts of executive Information System?
Good! Now, it is time to do exercise.

CHAPTER SEVEN
MANAGING AND DEVELOPING INFORMATION SYSTEM
7.1 INTRODUCTION
We have seen in the last chapters how information systems and managerial activities are
interrelated to each other. That is all managerial functions including planning, organizing,
direction or others like decision making at any levels of the management hierarchy either directly
or indirectly need to use proper information resources so as to come up with the right decision.
Therefore, in this chapter we are going to see how managers are responsible for the developing,
managing, and utilizing of such resources just like they do for other resources. Thus, what
managerial challenges does information technology pose for the managers of modern
organizations? The major parts of this module are designed to emphasize how managerial end
users can meet their responsibilities to plan, implement, and control the uses of information
systems technology, resources and services in their organizations. As management and planning
issue focus on the impact of information technology on management and organizations, the
importance of an information resource management approach to managing information
technology (IT), and the rule of managers in planning for the strategic and operational use of
information systems as well as, the implementation and control of information systems and the
need to control for information system performance and security.
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Learning objectives: After reading and studying this chapter, you should be able to:
 Know the major concepts of information system development and resources.
 Identify the major ways information technology has affected managers.
 Explain how problems of information system performance can be solved by management
involvement in IS planning and control.
 Explain how information technology is affecting the structure and activities of organizations.
 Identify the five major dimensions of the information resource management concept and
explain their impact on the management of the information systems function.
 Discuss the role of planning in organizations and the purpose of strategic, tactical, and
operational planning for information systems.
 Give examples of how planning methodologies and tools support the information systems
planning process.
 Appraise system-building alternatives: the traditional systems lifecycle, prototyping,
application software packages, end-user development, and outsourcing.
 Compare the strengths and limitations of each approach.
 Assess the solutions to the management problems these approaches create.
 Describe the principal tools and methodologies used for system development.

7.2 MANAGING INFORMATION SYSTEM

Dear learners! Who do you think is the responsible individual for managing of information
technology? Is it the system designer or end user or system specialists? Just try to answer in your
own words .did you try? Good! The question who should manage management information
system, Managers or technicians, End users or information specialists? No clear cut answer was
given in the past for many business organizations but somebody has to. Inadequate planning and
management of information technology by business firms and other organizations has been
documented for many years. Thus, there is a real need for managerial end users to understand
how to plan and manage this vital organizational function.

In this chapter we will explore how information technology (IT) has affected managers and
organizations, and stress the concept of information resource management as a key framework

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for managing information technology by both managerial end users and information system
managers. In addition to this, we will see how the managerial planning function can help
integrate information systems technologies into the strategic goals and plans of an organization.
When computers were first introduced into business, predictions were made that there would be
significant changes in management and organizations. The information processing power and
programmed decision-making capability of computer-based information systems were
supposedly going to cause drastic reductions in employees, including middle management and
supervisory personnel. Centralized computer systems would process all of the data for an
organization, control all of its operations, and make most of its decisions.

However this did not prove to be the case. Changes in organizational structure and types of
personnel did occur, but they were not as dramatic as predicted. Naturally, highly automated
systems do not require as many people as manual methods. Therefore, there have been
significant reductions in the number of people required to perform manual tasks in many
organizations.
For example, computerized accounting systems have drastically reduced the need for clerical
accounting personnel, and factory automation has greatly reduced the demand for many types of
factory workers. However, these reductions were countered by dramatic increases in sales and
service personnel, knowledge workers, and managers as businesses increased the depth and
scope of their operations. It was also countered to some extent by the need for more technicians
and professionals to develop and run the computer-based information systems of organizations.
For example, Peter Drucker, the visionary management scholar and author, predicts that, before
the end of the 1990s, the typical large business will have fewer than half the levels of
management and no more than one third of the managers it had in the 1980s. He also predicts
that information technology will allow the structure of information-based organizations to be
more like those of hospitals, universities, and symphony orchestras. They will be knowledge-
based, “composed largely of specialists who direct and discipline their own performance through
organized feedback from colleagues, customers, and head-quarters”.

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Figure 7.1 information resource and organizational interdependence.
Competitive pressures are forcing major firms to become global in scope, to decrease time to
market, and to manage business risk, customer service, and operating costs like never before.
They see information technology as an enabling technology for managing the interdependence
that business units must have to successfully confront the competitive measures they face. For
example, they see telecommunications networks and more cost-effective hardware and software
as enabling individuals, business units, and organizations to be “wired together” in close
business relationships that can provide the communication and coordination needed in today’s
competitive global marketplace. Thus information technology, that is, the technologies of
modern computer-based information systems, is once again being portrayed as a major force for
organizational and managerial change. Thanks to telecommunications networks and personal
computers, computing power and information resources are now more readily available to more
managers than ever before. In fact, these and other information technologies are already affecting
managerial decision making, organizational structures, and work activities in companies around
the world.
Finally, information technology presents managers with a major managerial challenge. Managing
the information system resources of a business is no longer the sole province of information
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systems specialists. Instead, information resources management has become a major
responsibility of all managers. That is, data and information, computer hardware and software,
telecommunications networks, and IS personnel should be viewed as valuable resources that
must be managed by all levels if management to ensure the effective use of information
technology for the operational and strategic benefit of the entire organization.

Dear student! Now, check your progress by attempting the following questions.

Dear student! Have you tried to answer by your own words? Well done! Now let’s see the
briefly the most common factors which leads to poor performance of an information system.

7.3. INFORMATION SYSTEMS PERFORMANCE

Dear learners! Management support is key point for any system being adapted or developed in
order to perform properly. That is executive levels have to give proper attention in terms of
budgeting allocation , assigning the right individual for information development, or in creating
worker awareness to the developed system. Therefore, system performance is also highly
dependent on the degree of management support from the proper undergoing of it. That is why
one of the prominent organizational leaders in his working company said the following statement
to express how decisive the support of top managers in system performance. “ Despite all the
current talk about the strategic use of information systems, a large number of top business
executives feel that information system spending is out of control – and that there is executives
still fail to see technology in business terms “ The information systems function has performance
problems in many organizations. The promised benefits of information technology have not
occurred in many organizations. The promised benefits of information technology have not
occurred in many documented cases. Studies by management consulting firms, computer user

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groups, and university researchers have shown that many businesses have not been successful in
managing their computer resources and information services departments.

Some of the points that accompany could not use information effectively are;
Information technology is not being used effectively by companies that use IT primarily to
computerize traditional business processes instead of using it for decision support and innovative
processes and products to gain competitive advantages.
Information technology is not being used efficiently by information services groups that provide
poor response times, frequent downtimes, incompatible systems, uninterrupted data, and
applications development backlogs.
Information technology is not being used economically in many cases. Information technology
costs have risen faster than other costs in many businesses, even though the cost of processing
each unit of data is decreasing due to dramatic price reductions and improvements in hardware
and software technology.
Therefore, information system performance in order to be effective accompany has to avoid this
kind of inherited attitude towards information systems.

Dear student! Now, do the following exercise.

Dear student! Have you understood about the system performance? If not, go back and revise it.

What are the solutions for poor System performance?

Dear learners! As we see in previous topics information systems do not implemented in
performance as they were intended to operate though their importance in improving
organizational efficiency and effectiveness is tremendous.

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What is the solution to problem of poor performance in the information systems function? There
are no quick and easy answers. However, the experiences of successful organizations reveal that
the basic ingredient of high-quality information systems performance is extensive and
meaningful involvement of managers and end users in the planning, development, and operation
of computer-based information systems. This could be the key ingredient in shaping the response
of management to the challenge of improving the business value of information technology.

A. Management involvement. Proper involvement of managers in the management of IT

requires the active participation of managerial end users in the planning and control of the
business uses of IT. Managers must manage the information system resources of their business
units for it‟s for operational efficiency, effectiveness, and competitive advantage. Then they will
be able to improve the performance of their business units‟ information systems function in the
key areas outlined in Figure6.2. Without this high degree of involvement, managers will not be
able improve the business value of information technology. The following Figure illustrates
several major levels of management involvement.

Figure 7.2. Showing managers Level of management involvement. Successful information

systems performance requires several levels of involvement by managers.
As we can see from figure 7.2 many organizations use an executive information services
committee of top management to do strategic information system planning and to coordinate the
development of information systems projects. This committee includes senior management of the
major divisions of the firm, as well as the chief information officer of the organization. A
steering committee of business unit managers, operating managers, and management personnel
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from the information services department may be created to oversee the progress of critical
systems development projects. The committee meets on a regular basis to review progress made,
to settle disputes, and to change priorities, if necessary. On the other hand, development of
decision support and work group systems requires managerial involvement in the prototyping
process for such projects. End user managers must also accept direct responsibility for managing
the resources and quality of information services provided to their business units and work
groups.
B. Organization culture and Technology
Another way to understand the organizational impact of information technology and its poor
performance is to view an organization as a socio-technical system. In this context, people, tasks,
technology, culture, and structure are the basic components of an organization. Figure6.4
illustrates this conceptual framework, which was first developed by Harold Leavitt. This concept
emphasizes that to improve an organization’s performance, managers must
(1) Change one or more of these components and
(2) Take into account the relationships among these interdependent components.
This is especially important for the proper use of information technology. In the past,
information systems technology has been used to automate organizational tasks without
sufficient consideration given to its strategic impact on the organization.

Figure 7.3 Organizations as socio technical systems.

Information systems must accommodate the people, tasks, technology, culture, and structure
components and relationships of an organization. Thus, a major managerial challenge of
information technology is to develop information systems that promote strategic improvements
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in how an organization supports its people, tasks, technology, culture, and structure. Managers
are people with a variety of preferences for information and diverse capabilities for effectively
using information provided to them. As we pointed out in chapter one of the module one,
information systems must produce information products tailored to meet managers‟ individual
needs, as information reporting, decision support, and executive information systems can do.
The tasks of many organizations, on the other hand, have become quite complex and inefficient
over time. In many cases, information technology has been used “to do the same old thing, only
faster.” However, it can play a major role in fighting organizational complexity by supporting the
reengineering of business processes, also called business process redesign (BPR).

For example, information technology developments such as electronic devices and E-mail can
dramatically reduce the need to prepare and mail paper documents and thus eliminate many
manual tasks and required procedures, and significantly improve communication and
coordination in an organization. The third important factor that affects the performance of
information system is technology of computer-based information systems, which continues to
grow more sophisticated and complex. However, this technology should not dictate the
information needs of end users in the performance of their organizational tasks. It should
accommodate the management culture and structure of each organization. For example,
executive information systems have shown they can overcome many of the objections of top
executives to the lack of individual and task flexibility of previous types of management
information systems. That is, they have a unique set of organizational values and styles. For
example, managers at some organizations share an informal, collegial, entrepreneurial spirit that
stresses initiatives, collaboration, and risk taking, Managers at other organizations may stress a
more formal “do it by the book,” “go through the chain of command,” or “don’t risk the
stockholders‟ money” approach. Naturally, the designs of information systems and information
products must accommodate such differences. For example, managers in a corporate culture that
encourages entrepreneurial risk taking and collaboration will probably favor information
reporting systems that give them quick access to forecasts about competitors and customers, and
E-mail and groupware systems that make it easy to communicate with colleagues anywhere.
Dear student! Now, do the following exercise to check your progress.

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Figure 7.4 Information technology can counter organizational complexity and Support the
reengineering of business processes.
Finally organizational structure is very important in accomplishing effective information system.
Organizations structure the relationships among their management, employees, and job tasks into
a variety of organizational subunits. However, we have just mentioned how Drucker, Keen,
Rockart, and others are emphasizing that information technology must support a process of
organizational structure which it supports by centralizing processing power, databases, and
systems development at the corporate headquarters level. This type of structure emphasizes
gathering data into centralized databases and producing reports to meet the information needs of
functional executives. Therefore, Instead of information technology must be able to support a
more decentralized, collaborative type of organizational structure, which needs more
interconnected telecommunications networks, processing power, databases, and systems
development resources distributed to business unit and work group levels. For example,
information technology must emphasize quick and easy communication and collaboration among
individuals and work groups using electronics instead of paper. Specific examples include E-
mail, voice mail, groupware, electronic meeting systems, and so on.

C. Centralization versus Decentralization

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Experience has shown that modern computer-based information systems can support either the
centralization or decentralization of information systems, operations, and decision making within
computer-using organizations. For example, centralized computer facilities connected to all parts
of an organization by telecommunications networks allow top management to centralize decision
making formerly done by lower levels of management. It can also promote centralization of
operations, which reduces the number of branch offices, manufacturing plants, warehouses, and
other work sites needed by the firm. .On the other hand, distributed networks of computers at
multiple work sites can allow top management to delegate more decision making to middle
managers. Management can also decentralize operations by increasing the number of branch
offices (or other company units) while still having access to the information and communication
capabilities they need to control the overall direction of the organization. Therefore, computer-
based information systems can encourage either the centralization or decentralization of
information systems, business operations, and management. The philosophy of top management,
the culture of the organization, the need to reengineer its operations, and its use of aggressive or
conservative competitive strategies all play major roles with information technology in shaping
the firm’s organizational structure and information systems architecture. Thus, companies
continue to use a variety of organizational arrangements for the delivery of information services.
In the early years of computing, when computers could barely handle a single department’s
workload, decentralization was the only option. Then the development of large mainframe
computers and telecommunications networks and terminals caused a centralization of computer
hardware and software, databases, and information specialists at the corporate level of
organizations. Next, the development of minicomputers and microcomputers accelerated a trend
back toward decentralization, Distributed processing networks of computers at the corporate,
department, work group, and end user levels came into being. This promoted a shift of databases
and information specialists to some departments, and the creation of information centers to
support end user computing. Lately, the trend has been to establish tighter control over the
information resources of an organization, while still serving the strategic needs of its business
units. This has results in a centralizing trend at some organizations and the development of
hybrid structures with both centralized and decentralized components at other. Some companies
have even „spun off” their information systems function into IS subsidiaries that offer
information processing services to external organizations as well as to their parent company.

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Other corporations have outsourced, that is turned over all or part of their information systems
operation to outside contractors known as systems integrators or facilities management
companies. Such changes in the organizational alignment of the information systems function are
expected to continue into the future. Organizations will continue to experiment with ways to both
control and encourage the use of information system resources to promote end user productivity
and the achievement of their strategic objectives.

7.4. INFORMATION RESOURCE MANAGEMENT

Information resource management has become a popular way to emphasize a major change in the
management and mission of the information systems function in many organizations. IRM can
be viewed as having five major dimensions. Figure 6.6 below illustrates this conceptual
framework.
In Strategic management, Information technology must be managed to contribute to a firm’s
strategic objectives and competitive advantages, not just for operational efficiency or decision
support.
Resource management, data and information, hardware and software, telecommunications
networks, and information system personnel are vital organizational resources that must be
managed like other business assets.
Functional management, Information technology and information systems can be managed by
functional organizational structures and managerial techniques commonly used throughout other
business units.
Technology management, all technologies that process, store, and communicate data and
information throughout the enterprise should be managed as integrated systems of organizational
resources.
Distributed management, managing the use of information technology and information system
resources in business units or work groups is a key responsibility of their managers, no matter
what their function or level in the organization.

Most of the information system executives surveyed agreed on the content and inevitability of a
central IS function. These central IS function will:
Manage the computing and telecommunication utility.

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Manage and administer central databases accessible to all corners of the corporation.
Operate high-volume applications.
Set standards and policies.
Perform IS strategic planning and opportunity finding.
Coordinate computing efforts in business units or department.
Offer consulting services to departments.
Conduct IT research and development.

Figure 7.5 The information resource management (IRM) concept, Note that there are five major
dimensions to the job of managing information system resources.

The IS function must manage information technology so that it makes major contributions to the
profitability and strategic objectives of the firm. Thus, the information systems’ function must
change from an information services utility focused only on serving a firm’s transaction
processing or decision support needs. Instead, it must become a producer of packager of
information products or an enabler of organizational structures and business processes that can
give a firm a comparative advantage over its competitors. As we saw in Chapter 2, companies
can develop strategic information systems to gain a competitive edge. Thus, information resource
management focuses on developing and managing information systems that significantly
improve operational efficiency, promote innovative products and services, and build strategic
business alliances and information resources that can enhance the competitiveness of an
organization.
Dear Learners! Now, it’s time to do exercise

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7.5 MANAGING SYSTEMS DEVELOPMENT
Managing the investigation, analysis, design, implementation, and maintenance of information
systems within computer-using organizations are a big responsibility. Planning, organizing, and
controlling the systems development function of an information services department is a major
managerial responsibility. It requires managing the activities of systems analysts, programmers,
and end users working on a variety of information systems development projects. Managing
systems development this requires a project management effort, which we will discuss in the
next chapter. In addition, many systems development groups have established development
centers, staffed with consultants to the professional programmers and systems analysts in their
organizations. Their rule is to evaluate new applications development tools and help information
systems specialists use them to improve their application development efforts.

Figure 7.6 A functional organizational structure for an information services department. Note
the activities that take place under each of the major functions of information services.

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