topic_1 the changing role of the computer

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ICT for strategic Advantage

TOPIC ONE – THE CHANGING ROLE OF THE COMPUTER

Introduction

Information Systems are a tool for building successful organisations. They can helpcompanies improve their customer relations, provide better information for decision making,strengthen productivity and promote global competitiveness.

Effective IS can help businesses provide improved customer service, can ‘add value’, and inthat way lead to a greater market share. sed effectively, Information !ommunicationTechnologies may give an organisation strategic advantage.

"usinesses need to learn how to use computers and the related technology to achieve andsustain success for society, organisation and the individual.

#ou are re$uired to work through the subse$uent Study %uide sections, reading the !hapter and pages of &obson as indicated. #ou are also re$uired to read the articles, indicated withinthe sections of the workbook, which have been provided for you as a start to your research.%roup discussions are encouraged as they will assist you in answering the S'(s.

' number of ma)or articles have been supplied. #ou are to read and further research thetopic introduced by the article designated to you. *n a specified date you are to lead a groupdiscussion session on your designated article.




't the end of this Topic you will be able to+

• ifferentiate between IS and IT

• escribe the different categories which make up an IS

• E-plain the differences between data and information

• iscuss the different levels of decisionmaking / operational0tactical0strategic

• E-plain the need for $uality in data

• iscuss the three sources of data

Information Technolo! 1IT2 34ardware, software, telecommunications, databasemanagement, and other information processing technologies used in computerbasedinformation systems.3

Information "!#tem# 1IS2 are systems that deliver information to individuals andorganisations. They consist of hardware, software, data, telecommunications, businessprocesses and rules, people, and environmental factors.

$ata and information% The terms data and information are often used interchangeably indiscussions of data processing 152 and information systems. There is, however, a keydifference between the two terms which is fundamental to understanding the role andoperation of information systems within organi6ations.

$ata% The term data refers to the complete range of facts, events, measurements, opinionsand value )udgements, etc. that e-ist both within and outside the organi6ation. ata can beclassified in an organi6ational conte-t into a number of different categories or levels. i.e datarecorded in organisation7 data available to organisation7 data potentially available toorganisation.

The data information con&er#ion 'roce## (fi )*

The data conversion functionmay be viewed schematicallyas shown 1fig 82. The firststage in the process is thecapture and recording of thebasic or raw data. The termra+ data is used to refer todata that has not beenmodified or processed by theorgani6ation. ata captureand storage today can stillbe in a written form, althoughother methods of datacapture are increasinglybeing used.

"A,%

9hat other methods of data capture can be used:




The ne-t stage is the processing of the data into a more convenient form for the users, whichmay include conversion into other units of measurement, sorting, summari6ing, storing, andso on. The third stage involves the communication of the processed data to the users, whichmay involve te-tual, graphical or oral methods of communication. p to this point, theprocess is still only concerned with data, although the process is developing the data into aform in which it can potentially become information. The general term applied to these

activities is data processing.

InformationInformation can be viewed as a subset of the data held within the organi6ation. Thisindicates that although the data processing system delivers data to the user in a processedform, only a part of this data will be converted into information7 the remainder will bediscarded by the particular user. In other words, all members of an organi6ation will receive astream of data inputs in the form of instructions, letters, statistics, internal memoranda, andso on. ' proportion of this data will be either filed away automatically and never referred to or alternatively deposited in the wastepaper bin. *nly a proportion of the data received will beread, used or acted on by the receiver. This will then be classified as information rather thandata.

Information is that part of the total data available which i# a''ro'riate to the re-uirement#of a 'articular u#er or rou' of u#er#. 'n effective information system will, therefore, beone which minimises the amount of data passing through the hands of the user withoutbecoming information, that is, one which reduces or eliminates the contents of the data bo-and increases the contents of the information bo- 1fig 82.

!ertain parts of the data may be appropriate toonly one user in the organisation 1fig ;2, or alternatively 'art# of the data are appropriate or common to a number of users, with other partsspecific to each individual 1E<2

ser 4 re$uires only part of the information thatuser % re$uires.

i.e the chief accountant 142 and the payroll clerk1%2

ser 4 also relies on both formally recorded andunrecorded data from other sources outside theaccounting function.

Fiure .

Pre#entation of dataThis may be differentiated according to their different need. !hief accountant may re$uireonly summarised statements of salary and wage e-penditure, whereas the payroll clerk willre$uire details of each member of staff.

An item of data i# onl! information to #ome of the 'eo'le #omeof the time and not all of the 'eo'le all of the time/

$ATA PROCE""ING "0"TEM"

In the beginning, computers were all rather limited, highly speciali6ed machines which

re$uired a dedicated environment and specialist personnel to make them function correctly.Such machines were called ‘mainframes’ and the organi6ation needed a computer department to provide the necessary data processing services or to produce reports. The

ata available withinorganisation

D

F

C G

E

A

B

H

ata recorded inorganisation




systems which these computer installations supported were called data processing 152 or transaction processing systems. Some e-amples of 5 systems in a typical organi6ationare+

• a payroll system

• a stock control system

• an order entry system.

'll these system types have one thing in common. They involve repetitive tasks using welldefined information which is easy to capture and to store. In a word, they are operational systems. 9hile they may have helped the business to run efficiently, they probably did littleto support the decisionmaking process or to help manage the business more effectively.Some other features of 5 systems include the following+

• the computer programs are written in a thirdgeneration language 1=%>2

and are capable only of carrying out the task for which they are designed

• the data storage files are structured to suit one particular application 1e.g.

payroll2 and are not easily changed to cater for new re$uirements

• there is an identifiable gap 1organi6ational and cultural2 between the

specialist data processors and the users.

These factors led to a lot of frustration between the users 1accountants, production and salespeople2 and the computing specialists. Typical reasons for such frustration include+

• the fact that the 5 department seemed to have different ob)ectives from

the user departments. There were fre$uent arguments over who ‘owned’the data and complaints that ‘the 5 department only wants to developsystems which are technically interesting’

• the limitations of the technology. ntil the 8?@As many 5 systems were

still running important applications in batch mode 1the ‘overnight run’2 andsimple re$uests for changes to programs could take months to achieve

•

the computer specialists’ lack of understanding of the users’ problems.Information systems seemed to take years to develop and, whencompleted, often did not do what the users wanted.

!learly, there was a need for systems which were more fle-ible, which could put informationinto the hands of the user and which could support the processes of tactical and especiallystrategic management.

CATEGORIE" OF 1U"INE"" INFORMATION "0"TEM"

"usiness Information Systems 1"IS2 can be divided into two broad categories+ systems thatsupport an organisation’s business activities, and systems that support managerial decisionmaking.+

• O'eration# information #!#tem# are generally concerned with process control,transaction processing, communication 1internal and e-ternal2 and productivity.

• Manaement information #!#tem# provide feedback on organisational activities

and help to support managerial decision making.

)% OPERATION" INFORMATION "0"TEM"

Tran#action Proce##in (TP*Involves recording and processing the data that results from an organisation’s businesstransactions. Transaction processing can be carried out by batch processing or realtimeprocessing.




1atch Proce##inIn 1atch processing identical product items are processed as a group through each of theprocessing stages. The products in each batch may be associated with the samecustomer’s order or may relate to orders for several different customers. The usual reasonadvanced for batch processing is that there may be variations in the production operations

re$uired to produce either completely different products or variations on the same productdesign. The costs associated with preparing the machinery for each new product type or variation may make it more efficient to process a number of similar items before ad)ustingthe machinery for the ne-t type of product. <or e-ample, in a car plant it is clearly moreefficient to paint all the ‘batched’ blue cars consecutively before spending time in cleaningthe spray gun and changing the paint supply to paint the red cars, as opposed toundertaking these operations separately after each car is sprayed in the re$uired colour.The data on the costs of resources used in the production operations are collected andcharged to each batch of items processed. The cost of individual items would normally beassessed from the average cost of the batch produced.

' good e-ample of batch processing is the production of bills for utilities and other services.

Typically, customer data is collected and prepared for processing during the day. Theprocessing itself takes place during the night, when the demand on an organisation’scomputer resources are lowest. On2line Proce##in

In realtime processing 1sometimes known as online processing2, transaction data isprocessed immediately. 'n e-cellent e-ample of realtime processing is a cashpointsystem, where balance en$uiries and cash withdrawals are processed almost instantly.On2line systems re$uire $uick response times and necessitate a high degree of securityand data integrity

"A,9hat is the difference between a batch system and an online system: 9hat would be mostappropriate for the following+ ' periodic update of a data warehouse from an operational database" capturing information on customer sales transactions.




.% Manaement Information "!#tem# (MI"#*If the first phase of business computing was to automate the manual and clerical processesof business with the aim of increasing efficiency, the second phase was to emphasi6e therole of information.

Early management information systems sought to use the output from e-isting 5 systems1and the 5 department2 in some form which made it more suitable for middle managementto understand. 4ere are two e-amples+

• a stock control system used to automate the capture, verification, collation andstorage of information about goods may produce potential information aboutpurchasing patterns, stock replenishment and the profitability of certain product linesor outlets

• airline booking systems may provide ‘spinoff’ information to management aboutcustomer preferences, route patterns and reactions to world events.

It soon became apparent that BISs had considerable potential for the firms that wereprepared to develop them. <orecasting, reporting and budgeting0control systems weredeveloped and for the first time managers began to be affected 1sometimes positively,sometimes negatively2 by computeri6ation pro)ects. It also became apparent that BISswould re$uire ma)or technological and organi6ation changes.

• The ‘corporate database’ containing all the information that a company owned aboutits products, customers, suppliers, and so on, could be accessed in a number of different ways and could be changed in format without re$uiring ma)or programmingeffort.

• The BIS function was seen as part of a service to management. 4ence the profile of computing tended to be raised within the organi6ation and often the 5 departmentbecame part of a management services department. *ther, complementary functionssuch as operations research were therefore to be found alongside the information

systems specialists.• Buch new technology 1or ‘old’ technology which previously e-isted only in an

academic or scientific environment2 came to be offered for commercial use.

The ob)ective of an BIS is to provide the operational and tactical 1lower and middle2managers of an organi6ation with the information which they need to carry out their function.BISs are based on reportproducing software which draw data from the same source as thedata processing system C usually the corporate database. If the 5 system is said to carryout the company’s daytoday business processes, then the BIS is the ‘feedback loop’ whichmonitors the system. It is possible to form some generali6ed facts about BISs+

• BIS reporting structures are relatively rigid 1the software and procedures

are not fle-ible2 and therefore BISs are more suitable for monitoring astable environment

• the analytical powers of a BIS are limited. BISs tend to rely on informationbeing e-tracted in a routine way and presented in a form 1usuallymanagement reports2 that makes it more meaningful than ‘raw data’

• BISs cope best with wellstructured decision situations, such as ratioanalysis or stock control calculations. 's such they do not directly supportthe decisionmaking process, but make available information on which adecision may be based

• the information which BISs produce is usually internally gathered anddeals with the reporting of past performance rather than pro)ecting thefuture

•there are fre$uent time delays in BISs between an event occurring and itbeing reported.




!omputergenerated reports are clearly a very important part of a BIS. The designers of BISs often go to great lengths to limit the amount of information to which managers aresub)ected. The principle of responsibility reporting applies+ managers are informed onlyabout things that are under their direct control. Specific types of report include the following+

E3ce'tion re'ort#4 which are another method of preventing information

overload by causing the software to produce a report only when asignificant event occurs C for instance, when specific control conditionsare broken. 'n e-ample would be a report which listed only the customer orders which had not been delivered within five days. If no orders wereoverdue by this length of time, no report would be produced.

"A,4owever, consider what happens if the ‘e-ception’ was a sudden, une-pected rise inprofit, or in sales. 9ould this event have been input into the system for flagging:!an it be considered a noteworthy event:

On2demand re'ort#4 which enable managers to re$uest reports on a

particular fact or part of the organi6ation on an ‘as and when’ basis. Such areporting system re$uires fle-ible technology, such as a relational databaseand D%> system.

"cheduled re'ort# are produced automatically on a daily, weekly or monthly basis, usually to a fi-ed format. E-perience shows that suchreports may lose their news value and may be ignored as, unless they arepresented in minimal summary form, they contain much information whichre$uires no management action.

"OURCE" OF INFORMATION

4owever, data can be formal, as seen above, and informal 1i.e. grapevine2 this can be

termed unprocessable data.

Un'roce##a5le data

Hard or ,uantitati&e dataThis includes the use of figures, such as statistics. 'lso known as hard data, often collectedin order to measure or $uantify an ob)ect or situation.

"oft data or ,ualitati&e dataescribes without the use of figures, the $ualities or characteristics of an ob)ect or situation. 'lso known as soft data.

Formal and in formal information #!#tem# 'll organi6ational information systems are a mi-ture of formal and informal elements. The

differences are as follows+• <ormal information systems use reports, meetings and predefined data to process

data around the organi6ation. Buch of what goes on in a formal information system




will be well structured, routine and capable of being defined with precision. <or thisreason formal systems are sometimes called ‘hard’ systems and are relatively easyto computeri6e.

• Informal information systems consist of less welldefined e-changes of information,

using less structured channels of communication. Telephone conversations, memosand discussions over lunch are all informal. Bost managers rely far more on

informally obtained information than they do on formally produced reports. *pinions,feeling and ‘hunches’ are all important factors in decision making and are central toan approach to information analysis called ‘soft systems’ which has links withoperations research and general systems theory.

It is impossible to state whether one type of information system is more important to anorgani6ation than another. ' good system will take both elements into account and will seekto allow the users some fle-ibility in how they use the information.

<ormal communication often ignores group and social mechanisms. ' formal report, for e-ample, might marginalise or ignore staff opinions, causing offence and leading to reducedmorale.

Informal communicationIn general, very little of the information transmitted by word of mouth is retained by therecipient. ' number of factors, for e-ample ‘noise’, can reduce the amount of informationretained to as little as ;A per cent. In the conte-t of communication, noise refers to any factor that serves to hinder the transmission of information or distort its meaning.

Informal communication is always present in an organisation, regardless of its si6e or nature.Information of this kind can be considered a valuable resource and can be harnessed towork for the benefit of the organisation. 5erhaps the most common means by which informalcommunication takes place is by word of mouth. In a sales organisation, for e-ample, a

casual conversation between a salesperson and a client might yield information that can beused to enhance a product or find new ways of making it more attractive to customers.

"A,

Attri5ute# of data

"ummar! of Attri5ute# of Information ,ualit!

Timeline## Accurac! Granularit! Additional Characteri#tic#

!urrency<re$uencyTime

5eriod

&elevance!ompleteness!onciseness

Scope

!larityetail*rder

5resentationBedia

!onfidence in source&eliability 'ppropriate

&eceived by correct personSent by correct channels




The three attributes that we are interested in are timeliness, accuracy and granularity.The time dimension describes the time period with which the information deals and thefre$uency with which the information is received. Information that contains errors,omissions, or which is inappropriate has limited value to an organisation.

The correct level of detail is essential, for some a summary is all that is re$uired for others

highly detailed information is necessary.

,ualitati&e dimen#ion# of informationIt is possible to differentiate categories of information on the basis of $uality. The term $ualityin this conte-t refers to the dimensions which enhance the value of the information to theuser. The figure below illustrates a number of the more important $ualitative dimensions of information.<our key points need to be stressed in relation to these $uality dimensions+

• not all the dimensions will be relevant in any given decision situation

• each dimension may be represented by a range of potential levels of $uality

• even where there are several relevant dimensions, certain dimensions may be more

important than others. In the case of financial accounting information, for e-ample, ahigh degree of accuracy may be more important than the timeliness or currency of the information received

• the importance of a particular dimension in a given decision situation is a reflection of

the decision situation, the nature of the problem faced, and the skills of individualdecisionmakers. In the case of a decisionmaker with strong analytical abilities, theprovision of detailed and comprehensive information as opposed to summari6ed andpartial information may enhance the decision taken. 4owever, if the decisionmaker’sanalytical abilities are less well developed, a more summari6ed version of theinformation may yield higher value.

Attri5uteRANGE OF ATTRI1UTE"

Granularit!Accurac!Time'er#'ecti&e

etailed4ighly accurate!urrent

Summari6edInaccurate4istoric

'ccessibility!ompleteness&elevance"iaserifiable(uantifiable

egree ofuncertainty

!larity

&eadily available<ully comprehensive 'ppropriate to currentneeds*b)ectiveSelfverifiable(uantified

!ertain!learly e-pressed

elayed availability5artial outlineInappropriate to currentneedsSub)ectiveFo means of checkingFot amenable to numerice-pression4ighly uncertain 'mbiguous

,ualitati&e dimen#ion# of information%




Co&erae of an orani#ation6# I"

E-pert System i.e. !redit !ontrol System

'uditing Investment 'ppraisal

ITEM $"" E"*rganisational >evel Banagement 'll*b)ective ecision aid Spread E-pertiseomain Farrow / Simple "road / !omple-Interface ser (ueries system System (ueries ser E-planation >imited !onsiderable

"A,) >ocate at least two different e-amples of information. <or each e-ample determine

whether the information is of ‘good’ or ‘poor’ $uality. E-plain your reasoning withreference to the three attributes of information described above.

. Information can be transmitted via formal and informal means. sing specifice-amples, you are re$uired to+

a describe the advantages and disadvantages of each methodb discuss each method in terms of the attributes of information $uality that

are likely to be present.

EI"

MI"

TP7$P#!#tem

$""

E"

"trateic

Tactical

O'erational

T!'e of "!#temLe&el of Manaement




The Le&el# of Manaement

• 5lanning and !ontrol of *verall

*rganisational irection by top

management

• 5lanning and !ontrol of

*rganisational subunits by middlemanagement

• 5lanning and !ontrol of ayto

ay *perations by supervisorymanagement

$ATA 8 INFORMATION

Accurac!<reedom from error. 4opefully the data capture and data edit processes will detect andre)ect inaccurate data. This should not be confused with level of accuracy.

Com'letene##*f data is re$uired to ensure that valid information is derived from the data

Rele&anceThe data must pertain to the decision at hand to be useful

Timeline##ecisions can involve rapidly changing conditions. Fot to be confused with level of timeliness.

Audita5ilit! 'bility to verify the accuracy and completeness of data.

$ATA CRITICAL TO THE "UCCE"" OF AN ORGANI"ATION

There are three sources

InternalThe organisation3s own internal operations, activities and plans<orecast future sales and plan deployment of sales force

InternalThe data that describes the business transactions that flow into the firm from e-ternalsources. These sources are Invoices from suppliers and orders from customers, EI

E3ternalInsight about the market, industry and other elements of the environment in which the firm

competes.

"trateicManaement

Tactical Manaement

O'erational Manaement




$ATA MANAGEMENT

ata Banagement is an abstract concept that serves to group a number of related activitiesdirected at managing data as a resource. The ob)ective is to ensure that data needed tosolve business problems or e-ploit opportunities are made available to the right people at

the right time and in the proper form to be used.

ata is a vital resource of the enterprise and must be managed as an important asset. Inincreasingly competitive global markets, the availability of more powerful computers andliteracy of employees there is a need or rather a demand for more and better data. 'dded tothis we now have more empowered endusers.

topic_1 the changing role of the computer

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