Information Systems

Data
Definitions
Raw facts such as an employee’s name and number of
hours worked in a week, inventory part numbers or sales
orders.
Information
A collection of facts organized in such a way that they
have additional value beyond the value of the facts
themselves.
Data Information

$35,000 12 Units Salesperson: J. Jones

$12,000 J. Jones Data Sales Territory:
Western Region Processing Western Region
$100,000 100 Units Current Sales: 147
35 Units Units = $147,000
 Definitions
Process:
Set of logically related tasks

Knowledge:
Awareness and understanding of a set of information
 The Value of Information
• Directly linked to how it helps decision makers achieve
their organization’s goals
• Valuable information:
– Can help people and their organizations perform
tasks more efficiently and effectively
 Organizational need for Information
Information plays a key role in all decision making-
• Response time are critical
• Cost of lost opportunity is high
• Decision making is increasingly becoming information
dependent
Can help decision makers make judicious use in taking
decisions-
• Problem identification
• Problem definition
• Alternatives creation
• Comparison of alternatives
• Choice
Characteristics of valuable information
 Types of information
On the basis of the purpose for which information is utilized, it
could be classified into three main categories:-
•Strategic information: It is required by the managers at the
strategic level of management for the formulation of
organizational strategies. This relates to long term planning
policies of the organization as a whole. Example- information
pertaining to new technologies, new products, competitors etc.
•Tactical information: It is generally based on data arising from
current activities of the organization. It is used in short term
planning. Example- the sales analysis and forecasts, annual
financial statements, production resource requirements etc.
•Operational information: It applies to short periods which
may vary from one hour to a few days. It is often required for
taking immediate action. Example- current stock in hand, work-
in-progress levels, outstanding order from customers etc.
What is a System?

System is a group of elements organized with a purpose.

Systems can be classified as:-

•Physical: Natural/ Artificial

•Abstract/ Conceptual
•Probabilistic/ Deterministic
•Open/ Closed

Systems often consists of subsystems that can send and receive

data from each other.
 Definitions
Information Systems
An information system(IS) is typically considered to be a set of
interrelated elements or components that collect(input),
manipulate(processes), and disseminate (output) data and
information and provide a feedback mechanism to meet an
objective.
Open System
Close System
 Functions/ Benefits of an Information
System
•Provides various information which supports decision making
•Provides operational efficiency, satisfaction and services to its
customers
•Its functions helps in accounting, marketing, Human resource
etc.
•Helps people communicate and collaborate with each other
•Identifying business opportunities
•Product development
•Client lock-in and competitor lock-out
Client lock-in: Making it hard for customers to switch by creating high switching
costs or integrating deeply with their existing systems.

Competitor lock-out: Implementing tactics such as exclusive contracts and

regulatory barriers to prevent competitors from entering or competing effectively in
the market.
 Manual and Computerized
Information Systems
• An information system can be:
– Manual(Manual information systems: Reliant on paper-based or
human-driven processes for data collection, storage, and retrieval,
often lacking efficiency and prone to errors). or
computerized(Utilize digital technology to efficiently collect, store,
process, and disseminate data, enhancing speed, accuracy, and
accessibility of information for decision-making and operational
efficiency)
• Example:
– Investment analysts manually draw charts and trend lines to
assist them in making investment decisions
• Computerized information systems:
– Follow stock indexes and markets and suggest when large blocks
 Computer-based Information System
An Information System is an organized combination of
•people,
•hardware,
•software,
•communication networks and
•data resources
that collects, transforms and disseminates information in a organization.
 IS Vs IT
Information technology- IT refers to all technologies, products,
inventions and methods that collectively facilitate construction and
maintenance of information systems. It is the hardware and
software used by information systems.

Information System- is an assembly of people, hardware,

software, data and networks to capture, transmit, store, retrieve,
manipulate or display information.

•IS uses IT
•IT drives the development of IS
•Advances in IT affect IS
 IS Vs IT Payroll
System

INFORMATION
TECHNOLOGY Inventory
System
Hardware
Software are used to build
INFORMATION
Databases
SYSTEMS
Networks
Marketing
Other related
System
components

Customer
Service
System
IS, IT and Organization
 Expanding Roles of IS
1. Data Processing: 1950s-1960s
2. Management Reporting: 1960s-1970s
3. Decision support: 1970s-1980s
4. Strategic and End User Support: 1980s-1990s
5. Global Internetworking: 1990s-2000s
 Scope of Information Systems

The structure of an IS often parallels the structure of an

organization. An organization is often divided into various
functional units and there are IS for each functional unit as well as
systems common to all functional units.

However, because no two organizations have exactly the same

needs, IS solutions are not generic, they are customized. An
organizations approach to IS depends on a number of factors-
•Size and number of facilities
•The kind of arrangements and organization has with customers
and suppliers
•The type of industry the company is in
•The speed with which the market changes
Figure 2-1
 Classification of IS
Information Systems

Operations Management
Support System Support System

Transaction Office Management Decision Executive

processing Process control automation support information
systems information
systems systems systems systems systems
1. Operations support systems process data generated by business
operations
Major categories are:-
i) Transaction processing systems
ii) Process control systems
iii) Office automation systems
2. Management Support Systems provide information and
support needed for effective decision making by managers
Major categories are:-
i) Management Information System
ii) Decision Support Systems
iii) Executive Information System
 Transaction Processing Systems
Used at Operational level of the organization. It can perform various
functions:-
❑ Process business exchanges
❑ Maintain records about the exchanges
❑ Handle routine, yet critical, tasks
❑ Perform simple calculations

Goal: to automate repetitive information processing activities

Examples:
✔Payroll
✔Sales and ordering
✔Inventory
✔Purchasing, receiving, shipping
✔Accounts payable and receivable
 Process control systems
It monitor and control industrial processes.
Example: in a petroleum refinery use sensors to monitor
chemical processes

Office automation systems

It automate office procedures and enhance office communications
and productivity. It helps people perform personal record keeping,
writing, and calculations efficiently
Main types of tools include:
✔Spreadsheet programs
✔Text & image processing systems
✔Presentation packages
✔Personal database systems and note-taking systems
 Management Information Systems
It provides information for managing an organization. It extract and
summarize data from TPSs and allow managers to monitor & direct
the organization. It also provide accurate feedback and reports on a
scheduled basis. It creates 3 types of reports:-

✔Detailed
✔Summary
✔Exception

Examples:
✔Sales forecasting
✔Financial management and forecasting
✔Manufacturing planning and scheduling
✔Inventory management and planning
✔Advertising and product pricing
 Decision Support System
Interactive support for non-routine decisions or problems. An
interactive information system that provides information, models,
and data manipulation tools to help make decisions in
semistructured and unstructured situations. It also support
analytical work.

❑Designed to support organizational decision making

❑“What-if” analysis
❑Example of a DSS tool: Microsoft Excel
❑Text and graphs
❑Models for each of the functional areas
❑Accounting, finance, personnel, etc.
 Executive Information Systems
It provide critical information tailored to the information needs of
executives. A highly interactive system that provides a flexible
access to information for monitoring results and general business
conditions

❑Use both internal and competitive information

❑User-friendly interface
Examples:
✔Executive-level decision making
✔Long-range and strategic planning
✔Monitoring internal and external events
✔Crisis management
✔Staffing and labor relations
Group Decision Support Systems
Group Decision Support Systems
Other categories
a) Expert systems
b) End user computing systems
c) Business information systems
d) Strategic information systems
e) Knowledge management systems
a) Expert Systems are knowledge-based systems that provides expert
advice and act as expert consultants to the users
b) End user computing systems support the direct, hands on use of
computers by end users for operational and managerial
applications
c) Business information systems support the operational and
managerial applications of the basic business functions of a firm
e) Knowledge Management Systems support creation,
organization and dissemination of business knowledge
throughout company
Example: Intranet access to best business practices
 Why business needs IT/ IS?
IT has become an everyday part of business life. All medium to
large organizations depend on IT for their continued survival.
(a) Changing Business Environment (Business Drivers):-
• Globalization
• Changing nature of workforce
• Powerful customers
• Technological pressures
• Social responsibility
• Reengineering business processes
• Competitive advantage
 Why business needs IT/ IS?
(b) Fundamental role of IS in business-
IS plays three vital roles in business firms-
1. Support business operations (Doing things faster)
2. Support managerial decision making (Doing things better)
3. Strategic advantage (Doing things smarter)
 Why business needs IT/ IS?
(b) IT based innovations in business-
IT applications have changed the nature of work and the
workplace. IT has helped the firms gain a competitive
advantage by improving their internal operations, thereby
reducing internal costs and developing products quickly.
Let us look at representative areas in which IT based innovations
have affected for major functional areas of business:-
• Design systems- CAD (computer aided design)
• Manufacturing systems- CIM (computer integrated
manufacturing)
• Sales & marketing systems- e-commerce
 Obstacles & Challenges
IT and IS are really powerful & valuable tools, but not
magic. Implementation of IT based innovations has
been delayed/ failed because of various reasons:-
1. Unrealistic expectations
2. Difficulty in integrating IT based systems with other
systems in the organization
3. Workforce downsizing
4. Information overload
5. Employee mistrust
6. Difficult to built
7. Security breaches
 Opportunities

1. Enhanced global competitiveness

2. Capture market opportunities
3. Support corporate strategy
4. Enhance worker productivity
5. Improve quality of goods and services
 Conclusion

Information Systems are indispensable to the business,

industry, academia and any organization to meet the future
challenges.
MIS professionals help organizations to maximize the
benefit from investments in personnel, equipment and
business processes.
Information Management & Decision Making
Information Management & Decision Making
contd.
Fundamentals of IT in Management
IT plays a critical role in increasing operational excellence,
customer and supplier intimacy, improved decision making
and gaining competitive advantage.

When IT is integrated throughout the enterprise and linked

with management, it can provide the foundation for new
products, services and ways of conducting business.
 Models of Decision Making
A decision-making model is a process that takes
individuals and/or teams through a series of steps
to help them arrive at a decision.
Decision-making models can be structured and
collaborative, involving a wide range of
stakeholders and resulting in greater buy-in.
Sometimes, usually when a decision has to be
made quickly, they are more informal. Then, the
decision-making process may fall to the leader,
who may rely on expertise, experience, and “gut
instinct” to solve a problem.
Models of Decision Making
 Models of Decision Making
• Herbert Simon made key contributions to enhance our understanding of the
decision-making process. In fact, he pioneered the field of decision support
systems. According to (Simon 1960) and his later work with (Newell 1972),
decision-making is a process with distinct stages. He suggested for the first
time the decision-making model of human beings. His model of decision-
making has three stages:
• Intelligence which deals with the problem identification and the data collection
on the problem.
• Design which deals with the generation of alternative solutions to the
problem at hand.
• Choice which is selecting the ‘best’ solution from amongst the alternative
solutions using some criterion.
 Models of Decision Making
• Intelligence Phase
This is the first step towards the decision-making process.
In this step the decision-maker identifies/detects the
problem or opportunity. A problem in the managerial
context is detecting anything that is not according to the
plan, rule or standard. An example of problem is the
detection of sudden very high attrition for the present
month by a HR manager among workers. Opportunity
seeking on the other hand is the identification of a
promising circumstance that might lead to better results.
An example of identification of opportunity is-a marketing
manager gets to know that two of his competitors will
shut down operations (demand being constant) for some
reason in the next three months, this means that he will
be able to sell more in the market.
 Models of Decision Making
Thus, we see that either in the case of a problem or for the purpose of
opportunity seeking the decision-making process is initiated and the first stage
is the clear understanding of the stimulus that triggers this process. So if a
problem/opportunity triggers this process then the first stage deals with the
complete understanding of the problem/opportunity. Intelligence phase of
decision-making process involves:
Problem Searching: For searching the problem, the reality or actual is
compared to some standards. Differences are measured & the differences are
evaluated to determine whether there is any problem or not.
Problem Formulation: When the problem is identified, there is always a risk of
solving the wrong problem. In problem formulation, establishing relations with
some problem solved earlier or an analogy proves quite useful.
 Models of Decision Making
• Design Phase: Design is the process of designing solution outlines for the
problem. Alternative solutions are designed to solve the same problem.
Each alternative solution is evaluated after gathering data about the
solution. The evaluation is done on the basic of criteria to identify the
positive and negative aspects of each solution. Quantitative tools and
models are used to arrive at these solutions. At this stage the solutions are
only outlines of actual solutions and are meant for analysis of their suitability
alone. A lot of creativity and innovation is required to design solutions.
• Choice Phase: It is the stage in which the possible solutions are compared
against one another to find out the most suitable solution. The ‘best’ solution
may be identified using quantitative tools like decision tree analysis or
qualitative tools like the six thinking hats technique, force field analysis,
etc.This is not as easy as it sounds because each solution presents a
scenario and the problem itself may have multiple objectives making the
choice process a very difficult one. Also uncertainty about the outcomes and
scenarios make the choice of a single solution difficult.
 Models of Decision Making
• Rational Decision Making Model
• This one is often seen as the most classical approach and
was one of the first attempts at developing a model for
decision making. The rational decision-making model is a
series of steps to be considered when making a decision
that should lead you to the best choice. This is a good
option if your problem or situation is well-defined and you
have quantifiable options. Here are the steps:
1. Identify the problem or opportunity
2. Gather and organize information
3. Analyze the situation
4. Develop a range of options
5. Evaluate and assign value to each one
6. Select the option you deem is best
7. Actively decide on that option and move forward
 Models of Decision Making
• Ethical Decision Making Model
• Another important factor to consider is the
ethics of a particular decision. Almost
every decision involves an ethical
element, so you must also look for an
ethical decision-making model that suits
your situation. Here are some questions to
identify the ethical component of your
decisions:
• Is this decision fair?
• Have I considered all of the people who will be
affected?
• Would I want to be on the receiving end of this
Models of Decision Making
Models of Decision Making
Models of Decision Making
Models of Decision Making