6. Information Systems

Lecture 5 – Information Systems

An information system is defined as a set of hardware devices, procedures and software (programs) designed around user based criteria to produce information and communicate it to the user for planning, control and performance. Ideally, information reduces uncertainty about a state or event. 

It is organized collection of people, information, business processes and information technology – designed to turn inputs to outputs in order to achieve a goal. IS enhances work, decision making, problem solving, communication and coordination. 

It is a set of interrelated components that collect/retrieve, process, store and distribute information to support decision making, control and coordination of activities in organizations. IS helps managers in business organizations to analyze problems, visualize complex subjects, and create solutions.

Fundamental roles of IS in businesses

• Support business processes and operations
• Support business decision making
• Support of strategies for competitive advantage

Components of information systems

An information system is essentially made up of five components hardware, software, database, network and people. These five components integrate to perform input, process, output, feedback and control.

• Hardware – consists of input/output device, processor, servers and storage media devices. 
• Software – consists of various programs and procedures. Database consists of data organized in the required structure. 
• Communication Network – consists of hubs/switch, communication media and network devices. 
• People – consist of device operators, user support technicians, network administrators and system specialist.
• Information processing – consists of input; data process, data storage, output and control. During input stage data instructions are fed to the systems which during process stage are worked upon by software programs and other queries. During output stage, data is presented in structured format and reports (informations).

Classification of Information System

In any given organization information system can be classified based on the usage of the information. Therefore, an information system in an organization can be divided into 2 main groups; Operations support systems and Management support systems.

1. Operations support system

In an organization, data input is done by the end user which is processed to generate information products i.e. reports, which are utilized by internal and or external users. Such a system is called operation support system.

The purpose of the operation support system is to facilitate business transaction, control production, support internal as well as external communication and update organization central database. The operation support system is further divided into; a transaction-processing system, processing control system and enterprise collaboration system.

•  Transaction Processing System (TPS)

In manufacturing organization, there are several types of transaction across department. Typical organizational departments are Sales, Account, Finance, Plant, Engineering, Human Resource and Marketing. Across which following transaction may occur sales order, sales return, cash receipts, credit sales; credit slips, material accounting, inventory management, depreciation accounting, etc. These transactions can be categorized into batch transaction processing, single transaction processes and real time transaction processing. Examples of TPSs include; Reservation systems, Point of sale systems, Payroll systems, billing systems etc.

•  Process Control System

In a manufacturing organization, certain decisions are made by a computer system without any manual intervention. In this type of system, critical information is fed to the system on a real-time basis thereby enabling process control; such systems contains sensors, flow meters, temperature detectors, pressure checkers and force testers. This kind of systems is referred as process control systems. Examples, Supervisory control and data acquisition (SCADA), Programmable Logic controllers (PLC) or Distributed control systems (DCS) etc, such systems work to gather and transmit data obtained during the manufacturing process.

•  Enterprise Collaboration System

In recent times, there is more stress on team effort or collaboration across different functional teams. ECS is system which enables collaborative effort by improving communication and sharing of data. Enterprise collaboration system is a combination of groupware, tools, internet, extranets and other networks needed to support enterprise-wide communications, such as the sharing of documents and knowledge to specific teams and individual within the enterprise. Examples include; e-mail, videoconferencing, web publishing, Chat systems, Collaborative document sharing, calendaring and scheduling systems, Task/project management tools etc.

2. Management Support System

Managers require precise information in a specific format to undertake an organizational decision. A system which facilitates an efficient decision making process for managers is called management support system. Management support systems are essentially categorized as management information system, decision support system, executive information system, expert system and strategic information systems.

• Management information system – provides information to manager facilitating the routine decision-making process. It provides reports to the managers e.g. daily sales analysis reports
• Decision support system – provides information to manager facilitating specific issue related solution. It provides interactive and ad-hoc support for decision making, e.g. A what-if-analysis to determine where to spend advertising cash.
• Executive Information systems – which provides critical information for executives and managers, e.g. easy access to actions of competitors
• Expert system – uses artificial Intelligence (AI) technologies to simulate the judgment and behaviour of knowledgeable humans.  Such systems provides expert advice and act as consultant to users, e.g. process monitor, credit application advisor 
• Knowledge Management systems – supports creation, organization of business knowledge, e.g. internet access to best business practice
• Strategic Information systems – support operations/ management processes that provide strategic product/services for competitive edge, e.g. online stock trading, shipment tracking etc.

Qualities of a good IS

• Relevance – it should be pertinent and meaningful to decision maker (user)
• Complete – in terms of functionalities and must contain all facts that are necessary to the users
• Accurate – must be accurate and free of errors or bugs/vaults
• Maintainable – easy to maintain
• Cost-effective – cost effective and efficient system for gathering information
• Usability – easy to learn and use
• Security – it must be secure
• Fault tolerant – it must stand work load
• Scalability – it must be scalable, ready for enhancement
• Effectiveness and efficiency
• Reliable 
• Trustworthy

Categories of Information, levels and types of Information systems in Organizations

There are three categories of information related to managerial levels and the decision managers make. The first level is strategic information, which relates to long –range planning policies that are of direct interest to upper management. Information such as population growth, trends in financial investment and human resources changes would be of interest to top company officials who are responsible for developing policies and determining long-range goals. This type of information is achieved with the aid of Decision Support System (DSS).

The second level of information is managerial information. It is of direct use to middle management and department heads for implementation and control. Examples are sales analysis, cash flow projection and annual financial statements. This information is of use in short – and intermediate -range planning – that is months rather than years. It is maintained with the aid of management information systems (MIS).

The third information level is operational information, which is short-term, daily information used to operate departments and enforce the day-to-day rules and regulations of the business. Examples are daily employee absent sheets, overdue purchase orders and current stocks available. Operational information is established by Data processing systems (DPS).

Diagram above is a pyramid model of different types of information systems based on different levels of hierarchy in an organization.

Therefore, in designing an information system, the analyst needs to determine the type of information needed at every level, how it is structured and in what format it is before deciding on the system needed to produce it. This is another reason for having a background in systems theory and organizations.

Comparison of IS versus IT

It is often observed that term information system and information technology are used interchangeably. In a literal sense, information technology is a subset of information systems. Information systems consist of people, processes, machines and information technology. The great advancement in information systems is due to development in information technology and introduction of computers.

Information System

An information system can be defined as set of coordinated network of components, which act together towards producing, distributing and or processing information. An important characteristic of computer-based information systems information is precision, which may not apply to other types. In any given organization information system can be classified based on the usage of the information. Therefore, information systems in business can be divided into operations support system and management support system.

Information Technology

Everyday knowingly or unknowingly, everyone is utilizing information technology. It has grown rapidly and covers many areas of our day to day life like movies, mobile phones, the internet, etc. Information technology can be broadly defined as integration of computer with telecommunication equipment for storing, retrieving, manipulating and storage of data. According to Information Technology Association of America, information technology is defined as “the study, design, development, application, implementation, support or management of computer-based information systems.” Information technology greatly enhances the performance of economy; it provides edge in solving social issues as well as making information system affordable and user friendly.

Information technology has brought big change in our daily life be it education, life at home, work place, communication and even in function of government.

Comparison of Information System and Information Technology

Information system and information technology are similar in many ways but at the same time they are different. Following are some aspects about information system as well as information technology.

• Origin: Information systems have been in existence since pre-mechanical era in form of books, drawings, etc. However, the origin of information technology is mostly associated with invention of computers.
• Development: Information systems have undergone great deal of evolution, i.e. from manual record keeping to the current cloud storage system. Similarly, information technology is seeing constant changes with evermore faster processor and constantly shrinking size of storage devices.
• Business Application: Businesses have been using information systems for example in form of manual books of accounts to modern systems. The mode of communication has also gone under big change, for example, from a letter to email. Information technology has helped drive efficiency across organization with improved productivity and precision manufacturing.