Chapter- 2Information System Concepts

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What is Information?

• Information means processed Data• Data is facts or values of results, and

information is the relations between data and other relations

• Information relates to description, definition, or perspective (what, who, when, where).

• Information is essential :• It adds knowledge, • helps in decision making, • analyzing the future and • taking action in time

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Information

• Processed data is called Information• Most computers today are used for Info. Gathering• Various tools available to summarize and present the data• Huge databases are maintained• Eg: online marketing companies etc

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Characteristics of Information

• Availability - Timeliness• Purpose – Ultimate reason• Mode and format – Written / Verbal • Decay – Cricket Score card• Rate – Online movies • Frequency – Weekly vs QTD vs YTD• Completeness – Raymond!

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Characteristics of Information

• Reliability – confidence• Validity – Temperature • Quality – haste is waste• Transparency – Realistic• Economical – Cost of information < Value• Adequacy – To take desired actions

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What is a System?

• An orderly arrangement of a set • of interrelated and interdependent elements • that operate collectively to accomplish • some common purpose or goal

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Eg: Human Digestive SystemStarts with the right hand and ends with……

Classification of Systems

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Classification of Systems –Element based

Abstract / Conceptual• Arrangement of

interdependent ideas or constructs (theories)

• Eg: Theology – Idea of God• Eg: Satisfaction you get after

passing ISCA etc

Physical• A set of tangible elements

operating together

• Eg: Transport System• Eg: Computer System

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Classification of Systems –Interactive Behaviour

Open System• Interacts freely with its

environment by taking input and returning output

• Independent & self contained• Gets feedback• Eg: Business / IS System

Closed System• Does not interact with the

environment nor changes with the change in envt.

• Insulated

• Does not get feedback• Eg: Wall Clock

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Any Example ?

Entropy

• Problem in the system• System will not be able to render the required service• It is the quantitative measure of disorder in a system• May be due to life span of system or decay due non utilization or

unexpected disturbances

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Negative Entropy

• Negative Entropy is required to put the system back to use!• Open system requires more entropy than closed systems – Why?

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Ex -1: Cycle tyre got puncturedSoln: Vulcanizing the Tyre

Ex -2: Software not working properlySoln: ??

Classification of Systems –Degree of Human Intervention

Manual• Physically done by humans• Not much of System

intervention

Automated• Computers / Technology

used to complete the task• 100 % Automation not

possible practically

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Eg: Consider preparing Accounts prior to introducing Tally / SAP

Classification of Systems –Working / Output

Deterministic System• Operates in a predictable

manner• No flexibility• Anticipation without any

errorsEg: computer Program

Probabilistic System• Cannot be exactly

predicted• Probable behaviour• Degree of error attached

with the predictionEg: Following Traffic Rules

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Other Concepts

• System Boundary• The limits within which the System operates• Features that define and delineate a system

form the boundary• Eg: Automobile – body of the vehicle, tyres etc

• System Environment• External world outside the system boundary

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Examples ???

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Other Concepts

• Subsystem• Part of a larger system• Each system is composed of subsystems, which in turn are made up of other subsystems, • The interconnections and interactions between the subsystems are termed Interfaces• Interfaces occur at the boundary and take the form of inputs and outputs

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System

Sub- System 1 Sub- System 2Interface

Other Concepts

• Supra-System • entity formed by a system and other equivalent systems with which it interacts• Sub-system is a part of a supra-system

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LBM Ltd

Finance Marketing HR R&D

Characteristics of Subsystems

• Decomposition• Decentralized or divided into smaller Subsystems• Will happen till smallest division is of manageable size• Done by specifying the boundaries for each• Eg: Classification of Departments based on function

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Example Payroll

Personnel pay-roll records

Payroll data entry and validation

Salaried payroll processing

Payroll reports for management

Payroll reports for government (TDS filing) 20

Characteristics of Subsystems

• Simplification• Mainly to reduce the number of interconnections by grouping common attributes

• Decoupling• Two different subsystems are connected very tightly• Very closely linked / coordination• JIT Production – Raw Material – Production directly

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System Stress

• Stress indicates the pressure given on system• Due to excess usage • If unchecked might collapse / decay• Utilizing more than capacity• Eg: Servers during results time / IRCTC tatkal ticket booking time

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Components of IS

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CBIS – Computer based IS

• Computer plays a major role with following as major components:• Hardware – physical components• Software – programs • Data – raw facts and figures• Procedure – step by step mechanism• People – users, programmers, analysts etc

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Characteristics of CBIS

1. Work for predetermined objectives 2. Many interrelated and interdependent subsystems - cannot function in isolation3. If one subsystem / component fails, in most cases the whole system does not work4. subsystem works with another subsystem is called interaction5. Work done by individual subsystems is integrated to achieve the central goal of the system

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Application of CBIS

• Finance & Accounts:• Working Capital Mgmt• Capital Budgeting• Tax Planning• Payroll

• Production:• Inventory• Product Planning – CAD

• Production:• Inventory / R&D

• Marketing:• Sales Management• Order Processing

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Information requirements depend on:

1. Operational function• Every Function / Department has its own

requirement

2. Type of decision making• Programmed / Structured Decisions - made on

problems and situations by reference to a predetermined set of precedents, procedures, techniques and rules

• Repetitive in nature• Eg: Ordering Stock when Inventory is complete

• Non-programmed Decisions – made on new and non- repetitive

• Eg: Sudden change in Govt Policy / Merger etc

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Types of Information Systems

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User Types

# Type Group Served

1 Executive IS SeniorManager

2 MIS / DSS Middle Manager

3 Knowledge Mgmt System / Office Automation

Knowledge and Data Workers

4 TPS Operational Managers

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Name Meaning Types

Management Support

Systems (MSS)

Focus on the managerial uses of information& provide information to managers for planning and decision making

(more of non- programmed)

Can handle more data

• Decision Support System• Executive Information System• Expert System

Name Meaning Types

Operations Support

Systems (OSS)

To improve the operational efficiency of the enterprise

• Transaction Processing Systems• Management Information Systems• Enterprise Resource Planning Systems

Name Meaning Types

Office Automation

Systems (OAS)

Newest and most rapidly expandingCBIS

Different office activities can be broadly grouped

Eliminates distance, time, paper work etc.

• Text Processing• E-doc Mgmt System• E-mail • Telecon –/ V-Con etc

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Transaction Processing System (TPS)

• manipulates data from business transactions• lowest level of management• sales, purchase, production, delivery, payments or receipts are recorded• Transact record data into useable form

• Eg: Tally

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Capture Data & Organize files Process

Generate Reports

Using query to retrieve data

when required

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Components of TPS

I - InputP - ProcessS - StorageO - Output

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Features

• Large volume of data• Automation of basic operations• Benefits are easily measurable

• Improves Efficiency• Reduces work load• Faster response

• Source of input for other systems• Provide source of info for Strategic & Tactical users

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Process Control System (PCS)

• computer is used to control ongoing physical processes• designed to automatically make decisions, which adjust the physical

production process• Used to maintain an output within a required range• Example: assembly lines in automated factories

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Enterprise Collaboration Systems (ECS)

• supports collaboration to communicate ideas, share resources and co-ordinate cooperative work efforts

• objective is to use IT to enhance the productivity and creativity of teams in enterprises

• Example: Assume facebook was used productively• Now stop the assumption!

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Office Automation System (OAS)

• Document Capture• Document Creation • Receipts and Distribution • Filling, Search, Retrieval and Follow up• Calculations • Recording Utilization of Resources

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Benefits of OAS

• improve communication within an organization• reduce the cycle time between preparation of messages and receipt• costs of office communication comes down• ensure accuracy of information

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Computer Based Office Automation Systems

• Text Processing System• process of development of documents such as letters, reports, memos etc• word processing systems or desktop publishing systems• Supported by printers

• Electronic Document Management System (DMS)• DMS capture the information contained in docs• remote access of documents

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Computer Based Office Automation Systems

• Electronic Message Communication Systems• telephone, mail and facsimile• Electronic Mail

• Electronic Transmission• Online Development and Editing• Broadcasting and Rerouting• Integration with other Information Systems• Portability• Economical

• Facsimile• communication of images of documents over telephone lines

• Voice Mail – Spoken Message

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Knowledge Management System (KMS)

• Information and Knowledge are the key elements of this economy. • A firm’s competitive gain depends on its knowledge processing • i.e. what it knows; how it uses & how fast it can know something new. • much more influential than the harmony of land, labour & capital • Its is the process of capturing, developing, sharing, and effectively

using organizational knowledge

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Types of Knowlege

• Explicit knowledge: • Explicit knowledge is that which can be formalized easily and as a

consequence is easily available across the organization• Online tutorials, Policy and procedural manuals

• Tacit knowledge:• Resides in a few often-in just one person and hasn’t been captured by the

organization or made available to others. • unarticulated and represented as intuition, perspective, beliefs, and values

that individuals form based on their experiences. • It is personal, experimental and context-specific. • It is difficult to document and communicate the tacit knowledge.• For example – hand-on skills, special know-how, employee experiences

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Management Information Systems (MIS)

• Tool to support operational control, management control and decision making functions in an organization

• Assist managers in decision making and problem solving• Use results produced by the TPS• Mainly used by middle & top level

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Characteristics of MIS

• Management Oriented –• Understanding mgmt requirements

• Management Directed –• Mgmt should Devote time

• Integrated –• All sub-systems should be integrated• Comprehensive & Holistic Approach

• Common Data Flows• Minimum data processing procedures• Avoid Human intervention

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Characteristics of MIS

• Heavy Planning –• Takes a good amount of time• Constantly be updated

• Sub- system –• Split into smaller sub-systems for ease

• Common Database• Avoid duplication & multiple storage

• Computerised• Faster, accurate processing

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Pre-requisites – Pillars of MIS

• Database• User – oriented• avoiding duplication • available to authorized persons • controlled by a DBA

• Qualified system and management staff• Experts & Professionals – Training

• Support of Top Management• Everything flows from their support

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Pre-requisites – Pillars of MIS

• Control & Maintenance• No short cut methods• Document changes

• Evaluation • Examine flexibility• Ascertain the view of users• Guiding – timely action

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Limitations of MIS

• Inputs determine the quality of output• Not a substitute for effective mgmt• not have requisite flexibility• cannot provide tailor-made information• less useful for making non-programmed decisions• Frequent changes in top mgmt – lesser effectiveness

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Misconceptions about MIS

• Any computer based information system is a MIS.• Any reporting system is MIS.• MIS is a management technique.• MIS is a bunch of technologies.• MIS is an implementation of organizational systems and procedures.

It is a file structure.• More data in generated reports refers more information to managers.• Accuracy plays vital role in reporting

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Constraints in MIS (Internal Weakness)

• Non-availability of experts, who can diagnose the objectives – what on earth does the Mgmt require?

• What and which all Sub-system to be installed?• Diverse Bizz Objectives• No cooperation from staff

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Decision Support Systems (DSS)

• supports business and organizational decision-making activities• Systematic structure helps the mgmt in developing semi-structures and unstructured solutions• Supports human decision making instead of replacing• Can be built with a variety of tools – internal & external data

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Characteristics

• Support semi-structured or unstructured decision-making• Use of Stimulate Envt• What if analysis• Testing of data

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Characteristics

• Flexibility• Due to unstructured queries – high flexibility – unlike MIS • Adhoc Reports• focuses on decision rather than data

• Ease of Learning and Use• User friendly• Support Online Real Time• Commands using simple English words• mainly for decision making rather than communicating decisions and training purposes

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Components of DSS

• Users• Need to understand the problem • Manager - unstructured or semi-structured problem to solve• Staff Specialist (Analysts) - people, who are more details oriented and willing to use complex

system

• Databases • Collection of data from internal / external• Ex: Internal – Sales Report / Margin or CVP Ananlysis• Ex: External – Interest Rates / Economic Indicators• Stored in a structural form• Eg: Marking, sales etc

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Application of DSS

• Costing & Pricing• Margin maintenance• Make or buy

• Capital Budgeting• Lease v/s loan• NPV / PI

• Budgeting & Variance analysis• Graphical view

• General DSS

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Diff between DSS & MIS

DSS• Providing integrated

tools, data, models• Highly flexible• External oriented• More analytical

capability• Emphasis on tools to be

used in decision process• Interactive

MIS• Providing structured

information• Relatively inflexible• Internal oriented• Lesser analytical

capability• Emphasis on

information requirement analysis

• Static

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Executive Information Systems (EIS)

• a DSS that is designed to meet the special needs of top-level managers• extract summary data• provides rapid access to timely information• extensive online analysis tool like trend analysis, market condition• capable of accessing both internal and external data

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Decision Making Envt

• Lack of structure• Unstructured

• High degree of uncertainty• Future orientation

• What next analysis?

• Informal Source• Use of grapevine

• Low level of detail• Decision taken looking at the larger picture

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Contents of EIS

• whatever is interesting to executives• must be easy to understand and collect• must be based on a balanced view of the organization's objective• must encourage management and staff to share ownership of the

organization's objectives• Meet changing needs

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Office Automation Systems (OAS)

• Help computerize activities to improve efficiency• Storing & Retrieval – For future use• Document Capture – preserving Documents – mails, charts• Document Creation - preparation of documents, dictation, editing of texts • Calculations - calculator functions like interest calculations, percentage calculations etc• Text Processing - Mail merge / letter• E-Communication – email / V-Con / Fax

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Expert Systems

• is highly developed DSS that utilizes knowledge generally possessed by an expert to share a problem

• Imitate reasoning processes of human and experts• Eg: providing advice regarding portfolio management

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Business Application

Areas Application

Accounting & finance Tax advice, forecasting

Marketing Customer inquires, discount policies

Manufacturing Scheduling tasks, CPMPersonnel Qualifications required

General Business Strategies, M&A etc

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Benefits

• Knowledge can be preserved and not lost• Expert labor is expensive and scarce• Assists inexperienced personnel• Not subject to emotions, fatigue• Used as a strategic tool in marketing, cost cutting etc

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Others• Knowledge Management Systems

• Support the conception, association and propagation of business knowledge within the enterprise.

• Functional Business Information Systems • supports the operational and managerial

applications of the basic enterprises of an industry.

• Strategic Information Systems • provide an industry strategic products, services and

capabilities for competitive advantage.

• Cross Functional Information Systems• combines most of information systems and are

designed to produce information and support decision making for different levels of management

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Information requirements depend on:

3. Level of management activity

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Strategic / Top Level

Tactical / Middle Level

Operational / Supervisory Level

Turnaround Eg: going for IPO / Merger / Introducing New Products

Less surrounded by uncertainty

Routine tasks

High flexibility

Moderate flexibility

Very Less

Middle level managers - objective is to win the war, strategic level is to decide whether to wage a war or not!

Organizational levels using IS

• Operational Level Systems• operational managers by keeping track of the

elementary activities• Knowledge Level Systems

• to integrate new knowledge into the business –growing field of KPOs etc

• Management Level Systems• middle managers in monitoring, decision-making

and administrative activities – What if analysis• Strategic Level Systems

• senior level management to tackle and address strategic issues and long term trends – inside & outside the orgn

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Enterprise Resource Planning (ERP)• fully integrated business management system • integrates the core processes to provide an organization a structured

environment • decisions concerning demand, supply, operational, personnel, finance,

logistics etc. are taken• fully supported by accurate and reliable real-time information

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What it can Implement?

• Business System• Production• Maintenance• Quality Checks• Marketing• Finance• HR

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Characteristics of ERP

• Flexible – Diff countries / languages / policies• Modular & Open – Any module can be attached and detached• Integrated – Real time reports• Best Business practices – adopts through benchmarking

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Enterprise Resource Planning (ERP)

• process management software that allows an organization to use a system of integrated applications

• ERP software integrates all facets of an operation, including product planning, development, manufacturing, sales and marketing

• Components• Software – Modules – Finance, HR, Marketing• Process flow– Interface – integrates – information• Hardware – Physical Requirement• Customer / Users

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Meaning

• A fully integrated business management system covering functional areas of an enterprise like Logistics, Production, Finance, Accounting and Human Resources

• ONE database, ONE application, and ONE user interface for the entire enterprise,

• Enhances a manufacturer ability to accurately schedule production, fully utilize capacity, reduce inventory, and meet promised shipping dates

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Evolution of ERP

• Material Resource

Planning (MRP)

MRP

• Manufacturing Resource Planning

MRP II • Money Resource Planning

MRP III

• Enterprise Resource Planning

ERP

Characteristics

• Flexibility• respond to the changing needs of an enterprise

Modular & Open• Any module can be attached or detached whenever required

Comprehensive: • Able to support variety of organizational functions and wide range of business organizations.

Beyond The Company : • Not be confined to the organizational boundaries, connect beyond

Best Business Practices • have a collection of the best business processes applicable worldwide.

Core Banking System (CBS)

• Anywhere Banking• Examples of core banking products include Infosys’ Finacle, Nucleus• FinnOne and Oracle's Flexcube application

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Features

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Impact of IT on IS

• E-business• 24 hour sale, lower cost of doing business• B2B, B2C, C2C can be done

• Financial Service Sector• Automatic & quick transfers – large payments

• Wholesaling and Retailing• Logistics Support – Integration of trade

• Public sectors• Better mainlining of records, quick analysis

• Others• Reservations to Online classes

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IT tools crucial for business growth

• Business Website• Faster reach and quick updates• Develop using HTML, XML, ASP.NET etc.

• Internet and Intranet• Connect anywhere to anywhere• Within or outside the organisation

• Software and Packages• DBMS, Knowledge Discovery databases, Business

Intelligence tools etc used• Hardware

• Webcam, microphone, Smartphone etc

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Data Mining

• Applied in database analysis and decision support i.e. market analysis and management by finding patterns

• Helpful in • target marketing, • Customer relation management, • market basket analysis, • cross selling, • market segmentation, • risk analysis, • customer retention, • improved underwriting, • quality control, competitive analysis and• fraud detection

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Applications of DM

• text mining,• web analysis,• customer profiling - it can list out what types of

customers buy what products by using clustering or classification,

• Identifying customer requirements - attract new customers

• provide various multidimensional summary reports and statistical summary information,

• finance planning and asset evaluation83

That’s all Folks!Until we meet again…

Thank You!

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