Foundation of information System in business

Module -01

Ptd By Mr.Lokesh K N

What is Information System

Information System plays a crucial role in the management of enterprise In this fast changing world quality, timeliness, innovation, customer orientation is more important to translate demand into realizable goals. Thus large portion of world has its stake information system. Information system is a centre stage of modern management.

What is Information System

Management emphasize the effective use of information system for managerial decision making rather than merely stressing on technology Information highlight on processed data rather than raw data Systems emphasizing a fair degree of integration & a holistic view

Information System Defined

As an integrated system of man & machine for providing the information to support the operation, the management & decision making function in the organization

 Definition emphasizes
Organization wide information Decision support Managerial emphasis Computer based systems.

So basic knowledge of information system is almost becoming a generic skill needed by every professional.

Uses of IS
Gaining competitive advantage Balancing market strength Increasing market shares Acquire more attractive finance Introducing new products & services Loyal customers

Data vs. Information

Data
Raw facts Distinct pieces of information, usually formatted in a special way

Information
A collection of facts organized in such a way that they have additional value beyond the value of the facts themselves

Examples
Data thermometer readings of temperature taken every hour: 16.0, 17.0, 16.0, 18.5, 17.0,15.5.
Transformation

Information todays high: 18.5 todays low: 15.5

Types of Data
Data
Alphanumeric data Image data Audio data Video data

Represented by
Numbers, letters, and other characters Graphic images or pictures Sound, noise, tones Moving images or pictures

Data Information

Data

Transformation

Information

Information
Processed data, presented in a form which assists decision-makers Reduce uncertainty May provoke a manager to initiate action Data and Info relative concepts
Producer-consumer relationship

Often used interchangeably

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Characteristics of Information
Timeliness: Information must reach the user in a timely manner, just when it is needed; not too early, not too late Appropriateness: Information must be relevant to the person who is using it. Accuracy: Accuracy costs. We don't always need 100% accurate information so long as we know the degree of accuracy it represents (eg: + or 5%). (Remember the value of information). Conciseness: Information should always contain the minimum amount of detail that is appropriate for the user. Too much detail causes information overload.

 Frequency: Frequency is related to timeliness. How often the information required. Its frequency should be synchronized with the timing of the decision making of the user. Understandability: The format and presentation of information are very important. Complete: All the relevant parts are included. E.g. marketing data about household incomes may lead to bad decisions, if not accompanied by consumption habits of the target population. Current: Decisions are often based on the latest information available. Economical: The costs of gathering information should be justified by the overall benefits

Nature of Modern Business

Large size Oligopolistic character Diversified Global reach Technology oriented Change Govt control

System
A set of interconnected elements to achieve a common objective Elements are interrelated and interdependent Composed of sub-systems, which in turn may be made up of other subsystems The set of elements may be: Input(s), Process(es), or output(s)

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 A system cannot exist in vacuum It exists and functions in an environment, separated by its boundary Open system: interacts with its environment, exchanges inputs and outputs Closed systems: do not interact, or exchange any inputs or outputs with its environment Info system converts data into information

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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.

What Is A System?
Systems have three basic functions: 1. Input: Involves capturing and assembling elements that enter the system to be processed. Example: - raw materials, - energy, - data.
Ir. Muhril Ardiansyah, M.Sc., Ph.D. 18

What Is A System? (continued)

Systems have three basic functions (continued): 2. Processing: involves transformation processes that convert input into output. Example: - manufacturing process, 3. Output: involves transferring elements that have been produced by a transformation process to their ultimate destination. Example: - finished products, - human services
Ir. Muhril Ardiansyah, M.Sc., Ph.D. 19

A Business as a System

Chapter 1 Foundations of Information Systems in Business

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Organization Structure
Development of good information system call for deep understanding of the structure & dynamics of the organization. Organization is an arrangement of people in an institution based on concept of division of labour, authority, responsibility & decision making with the objective of attaining corporate goals. Mr. Anthony, a mgmt theorist classified organization management into 3 levels
Strategic Tactical operational

 Operational level
Making routine day to day decisions Address well structured problem Information internal to the organization Processing of large data Primary attribute is efficiency

Tactical level
Decision taken by middle mgmt staff & have medium & long term impact E.g. performance analysis, budget analysis, vendor rating. Summarized organization wide information required ( both internal & external) Need is quality of information Less structured, flexible & critical data Mix of effectiveness & efficiency

 Strategic level
Long term implication E.g. diversification, new plant location, tech acquisition, strategic alliance. Strategic decision enable organization to reach zenith of success or destruction Calls for unstructured, uncertain external information Information should be extremely adaptive, flexible & insightful.

What Is An Information System?

An Information System can be any organized combination Of: - people, - hardware, - software, - communications networks, - policies. This system Stores, retrieves, transforms, and disseminates information in an organization

Figure 1.6 Components of an information system

IS Vs IT
INFORMATION TECHNOLOGY Hardware Software Databases are used to build INFORMATION SYSTEMS

Payroll System

Inventory System

Networks
Other related components

Marketing System

Customer Service System

Fundamental Roles of IS in Business

There are three fundamental role:

Support of its business processes and operations. Support of decision making by its employees and managers. Support of its strategies for competitive advantage.

Trends in Information Systems

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Trends In Information Systems:

1. Data processing: 1950s 1960s - electronic data processing systems -- transaction processing, record keeping, and traditional accounting applications. 2. Management reporting: 1960s 1970s - management information systems -- management reports of pre specified information to support decision making.

Trends In Information Systems (continued):

3. Decision support: 1970s 1980s - decision support systems 4. Strategic and User Support: 1980s 1990s - end user computing systems - executive information systems - expert systems - strategic information systems

Trends In Information Systems (continued):

4. Electronic Business and Commerce: 1990s 2000s - internet based e business and e commerce systems

The IS (Information System) Functions:

A major functional area of business equally as important to business success, as the function of: - accounting, - finance, - operations management, - marketing, - human resource management.
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The IS Function
The IS function is
A major functional area of business An important contributor to operational efficiency, employee productivity, morale, customer service and satisfaction A major source of information and support for decision making A vital ingredient in developing competitive products and services in the global marketplace A key component of todays networked business

Chapter 1 Foundations of Information Systems in Business

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Purposes of Information Systems

Chapter 1 Foundations of Information Systems in Business

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Classification of IS
Information Systems

Operations Support System

Management Support System

Transaction processing systems

Office automation systems

Expert System

Management information systems

Decision support systems

Executive information systems

1) Transaction processing systems

1) Process business exchanges
2) Maintain records about the exchange 3) Handle routine, yet critical, tasks

4) Perform simple calculations

2) Office automation systems automate office procedures and enhance office communications and productivity.

 Management information systems

Routine information for routine decisions Operational efficiency Use transaction data as main input Databases integrate MIS in different functional areas

Decision Support System

Interactive support for non-routine decisions or

problems End-users are more involved in creating a DSS than an MIS

Executive information systems

provide critical information tailored to the information needs of executives

Expert Systems
are knowledge-based systems that provides expert advice and act as expert consultants to the users

MIS Characteristics:
System approach
Takes Comprehensive view in the light of its objective

Management oriented
Top down approach followed Derived from the overall business objectives

Need based
Caters to info needs at different levels

Exception based
Exception based reporting principle
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 Futuristic
On the basis of projections

Integrated
Blends info from several operational areas

Common data flows

Should avoid data duplication and redundancy

Long term basis

Strive to be futuristic

Divide and conquer

Use partitioning into subsystems

Central database
Let subsystems access the master data
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MIS Functions:
Data capturing Processing of data Storage Retrieval Dissemination of MI finished product of MIS

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