Definition of System:

System may be defined as a group of two or more interrelated components or sub-systems

which serve a common purpose.
Multiple Components: Kite and String
Relatedness: Cricket Ball and a volleyball
Each individual component of a system has its own goals but together these parts work in
harmony.
Education System, University System, teaching system, examination system, admission
system.

Types of System:
Physical and Abstract Systems: Computer Centre, Software
Deterministic and Probabilistic Systems: Computer System, Admission System
Open and Closed System: Open system needs to receive feedback, subsystems are always
open systems

INFORMATION:
Information is data that have been organized so that they have meaningful value to the
recipient.
Data……….Processing…………Information
Mat Score (Data) Percentile (Information)

Characteristics of Information:
Relevance
Timeliness
Accuracy
Completeness
Summarization
Reliability
Validity: do you like new product
Consistency: consistent base, factory 12 months production but different shifts
Age: should not be old
Impartiality: if the data is collected with a perceived view. Tv popularity, timing of sample
collected
Cost Benefit Analysis: benefits of info and cost in collection
Frequency: daily sales, or monthly sales, or yearly sales (seasonal changes not appear in
yearly sales)
NEED OF AN EFFICIENT INFORMATION SYSTEM:
Impact on organizations functions
Create a database and knowledge base
Bring clarity in communication (data dictionary)
Improving administration of business
High degree of professionalism
Help in directing the organization
Impact on efficiency of managers
Create an information based work culture
Improves quality of decisions (dss)

BUSINESS INFORMATION SYSTEMS: (BIS)

Business information systems are sets of inter-related procedures in a business enterprise to
generate and disseminate desired information.

BASIC COMPONENTS OF BIS

Hardware
Software
Data
Procedures
People

CATEGORIES OF BIS:
A) Shared BIS
1) TPS
2) MIS
3) DSS
4) EIS (Executive Information System)
5) ES (Expert Systems)
6) OAS (Office Automation System)
B) Personal BIS

TRANSACTION PROCESSING SYSTEMS:

TPS process day-to-day transactions of an organization to carry on its business operations.
TPS support the monitoring, collection, storage, Processing and dissemination of the
organization’s basic business transactions.
Financial statements are made, wages are paid to employees, production reports are
prepared.
Repetitive activities like customer orders processing
One transaction may generate additional transactions e.g. purchase order affects stock
MANAGEMENT INFORMATION SYSTEMS
MIS uses information contained in TPS and process them by generating summary reports
of information for managers to plan and control operation. These are mainly information
reporting systems.
Also called Operations Support Systems.
Needs of Low to Middle Level Management.
Contains information such as budgeted figures, previous year figures, year to datefigures,
variances etc.
Info to study the actual performance against the planned performance.

DECISION SUPPORT SYSTEMS:

Support the process of decision making. Use computers to facilitate the decision making
process of unstructured decisions.
Used by Middle level managers
Use information from multiple sources in an organization which is presented in a
summarized form such as graphs and charts to assist management to take strategic
decisions.
May be defines as what-if approach.
MIS is a subset of DSS.

EXECUTIVE INFORMATION SYSTEMS:

Lay more emphasis on summary info, integration of external and internal info, exception
reporting technique and establish link with the basic operations of the enterprise.
Use by top level managers
Installed to reduce load on executives
Help in making the decision process efficient and effective.
What-if analysis
Reports in standard formats often involving graphs
Act as electronic briefing systems
Basically computer based query systems.

EXPERT SYSTEMS:
Aim at formalizing expertise an make it available for repetitive type of business decisions.
Use artificial intelligence tools to generate knowledge out of information, existing theories,
belief and experience of managers.
Help human experts perform their job more effectively and replicate the expertise at
various locations.
These have been developed for the purpose of passing expertise from those with the
knowledge to those who need the knowledge in a convenient and easily accessible manner.
Designed to replace functions performed by human experts.

OFFICE AUTOMATION SYSTEMS:

Integration of computer, telecom and office equipment technologies to improve the
execution of business functions through increasing the productivity, effectiveness and
working conditions of office support staff.
OAS Combine various technologies to reduce the manual labour required in operating and
efficient office environment.

BIS AND THEIR APPLICATION AT DIFFERENT LEVELS OF MGT.

Top level management: EIS, DSS, ES, OAS
Middle level management: DSS, MIS, ES, OAS
Lower level management: MIS, TPS, ES, OAS

EIS
Top DSS
MIS
TPS
Middle

Lower

Expert System
Office Automation
Sys

Expert Systems
Office Automation Systems
 Transaction Processing Systems
Introduction
n TPS processes transactions and produces reports e.g. financial statements are made,
wages are paid to employees, production reports are prepared.
n TPS supports the monitoring, collection, storage, processing and dissemination of
the organization’s basic business transactions.
n Transaction processing systems are those business systems which process day-to-
day transactions of an organization to carryout its business operations. They are also
called Operations Support Systems.

List of Business Transactions:

n Manufacturing : Production reports, Quality-control reports
n Inventory Management : Consumption of material, Inventory levels
n Accounting & Finance : Financial statements, Accounts of Expense, Tax Records
n Purchasing : Purchase orders, Accounts payable, Receipt of material
n Sales : Sales records, Invoices and billing
n Accounts Receivable : Sales returns, Dispatch of goods
n Payroll : Attendance record, Pay & deductions

Objectives of TPS:
n Efficient and effective operation of the organization.
n Timely documents and reports
n Increases the competitive advantage of organization.
n Provides necessary data for DSS
n Ensures accuracy and integrity of data
n Safeguards assets and security of info.
n Provides framework for analyzing an organization’s activities

Transaction Processing Cycle:

n Data Entry
n Transaction processing
n File and database updating
n Report and document preparation
n Inquiry processing

Transaction Processing Cycle:

n Transaction taking place in different organizations can be grouped according to four
common cycles of business activity.
a) Revenue Cycle
b) Expenditure Cycle
c) Production Cycle
d) Finance Cycle
 Transaction Processing Cycle

Billing

Revenue Cycle : This Order

Delivery
involves accounting Cash/
transactions resulting Credit
from economic events
that produce revenue for
the accounting entry.

Order
Entry Customer

Transaction Processing Cycle

Voucher
System

Expenditure Cycle : Receivin

This involves g
accounting transactions System Cash
caused by the economic Disbursin
g
events necessary to
acquire material and
supplies for the
accounting entity.
Purchasin
g Supplies
System
Transaction Processing Cycle:
n Production Cycle:
Production cycle involves accounting transactions related to
conversion of purchased inventory into finished products. Materials, labor and overhead are
consumed in the production process

Transaction Processing Cycle

Finance Cycle :
This involves
accounting transactions Journal
Entry Property
that record the System
acquisition of capital
from owners and
creditors, and the use of
that capital to acquire
assets necessary for
generating funds and
reporting to owners and Financial
Sources Reporting
creditors on how it is Of Capital
used.

Components of TPS:
1 Input : The input function accepts data from outside the system so that the data can be
processed in the system.
As data is entered, a program must check it for errors which is called data validation
like:
a) Missing data
b) Valid size for item: too few characters
c) Class or composition error e.g. numeric or date
d) Invalid value e.g. negative marks
e) Range or reasonableness test : marks out of 100
f) Comparison with stored data : payment made compared with payment
due.
 2 Storage: Data in TPS is stored in data files and databases in the form of master data
and transaction data e.g. Inventory file.
3 Processing: Processing converts data into information. Processing can be Batch
processing e.g. payroll processing, customer order processing and online processing
e.g. railway booking system.

Characteristics Batch Processing Online

Processing
Processing Periodically As soon as
generated
File Update When batch is When
processed transaction
processed
Response Several hours or A few seconds
Time days

4 Outputs :
a) Updated master data
b) Operational results e.g. salary cheques
c) Operational and Summary : detailed report and summary reports, exception
reports (persons exceeding acceptable amt of overtime)
Action Reports: authorizes action e.g. salary cheques authorize banks
Information Reports: customer invoices
Turnaround Reports: combine action reports and information reports

5 Backup and Recovery Procedures: backup of stored data and its recovery.
6 Coding Schemes in TPS :
a) Mnemonic Codes: div for division
b) Sequence codes
c) Block codes: id codes, data and error checking codes
g) Group Codes: master ledger

Controlling TPS:
n To ensure completeness of data processing and to minimize the chance of error.
n Control Totals : enter bill total and all items
n Audit Trails : Trial balance
 MIS
Management Info System:
• The term MIS refers to the data, equipment and computer programs that are used to
develop info for managerial use.
• The systems focus primarily on the info needs of low to middle level managers.

Features of MIS:
• Summary Information :
• Operational control and efficiency :
o Budgeted figures
o Previous years’ figures
o Year to date figures
o Variances
• Focus on internal information
• MIS is useful to structured decisions
• Input mainly comes from TPS

Concepts of MIS:
n Management : Management is an art of getting things done through others to
achieve certain objectives of the organization.
• Planning : Planning involves future course of action in respect to :
• What is to be done
• When it is to be done
• Who has to do it
• How it is to be done
• Where it is to be done
• Why is it to be done

Planning:
n Planning process involves the following steps
• Setting long term goals of organization
• Setting time period for the plan
• Identifying alternative courses of action available
• Evaluation of alternative courses of action
• Selecting the best course of action
• Formulating the derivative plans

External Information:
n Information requirements regarding external and internal environment
• External Information:-
• Government policies
• Economic trends
• Technological changes
 • Availability and cost of various resources
• Competitor’s activities
• Customer reaction

Planning:
n Internal Information:-
• Sales Forecasts
• Financial resources and plans
• Availability of resources
• Capacity utilization pattern
• Personnel Utilization pattern
• Budget allocation and utilization

Organizing:
n Process of organizing involves following steps
• Analysis of activities to be performed for plan
• Dividing the activities into convenient tasks
• Allocating sub-tasks to people
• Delegation of authority
n Organizing relates to people tasks and technology
n Organizing Chart is graphical representation

Organizing
n Information required for organizing includes
• Future plans of action
• Budgets
• Orders
• Specifications
• Instructions

Staffing:
n Staffing: Putting the right person at the right job.
n Staffing involves following steps
• Defining the requirements
• Selecting suitable persons for these job positions
• Training and developing the selected staff
• Organizing is job oriented and staffing is worker oriented

Directing:
n Directing involves guiding, motivation and leading the people
n Directing involves the following steps to achieve the objectives of the organization:
• Communication
• Motivation
• Leadership

Controlling:
 n Controlling involves following steps:
• Fixing standards for performance
• Measuring the actual performance
• Observing the deviations between actual and standard performance
• Taking corrective actions
n Information system plays a vital role in control process
• Measuring the actual performance
• Identifying the deviation between actual and stdrd
• Analyzing the causes of deviation

Information:
n Information is knowledge derived from facts
n System: Collection of related components that interact with each other to perform a
task in order to achieve a common objective. A computer information system
consists of hardware, software, data, procedures, people and communication links.
n MIS supports management activity

MIS:
n Definition : The MIS refers to the data, equipment and computer programs that are
used to develop information for managerial use

Characteristics of effective MIS:

n Flexible : Alternative ways of processing data
n Versatile : Capable of catering to the information needs of managers who can differ
in their style of decision making and analytical skills and computational ability
n Analytical: Rigorous analysis of data multiple quantitative models.
n Communication : Better interpersonal communication
n Integrated: Without integrating processes, individual applications may be
inconsistent and incompatible.
n Management Oriented

Prerequisites of Effective MIS:

n Database : Same data an be viewed by different individuals in different ways as per
their requirement
n MIS Professional : MIS Professional requires knowledge of organizational
functions such as marketing, finance, manufacturing, accounting, management and
computers
n Support of Top Management : Full support of top management
n Control and Maintenance Procedures: Checks to ensure that system is being
followed.
n Periodic Evaluation.

Constraints in Operating an MIS:

n Rational person
 n Work vacuum is created ( when all automated )
n Sense of being neglected
n Fear of challenge and exposure (for middle and top level management)
n Non availability of MIS experts

Advantages of Computers in MIS:

n Better decision making (quick reporting)
n Data Accessing from Remote locations : Distributed Data processing
n Data Storage : data storage and processing at a very high speed
n Fast Computations : matrix inversion
n Data security : read only, update and delete rights
n Data confidentiality :
n Easy access using non-procedural languages
n Flexibility : transfer of data
n User friendly : Railway touch system

Limitations of MIS:
n Conceived as data processing and not info processing
n Insufficient checks and controls in MIS
n MIS is developed without streamlining TPS
n Lack of training would make MIS ineffective
n Cannot provide tailor-made Info packages
n Frequent changes in top mgt. reduces effectiveness
n Not a substitute for effective management
n Incomplete update of database
n Obtaining acceptance and support is a problem
n Slow in responding to dynamics of market

Factors affecting Info requirements:

n Nature of business functions or activities
• Marketing functions e.g. sales
• Finance function
• Production function
• Human resources management function
• Information function
n Type of decision making
• Structured decisions : preplanned or pre specified or programmable e.g.
inventory order
• Unstructured decisions : not pre specified, occur with less frequency, taken
by precedents or experience or predetermined guidelines

Factors affecting Info requirements:

 n Levels of Management
• Top level (Strategic Planning) : define the goals, policies and general
guidelines for organization. Directing business, market strategies, product-
mix. Not periodic. Their info requirements are
• Outlook of the economy
• Current and prospective political environment
• Prospects of industry
• Capabilities of competitors
• Alternative strategies
• Resource requirement for alternative strategies

Factors affecting Info requirements:

n Supervisory Level (Operational planning) :
• short term decisions for current operations
• programmable decisions
• primarily internal data generated from transactions
• sequence of processing is significant e.g. additions to inventory are
processed before withdrawal

Sources of Info and Levels of Management:

Extern
Top al

Middle
Sources of Info and Levels Of Management :

Lower Internal

n Degree of Summarization and Levels Of Management:

 Summar
Top y

Degree of Summarization
Middle and Levels Of
Management:
Lower Detailed

Strategi
Top c

Middle
Type of Information and Levels Of Management:
Operati
Lower ona
l
 EIS
Top DSS
MIS
TPS
Middle

Lower

Expert System
Office Automation
Sys

Organization structure and Info Needs:

CHARACTERISTIC TOP MIDDLE LOWER

Type of Info External Internal Internal

Activity Scope Very wide Functional Well defined
Complexity High Less No
Planning Heavy Moderate Minimum
Attn on Control Moderate Heavy Heavy
Time Frame One to five yr Up to one year Day-to-day
Nature of Activity Unstructured Moderately Highly
Structured Structured
Job Measuring Difficult Less difficult Easy
Organization structure and Info Needs
CHARACTERISTIC TOP MIDDLE LOWER

Activity Plan, policies Implementing End Product

Mental Level Creative Reasonable Efficient

No. of people Few Moderate Many

Aggregation Aggregate Moderate Detailed

Time Horizon Future Moderate Historic

Accuracy Low Moderate High

Usage Infrequent Moderate Frequent

Inputs to MIS:
n TPS :
• Payroll processing
• Sales and order processing
• Accounts payable and receivable
• Inventory management
• Material purchases, receiving etc
n Internal Data from Databases : e.g. expenses on sales promotion
n Ad hoc requests for information : if product is not selling, then getting area wise
sales

Output of MIS:
n Summary reports
n Exception reports : stock below minimum level
n Scheduled reports : daily sales report, debtors outstanding, profit and loss a/c,
balance sheet
n Ad hoc report: information in response to unplanned information requests.
n Drill down reports
• Repairs to building
• Repairs to machinery
• Repairs to air conditioning
• Repairs to office equipment

Four Major Phases of Decision Making:

a) Define the problem: Environment is searched for conditions calling for decision.
b) Identification of various feasible solutions: The generation of various possible
course of actions.
c) Choice of best solution among alternative: A choice is made of an optimal
alternative. The following techniques of choosing.
1) System of Equations
2) Linear programming
3) Integer programming
4) Dynamic programming
5) Queuing models
6) Inventory models
7) Capital budgeting analysis
8) Break-even analysis.
d) Implementation of chosen action: Communication of decision to the subordinates to
gain their acceptance and getting their support for putting the decision into action.
The result of the decision is monitored. Analysis is made between objectives and
actual results and deviation, if any, is analyzed flow of activities but at any stage,
there may be return to a previous stage.

Defining
Problem

Identification
of feasible
alternatives

Choice of the
best alternative

Implementatio
n of chosen
solution

Classification of Decision:
 a) Watch television rather than sleeping.
b) Purchase DVD instead of CD player.
c) Manufacture product A in your factory instead of product B.

Decision can be classified into following categories:

1) Programmed or Structured decision:
a) Programmed decision is inventory re-order formulas and rules for granting
credit.

2) Unprogrammed or unstructured decision:

a) The decision is too infrequent to justify the organization cost of
preparing a decision procedure.
b) The decision process is not understood well enough.
c) The decision is too changeable to allow a stable pre-established decision
procedure.

Most unprogrammed decision are made by upper level Managers.

3) Strategic Decisions:
a) Strategic planning is the job of top level management.
b) Strategic planning deals with long range consideration.
c) Choice of business, direction, market strategy, product mix, etc.

4) Tactical decision:
a) Tactical decision relate to the implementation of strategic decisions. It
includes acquisition and organization of the resources, structuring of work and
recruitment and training of staff.
b) Short and medium term trends.

5) Operational decisions:
a) Short-term decision relating to pricing, production levels.
b) The main objective of operational decision is to ensure effective and
efficient use of existing facilities and resources to carry out activities with in budget
constraints.

6) Group decision :
Decisions made by more than one member are called group decision
The advantages of group decision are:-
1) Implementation of decision becomes easy.
2) Reduce the amount of communication necessary to implement
the decision.
3) Reduce the amount of co-ordination.
 4) More solution are discussed in group situation.
5) Involve many individuals, mare data and information
The disadvantages of group decision are:-
1) Slower in arriving at solutions
2) Indecisive in the sense
3) Decisions by compromising
4) Highest-level individual can influence the group.
5) Off factions and trying to win points.
Groups are best used in the following cases:-
1) Accuracy is more important than speed
2) The group is cohesive and works
3) Co-ordinates facilitates
4) Requires a number of skills and experiences
Decision –making can be improved by:-
a) Higher – status individuals do not dominate the group.
b) Criticism should be accepted in a fruitful way.
c) Coaching the group to avoid personalized conflicts.
d) Making the group uneven in number ( preferably five or
seven )
e) Including specialist from various areas.
f) Explaining clearly the objectives.

Steps in the Process of the Decision –Making:

a) Recognition of the problem - Problem finding is a matter of identifying
variance from objective and defining their causes.
1) Organization’s performance decline
2) Results of the organization do not meet the planned objectives.
3) Results of the organization are not comparable those of other
similar organizations.

b) Search for information and alternatives- Issue of what can be done about
failure to meet profit objectives may be due to higher costs or due to lower
selling price or booth.
1) Reduce raw material costs through better purchasing.
2) Producing own raw material.
3) Efficient machinery.
4) Hiring cheaper labour
.
c) Choice: The decision maker must chose one, risk and benefits that
could flow from each alternative.

d) Implementation: The decision maker communicates the decision made

organization support for it and assigns resources top implement it. Feedback
systems are installed to ensure that decision is being implemented.

Decision-Making through MIS

 Management Information System may be utilized in the decision-making
process because information is the essential ingredient of decision making. Through MIS,
information can be provide to the decision-maker to improve the decision making ability .
By far the greatest number of business decisions is repetitive and routine. The decision of
the organization may be programmed through the proper design of MIS. The computer
automatically makes the decision in following steps:-
a) Analyze the problem and design a decision rule.
b) Program the decision rule.
c) Design the input and output of the computer information system.

Three stages of the decision- making process and the role MIS:-
a) Identifying the problem: Sales analysis report helps managers in
identifying the status of sales performances .
b) Identification of various feasible solution:
c) Choice of best solution among alternatives: Financial and marketing
ratio, calculation of net present value , internal rate of return, payback
period.

Functional Information Areas:

The functional of a typical business enterprise can be broadly classified into
the following categories:-
1) Production Function
2) Sales and Marketing Function
3) Finance Function
4) Human Resources Management Function
5) Information Function

Management Information
System

Accountin Manufacturin
Finance Marketing Human Resou
g g

- Order Processing - Forecasting - Price - Process Schedule

- Recruitment
- Inventory control - Funds Mana- - sales order - Material Management
- Selection
 - Accounts receivable -gement - Forecasting - Purchase
- Training
- Accounts Payable - Auditing - Billing - Shipping
- Development
- Payroll - Distribution - Plant and
Machinery - Payroll
- General Ledger - Product Promot- - Research and
Devel- - Evaluation
- Purchase - ion, etc. –opment, etc.
- Retirements, etc.
- Billing

Each of these function has an information system composed multiple sub-

systems functional areas in detail.

Finance and Accounting Information systems:

Accounting information systems collects all the data relevant to accounting
provides complete documentation and comprehensive information, and also provides a
basis for enterprises – wide control and Planning. Information provided by accounting
transaction processed is used primarily by marketing or other functional group and produce
financial statement such as balance sheet and profit and loss account. These systems also
produce forecast of future conditions such as projected financial statement and financial
budgets.
There are two types of accounting systems:-
a) These systems include transaction processing systems such as
order processing, inventory control, accounts receivable,
accounts payroll and general ledger systems.
b) Management accounting systems:- Cost accounting report,
projected financial statement, analytical report comparing actual
to forecasted performance.

The important accounting information systems are discussed below:-

1) Order processing: Processing of customer orders and producing
invoices and provides information to inventory control systems.
2) Inventory control: Inventory control systems help in minimizing
investment in inventory and thereby in reducing inventory
carrying cost.
3) Accounts receivable Systems: Record amounts owed by
customers and helps in controlling the outstanding and timely
collection.
4) Accounts Payable: Record purchase made from suppliers and
prepares cheques in payment.
5) Payroll: Receive and maintain data from employee time cards
and other works records. They produce salary cheques.
6) General Ledger: Produce trial balance, profit and loss account,
balance sheet and various income and expense statement,
financial ratio analysis, budgetary control, credit management,
aging analysis of debtors.
Financial Information System
The finance functions of a business is responsible for obtaining money
needed by the business and planning the use of that money from the sale of goods and
services, from investment made by the business and from banks and other institutions that
lend money to the business.

Data Inputs I S Output

Transaction data Forecast

Forecasting Data
Funds
Management Other Areas

Financial
Intelligence Data
Audit and
Control External
Environmen
Strategic Plans t

Source OF Financial Data

The Source of financial Data as above the diagram
a) Transaction Data: The Transactions of revenues and
expenses incurred from each functional area.
b) Forecasting Data: To compare the actual transition
with the anticipated as per the forecast.
c) Financial Intelligence Data: Banks, Government,
Stock market, etc.
d) Strategic Plans : The organization’s goal is to increase
profits by 30 percent

Output Of financial Information Systems

The Outputs of financial information systems:
a) Forecasting: Prepare immediate and long term
predictions of the activity of the organization for 10 or
more year.
 b) Fund Management: Determine the flow of funds into
and out of the organization. Long term funds may be
raised from various long-term sources like equity,
debenture, etc. Short-term funds may be raised from
banks, creditors, etc.
c) Audit and Control: Audit and control is an inspection
that determines whether things are working according
to the guidelines.

Financial Decisions
Financial decision relate to effective utilization of funds. Various financial
decisions are given below:-
a) Estimation of requirement of funds: A business must make a
financial forecast.
b) Capital structure Decision: A business must select on optimum
mix of different sources of capital.
c) Capital Budgeting Decision: Evaluating the profitability and
financial impact of proposed capital expenditure.
d) Dividend Decision: Distribute all profits or retain them or
distribute a portion.
e) Tax Management: Tax planning is done to reduce the outflow of
cash resources by way of tax.
f) Current Asset Management: Sufficient funds are not invested in
current assets, the organization may become illiquid, idle current
assets do not earn any profit.

Marketing Information System

 Transaction Data Product Plan

Marketing Place Plan

Research data
Other Areas
Price Plan
Marketing
Intelligence Data
Promotion Plan External
Environment
Strategic Plans Budget and
sales Forecast

Sources of Marketing Information:

The sources of marketing information are:-
a) Transaction Data: Reports on order, sales, prices,
inventory level, receivables, etc.
b) Marketing Research Data: Consumer related data that
can support marketing decision, personal interviews,
surveys, questionnaire, etc.
c) Marketing Intelligence Data: Information about
competitor’s strategy.
d) Strategic Plan: Types of products which the company
plans to supply to the market.

Output of marketing information System:

a) Plan and control the performances of specific
products, product lines, and brands.
b) Place Planning: How the product is distributed across
geographical area.
c) Price planning: Cost-based pricing and mark-up for
profit.
d) Promotion Planning: Advertising and Promotion
e) Budget and Sales Forecasting: Short-range for
forecasting and Long-range forecasting. Sales for
periods up to one yr and sales period for one yr or
more into the future.

Manufacture System
 Production data Product design

Inventory Data

Facility Design
Vendor Data Other Areas

Marketing Data
Production

Labour External
/Union/Engineering Environment
Data Quality Control and
Quality Assurance

Environment Data

Sources Of Manufacturing Data

a) Production Data: Data gathered and processed on
production.
b) Inventory Data: Inventories of raw Material, work-in-
process and finished goods.
c) Vendor Data: Maintained by Purchase department.
d) Marketing Data: Marketing specifies what is required.
e) Labour, Union, and Engineering Data: Awareness
About labour market, labour union and personal
performance.
f) External Environment Data: Knowledge of raw
material prices and Availability of labour.

Output of manufacturing Information System:

a) Product Design: Computer Aided Design (CAD) and Computer Aided
Engineering (CAE) are used in product design. It also used CAPP, MRP
and CAM may be used to help Manufacture products.
 b) Facility Design: It Includes plant location and Layout.
c) Production: Planning, directing and controlling of the material supply
.The task of production planning is accomplished through:-
1) Routing: Route over which each piece is to travel
2) Scheduling: When each operation in a production process is to be
carried out.

There are two basic types of production methods:

1) Job Shop Production: each order taken by the firm is considered
to be a job.
2) Process Production: Goods are produced at a mass scale for
general consumption.

Human Resources Information System:

Transaction Data Organizational

Resources Planning

Functional Plans Organizational Other

Management areas

External Data Payroll and External

Administration Environment

Sources of Human Resource Information System Data

a) Transactional Data: This data includes employee number, name,
qualification, experience, data of joining, etc
b) Functional Plans: Future planning for recruitment, job
assignment, etc is made.
c) External Data: The availability of personal, trends in the labour
force, competitor’s market offering to the employees,
Government and labour laws, etc.
Output of Human Resources Information System:
a) Organizational Resources Planning: It provides proper
acquisition and allocation of the resources of manpower to the
required areas of work.
b) Organizational Management: The train and develop the
employees of training and development needs of personals at all
levels. Development of suitable training programmes and
employees development programmes.
c) Payroll and Administration: Distribution of employees’ wages,
salaries, incentive payments and fringe benefits and
compensation.

Integration of Business Functions

The various business functions should be integrated to bring about
‘onenesses’ in the organizational activities. Each activity needs to be directed towards
achievement of common objectives laid down for the organization as a whole. The
information systems are becoming more and more multifunctional and are transgressing the
organizational boundaries of various business functions. Conceptual classifications of
information system are design to emphasize the many different roles of information
systems. In practice, these roles are integrated into composite or cross functional
information systems that provide a variety of functions. Thus, Most Information systems
are designed to produce information and support decision-making for various levels of
management and business function, as well as to do record keeping and transaction
processing. For example, sales order/order processing, which is an accounting information
system and sales analysis which is a marketing information system. However, these two are
typically integrated in a business.

ERP systems are designed for applications that encompass a large portion of the business.
They integrated many common applications into one system.
An Enterprise Resource Planning (ERP) system is an information
system which supports several areas of a business by combining a number of applications
with a single database that stores all the data used by the applications.
 DECISION SUPPORT SYSTEMS

INTRODUCTION:
Unstructured decisions have no pre-established decision procedure because:-
a) Such decisions are too infrequent to justify the organizational cost of preparing a
decision procedure.
b) The decision process is not understood well enough.
c) Decision process is too changeable to allow pre-established decision procedure.
Decision support systems use computers to facilitate the decision-making process of
unstructured decisions.
These system are not designed to replace managerial judgment but to support
and help managers to react quickly to changing needs and are used by managers for
generating tactical information and performing ‘what-if-analysis’ for the managers.
DSS uses information from multiple sources in an organization which is
presented in summarized forms such as graphs and charts to assist top management to take
strategic decision.

What Is A DSS
Decision support system may be defined as a “what-if” approach that uses an
information system to assist management in formulating policies and projecting the likely
consequences of decisions.
DSS results from adding external data sources, accounting and statistical models, and
interactive query capabilities.
Thus, DSS is an effective blend of human intelligence, information technology and
software which interact closely to solve complex problems.

Comparison between MIS and DSS.

MIS DSS

1) MIS focuses on structured tasks and routine decision
2) MIS places emphasis on data storage
3) In MIS, data is often accessed indirectly by managers
4) MIS puts reliance on computers expert
5) In MIS, access to data requires a wait for managers’ turn
6) In MIS, the manager does not completely understand the
nature of the decision
7) MIS places emphasis on efficiency of decision
8) MIS provides tactical information to top management
to take decisions
9) MIS are regular and recurring
1) DSS focuses on semi-structured tasks which require
managerial judgment
2) DSS places emphasis on data manipulation.
3) In DSS, data is accessed directly managers
4) DSS puts reliance on manager’s own direcr
5) In DSS, access to computer and data is direct
6) In DSS, manager knows the decision environment
7) DSS places emphasis on effectiveness of decision
8) DSS provides strategic information
9) The need for DSS cab be irregular
Comparison between EDP, MIS and DSS

Characteristics EDP MIS DOS

Data Volume Large Medium Low
Processing High Average Small
Type of processing Routine Unique to Unique to
Organization Individual user
Equipments conventional Interactive Humane
Mode of Process Batch On-line Real time
Input-output Card, print Terminal, Speech, touch
Devices mouse
Location of data Centralized Distributed individual
Symbolic operation None Medium Large
Application Program Query Menu
People Replace Retain little change
Management impact Lower Medium Higher
Man vs Machine Machine Co-operative Man Supreme
Supreme
Time frame Past Past / Present/
Present Future
Typical state Passive/ Reactive/ Active/
Reactive active creative
Identifies with Problem Solution Opportunity

Types of Decision Support Systems

a) Database – oriented DSS: - This data can be analyzed with the use of On-Line
Analytical Processing (OLAP) and Data mining.
Data mining refers to extracting of “mining” knowledge from
large amounts data. The following types of information can be obtained from data mining:-
1) Associations: - Correlation relationships among a large
set of data items. For example when, milks purchased,
bread is purchased 70 per cent of the time. Place milk and
bread within close proximity.
2) Sequence: - Sequence or time series analysis methods
relate events in time. Uniform are purchased by students
within one month of declaration of results 90 per cent of
the time.
3) Classification and prediction:- Insurance claims currently
under process are most likely fraudulent
4) Clustering: - Clustering is the process of grouping a set of
physical and abstract objects into classes of similar
objects from class on time.
On-line Analytical Processing (OLAP):- On-line Analytical Processing (OLAP) refers to
graphical software tools that provide complex analysis of data stored in a database”what
if”.
b) Model-oriented DSS – Simulation, Maximizing or optimizing scenarios.

DSS Goals/ Features and Application:- The features/goals of DSS may be termed as
follows:-
a) DSSs support unstructured and semi-structured decisions:-

Defining and Formulating

the Problem

Framing the problem into

DSS model

Obtaining results with the

use of model

Problem Reformulation

b) DSS should be flexible:- It should have Flexibility of use in various unexpected

decision situations.
c) DSSs emphasis is on small single models that are easily understood and
implemented. The decision support systems are usually built and operated by users
who may not be computer professionals.
Advantages of DSS
Following are the advantages of DSS:-
a) As DSS reduces the time and effort in collecting and analysis of data .
b) As modeling and forecasting is made easy DSS, managers get more insight into the
business processes.
c) As DSS makes it possible to explain to others the basis for arriving at a particular
conclusion.
d) DSS facilitates the quicker analysis of data for unstructured decision-making, which
improves the speed of response in unexpected decision-making situation.
e) DSS facilities quicker analysis of variances and expectations.
f) DSS facilities in-depth analysis of data.
g) DSS may be constructed to support one-time decisions.

The other advantages of DSS are:-

1) Cost Savings.
2) Improves managerial effectiveness.
3) Extensive range of support to management.
4) Support of individual/groups
5) Graphical display
6) Designed and run by managers, incorporated data and models.
7) Contains a database drawn from internal files / external environment.
8) Concerned a with small area of managerial activity or a small part of a large
problem.
9) It permits the managers to test the probable results of alternative solutions.
10) It specializes in easy to use software that utilizes natural languages.
11) It employs interactive processing that permits rapid response times.
12) Use and control rest with the user and not with the information management
department.
13) These are flexible and adaptable to changes in the external environment or in the
decision maker’s style.
14) They support and not replace the managerial judgment.
15) They improve the effectiveness of the decisions instead of efficiency with which the
decisions are made.

Limitations of DSS
a) DSSs cannot replace human decision-making talents such as creativity, imagination
or intuition.
b) DSSs are generally designed to be narrow in scope of application.
c) Language and command interfaces are not sophisticated enough to allow for natural
language processing.
d) The power of a DSS is limited by the computer system upon which it is running.
Components of a DSS
a) User – Most of the unstructured decision are made at the strategic or top
level of management. It is not necessary that user of DSS should have
through knowledge of computer.
b) Databases – A database is a collection of data that is organized in such a
way that it corresponds to the needs and structure of an organization.
c) DSS software – DSS software must be easy to operate for extracting
relevant information without much effort. Spreadsheet software such a
Lotus 1-2-3 and MS Excel provides such facilities.
d) Model base – Statistical Models, mean, median, mode, deviation, scatter
plot. Optimization models, forecasting models and sensitivity analysis
models are some of the common models which from a model base.
Optimization: Non – Linear programming
Sensitivity analysis models: Sensitivity analysis models study the impact of
discrete changes in parameters of optimal solution.

Database
Model base

DSS Software

user
The Tools of Decision Support Systems
Tools are the building blocks of the DSS, e.g., Electronic spread sheets, 4 GLS,
RDBMS, etc. Decision support tools may involve the following:
a) Material requirement planning (MRP) - MRP is a method for ordering and maintaining
material in stock.
b) Linear Programming
c) Queuing theory
d) Descriptive statistics
e) Correlation analysis
f) Variance analysis
g) Network analysis – Network analysis is a pictorial tool for identifying and sequencing
tasks.
h) Transportation problem
i) Maximum flow or distance
j) Dynamic Programming – Dynamic programming is a tool to ensure that appropriate
course of action and decision of top level management are being followed by managers
at operational level.
k) Regression analysis
l) Multi-dimensional scaling
m) Markov processes – Markov processes are tools used to determine global probabilities
associated with the occurrences of events

Architecture of Decision Support Systems:

Organize the data

Collected Financial
TPS Data MIS Forecasts
Data Base Data
Structure the
models
Financial
Reports
External Simulate
Data Model Base performance
Consisting of
forecasting,
evaluation and
Find the best Recommended
resources
allocation models Investments
alternative
Decision Support Systems In Accounting Systems:
a) Budgeting Models – Sale budget, production budget manpower budget, expense
budget, etc. The system is used to observe whether the performance of the
organization for a particular period is as per the budget. The use of spread sheet,
row totals and column totals, Bar charts, line charts, etc.
b) Cost Analysis model – Cost analysis is undertaken to control the costs and the value
of inventory. DSS models offer up-to-date cost information and tools for studying
the behaviors of various elements of cost. These models also offer leads for the
identifying opportunities for reduction of cost in the process of improving
profitability.
c) Break-even analysis model – This model is used for determining the volume of
business activity at which there is no profit or loss

Break-even point = Fixed cost / Revenue per unit – Variable cost per unit

d) Evaluation of Funds and Investment – Investment decision refers to the selection of

assets in which funds should be invested.
e) Cash and funds flow models for budgeting – DSS models help in estimating the
demand and availability of funds for each plan period.
Chapter – 6

Executive information Systems (E I S)

Executive are generally the managers at the top-level of the organizational hierarchy.
In any organization, executives perform the following activities:-
- Strategic planning: which means defining goals of the organization.
- Defining policies and general guidelines to achieve the defined goals.
- Make unstructured decisions.
The decision made by executives are mostly unstructured for which information
requirements are generally for processed and summarized data from a variety of sources.
For strategic planning, executives need considerable external data in aggregate from.
The characteristics of information required for strategic planning are:-
1) Information required is largely from external sources.
2) Scope of information required is very large, such as capabilities of collected of
competitors and their market share.
3) The information required for strategic planning cannot be collected on regular basis.
4) The information collected for strategic planning cannot be specified in advance.
5) The information is required in aggregate form.
6) The time horizon of information required if future.
7) Accuracy of information may not be very high. Low level of accuracy may serve
the purpose of strategic planning.
8) The information is infrequently used.
9) The Information required for strategic planning may be very complex and may
include many variables.
Executive information systems are those information systems that lay maore emphasis on
presentation of summary information, integration of external and information, exception
reporting techniques and establish link with the basic operations of the enterprises. These
information systems are used by top-level managers. Executive information systems help
in:
a) Identifying options.
b) Evaluation of alternative courses of action
c) Making informed choices regarding business operations.
d) Consolidation and summarizing adapt collected from both external and internal
sources.

Executive information systems are installed to reduce the information overload on

executives. The executive information systems also provide drill-down facilities to the
executive. With this facility, the executives may see the details behind exceptions, if
necessary. With this, the executive may analyze the reasons for exceptions, deviation, etc.
For example, in a five star hotel chain executive may be supplied room occupancy rate for
on day-to-day basis. In case the executives notice a low occupancy rate for a certain hotel,
they may question the general manager of that hotel to submit reasons for low occupancy.

EIS enables presenting of reports in standard formats and this often involves graphics.
EISs extend and support the capabilities of executives, permitting them to make sense of
their environments. EISs are management information systems tailored to the strategic
information needs of top management. Top executive get the information they need from
many sources including letters, memos, periodicals and report produced manually as well
as by computer systems. 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. EISs combine many of the features of MIS and DSS but their focus is on
meeting the strategic information needs of top management. EIS can provide following
types of access to the executive:-
a) Status access – Ready access to an automated set of reports that give the
current status of various operation or projects.
b) Personal analysis – Ability to look through certain data files and manipulate
the figures, reporting them in various ways.
c) Model-based analysis – Ability to invoke specific calculation models with
ready access to the required data. This may involve making simple
projections, or adding data from external sources.

An executive information system may be considered as a specialized type of decision

support systems in which there is :-
1) Limited and relatively simple use
2) Very high priority when used
3) Considerable backup organizational support
4) Constantly changing requirements.

It can be concluded that:

EISs are not normally used to arrive t decision, but are used simply to review information
in different formats and structures to aid in the decision-making process.

Feature of Executive Information System:

a) Executive information systems are tailored to individual executive users.
b) Executive information systems extract, filter, compress and track critical data.
c) They provide on-line status access, trend analysis, exception reporting and ‘drill-
down” capabilities. This allows executive to reach information in further detail.
d) They access and integrated a board range of internal and external data.
e) They are user-friendly and require minimal or no training to use.
f) These are used directly by executives without intermediaries.
g) They are present graphical, tabular, and/or textual information.
h) EISs contain statistical analysis tools.
i) EISs have the ability to solve business problems.
Distinction between EIS and ESS
Though the terms EIS and ESS are used interchangeably, yet they differ in the sense that:
1) ESSs are EIS with additional capabilities.
2) ESSs support electronic communications ( e.g. E-mail conferencing and word
processing)
3) ESSs Provide data analysis capabilities ( e.g. spread sheets, query languages and
DSSs)
4) ESSs include personal productivity tools ( e.g. electronic calendars, tickler files and
rolodex).

Activities Supported by EIS

Executive information systems support the following activities:-
a) Decision-making at executive level
b) Strategic planning including long-range planning.
c) Monitoring of internal and external events and resources.
d) Crisis management
e) Staffing and labour relations.

Benefits of Executive Information Systems

Following are the benefits of EIS:
1) Executive information systems help the executives in identifying options,
evaluation of alternative course of action and in making informed choices.
2) Executive information systems provide data in a very aggregate form. Moreover,
executives are also provided with an option to drill-down and see the details, if
necessary.
3) Executive information systems provide fast access to up-to-date information which
is concise.
4) Executive information systems provide exception reports.
5) Executive information systems can provide personalized information and analysis.
6) Executive information systems enable presentation of information in standard
formats
7) Executive information systems are very flexible in use.
8) Executive information systems offer an interactive and user-friendly operating
environment.
9) Executive information systems extend and support the capabilities of executives
and permit them to make sense of their environment.
10) Executive information systems provide timely and concise information about the
performance of the organization. This helps the executives in grasping business
conditions very quickly.
11) Executive information systems extend the life of information. The information
delivered on apiece of paper. Information stored in electronic form can be retrieved
on demand.
Limitations of Executive Information Systems
Following are limitations of EIS:
 1) As the scope of information required by executives is very wide, it may not
always be economically feasible to collect all such information. Moreover,
much of the data required for strategic planning cannot be collected on regular
basis, and much of it cannot be specified in advance.
2) It is very difficult and very often almost impossible to make the cost benefit
analysis of using an executive information system. Thus it becomes very
difficult to measure the performances of these systems.
3) As executive information systems use much of data generated from external
sources, these systems are expensive.

Comparison between Decision Support Systems and Executive Information System

Feature Decision support Executive Information

System System

Expertise required Detailed training for problem Brief training for specific
Solving required by analytical use required by executive
And technical managers

Communication with Simplified processes, which can simplified processes

the computer have familiar problem complexity for rapid responses
but not language complexity

Data management large quantities of data is extracted Specified or summarized

Software and investigated from different data is extracted and
Internal and external sources reviewed from defined
Sources

Business planning Tabulation and statistical programs Tabulation, summarization

Software with consolidation and summari- and consolidation in
-zation capabilities, operations simplified formats
research methods

Algorithm Capability Mathematical, statistics, forecasting Simplified statistics and

, time series analysis, and other forecasting
techniques

Communications Ability to collect data from diverse Ability to collect data

Sources and transmit to others from specified files and
Some external sources

Personal Computer Micro-mainframe connections for Connection to extract

Usage large consolidations and maintena- database, some external
-nce of database, plus local area sources and some
network interaction subordinate equipment.

Output Is produced in tabular or graphic Is produced in tabular or graphic

 from for presentation from for review

Components of Executive Information System

An executive information system consists of following three major components:-
a) Database management system
b) Inquiry and analysis functions: Inquiry and analysis functions are a variety of
programmed subroutines and arithmetic and statistical packages that are used for
analyzing and manipulating the information organized in the database.
c) Graphical and report-writing functions - Graphical and report-writing functions
provide the capability to view the data from several angles.
Chapter 7

Knowledge-Based System
Knowledge-based systems store and utilize effectively large amount of knowledge.
Knowledge-based systems are a sub-set of artificial intelligence.
Knowledge is the information about a specific domain needed by a computer
program to enable it to exhibit intelligent behavior with regard to a specific problem. The
most popular form of a knowledge-based system is an expert system.

Expert systems
The expert system aim at formalizing expertise and make it available for repetitive type of
business decision.
The expert system have been developed for the purpose of passing expertise
from those with the knowledge to those who need the knowledge in a convenient and easily
accessed manner. By asking questions and by comparing the user’s answers with the
information stored in extensive expert knowledge database, expert system provide
intelligent, knowledgeable answers. Expert systems provide information to managers in the
form of expert advice.
Expert system is a subject of artificial intelligence. Expert system can be
described as programs that help the computer to make decision in a similar way as an
expert in specific domain, a particular subject area, of interest. Expert System are used in
making unstructured decisions.

Applications Area of Expert System

Expert systems can be used in several areas of an organization, such as:-
Accounting and Finance
- In selecting forecasting models.
- In providing tax advice
- In credit authorization decisions.
Marketing
- In assisting with marketing times.
- In establishing sales quotas
- In responding to customer’s inquiries.
- In determining rebate policies.
Manufacturing
- In determining whether process is running correctly.
- In analyzing quality and providing corrective actions.
- In product designing and layout.
- In maintaining facilities
Others
- In assessing project proposals.
- In education trainees.
- In recommending acquisition strategies.
 - In evaluation performance.
- Inferring situating descriptions from observations.
- Inferring likely consequences of given situations.
- Inferring system malfunctions for observations.
- Configuring objects under constraints
- Developing plans to achieve goals.
- Prescribing remedies for malfunctioning.
- Executing a plan to administer a prescribed remedy, etc.

Advantage of Expert Systems

Expert systems provide various advantages. The major advantage of using expert-systems
are:-
a) Planning
b) Decision-making
c) Monitoring
d) Diagnosis
e) Training
f) Extensive use of expertise
g) Timely response
h) Consistent solutions
i) Reliability
j) Increase the capabilities of other computerized systems
k) Expert systems have an ability to work to work with incomplete or uncertain
information

Disadvantages of Expert systems

In Spite of various advantages, expert systems have some drawbacks also. These are:-
- Expert System are not generalized experts or problem solvers.
- Expert Systems may take a longer time in solving the problem as compared
to experts.
- Some problems may be too tough to be solved by an Expert System.
- It is always not possible to extract knowledge from an expert.
- Expert Systems take longer development time and are expensive.
- It is very difficult to make the cost-benefit analysis of using an Expert
System.
- Knowledge to be captured may not always be readily available.
- The experts may have different approaches to a given situation.
- Means are not available to check whether conclusions of expert system are
reasonable or correct.
 Input Output
Question and Recommendations
Processing
answer of user
Matching of user
questions and answers to
information in knowledge
base
Determining sequence of
questions presented to the
user
Making a conclusion

Storage
Knowledge- base

Components of Expert System

Components of an expert system can be classified into following categories:-
a) User interface – User interface is used by the users to input questions and answers.
b) Knowledge-base – Knowledge base is structured storage of specific facts about the
expert area and the rules that will be used by an expert system to make decision
based on those facts.
c) Inference Engine - Processing in an expert system consists of matching facts and
rules, determining the sequence of question presented to the user and making a
conclusion.
Inference engine matches the problem symptoms with the
knowledge in the knowledge-base and generates recommendations. Thus,
inference engine analyzes rules in the knowledge base to draw conclusions.
Rules Contained In Knowledge Base
Rule 1: If the applicant has required education, then hire applicant.
Rule 2: If the applicant has required experience, then hire applicant .
Rule 3: If applicant has degree in commerce, then applicant has required education.
Rule 4: If applicant has degree in non-commerce field and has an MBA, then applicant has
required education.
Rule 5: If applicant has two or more years’ experience in accounts job then applicant has
required experience.
Rule 6: If applicant has five or more years experience in non-accounts job then applicant
has required experience.

The user enters the applicant’s details from the application such as applicant’s name,
education, experience, etc. The inference engine uses the rules contained in knowledge
base to evaluate the data entered by the user.
Chapter 8
OFFICE AUTOATION SYSTEM AND VIRTUAL OFFICE

Office Automation System

The main objective of office automation system is the centrality, consistency,
communication and control of the information.
Office automation is the integration of computer, telecommunications
and office equipment technologies to improve the execution of business functions through
increasing the productivity, effectiveness, and working conditions of office support staff.
Office automation system are concerned with handling, controlling and
distribution of the information of the organization .office automation refers to the use of
computer and communication technology to perform various office functions. The various
activities in an office can be classified into two categories:-
1) Activities performed by clerical staff ( typists, secretaries, clerk etc.) e.g.
typing, mailing, retrieving documents, scheduling of meetings and
conferences, etc.
2) Activities performed by managers e.g., controlling performance; production
of information such as report, memos or messages and conferencing.

Office automation facilitates both types of activities.

Office automation tools consist of devices such as fact photocopiers, phones and computer-
based office automation systems. Some of these applications are discussed below:-
1) Word Processing: Word processing refers to preparation of documents such as
letters, reports, memos, etc., with the assistance of a computer.
2) Electronic filling: Electronic filling facilities the filling of incoming and outgoing
mail and documents on a magnetic media.
3) Electronic mail: Electronic mail consists of following facilities:-
• Send messages electronically to other users with in the same organization.
• Automatic logging of copies.
• Retains messages for specified periods.
• Authenticates the messages with a signature.
• Notes time of dispatch.
• Provides unlimited ‘mail-boxes’.
• Sets up precedence and priorities.
• Provides a level of security and privacy.
4) Automating daily calendars
5) Groupware
6) Desktop publishing
7) Image processing.
8) Presentation graphics
9) Computer graphics
10) Voice processing
11) Facsimile
12) Teleconferencing
Advantages of Office automation systems
The advantages of office automation system are the following:
1) They provide more time to managers to concentrate on their basic job.
2) They improve the quality of work in terms of content, thoroughness, timeliness and
accuracy.
3) They speed up specific functions and thereby increase the quantity of clerical
output.
4) They use electronics to absorb the normal growth of functions.
5) They reduce the time spent on input capture and creation.
6) They help in eliminating routine, boring, or less desirable tasks.
7) They help in reducing administrative detail overhead.
8) They help in reducing the traveling expenses for discussion, meetings, e.g.,
teleconferencing.
9) They co-ordinate and integrate office tasks.
10) They enable more cost-effective and time-effective communications.
11) They reduce the turnaround time by moving information quickly and efficiently to
the people who need it. Turnaround time is the time interval between preparation
and receipt of messages or documents.
12) They increase the productivity of office workers at all levels.

Limitations of Office automation

a) Cost of automated office hardware is very high.
b) Office automation can disrupt traditional office work roles and work environments.
c) Office automation may lead to security problems. For example, an inefficient and
unauthorized use of e-mail, fax, etc. may adversely affect the office’s productivity.

Virtual Office
Virtual office involves the use of computer by employers at home to telecommute and to
collaborate with other employees. Employees may receive work through electronic
messaging information sharing system.
Advantages of Virtual office are:-
a) Virtual offices reduce the office rental cost and office maintenance costs.
b) Virtual offices result in reduction of equipment costs because telecommuters can
share the equipment.
c) The essence of virtual office is that office work can be performed virtually at any
geographical location.
d) Virtual office enables office work to be performed by physically handicapped
persons.
Chapter 9

CLIENT / SERVER ARCHITECTURE

Client / Server Architecture

In a client / server network, end user micro computer workstations are the client. They are
interconnected by local area network, and share application processing with LAN servers
which also manage the network.
Thus, client / server system is a form of computer network that divides
processing functions between clients (computers that sue services) and servers (computers
that provide services).
Networked computer systems allow end users to communicate
electronically and share the use of hardware, software and data resources.

The Traditional Computing Models

The Traditional Computing models are:-
a) Mainframe computers – Mainframe computers work in time sharing, multi-
user, and Multiprogramming environment. In mainframe, all intelligence is
within the central host computer. Users establish a communication link with
the host computer through a dump terminal; personal computer or Unix
Workstations and send information to the host via keyboard. Limitations of
mainframe software architecture are:
1) They are Stable and monolithic.
2) Do not easily support (GUI) graphical user interface.
3) Access is limited to locally clustered resources.
4) Cost thousand times more than a PC.
5) Only pre configured application works. Mainframe computing is not a true
network because there is no sharing of information and capabilities.
b) Personal computers – Local area network (LAN), which enables sharing of
data peripherals.
c) File sharing Structure – Personal computer communications software often
provide file transfer facility by which the user can send data from a file at
PC to the other computer and Vice Versa.

Client Server Model

In the client server approach, the processing task is divided into parts, between server and
workstation. The global tasks are handled by the server whereas workstation handles all the
local tasks.
This result in reduction of network traffic and thereby making the system fast
and easy to use. Moreover, this approach allows multiple users to access the same data
simultaneously sharing of other resources, e.g. print servers and spooling software.
Client/Server Computing
The steps involved in client/server computing are as follows:-
1) A user enters a request on the client computer.
2) The client software determines what data is needed and send a request for
the data over the LAN to the database server.
3) The server’s database software then locates the requested data and send it
back to the client over the LAN.
4) The client software processes the data and presents the results of processing
through the user interface. To the user.

The other reasons for changing to client/server computing are:-

a) Direct access to required data.
b) Highly Flexible as it is relatively easy to add capabilities.
c) Easy access to the required information, irrespective of physical location of data
d) Improving the flow of information.
e) End-users are ensured of better services.
f) Cost savings because investment in mainframe can be avoided.

Implementation Examples of Client/Server Technology

• To process credit card purchases.
• For money transfers
• For credit checks
• For inquiring customer accounts
• For on-line shopping
• E-business
• On-line banking
• Call-centre
• Telecommunication based on intranet technology.
• Intranet application

Benefits of Client/Server technology

1) Easier access to corporate’s internal and external data.
2) It reduces costs of processing dramatically.
3) The maintenance cost of programs is low.
4) Client/server technology gives control to users of their own application at their own
locations.
5) Easy to add capabilities for more users.
6) Reduces the operating costs of information systems department. Client /server
database management systems are less expensive than mainframe DBMSs.
7) The server is free of user-interface and increases the efficiency.

Limitations of Client/Server Technology

a) It is difficult to write software that divides processing among clients and servers.
b) At times when too many users want service simultaneously, a specific server can
get bogged down quickly.
 c) Personal computers with independent processing power are more difficult to
coordinate and administer on a network.
d) Client/server technology requires more diverse technical support, as it allows a
company to use hardware and software from many different vendors.
e) The server is usually the central location for critical data adequate physical security
and operational security measures need to be taken to ensure data safety. It becomes
difficult to ensure security in distributed environment.
f) Administration of distributed equipment can be much more expensive.
g) Failure of one server can render a large client/server system unavailable.

Approaches to client/server
Any application is comprised of six different activities, which include the following:-
1) User interface
2) Presentation logic
3) Application logic
4) Data request and result acceptance.
5) Physical data management
6) Data integrity

These activities allow users to :-

a) Easy data access
b) Fast and efficient computing
c) Quick application response
d) Makes workers more productive
e) Saves time being in time sharing mode.

The major resources required for client-server computing process are:

a) Display devices
b) User interface devices
c) Peripheral devices
d) Data storage devices
e) Application Software
f) Operating system
g) Data base management system

Components of Client/server
The key components of client/server architecture are:-
a) Client : There are three types of clients, these are:-
1) Non-Graphical user Interface: ATMs, cell phone, fax machines, and robots.
2) Graphical User Interface (GUI): It involves interaction models like pull
down menus in windows environment.
3) Object Oriented User Interface(OOUI)
b) Server: On a local area network, server is a computer that executes administrative
software that controls access to the network and its resources such as printers and
disk drives.
c) Middleware: Middleware is a software that resides between two or more types of
softwares and translates information between them. Middleware is the distributed
software needed to allow clients and servers to interact. Middleware performs the
following function:-
1) API (MAPI) and Open Database Connectivity (ODBC) module.
2) SOL access Group’s (SAG)
3) Remote Data Access (RDA)
4) RPC
Middleware is composed by four layers, these are:-
• Service Layer: It carries coded Instructions and data from software
applications to the Back-end Processing layer from encapsulating
network-routing instructions.
• Back-end Processing Layer: It consists of a processor that
manipulates and encapsulates data sent to the network
• Network Operating system layer: It adds additional instructions
to ensure that the transport layer transfers data packets to the
assigned recipient efficiently and correctly.
• Transport Layer: It moves data from one place ( source) to another
( destination )
d) Network: Network is a group of computers and associated devices that are
connected by communication facilities, e.g. LAN, WAN.

Mainframe
(Root system)

Server # 1 Server # 2 Server # 4

LAN

PC: User # 2 PC: User # 3

PC: User # 1
Client/server Architecture
In a client-server approach, the various components of an application are distributed over
the enterprise. The various components of an application which can be distributed are:-
a) Presentation component: Presentation component is the application
interface. It shows how the application appears to the user.
b) Applications (Processing) logic component: The processing logic is created
by the business rules of the application.
c) Data Management Component: The data management component consists
of the storage and management of the data needed by the application.
On the basis of division of these three processing components between the server and
client, the following client/server computing models may be implemented:-
1) Distributed Presentation: In distributed presentation, all the three processing
components reside on the server, but the presentation logic is divided between the
client and the server.
2) Remote Presentation: In remote presentation, application logic component and data
management component reside on the server, but the presentation component
resides on the client.
3) Distribution Logic: In distribution logic, data management component resides on
the server and the presentation component resides on the client. The application
logic component is distributed between the client and the server.
4) Remote data management: In the remote data management, database management
component resides on the server while presentation component and application
logic components reside on the client.
5) Distributed database: In the distributed database, all three processing components
reside on the client, but the database management component is distributed between
the client and the server.

The abovementioned distribution of processing components gave rise to the ideas of ‘fat’
clients and ‘thin’ clients.
a) Fat clients: Fat clients have large storage and processing power in which all the
three components of an application can be processed, e.g., file server or database
servers. In this, client handles presentation and processing functions and server
manages data and access to data. It is commonly known as “2-Tier” system.
b) Thin clients: Thin clients have limited processing capability with no local storage.
Thin clients can handle only the presentation component.
c) Fat servers: In client/server architecture, fat server is a server machine that performs
most of the processing with little or none performed by the client. Application logic
and data reside on the server and the presentation layers are handled by the client.
They are commonly known as “3-Tier” system. Example of fat server is web server.
Client/Server Security
To increase the security, an information system auditor should ensure the following control
techniques, these are:
1) Use only read only media.
2) Disable the floppy drive to secure access to data and application.
3) Avoid unauthorized access by using diskless workstations.
4) Having a key or password-protected configuration and set up.
5) Requiring password to boot.
6) Requiring password to mount removable media.
7) Use network monitoring devices to know about the clients to monitor the activities
continuously and to maintain devices.
8) Access should only be given to those who need specified data.
9) Computer network should have real-time intrusion detection system to test for
legitimate traffic and network usage.
10) Use error detection and correction software when transmitting data.
11) Design user interfaces that prevent the input of invalid data.
12) Backup data regularly.
13) Use data encryption techniques to store and transmit data.
14) To check data integrity on servers, an error correction code (ECC) capable memory
controller may be installed.
15) Reduce the risk of someone stealing proprietary information. Control physical
security with staff access cards, alarms, surveillance cameras, etc.
16) Each user can carry personalized smart card which can be used to store data and
personal information of the user, rather than entrusting it to the network storage.
17) Application controls may be used where users will be allowed to access only the
functions in the system that are required to performs their duties.

Client/Server Risks and Issues

The major drawback of client/server model is the inherent risk involved in transmission
from centralized system ( mainframe). Risk can be classified into following four categories,
these are:
a) Technological Risks:
• Will the new system work?
• How soon will it become obsolete?
• Will the existing controls work?
• Will the new requirements put excessive performance constraints on the
system?
• Will existing software i.e., network operating system, network interfaces,
protocols, the application software will be compatible with the new system?

b) Operational Risks:
• Will the required performance of the new system be achieved?
• Will the chosen software be able to grow or adapt to the changing needs of
business?
• Will the staff require training regarding security practices?
c) Economic Risks
d) Political Risks:
• Will the management, professional and end users be satisfied?
• Will the turnover among staff be low enough to allow continuity?
• Are enough people available?
• If the answer to these questions is “no”, further investigation should be
undertaken to assess risk potential.
Chapter 10

System’s Acquisition, Software Development and Testing

Hardware Evaluation Factor Maximum Proposal Proposal Proposal
possible I II III
points
Performance in terms of speed, capacity 10 8 7 8

Cost Including cost of maintenance and 10 6 9 7

operation

Reliability in terms of error control and 10 8 8 8

diagnostic feature

Availability in terms of lead time 10 10 8 7

Compatibility With existing hardware

and software and compatibility with
hardware and software provided by
competing suppliers 10 10 9 8

Expansion in terms of upgrading by

acquiring “add on” units 10 10 8 9

Connectivity with wide and local area

networks of different types of
computers and peripherals 10 9 8 8

Environmental requirements in terms of

its electrical power consumption, air-
conditioning etc. 10 9 8 7

Availability of system and application

software to support the hardware 5 5 4 4

Performance record 5 5 3 1

Quality of services 5 4 4 4

Training 5 4 3 3
Overall Rating 100 88 79 74
System Design Phase is followed by the fourth phase of system development life cycle i.e.,
System acquisition and software Development.
While acquiring the system, the following factors
must be kept in mind:-

a) Equipment selected should not be approaching obsolescence.

b) The equipment selected should not have the danger of becoming locked into
a particular vendor’s equipment. E.g. HCL
c) A third factor in equipment selection is a avoiding a dead-end system. A
system should be selected that will be enhanced by the vendor in future.
d) A computer system selected should be part of family of computers to ensure
that upward compatibility would be available.
e) It should be ensured that hardware is computer-friendly i.e., safe,
comfortable and easy to use. All these factors which have been listed in
table 9.1 should be considered while acquiring the system.

Financial factors,
After the decision to go ahead with the acquisition has been taken the next
question is whether to rent, purchase or lease.
a) The Rental Option: - The user agrees to a monthly payment. The rental option is
generally for the short-term use of a system, may be from 1 to 12 months. The
advantages of using rental option are:-
1) Insurance, maintenance and other expenses are included in rental charges.
2) It provides financial leverage to the user. The decision to purchase a system
can be delayed until adequate financing is available, until a new generation
of equipment is a available, or until such time as the organization wishes, for
whatever reasons.
3) Rental charges are expenses and are tax deductible.
4) Rental option provides more flexibility as it makes the risk of technological
obsolescence.

The disadvantages of using rental option are:-

1) Rental option is very expensive.
2) As rental options are generally for a shorter period, the user not provided enough
security to plan on the continued availability of the system.

b) The Lease Option: - A lease is a commitment to use a system for a specific time,
generally from three to seven years. The leasing option has following advantages:-
1) No financing is required. The risk of system obsolescence is shifted to the
lessor.
2) Lease charges are lower as compared to rental charges and are also tax-
deductible.
3) Lease may be written to show higher payments in early years to reflect the
decline in the value of the system.
4) Lease may or may not include maintenance or installation costs or providing
a replacement system in an emergency
 5) Short-term leasing option enables the user to upgrade to amore powerful
system at the end of the lease.
However, the leasing option has following drawbacks:-
1) The user loses residual rights to the system at the end of the lease period, unless
specifically provided for the lease agreement.
2) The lease period, once entered into, cannot be terminated without a heavy penalty.
3) The user may not be able to exchange the leased system for another system.
4) The rent & interest user is at loss when interest rates are reduced.

c) The Purchase Option – The ownership of computers through outright purchase is

the most common method of computer acquisition. Under this option, the
organization takes title to the equipment. The advantages of purchasing option are:-
1) The system can be modified at the will of the organization.
2) It involves lower continuing cash disbursements than those for a leased
system due to cash saving from depreciation and investment allowance.
3) It is a cheap option as compared to other option.
However, the draw backs of purchasing option are:-
1) Initial high investment.
2) Insurance and Maintenance expenses are borne by the user organization.
3) High overall risks as the organization is locked into the system it purchases.
Changing to a different computer system is more difficult under this option.

Software Acquisition: Make or Buy

The work performed by a computer system depends, to a large extent, on the software
resources available in an organization. Software is the brain, heart and soul of any
computer system. Software needs can be defined under three broad categories:-
a) System Software :- System software consists of
1) Operating System: MS-DOS, UNIX, Windows95, etc.
2) Translation software: OBOL, FORTRAN, C++ and PASCAL.
b) Application software:- Application software is the collection of programs that
actually process data to generate information for various application
c) Interaction Query Software:- These software are also called end user languages and
4GLs and they enable the user to develop limited application for their use without
much of technical expertise.

Planning for software acquisition involves two basic decision:-

• Make or buy decision and
• Selection of specific software

Advantages and disadvantages of Ready-made Application Software

Main advantages of using ready-made application software are summarized below:-

a) Low Cost :- As ready-made software packages are developed for general market.
 b) Faster procurement – software package developed in-house takes a very long time
to develop.
c) Rapid implementation – Ready-made software package can be implemented
immediately after their purchase.
d) High quality – As the ready-made software package typically has a large customer-
base, developers continuously invest in refinement and testing.
e) Low risk
f) Fast updation
g) Longer life cycle – Ready-made software packages have longer life cycle because
there is usually for more user experience behind the software.
h) Better control – Ready-made software packages are better from the point of control
and audit because people associated with the in house development of software may
have interest in keeping separate exit routes in the software.

But ready-made software packages have certain disadvantages as will, which are:-
1) The ready-made software packages may not fit into the specific
requirements of the applications.
2) Frequent changes in ready-made software are either expensive or not
possible.
3) Non-availability of software package that meets the specific requirements of
the business process.

Sources of Ready-made Software

The major source of ready-made information systems software packages are

computer manufacturers, computer retailers, computer service centre, time-
sharing companies, system integrators and independent consultant.

Step Involved in Selection of a Computer System

Computer system consists of hardware and application software. The various steps
involved in selection of a computer systems are:-
a) Requirement analysis- Which Hardware/ Software, printers etc.
b) System specifications.
c) Request for proposal- RFP should include the following:-
1) Complete statement of system specifications, programming language, price
range, terms and timeframe.
2) Request for Vendor’s responsibilities for conversion, training and
maintenance.
3) Warranties and terms of license or contractual obligations.
4) Request for financial statement of vendors.
5) Size of staff available for support system.
d) Evaluation and Validation- In this phase, the proposal received from various
vendors are evaluated and the vendor who is best suited to the user’s needs is
identified.
e) Vendor selection- The vendor with the best combination of repution, reliability,
service record, training, delivery time, price, etc. is selected. The sources available
to check on vendors include the following
1) Software/ Hardware houses
2) Universities
3) Trade associations
4) Users
5) Publication and Journal
6) Published directories
7) Consultants
8) Industry Contracts.
f) Post-installation review- After the system is installed, a system evaluation is mae to
determine how closely the new system conforms to plans.