Managerial Perspectives 4™ EDITION D P GoyalManagement Information Systems Managerial Perspectives Fourth Edition D P GOYAL Professor, Information Systems & Dean ~ Executive Graduation Programmes Management Development Institute Gurgaon, India VIKAS® PUBLISHING HOUSE PVT LTDVIKAS® PUBLISHING HOUSE PVT LTD £-28, Sector-8, Noida ~ 201301 (UP) India Phone: +91-120-4078900 + Fax: +91-120-4078999 E-mail: helpline@vikaspublishing.com + Webste: www.vikaspublishing.com Registered Office: 576, Masjid Road, Jangpura, New Delhi ~ 110014 (India) Regional Offices: ‘+ Ahmedabad : 395, Grand Monarch, 100 , Shyamal Road, Near Seema Hall ‘Ahmedabad — 380 051 « Ph, 079-85254204, 9898294208 + Bengaluru. : First Floor, N.S. 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Disputes, if any, ere subject to Delhi Jurisdiction only Printed in IndiContents Foreword m7 Preface to the Fourth Edition xvii Preface to the First Edition xix Part — 1: ConcePpTuAL FOUNDATIONS hy Management Information Systems: An Overview 3 11 Introduction 3 1,2 __Need for Management Information Systems Management Information Systems: A Concept iz 1 MIS: A Definition 14 1.5 Management Information System and Information Technology 18 1.6 Nature and Scope of MIS 18 1.7 MIS Characteristics 19 18 Structure of MIS 21 1.9 Types of MIS 25 1.10 Role of MIS in Global Business 48 1.11 — Challenges of Managing Information Systems 50 Summary SI Exerc i Review Questions 35 Assignments 356 Further Readings 56 Case Study — 1: MIS at Hotel Gallerta Imernational 58 Case Study ~ 2: MIS at Orient Crafis 60 Case Study — 3: MIS Failure at Runa Labs Pvt. Ltd. 62 Case study — 4: MIS at Kalsi Agro International 66vi Management Information Systems Information, Systems and Organization Concepts hy RB 2B eM ep : v © BS 2.12 Introduction Information: A Definition Types of Information Information Quality Dimensions of Information System: A Definition Kinds of Systems System-related Concepts Elements of a System Information System Organization: A Concept Impact of Information Systems on Organization umman Review Questions Assignments Further Readings Information Systems and Competitive Advantage Introduction Changing Role of IS Competitive Advantage Strategies for Dealing with Competitive Fores Porter's Value Chain Model Strategic Information Systems (SIS) Summary Review Questions Assignments Further Readings Case Study — 1: MIS at Johan & Johan Case Study ~ 2: Information System at GreenBus 102 103 106Contens Database Concepts vii Part — Il: INFORMATION TECHNOLOGIES 4. IT Infrastructure and Emerging Technology 109 4.1 Introduction 109 4.2 AComputer System 109 4.3 Computer Categories il 4.4 Computer Evolution 4 45 IT Infrastructure 7 4.6 IT Infrastructure Components ug 4.7 Emerging Technology 142 Summary 146 Exercises 147 Review Questions 151 Assignments 151 Further Readings 151 Data Resource Management 153 Introduction 53 Files: The Traditional Approach 5 The Database Management Approach: The Modern Approach 156 Database Management System 160 36 DataModels Ask 5,7 Data Warehousing and Data Mining 116 5,8 Application of DBMS using MS-Access 178 Summary 194 Exercises 194 Review Questions 196 Assignments 198 Further Readings 199 Lab Exercise — 1: Database Management 200 Lab Exercise — 2: Database Management 202vii Management Information Systems 6. Telecommunications and Computer Networks 205 6.1 Introduction 205 6.2 Telecommunications 205 6.3 Types of Signals 206 6.4 Communication Channels 207 6.5 Characteristics of Communication Channels 209 6.6 Communication Hardware 2i1 6.7 Communication Networks. 214 6.8 — Computer Networks in India 218 6.9 Internet 219 6.10 Applications of Communication 226 Summary 228 Exercises 228 Review Questions 231 Assignments 231 Further Readings 232 Case Study: Networking at a Technology Institue 233 Part — Ill: Business Apptications oF IS 7. e-Commerce, e-Business and e-Governance 239 7.1 Introduction 239 7.2 e-Commerce 239 73) Sales Life Cycle 242 14 Infrastructure 244 75 Applications 246 7.6 e-Commerce Payment Systems 247 7.7 Management Challenges and Opportunities 248 7.8 — ¢-Business 250 7.9 e-Governance 250 Summary 253 Exercises 254Contens Review Questions Assignments Further Readings 8. Enterprise Systems 8&1 8.2 83 84 8.5 Introduction Enterprise Systems erprise Resource Planning (ERP) System Customer Relationship Management (CRM) System Supply Chain Management (SCM) System Summary “rercises Review Questions Assignment Further Readings 9. Decision Support Systems 9.1 9.2 93 o4 9.5 9.6 97 9.8 9.9 9.10 Introduction Decision-Making: A Concept Simon’s Model of Decision-Making Types of Decisions Methods for Decision-Making Decision Support Techniques Decision-Making and Role of MIS Decision Support Systems (DSSs) Business Intelligence Knowledge Management Systems Summary E. Review Questions ercises Assignments 257 257 257 258 268 273 276 277 280 280 280 281 281Management Information Systems Further Readings 313 Case Study: Knowledge Management Systems at 315 Abhi & Subhi Consultancy Part — IV: Manacement oF IS 10. Information System Planning 10.1 10.2 103 104 10.5 10.6 11. 1S Choices and System Acquisition Wd 2 113 Introduction Information System Planning Creating an IS Plan (CRISP) Resource Allocation Project Planning Organization Structure and Location of MIS Department Summary Exercises Review Questions Assigninents 337 Further Readings 337 Case Study — 1: Plannmg of Information Systems at Soren & Company 338 Case Study ~ 2: Health Portal at Apollo Hospitals 339 Case Study — 3: IS Planning at Lafra Supply Chain Solutions: A Rhyati Jhunjhunwala & Company Report S41 Introduction TS Choices Acquisition of Hardware and Software Summary Exercises 363 Review Questions 365 Assignments 365 Further Readings 365Contens 12. 13. 14. IS Development and Project Management 12.1 Introduction 12.2 system Development Life Cycle 12.3. System Development Models 124 Project Management Summary Exercises Review Questions Assignments Further Readings Case Study: MIS at Mamk Manufacturing Information Requirements Analysis & Systems Design 13.1 Introduction 13.2 Systems Analysis 3 Requirements Determination 13.4 Strategies for Requirements Determination 13.5 Structured Analysis Tools system Design Summary Exercises Review Questions Assignments Further Readings Case Study: Information Requirements Analysis & Design at XYZ Bank IS Implementation and Change Management 14.1 Introduction 14.2 Implementation Process 143 Organizational Change 144 Change Management 145 Organizational Learning 389 389 300 390 392 394 400 413 44 417 417 418 419 442 442 442 448 450 450xii Management Information Systems Summary 452 Exercises 452 Review Questions 454 Assignments 454 Further Readings 454 15. Evaluation and Maintenance of IS 456 15.1 Introduction 456 15.2. Evaluation Approaches 456 Evaluation Classes 458 154 Product-based MIS Evaluation 459 15 Cost/benefit-based Evaluation 460 15.6 Models Used in Evaluation 463 15.7 Process-based Evaluation 464 15.8 | System Maintenance 465 Summary 466 Exercises 466 Review Questions 469 Assignments 469 Further Readings 469 Case Study: Effectiveness of MIS 470 Part — V: Security, ETHICAL AND SociAt Issues 16. 1S Security and Control 475 16.1 Introduction 475 16.2 18 Security Threats 475 16.3. Protecting Information System 478 164 IS Security Technology 480 16.5 The Disaster Recovery Plan 483 16.6 IS Security Level 484 Summary 484 ercises 4186 Review Questions 489Contenis xiii Assignments 489 Further Readings 489 17. Ethical and Social Issues of ISs 491 17.1 Introduction 491 17.2 Ethical Issues 491 173 Social Issues 494 Summary 497 Exercises 498 Review Questions 500 Assignments 500 Further Readings 500 Case Study: IT Monitoring at HSCMT College 502 Answers of Objetive Type Questions 503 Glossary 508 Index 515Copyrighted materialForeword ‘am very glad to write the Foreword for this book authored by Dr Dharam Paul Goyal who had attended a one-month programme for trainers of information analysts conducted by the Indian Institute of Management, Ahmedabad, for Computer Science University faculty from the Commonwealth Countries. Indian organisations are spending large sums of money to understand and use information technology. This investment is growing at the rate of 35 per cent per annum. However, the impact of the investments in IT on efficiency and competitiveness of organisations has been somewhat marginal. This is because organisations do not make a careful choice of the application areas, or are unable to implement the chosen applications successfully. Often data existing in computer files is not used by managers to improve planning and decision-making. Indian industry needs IT specialists who have a broad perspective on organisational functioning and concepts in designing information systems. Similarly, managers need to be aware of the potential of information technology and the effort that is required to harness this potential, From the contents of this book, I find that the coverage would be useful for providing information system concepts to IT professionals. Managers would also find the contents useful, particularly because a large number of case studies have been included. JIM, Ahmedabad SC Bhat:Copyrighted materialPreface to the Fourth Edition Iwo reasons have primarily contributed in seeing this edition happen. First, the challenges I posed by ever-increasing complexity of business environment coupled with the advancement of information systems. The second reason has been the encouragement received from the overwhelming reception of the earlier editions and the feedback received from the valued readers of this book. I authored this book to fulfil the needs of a large majority of students looking for a simple, easy-to-understand and a comprehensive yet relevant material presented in a logical way on a subject like Management Information Systems. Iam more than rewarded when I see the objective of my writing this book being achieved. ‘The 4edition is an enhanced edition that updates and improvesits coverage by restructuring a few chapters and adding some new chapters. This new edition would certainly meet the needs of the business students who are ~ or will soon become ~ managers in today’s fast-changing business world. Every effort has been made to keep the language simple and ea Another major change in the 4" edition is of the publisher. The new publisher has assured that, they would try their level best to provide a copy of this edition at an affordable price without compromising on the quality of the book. Iam confident that my readers would continue their support to this new edition as well. y to understand. Acknowledgements Tam gratefull to a large number of students, professors and authors who contributed in more than one way, either directly or indirectly, to this edition. My sincere gratitude is due to two .great visionaries ~ Professor B S Bhatia and Professor R P Hooda, who have been a great source of strength and have always boosted my morale. Textend my thanks to all the faculty colleagues at MDI, Gurgaon, especially Professor Mukul Gupta, Director MDI, for providing me a good academic environment. I am also grateful to a large number of friends and colleagues at various institutes and universities for their confidence in my work and for sending their constructive feedback to improve upon the earlier edition. My respected parents, who instilled all the good values in me, are a great source of inspiration. Special thanks to my entire family including my wife, Ms Mani Goyal, my son, Ankit, and my daughter, Shreya, for providing a motivating and congenial environment at home. Manya time, this edition of the book has encroached upon the time of my family, which they have sacrificed for a greater cause. I also appreciate the untiring efforts of the entire team at Vikas Publishing House, especially Mr Rahul and Mr Anam, for making sure that this edition comes out on time. Last but not the least, I am always grateful to the great Almighty God for choosing me to disseminate this knowledge. I shall be happy if you could spare some time to send your valuable feedback to improve upon this edition. I can be reached at dpgoyal23@gmail.com. DP GoyalCopyrighted materialPreface to the First Edition ihe globalisation of business, widespread technological innovations, social and political changes, andan increased awareness in customers are some of the factors that have forced the business world to undergo rapid changes. In view of these ever-increasing complexities of the business environment, a growing need for guidance on concept, issues and strategies for understanding, developing and managing information systems in organisations is being felt all over the world. This is because of the fact that information, which is a vital and necessary input in decision-making, is provided by a Management Information System of the organisation. In other words, any organisation, to survive and grow in this competitive environment, must have an effective and efficient information system. Based on the feedback received from a large number of practising managers, students and consultants, and from a survey of the available written material on the subject, an effort has been made to cover all the important aspects of MIS. Accordingly, the book has been divided into six parts, each dealing with a major portion of the field of information systems. Part I deals with an introductory framework of MIS, which traces the growing importance of information systems, and presents a general model to understand the concept of MIS, its functions and important characteristics. This part also discusses the structure and categories of MIS Part Il provides conceptual foundations on decision-making and information. It also clearly describes a system and system-related concepts. Part III is dedicated to computer system technology, which gives in detail the basics of a computer system, and also describes data management and data communication concepts, which are essential to understand computer-based MIS Part IV presents models of the system development process, system analysis techniques and system design. This part, basically, educates the user about the various system development phases. Part V explores some of the challenges involved in managing information systems after these are ready for implementation in users’ organisations. It includes topics such as implementation, evaluation and maintenance of information systems. This part also provides an insight into understanding information system planning, and information system as an enabler. Part VI discusses several real-life MIS case studies in organisations. This part is meant to provide an opportunity to the students to correlate theoretical concepts with practical situations. The case studies, it is hoped, will promote discussions among the students. ‘The subject of MIS has always been difficult to teach, and it has been equally difficult to comprehend for students because it has not been well defined. While some authoritiesxx Management Information Systems focus on computer technology, others devote too much attention to management principles and functional areas. Nowadays, MIS is considered a combination of two disciplines, namely management and computer science. In this text, an attempt has been made to balance these disciplines. The book has been divided into six parts, which gives a well-defined form to the study of information systems. ‘The book contains a good balance of theory and practice. For example, in addition to giving a general framework to understand MIS, the text gives a great deal of attention to demonstrating how analysis and design techniques are applied, and how one may implement and evaluate a newly developed information system. Simple and clearlanguage has been used to make the text interestingand understandable. No background of computers is required to follow this text, as the book has been written to satisfy the needs of various kinds of students, business executives, consultants, professors, ete. Acknowledgements Many people have helped in making this book a reality. No words can express adequately my gratitude to a large number of persons from whom I sought help and cooperation. This book might not have seen the light of the day had I not been inspired by Prof. Subhash Bhatnagar of Indian Institute of Management, Ahmedabad; Prof. B S Bhatia of Punjabi University; and Prof. O P Goyal of MD University. I am sincerely indebted to all of them. My deepest gratitude is due to my teachers, colleagues and friends at the Punjab School of Management Studies, Punjabi University, and my ex-colleagues at ‘Thapar Institute of Engineering and ‘Technology, for boosting my morale and for providing me an encouraging environment. Here, | must specially mention the names of Prof. R K Sehgal, Prof. Gurdip Singh and Prof. M $ Bedi for all their help and moral support. 1 also cannot forget the contributions made by Prof R P Hooda of Kurukshetra University; Prof. D B Phatak of I'l, Mumbai; Prof. Ambuj Mohanti of EM, Calcutta; and Prof. (Mrs.) Rekha Jain of IM, Ahmedabad in refining my skills as an academician and an author. Lam, indeed, deeply grateful to all these eminent personalities. My affectionate students, to whom I have taught this course for more than thirteen years, also deserve a special mention for their thought-provoking queries and interest in my work. In fact, their difficulty in getting adequate literature matching their requirements motivated me to devote myself to the writing of this book. I express my gratitude to the anonymous referee for his very useful suggestions for this piece of work. I must acknowledge with thanks the efforts of M/s Macmillan India out my work in book form so expeditiously. imited for bringingPreface to the First Edition xxi My sincere appreciation is also due to Mrs. Kamna of IMT for her help in some of the case studies, and Mr Prem Pahuja for his efforts in preparing the entire manuscript on a word processor. Finally, | also wish to thank my wife Mani Kanta Goyal, my eight-year old son Ankit and two-year old daughter Manu for their wholehearted support to this project. Despite my periods of silence and absence because of my involvement with this work, they provided mea motivating and congenial environment at home. No author, perhaps, can ever ask for more from his family. I shall be grateful to mylearned readers ifthey could bring to my notice any shortcomings in this book and send their valuable suggestions to help improve the next edition. D P GoyalCopyrighted materialPart - |: Conceptual Foundations 1. Management Information Systems: An Overview Information, Systems and Organization Concepts Information Systems and Competitive AdvantageCopyrighted materialChapter 1 MANAGEMENT INFORMATION SYSTEMS: AN OVERVIEW LEARNING OBJECTIVES After studying this chapter, you should be able to: * Understand the Importance of MIS * Explain the Concept of MIS + Define MIS, Its Components and Activities, * Describe the Nature and Scope of MIS * Know the Characteristics of MIS « — Expiain the Structure of MIS ‘* Understand the Types of MIS * Describe the Role of MIS in Global Business * Explain the Challenges of Managing MIS 1.1 INTRODUCTION The purpose of an information system is to help an organization manage its business better. For instance, an inventory management system would assist the organization in keeping track of stocks and optimizing stock levels. A human resources information system would help in managing the key activities relating to human resources of the organization, and so on. With ever increasing complexities of business as well as management, now-a-days, information systems are not merely required for improving efficiency of business operations; rather these systems are used for effective business decisions and achieving strategic advantage. Given the increasing role of information technology (IT) in an enterprise, the functions of information systems are changing. It is transforming from a technology provider to a strategic partner and from a resource to a strategic tool, Because of the increasing use and participation of IT in all processes and projects, all the managers, irrespective of their functional areas, need to understand, deploy and effectively manage information systems/information technology 1.2 NEED FOR MANAGEMENT INFORMATION SYSTEMS. Now-a-days, information systems and information technology have become a vital component of any successful business and every manager is supposed to be equipped with the knowledge4 Management Information Systems of information systems (ISs) and information technology (IT). Further, information system, nowadays, is regarded as a major functional area just like any other functional areas of a business organization like marketing. finance, operations, and human resources. cte, Also, information technologies including Internet-based information systems play an increasingly important role in organizations. It goes without saying that in any organization, be it private, public or government, all managerial functions are performed through decision-making: for taking rational decision, timely and reliable information is essential and is procured through logical and well-structured method of data collecting, processing and disscminating of information to decision-makers. Such a logical and well-structured method in the field of management is widely known as management information system (MIS) MIS has already been considered to be of paramount importance, sometimes regarded as the nerve centre of an organization. Such systems assist decision-makers in organizations by providing information at various stages of decision-making and, thus. greatly help the organizations to achieve their pre-determined goals and objectives. MIS has assumed all the more importance in today’s global business environment because of the following three main challenges. 1. Because of liberalization and globalization, in which organizations are required to compete not locally but globally, a manager has to take quick decisions, otherwise his business will be taken away by his competitors, 2. In this information ago, where information is doubling up every 18 months, a manager has to process voluminous data; failing which he may end up taking a wrong decision that may prove costly for the company 3. Third, because of proliferation and advances in Information Technology, nowadays, IT isno longer a luxury; rather it has become a necessity. IT can now be used as an cnabler in achieving business strategic advantages. In the absence of which the organization may loose on such benefits and may even fail to survive in the long run. Today, information systems play three vital roles in a business organization: 1. Support the business processes and operations of an organization 2. Support decision-making by employees and managers of an organization 3. Support the straicgies of an organization for gaining competitive advantage. Thus, in today’s world of ever-increasing complexities of business as well as management. every business organization, in order to survive and grow, must have an efficient and effective MIS that provides timely, reliable and useful information to enable the managers to take speedy and rational decisions. On the other hand, an MIS that is not adequately planned, analzed, developed, implemented and/or is poorly maintained, may provide delayed. inaccurate, irrelevant or obsolete information, which may prove costly or even fatal for the organization. In other words, organizations today cannot survive and grow without properly planned, designed, implemented and maintained MIS. It has been well understood that MIS enables even small organizations to more than offset the economies of scale enjoyed by their bigger competitors and thus helps in providing a competitive edge over other organizations,Management Information Systems: An Overview 5 Since MIS isa support system that assists every manager in an organization, it is important that every manager, irrespective of his/her functional area (i.c. finance, human resources, marketing, operations, IT); responsibility level in an organization (i.c. strategic planning level, middle management, or operational control level); size of the organization (small, medium or large); type of organization (public, private or government), needs to use MIS in his/her working. However, this does not mean that every manager must be an expert in computer science, programming or other complex technologies (if one is not going to specialize in information technology): rather one needs to be well aware of MIS as a business system and its applications. 1.2.1 Capabil: Management information systems are based on the systems approach and use of ICT, The various capabilities of MIS include the following: s of Management Information Systems * Automating business processes of an organization © Capturing data from different sources accurately and quickly * Performing high-speed, high-volume numerical computations and process voluminous data quickly * Providing fast, accurate information, communication and collaboration within and among organizations * Storing huge amounts of information in a small, casy to access space * Enabling fast and inexpensive access to large amount of information worldwide © Analysis and interpretation of vast amounts of data quickly and efficiently * Increasing the efficiency and effectiveness of managers working in groups in an organization or in several locations anywhere in the world ¢ Allowing an organization to become more flexible and responsive 1.2.2 Benefits of Management Information Systems Because of the established capabilities of MIS, nowadays. the question is not whether an organization needs MIS or not; rather. how we can use information systems effectively and efficiently so as to leverage IT for getting business advantages. MIS providesa large number of benefits to an organization, which include: © Reduced inventory * Reduced carrying cost of inventory * Reduced manpower * Reduced cycle time * Reduced data transfer time * Reduced errors © Reduced quality costs + Improved information accuracy6 Management Information Systems * Improved decision making capability * Improved customer satisfaction In view of the need and benefits from such a system, a large number of organizations have already implemented these systems and many more are in the process of developing! acquiring and implementing such a system. These information systems are just not the small applications of technology: rather nowadays, organizations are implementing large enterprise wide systems thatare highly integrated and complex systems that arc taken as complete business transformation systems. 1.2.3 MIS — What You Need to Know Another important question is what a manager needs to know on the subject of MIS to be competent enough to effectively use and manage the information systems in an organization The field of information systems encompasses many complex technologies, behavioural concepis and a large number of specialized applications in business and non-business areas What a manager needs to understand is * The basic concepts of information systems and information technology © The planning of information systems * The development of information systems ‘* Business applications of information systems * The challenges and issues in managing ISs/IT Figure 1.] illustrates the major areas that any manager needs to know about information systems, The understanding of these areas will certainly help any business professional, manager, entrepreneur or a business analyst to become a better user, developer, and manager of information systems. Basic Concents of Information| Systems, Basic Concents of Information Technology Planning 4 mis > SNS MIS implementation intomason ors Systems Business Applications of Information Systems Figure 1.1. Main Areas of MISManagement Information Systems: An Overview 1.3. MANAGEMENT INFORMATION SYSTEMS: A CONCEPT Though the term ‘MIS’ is of recent origin, such a system has been in exisicnee since the advent of business organizations. Until recently, the status of MIS was similar to that of oxygen before Layoisier’s discovery of the gas—vital but unrecognized. However. in the past, competition twas not so intense and thus business as well as management used to be simple, whereas today both have grown to unprecedented levels of complexity. Also, with the advent of computers and communication technology. it has now become possible to transmit large amounts of information across long distances cheaply and without loss of time, Thus. environmental pressures have necessitated that information be considered as a fifth important resource along with the traditional four resources of money, materials, men and machines. In fact, some management researchers have gone as far as to define a manager as a transducer that transfers information to decision. Thus, there is no denying the fact that MIS, though was very much in use since the start of the first business organization, it remained manual, very simple and unrecognized, whereas today. it has got a greaily refined nomenclature, along with a well- designed computer-based structure, and follows the systems approach. Management Information system is an acronym of three words, viz., Management, Information and Systems. In order to fully understand the term ‘MIS’, let us understand these three words. 1.3.1 Management Management has been defined variously by different scholars. However, Koontz’s definition of management is widely recognized and used, which runs as follows. ‘Management is the art of getting things done through and with the people in formally organized groups’. (Koontz, 1972) However, a manager in the organization docs not get things done through a magic stick; rather s/he does it by performing different functions in a systematic way. The basic functions, which a manager performs in an organization, are listed under managerial functions. Managerial functions @ Planning Gi) Organizing Gil) Staffing (iy) Directing () Controlling ‘To get an insight into the term ‘management, it would be fair to brielly discuss these basic functions of management. Let us understand these functions one by one Planning Planning is a process that involves setting goals and organizing the activities required to achieve the goals. It bridges the gap between where we are and where we want to be (Figure 1.2)8 Management Information Systems Future (Where we want tobe) Today (Where we are) Planning Figure 1.2 Act of Planning As planning involves charting the future course of action, it generally answers the following questions © What to do’ © When to do? * Whois to do? * How is it to be done? ‘* Where is it to be done? ‘+ Why is it to be done? Managers plan by setting goals and objectives and lay down policies. procedures, rules, programmes, budgets, strategies and schedules to achieve the plan Organizing Organizing is the process of identifying the entire job, dividing the job into convenient subjects! tasks, allocating sub-jobs to person/group of persons and delegating authority to cach so that the job is carried out as planned. Managers organize tasks by dividing activities, assigning duties and delegating authority for effective operation and achievement of goals Staffing Staffing is the process of putting the right person on the right job. This function involves activities like defining the requirements with regard to the people for the job to be done, selecting suitable persons for these positions and training and developing them to accomplish their tasks as effectively as possible. The twvo functions, ic. organizing and staffing, should not be confused because of their close relationship. Organizing focuses attention on the structure and process of allocating jobs so that common objectives can be achieved; whereas staffing pertains to the people in the jobs. Thus, organizing is job-oriented, whereas staffing is person-oriented Directing The function of directing has been identified with command by Henri Fayol. However, modern management philosophers are of the view that directing includes: * Communication * Motivation + Leadership Dirceting is important because in order to achieve predetermined goals and objectives people manning the organization have to be guided, motivated and led by the manager.Management Information Systems: / Controlling Controlling and planning are two sides of the same coin. Controlling ensures that activities are being performed as per plans. Controlling is a process that involves: © Fix © Measurement of actual performance. ing standards for measuring work performance. Comparing actuals with standards and finding out deviations, if any. and + Taking corrective actions. Managers control the performance of work by setting performance standards and avoiding deviations from standards Thus, it manates from the above discussion that in order to get things done through people, a manager performs the above-mentioned functions. Further, to perform these functions. a manager has to take a variety of decisions. In other words, decision-making is a fundamental prerequisite for each of the foregoing processes, Peter Drucker, a management guru, has gone io the extent of saying ‘Whatever a manager does. he does it through decision-making.” In brief, decision-making is the essence of management. To further understand the functioning of a business organization. let us briefly discuss the management hierarchy Management hierarchy There arc several ways to describe the various management levels. Although there are no concrete lines of demarcation, one can distinguish between layers within the organization. Robert B Anthony. a management thinker, described three levels of business activities carried out in operating an organization. These three levels, viz.. Operational Control (operating management): Management Control (middle management): and Strategic Planning (top management) are shown in Figure 1.3. ‘Strategic Planning Level Management Control Level Operational Control Level Figure 1.3 Levels of Management Hierarchy10 Management Information Systems ‘The strategic planning level determines what markets or businesses the company should be in at present or plan to be in the near future. ‘The next level, management control, includes processes or functions that facilitate the management of the processes delegated to the operational control level. An example of a ‘management control process is production scheduling, where a system is established to schedule producis through the various fabrication and assembly points within a factory. The feedback from the production scheduling process cnables the management to control the operation. The bottom level, operational control, indicates processes performed to control the basic product or services produced by the company. It is concerned with individual tasks or transactions, such as procurement of raw material as per the prescribed quantity and quality or selling of products to specific customers. In a bank, operational control activities include physical sorting, recording and posting of cheques. Jerome Kanter summarizes the interaction amongst the three levels of management. At ihe strategic planning level, top management esiablishes the policies, plans and objectives of the company. as well as a gencral budget framework under which the various depariments will operate. These factors are passed down to the middle management, where they are translated into specific revenue, cost, and profit goals. These are reviewed, analyzed, and modified in accordance with the overall plans and policies, until agreement is reached. Middle management then issues the specific schedules and measurement yardsticks to the operating management The latier levels have the job of producing the goods and services required to meet the revenue and profit goals. which in turn will enable the company to reach its overall plans and objectives The interaction has been shown in Figure 1.4 rey Management t i Middle Management Schedules | Management t t Operating Management Figure 1.4 Interaction of the Three Levels of ManagementManagement Information Systems: An Overview in 1.3.2 Information Information, the second component in the term Management Information Systems, is considered as a valuable resource required by the management in order to run a business organization. Information is data that is processed and is presented in a form which assists decision-makers It may contain an clement of surprise, reduce uncertainty or provoke a manager to initiate an action, Whereas data (the singular being datum) is a term used for raw facts, figures, symbols, etc., that are currently not being used in a decision-making process. Data usually take the form of historical records. In contrast to information, raw dala may not be able to surprise us, may not be organized and may not add anything to our knowledge. ‘The relation of data to information is that of raw material to finished product, as depicted in Figure 1.5 and Figure 1.6. Data >| Processing >} Information Figure 1.5 Relation of Data to Information ‘The student with Nees in MIS. 105 80 70 RNO MIS 08 70.82 |__ [pees 110 60 85 105 80 11 «50 90 108 «70 12 82 100 13° 42 «35 Data Information Figure 1.6 Example of Data and Informaton However, the concept of data and information is a relative one. The analogy of raw material to finished product illustrates further that information for one person may be data for another, justas a finished product from one manufacturing division may be the raw material for another. For example. the withdrawal slip may be information for a cashier or teller of a bank but it is raw daia for the branch manager. Similarly. the role may also change over a period of time Thus, something may be information today but may not be information (may be data) after a certain period of time. Because of this relationship between data and information, the two terms are often used interchangeably Information needs of managers at different levels As discussed carlier, the three levels of management perform different functions in an organization. Accordingly. they will require different types of information. The information needs of managers at the three levels of management can be shown over a continuum, with12 Management Information Systems top management at one end and operating management at the other (Figure 1.7). Middle management. as always, falls in between, having some elements of both ‘The type of information being utilized by cach level of management, is in accordance with the nature of jobs performed by managers at their respective levels. For example, top level management is responsible for formulating objectives, strategies, and policies for the entire organization, This involves predicting the future of the organization and its environment. The information requirements for such decisions is highly unstructured, ic. not well-defined. It is because of its unstructured nature that such information becomes difficult to process. For example, it is difficult to determine with accuracy the market share of a company’s product or the extent of its penciration in a specific market segment. On the other hand, well-defined information, which may be called structured information, can be easily processed as in the ease of operating management. This level of management is given specific jobs to be performed and thus its information needs, which tend to be routine and repetitive, are well-defined and known. For example. a supervisor has the monthly production schedule for a particular product, which indicates that 150 units are scheduled to be produced for each of the next five days. He will want to review the information that indicates the availability of raw material, labour or machines, etc., on a day-to-day basis to see if the schedule is being met and if it is being met efficiently Unstructured Non-programmed Futuristic Approximate — External Type of Information Structured Top Management Programmed S| Historica Exact Interal Operating Management Figure 1.7 Information Needs of Different Management Levels Information for planning purposes pertains to the future and thus is approximate when compared to information required at the operating level. For example, a managing director of a. company would not require the exact sales figures (say 534634520.80); rather & 53 crore would suffice. However, from future information requirements, one should not understand that the top management is not interested in past history and operating results. Past results must be reviewed in light of external conditions and the market in which the company competes The focus of top management is on future plans and policics. Information at the operating level has to be exact, e.g, the length of a paper pin to be produced would be 18.2 mm in length and 0.65 mm in diameter and so on. Similarly. top management requires mainly external type of information for decision-making. External information is that information whose source is outside the operations of the company. For example, population growth in the market served byManagement Information Systems: An Overview 13 a company or the changes in the cthnic makeup of the market is external information, whereas, the operating management needs internal information. The internal information is a by-product of the normal operations of a business. For example, a recording of inventory usage for the past week is typical internal information. Internal information generally is historical or static in nature; it is also called after-the-fact data. ‘The characteristics of information are discussed in Chapter 2. 1.3.3 Systems The term ‘system’ is the most loosely held term in management literature because of its use in different contexts. However, a system may be defined as a set of elements which are joined together to achieve a common objective. The clements arc interrelated and interdependent, Further, every system is said to be composed of sub-systems, which in turn are made up of other sub-systems, This may be illustrated by taking an example of @ business organization, that may be regarded as a system and the parts of the organization (divisions, departments, units, etc.) are the sub-systems (For details refer to Chapter 2.) The set of clements for a system may be understood as Input, Process and Output. A system has one or multiple input(s): these inputs are processed through a transformation process to convert these input(s) into output(s). For example, in 2 manufacturing organization, raw material is input to a system, which is processed by using various organizational processing facilities to convert it into finished products (output). Similarly, in an information system data is input, which is processed to convert it into information. The three elements of a system are portrayed in Figure 1.8 + Input >| Process Output Figure 1.8 Elements of 2 System When feedback and control elements are attached to any system, to make it self-regulating and self-monitoring, it is knownasa cybernetic system (sce Figure 1.9). A person-madc example of a cybernetic system is that of a Thermostat controlled heating system which automatically monitors and regulates itself to maintain a desired temperature on the basis of feedback it gets from the environment. Automation is introduced in engineering systems by involving the principles of feedback and control Input >| Process + Output Feedback! Control Figure 1.9 Cybernetic System4 Management Information Systems A sysicm cannot exist in vacuum: rather, it exists and functions in an cnvironment. However, it is separated from its environment by its boundary as shown in Figure 1.10. Input ———+ Processing—+ utput \l7 Emmonment Feedback/Control 4 | XN System t Boundary Figure 1.10 A System Separated from Its Environment by its Boundary Several systems may share the same environment. Some of these systems may be connected to one another by means of a shared boundary or Interface. A system which interacts with its environment and exchanges inputs and outputs is known as an open system. A system which does not interact or exchange any of its inputs or outputs with its environment is called a closed system. System concepts have been explained in more detail in Chapter 2. ‘The basic concepts of a general system can be applied to understand an information system For example, an information system is a sct of interrelated components like people, hardware, software, databases and computer networks. All the interrelated components work together to achieve a common objective i.e. producing of information by processing the data. They have well-defined boundaries like functions, modules or department. Information systems use feedback/control to improve their effectiveness like produce error messages, dialog boxes and passwords, etc. 1.4 MIS: A DEFINITION Having discussed the concepts of the three components of MIS, viz., Management, Information and System. let us now try to understand its definition. While discussing various components. it has been clearly established that decision-making is the essence of management and for taking rational decisions, information is an essential and vital input. Further, to obtain information. a logical and well-defined method of information, which can be implemented by joining certain interrelated elements, is essential, Thus, if we simply combine all the above facts. we may devise our definition of MIS as follows. Management information system is a system consisting of people, machines, procedures, databases and data models, as its elements, The system gathers data from the internal and external sources of an organization: processes it and supplies Information to assist managers in the process of decision-making. Here the word system implics that MIS follows a systems approach which means a holistic approach and is based on the concept of synergy where the output is greater than the sum of its parts. Thus, it clearly indicates that MIS is not a single system: rather it is an integrated system where There are many types of MIS (Box 1.1). parts (sub-systems) fit into an overall design.Management Information Systems: An Overview 15 Box 1.1 Examples of MIS ‘* Payroll Information System ‘* Accounting Information System + Loan Processing Information System © Customer Complaint Handling System ‘* Inventory Information System © Marketing Information System * Finance Information system © Supply Chain Management System ‘+ Customer Relationship Management System * Business Inteligent System * Enterprise Resources Planning System + Materials Requirement Planning System Customer Order Information System Manufacturing Resources Planning System + Library Information System ‘+ Online Leaming and Teaching System ‘+ Human Resources Information System A diagrammatic representation of the concep! of MIS is shown in Figure 1.11. The purpose of MIS as understood today is to raise managing from the level of piecemeal steady information, intuitive guesswork and isolated problem-solving to the level of systems insight system information, sophisticated data processing and systems problem solving Data || Processing ata || Logic = Judgment — External environment = Intuition - Experience— Skill Decision Datg |! Computers || Information | [Intetigence}>{ Design ]+[_choice | i Decision Making Data || beings. beings ¥ Decision Database Implementation Computer Performance Networks Monitoring/Feedback igure 1.11 Concept of MIS 1.4.1 MIS Activities MIS is set up by an organization with the prime objective to obtain information to be used by its managers in decision-making. In order to provide information, information system performs several tasks or activities, which are shown in Figure 1,12 and are discussed below: Data capturing MIS captures data from various internal and external sources of an organization. Data capturing may be manual or through computer terminals, End users typically. record data about transactions on some physical medium, such as a paper form, orenter it dit 10 a computer system ly i16 Management Information Systems Processing of data The captured daia is processed to convert it into the required management information Processing of data is done by such activities as calculating, comparing. sorting, classifying and summarising. These activities organize, analyse and manipulate data using various statistical, mathematical, financial, operations research and/or other business models. Storage of information MIS stores processed or unprocessed data for future use, If any information is not immediately required. itis saved as an organizational record. In this activity. dataand information are retained in an organized manner for later use. Stored data is commonly organized into fields. records files and databases. all of which will be discussed in detail in later chapters. MIS retrieves information from its stores as and when required by various users. As per the requirements of management use1s, the retricved information is cither disseminated as such or it is processed again to meet the exact information demands Dissemination of information Information, which is a finished product of MIS, is disseminated to the users in the organization. It could be periodic. through reports or on-line through computer terminals. Source sous veer User Souree: Data Capture Processing Dissemination > User 2 User we =| source Storage of Information Figure 1.12 Activities of MIS Control of system performance Control of Information System's performance is an important [S activity. This is undertaken with the help of feedback the IS produces about its input, processing, output and storage activities. The feedback received from the system is monitored and evaluated against the standards and if any deviations are found, appropriate corrective actions are taken so that proper information is produced for the managers.Management Information Systems: An Overview 7 1.4.2 Components of MIS MIS comprises various components, which are given below. These components are shown diagrammatically in Figure 1,13. I 2 6 People (Users and IS/IT specialists) Hardware (computer. servers, peripherals) and Software (Information Systems software, Operating systems) Database. data warehouse (organizational data from within and outside, knowledge base) Model base Computer networks (communication media and networks) Processes (business processes, procedures, and policies) Letus deseribe these components. in brief. 1 6. People: As MIS is a user machine systems, people are one of the important components of MIS. Thus, this component includes all the people, may be users, management and IT specialists, etc Hardware and software: This component represents the computers that inchide the hardware like computers, servers, desktops, other peripherals: and Software like enterprise resource Systems software, Operating systems, etc Database/Data warehouse: This is the repository of organizational data from within and outside the organization. Model base: This is the group of various models like mathematical model, arithmetical model, statistical model, financial model, forecasting model, descriptive model, etc., which are essential to process the data into information, Network: The network component includes communication processors, such as modems, inter-network processors, and communication control software, such as network operating systems and internet browser packages. Processes: Include business processes, procedures, and policies of the organization. Computer Hardware/Software Networks Database Input and Output Operating Procedures Figure 1.13 Components of MIS.18 Management Information Systems 1.5 MANAGEMENT INFORMATION SYSTEM AND INFORMATION TECHNOLOGY MIS deals with planning, development, applications and management of information sy stems to help decision makers in an organization, whereas, information technology (IT) is referred to the technological side of an information system, which is understood to include computer hardware, software, databases, computer networks, and other devices, In other words. MIS is a broader term that focuses on managing information resources in an organization and IT may be understood as a sub-system of an information system. For the sake of convenience, sometimes, the term IT is also being used interchangeably with information system. There is another school of thought which advocates that IT should be viewed as a broader concept that describes a combination of all or many of the information systems, users and information management for the entire organization. For the purpose of this book, the term “MIS" is used in its broader perspective, keeping in view that information and people are the most important resources within MIS and technology is understood as an enabler of MIS. In this book, technology has also been covered but not as a sole focus of MIS. In other words, MIS is required to be understood more as a management subject than as a computer science subject. Hen management-oriented course with managerial perspectives of IT. . MIS is nota technical course: rather it is a 1.6 NATURE AND SCOPE OF MIS The concept of MIS is imerdisciplinary in nature, ic., ithas borrowed its concepts from a large number of disciplines like computer science, operations research, management science and behavioural sciences. etc. (Figure 1.14) Computer Science Operations Research Psychology Economics Management Figure 1.14 Interdsciplinary Nature of MIS Because of its interdisciplinary nature, MIS is neither termed as a pure science nor an art rather it is considered as a combination of both, An information system is a logical system, which is concerned with “how” something is being accomplished and thus may be differentiated from a physical system, which is the process itself and is concerned with the content or “what is going on, MIS, in fact, encompasses both physical system and information systems. ThereManagement Information Systems: An Overview 19 has been a lot of debate on the issue whether MIS is more management-oriented or computer- oriented. Though there are advocates of both the sides, MIS should be considered more of a Management subject than of computers because of simple logic that computers are just a tool in the hands of managers. Computers are used for their characteristics like accuracy, speed and capacity to handle large amount of data. Nowadays MIS finds application in all functional areas of every type of business organizations at all Ievels. As has already been discussed, MIS caters to information needs of managers in an organization, thus its scope lics in structured as well as unstructured type of information which could be gathered from intemal as well as external sources of the organization. Further, with the advent of computers and communication icchnology. the scope of MIS has increased manifold. Though. you will still find a variety of information systems that exist which may be manual information systems, where managers use tools such as pencils, paper or calculators to convert raw data into information. However, because of high potential of computers and communications technology (CCT) organizations in the future would like to make usc of advances of CCT. Today, MIS is not a standalone computer-based information system: rather it is networked where computers can exchange information quickly at a distance. Internet has further revolutionized the business world. In fact, the Internet has been the main driving force in popularizing c-commerce in 1999, and the sudden rise of dot-com companies. The failure of dot-com companies in the mid-2000 does not mean an end of e-commerce applications: rather companies have learnt a lot in the process Nowadays, organizations are moving towards digital organizations where all or many of the business activities are performed electronically and a much broader term is being used, which is known as e-business. ‘The term e-commerce refers to the entire online process of developing, marketing, selling, delivering, scrvicing and paying for products on the Internet: the term of e-business is a more general one and it refers to the style of operating an organization by making extensive use of information technology within critical business processes, such as designing products, obtaining supplicrs, manufacturing, selling, fulfilling orders and providing services through the extensive use of computer and communication technologies and computerized data. In other words, c-business covers customer-relationship management, cnterprise resource planning, and supply chain management, ctc., and also includes e-commerce. The concepts of e-commerce and e-business are discussed in later chapters of this book. 1.7 MIS CHARACTERISTICS A management information system has certain characteristics, which are discussed below Systems approach The information system follows a systems approach. The systems approach implies a holistic approach to the study of system and its performance in the light of the objective for which ithas been constituted. This approach is anti-piecemeal approach, In other words, systems approach means taking a comprehensive view or a complete look at the interlocking sub-systems that operate within an organization20 Management Information Systems Management-oriented MIS is management-oriented that implies top-down approach should be followed. Top-down approach suggests that the system development starts from the determination of management needs and overall business objectives. The MIS development plan should be derived from the overall business plan, Management-oriented characteristic of MIS also implies that the management actively directs the system development elforis. In MIS development, a manager should spend a good amount of his/her time in system design, To ensure that the implemented system meets the specifications of the system, continued review and participation of the manager is necessary Need-based MIS caters to the specific needs of managers at different levels of the management hierarchy MIS design and development should be as per the information needs of managers at different levels, viz., strategic planning level. management control level and operational control level. Exception-based MIS provides information on the exception-based reporting principle so as to trigger a control action. Exception-based reporting means an abnormal situation, ic. the maximum, minimum or expected values vary beyond tolerance limits. In such situations, there should be exception reporting to the decision-maker at the required level. Future-oriented Besides exception-based reporting, MIS also looks at the future. In other words, MIS does not merely provide past or historical information, Rather, it provides information on the basis of projections based on which actions may be initiated. Integrated Integration is a necessary characteristic of a management information system, It is significant because of its ability (o produce more meaningful information. For example, in order to develop an effective production scheduling system. it is necessary to balance such factors as: + set-up cosis © =workforce * overtime rates * production capacity * inventory level © capital requirements © customer services A system that ignores any one of these elements, for example, inventory levels, is not providing the management with an optimal picture. The cost of carrying excess inventory may more than offset the other benefits of the system. Integration in the sense intended here, means