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INFORMATION SYSTEM

An information system can be defined technically as a set of interrelated components that collect (or retrieve), process, store and distribute information to support decision making and control in an organization.

Figure 1 Functions of an information system

Information refers to the data that have been shaped into a form that is meaningful and useful to human being. Data refers to the stream of raw facts representing events occurring in organizations or the physical environment before they have been organized and arranged into a form that people can understand and use. Input captures or collects raw data from within the organization or from its external environment. Processing converts the raw input into a meaningful form. Output transfers the processed information to the people who will use it or to the activities for which it will be used. An information system also requires feedback, which is output that is returned to the appropriate members of the organization to help them evaluate or correct the input stage.

ORGANIZATIONS
Information systems are an integral part of organizations. Organizations have a structure that is composed of different levels and specialities. Authority and responsibility in a business firm is organized as a hierarchy, or a pyramid structure of rising authority and responsibility. The upper levels of the hierarchy consist of managerial, professional and technical employees, whereas the lower level consists of operational personnel.

Figure 2 Levels in a firm

Senior management makes long-range strategic decisions about product and services as well as ensures financial performance of the firm. Middle management carries out the programs and plans of senior management. Operational management is responsible for monitoring the daily activities of the business. Knowledge workers, such as engineers, scientists or architectures design products or services and create new knowledge for the firm, whereas data workers such as secretaries or clerks, assist with paperwork at all levels of the firm. Production or service workers actually produce the product and deliver the service.

BUSINESS PROCESS
Business process refers to the manner in which work is organized, coordinated and focussed to produce a valuable product or service. Business processes are concrete workflows of material, information and knowledge sets of activities. Business processes also refer to the unique ways in which organizations coordinate work, information, and knowledge, and the ways in which management chooses to coordinate work.

HOW INFORMATION TECHNOLOGY ENHANCES BUSINESS PROCESSES


Information Systems automate many steps in business processes that were formally performed manually. It can change the flow of information, making possible for many more people to access and share information, replacing sequential steps with tasks that can be performed simultaneously, and eliminating delays in decision making. It can even transform the way a business works and drive new business models.

TYPES OF INFORMATION SYSTEM


For most businesses, there are a variety of requirements for information. Senior managers need information to help with their business planning. Middle management needs more detailed information to help them monitor and control business activities. Employees with operational roles need information to help them carry out their duties. As a result, businesses tend to have several "information systems" operating at the same time. TRANSACTION PROCESSING SYSTEMS Operational managers need system to keep track of the elementary activities and transactions of the organization. A transaction processing system (TPS) is a computerized system that performs and records the daily routine transactions necessary to conduct business, such as sales order entry, hotel reservations, payroll, employee record keeping and shipping. The principal purpose of systems at this level is to answer routine questions and to track the flow of transactions through the organizations. Manager needs TPS to monitor the status of internal operations and the firms relations with the external environment. TPS are also major producers of information for other types of systems. MANAGEMENT INFORMATION SYSTEMS Middle management needs systems to help with monitoring, controlling, decision-making and administrative activities.

Management information systems (MIS) is a specific category of information systems serving middle management. MIS provides middle managers with report on the organizations current performance. This information is used to monitor and control the business and predict future performance. MIS summarize and report on the companys basic operations using data supplied by TPS. The basic transaction data from TPS are compressed and usually presented in reports that are produced on a regular schedule. MIS serve managers primarily interested in weekly, monthly and yearly results. MIS generally provides answers to routine questions that have been specified in advance and have a predefined procedure for answering them.

Figure 3 Transaction processing system and Management information system

DECISION SUPPORT SYSTEMS Decision support systems (DSS) support non routine decision making for middle management. They focus on problems that are unique and rapidly changing, for which the procedure for arriving at a solution may not be fully predefined in advance. DSS use both the internal information and information from external sources such as current stock prices or product prices of competitors. These systems use a variety of models to analyze data, or condense large amounts of data into form in which decision makers can

analyze them. DSS are designed so that users can work them directly; these systems explicitly include user-friendly software. DSS is referred to as business intelligence systems because they focus on helping users make better business directions. EXECUTIVE SUPPORT SYSTEMS Senior managers need systems that address strategic issues and long term trends, both in the firm and in the external environment. Executive support systems (ESS) help senior management make these strategic decisions. ESS addresses non routine decisions requiring judgement, evaluation and insight because there is no agreed-on procedure for arriving at a solution. ESS present graphs and data from many sources through an interface that is easy for senior managers to use. ESS is designed to incorporate data about external events, such as new tax laws or competitors, but they also draw summarized information from internal MIS and DSS.

Figure 4 Types of information System

ENTERPRISE APPLICATIONS
One of the major challenges in a company is to get all the different kinds of systems to work together. One solution is to implement enterprise applications, which are systems that span functional areas, focus on executing business processes across the business firm, and include all levels of management. They help businesses become more flexible and productive by coordinating their business processes more closely and integrating groups of processes so

they focus on efficient management of resources and customer service. There are four major enterprise applications: enterprise systems, supply chain management systems, customer relationship management systems and knowledge management systems.

Figure 5 Enterprise application architecture

ENTERPRISE SYSTEMS Enterprise systems, also known as enterprise resource planning (ERP) systems, collects data from various key processes in manufacturing and production, finance and accounting, sales and marketing and human resources and storing the data in a single central data repository. Information that was previously fragmented in different systems can be easily shared across the firm to help different parts of the business work more closely together. SUPPLY CHAIN MANAGEMENT SYSTEMS Supply chain management (SCM) systems help businesses manage relationship with their suppliers. These systems help suppliers, purchasing firms, distributors, and logistics

companies share information about orders, production, inventory levels and delivery of products and services so that they can make better decisions about how to organize and schedule sourcing, production and distribution. The ultimate objective is to get the right amount of their products from their source to their point of consumption with the least amount of time and with the lowest cost. They automate the flow of information across organizational boundaries. CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS Customer relationship management (CRM) systems help firms managing their relationships with their customers. CRM systems provide information to coordinate all of the business processes that deal with customers in sales and marketing, and service to optimize revenue, customer satisfaction, and customer retention. This information helps firms identify, attract and retain the most profitable customers; provide better service to existing customers; and increase sales. CRM systems consolidate and integrate customer information from multiple communication channels telephone, e-mail, wireless devices, retail outlets or the web. The CRM systems provided a 360-degree view of each customer, including prior service-related questions and all the marketing communications the customer had ever received. KNOWLEDGE MANAGEMENT SYSTEMS The value of a firms products and services is based not only on its physical resources but also on intangible knowledge assets. Knowledge management systems (KMS) enable

organizations to better manage processes for capturing and applying knowledge and expertise. These systems collect all relevant knowledge and experience in the firm, and make it available wherever and whenever it is needed to improve business processes and management decisions. They also link the firm to external sources of knowledge. KMS support processes for acquiring, storing, distributing and applying knowledge, as well as processes for creating new knowledge and integrating it into the organization.

REFERENCE
Management Information Systems; Eleventh Edition; Ken Laudon, Jane Laudon, Rajanish Dass

MULTIPLE CHOICE QUESTIONS


1. Training the employees about the various functionalities of the system will reduce the A. Business risk B. Technological risk C. Organisational risk D. Breakdown risk

2. A system is a set of ________ with a clearly defined boundary, working together to achieve a common set of objectives by accepting inputs and producing outputs in an organised transformation process.

3. Which of the following should a system necessarily possess? a) Input b) Process c) Output d) Feedback

A. a only B. a,b,c only C. d only D. all of the above

4. Information specialists form a part of A. Software resources B. People resources C. Hardware resources D. Data resources

5. Translating the problem statement into a series of sequential steps describing what the program must do is known as: A. coding. B. debugging.

C. creating the algorithm. D. writing documentation.

6. Feasibility study forms a part of A. System Implementation B. System maintenance C. System design D. System Investigation

7. Technical writers generally provide the ____________ for the new system. A. programs B. network C. analysis D. Documentation

8. External user acceptance testing is also known as A. Alpha testing B. Beta testing C. Gamma testing D. System testing

9. Cutting off or scrapping the old system completely as the new system is being implemented is called A. Parallel implementation B. Direct implementation C. Sourced implementation

10. Debugging a program in the system is a part of A. Maintenance B. Coding C. Testing D. None of the above

11. ______ is essential for software that processes confidential data to prevent system intrusion by hackers. A. Intrusion testing B. Usability testing C. Security testing D. Performance testing

12. Most modern software applications enable you to customize and automate various features using small custom-built miniprograms called: A. macros. B. code. C. routines. D. subroutines.

13. The make-or-buy decision is associated with the ____________ step in the SDLC. A. Problem/Opportunity Identification B. Design C. Analysis D. Development and Documentation

14. The problem statement should include all of the following EXCEPT: A. input. B. output. C. processing. D. storage.

15. Translating the algorithm into a programming language occurs at the ____________ step of the PDLC. A. Debugging B. Coding C. Testing and Documentation D. Algorithm Development