Fundamentals of Information System

1. Fundamentals of Information System

2. SYSTEM CONCEPT • What is a system? A system can be defined as a group of interrelated or interacting elements forming a unified whole. • According to James A O’Brien, “A system is defined as a set of interrelated components, with a clearly defined boundary, working together to achieve a common set of objectives by accepting inputs and producing outputs in an organized transformation process”. • examples: Thus, we can talk of the physical system of the sun and its planets, the biological system of the human body, the technological system of an oil refinery, and the socioeconomic system of a business organization.

3. INFORMATION SYSTEM • “Information System (IS) - A system that creates, processed, stores, and retrieves information”- Gupta • The information system receives the inputs of the data and the instructions, processes the data according to the given instructions, and gives the output of the processed results. Information system contains information about significant people, places, and things within the organization or in the environment surrounding it.

4. According to Laudon and Laudon: • “An information system can be defined technically as a set of interrelated components that collect (or retrieve), process, store, and disseminate information to support decision making, coordination, control, analysis, and visualization in an organization. • “An information system is an organized combination of people, hardware, software, communication networks, and data resources that collects, transforms and disseminates information in an organization.”-James A. O’Brien

5. When we use the term Information system we will be referring to Computer-based information system-which rely on computer hardware and software technology to process and disseminate information. People have relied on information system to communicate with each other using a variety of physical devices (hardware), information processing instructions (software), communications channels (networks), and stored data (data resources) since the dawn of civilization.

6. INFORMATION TECHNOLOGY • Information Technology (IT) refers to the resources used by an organization to manage information that needs to carry out its mission. • IT consists of: • Computer hardware • Software • Database and • Telecommunication.

7. DIFFERENCES BETWEEN INFORMATION SYSTEM AND INFORMATION TECHNOLOGY • An Information System is a tool that creates, processes, stores, and disseminates information to help managers make decisions. • Information Technologies on the other hand, are technologies that support the design and development of information system.

8. ACTIVITIES OF AN INFORMATION SYSTEM • Activities in an information system produce the information organization need for making decisions, controlling operations, analyzing problems, and creating new products and services. • Input of data resources • Processing of data into information • Output of information products • Storage of data resources • Control of system performance

10. Information system consists of five major resources: • People • Hardware • Software • Data, and • Networks • You should be able to recognize these five components at work in any type of information system you encounter in the real world. Figure outlines several examples of typical information system resources and products. INFORMATION SYSTEM RESOURCES

12. Managerial decisions are made within the structure of an organization. • According to Uma G.Gupta, “Organizational structure identifies the level of responsibility, authority, management, and scope of control of employees in the organization.” • There are two types of organizational structure: • Pyramid or Hierarchical structure. • Task-based structure. INFORMATION SYSTEM AND ORGANIZATIONAL STRUCTURE

13. Pyramid or Hierarchical Structure • One of the most popular organizational structures is the traditional pyramid, or hierarchical, structure. • According to Gupta, “The pyramid structure is an organizational hierarchy with the chief executive officer (CEO) at the top and non-managerial employees (staff) at the bottom. Middle managers are somewhere between top management and non-managerial employees.” • The Pyramid Structure divides management into three layers: • Top level or Top management • Middle level or Middle management • Lower level or Lower management

14. Top Level or Top Management • “Top executive develop overall organizational goals, strategies, policies, and objectives through long-range strategic planning. They also monitor the strategic performance of the organization and its overall direction.”- James A. O’Brien • Middle Level or Middle Management  • “Middle managers develop short-and medium-range plans and budgets and specify the policies, procedures, and objectives for sub units of the organization. They also acquire and allocate resources and monitor the performance of organizational sub units, such as departments, divisions, and other work groups.” – James A. O’Brien

15. Lower Level or Lower Management • Lower-level managers are responsible for the day-to-day operations, activities, and transactions of an organization, which include inventory control, payroll, processing sales transactions, and keeping track of employee hours. • “Supervisory managers develop short-range planning devices such as production schedules. They direct the use of resources and the performance of tasks according to established procedures and within budgets and schedules established for the work groups of the organization.” James A. O’Brien

17. The Task-Based Structure • Another type of organizational structure is called task-based organization. • “A Structure in which a group of people required to accomplish a given task is brought together based on their skills rather than on their places in the organizational hierarchy.”-Gupta • A good example of a task-based team is one that is assembled to perform surgery. A group of medical specialist and physicians comes together to accomplish the task, regardless of their levels within the structure of the hospital.

18. CLASSIFICATIONS OF INFORMATION SYSTEM • Therefore, several types of information system can be classified conceptually as either operations or management support system. CLASSIFICATIONS OF INFORMATION SYSTEM

19. Accordingly, different types of information system are designed to meet the various information needs of managers. • Information system performs important operational and managerial support roles in business and other organizations. • Therefore, several types of information system can be classified conceptually as either operations or management support system. • Figure illustrates this classification of information system.

21. OPERATION SUPPORT SYSTEM • Information system has always been needed to process data generated by and used in business operations. Such operations support system (OSS) produces a variety of information products for internal and external use. • The role of a business firm’s operations support system is to - • Efficiently process business transactions • Control industrial process • Support office communications and productivity, and • Update corporate database

23. Transaction Processing System • A transaction processing system is a computerized system that performs, records and processes the daily routine internal and external transaction in an organization. • According to Laudon and Laudon, • “Transaction processing system is a computerized system that performs and records the daily routine transaction necessary to conduct the business; they serve the operational level of the organization.”

24. Example: McDonald’s, which sells a large number of hamburgers every day, orders raw materials from its suppliers. Each time the company places an order with a supplier, a transaction occurs and a transaction system records relevant information, such as the supplier’s name, address, and credit rating, the kind of quantity of items purchased, and the invoice amount. Transaction processing system processes these data and the result of such processing are used to update customer, inventory, and other organizational databases.

25. Process Control System • Operation support system makes routine decisions that control operational processes. For example, petroleum refineries and the assembly lines of automated factories use such system. They monitor a physical process, capture and process data detected by sensors, and make real time adjustments to a process.

26. Office Automation System • Office automation system (OAS) collects, process, store, and transmit information in the form of electronic office communications. These automated systems rely on text processing, telecommunications and other information system technologies to enhance office communications and productivity. - James O’Brien • For Example, a business may use word processing for office correspondence, electronic mail to send and receive electronic messages, desktop publishing to produce a company newsletter, and teleconferencing to hold electronic meeting

27. MANAGEMENT SUPPORT SYSTEM • When information system focuses on providing information and support for effective decision making by managers, they can be called management support system (MSS). • Conceptually, several major types of information system are needed to support a variety of managerial end user responsibilities: • Management Information system • Decision Support System • Executive Information system

28. Management Information system • Management Information system (MIS) is the most common form of management support system. They provide managerial end users with information products that support much of their day-to-day decision-making needs. • MIS provide a variety of reports and displays to management. Information products provided to managers include displays and reports that can be furnished • (1) on demand • (2) periodically, according to a predetermined schedule, or • (3) whenever exceptional conditions occur.

29. Decision Support System • Decision support system (DSS) is computerized system that provides managers with internal and external data and decision-making models that facilitate semi-structured decision-making. – Gupta • Decision support system is interactive, computer-based information system that uses decision models and specialized databases to assist the decision-making process of managerial end users. – O’Brien

30. Decision Support System

31. Executive Information system • Senior managers use a category of information system called executive information system (ESS) to make decision. • “Information system at the strategic level of an organization designed to address unstructured decision making through advanced graphics and communication.” –Laudon and Laudon • Top executives get the information they need from many sources, including letters, memos, periodicals, and reports produced manually as well as by computer system. Other sources of executive information are meetings, telephone calls, and social activities. Thus, much of a top executive’s information comes from non-computer sources

32. WHY ORGANIZATION NEED INFORMATION SYSTEM?

33. Meeting Global Challenges • Capturing Opportunities in the Marketplace • Supporting Corporate Strategy • Companies use three basic strategies to compete successfully in the marketplace: • They stay ahead of the competition by providing goods services at the lower price than their competitors. • They produce high specialized or unique goods and services that allow them to stand apart from their competitors. • They find a market niche and focus on meeting the needs of this special group. • Linking Departments whose Functions are Different • Enhancing Worker Productivity • Enhance Decision Making • Improve Team Collaboration • Create Business Partnership and Alliances • Enable Global Reach • Increasing the Quality of Goods and Services

34. Meeting Global Challenges • Through globalization can bring many benefits, such as increased profits and markets share, the challenges of running a global company are also significant. • If the company is to be successful, it must effectively coordinates and control products, people, and procedures around the world. • This requires a great deal of timely, accurate, and reliable information.

35. Capturing Opportunities in the Marketplace • Successful companies are those that can identify and take advantage of opportunities in the marketplace and can continue to do so over the long run. • These system have catapulted some companies to the top of their industries, leaving their competitors far behind.

36. Supporting Corporate Strategy • Companies use three basic strategies to compete successfully in the marketplace: • They stay ahead of the competition by providing goods services at the lower price than their competitors. • They produce high specialized or unique goods and services that allow them to stand apart from their competitors. • They find a market niche and focus on meeting the needs of this special group.

37. Linking Departments whose Functions are Different • Some years ago, departments or units with different functions in a business, such as accounting, finance, manufacturing, and human resources, were viewed as separate business entities. • Often the efforts of these departments were not coordinated; this resulted in inefficiencies and lost opportunities for the company. • Today, most companies treat these apparently different departments as parts of a cohesive unit whose members must work together to achieve the overall goals of the business. • This is not always an easy task, because the goals of some units may conflict with those of others. However, information system can bring different functioning units together by coordinating their tasks and functions.

38. Enhancing Worker Productivity • The pervasiveness of computers and information system in business has made them essential tools in many tasks, such as manufacturing the shop floor, evaluating the performance of employees, tracking customers, recording items, and generating the payroll. • Computers and information system can therefore have a significant impact on a company’s bottom line.

39. Enhance Decision Making • Managers make their decision based on the information available and the experience they have achieved over time. • If the information is well processed and well analyzed, it facilitates managers to make proper decisions. MIS, DSS, ESS supports managers to make enhanced decisions.

40. Improve Team Collaboration • Team working is characterized as a best business practice today. A team comprises more than two people who are responsible for similar work. • They may be geographically spread and need to exchange information. Networking, Internet and Groupware software facilitates the process of information sharing among group members.

41. Create Business Partnership and Alliances • No business in the world works standalone. They need to communicate and make transactions with suppliers, customers, banks, insurance companies etc. • Information system facilitates the process and help to make amity among different parties. • Electronic Data Interchange (EDI) transferred structured information such as invoice, orders between business organizations. Internet along with firewalls can also establish business-to-business transaction which is known as B2B e-commerce.

42. Enable Global Reach • We embraced globalization and our operating environment is a global economy. Because of the Internet we now have the ability to market our products and services in countries all over the world and develop partnerships and alliances with other businesses throughout the globe.

43. Increasing the Quality of Goods and Services • Quality is a leading concern for top and middle managers around the world, regardless of the products or services that their companies produce. • Total quality management (TQM) is one of the most popular and most widely used approaches for enhancing quality in an organization. • Quality-oriented efforts and decisions are highly information-intensive, so computers help a company achieve its quality goals by providing the right information to the right people at the right time. • An enterprise-wide effort is required to improve quality; this often involves coordinating the tasks and decisions of many departments and units, sometimes located all over the world.

44. “Deskilling” of Workers Many industries, such as the automobile, defense, and insurance industries, have gone through periods of massive layoffs because of intense automation efforts. POTENTIAL RISKS OF INFORMATION SYSTEM

45. Information Overload excessive amounts of information can overwhelm managers who must digest it and use it to make decisions, a phenomenon called information overload. • Employee Mistrust When organizations introduce information system, employees sometimes fear that computers will eventually replace them.

46. Increased Competitive Pressure A few years ago, when computers were expensive, many companies (small business in particular) that could not afford to invest in these machines found themselves slowly and steadily being pushed out of the marketplace by large companies that invested heavily in computers and information system • Disenchantment ( Dissatisfaction )with Information System • In recent years, the CEO of many corporations has become disappointed with computers and information system because of poor returns from investments in this system.

47. Challenges in Developing Information System Although there are many successful information system, building these system is one of the most difficult and challenging tasks facing IS personnel. • POTENTIAL RISKS OF INFORMATION SYSTEM • Security Breaches When companies introduce new and sophisticated technologies, they must also find new ways to protect these assets from theft, pilferage, and security breaches.

48. Questions?