CHAP 1 - IS CONCEPTS

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CHAP 1 - INFORMATION SYSTEM CONCEPTS

Introduction
Definition of a system
Types of a System
General model of a system
System Environment
Information
Information System and its role in Management
Types of Information Systems at different levels
Operations Support systems (OAS)
Management support systems (MSS)
Office automation system (OAS)
DEFINITION OF A SYSTEM
• Orderly arrangement of a set of interrelated & interacting elements - operate collectively - common goal.
• Example: Human body, Computer System, Business Enterprise
• Types of System-
1. Elements
2. Interactive behaviour
3. Degree of human intervention
4. Working/output
CLASSIFICATION CHART OF A SYSTEM
1) According to Elements, Systems can be:

1. Abstract system: Orderly arrangement of interdependent ideas. Also referred as Conceptual system or
model. E.g. Theology - arrangement of ideas about God.
2. Physical system: Set of tangible elements interacting and operating together to accomplish common goal.
E.g. Motor car - arrangement of physical parts
Physical systems are more than conceptual construct; they display activity or behavior. The parts interact to
achieve an objective.
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2) According to Interactive behaviour, Systems can be:

All systems work in a specific environment and based on how they perform within an environment, systems can be
categorized in two broad classes:
Open System –
• Interacts freely with its environment and its elements by taking input and returning output
• Changes itself to match with change(s) of/in environment; Adapt
• E.g. Information systems are open systems because they accept inputs from environment and sends outputs
to environment.
Closed system –
• Does not interact with the environment
• Does not change with the change in environment, remain insulated
• Relatively shorter life-cycle because it decays faster for not having any input/interaction from environment
• E.g. Physical system such as ‘Throw-away’ type sealed digital watch
Organisations are considered to be relatively open systems-

• Continuously interact with the external environment. Act as input-output systems. I-P-O.
• Sometime act as relatively closed system to preserve their identity and autonomy. They may ignore many
opportunities so as to maintain their core-competence.
Entropy- is the Quantitative measure of disorder in a system. Systems can decay or become disorganized. Inputs
of energy/ matter needed to offset increase in entropy. This maintainance input = Negative entropy. Open
system require more –ve entropy than relatively closed system. However, life-cycle of closed system is shorter.
3) According to Degree of human intervention, Systems can be:

• Manual system – where data collection, manipulation, maintenance and final reporting are carried out
absolutely by human efforts.
• Automated systems – where computers or microprocessors are used to carry out all the tasks mentioned
above. It depends on manual intervention in a small way. It involves a close man-machine interaction.
Why use computers? Because otherwise work too difficult, time consuming and sometimes impossible. “The
reasons for using computer in business area are as follows”:
1. Handling huge data volume
2. Storing data for indefinite period
3. Quick and accurate data-processing (IPO)
4. Quick retrieval of information on query
5. Quick and efficient transportation of data/information to distant places
6. Using software tools for quick decision making
4) According to Working/output, Systems can be:

Deterministic system
• It operates in a predictable manner
• Interaction among the parts is known with certainty
• Future state/action can be predicted without error
• E.g. a correct computer program
Probabilistic system
• Relates to probable behaviour
• Future state/action cannot be predicted without error
• E.g. Inventory system
General Model of System

General model of a physical system comprise of IPO or Input ---> Process ---> Output. A system may have several
Inputs & Outputs.
• Input- is the data flowing into the system from outside
• Processing- is converting the input into useful form
• Output- is the information flowing out of a system
• Storage- is the means of holding information for use at a later date
• Feedback- occurs when the outcome has an influence on the input
Components of a System OR System Environment

All systems function within some sort of environment. What constitutes the system?
• Inter-connections and interactions between sub-systems.

Interfaces
• Interfaces occur at the boundary and take the form of inputs and outputs.
Sub-system • Part of a larger system - a system is made up of sub-systems.
• Defines & delineates a system from its environment or delineates a sub-system within a
Boundary system.
• The system is inside the boundary; the environment is outside the boundary.
• External world which is outside system boundary = SE

System
• Collection of elements that surround a system and interact with it as well
Environment
• Systems function within the environment
• Entity formed by a system / sub-system and other equivalent systems

Supra-system
• E.g. Organisation (Supra-system) -> Functional areas (sub-system).
Characteristics of Sub-systems (-Decomposition or Identification of Sub-systems-)
Sub-systems are building blocks – helps in analysis & development. Principles how systems are built from sub-
systems:
1) DECOMPOSITION
1. A complex system is decomposed/factored into smaller subsystems of manageable sizes

2. Resulting sub-systems form hierarchical structures
3. Boundaries and interfaces are defined
4. Thus, sum of the subsystems forms the entire system
Need/Use: Complex system difficult to comprehend as a whole. Hence, (1) to analyze an existing system and (2)
to design and implement a new system.
Example (Approach to decomposition):

1. Information system divided into sub-system – Accounting, payroll, purchasing, production, inventory etc.
2. Additionally, each sub-system is divided further into sub-systems. E.g. Accounting further decomposed:
General Ledger, A/C receivables etc.
3. If the task is to design and program a new system, the sub-systems (major applications) defined in (2) might
be further subdivided into smaller sub-systems or modules
2) SIMPLIFICATION
Process of organizing subsystems so as to reduce the number of interconnections. No. of interconnections if all
the subsystems interact = ½ x n x (n-1), where n is the number of subsystems. (-E.g. Pentagon-)
3) DECOUPLING
If two different subsystems are connected very tightly, very close coordination between them is required.
E.g. RM is put directly into production the moment it arrives at the factory. RM system can be said to be tightly
coupled. Here, RM delivery (input to production system and output from RM system) must be precisely timed in
order to avoid delays in production or to prevent new material from arriving too soon with no place to be stored.
• Inventories, buffer, or waiting lines: RM inventory allows the two subsystems to operate somewhat
independently (in short run). Data buffers are used in some computer and output of data to compensate for
diff rates of input-output.
• Slack and Flexible resources: When the output of one subsystem is the input to another, the existence of
slack resources allows a subsystem to respond to the demands of the other subsystem.
• Standards: Standard allows a subsystem to plan and organize with reduced need to communicate with other
subsystems. A standard decoupling mechanism eliminates tedious & time-consuming checking.
System stress & System change

Systems change because they undergo stress. A stress is a force transmitted by a system's supra-system that
causes a system to change, so that the supra-system can achieve its goals. Result-
• System will change to accommodate the stress
• System will be unable to accommodate the stress
o Supra-system reduces stress otherwise system will decay & terminate
- Changes may be structural changes or process changes
INFORMATION
• Information is data that have been put into a meaningful and useful context.
• The term “data” and ‘information’ are often used interchangeably. Data : Information :: RM : FG
• Raw material i.e. data determines quality of output i.e. information. This phenomenon is called Garbage in
garbage out (GIGO)
Processing Decision making

Data Information Action
Important attributes/characteristics of Information

The important attributes of useful and effective information are as follows:
Purpose To inform, evaluate, organize. Help plan, control, solve problems, and make decisions
Rate Rate of transmission /reception of information
Mode Visual, verbal or in written form.
Completeness Better decision making
Transparency Should give true picture
Use of tables, charts, graphs and diagrams. Summary vs. Entire report. Proper classification.
Format
Simple & relevant; Uncluttered
Availability Useless if not available at the time of need
Decay Value of information usually decays with time and usage. Refresh/update regularly.
Reliability Information is reliable if it leads to correct decision repeatedly
Quality refers to the correctness of information. Should be free from errors, personal bias.
Errors due to:
Quality • Incorrect data measurement and calculation methods
• Failure to follow processing procedure
• Loss or non-processing of data
Value of Difference between the value of the change in decision behaviour caused by the information
information and the cost of procuring the new information.
Adequacy Information must be adequate for initiating action
Benefits must justify the cost incurred in procuring information. Costs are easy to measure.
Benefits are difficult to quantify. Hence, classify all the managerial statements into
categories:
Cost Benefit
• Absolutely essential- Can’t be discontinued whatever be the cost
analysis
• Necessary- Can be discontinued in exceptional circumstances
• Normal- Can be discontinued if costs are high
• Extra- Prepare if benefits outweigh costs
Validity Closeness of info. to the purpose which it is meant to serve
Frequency Frequency with which information is transmitted or received affects its value
PReM mey -> ladka CT marta hai -> FADR jaag jaata hai -> Ladke ke Career ka Quality/Value/Adequacy -> Cost-benefit
analysis -> Vivaah ke Fere
Types of Information
Information, in the context of business organizations, broadly, can be divided into two different types:
Internal information:
• Information as generated from the operations of the organization (internal) at various functional areas
• Gets processed and summarized from junior to top most level of management
• All levels of management use it
• E.g. production figures, sales figures, information about personnel, accounts, material etc.
External information:
• As collected from the external environment of the business organization

• Affects the organizational performance from outside the organization.
• Top level of management uses it
• E.g. Govt. policies, competition, economic status etc.
Access to internal and external information by different levels of management
INFORMATION SYSTEM AND ITS ROLE IN MANAGEMENT
An information system is an arrangement of a number of elements that provides effective information for
decision-making and / or control of some operations of an organization. It reduces uncertainty. Some of
important implications (-benefits-) of information system in business are as follows:
• Decision-making to achieve goal
• Right decision at the right time
• Knowledge used in unusual situations
• Solving critical problems
• Edge in the competitive environment
• Formulate a strategy of action
Factors on which Information requirements of executives depend
1. Operational function 2. Type of decision making 3. Level of management activity
1. Operational function: The grouping/clustering of several functional units on the basis of related activities into
a sub-system is termed as operational function.
• E.g. In a business enterprise, marketing is an operational function. Grouping of functional units like market
research, advertising, sales analysis and so on.
• Information requirement of different operational functions vary in content and characteristics
2. Type of decision making: Organisational decisions can be categorised as (1) programmed (2) non-programmed
ones.
Programmed decisions Non-programmed decisions
1) Structured decisions Non-structured decisions
Decisions made on problems and situations by Decisions made on situations and problems which are
2) reference to a pre-determined set of precedents, novel and non-repetitive and about which not much
procedures, techniques and rules knowledge and information are available
Well-structured in advance and are time-tested No pre-determined guidelines, standard operating

3)
for their validity. procedures,
For familiar, routine and recurring problems - Not Requires managerial intelligence, experience,
4)
much judgment and discretion is needed judgment and vision
5) Decision making is simplified No simple or single best way of making decisions
6) Tend to be consistent over situations & time Decisions tend to be unique or unusual
E.g. Ordering inventories when the level drops to E.g. Determining the best training for a new
7)
100 units or fewer in a retail shop. employee joining the organization.
3. Level of management activity: Different levels of management activities in management planning and control
hierarchy are–Strategic level, tactical level and operational level.
Strategic Level or Top level:

• Concerned with developing of organisation mission, objectives and strategies.
• Strategic decisions made at Top level - Relates to problems critical to the survival and success
• Involves analysis and judgement
• Comparable to non-programmed decisions – available information incomplete
Tactical Level or middle level:

• Taken at middle of managerial hierarchy
• Managers plan, organise, lead and control the activities of other managers
• Sometimes referred as Operational decisions – Relatively structured
• A single strategic decision calls for a series of implementable tactical decisions
• More specific and functional
• Information easily available - less uncertainty and complexity
• Decision variables can be forecasted and quantified - impact is relatively localised and short-range
Supervisory or operational Level:

• Lowest level in managerial hierarchy.
• Managers coordinate the work of non-managerial workers
• Ensure that specific tasks are carried out, routine office work
Components of computer-based information system (CBIS)
CBIS is an information system in which computers play a major role. Components-

• H/w- Includes machinery (CPU, equipments, devices)
• S/w- Computer programs and manuals that support
• Data- facts to produce useful information
• Procedure- Policies that govern computer operations
• People- Operators include users, programmers, system analysts and administrator, DBA
CBIS characteristics are as follows:

1. Pre-determined objectives
2. Interrelated and interdependent subsystems
3. Sub-system works with other sub-systems (a.k.a interaction)
4. Work done by individual subsystems is integrated to achieve the central goal
5. Success of a system dependant on sub-system
Major areas of computer-based applications are:
Major areas: Goal is …
• To ensure financial viability, plan & monitor budgets.

Finance and • Helps forecasting revenues, optimum use of funds.
accounting • Sub-application areas include financial accounting, G/L, AR/AP, BS, Cash
management etc.
• To maximize sales and ensure customer satisfaction.

Marketing and sales
• Others- new customers, advertising, order processing, after-sales service etc.
• To optimally deploy man, machine and material to maximize production or service.

Production or
• Others- overhead cost control and waste control, product quality, machinery
manufacturing
maintenance, CAD (Computer Aided Design), CAM (Computer Aided Manufacturing)
• To maintain optimal level stock of raw materials, component tools and equipment.
Inventory / Stores
• Minimize inventory holding cost and the risk of production stoppage due to stock
management
shortage. E.g. EOQ, ABC
• To have Right people at right place.

HRM
• Look after Recruitment, salary, training, promotion, administration.
TYPES OF INFORMATION SYSTEMS AT DIFFERENT LEVELS
Data available at different functional areas of an organization for management:-
At the lowest level,

• Managed by operational level managers (like supervisor, section in-charge),
• Inputs from various sources are collected
• Routine office work - no decision-making process
• Proper organization of data for further processing is important – sufficient manpower needed
At the middle level,

• Decision making-process starts.
• Inputs from different internal and external information sources are collected and processed
• Middle level managers key personnel - Use tools of analysis and typical software products to report to the
higher level with options and possible effects
At the top level,

• Decisions are taken on the basis of the information passed from middle management.
Information systems can be classified into 3 broad categories upon their focus on kind of activities in a
business enterprise- 1) OSS 2) MSS 3) OAS
- TPS - DSS - Text

- MIS - EIS - E-Document Mgmt
- ERP - ESS - E-messaging
- Tele-Conf.
OPERATIONS SUPPORT SYSTEMS (OSS)
Objective – is to improve operational efficiency of the enterprise. As these systems are concerned with
operations, they use internal data primarily for managers at the lower levels. These are further classified into:
1. Transaction Processing Systems (TPS)
2. Management Information Systems (MIS)
3. Enterprise Resource Planning Systems (ERP)
1) Transaction Processing Systems (TPS)
TPS at the lowest level of management is an information system that manipulates data from business
transactions. Any business activity such as sales, purchase, production, delivery, payments or receipts involves
transaction and these transactions are to be organized & manipulated to generate various information products
for external use. E.g. selling of a product to a customer will give rise to the need of further information like customer billing,
inventory status and increase in AR balance.
Typically, a TPS involves the following activities-

o Capturing data to organize in files or databases
o Processing of files/ databases using software
o Generating information reports
o Processing of queries
A TPS may follow periodic data preparation and batch processing (e.g. payroll) or on-line processing (e.g.
inventory control). Latter provides up-to-date status
TPS Components (-IPOs-)

• Inputs: Source documents, such as customer orders, sales, slips, invoices, POs, and employee time cards, are
the physical evidence of inputs into TPS. Purpose- capturing data, standardizing operations, record for future
reference etc.
• Processing: Use of journals and registers to provide a permanent and chronological record of inputs.
• Storage: Ledgers and files provide storage of data on both manual and computerized systems. E.g. GL, AP/AR
ledgers
• Outputs: Any document generated in the system is output. Some documents are both output and input.
Financial reports summarize the results of transaction processing as per reporting standards
Features of TPS
• Large volume of data: TPS is transaction-oriented -> large volumes of data -> require greater storage
capacity. Relevant data are captured quickly and correctly.
• Automation of basic operations: TPS aims at automating the basic operations. Important source of up-to-
date information
• Benefits easily measurable: TPS reduces workload of people & improves efficiency. Benefits are tangible
and easily measurable. Therefore, cost-benefit analysis is easy to conduct. User acceptance is easy as well.
• Source of input for other systems: TPS is the basic source of internal information for other systems. Heavy
reliability on TPS makes it important for tactical and strategic decisions as well.
2) Management Information Systems (MIS)
• MIS vs. TPS- MIS assist managers in decision making and problem solving in contrast to TPS, which are
operations oriented. May use results of TPS.
• “Integrated user-machine system that provide information to support operational control, management
control, decision making, and problem solving”
• Information systems can be developed so that necessary reports are prepared regularly to support recurring
decisions, issues
• Uses resources such as hardware, software, personnel, procedure, supplies
• Designed to provide accurate, relevant and timely information to managers at different levels
• Management: A manager may be required to perform following activities in an organization.

Determine objectives & plans to achieve them
Organise resources
Exercise Control over functions
Monitor results
Thus, management comprises the processes or activities that describe what managers do in the operation of
their organization, plan, organize, initiate, and control operations.
• Information: Sets of facts, figures and symbols processed for the current decision-making situation
• System: Set of related components, activities, process and human beings interacting together so as to
accomplish some common objective. Functions of MIS:
Characteristics of an effective MIS / Factors to be considered for designing an effective MIS
Management oriented:
• MIS development should start with the appraisal of management needs and business objectives
• MIS is needed at all management levels
Management directed:
• Management should actively direct the system’s development efforts at all times
• E.g. system design, system implementation, specifications
Integrated:
• All the functional and operational information sub-system should be tied together into one entity
• Helps generate more meaningful & comprehensive information
Common data flows:

• Use common IPO procedures and media
• Eliminates duplication of work
• Simplifies operations
Common database:
• Database is the "superfile" which consolidates & integrates data records formerly stored in separate data
files
• Accessed by several information sub-systems
• Eliminates duplication in data storage, updating, deletion and protection
Computerised:
• Use of computers increases the effectiveness, speed, accuracy and consistency of the system
• Handle a wide variety of applications, reduction in clerical staff
Planning:
• MIS development needs 3 or more years
• Consider future objectives and requirements of firm's information
• Avoid the possibility of system obsolescence before the system gets into operation
Sub-system concept:
• MIS must be broken down into digestible sub-systems which can be implemented one at a time by
developing a phasing plan
Misconceptions or Myths about MIS: (- Computers are More Accurate -)
• MIS is about use of computers- MIS may or may not be computer based; computer is just a tool
• More data means more information for managers-It is not the quantity of data, but its relevance, which is
important. Unorganised mass of data creates confusion.
• Accuracy in reporting is very important- True for operating level. It is untrue for higher management as they
are concerned with broad decisions. Higher levels of accuracy involve higher cost.
Pre-requisites of an effective MIS
1. Database:-
• “Superfile”
• Subdivided into the major information sub-sets
• Improves accessibility & reduces redundancy
• Its important characteristics are:
• Each subsystem utilises same data i.e. common data source
• Reduces duplication of efforts
• User–oriented
• Available to authorised persons only
• Controlled by a separate authority, known as Data Base Management System (DBMS)
2. Qualified system and management staff:

• Two categories of officers viz. (1) Systems and Computer experts and (2) Management experts.
• Difficult to attract & retain suitable experts
3. Support of Top Management :

• Support essential because-
• Otherwise subordinate managers become lethargic
• Resources involved is large
4. Control and maintenance of MIS:

• Control implies system operation works as per design; no shortcuts
• Maintenance implies identifying areas of improvements. Formal methods for changing and documenting
changes.
5. Evaluation of MIS:
• Capable of meeting the information requirements in future as well. It requires MIS evaluation taking
appropriate timely action. Evaluation should consider-
• Whether enough flexibility exists
• Users’ and the designers’ views
• Appropriate action steps
(- MIS * DB * Chalaane waale Staff * Top Mgt Support * CoM * Eval. -)
Constraints in operating a MIS:
1. Non-availability of experts:
• Constraints- Shortage of experts who can diagnose the objectives of the organisation and provide a direction
• Remedy- Grooming internal staff after proper selection and training
2. High turnover of experts in MIS:

• Constraints- Due to pay / promotion issues, behaviour
• Remedy- Better working conditions, pay
3. Non- cooperation from staff:

• Constraints- Non-cooperation
• Remedy- Educating and explaining system’s utility; active involvement during development / implementation
4. Sub-system selection:
• Constraints- Selecting sub-system of MIS
• Remedy- Need and importance of the MIS function should be guiding criteria
5. Non-standardised approach:
• Constraints- Approach adopted for designing and implementing MIS is a non-standardised one
• Remedy- Gradual standardisation
6. Difficulty in quantifying the benefits:

• Constraints- Not comparable with cost until then, raises question amongst managers
• Remedy- Managers be educated
Effects/Impact of using Computer/Computer technology for MIS:
1. Speeds up processing and retrieval of data-

• Modern business situation- complexity, competition, risk-reward
• Demands quick information for decision making
• Computation and storage capabilities
2. Increases the effectiveness of MIS-

• Timely, accurate and desired information for the purpose of decision making
3. Expands scope of MIS-

• Applications previously not feasible under manual systems now developed
• E.g. Online real-time system
4. Widens scope of analysis-

• Helps provide multiple types of information accurately and in no time to decision makers
• E.g. Daily detailed sales reports helps analyze weaknesses and take timely action
5. Integrates different information sub-system-

• MIS is group of information sub-system- production, finance, marketing etc.
• Common database helps integrate all and thus, support operational & management control, strategic
planning
6. Handles increased Complexity of system design and operation-

• System design has become complex because of multitudes of variables
• Computer software helps develop MIS programs
7. More Comprehensive information
E.g. hawk-eye (- COMPS -> Speeds Up Eff and Scope of “MIS” Analysis. Provides I C C information -)
Limitations of MIS
1. Quality of the outputs – depends on the quantity of input and processes (e.g. GIGO)
2. Considers Quantitative factors- Ignores morale, attitude
3. Less useful for making non-programmed decisions.

4. Lacks requisite flexibility – to quickly update itself with the changing needs
5. Can’t provide tailor made information packages
6. Not a substitute for effective management - Just a managerial tool for decision making / problem solving
7. Effectiveness reduced if frequent changes in top management, organizational structure & operational team
8. Effectiveness reduced if information withheld
ERP (refer Chapter 7)
Definition: “ERP system is a fully integrated business management systems that integrates the core business &
management processes to provide an organization a structured environment in which decisions concerning
demand, supply, operational, personnel, finance, logistics etc. are fully supported by accurate and reliable real-
time information."
Objectives:
• to provide support for adopting best business practices
• to implement these practices with a view towards enhancing productivity and
• to empower the customers and suppliers to modify the implemented business processes to suit their needs
ERP Model: An ERP system integrates various BUSINESS PROCESSES as shown

1) Business System : It includes the following aspects - Forecasting, Targets, Strategy, Resource allocation,
monitoring and control
2) Production: Planning, Work processes, Purchasing and procurement system, Inventory management
3) Maintenance : Planning, Breakdown, preventive and conditional maintenance
4) Quality Control: Assessment against standards and BY process, materials, and work center location, Analysis
5) Marketing: Market/customer/product analysis, Sales forecasting and budgeting; Marketing research
6) Finance: Planning and control; Management of long-term funds, WC, FSA, Costing, taxation
7) Personnel: HR planning, recruitment, and training; appraisal; compensation management; health and safety
8) Consolidation of Business Operations : Accounting by units and divisions, functions
BENEFITS of ERP ≠ Chap. 7 [- Client -> Goods Purchased -> Goods Sold -> Paper work / reports -> ☺ -> Intl. expand -]
There are numerous benefits of ERP which can be categorized into following groups:
1. Better use of Organizational Resources: ERP model helps indicate where the resources find best
usage; optimum utilization.
2. Lower Operating Costs: Improved business performance through cycle time reduction, inventory
reduction, order fulfillment improvement, increased business agility => Better profits.
3. Proactive Decision Making: Decisions must be made in advance of likely environmental changes
and anticipated competitive moves. X Reactive decision.
4. Decentralized Decision Making: Decisions are made at those points at which these are relevant
for execution. Faster processing technology & SQL helps + Decisions at lower management levels -
> less burden on higher management levels and freeing them for strategic thinking.
5. Enhanced customer Satisfaction: Define end-to-end approach for managing customers' requests.
Eff-Eff processing of requests & focus on customer relationship management (CRM).
6. Flexibility in Business Operations: Adjust to environmental needs - different languages,

currencies, accounting standards, etc. can be covered in one system.
LIMITATIONS of ERP (-N.B. Not applicable for the latest ERPs -)
• An ERP system provides current status only, such as open orders, Managers often need to look at
past along with the current status to identify trends and patterns that aid better decision
making.
• The methods used in the ERP applications are not integrated with other organizational or
divisional systems. Further, they do not include external intelligence.
Some major ERP packages available in Indian market are as SAP, Oracle Applications, Ramco Marshals,
eBPCs, Activera and Baan ERP.
Refer Chap. 7 for the following sub-Topics

• Characteristics of ERP (Evaluation of ERP done on following criteria) (-Hint: FM Tally Co. -)
• Features of ERP (-Hint: Multi : MPS -)
MANAGEMENT SUPPORT SYSTEMS (MSS)
MSS focus on the managerial uses of information resources and provide information to managers for planning and
decision making. The information provided by these systems is based on both the internal and external data using
various data analysis tools. 3 types of MSS, namely:
• Decision Support Systems (DSS)
• Executive Information (Support) System (EIS)
• Expert Systems
MSS
DSS EIS ES
• Interactive computerized • For Top level

information system, • Characteristics: Top Execs, No need, • Highly developed DSS
Complies, Personalizes, Online-Timely access from In-Out
• Buz. Applications & Needs
Solves • Exec decision: STephen’s house Fire
• Benefits
• 3 Characteristics: Support, • Decision-Making Envt.
Flex, Easy • Roles & Char.
• Properties
• 4 Components: DoSaS are • Vs. Tradtional: • Components
from UDP, Madras • Contents: Cricket team
DECISION SUPPORT SYSTEMS (DSS)
DSS definition - Interactive computerized information system that supports business decision-making activities.
• Compiles useful information from raw data & Solve problems.
• Provides tools to managers, to assist them in solving semi-structured and unstructured problems, in a
personalized manner
• Typical information that a DSS might gather and present would be:
• an inventory of all the current information assets
• comparative sales figures; projected revenue figures based on assumptions
• consequences of different decision alternatives
DSS vs. Programmed Decision Systems (PDS)

• DSS- A DSS supports the human decision-making process, rather than providing a means to replace it.
• PDS- Systems that replace human decision making rather than support it are sometimes called programmed
decision systems (PDS). These systems are used to make routine, structured decisions, such as approving
loans or credit etc.
• Difference- In PDS, the focus is on doing something more efficiently. On the other hand; in DSS, the focus is
on helping decision makers become more effective.
Characteristics of DSS: The DSS are characterized by at least 3 properties:

1. They support semi-structured or unstructured decision-making.
2. They are flexible enough to respond to the changing needs of decision makers
3. They are easy to use
1. Support Semi-structured & Unstructured decisions

• Structured decisions- easily made from a given set of inputs, programmed fairly easily. E.g. debt overdue
reminder notice
• Unstructured decisions and semi-structured decisions- decisions for which partial information available
Steps in solving a problem with DSS or How a semi-

structured problem might be solved by using a DSS.
• Firstly, the problem is defined and formulated.
• It is then modeled with DSS software.
• Next, the model is run on the computer to provide
results. The modeler, in reviewing these results, might
decide to completely reformulate the problem, refine
the model, or use the model to obtain other results.
• E.g. Simulating Cash Flows – several iterations
2. Flexibility to adapt to changing needs

Semi-structured & Unstructured decisions may not conform to set of decision-making rules.
Must enable users to model their own information needs. Adaptable to changing information needs –
output formats, spontaneous queries
DSS Designer must make it flexible and not rigid
3. Ease of Learning and Use:

Used by users who are non-computer professionals
DSS Tools should be easy to learn and use
User-oriented interfaces such as grids, graphics, non-procedural fourth – generation languages (4GL),
natural English, easy documentation and graphical user interfaces (GUI)
Examples of DSS in accounting
• General Decision Support System- User works interactively with the computer to develop a hierarchical model
of the decision problem.
• Capital Budgeting System- E.g. NPV, IRR decisions to evaluate investment alternatives
• Cost Accounting System- E.g. Healthcare industry requires controlling costs of supplies, machinery, staff etc.
• Budget Variance Analysis System- E.g. Division wise monthly variance reports
FOUR COMPONENTS OF A DSS (- DoSaS are from UDP, Madras -)
User- User is usually a Manager dealing with unstructured or semi-structured problem.

• Need not be technical expert. Only requires understanding of problem and factors to be considered.
• 2 broad classes of users:
o Manager: Users who have basic computer knowledge and want the DSS to be very user friendly.
The manager may be at any level of authority in the organization
o Staff Specialist (Analysts): Users who are more details oriented and willing to use complex
system in their day to day work.
Databases- DSS includes one or more databases. Databases contain both “routine and non-routine” data from
both “internal and external” sources. Database is implemented at 3-levels as listed below
a) Physical level: It involves the implementation of the database on the hard disk i.e. storage of data in the
hard disk. The management of storage and access is controlled by OS.
b) Logical Level: It is designed by professional programs, which have complete knowledge of DBMS. It deals
with the nature of data stored, the scheme of the data. Storage which is logically divided into various
tables having rows and columns and the techniques for defining relationships with indexes.
c) External level: The logical level defines schema which is divided into smaller units known as sub-
schemas and given to the managers each sub-schema containing all relevant data needed by one
manager.
Planning languages (-PL-)- Two types are:

• General-purpose PL- Used to perform routine tasks like budgeting, forecasting. E.g. via-Spreadsheets
• Special-purpose PL- Limited in scope but they usually do certain jobs better than the general-purpose PL.
E.g. statistical languages, such as SAS, SPSS
Model base- Planning language allows user to maintain dialogue with model base, which is, the Brain of DSS
because it performs quantitative analysis, data manipulations, computations, mathematical functions.
Corporate DB
User DB
DSS Model
base
Executive Information Systems (EIS)
EIS– is a DSS that is designed to meet the special needs of top-level managers.
“EIS” and “ESS” (executive support system) used inter changeably. But ESS > EIS. ESS includes additional
capabilities such as e-mail.
Executive: Top level manager who exerts a strong influence on decisions.
Characteristics:
1) EIS is a CBIS that serves the information need of top executives.

2) EIS enables users to extract summary data and model complex: no need to learn query languages, statistical
formulas or high computing skills.
3) EIS provides rapid access to timely information and direct access to management reports.
4) EIS is capable of accessing both internal and external data.
5) EIS provides extensive online analysis tool like trend analysis, market conditions etc.
6) EIS can easily be given a DSS support for decision making.
Executive Roles and Decision Making:
Most executive decisions fall into one of three classes-

1. Strategic Planning: Relates to general, long-range direction of the organisation. By CEO.
2. Tactical Planning: Relates to how, when, where, & what of issues involved with carrying out strategic plan.
3. Fire Fighting: Relates to major problems that must be solved at an executive level. E.g. big lawsuit, strike
Also, executives need a certain degree of control to ensure that these activities are carried out properly.
Control: Exercise general control over the organisation. Periodically review & compare against plans.
Executive Decision-Making Environment
“Often, executives rely on their own intuition, gut feelings and past experience rather than on sophisticated
analytical skills”. Five characteristics of the types of information (those are responsible for this phenomenon) are-
1. Informal source: Rely heavily on informal sources- team lunch, TV, media, social events, informal chats
2. Low level of detail: Decisions are made by observing broad trends. Macro-view / big picture.
3. Lack of structure: Many decisions are relatively unstructured.
4. High degree of uncertainty: Lack of precedent. Possible results scientifically not predictable from actions.
5. Future orientation: Strategic-planning decisions needed to shape future events. Must adapt to change.
EIS Roles and Characteristics
EIS provide executives with access to financial data, marketing and sales information, HR information,
manufacturing data, and competitive/ strategic information. Business EIS includes facilities such as e-mail, word
processing, spreadsheet, news feeds etc.
• Tool that provides direct on-line access to relevant information (i.e. timely, accurate & actionable) in a
useful and navigable format.
• Requires limited time, limited keyboarding skills, and little direct experience with computers
• Helps identify broad issues and locate root cause
Executive Information Systems differ from traditional information systems in the following ways:
(- Level of Mgmt decides “Nature of Info” “Sources & Format & Interface”. More drill down for more details -)
And…
1. Information presented in pictorial or graphical format
2. Information is presented in summary format with facility to ‘drill down’ to details
The powerful focus of an EIS is due to the saying "what gels measured gets done." Managers are particularly
attentive to concrete information about their performance when it is available to their superiors.
Contents of EIS
A practical set of principles to guide the design of measures and indicators to be included in an EIS is
presented below-
• Team-work and friendly competition- Promote it
• Joint-ownership- Must encourage management and staff to share ownership of goals
• Availability & Confidentiality- EIS Information must be available to everyone. Confidential info excluded.
• Evolve- with changing needs
• Easy to understand and collect- EIS measures must be easy to understand and data easy to collect
• Reflect organization's objective- Based on a balanced view of the organization's objective in the areas of
productivity, quality, customer service etc.
• Reflect everyone's contribution- in a fair and consistent manner. Unbiased.
(- Cricket Execs. -> Team Jointly travels in AC Volvo bus. Objective and Contribution Easy-2-Understand -)
EXPERT SYSTEMS
• - Highly developed DSS that utilizes knowledge generally possessed by an expert

• - Software systems that imitate the reasoning processes of human experts and provide decision makers
with the type of advice they would normally receive from such expert systems
• - Ability to explain the reasoning process that was used to make decisions.
E.g. an expert system in the area of investment portfolio management might ask its user a number of specific questions relating
to investments for a particular client like - how much can be invested. Does the client have any preferences regarding specific
types of securities? And so on.
Some of the BUSINESS APPLICATIONS of Expert Systems are as follows:

(i) Accounting and Finance: Advices/helps on tax, investments, forecast models
(ii) Marketing: Helps in ____ sales quotas, customer inquiries, marketing timing, discount
(iii) Manufacturing: Helps in ____ process is running correctly, quality, corrective measures, facilities,
scheduling job-shop tasks, selecting transportation routes, product design
(iv) Personnel: Helps in ____ assessing applicant qualifications
(v) General Business: Helps in ___ project proposals, acquisition strategies, educating trainees, evaluating
performance.
NEED for Expert Systems

• Expert labor is expensive & scarce. Knowledge workers not easy to find & keep and companies are often
faced with a shortage of talent in key positions.
• They often can handle only a few factors at a time (-X multi task-)
Both these limitations imposed by human information processing capability and the rushed pace at which business
is conducted today put a practical limit on the quality of human decision making this putting a need for expert
systems
BENEFITS of Expert Systems

(i) Information in an active-form so it can be summoned anytime almost like a real life expert
(ii) Not subject to such human fallings as fatigue, being too busy, or biased
(iii) Preserve knowledge that might be lost through retirement-resignation-death of an acknowledged

company expert
(iv) Assist novices in thinking the way experienced professional do.
(v) Effectively used as a strategic tool is the areas of marketing products, cutting costs etc
Still Expert Systems are not always the answer to managerial / org problems.
Some of the PROPERTIES that potential applications should possess to qualify for Expert System
development are as follows:
• Availability: of expert(s) who are capable of communicating how they solve the problems to which the
Expert System will be applied.
• Expertise: Solutions to the problem require the efforts of experts. That is, only a few possess the
knowledge, techniques, and intuition needed.
• Domain: The domain, or subject area, of the problem is relatively small and limited to a relatively well-
defined problem area
• Structure: Solution process must be able to cope with ill-structured, uncertain, missing, & conflicting data
• Complexity: Solution requires logical inference processing, which would not be easily handled by
conventional information processing
(- Experts should be Avaialable – who have Domain knowledge -> For ill-structured/Complex probs. -)
COMPONENTS of Expert Systems (ES)

ES provides tools, information and methods for decision making in specific areas such as systems which generate
competitive bids, systems to support loan approved, systems to support draining in specialized areas where
experts are is scarcity and so on. ES is typically composed of the-
1. Knowledge Base
2. Inference Engine
3. Knowledge Acquisition Subsystem (-Knowledge base development and maintenance -)
4. User Interface
1) Knowledge Base (KB): The knowledge base stores the rules, data and relationships that are used to solve
problems and contains specific facts about the expert area.
• E.g. where an insurance agent needs both expert tax and financial advice is a good candidate for an ES with
two knowledge bases.
• A set of RULES must be developed to bridge the knowledge bases and resolve any conflicts. The knowledge
acquired from the expert has to be represented formally that deals with the structuring of the information,
how to manipulate it to infer additional data, and knowledge acquisition. The power of a system tends to be
related to the depth and breadth of the knowledge in the knowledge base. There are several types of
representation techniques, like - Production Rule Systems, a Structured Object and Predicate Calculus or
Logic.
2) Inference Engine: Main processing element consisting of system of programs that requests data from the user,
manipulates the knowledge base and provides a decision to the user.
• It performs this task in order to deduce new facts, which are then used to draw further conclusions.
• Active component of an ES since it steers through knowledge and progresses the whole interaction. The
inference engine chooses “rules from the agenda” to fire
• Techniques which model different reasoning methods
o A forward-chaining mechanism first examines the KB and the problem at hand; then, it attempts to
discover a solution. For instance, a medical ES may be used to examine a patient's symptoms and provide a
diagnosis based on the symptomology, the ES might locate several diseases that the patient may here.
o With backward chaining, on the other hand, the Inference Engine starts with a hypothesis or goal,
which it then checks against the facts and rules in the knowledge base for consistency. E.g. the ES
might be given the goal to "find this patient's disease(s) and would work back from there, asking questions as
necessary to confirm or a refute candidate diagnoses”.
3) Knowledge Acquisition Subsystem (KAS): Software component of an ES that enables the Knowledge Engineer
(KE- a specialized systems analyst responsible for designing and maintaining the ES) to build and refine an ESs
knowledge base. The KE works with the knowledge acquisition subsystem to model decision logic and update the
knowledge base.
• Knowledge base development and maintenance can be done using special, reasonably user-
friendly software. This software provides a convenient and efficient means of capturing and storing the contents
of the knowledge base. Users are often presented with easy-to-operate menus and templates for entering rules, facts
and relationship among facts. Once these are entered the software correctly stores the information in the knowledge
base. Such software notes it much easier and less expensive to develop, update and refine the KB.
4) User Interface (UI): Method by which an ES interacts with a user. E.g. dialog boxes, command prompts etc.
• Some ESs interact with other computer applications, and do not interact directly with a human
• In most instances, the ES prompts user to supply information -> user types in -> data entered examined
by interface engine and compared to the facts, rules and relationships in the knowledge base -> prompts
user for more information until system has enough data about the current problem so that it can reach a
conclusion. Thus UI for an ES is highly interactive.
Office Automation System (OAS) - CBIS
Different office activities can be broadly grouped into the following types of operations:
• Document Capture: Documents originating from outside sources like incoming mails, notes, handouts,
charts, graphs etc. need to be preserved.
• Recording Utilization of Resources: Includes record keeping in respect to specific resources utilized by
office personnel.
• Calculations: Include the usual calculator functions like routine arithmetic operations for bill passing,
interest calculations etc
• Document Creation: Consists of preparation of documents, dictation, editing of texts etc. and takes up
major part of the secretary's time.
• Receipts and Distribution: Includes distribution of correspondence to designated recipients.

• Filing, Search, Retrieval and Follow up: Related to filling, indexing, searching of documents, which takes up
significant time.
(- Captured PO -> Calculated Costing of resources -> Created invoice -> Distributed -> Filing and Follow up -)
The application of computers to handle the office activities is also termed as office automation.
BENEFITS of Office Automation Systems

• ↑ communication & accuracy of communication flows.
• ↓ cycle time between preparation of messages & receipt of messages at the recipients' end.
• ↓ costs of office communication in terms of time spent by executives, cost of communication links
CATEGORIES of Computer based Office Automation systems (OAS) ---
• Common • Capture / Store

• Audio / Video
• Automate • Remote access • E-mail, Fax, Voice-mail
• Pre-recorded
• Quick copies • X Travel
Text Processing Systems

• Most commonly used components of the OAS - office communication takes place in writing
• Automate development of documents such as letters, reports, memos etc. They permit use of standard
stored information to produce personalized documents - ↓ keying effort & errors
• May be simple word processing systems OR desktop publishing systems. The desktop publishing systems help
in quick production of multiple copies of the document with quality printing.
• Desktop publishing systems are supported with printers, scanners etc.
E- Document Management Systems

• Useful in capturing information contained in documents, stored for future reference and communicate the
relevant parts to the users as and when required. Systems linked to OAS.
• Useful in internal communication. For example, the loan application form filed in a branch of a bank can be
accessed by the sanctioning officer for scrutiny at the head office or any office for scrutiny of loan proposals.
• Useful in remote access of documents that is almost impossible with manual systems
• Location of executive becomes irrelevant for access to documents. Thus, these systems can be very useful in
an office environment where traveling executives share work space in the office.
E- Message Communication Systems

• Business enterprises use various communication systems for sending & receiving messages. These include
telephone, mail and facsimile (Fax), etc. Offer economy via- reduced time in sending or receiving the
message, reliability of message and cost.
• 3-BASIC COMPONENTS of Message Communication Systems (E-mail, Fax, Voice-mail):-
(i) E-MAIL: Various features of electronic mail are stated below :

1) Integration with other Information systems: Ensures accuracy and quick access
2) Online development and editing: Email message can be developed and edited online before
transmission. Eliminates need for use of paper -> less space needed.
3) Broadcasting and Rerouting: Sending message to many recipients simultaneously. E.g. branch
circular -> could be re-routed/forwarded with/without any change or attachment
4) Electronic transmission: Transmission of messages & confirmation of transmission with e-mail is

electronic, quick and the reliable
5) Economical: for both formal communication & informal communication within enterprise.
6) Portability: Physical location of the recipient and sender irrelevant. Accessed from anywhere
(ii) FACSIMILE (FAX)

1) E-communication of images of documents over telephone lines.
2) “Computer based” fax technology automates fax communication and permits sharing of fax
facilities. It uses special software and fax servers to send and receive fax messages using
common communication resources. These servers have the ability to receive fax messages and
automatically reroute them to the intended recipient after viewing it at the central computer.
Similarly, the managers in an enterprise can leave the fax messages to the server which will send it to the
intended recipient automatically.
(iii) VOICE MAIL

• A variation of email in which messages are transmitted as digitized voice.
• Recipient of voice mail has to dial a voice mail service or access the e-mail box using the
specified equipment and he can hear the spoken message in the voice of the sender. The
secured type of voice mail service may require the recipient to enter identification code before
the access is granted to the stored information.
Teleconferencing and Video-conferencing Systems
Conducing a business meeting involving more than two persons located at two or more different places.
• ↓ time & cost of meeting as the participants do not have to travel
• Audio or video conferencing with or without use of computer systems.
• However, computer based teleconferencing has the advantage of flexibility in terms of pre-recorded
presentations and integration with other information systems. Based on PC, digital camera and visual
communication software. The communication links are still quite expensive

CHAP 1 - IS CONCEPTS

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CHAP 1 - IS CONCEPTS

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CHAP 1 - INFORMATION SYSTEM CONCEPTS

CLASSIFICATION CHART OF A SYSTEM

1) According to Elements, Systems can be:

2) According to Interactive behaviour, Systems can be:

Organisations are considered to be relatively open systems-

3) According to Degree of human intervention, Systems can be:

4) According to Working/output, Systems can be:

General Model of System

Components of a System OR System Environment

• Inter-connections and interactions between sub-systems.

Sub-system • Part of a larger system - a system is made up of sub-systems.

• External world which is outside system boundary = SE

• Entity formed by a system / sub-system and other equivalent systems

Characteristics of Sub-systems (-Decomposition or Identification of Sub-systems-)

1. A complex system is decomposed/factored into smaller subsystems of manageable sizes

Example (Approach to decomposition):

System stress & System change

- Changes may be structural changes or process changes

Processing Decision making

Important attributes/characteristics of Information

Rate Rate of transmission /reception of information

Mode Visual, verbal or in written form.

Completeness Better decision making

Transparency Should give true picture

Availability Useless if not available at the time of need

Reliability Information is reliable if it leads to correct decision repeatedly

Adequacy Information must be adequate for initiating action

Validity Closeness of info. to the purpose which it is meant to serve

• As collected from the external environment of the business organization

Access to internal and external information by different levels of management

INFORMATION SYSTEM AND ITS ROLE IN MANAGEMENT

Factors on which Information requirements of executives depend

1. Operational function 2. Type of decision making 3. Level of management activity

Programmed decisions Non-programmed decisions

1) Structured decisions Non-structured decisions

Well-structured in advance and are time-tested No pre-determined guidelines, standard operating

5) Decision making is simplified No simple or single best way of making decisions

Strategic Level or Top level:

Tactical Level or middle level:

Supervisory or operational Level:

Components of computer-based information system (CBIS)

CBIS is an information system in which computers play a major role. Components-

CBIS characteristics are as follows:

Major areas of computer-based applications are:

Major areas: Goal is …

• To ensure financial viability, plan & monitor budgets.

• To maximize sales and ensure customer satisfaction.

• To optimally deploy man, machine and material to maximize production or service.

• To have Right people at right place.

TYPES OF INFORMATION SYSTEMS AT DIFFERENT LEVELS

Data available at different functional areas of an organization for management:-

At the lowest level,

At the middle level,

At the top level,

- TPS - DSS - Text

OPERATIONS SUPPORT SYSTEMS (OSS)

1) Transaction Processing Systems (TPS)

Typically, a TPS involves the following activities-

TPS Components (-IPOs-)

2) Management Information Systems (MIS)

• Management: A manager may be required to perform following activities in an organization.

Characteristics of an effective MIS / Factors to be considered for designing an effective MIS