Information System For Managers Complete

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INFORMATION SYSTEM FOR MANAGERS
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COURSE DESIGN COMMITTEE
Dean TOC Reviewer

Dr. Vidya Naik Ms. Brinda Sampat
Dean, NMIMS Global Access - Assistant Professor, NMIMS Global Access -
School for Continuing Education School of Continuing Education.
Specialization: Information Technology
Associate Dean Content Reviewer

Mr. Abhishek Asthana Ms. Brinda Sampat
Associate Dean, NMIMS Global Assistant Professor, NMIMS Global Access -
Access - School for Continuing School of Continuing Education.
Education Specialization: Information Technology
Stream Leader
Ms. Brinda Sampat
Assistant Professor, NMIMS Global Access -
School of Continuing Education.
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Specialization: Information Technology
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Author : Mr. Sanjeev Saxena

Reviewed By: Ms. Brinda Sampat
Copyright:
2014 Publisher
ISBN:
978-93-5119-458-3
Address:
4435/7, Ansari Road, Daryaganj, New Delhi–110002
Only for
NMIMS Global Access - School for Continuing Education School Address
V. L. Mehta Road, Vile Parle (W), Mumbai – 400 056, India.
NMIMS Global Access - School for Continuing Education

C O N T E N T S
CHAPTER NO. CHAPTER NAME PAGE NO.
1 Introduction to Information System 01
2 Components of Information Technology 27
3 Networking Concepts 51
4 Database Management 87
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Types of Information Systems 115
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6 Enterprise Resource Planning (ERP) 149
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7 Electronic Data Interchange (EDI) 167
8 Data Warehousing, Data Mining, and Business Intelligence 189

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9 Decision Support System 217
10 Customer Relationship Management 237
11 Supply Chain Management 251
12 Building and Deploying an Information System 273
13 Managing Information Systems 295
14 Case Studies 319

INFORMATION SYSTEM FOR MANAGERS
C U R R I C U L U M
Introduction to Information System: Need of Information in Managing Business; Evolution of

Information Systems; Information and Control Systems; Classification of Information Systems;
Business Process Design; Managing Information Systems
Components of Information Technology: Computer Systems Hardware; Software Concepts; Net-

working Concepts; Database Concepts
Types of Information Systems: Introduction to Information Systems; Operations Support Sys-

tems; Management Support Systems; Other Types of Information Systems
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Role of Information Systems in Managing Business: Functional Information Systems; Integrated
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Systems ERP; Electronic Data Interchange; Data Warehousing, Data Mining and Business Intelli-
gence; CRM & SCM
Building and Deploying an Information System: Information System Architecture; Software De-
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velopment Lifecycle; Software Development Models; Requirement Analysis & Design Consider-
ations; Software Testing; Deploying an Information System
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Managing Information Systems: Infrastructure Management; Maintenance of Information Sys-

tems; Management of Changing Requirements; Incidence Handling; Disaster Recovery and Busi-
ness Continuity Planning

C H A
1 P T E R
INTRODUCTION TO INFORMATION SYSTEM
CONTENTS
1.1 Introduction
1.2 Meaning of Information
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1.2.1 Difference between Data and Information
1.2.2 Importance of Information for Organisations
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Self Assessment Questions
Activity
1.3 Concept of System
Activity
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1.4 Definition of an Information System

1.4.1 Evolution of Information System
1.4.2 Need of Information System in Organisation
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1.4.3 Functions of Information Systems

1.4.4 Framework of an Information System
1.4.5 Information and Control Systems
1.4.6 Computerised Information System
Activity
1.5 Business Process Design
1.5.1 Business Process Modelling
1.5.2 Business Process Re-engineering with diagram
Activity
1.6 Management Information Systems
1.6.1 Nature and Scope of MIS
1.6.2 Features of MIS
1.6.3 Functions of MIS
Activity

2 INFORMATION SYSTEM FOR MANAGERS
CONTENTS
1.7 Summary
1.8 Descriptive Questions
1.9 Answers and Hints
1.10 Suggested Reading for Reference
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INTRODUCTION TO INFORMATION SYSTEM 3
INTRODUCTORY CASELET
N O T E S
IMPLEMENTATION OF INFORMATION SYSTEM

AT RED INDIAN AUTOMOBILES
The Red Indian automobiles company was launched by three

partners. In the initial days, the company had success in its busi-
ness. However, soon this success disappeared as the company was
not able to make enough sales. The company made many efforts
to get customer’s attention but without positive results. After a
detailed market research, it was found that the other competitors
had better car design models coupled with attractive offers to
grab customer attention.
Management of Red Indian Automobiles realised that their car

designing techniques were obsolete. Another reason for failure
was their incapability to make effective decisions due to their in-
ability to perform a deep analysis of the current market trends
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and customers’ demands.
After a long discussion the company decided to hire an Informa-

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tion Technology (IT) consultant to find a solution to the prob-
lem. The IT consultant team suggested a new computerised in-
formation system and a designing tool that make car designing
and modelling easier and faster. The company implemented the
systems and was surprised to see the efficiency and effectiveness
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of the outcome. The new computerised information system was

really fast and able to perform a different kind of analysis on data
which was earlier ignored by the managers of Red Indian auto-
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mobiles. Data analysis provided the company useful information

about their business operations and customers’ demands. They
also created better designs using the car designing tool. New car
designs were impressive and were able to attract customers in the
market.
Eventually, customers started coming back to the company and

sales began to improve.

N O T E S
LEARNING OBJECTIVES
After completing this chapter, you will be able to:

> Define the term information
> Explain the concept of system
> Discuss information system
> Explain business process design
> Discuss management information system
1.1 INTRODUCTION
In your life, you must have withdrawn money from an ATM machine
or at least seen someone withdrawing money from the ATM machine.
Have you ever wondered what kind of system is being followed by the
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ATM machine to provide you all the information regarding your bank
account? The system that is followed by an ATM machine is called
information system.
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Information means knowledge about a particular fact that can affect
the decision or an outcome. For example, if a manager receives infor-
mation that the net profit of his company is decreasing, he would cut
down the expenses to increase his company’s net profit. Similarly a
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system is a set of activities and components that are organised togeth-

er to achieve a certain objective.
Thus, an information system is a combination of hardware, software,

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and infrastructure to enhance the decision making ability of managers

and increase the productivity of the organisation. An information sys-
tem has become an essential part of decision-making in an organisation.
It has become an effective blend of information technology and people
activities that help operations and management. Though, such tools
used to be quite costly in the past, with continuous innovations in infor-
mation technology, business enterprises started using cost-effective and
user-friendly information systems. Management Information System
(MIS) is one such example of a cost-effective information system.
The purpose of MIS is to keep business management updated with

well-structured information to achieve objectives of an organisation
efficiently. The business concepts like defect free production, quick
and logical decision-making and strategic business environment are
used by MIS.
This chapter starts by discussing the significance of information in

organisations. In addition, it explains the difference between data and
information and importance of information from organisations. Fur-
ther, it discusses about the concept of system and information system.
The chapter concludes by explaining the business process design and
management information systems.

N O T E S
1.2 MEANING OF INFORMATION

Shannon defines information as “a purely quantitative measure of
communicative exchanges”.
The word information is derived from Latin word “informare” which

means "give form to". As discussed earlier, in an organisation Infor-
mation means knowledge about a particular fact that can affect the
decision or an outcome. One can also say that outcome of information
system is called information.
Thus, information is a compilation of facts which have been organised

and processed to have additional value to the business. Simply put,
individually these facts are just data but after organising and process-
ing, these facts become invaluable information for the organisation.
Information plays a vital role in an organisation to make important
managerial decisions that enhance the efficiency of the business.
1.2.1 DIFFERENCE BETWEEN DATA AND INFORMATION
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Data is composed of fact such as number of employees, salary, number
of inventory. In any information system data plays a key role because
it signifies facts. Other than facts data also consists of observations, as-
sumptions and occurrence related to entities such as people, process,
and events.
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For example, in an organisation a very large number of employees

work together. It is necessary for the organisation to keep track of
these employees. An organisation maintains the personal (such as
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data related to birth), educational (such as qualification) and physical

(such as blood group) facts regarding their employees. These facts are
data that organisation uses to keep a record of its employees.
There are different types of data that are used to make an effective
decision in an organisation. Table 1.1 shows the types of data:
TABLE 1.1: TYPES OF DATA

Data Description
Text Alphabets, Numbers, Symbols
Graphic Images, Pictures
Audio Sound, Tone
Video Moving Images With Sounds
Data and information are two different things and both have different
purposes and properties. Table 1.2 shows the difference between data
and information:

N O T E S
TABLE 1.2: DIFFERENCE BETWEEN

DATA AND INFORMATION
Data Information
Data is distinct, unrefined and Information is arranged, organised
disorganised and processed
Data generally does not have a Information has a precise meaning.
meaning.
Gathering of data makes a data- Gathering of information makes a
base or data warehouse. significant contribution to knowl-
edge.
Data is gathered from various Information is extracted by process-
sources. ing data collected from numerous
sources.
Data can be used indirectly for Information can be directly used for
decision making. decision making.
Data need to be interpreted After interpretation data becomes
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information.
Example, record of sales in a day. Example, pattern of sales in a day.
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1.2.2 IMPORTANCE OF INFORMATION
FOR ORGANISATIONS
Information is of great importance for an organisation to function suc-

cessfully. Without effective information generating system, an organisa-
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tion cannot function properly. In addition, lack of effective and proper

information may send a wrong signal to other associated organisations.
For instance, if a vendor has not heard from a supplier, he might mis-
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interpret this as rudeness which might never be the intention of or-

ganisation. The continuous and steady flow of information helps an
organisation to build credibility, transparency in business interaction.
Information plays a key role in many critical tasks such as decision mak-
ing. The importance of information for organisations is listed below:
Information saves money: Information saves an organisation time
and money in the following ways:
It enables employees to share work with each other to avoid
re-doing.
It saves employees time by helping them find the information
faster.
It gives employees a better chance to make effective decisions
and avoid big mistakes.
It enables organisation to identify and utilise their employees`
knowledge. This enhances an employee’s morale and job sat-
isfaction.
It prevents an organisation from losing vital knowledge and
information when an employee resigns.

N O T E S
Information makes money: Information helps an organisation to

function effectively, which enables it to make more money in fol-
lowing ways.
It defines an organisation`s position in the marketplace in a
better way to sell its expertise.
It offers expertise in the right format, which allows an organi-
sation to sell that same expertise over and over again.
It helps in identifying the gaps in an organisation`s collective
knowledge.
It improves customer service by providing more knowledge
about your customers and their needs.
SELF ASSESSMENT QUESTIONS
1. The continuous and steady flow of information helps an
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organisation to build ___________, _________in business
interaction.
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2. Data is arranged, organised and processed.(True/False)
ACTIVITY
Using the Internet find out, how organisations manage their data
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and information. Present your findings in a short note.
1.3 CONCEPT OF SYSTEM

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We all use some or the form of the vehicle in our day- to- day lives.
But have you ever wondered how these vehicles function. A vehicle is
made of many parts such as battery, brakes, gear, steering or handle,
etc. and all these parts have their own specific function. All the parts
are connected to each other and if there is an issue with one part, it
will affect the functioning of the other part. Thus, a vehicle is a system
comprising different parts interrelated to function effectively.
A system can be described as a set of components which are interde-

pendent and organised for a common purpose. A system is outlined
by its boundaries and it is surrounded and influenced by its environ-
ment. You can define a system by its structure and purpose and ex-
press in its functioning.
Now, let us consider some of the features of a system in the following

section.
Objective: Every system has a predefined objective that it has to
achieve. For example, an organisation’s main objective is to earn
the maximum possible profit for each department. Thus, everyone
in the organisations has to work together to achieve this goal.

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Standards: A system is a standard that has been accepted by ex-

perts to achieve an objective. For example, there could be multiple
ways to solve a problem but only the best way can be a standard.
Environment: Every system needs to adapt itself according to the
environment. It is required for a system to fit in its environment.
For example, you cannot fit the engine of a car in a motor bike.
Boundaries: Every system has its boundaries and it has to work
within this boundary. Nonetheless, there are times when a system
has to interact with other systems beyond its boundaries. For ex-
ample, every system in an organisation has its work domain such
as personal, financial, and marketing, but if the personal system
needs the financial information regarding employees then it has to
interact with the financial system.
Structure: Every system has a structure that is determined by its
parts and their composition.
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Behaviour: Every system has a behaviour which includes input,
processing and output of information.
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Interconnectivity: Systems have interconnectivity which establish-
es functional and structural relationship among its various parts.

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3. A system can be defined as a set of _______ which are ______

and _______for a common purpose.
4. Which of the following is not a characteristic of a system?
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a. standards
b. boundaries
c. cost-effective
d. structure
ACTIVITY
Use the internet to find out how a system is implemented in an or-

ganisation. Present your findings in a short note.
DEFINITION OF AN INFORMATION
1.4
SYSTEM
Information systems (IS) is made up of two words information and
system. Information is a collection of organised and processed data.
On the other hand, a system is a procedure which takes input, pro-
cesses the input and provides the output.IS is a procedure that is used
to process data and provide useful information.

N O T E S
Basically, IS consists of numerous components such as network of

hardware, software, and people to process data to retrieve informa-
tion. This information helps in making effective decisions and manag-
ing various departments and operations of a business.
Figure 1.1 shows the interrelationship of components in IS:
End
Structured User
Data from and
various • Sorting meaningful
End
Input internal or Process • Calculating Output information
User
external • Analysing useful for
sources business
functions End
User
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Data
Storage
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Figure 1.1: Interrelationship of Components in Information System
An information system collects its data from various sources which

could be internal and external employees’ performance and oppo-
nents’ performance.
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The data is either stored on paper or in electronic format. Critical cal-

culations, logical analysis and other statistical methods are used to
process data. After processing data, it is converted in information. The
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information retrieved is distributed to various end users to help them

in their decision-making, problem solving, strategy forming and con-
trolling functions in an organisation.
For example, consider the data regarding individual sales made by

each sales executive in a particular month, and the standard sales tar-
get for each sales executive and trends in sales market in that month.
You can sort, classify, and analyse this data to retrieve information.
Using this information, you can perform analysis on the sales trends
for that time period, difference between target and actual sales for in-
dividual executive and aggregate sales based on teams. This data can
also be used to make predictions of following month’s sales and set
target for the subsequent month.
1.4.1 EVOLUTION OF INFORMATION SYSTEM
Information system has evolved with the time. This evolution in IS was
necessary as the requirements of a business keep changing. There are
certain trends in the business environment that made the evolution of
IS possible.

N O T E S
The trends in evolution of information system in ascending order are

as follows. Table 1.3 shows the evolution of information system:
TABLE 1.3: EVOLUTION OF INFORMATION SYSTEM

Time Period Description
Before 1960’s, The information system played a very simple role. The
main function of IS was Electronic Data Processing
(EDP). It provided transaction processing, record keep-
ing and traditional accounting applications.
In 1960’s Another role was added in information systems. This
role was to process data into useful informative reports.
Hence, the concept of management information system
(MIS) came into existence. MIS provided managers the
information they needed from decision making.
In 1970’s The Decision Support System (DSS) was introduced to
make the process of decision making more effective and
valuable. It provided an Interactive ad- hoc support of the
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managerial decision-making process.
In 1980’s A new role was added to the information system. It was
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added with strategic support. It provided various support
systems such as end user’s computing, direct computing
support for user, executive support, critical information
for top management expert system, and knowledge based
expert advice for users.
Onwards 1990’s Internet based e- business and e-commerce became part
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of the information system. After this, information system

was able to provide support for internet based electronic-
business and electronic-commerce. This was the era of
e-business.
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1.4.2 NEED OF INFORMATION SYSTEM IN ORGANISATION
When you visit a bank to deposit some money, you give money to the
cashier and some information regarding your account. But have you
ever thought how a bank manages a huge amount of information
about customers? Bank and other organisations deal with their huge
amount of data using the information systems. Every organisation
needs an information system to manage their business.
An organisation needs to take full advantage of IS to get maximum

benefits. In order to obtain maximum benefits from IS you need to
utilise all its capacities. IS helps management functions of an organi-
sation.
The need for IS in an organisation is as follows:

Communication: IS helps in communication of an organisation
and accomplishes the information needs of an organisation in
defining goals. The management of an organisation collects and
distributes information. IS makes this process more efficient by
enabling managers to communicate swiftly. It simplifies the move-

N O T E S
ment of information amongst employees of different levels. Manag-

ers use IS to share information with other employees who require
the information. The information system provides an effective
communication platform that helps employees to collaborate in a
systematic way.
Operations: Information system provides complete and updat-
ed information which allows you to perform business operation
more efficiently. It helps organisation to enhance productivity and
improve customer service. Information system is also needed for
improving product quality. For example, if an organisation has in-
formation that customers have a preference for a specific product
in a particular season. Then, organisation can start planning the
production of that product in advance before the onset of that par-
ticular season. Here, information system will guide you to stream-
line your operations.
Decisions: An organisation needs an information system to make
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better decisions. It projects the outcomes of your decisions. When
an organisation reaches a decision, it chooses a sequence of ac-
tions from various options and performs the corresponding task.
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With accurate information, an organisation can make effective de-
cisions. For instance, there might be occasions when an organisa-
tion has to make a decision out of several options. In such cases,
information system enables organisations in making the best de-
cision out of given choices. Information system can calculate key
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factors such as sales, cost, and profits for each possibility and tells
you which choice is more beneficial. Therefore, you can make ef-
fective decision using the information system.
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Records: In order to resolve issues, organisations are required to

find root cause of a problem and take suitable actions. To achieve
this organisation needs the record of its activities. These activities
need to be recorded for financial and monitoring purposes. The
information system keeps the record of documents, communica-
tion record and operational data. It arranges data from various re-
sources and presents it as valuable historical information.
1.4.3 FUNCTIONS OF INFORMATION SYSTEMS
Mr Mohan is head of human resource (HR) department of a multina-

tional company. His boss asked him to generate a report for the em-
ployees who have taken minimum leaves in the last year. On the basis
of these reports, the employees with the minimum number of leaves
were to be rewarded with bonus money. Mr Mohan took the list of total
number of employees and placed their leave data in the information
system. The information system processed the data and provided the
information required in the form of a report. The information system
completed the task in no time. This helped the boss to make decision
for rewarding the deserving employees.

N O T E S
Information system helps an organisation to make fast decisions and

is capable for performing various functions. We can break down func-
tions of information systems into various parts, which are described
as follows:
Input: Input is the data that is collected for processing. This data
could be anything and it can have different meaning to different
people if it is processed differently.
Storage: The storage of information has to be secure. In case, the
information is about people then it comes under the data protec-
tion act. The storage needs to keep data safe, but the information
also needs to be accessible for the organisation. Therefore, the
easy access of information is essential.
Processing: Processing is the stage where data is transformed into
information to make it meaningful. Data can be processed to have
different meanings in different scenarios. For example, the num-
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ber 2014 could mean the year or just a number to different people.
Output: Output is the result you get after processing the input.
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It is not cost efficient to spend money on input if you are not get-
ting any output. For example, if you are spending ‘x’ amount on
research and will get less than this amount in future. An organisa-
tion could get output in different forms such as money and feed-
back. You can observe the input and output of someone’s job to
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determine whether their work is creating any value.

Control: Control is necessary to manage the systems and produce
a desired output. In this stage, organisations check, record, con-
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trol, direct, validate. It is a useful technique to manage and control.

Closed and open systems: Closed and open are two types of sys-
tems. In closed system organisation keeps an internal relationship.
Closed systems do not disclose their profits or losses for the past
year. On the other hand, an open system shares its information
publicly. It allows the outside world to look at their profit and loss-
es. Both these systems have their own advantages. In closed sys-
tems, sharing any information to rival businesses is not permitted
and in open systems we allow other people to see and observe our
profits to create new business opportunities.
1.4.4 FRAMEWORK OF AN INFORMATION SYSTEM

A framework is a real or conceptual structure underlying a system to
guide. For example, when a building is constructed first a basic struc-
ture of the building is created with the help of a blueprint. This basic
structure is used to construct the actual building. Similarly a frame-
work for IS means a basic structure for implementing IS. It is also
called Information System Framework (ISF).

N O T E S
The primary goal of the ISF is to define numerous key building blocks
that establish the primary information system that are currently used
in management to provide a clear set of definitions, roles and respon-
sibilities applicable in context. The ISF brings together a number of
perspectives including control, monitoring and business.
IS comprises many complex technologies and applications. Five es-
sential areas required for the framework of IS are:
Foundation: It means the fundamental concepts of an IS. It in-
cludes fundamental business environment, basic components and
managerial concepts. For example, the basic system has developed
result-oriented systems.
Information Technology: It consists of technical components for
an IS. It includes hardware, software and networks. For example,
internet-based information sharing developed e-business.
Business Applications: It means the application of IS in different
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business functions which make it appropriate for them. Customer
relationship management (CRM) is an example of business appli-
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cation of IS.
Development: It emphasises on developing a more professional
and effective system for a business function. It is done to gain a
competitive advantage. More specific and advanced systems were
produced to support a business.
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Challenges: It consists of various ethical and social issues that

arise from IS applications in a business. For instance security is-
sues and cyber-crimes are some of the contemporary challenges
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faced by organisations.
1.4.5 INFORMATION AND CONTROL SYSTEMS
Have you ever wondered if you were unable to control the tempera-
ture of a microwave oven, you might not be able to heat or cook the
food as desired? Also, how will you drive a car if there was no steering
wheel in it? Thus, control is essential to make these machines work.
For instance, while driving the car you need to take a right turn, so you
will make use of steering wheel for turning right.
In this case, you used the information and controlled the outcome.
Similarly in business organisation we use information and control sys-
tems to control business outcomes of a process.
Thus, control can be defined as the process in which it is determined

whether the business is functioning according to desired standards or
not and if not what steps should be taken to rectify. Therefore, control
means maintaining the desired performance.

N O T E S
A good information control system in organisation should have follow-

ing characteristics:
Objective: The control system should be certain.
Appropriate: The control system should be according to the need
and culture of the organisation.
Clear: The control system should be clear and easily understand-
able.
Flexible: The control system should be flexible enough so that it
works even if the planned changes fail.
Economical: It should be cost effective and economical for the or-
ganisation.
1.4.6 COMPUTERISED INFORMATION SYSTEM
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Mr Shyam is CEO (Chief Executive Officer) of M&N inc. which is a
small furniture manufacturing company. Initially the company had
fewer clients therefore it used to manage all the data manually. The
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managers made their decisions on the basis of their knowledge and
instincts. Soon the business of the company grew and many new cli-
ents were added to their business. More clients lead to more business.
This led to change in style of functioning of M&N inc`s business. Now,
Mr Shyam needed to make fast, accurate and effective decisions and
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could not rely only on his managers` instincts for the business deci-
sions. He consulted with his managers and decided to implement a
computer based information system for his company.
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An information system is used for collecting, processing, storing and

distributing information for a specific purpose. An information system
that uses computer technology to perform these tasks is called com-
puterised information system or computer based information system
(CBIS).
Today, almost every industry uses a computerised information system.

For example, airline industry, investment firms, banks and savings
and loan companies, and transportation industry are some organisa-
tions that use a computer based information system.
A computer based information system consists of the following com-

ponents:
Hardware: The term hardware refers to various devices such as
input, output, processing and storage devices of an organisation.
Monitor, printer, CPU etc. are example of such devices.
Software: The term software refers to computer programs that
enable hardware to process data. These softwares are stored in a
storage device such as hard disk and provide useful information
from data after processing it.

N O T E S
Networks: Networks refer to a system that allows computers to

connect and share data and other resources with each other.
Data: Data are facts and are used as input to CBIS to process it.
The CBIS processes this data and delivers valuable information
for the organisation.
Procedures: Procedures are the instructions or commands for the
components of CBIS to process the data and generate the pre-
ferred output.
People: CBIS needs people to prove its usefulness. As CBIS is op-
erated by people in order to perform various tasks. People influ-
ence the success and failure of an information system.
The Figure 1.2 shows the fundamental components of a computerised

information system:
Information
Systems
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People Networks Software Hardware Data
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Figure 1.2: Fundamental Components of a Computerised Information

System
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Now, let us consider some of the advantages of CBIS for an organisa-

tion in the following section:
Accessibility Speeds: A CBIS is able to sort, store and access data
much faster. It can quickly analyse data and find the desired infor-
mation.
Security: It provides a protected environment for data files. It pro-
tects data using passwords and encryption (a mechanism to en-
code your data) so that only authorised users can access the data.
Manual information systems do not provide such kind of security.
In a manual security system, it is not easy to monitor and check the
people who have access to data. It also does not provide role based
access to data which is provided by a CBIS. For example, you can
allow some users to read and write data and prevent some users
from making any changes.
Track Changes: In manual information systems it is almost im-
possible to track changes without going through a huge amount
of paperwork. Using CBIS you can record which user accessed
which data, access time of data and any changes made by the user.

N O T E S
Data Storage and Availability: A CBIS stores a huge amount of

data and it automatically sorts data. This increases the availability
of data for users.
CBIS has some characteristics that make it useful for organisation.

These characteristics of CBIS are as follows:
It processes data accurately and fast, using various techniques like
operations research, simulation, etc.
It performs tasks such as collecting, organising, manipulating and
updating large amount of data, coming from different internal and
external sources
It provides real time information without any delay.
It supports various output formats and follows the latest rules and
regulations in practice.
It provides structured and related information for all levels of
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management.
It targets the flexibility in data storage and retrieval.
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There are numerous types of systems that are used by the organisa-
tions. However, there are some fundamental systems that are more
popular among these organisations. Figure 1.3 shows some popular
types of CBIS among organisations.
M
N
Executive
Executive Information
Systems
Decision Support
Senior Managers
Systems
Management
Middle Managers
Information Systems
Transaction Processing
Workers
Systems
Figure 1.3: Types of CBIS
Figure 1.3 shows some popular types CBIS. These types will be dis-
cussed in chapter 5 of this book.

N O T E S
5. Which of the following is not a function of IS?

a. Data recovery c. Processing
b. Storage d. Input
6. A CBIS stores a huge amount of data and it automatically
sorts data.(True/False)
ACTIVITY
List the different information systems used by the organisations.

Also find out the key difference between them.
1.5 BUSINESS PROCESS DESIGN
S
According to Hammer & Champy a process is “a collection of activi-
ties that takes one or more kinds of input and creates an output that is of
IM
value to the customer.”
According to Rummler & Brache “a business process is a series of

steps designed to produce a product or service.”
A process is a sequence of steps or instructions that are performed to

M
achieve a desired outcome. Similarly, a business process is a series of

steps that are performed to produce a product or service. For exam-
ple, when you take your car to a car wash service you enter your car
into the service centre, the operator records necessary data about you
N
and your car, and then he takes your car to the car wash service area
and cleans it. After all these tasks, you get your car cleaned and main-
tained. In order to get your car washed you went through an entire
process and had the desired outcome.
Business process design is the method to comprehend and outline

the business activities that help the business to operate effectively.
Process design is responsible for designing a business’ processes to
guarantee that they are improved, operational, meet customer re-
quirements, and enhance and manage development and progress of
an organisation. Improved efficiency and greater productivity can be
achieved by a well-designed process.
The advantages of business process design projects are:

Improvement in operational performance
Management of customer and supply chain
Integration and Automation of business process
Decrease in cost
New business opportunities

N O T E S
In these projects business process design normally happens in the

early critical phase. The main objective of the project is to implement
business change. This change could be to improve business operating
businesses, integrate software systems or both of them.
During the process of project improvement, the emphasis of the busi-
ness process design is on the efficiency of the project. This also in-
cludes understanding and measuring the requirements of the ineffi-
cient activities.
While implementing the project the main concern is to comprehend
the processes to be automated and select a suitable technology. The
process design activities can be modest to aggressive in both cases.
1.5.1 BUSINESS PROCESS MODELLING
In information system, Business process modelling (BPM) is an activ-
S
ity that represents processes of an enterprise, to analyse and improve
the current process. BPM is usually performed by business experts
or managers who wish to improve process efficiency and quality. The
IM
involvement of information technology may not be required; howev-
er, Information Technology is a common factor in modelling business
processes.
BPM concentrate on process, actions and activities. It is cross-func-

tional, usually combines the work and documentation of multiple de-
M
partment in the organisation. There might be situations when BPM

may also include activities of other organisations’ processes systems
that support the primary process. BPM model is analysed and repre-
N
sented in more detail in large organisations as compared to smaller

organisations.
BPM has various purposes in an organisation. These purposes are dis-

cussed as follows:
It is a diagram tool that is used to design process models.
It improves customer service and experience.
It reduces time and efforts.
It leads to increased profits.
It increases competitive advantage and market growth.
1.5.2 BUSINESS PROCESS REENGINEERING
According to Hamper and Champy “ business process re-engineering

is the fundamental rethinking and radical redesign of the business pro-
cesses to achieve dramatic improvements in critical, contemporary mea-
sures of performance, such as cost, quality, service and speed".
Business process re-engineering (BPR) can be defined as business

management strategy. BPR is a technique that allows us to rethink the

N O T E S
fundamentals and redesign the processes of business to achieve rapid

improvements. During the BPR, it is kept in mind that performance,
cost and quality are not being compromised.
A business process is a sequence of instructions that are implemented

to attain quality in products and services.
BPR helps companies to restructure their organisations by concen-

trating on the design of their business processes. A business process
is a group of logically related tasks which are executed to obtain a
pre-defined outcome. The aim of re-engineering is to concentrate on
business objectives and processes related to them. It encourages the
recreation of processes instead of optimisation.
For example, if a person visits a bank to apply for a loan, ATM card,
and a savings account. In order to perform all these three tasks, most
probably he has to go to three different counters. He has to give his
S
personal details and documents to all three counters and probably
wait in queue for a long time. However, the bank can simplify this pro-
cess by adopting and implementing BPR. The bank can adopt a one
IM
stop shopping approach to this case where all the operations can be
handled by a case manager. The case manager accepts the application
of the customer and stores it on the network where other team mem-
bers can access it. Using this approach all three tasks can be done
in a parallel way. After the verification, if the details provided by the
M
customer are incorrect or give error the application is rejected, else

the loan team processes the loan application. During this process the
case manager instructs the account team to open a saving account and
ATM team to provide ATM card to the customer. All this can be done
N
without moving to separate counters for documents and signatures.

Everything is done at the same time and place.
Business process re-engineering is also known as business process

redesign, business transformation, or business process change man-
agement. Figure 1.4 shows BPR cycle.
Identify Processes
Test & Implementation Review, Update

To-Be Analyse As-is
Design To-Be
Figure 1.4: BPR Cycle

N O T E S
In the Figure 1.4 the first step, identifies the activities that can in-
crease the value of organisation’s current process. Next, it analyses
the activities that can provide value to the customer. After that, the
new process is designed and tested before the implementation. If the
implementation fails, this cycle is performed again until the desired
outcome is achieved.
7. A business process is a series of steps that are performed to

produce a ______ or _______.
8. BPM concentrate on ________, _______ and ________.
ACTIVITY
S
Make a group of fellow students and discuss about BPR. Present
your discussion points in a short note.
IM
1.6 MANAGEMENT INFORMATION SYSTEMS
Have you ever visited a railway station to book a ticket? Earlier, getting
a train ticket from a railway station was a time consuming task. There
M
used to be a long queue at the ticket counter. It was also challenging

for the railway employees to manage the records of passengers and
train schedule as they used to perform all these tasks manually. It was
only after the introduction of Management Information System (MIS)
N
in the railways that the arduous task of railway employees became

fairly simple. MIS is an information systems for managing informa-
tion. Now you can book and your tickets from anywhere using the
computer and the Internet.
MIS is a source of information to the management which is helpful in

making effective decisions and well-organised business management.
It is emerging as the fastest developing concepts in a business environ-
ment. It has made its impact on decision making patterns and strat-
egies for business concepts considerably. For instance, a marketing
manager may need information about sales performance and trends,
production manager may need information analysing resources re-
quirement and worker productivity and personnel manager may re-
quire information regarding employee compensation and profession-
al development. Therefore effective MIS system is required to provide
managers with information about their area of concern.
MIS retrieves data from numerous resources, processes it, and con-
verts the data into significant and valuable information.

N O T E S
Figure 1.5 shows the structure of MIS:
Management
Information System Management
(Planning,
(Data, Process, Information
Organising, Directing,
Information) System
Controlling)
Figure 1.5: Structure of MIS
Internal and external sources are used to collect this data. This data
is processed using technical and analytical methods. After process-
ing, the transformation of data is performed making it into meaningful
information. This information is used to make decisions and help to
improve efficiency and effectiveness of the organisation.
1.6.1 NATURE AND SCOPE OF MIS
S
MIS has become a vital part of the business environment. It is useful
for managers who use information provided by it to take effective de-
IM
cisions. The nature of MIS can be described as:
Technology-based Concept: A concept which uses numerous tech-
nologies for data processing in the system.
System Approach: It consists of input, process and output used for
M
the management decision-making.

Interdisciplinary Concept: It incorporates all business aspects,
such as accounting, operational research, statistics, and manage-
ment etc.
N
MIS is used to analyse and organise unstructured data retrieved from

several resources. This data is transformed into meaningful informa-
tion which creates an opportunity for the management to make best
productive decisions. Information technology has given a great scope
to MIS.
1.6.2 FEATURES OF MIS
The following are the characteristics of MIS:

Management: MIS handles the management processes, such as
decision making, production planning, and goal setting.
Requirement Based: MIS gives the information needed by the
managers.
Concerned with Growth: MIS simplifies progress via effective
planning and control of the production processes.

N O T E S
Flexibility of Process: MIS provides various processes which are

flexible in nature.
Integrated: MIS incorporates numerous processes and resources
and delivers combined information, when needed.
1.6.3 FUNCTIONS OF MIS
MIS fulfils the information requirements of managers to make several

management decisions. Figure 1.6 shows the functions of MIS:
Generating
information
Collection
Data Dissemination
of Data from
Processing of information
S
various sources
Storage of
Storage of information as
IM
data data
Figure 1.6: Functions of MIS
Some functions of MIS are discussed as follows:

M
Data Collection from Various Sources: It includes collecting data

from different internal and external sources. External sources con-
sist of competitors, customers, suppliers, newspapers and so on.
N
Internal sources consist of financial reports, sales records and so

on. This data can be stored in both paper and in electronic forms.
Data Storage: All the records are stored and retrieved, when re-
quired.
Data Processing: It comprises tasks, such as calculating, analys-
ing, and summarising the collected data.
Information Generating: The collected data is transformed into
valuable and meaningful information after processing. This infor-
mation is well structured and organised.
Information Storage: Information is saved again in the database
to be used in future. The same information can be processed again
if required.
Information Distribution: The information produced is distrib-
uted to users or managers to assist them in performing their tasks
efficiently. For example, report generation.

N O T E S
DEFINITION
According to Schwartz, “MIS is the system of people, equipment,

procedures, document and communication that collects, validates,
operates on, transforms, stores, retrieves and presents data for use in
planning, budgeting, accounting, controlling and other management
processes.”
According to Coleman and Ritley, “An MIS

i. applies to all management levels;
ii. is linked to an organisational subsystem;
iii. functions to measure performance, monitor progress, evaluate
alternatives or provide knowledge for change or collective
action; and
iv. is flexible both internally and externally.”
S
According to Davis and Olson, “MIS is an integrated user-machine
system designed for providing information to support operational
IM
control, management control and decision making functions in an
organisation. ISs make use of resources such as hardware, software,
men, procedures as well as suppliers.”
M
9. MIS is used to analyse and organise unstructured data

retrieved from internal resources only. (True/False)
N
ACTIVITY
Find out how MIS affects your day to day life. List down the areas
where you have seen the use of MIS.
1.7 SUMMARY
The outcome of an information system is called the information.
Information with good quality helps an organisation to make ef-
fective decisions.
Data is made of fact such as number of employees, salary, number
of inventory. In any information system data plays a key role be-
cause it signifies facts.

N O T E S
A system can be defined as a set of components which are interde-

pendent and organised for a common purpose.
Information System (IS) is a process is an organised combination
of resources such as network of hardware, software, people that is
used to retrieve, filter, process, create and distribute data.
Control can be defined as the process in which it is determined
whether the business is functioning according to the standards or
not and if not what steps should be taken to tackle the problem.
Business process design is the method to comprehend and outline
the business activities that help the business to operate effectively.
Business process re-engineering (BPR) is a technique that allows
us to rethink the fundamentals and redesign the processes of busi-
ness to achieve rapid improvements.
MIS is a source of information to the management which is helpful
S
in making effective decisions and well-organised business man-
agement.
IM
KEY WORDS
Vendor: It refers to suppliers associated with the production

process in an organisation.
M
Compensation: It refers to any means of payment to an individ-

ual for his service or loss.
Procedure: It refers to the set of instruction to process informa-
tion.
N
Framework: A basic structure that works as a guideline to the

main system.
Management: It is a process of planning, organising, directing
and controlling the resources to achieve business goals.
1.8 DESCRIPTIVE QUESTIONS

1. Explain the need and functions of information systems in
organisations.
2. What do you understand by e business process modelling and
business process re-engineering? Discuss.
3. What are the functions of MIS in an organisation? Explain.

N O T E S
1.9 ANSWERS AND HINTS
ANSWERS FOR SELF ASSESSMENT QUESTIONS
Topic Q.No. Answers

Meaning of Infor- 1. Credibility and transparency
mation
2. False
Concept of System 3. components, interdependent, organised
4. c. Cost-effective
Definition of an 5. a. Data recovery
Information Sys-
tem
6. True
Business Process 7. product, service
S
Design
8. process, actions, activities
IM
Management Infor- 9. False
mation Systems
HINTS FOR DESCRIPTIVE QUESTIONS

1. An information system collects its data from various sources
M
which could be internal and external employees’ performance

and opponents’ performance. Refer to Sections 1.6 Definition of
an Information System.
N
2. Business process modelling (BPM) is an activity that represents

processes of an enterprise, to analyse and improve that the current
process. Business process re-engineering (BPR) is a technique
that allows us to rethink the fundamentals and redesign the
processes of business to achieve rapid improvements. Refer to
Section 1.7 Business Process Design.
3. MIS is a source of information to the management which is
helpful in making effective decisions and well-organised business
management. Refer to Section 1.8 Management Information
Systems.
1.10 SUGGESTED READING FOR REFERENCE
SUGGESTED READINGS
Rainer, R. K., & Cegielski, C. G. (2012). Introduction to information
systems: enabling and transforming business (4th ed.). Hoboken,
NJ: Wiley.

N O T E S
Srinivasan, R. (2011). Business Process Reengineering. : Tata Mc-

Graw Hill Publishing.
Stair, R. W., & Reynolds, G. M. (2006). Fundamentals of Informa-
tion Systems (3rd ed.). Cambridge, Boston: Thomson Learning.
E-REFERENCES
Introduction to Information System. Retrieved from http://www.
oum.edu.my/oum/v3/download/CBAD2103.pdf
Importance of Information Systems in an Organisation. Retrieved
from http://smallbusiness.chron.com/importance-information-sys-
tems-organisation-69529.html.
An Introduction To Control Systems. Retrieved from http://www.
facstaff.bucknell.edu/mastascu/econtrolhtml/intro/intro1.html.
S
IM
M
N

C H A
2 P T E R
COMPONENTS OF INFORMATION TECHNOLOGY
CONTENTS
2.1 Introduction
2.2 Hardware
S
2.2.1 Input Devices
2.2.2 Processing Devices
IM
2.2.3 Storage Devices
2.2.4 Output Devices
Activity
2.3 Software Concepts
M
2.3.1 Operating Systems

2.3.2 Programming Languages
2.3.3 Ready-made Packages and their Operating Systems
N

Activity
2.4 Summary

N O T E S
IMPLEMENTATION OF LATEST SOFTWARE

AND NETWORK SECURITY
St. Stephens’s Women’s College is a management college, which

was founded in 1957. Today, the college has become popular
because of its highly-qualified faculty and a wide range of pro-
grammes for students. The college campus has spread over a large
area, which facilitates a good infrastructure for over 920 students.
The college also provides hostel facilities to students. In the past
several years, education of Information Technology (IT) has been
added to the course curriculum and has been given high priority
in the college. Due to the variety of educational assignments, Web
access was given to students.
Giving Web access to students raised many concerns such as stu-

dents’ protection from inappropriate material and security of the
S
college network from hackers. The college authority delegated
the responsibility of handling and managing security systems to
IM
Richard Parker, a teacher at the college.
Richard Parker was not from a technical background but was

trained in computer security. He knew the basics of risk assess-
ment, running of software and hardware firewalls, and data secu-
rity elements. The college network had 280 PCs running on Win-
M
dows XP, which was outdated at the moment, and had not been
given software support by the manufacturer anymore. The col-
lege network was connected through the university network.
N
First, Richard Parker decided to install the new Windows 7 oper-

ating system and a firewall, which is a priority for any type of net-
work security. The firewall software works as a barrier between
the network and the outside world. Then, Internet usage guide-
lines and policies were made for students and the teaching staff.
With the help of efficient software, the college network now was
secure and protected.

COMPONENTS OF INFORMATION TECHNOLOGY 29
N O T E S
LEARNING OBJECTIVES

> Explain different types of hardware
> Discuss the various concepts of software
2.1 INTRODUCTION
Information system is a group of components integrated together to
collect, store, and process data. It delivers valuable information after
processing the data. Organisations, business or otherwise, are depen-
dent on an information system to control and manage their business
operations. They need an information system to manage customer
and supplier relationship, compete with other organisations, etc.
S
Business organisations use information systems to achieve their tar-
get potential customers for managing the organisation’s financial ac-
counts and human resources. Information systems have simplified
IM
many human activities, which have made a positive impact on soci-
ety. These systems have increased the speed of daily activities and
enhanced the efficiency of organisations. Data is a crucial part of in-
formation systems, and after being processed, this data delivers us
knowledge and information. This information has become a vital eco-
M
nomic resource for every organisation.
An information system comprises many components, which are used

to input, process, and output data in the form of information. The
N
main components of an information system are computer hardware,

software, data, human resources, and procedures. Hardware and soft-
ware are the components of IT, which is now a vital part of operations
and management in organisations.
This chapter starts by explaining the different types of hardware de-

vices, namely input devices, output devices, and storage devices. Fur-
ther, it explains software concepts, namely, operating systems, pro-
gramming languages, and ready-made packages and their operating
systems.
2.2 HARDWARE
In today’s world, every business organisation, whether small or big,
owns or leases computers. An organisation or an individual can own
one or more computers in the form of laptops, tablets, smart phones,
or any other portable device. Large organisations have distributed
computer systems located in remote data centres. These organisations
also use mobile devices, which are integrated into the organisational
information system.

N O T E S
Together, all the peripheral equipment, such as storage discs, in-

put-output devices, and telecommunication devices, constitute the
hardware of an information system. In the last few years, the cost of
hardware has rapidly decreased, whereas the cost of processing speed
and storage capacity has increased. However, the power consumption
of hardware is still a major concern being addressed by business or-
ganisations.
Hardware can be described as the collection of physical components of

a computer or the parts of a computer that can be physically touched.
Most hardware contains physical parts such as circuit boards, ICs (In-
tegrated Circuits), and other electronic parts. A computer monitor is
an example of hardware, which displays the information on a screen.
A computer cannot exist without hardware. Also, software applica-
tions cannot run without hardware. Computer hardware consists of
four types of devices, as shown in Figure 2.1:
S Input Devices
IM Types of Hardware
Processing Devices
Storage Devices
M
Output Devices
N
Figure 2.1: Types of Hardware
Let us discuss these types of hardware in detail.
2.2.1 INPUT DEVICES
Any hardware device that is used to enter data to a computer is known

as an input device. Input devices allow a user to perform numerous
tasks interactively with the computer. Without input devices, a user is
not able to interact with a computer.
Some most common input devices are discussed as follows:
KEYBOARDS
The most common input device used with computers is a keyboard. It

is similar in appearance to the traditional typewriter, but it has some
extra keys, which have their own purpose. Keyboards allow users to
input letters, numbers, and other symbols into the computer, which

N O T E S
enables users to write documents such as e-mails, business reports,

and business documents. Figure 2.2 shows the layout of a typical key-
board:
Escape Function Enter Backspace Delete Print Screen Scroll Indicators

Alphabetical
keys
Capitals Numeric
Lock Keypad
Shift
Control
Windows Alt Space bar Alt Windows Menu Control Shift Arrows Number Pad
Figure 2.2: Layout of Keyboard
S
(Source: http://digitalunite.com/guides/computer-basics/how-to-use-a-computer-keyboard)
Table 2.1 shows the description of the keys in a keyboard:

IM
TABLE 2.1: DESCRIPTION OF THE KEYS IN A KEYBOARD
Keys Description
Windows This is commonly used in combination with other
keys. For example, Windows key + E is used to open
M
Windows explorer.
F1 - F12 Function keys have different usage based on the op-
erating systems and the application.
N
For example, in a Windows operating system, F1 is

used to open the Help window.
Tab The Tab key is used to give indention between lines
and switch between controls such as menu bars and
textboxes.
Caps lock This is used to type capital letters.
Shift This is used to type a single capital character. It is
also a modifier key, which is used in combination
with other keys.
Ctrl The Ctrl (control) key is mainly used to perform var-
ious keyboard shortcuts such as ctrl + c for copying
data.
Alt The Alt (alternate) key is a modifier key that is used
in combination with other keys. For example, press-
ing Alt + F4 is used to close the currently open pro-
gramme.
Back Space This is used to delete text backwards.
Delete This is used to delete text, files, and other objects
from the computer hard drive.

N O T E S
TABLE 2.1: DESCRIPTION OF THE KEYS IN A KEYBOARD

Keys Description
Enter This is used to place the cursor on the next line and
to execute a command.
Space bar This is used to enter space between text.
Esc This is used to escape a programme.
PrtScrn This is used to print the currently open document.
Scroll lock This is used to lock the scroll bar and temporarily
stop the scrolling of text.
Pause This is used to pause the actions of the programme
being run or the scrolling of text.
Break This is used to break the pause or other halt state of
the computer.
S
Insert This is used to change the cursor type.
Home This is used to return the cursor to the beginning of
a line or a document.
IM
Page up This is used to move one page up.
Page down This is used to move one page down.
Arrows This is used to move the cursor in different direc-
tions such as up, down, left and right.
M
Num Lock This is used to enable and disable the numeric key-
pad.
Indicators This is used to notify the user about the status of the
N
different lock keys.

Menu This is used to open the context menu of the pro-
gramme which is clicked.
Alphabetic Keys This is used to enter alphabets.
Numeric Keys This is used to enter numbers.
Through many years, the keyboard has evolved with new technologies.
Its design has been changed many times in the past several years, but
the basic layout of a keyboard is still the same. However, variations of
the common keyboard are now available. Following are some different
types of keyboards:
Standard Keyboard: A standard keyboard has 105 keys on an av-
erage, however, some still older versions of keyboards, with the
number of keys ranging from 95 – 103, also exist. Standard key-
boards are the most basic keyboards, but they still have variations
in their key placement. QWERTY keyboards are the most com-
monly used keyboards. They are called QWERTY keyboards, be-
cause the six alphabets, Q, W, E, R, T, and Y, are in the first row.
Similarly, AZERTY, QWERTZ, and Dvorak keyboards are other

N O T E S
variations of a standard keyboard. Figure 2.3 shows a QWERTY

keyboard:
Figure 2.3: QWERTY Keyboard

(Source: http://sterlingadaptives.com/products/half-qwerty-508-keyboard/)
Ergonomic Keyboards: Ergonomics is the study of methods that

reduces stress on muscles to avoid strain injury. It emphasises cor-
S
rect positions and techniques while working, so that the work is
done with the least possible strain on any muscle. An ergonomic
keyboard is designed with these concerns in mind.
IM
The design of an ergonomic keyboard is based on ergonomics. It is
slightly broader than and different from standard keyboards. These
keyboards are used by people who spend long hours working on key-
boards to avoid stress in their wrist muscles. Figure 2.4 shows an er-
M
gonomic keyboard:
N
Figure 2.4: Ergonomic Keyboard

(Source: http://www.keyboardco.com/keyboard/tru-form-pro-ergonomic-keyboard-with-built-
in-touchpad-usa-data-sheet.asp)
Wireless Keyboards: Wireless keyboards do not need a wire to

connect to the computer. Such a keyboard is more comfortable to
use, because you can work on it with a certain distance from the
monitor. Wireless keyboards use different technologies, such as
Bluetooth, infra-red, and radio frequency, to connect to the com-
puter. These keyboards run on batteries and have a transceiver,
which connects to the computer and establishes a connection be-

N O T E S
tween the computer and the keyboard. Figure 2.5 shows a wireless
keyboard and a transceiver:
S
Figure2.5: Wireless Keyboard and a Transceiver
(Source: http://sweetscreams.com/choose-best-wireless-keyboard-online.html)
IM
MOUSE
A mouse is an input device that is used to point to an object on the

screen. It performs various tasks by its two click buttons known as the
M
left-click and the right-click buttons. The mouse sends information to

the computer when the user presses the click buttons and the com-
puter performs the task after processing the command. The user can
also consider the mouse as an alternative to the various MS-DOS com-
N
mands because, with the help of the mouse, the user does not have to
remember MS-DOS commands such as cd, mkdir, and dir.
Figure 2.6 shows a mouse and its parts:
left click
button
scroll
button
right click
button
Figure 2.6: Mouse and its Parts

(Source: http://diamondzvalley.blogspot.in/2011_03_01_archive.html)
As new technologies arrive, new types of the mouse have entered the
market. Some different types of the mouse are as follows:

N O T E S
Mechanical Mouse: A mechanical mouse has a ball inside it, which

is made of rubber or metal. The movement of the ball determines
the position of the cursor on the screen. Figure 2.7 shows a me-
chanical mouse:
Figure 2.7: Mechanical Mouse

(Source: 1. http://hexus.net/tech/tech-explained/peripherals/19231-the-different-types-
S
computer-mice/
2. http://german.alibaba.com/product-free/3d-mechanical-mouse-11209514.html)
Optical Mouse: Unlike a mechanical mouse, an optical mouse

IM
does not contain any ball inside it. It uses optical sensors or lasers,
which emit light to detect the mouse’s movement. It is costlier than
the mechanical mouse. Figure 2.8 shows an optical mouse:
M
N
Figure 2.8: Optical Mouse

(Source: http://www.lankalaptophouse.com/USB-Optical-Mouse.html)
Wireless Mouse: A wireless mouse has no wire attached to it. It

does not require a wire or a cable to work. Instead, it uses wireless
technologies such as Bluetooth and infra-red. It transmits data
with the help of radio waves or infrared light waves. A receiver is
connected to the computer using a USB port, and the mouse has a
transmitter built in it. This mouse provides the freedom of work-
ing on a computer from a distance.

N O T E S
Figure 2.9 shows a wireless mouse and a transceiver:
Figure 2.9: Wireless Mouse and Transceiver

(Source: http://www.tomsguide.com/us/squeezing-more-life-out-of-your-notebook,re-
view-583-12.html)
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SCANNERS
Organisations often encounter situations where they need to convert

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a physical document into an electronic document to read or edit it. In
such situations, they can use scanners.
A scanner is used to scan a text document or an image and convert it

into a digital file. A scanner allows the computer to read, display, and
edit the scanned document on the screen. Most scanners have a flat
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scanning surface, hence, they are also called flatbed devices. There
are some other popular types of scanners such as:
Sheetfed Scanner: A sheetfed scanner scans the document fed
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into it.
Handheld Scanner: A handheld scanner is held and dragged over
a document to scan it. It is commonly used in general stores to
scan product information.
Figure 2.10 shows flatbed and handheld scanners:
Figure 2.10: Flatbed and Handheld Scanners

(Source: http://www.allied-images.com/plustek_bookscan_overview.html)
http://www.barcode.co.uk/products/psc-quickscan-6000-plus-handheld-scanner.htm

N O T E S
DIGITAL CAMERA
A digital camera is a camera that stores images digitally instead of

capturing them on a film. It is stored in electronic format so you can
store and edit images in your computer. There are various photo ed-
iting computer applications that you can use to edit your images. Im-
ages captured with digital cameras have a limited resolution due to
the limited amount of memory in camera. Figure 2.11 shows a digital
camera:
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Figure 2.11 Digital Camera
(Source: http://www.ephotozine.com/article/olympus-sp-610uz-digital-camera-review-15939)
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JOYSTICK
Joystick is an input device that is used to control objects in comput-

er games. For example, The gaming parlours use these devices for
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arcade games. With the help of joystick you can move an object in
a game such driving a car in a driving simulator game. Figure 2.12
shows a joystick:
Figure 2.12 Joystick

(Source: http://onlinemca.com/mca_course/kurukshetra_university/semester5/computergraph-
ics/joy_stick.php)

N O T E S
TOUCH SCREEN
A touch screen can be described as a flat surface with sensitive panel.

This touch sensitive panel takes the touch of a finger as input. Using
the touch screen you can interact with devices without a mouse of
keyboard for input. It is used in the public environment where people
only need general information, for example ATM machine. However,
with the rapid growth and demand of this technology touch screens
are mainly used in small devices such as smartphone and tablets. Fig-
ure 2.13 show a touch screen mobile phone:
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Figure 2.13: Touch Screen Mobile Phone

(Source: http://www.vardhamantechnology.com/touch.html)
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LIGHT PEN
A light pen is a pointing device and used to give input to the computer.
It is shaped like a pen and connected to the computer. There is a light
sensitive element in the light pen which detects light from the screen
when placed against it. This allows the computer to identify the loca-
tion of the pen on the screen. Figure 2.14 shows a lightpen:
Figure 2.14: Light Pen

(Source: http://www.c64-wiki.com/index.php/Light_pen)

N O T E S
2.2.2 PROCESSING DEVICES
Organisations analyse and calculate huge amounts of data with the

help of a computer. A computer performs various calculations through
its processing devices.
In a computer, processing devices control the storage and retrieval of

information. The CPU (Central Processing Unit) is a processing de-
vice found in computers. The information is processed through the
CPU, which performs various operations on data such as calculation
and comparison. Every computer contains processing devices. Users
cannot perform operations on data without processing devices. Other
than the CPU, devices, such as graphics card, computer memory, net-
work card, and others, are also processing devices. Figure 2.15 shows
processing devices:
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Figure 2.15: Processing Devices

(Source: http://pdfcast.org/pdf/processing-devices)
2.2.3 STORAGE DEVICES
Whenever a user creates a new document, such as a business report

or an analytical report, the user needs to save it, so that it can be re-
used. Saving data is important in an organisation, because any loss
of data can lead to problems or loss. In a computer, a user saves data
in storage devices. A storage device is a hardware device that holds
user data. There are two types of storage devices used in computers:
primary storage device, such as a computer Random Access Memo-
ry (RAM), and a secondary storage device such as a computer hard
drive. Without a storage device, a computer cannot save any informa-
tion. There are different types of storage devices.

N O T E S
Figure 2.16 shows some important storage devices:
RAM
ROM
Compact Disc
Hard Drive
Figure 2.16: Important Storage Devices
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These storage devices are discussed as follows:
RANDOM ACCESS MEMORY

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RAM is the primary memory of a computer system. It is a storage de-
vice that allows information to be stored and retrieved quickly from
a random location in the memory. For example, when we copy text
from a document, the text is stored for a short amount of time in the
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RAM. Data is retrieved randomly in RAM and not sequentially, thus,

the computer accesses data faster as compared to data retrieval from
a hard disc. RAM is a volatile memory, because it needs electric power
to keep the data available. All the data stored in memory will be lost if
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power is lost. Figure 2.17 shows RAM:
Figure 2.17: RAM

(Source: http://ascomputerprice.com/view_category.php?c_id=3)
READ ONLY MEMORY
Read Only Memory (ROM) is a built-in memory in computer systems,

which can hold data and read that data from the chip, but it cannot
write data. ROM is a non-volatile memory, unlike RAM, which means
it maintains and stores information in itself regardless of the presence
of electric power. For example, system settings are stored in the ROM,
which are not lost even when power is switched off. Figure 2.18 shows
ROM:

N O T E S
Figure 2.18:ROM
(Source: http://www.ti.com/product/tms27pc512)
COMPACT DISCS
Compact Discs (CDs) are storage devices and are read by a laser in
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a CD-ROM drive. A CD-ROM drive is a CD player inside a computer
system. CDs are round in shape and can store up to 700 MBs (Mega
Bytes) of data. They can store any type of data. For example, audio file,
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video file, or any other digital file. A CD is often used in organisations
to store business presentations.
Figure 2.19 shows a CD:

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Figure 2.19: CD
(Source: http://findicons.com/icon/3088/cd)
HARD DRIVE
A Hard Disc Drive (HDD) or a Hard Drive (HD) is a secondary storage

device in a computer system. It is also the main storage device that
stores data permanently in the computer. The HD contains rapidly ro-
tating discs called platters inside air-sealed casings, which are coated
with magnetic material. It holds its data even when there is no pow-
er. HDs enable users to maintain and reserve data over a long period

N O T E S
of time. For example, organisations can store business reports in the

hard disc permanently. Figure 2.20 shows an HDD:
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Figure 2.20: HDD
(Source: http://ixbtlabs.com/articles2/storage/itogi2005hdd.html)
2.2.4 OUTPUT DEVICES

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A peripheral device that receives or displays output from a computer

is called an output device. When a user inputs data into a computer,
the computer processes the data and shows the result on the com-
puter monitor. A monitor is the most common example of an output
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device. Figure 2.21 shows some examples of important output devices:
Monitor
Printer
Projector
Figure 2.21: Important Output Devices
The output devices are discussed further:
MONITOR
A computer monitor, also known as a Visual Display Unit (VDU), is

an output device that displays the information from the CPU on the

N O T E S
screen. It works as an interface between the user and the CPU. A

monitor is connected to a video adapter through a cable. The CPU
instructs the video adapter regarding the information to be displayed
on the screen. Then the video adapter converts the instructions into
corresponding signals and sends them to the monitor. The monitor
comprises a circuitry that generates the content to be displayed on the
screen. Figure 2.22 shows a computer monitor:
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Figure 2.22: Computer Monitor
(Source: http://www.houseofjapan.com/electronics/nec-display-solutions-expands-accusync-se-
ries-with-24-inch-lcd-desktop-monitor)
PRINTER
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An organisation deals with a large number of documents on a daily

basis. These documents are on the computer system and are often
required to be printed on pages. Printers are used to print such docu-
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ments. A printer is an output device, which generates the hard copy of

data residing in the computer system. In an organisation, printers are
used on a wide scale to print text, images, business reports and other
important documents. There are many types of printers such as dot
matrix printers and laser printers. Figure 2.23 shows a printer:
Figure 2.23: Printer

(Source: http://www.compuworldaz.com/)

N O T E S
PROJECTOR
A projector is an output device that can project the computer screen

on a large flat surface. Projectors are commonly used in business
meetings and presentations to ensure that everyone can see the infor-
mation. Figure 2.24 shows a projector:
S Figure 2.24: Projector

IM
(Source: http://www.hitechreview.com/tv/projectors/casio-adds-four-new-models-to-its-green-
slim-projectors-line/28878/)
1. The two major components of information technology are

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____________ and __________.

2. Which of the following type of devices control storage and
retrieve information?
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a. Processing
b. Input
c. Calculating
d. Output
3. QWERTZ keyboards are the most commonly used keyboards.
(True/False)
4. Name the study of methods that reduces stress on muscles?
5. Wireless keyboards use different technologies, such
as________, ______, and ________, to connect to a computer.
6. A Sheetfed scanner is held and dragged over a document to
scan it. (True/False)
ACTIVITY
With the help of the Internet, find out some popular types of print-
ers that are used in business organisations.

N O T E S
2.3 SOFTWARE CONCEPTS

Software is a well-organised collection of instructions and code that is
written by programmers to achieve a predefined objective. Software
enables users to interact with a computer and perform various opera-
tions. Software is an essential part of a computer system. Without soft-
ware, computers are useless. For example, without the help of a Web
browser, users cannot access the Internet. Also, without an operating
system, which is also a type of software, the browser cannot run on a
computer. There are two types of software, discussed as follows:
System Software: System software is designed to control and op-
erate other computer programmes. The operating system is an ex-
ample of system software, because it manages other software pro-
grammes. Other software applications, which are installed with
an operating system, also exist. These applications are sometimes
also called system software, because they are a part of the oper-
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ating system. This kind of system software can be necessary for
other applications to function properly.
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All system software are not used by users directly, some system
software run in the background. For example, when a user installs
a windows operating system, Internet Explorer (IE) is automat-
ically installed with it. Although it is not necessary for a user to
use IE, because other Web browsers are available for free. Still,
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numerous applications rely on the components of IE to function

properly.
Application Software: Application software is a software pro-
gramme that is designed to perform specific tasks. Some exam-
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ples of application software are Web browsers, word processors,

spreadsheets and other utility applications. Consider the example
of word processor. Organisations always need to create various
reports and legal documents for different purposes. They use the
word processor programme to create such documents, because it
provides various utilities such as different fonts, colours and lay-
outs.
System software run in the background and enable other applications

to run. These system software consist of programmes such as assem-
bler, compiler and file management system. Application software run
on the top of these system software. System software are installed au-
tomatically when a user installs an operating system, whereas in case
of application software, the user can decide which application to install.
2.3.1 OPERATING SYSTEMS
An operating system is a software programme that allows the com-

puter hardware to communicate with the computer software. It also
controls and manages application software in a computer system. A
computer is useless without an operating system. The most commonly

N O T E S
used operating systems used in an organisation are Microsoft Win-

dows XP/7/8, Linux Ubuntu and Macintosh OSX.
When computers were first introduced, users interacted with com-

puters through commands. Memorising all the difficult commands
was not easy, because sometimes users needed to perform a series of
commands. Today, every computer uses a GUI (Graphical User Inter-
face) based operating system, which consists of buttons, menu bars,
textbox, etc., and is much simpler to operate. Figure 2.25 provides an
overview of the working of an operating system:
User 1 User 1 User 1
System Application
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Software Software
Software
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Operating System
Hardware CPU RAM I/O

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Figure 2.25: Overview of an Operating System

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(Source: http://www.tutorialspoint.com/operating_system/os_overview.htm)
2.3.2 PROGRAMMING LANGUAGES
A programming language is used to create computer programmes such

as software applications. A programming language contains predefined
instructions, which are used to create computer programmes. Comput-
er programmers write these instructions to command the programme
to perform its tasks. After writing the complete programme, it is com-
piled using a compiler. A compiler turns a programming language into a
machine language, which a computer understands. Then the compiler
generates an executable file, which the user can run on a computer.
Using programming language, programmers can develop different

kinds of software applications such as GUI applications and Web
applications. Following are some popular programming languages,
which are used to create applications:
C
C++
Java

N O T E S
EXHIBIT
Brief Description of C, C++, and Java
C
• C is a general-purpose, structured language. It was developed by
Dennis M. Ritchie to develop the UNIX operating system at Bell
Labs.
C++
• C++ is a programming language developed by Bjarne Stroustrup
in 1979 at Bell Labs. It is an advanced version of C language. C++
runs on a variety of platforms such as Windows, Mac OS, and the
various versions of UNIX.
Java
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• Java programming language was developed by James Gosling in
1995 at Sun Microsystems. It was developed as a core component of
Sun Microsystems' Java platform (Java 1.0 [J2SE]).
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2.3.3 READY-MADE PACKAGES AND

THEIR OPERATING SYSTEMS
Ready-made packages are ready to use. The user only needs to install
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these programmes and they can start using it. Ready-made packages
comprise computer programmes, user guides, and other documen-
tation sets. They provide inexpensive and quick solutions to numer-
ous computer applications. A wide range of ready-made packages are
available in the market. Some examples of such packages are Micro-
soft Office, Libre Office, Kingsoft Office, etc.
Such applications are used on a large scale in a business organisa-

tion. These applications should be compatible with the user’s oper-
ating systems to function properly. The user should always check the
system requirements of the application package before purchasing it.
There are many software packages that are built for a specific oper-
ating system. For example, the Microsoft Office package only runs on
Windows operating systems.
Let us discuss some important applications that organisations need in

ready-made software packages:
Word Processor: Word processor is an application that allows us-
ers to perform almost all types of operations on text. It allows users
to create, edit, and format documents. It also allows users to add
pictures, graphs and tables in documents. One of the most popular

N O T E S
word processors is Microsoft Word, which comes in the Microsoft

Office package and runs on Windows operating system.
Spreadsheet: A spreadsheet is a document that consists of rows and
columns for entering data. This data is recorded in spreadsheets
to perform various calculations. In an organisation, a spreadsheet
is mostly used for accounting purposes such as creating balance
sheets. Microsoft Excel is an example of a spreadsheet programme.
Relational Database Management System (RDBMS): An RDBMS
is used to store data in the format of rows and columns. This com-
bination of rows and columns forms a table. These tables can have
relations with other tables. For instance, a table that stores product
data can be related to a customer table. Microsoft Access is an ex-
ample of an RDBMS, which is found in the Microsoft Office.
Table 2.2 shows some ready-made software packages and their oper-
ating systems:
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TABLE 2.2: READY-MADE SOFTWARE PACKAGES AND
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THEIR OPERATING SYSTEMS
Ready-made Software Packages Operating System
Microsoft Office Windows operating systems
Breadbox Office DOS
Neo Office Mac OS X
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Kingsoft Office, LibreOffice, Open Cross Platform

Office
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7. MS Excel contains __________ which are used to record data

in the form of rows and columns.
8. An operating system turns a programming language into the
machine’s language. (True/False)
9. Which of the following is not a cross-platform software
package?
a. Kingsoft Office
b. Microsoft Office
c. Libre Office
d. Open Office
ACTIVITY
With the help of the Internet, list the application software and
ready-made packages used by most organisations.

N O T E S
2.4 SUMMARY
Information systems comprise many components, which are used
to input, process and output data in the form of information.
The main components of information systems are computer hard-
ware, software, data, human resources and procedures.
Hardware can be described as the collection of physical compo-
nents of a computer or the parts of a computer that can be physi-
cally touched.
Any hardware device that is used to enter data to a computer is
known as an input device.
In a computer, processing devices control the storage and retrieval
of information. The CPU (Central Processing Unit) is a processing
device found in computers.
A storage device is a hardware device that holds user data.
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A peripheral device that receives or displays output from a com-
puter is called an output device.
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System software is designed to control and operate other comput-
er programmes. The operating system is an example of system
software, because it manages other software programmes.
An operating system is a software programme that allows the com-
puter hardware to communicate with the computer software.
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KEY WORDS
Transceiver: A transceiver is a device that contains both trans-

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mitter and receiver. It transmits and receives analog or digital

signals.
Assembler: Assembler is a computer programme that trans-
lates other computer programmes from assembly language to
machine language.
Compiler: A compiler is a programme that translates a com-
puter programme written in some high-level programming lan-
guage (such as Java) into machine language.
Ergonomics: It is the study of methods that reduce stress on
muscles to avoid strain injury.
File Management System: It is the system used by an operat-
ing system or a programme to organise and keep track of files.

1. Describe the different types of hardware devices used by an
organisation.
2. Define the types of software used in computer.
3. Explain the use of operating systems.

N O T E S
Topic Q.No. Answers

Hardware 1. Hardware, Software
2. a. Processing
3. False
4. Ergonomics
5. Bluetooth, infra-red, radio frequency
6. False
Software 7. spreadsheets
Concepts
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8. False
9. Microsoft Office
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1. Hardware can be described as the collection of physical
components of a computer or the parts of a computer that can be
physically touched. Refer to Section 2.4.
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2. Software is a well-organised collection of instructions and code

that is written by programmers to achieve a predefined objective.
Refer to Section 2.5.
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3. An operating system is a software programme that allows the

computer hardware to communicate with the computer software.
Refer to Section 2.5.
SUGGESTED READINGS
Goel, A. (2010). Computer fundamentals. 1st ed. New Delhi: Dor-
ling Kindersley (India).
Watt, D. and Findlay, W. (2004). Programming language design
concepts. 1st ed. Chichester, West Sussex, England: John Wiley.
E-REFERENCES
Hardware. Retrieved from http://www.unm.edu/~tbeach/terms/
inputoutput.html
Software Concepts. Retrieved from http://www.gcreddy.
com/2013/02/types-of-software.html
Software Concepts. Retrieved from http://ecomputernotes.com/
fundamental/disk-operating-system/what-is-operating-system

C H A
3 P T E R
NETWORKING CONCEPTS
CONTENTS
3.1 Introduction
3.2 Meaning of Networking
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3.2.1 Need for Networking
3.2.2 Advantages and Disadvantages of Networking
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Activity
3.3 Hardware and Software for Networking
Activity
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3.4 Basic Components of a Network

Activity
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3.5 Types of Networks

3.5.1 Local Area Network
3.5.2 Metropolitan Area Network
3.5.3 Wide Area Network
3.5.4 Bluetooth as Wireless Technologies
3.5.5 RFID
Activity
3.6 Characteristics of Networks
Activity
3.7 Network Models
Activity
3.8 Applying Communication Networks
3.8.1 Intranet
3.8.2 Extranet
3.8.3 Internet


Activity
3.9 Summary
3.11 Answers and Hits
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NETWORKING CONCEPTS 53
N O T E S
TACKLING NETWORK ISSUES AMONG VARIOUS

BRANCHES OF CADENCE BANK
Cadence Bank, with its headquarter in Birmingham, is a region-

al banking company serving consumer, commercial and business
customers in Alabama, Florida, Georgia, Mississippi, Tennessee
and Texas. With $5.7 billion in assets and nearly 1,500 employees
spread across more than 100 branch office locations, Cadence
has a large distribution network. It runs applications for banking,
mortgage, trust and other financial services.
Like many companies in the financial services sector, Cadence is

growing through acquisition, which presents some unique chal-
lenges. Every company it acquires had its own network. Combin-
ing networks of these separate organisations with overlapping and
often completely different hardware, applications and third-party
S
service providers require Cadence to have a deep level of under-
standing about how applications and services are behaving on the
network and how users interact with them. Without proper vis-
IM
ibility into these networks, the IT team of Cadence struggles to
effectively combine, optimise and manage network resources.
Thus, to overcome this problem, Cadence chose Visual Perfor-

mance Manager (VPM) from Fluke Networks to provide network
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and application solutions. Cadence saw the benefits of using VPM

within days, as it was able to identify some unexpected disk-to-
disk replication that was causing a network slowdown. In another
case, VPM helped to uncover storage backup traffic between three
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branch offices that were also affecting network performance. The

backup was supposed to occur over night during non-business
hours, but was taking too long and running into the business day
hours where it was impacting users. After using VPM to find the
source of the slowdown, Cadence was able to apply some policies
to prevent this problem.
(Source: http://www.flukenetworks.com/content/case-study-visual-performance-manag-
er-gives-regional-banking-and-financial-services)

N O T E S
LEARNING OBJECTIVES
After studying this chapter, you will be able to:

> Explain the meaning of networking
> Describe the Hardware and Software requirement for Net-
working
> Explain the basic components of a network
> Discuss the types of networks
> List the characteristics of networks
> Describe various network models
> Discuss various communication Networks like Intranet, Ex-
tranet and Internet
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3.1 INTRODUCTION
Networking is a widely and commonly used term be it human net-
IM
working or networking of devices. Basically a human network is a
group of people, for instance, friends, colleagues or family. A human
network helps in exchange of information and ideas amongst them.
Human networks help in growth and evolution of people and help one
in becoming better human beings by bringing synergy.
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Similarly, a computer network is another interconnection of computers

which helps in better and faster communication amongst them. Along
with human networking, computer networking is a significant part of
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a business world. It is difficult to imagine an organisation in present

times functioning without a computer network. Networking facilitates
exchange of information and smooth communication between various
departments within an organisation. Earlier computer networking was
considered a hardcore technical job that came under the domain of net-
work administrators, engineers and technicians. Now it involves any-
one who has access to any kind of computer network.
With time, we have been observing a revolution in our communication

system be it through radio network, television network, telephone net-
work, and now through a computer network. The launches of commu-
nication satellites have enhanced these networks a great deal. The fo-
cus of these networks has been to share information as fast as possible.
The information may be in any form either entertaining, as in radio
or television networks, or other important information related to or-
ganisations. The communication system also plays a significant role in
other aspects of our daily life. It provides basic infrastructure support
to various services and applications which include some critical opera-
tions like online money transactions and military data. Communication
network also greatly helps in the transportation system be it road, air,
road or water. It helps in monitoring and regulating the traffic.

N O T E S
In an organisation computer networks play a significant role in achiev-

ing the objective of collecting, sharing and processing information at
good speed. An organisation with many of its branch offices located
at geographically diverse places can connect through computer net-
works. These networks enable the organisation to keep track of inven-
tories, monitor productivity and maintain payroll.
Computer networks facilitate services such as e-mail, web search,
streaming of multimedia contents, online purchases, ATM machines
etc. Cellular telephone system is a part of everyone`s life nowadays.
Due to this growing integration of the communication network and
computer network into business and normal life, we can say that this
aspect of understanding the know-how of networking is not the pre-
rogative of network administrators alone. We all, especially informa-
tion systems, business and computer science students, need to under-
stand the basic concepts of computer networks.
This chapter begins by introducing the concept of networking in an
S
organisation, its need and its advantages and disadvantages. Next, it
examines the hardware and software requirements of a computer net-
IM
work and other basic components of a network. Further, it explains
the different types of networks. Further ahead, it tells about the char-
acteristics of network and network models. Towards the end,the chap-
ter concludes with a discussion about the communication networks
like Intranet, Extranet and Internet.
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3.2 MEANING OF NETWORKING

Networking, or computer network, can be defined as “A computer net-
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work is a group of computer systems and other computing hardware de-

vices that are linked together through communication channels to facili-
tate communication and resource-sharing among a wide range of users.
Networks are commonly categorised based on their characteristics.”
In simple terms, a computer network, also called network, is described

as two or more computers that are connected with one another for
the purpose of communicating data electronically. In other words, a
computer network is an interconnection of computers and computing
equipment using either wires or radio waves over small or large geo-
graphical areas. A wireless network makes use of radio waves.
Simplest network of interconnected two systems is depicted in Figure 3.1.
Figure 3.1: Network of two systems

N O T E S
3.2.1 NEED FOR NETWORKING
As discussed earlier, networking can also be described as a set of two

or more computers that are connected together in order to share
hardware resources (such as printers and CDs), software resources
(exchange data and files), or allow electronic communications. In a
network, the computers may be linked with each other through ca-
bles, telephone lines, radio waves, satellites, or infrared light beams.
Figure 3.2 shows the sharing of printer by three systems in a network.
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IM
Figure 3.2: Network of computers sharing a printer
In organisations, before forming a network of computers, the computer

systems might have been working in isolation. These isolated systems
are unable to share any hardware or software resources with the other
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systems. In this scenario, it becomes difficult for the company manage-

ment to correlate data present on these isolated systems. To extract and
correlate information about the company as a whole, the management
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decides to create a network of these isolated computers. Thus, the core

issue in forming a network of computers is to share resources of an or-
ganisation as a whole, be it hardware or software resources.
An organisation may feel the need to have networking due to follow-

ing reasons:
Resource sharing: The main objective here is to make all the hard-
ware equipment, like printer, and all the information, especially
data and program available to everyone who is on the network ir-
respective of physical location of resources and user.
High reliability: Copies of the data file can be kept at multiple
locations in a network. Thus, if there is a hardware failure at any
end of the network, other copies of the data file can be obtained
from any of these locations. This ensures that the data is not lost
due to hardware failure. The factor of reliability in networks is of
utmost importance in many areas like banking, military and air
traffic control.
Economic: Computer systems which are part of the network are
low in price and high in performance. Thus in a network, data is
kept in a centralised mainframe system and the rest of the sys-

N O T E S
tems are personal computers which are cost effective. This model
of network is also called as client-server mode, where mainframe
system is the server and rest are clients.
Scalability: A network should be scalable i.e., it can be expanded
just by adding one more system to the centralised mainframe sys-
tem without adversely affecting the performance of the entire net-
work. Rather the network can be enhanced by adding new clients.
Powerful communication medium: A computer network proves
to be a powerful communication medium for employees who are
situated at physically far off distances. They can share mails and
data. If one of them makes any changes in a document another can
see it immediately. This quick sharing of important information
over long distances also improves the performance of the organi-
sation as a whole.
Now, let us consider some of the real life application of computer net-
S
works:
Banking transaction like fund transfers, FD, RD etc.
IM
Taking out cash from an Automated Teller Machine(ATM).
E-mails i.e., sending and receiving mails electronically
Online ticket reservation for airlines, rail, hotels.
Data sharing with ease in offices.
M
We have seen some real life scenarios where computer networks in-
crease the efficiency of an organisation. However, computer networks
have a flip side too. Let us discuss a few advantages and disadvantages
of networking in the following section.
N
3.2.2 ADVANTAGES AND DISADVANTAGES

OF NETWORKING
As we have seen in previous sections, computer network brings an

added advantage to an organisation. Some of the advantages of com-
puter network are as follows:
Advantages of Networking
Information
Sharing of Resource Instant
storing Services Security
files Management Messaging
and sharing
Figure 3.3: Advantages of Networking

Information storing and sharing: Information can be easily creat-
ed and managed using computers. A computer network provides a
place to store the information as well as the essential mechanisms

N O T E S
and infrastructure to share that information with other users us-

ing the network.
Sharing of files: On a computer network, files can be stored on a
central computer (also called a file server). This enables the data
to be shared throughout an organisation. Backup of files can be
easily maintained when files are saved on a central file server rath-
er than when they are scattered across a separate independent
computers.
Resource Management: For a network, software licenses are
cheaper than buying licenses for several standalone computers.
Network versions of software are known to have speedy installa-
tion on client computers than on the file server. Hardware devices
such as expensive laser printers or scanners can easily be shared
over the network. This sharing of expensive devices proves eco-
nomical for the network.
S
Services: An organisation, if in the public domain, can provide
online services to its customers using the network. For instance,
banks provide various facilities like applying online for a loan, on-
IM
line fund transfer from one account to the other etc. A university
can register students and offer various courses online.
Instant Messaging: Network users can communicate instantly by
emails and instant messenger.
M
Security: In computer networks, security is established through

centralised server by providing login credentials to authenticated
users only. The credentials like userid and password ensure that
only the authenticated users have access to the network and can
N
access certain files, applications and sensitive information. Estab-

lishing network security also ensures that one user cannot see oth-
er users’ files unlike on stand-alone machines.
Although whatever we have seen so far indicate computer networks

enhance the overall performance of an organisation, but this network
has some disadvantages as well.
Some of the disadvantages of Networking are as follows:
Disadvantages of Networking
Expensive Regular Server Hardware Security and

Installation Maintenance Failure Failure Compliance
Figure 3.4: Disadvantages of Networking

N O T E S
Expensive Installation: Network cabling, network cards, routers,

bridges, firewalls, wireless access points, file server and software
required for establishing a computer network can be costly. Thus,
establishing large networks carries hefty price tags. Software in-
stallation for a large network also requires the services of techni-
cians on a regular basis.
Regular Maintenance: Regular maintenance of a network is time
consuming and complicated and requires expertise and training.
Thus, a full-time administrative manager needs to be employed for
a large network.
Server Failure: Failure or breakdown of a network server brings
down the entire network with it. Thus, good network design prac-
tice says that critical network services (provided by servers) should
be in duplicate on the network. This ensures that there is no net-
work failure in case of server breakdown. However, it increases
the overhead of maintaining a duplicate sever.
S
Hardware Failure: Establishing a network entails lots of hard-
ware in terms of cables and other devices. A broken cable or a
IM
breakdown of any device in the network can bring the entire net-
work to a halt.
Security and Compliance: Network security is expensive but also
very important. A network needs to be secured against computer
viruses that can spread to other computers throughout the net-
M
work. Another threat to computer networks is of hacking, partic-

ularly in larger networks. Security procedures, like firewall, are
needed to prevent such abuse.
N
1. A printer can be shared by multiple computers in a computer

network. (True/false)
ACTIVITY
In a group, discuss a scenario where there is no network of comput-

ers in today’s world and all computers are standalone. What will the
world look like? Present your findings in a short note.
HARDWARE AND SOFTWARE

3.3
FOR NETWORKING
A network design consists of basically two parts viz. hardware and
software. Both are complimentary to each other. One does not work
without the other.

N O T E S
HARDWARE REQUIREMENTS FOR NETWORKING
Figure 3.5 depicts the hardware requirements for networking.
Router
Workstations
Firewall
Switch Bridge
File Servers
S
Repeater
IM
Figure 3.5: Hardware requirement for Networking
(Source: http://fcit.usf.edu/network/chap3/chap3.htm)
Network hardware consists of all the hardware required for estab-

lishing a smooth network connection between computers. Figure 3.5
M
shows a simple network with required hardwares for a network. The

network includes all computers, peripheral devices attached to com-
puters, interface cards and the equipment that are needed to perform
communication and data processing within the network.
N
Typically, networking hardware includes gateways, routers, network

bridges, switches, hubs, and repeaters. Wireless networking is also
becoming increasingly popular, especially for portable and handheld
devices.
Networking hardware consists of the following devices:

File/Network Servers: File server is a part of nearly every type of
network. There can be more than one file servers too in a network.
A file server is a very fast computer with a large RAM (Random
Access memory/internal memory) to enhance it speed, and has a
big storage space. File Sever has one or more faster network inter-
face card(s) too. The network operating system enables comput-
ers in the network to share server resources and information with
other network users. In small networks, a single network server is
enough to provide the functionality required for a network such as
file sharing, printer sharing, email, database, and other services.
While configuring a file server, budget defines its characteristics.
Following are some of the recommended features of an efficient
file server:

N O T E S
Fastest processor(s)
Large amount of RAM
One or more large and fast hard drives
Extra expansion slots
Fast network interface card(s)
Network Interface Cards: The network interface card (NIC) is a
piece of hardware device that provides a physical connection be-
tween the network and the connected computers. NICs are pres-
ent internally in computer hardware. NICs define the speed and
performance of a network. It is a good idea to use the fastest net-
work card available for the type of computer you are using.
There are two very common network interface cards viz. Ethernet
cards and wireless adapters.
Ethernet Cards: Ethernet cards are usually included with a
S
computer, although additional Ethernet cards can be pur-
chased and installed on most computers.
IM
M
N
Figure 3.6: Ethernet Card

Wireless Adapters: Wireless adapters are used in portable de-

vices, such as laptops, smart phones, and tablet devices. Exter-
nal wireless adapters can be purchased and installed on most
computers having an open USB (Universal Serial Bus) port, or
unused expansion slot.
Figure 3.7: Wireless Adapters

(Source: http://www.everymac.com/mac-answers/mac-os-9-classic-support-faq/usb-adapt-
ers-wireless-ethernet-bridge-macos-9-compatible.html)

N O T E S
Router: A router is considered as traffic regulator of a network.

It is a specialised network device that manages the traffic of data
packets within the network. It also determines the next network
point to which it can forward a data packet so that the destination
is reached in a fastest possible way.
Figure 3.8: Router

(Source: http://www.which.co.uk/technology/computing/guides/wireless-router-buying-guide/
wireless-router-basics/)
S
Gateway: Every network has a boundary or a limit, so by default
all communication and resource sharing takes place within that
IM
network. If one network wants to communicate outside of its own
boundary with another network then a special device called gate-
way is required to make it possible. A gateway is a device that is
implemented at the boundary of a network and is familiar with
the routing path of other remote networks. It manages all the data
M
communication that is directed internally or externally from that

network. Gateways possess details about the host network’s inter-
nal paths and also of the different remote networks. Thus, if a net-
work node wants to communicate with another network, it passes
N
the data packet to the gateway, which then redirects it to the desti-
nation using the best possible path.
Host A
Network
Host B Gateway
Host C
Figure 3.9: Gateway

(Source:http://www.h3c.com/portal/Technical_Support___Documents/Technical_Documents/
Security_Products/H3C_SecPath_U200-A_U200-M_U200-S/Configuration/User_Manu-
al/01-Firewall_Web_Configuration_Manual-5PW100/201205/746159_1285_0.htm)

N O T E S
Switch: A switch is a device that allocates traffic from one network

segment to a specific destination which connects the segment to
another network segment. Unlike a hub, a switch splits the net-
work traffic and sends it to different destinations rather than to all
systems on the network.
Switch
Figure 3.10: Switch
S
(Source: http://www.directsystems.com/support/switchvshub.php)
IM
Bridge: Big network can be divided into smaller, efficient networks
called segments. A bridge is a device that connects these multiple
network segments. It monitors and regulates data traffic on both
sides so that it can pass packets of information to correct location
in the network. A bridge manages the traffic to maintain optimum
M
performance on both sides of the network. A bridge might be con-

sidered as a traffic cop at a busy intersection during rush hour who
keeps information flowing on both sides of the network, but does
N
not allow unnecessary traffic through.
Network
Gateway
Bridge
Active Wall
Switch
LAN
Figure 3.11: Bridge

(Source: http://www.itinfopoint.com/post/69/network-bridge/)

N O T E S
Hub: A hub is a network device that is placed centrally and all the
computers are attached to it via cable. It is used to send data or sig-
nal sent by one of the computers to all the others connected with it.
Although the mechnism used here is very simple of receiving from
one and sending to all; it leads to a lot of unnecessary traffic being
sent to all devices on the network. It results in traffic congestion
and data collision in the network. A major disadvantage of hubs is
that they cannot identify the sender and receivers connected to it.
Thus, it sends the same data/signal to all the connected devices in-
clusive of sender. In addition, they are unable to send and receive
signals at the same time. Hubs have become obsolete now, though,
they are still used to reduce the networking cost.
S
IM
Figure 3.12: Hub
(Source: http://www.computer-networking-success.com/network-topologies.html#sthash.
M
LdGmuJM0.dpbs)
Repeater: Repeater is a device which amplifies or regenerates

weak digital signals received before sending them from one part
N
of a network into another. Sometimes a signal loses strength as it

goes around in a cable; it becomes necessary to boost the signal.
This is performed with a device called a repeater. The repeater
electrically amplifies the signal it receives and rebroadcasts it.
Printer
Client
Client
Thinnet
Repeater
Thicknet
Client
Client
Figure 3.13: Repeater

(Source: http://ansmachine.blogspot.in/2014/05/repeater-networking-device.html#.U6Ag-
GmS6ZkQ)

N O T E S
SOFTWARE REQUIREMENTS FOR NETWORKING
Software or in other words computer software is also known as a com-

puter program. It is the non-tangible component of computers in con-
trast to computer hardware which is the physical component of com-
puters. Computer hardware and software are complementary to each
other one cannot be used without the other. Some commonly used
softwares are Windows operating system, Microsoft Office etc.
Some softwares are meant for single user computers like desktop, lap-
top which are standalone computers. Standalone computer are not
part of any networks, they work independently. There are other soft-
wares which are meant specifically for a network like Network Oper-
ating Systems (NOS) which coordinates the activities of multiple com-
puters across a network. NOS acts as a director to keep the network
running smoothly.
The NOS can be of two major types. They are:

Peer-to-Peer
Client/Server
S
IM
Both these types are very popular and contemporary networks are usu-
ally a combination of both these NOS. The networking design can be
considered independent of the servers and computers that will share it.
Peer-to-Peer: In Peer-to-peer network, as the name might sug-
M
gest, all computers are at par with each other, they are considered
equal. NOS allows every computer which is a part of peer-to-peer
network to equally share resources and files located on their com-
N
puters and to access shared resources found on other computers.

In this case, there is no centralised file server which manages
the entire system (Refer to Figure 3.14). Peer-to-peer networks
are suitable for small to medium local area networks where the
number of computers attached to the network is less. All modern
desktop operating systems, such as Macintosh OSX, Linux, and
Windows, can function as peer-to-peer network operating systems.
Resources are shared among equals

in a peer-to-peer network.
Figure 3.14: Peer-to-Peer Network

(Source: http://supersubstituteteachers.com/Networking/gavin/PeerA.html)

N O T E S
Client/Server: In Client/server NOS there is a centralised dedicated

computer called file server which controls all functions and applica-
tions (Refer to Figure 3.15). The file server is considered to be the
heart of the system; it provides access to centralised resources. All
the other computers (called clients) can access these resources pro-
vided by the file servers. Thus, NOS provides the mechanism to in-
tegrate all the components of the network and allow multiple users
to simultaneously share the same resources irrespective of physical
location. UNIX/Linux and the Microsoft family of Windows Servers
are examples of client/server network operating systems.
File Server
S
Resources are controlled by the file server
in a client/server network.
IM
M
Figure 3.15: Client/Server network

Firewalls: Firewall is an integral part of contemporary networks.

N
It is a networking device, either hardware or software, that is in-

stalled at the entrance of an organisation’s local network. Firewall
is required when this network is connected to a public network,
such as the Internet. There are certain rules followed by a firewall
that is defined by the organisation to filter traffic into and out of
its network, to protect the organisation’s network users and data
from outside threat like hacking, infringement of privacy etc.
Firewall rules are usually simple, consisting of a verb, either allow or

deny, the direction of the traffic, either inbound or outbound, and an
address or other network traffic identifier. Although firewalls typically
protect internal networks from public networks, they can also be used
to control access between specific network segments within a net-
work. For example, you might place a firewall between the accounts
department and the sales department.
2. In ________ network, all computers are at par with each other

i.e. they are considered equal.

N O T E S
ACTIVITY
Study the network system implemented in your computer lab.

Then make a list of hardware devices used in creating the network.
3.4 BASIC COMPONENTS OF A NETWORK

A computer network includes lots of components, hardware as well
software. There are few common hardware devices attached to a net-
work that is shared by all the computers in a network like printers,
file servers etc. The computers are attached using transmission ca-
bles to form a network. Shared data is also one of the most important
components of the network. Then there are other components which
form the network like NIC, local operating system and the network
operating system(NOS).
S
Let us discuss each component of a network in the following section:
File Servers–File Server or simple server is a computer that is
IM
one of the most important components of a network. It holds files,
programs, and data that have to be shared over the network. Net-
work operating system also resides on the server. Servers provide
access to shared network resources to all the users of the network.
Servers can be of many different kinds and one server can provide
M
several functions. For example, there are file servers (enable shar-
ing of files), print servers (enable sharing of printers), mail servers
(enable sharing of mails), communication servers, database serv-
ers (enable sharing of common database), fax servers (enable shar-
N
ing of fax machine) and web servers, to name a few.

Client - Client is another name for all the computers that are a
part of a network, except server, which can access the network and
shared network resources. Client/ client computers are basically
the customers (users) of the network, as they request and receive
services from the server.
Transmission Media - Transmission media is the hardware cable
used to interconnect computers in a network. These cables can be
twisted-pair wire, coaxial cable, and optical fiber cable. Transmis-
sion media are sometimes called channels, links or lines.
Shared data - Shared data is that data which resides on file serv-
ers and is meant to be shared by all the computers which are part
of the network. It can be data files, software etc.
Shared printers and other peripherals - Shared printers and pe-
ripherals are hardware resources that are connected to the server.
They can be shared by all the computers connected to the network
by sending a request to do so to the server. Printers, fax machine
are some of the peripherals that can be used by clients on the net-
work.

N O T E S
Network Interface Card (NIC)–NIC is a special expansion card

which is attached to every computer to enable the computer to
connect to a network. The NIC sends and receives data, and con-
trols data flow between a computer and the network
Local Operating System - A local operating system is the operat-
ing system that resides on individual computer which is a part of
a network. It enables the computer to work individually as well as
work as part of a network. Examples are MS-DOS, Unix, Linux,
Windows 2000, Windows 98, and Windows XP etc.
Network Operating System (NOS) - The network operating sys-
tem is an operating system that runs on servers as well as on all
the computers that are part of a network. This operating system
allows the computers to communicate with each other over the
network and to share network resources.
Topology – Topology is defined as geometrical representation of
S
various devices in a computer network. It basically defines the
structure of a network and can be physical as well as logical. Phys-
ical topology refers to placement of various components like de-
IM
vices and cabling. Logical topology refers to the way data moves
between components irrespective of its physical design.
There are four basic physical topologies that are common in network:
1. Mesh: In mesh topology all the components of a network are
M
connected to each other directly. Figure 3.16 depicts mesh

topology.
N
Figure 3.16: Mesh Topology

(Source: http://computernetworkingsimplified.com/category-1/network-topologies/what-is-a-
mesh-topology-network/)

N O T E S
2. Star: In star topology each device connected to a central device

(either hub or switch) with a point-to-point connection. Figure
3.17 depicts star topology.
S
IM
Figure 3.17: Star Topology
(Source: http://www.whatsupnew.com/network-topology/)
3. Bus: In bus topology each device is connected to a single bus

M
cable running through the network. Figure 3.18 depicts bus

topology.
N
Figure 3.18: Bus Topology

(Source: http://cedtinet.blogspot.in/2013/06/bus-topology.html)
4. Ring: In ring topology all the devices are set up in a circular

fashion in which data travels around the ring in one direction
and each device on the ring acts as a repeater to keep the signal
strong as it travels. Figure 3.19 depicts ring topology.

N O T E S
Ring
S
Figure 3.19: Ring Topology
(Source: http://www.mattytv.com/blog/networking/ring-topology/)
IM
Hub - Hub is a device that is placed centrally in a network connec-
tion. It acts like a distribution center. The basic function of a hub
is to take data from one device in the network and transmit it to
the entire network. Figure 3.20 shows a network in which the hub
is placed in the centre and all the other devices are attached to it.
M
N
Figure 3.20: Hub in the centre of the network

(Source:http://www.thebryantadvantage.com/CCNACCENTCertificationTrainingHubsColli-
sionDomains.htm)
Switch - Switch is a telecommunication device grouped as one of

the computer network components. Switch is like a Hub but has a

N O T E S
few advanced features. Unlike Hub, it can deliver data to the right
destination or device by recognising its physical address. Like
Hub, switch doesn’t broadcast the received message to the entire
network. In other words switch connects the source and destina-
tion directly which increases the speed of the network.
Network
DSL/Cable
Moderm
Switch
Router
Notebook E
Computer A Computer B Notebook C
S
IM
Computer D
Figure 3.21: A Switch

(Source: http://www.home-network-help.com/network-switch.html)
M
3. In which of the following topology, every subsequent device

N
acts as a repeater to keep the signal strong as it travels.

a. Mesh
b. Bus
c. Star
d. Ring
ACTIVITY
Study the type of topology implemented in your computer lab.

Present your findings in a short note.
3.5 TYPES OF NETWORKS

The network can also be classified on the basis of scale i.e., their size.
The size of network characterises its physical capacity or its organisa-

N O T E S
tional purpose. Accordingly, user authorisation and access rights and

the use of network differ. Thus, networks have been basically divid-
ed into three types namely, LAN, WAN, MAN, depending upon their
size, but in recent times a few other networks have been included like
Bluetooth and RFID.
Thus there are following five types of networks:

LAN (Local Area Network)
MAN (Metropolitan Area Network)
WAN(Wide Area Network)
Bluetooth
RIFD (Radio Frequency Identification)
S
IM
WAN
Metropolitan-area
LAN Network
MAN
M
N
LAN LAN
Figure 3.22: Pictorial depiction of LAN, MAN, WAN
3.5.1 LOCAL AREA NETWORK
Local Area Network (LAN) is a communication network that inter-

connects computer within a small geographical area like within a
building or small group of buildings. Thus, LAN is a small network
of computers attached to each other. It is considered to be the best
network for smaller organisations. By virtue of being a small network,
the data transfer speed is very high. An example of a LAN is shown in
Figure 3.23.

N O T E S
Network
CORPORATE
FIREWALL
DHCP
CERTIFICATE AUTHENTICATION FILE, PRINT
SERVER
SERVER SERVER SERVER
Figure 3.23: LAN
S
IM
(Source: http://www.mysecurecyberspace.com/encyclopedia/index/local-area-network-lan.html)
3.5.2 METROPOLITAN AREA NETWORK
Metropolitan Area Network (MAN) is basically bigger version of

M
LAN. It might span a city or a large campus. It is bigger than a LAN

but smaller than WAN. The area covered by MAN can be a group of
nearby corporate offices spanning over a city. MAN can be either pri-
vate or public. A local cable television network is an example of MAN.
N
Network
Firewall
MAN
Figure 3.24: MAN

(Source: http://readanddigest.com/what-is-computer-networking/)

N O T E S
3.5.3 WIDE AREA NETWORK
Wide Area Network (WAN), is a network bigger than MAN, it covers

computer communications network that spans cities, countries, and
the globe. It uses cables, telephone lines and satellite links for its func-
tioning. WAN is defined by an unlimited geographic area it covers. A
WAN can also interconnect multiple LANs. WAN is more suscepti-
ble to errors due to the increased distance as compared to LANs and
MANs.
Workstation
S
Server
Workstation
IM
WAN Server
M
Workstation
N
Server
Figure 3.25: A WAN

(Source: http://www.bbc.co.uk/schools/gcsebitesize/ict/datacomm/2networksrev1.shtml)
3.5.4 BLUETOOTH AS WIRELESS TECHNOLOGIES
Bluetooth technology is a wireless communication technology stan-

dard that is simple, secure and is prevalent. It is used for exchang-
ing data over short distances. It uses short-wavelength ultra-high fre-
quency radio waves from fixed and mobile devices for data transfer.
In recent time, Bluetooth technology has become so common that it

N O T E S
can be found in millions of devices ranging from mobile phones and

computers to medical devices and home entertainment products. It is
intended to replace the cables connecting devices, while maintaining
high levels of security. The key features of Bluetooth technology are
low power, and low cost.
The most advantageous feature of Bluetooth technology is that a wide

range of devices can connect and communicate with each other ir-
respective of technology these are based on. The only condition to
communicate is that they should be Bluetooth enabled devices. When
two Bluetooth enabled devices connect to each other, it is called pair-
ing. The structure and the global acceptance of Bluetooth technology
mean any Bluetooth enabled device, almost everywhere in the world,
can connect to other Bluetooth enabled devices located in proximity
to one another.
S
IM
DVD-player
Headset
Projector
M
Personal
N
Mobile Scanner Printer

Notebook Digital
telephone Assistant
Digital
Infowear Camera Disk Drive
Refrigerator
Figure 3.26: A Bluetooth Network

(Source: http://www.toshiba-europe.com/computers/tnt/bluetooth.htm)
3.5.5 RFID – RADIO FREQUENCY IDENTIFICATION
Radio-frequency identification (RFID) is an acronym that refers to

small electronic devices that consist of a small chip and an antenna.
The chip is typically capable of carrying 2,000 bytes of data or less.
RFID is a non-contact wireless technology that uses radiofrequency

N O T E S
electromagnetic fields to transfer data and is employed for the pur-

pose of automatically identifying and tracking tags attached to objects.
The tags store information electronically. Unlike a barcode, these tags
are not necessarily within line of sight of the reader, and may be em-
bedded in the tracked object.
Functionally, a RFID device is similar to a bar code or a magnetic strip

on the back of a credit card or ATM card; it provides a unique iden-
tifier for that object. And, just as a bar code or magnetic strip, the
RFID device must be scanned to retrieve the identifying information.
A significant advantage of RFID devices is that unlike these devices
RFID does not need to be positioned precisely relative to its scanner.
In contrast, RFID devices can work within a few feet (up to 20 feet for
high-frequency devices) of the scanner. For instance, you could just
put all of your groceries or purchases in a bag, and set the bag on the
scanner. The scanner would be able to read all of the RFID devices
and total the purchase immediately.
S
IM
Reader or
Interrogator
M
Antenna
Tag or
N
Transponder
Computer
Figure 3.27: Showing how RFID works

(Source: http://www.epc-rfid.info/rfid)
4. For two Bluetooth devices to be able to communicate with

each other they need not be Bluetooth enabled. (True/false)
ACTIVITY
Using Internet find out about LAN, MAN and WAN and list their
characteristics.

N O T E S
3.6 CHARACTERISTICS OF NETWORKS

Different networks are characterised by their cost, performance and
structure. We can compare characteristics of different networking op-
tions to evaluate the networks at different levels. Following are some
of the characteristics of a network:
Availability: Availability is the measure of the probability that the
network will be available when required. It can be calculated as
follows:
Total Time A Network Is Available

Availability =
Total Time A Network Is Required To Be Available
Example: A network required to be available for 30 minutes was

only available for 25 minutes. The availability of such a network
can be calculated as follows:
Availability =
25
30
5
6
S
IM
Cost: Cost is the total expenditure incurred for setting up of a net-
work and maintaining it on a regular basis.
Scalability: Scalability is the measure of how best a network ac-
commodates an increase in number of users and increase in data
M
transmission in an existing structure. A scalable network is de-

signed in such a way that allows easy future expansions to avoid
adverse effect on its existing performance. If it is not so then
high expenses will have to be incurred to transform an old net-
N
work into a new one which can accommodate more users or trans-
mits more data.
Security: Security is a major concern in networks. For a network
it defines the level of protections of a network from misuse, intru-
sion, etc. Maintaining security is of utmost concern for a network
to keep things in order and to avoid unwanted attacks otherwise
insecure networks might cost a lot in the long run.
Reliability: Reliability is the characteristic of a network that shows
the level to which a network can be depended upon. This charac-
teristic is weighed against the dependability of the network com-
ponents like switches, routers, hub etc. that are used in a network.
If any of these fail then the entire network might just shut down.
Topology: Topology can be of two types i.e. physical topology and
logical topology. Physical topology deals with the arrangement of
physical components in a network whereas logical topology deals
with the path that data signals take through the physical topology.

N O T E S
5. ______ deals with the arrangement of physical components

in a network whereas _______ deals with the path that data
signals take through the physical topology
ACTIVITY
Make a chart showing the physical topology followed in your college.
3.7 NETWORK MODELS

While dealing with networking, the terms “network model” and “net-
work layer” are common place. Network model is defined as a set of
network layers and how they interact with each other and with the
S
layers present in another network. The two network models are:
The TCP/IP Model–The TCP/IP model is also called the De-
IM
partment of Defense DoD model because it was designed for the
Department of Defense in United States. TCP/IP model is a col-
lection of communications protocols and is used for the Internet.
Commonly it is referred as TCP/IP. TCP/IP provides end-to-end
connectivity between source and destination network. It specifies
M
how data should be formatted, addressed, transmitted, routed and

received at the destination. The TCP/IP model has been organised
into four layers which are used to sort all related protocols accord-
ing to the scope of networking involved. There is an organisation
N
called the Internet Engineering Task Force (IETF) which is re-

sponsible for maintaining the TCP/IP model and related protocols.
The layers of TCP/IP model from lowest layer to highest layer are:
The Link Layer: This layer contains communication technolo-
gies for a single network segment.
The Internet Layer: This layer connects hosts across indepen-
dent networks, thus establishing internetworking.
The Transport Layer: This layer handles host-to-host commu-
nication.
The Application Layer: This layer provides process-to-pro-
cess application data exchange.

N O T E S
TCP/IP
Application
Transport
Internet
Network Interface
S
Figure 3.28: The TCP/IP Model
(Source: http://ayurveda.hubpages.com/hub/OSI-model-and-TCPIP-model)
OSI Network Model - The International Standards Organisation

IM
(ISO) has defined a standard called the Open Systems Intercon-
nection (OSI) reference model. OSI is a seven layered architecture.
The Open Systems Interconnection model (OSI) is a conceptual
model that characterises and standardises the internal functions
of a communication system by partitioning it into seven logical/ ab-
M
straction layers. Every layer serves the layer above it and is served
by the layer below it. For example, a layer that provides error-free
communications across a network provides the path needed for
N
applications above it, while it calls the next lower layer to send
and receive packets that make up the contents of that path. Two
instances at one layer are connected by a horizontal connection on
that layer.
The seven layers of OSI model are:

1. Application Layer: It is used in applications that are written
specially to run on the network. This layer allows access to
network services that support applications.
2. Presentation Layer: This layer translates from application format
to network format and vice-versa to enable easy transmission of
data across networks.
3. Session Layer: This layer is responsible for establishing,
maintaining and ending sessions across the network.
4. Transport Layer: This layer divides streams of data into chunks
or packets that can be transported across network. It also
reassembles the message from packets at the other end.

N O T E S
5. Network Layer: This layer translates logical network address

and names to their physical address. It breaks the data into
smaller unit and assembles data at the other end.
6. Data Link Layer: Takes a string of bits and delivers it across a
link.
7. Physical Layer: This layer defines physical means of moving
data over network devices.
Application Process I Data Application Process n
7: Application Layer Data 7: Application Layer
6: Presentation Layer Data 6: Presentation Layer
S
5: Session Layer Data 5: Session Layer
4: Transport Layer Data 4: Transport Layer

IM
3: Network Layer Data 3: Network Layer
2: Datalink Layer Data 2: Datalink Layer
1: Physical Layer Data 1: Physical Layer
Data Transmission
M
System 1 System 2
Logical Connection in each Layer
Realisation of the communication

N
Figure 3.29: Open Systems Interconnection (OSI) model

(Source: http://edugeeks.in/osi-model-computer-awareness-material-for-bank-exams/)
6. Which of the following layer is not present in TCP/IP network

model”
a. Internet Layer
b. Link Layer
c. Physical Layer
d. Application Layer
ACTIVITY
List the differences between both TCP/IP and OSI network models.
You can utilise Internet for any assistance.

N O T E S
APPLYING COMMUNICATION
3.8
NETWORKS
Communication networks have been widely used in business
organisations. These are used for communication within as well as
outside the organisation. Earlier, organisations maintained separate
networks for voice, data, and video communication whereas now,
there are multi-service networks available. Multi-service networks
are capable of communicating all these media together through a
single network infrastructure. These networks help in reducing the
cost involved in networking and support with services and solutions
as well, such as video collaboration, voice data call centers, distance
learning or unified messages to combine voice mail, e-mail and
faxes. These applications need network support to be executed in an
organisation.
S
Now, let us study communication networks in a business application
in the following section.
IM
3.8.1 INTRANET
In Intranet, multiple PCs are networked to be connected to each oth-

er. Computers in intranet are not accessible to the world outside of
the intranet. Usually every organisation has its own Intranet network
M
and members/employees of that company can access the computers

in their intranet.
Each computer in Intranet is also identified by an IP address, which is

N
unique among the computers in that Intranet.
Figure 3.30: An Intranet

(Source: http://www.tutorialspoint.com/computer_fundamentals/computer_internet_intranet.
htm)

N O T E S
3.8.2 EXTRANET
Extranet is a computer network that is used outside the intranet. An

extranet is a computer network that gives controlled access from the
outside, for specific business or educational purposes. In an organ-
isation, an extranet can be defined as an extension of an organisa-
tion’s intranet that is extended to users outside the organisation, usu-
ally partners, vendors and suppliers that are part of the organisation.
An extranet provides access to needed services for external partners,
without granting access to an organisation’s entire network.
S
IM
M
N
Figure 3.31: An Extranet

(Source: http://computerlearnhow.com/the-difference-between-internet-and-intranet/)
3.8.3 INTERNET
The Internet is a global system of interconnected computer networks

that uses the standard TCP/IP to link several billion devices all over
the world. Simply defined, an Internet is a ‘network of networks’ that
consists of billions of private, public, academic, business, and govern-
ment networks. These networks can be of local to global scope that is
linked by various networking technologies be it electronic, wireless,
and optical. Every computer on the internet is identified by a unique
address called as its IP address. An IP address is a unique set of num-
bers (such as 100.11.22.113) which identifies a computer`s physical
location. The Internet also carries an extensive range of information
resources and services, such as the inter-linked hypertext documents
and the World Wide Web (www), support for email etc. Internet is ac-
cessible to every user all over the world.

N O T E S
Figure 3.32: An Internet
S
(Source: http://www.tutorialspoint.com/computer_fundamentals/computer_internet_intranet.
IM
htm)
7. Every computer in ______ and _______ is recognised by a

M
unique address called as its IP address.

8. Vendors and suppliers of an organisation can have access to
the intranet of the organisation. (True/ False)
N
ACTIVITY
In a group, discuss the merits and demerits of using the Internet

and present the outcome in a short note.
3.9 SUMMARY
Networking, or a computer network, is described as two or more
computers that are connected with one another for the purpose of
communicating data electronically.
In a computer network, computers are connected together in order
to share hardware resources (such as printers and CDs), software
resources (exchange data and files), and allow electronic commu-
nications amongst each other.
A computer network design consists of basically two parts viz.
hardware and software.

N O T E S
Networking hardware includes gateways, routers, network bridg-

es, switches, hubs, and repeaters. Wireless networking is used for
portable and handheld devices.
The Network Operating System (NOS) are be of two major types::
Peer-to-Peer
Client/Server
Printers, file servers are hardware devices that are attached to a
network and shared by all the computers in a network. Shared
data is also one of the most important components of the network.
There are four basic physical topologies that are common in net-
work: star, mesh, bus and ring.
There are following five types of networks:
LAN (Local Area Network)
S
MAN (Metropolitan Area Network)
WAN(Wide Area Network)
IM
Bluetooth
RIFD (Radio Frequency Identification)
Different networks are characterised by their cost, performance
and structure.
M
The two network models are:

TCP/IP
OSI
N
Communication networks like Internet, Extranet and intranet are

widely used in business organisations for business communica-
tion.
KEY WORDS
Router: A router is a specialised network device that manages

the traffic of data packets within the network.
Gateway: Gateway is a device that enables one network to com-
municate outside of its own boundary with another network.
Hub: A hub is a network device that is placed centrally and all
the computers are attached to it via cable. It is used to send data
or signal sent by one of the computers to all the others connect-
ed with it.
Repeater: Repeater is a device which amplifies or regenerates
weak digital signals received before sending them from one part
of a network into another.

N O T E S
Firewalls: Firewall, either hardware or software, is installed at

the entrance of an organisation’s local network, to filter traffic
into and out of its network, to protect the organisation’s net-
work users and data from outside threat like hacking, infringe-
ment of privacy etc.
Topology: Topology is defined as geometrical representation of
various devices in a computer network.
Bluetooth: Bluetooth technology is a wireless communication
technology standard that is simple, secure and is used for ex-
changing data over short distances.
RFID: Radio Frequency Identification (RFID) is a non-contact
wireless technology that uses radiofrequency electromagnetic
fields to transfer data and is used for the purpose of automati-
cally identifying and tracking tags attached to objects.
S
IM
1. Discuss various advantages and disadvantages of implementing
networking in an organisation.
2. What are the five types of networks? Explain each of them with
an example.
M
3. Differentiate between two types of network models, explaining

their area of implementation.
4. Describe the three communication networks viz. Intranet,
N
extranet, and Internet.
Topic Q.No. Answers

Meaning of Networking 1. True
Hardware and Software for 2. Peer-to-peer
Networking
Basic Components of a Net- 3. Ring
work
Types of Networks 4. False
Characteristics of Networks 5. Physical topology, logical topology
Network Models 6. c, physical layer
Applying Communication 7. intranet, internet
Networks
8. False

N O T E S
1. Computer network brings an added advantage to an organisation.

Although whatever we have seen so far indicate computer
networks enhance the overall performance of an organisation,
but this network has some disadvantages too. Refer to Section
3.4.2 Advantages and Disadvantages, of Networking.
2. The network can also be classified on the basis of scale i.e., their
size. The size of network characterises its physical capacity or its
organisational purpose. Refer to Section 3.7 Types Of Networks
3. Network model is defined as a set of network layers and how they
interact with each other and with the layers present in another
network. The two network models are TCP/IP and OSI model.
Refer to Section 3.9 Network Model.
4. Communication networks have been widely used in business
organisations. These are used for communication within as well
S
as outside the organisation. Earlier, organisations maintained
separate networks for voice, data, and video communication
IM
whereas now, there are multi-service networks available. Refer
to Section 3.10, Applying Communication Networks.
3.12 REFERENCES
M
SUGGESTED READINGS
Shackleford, D. (2012). Virtualisation Security. 1st ed. New York:

N
Wiley.
Tanenbaum, A. (1996). Computer networks. 1st ed. Upper Saddle
River, N.J.: Prentice Hall PTR.
E-REFERENCES
encyclopedia britannica, (2013). bluetooth (technology). [online]

available at: http://www.britannica.com/ebchecked/topic/1191284/
bluetooth
encyclopedia britannica, (2013). computer network. [online] avail-
able at: http://www.britannica.com/ebchecked/topic/130637/com-
puter-network
Encyclopedia Britannica, (2012). wide area network (WAN) (com-
puter science). [online] Available at: http://www.britannica.com/
EBchecked/topic/643173/wide-area-network-WAN
Encyclopedia Britannica, (2013). computer :: Local area networks.
[online] Available at: http://www.britannica.com/EBchecked/top-
ic/130429/computer/235918/Local-area-networks

C H A
4 P T E R
DATABASE MANAGEMENT
CONTENTS
4.1 Introduction
4.2 Meaning of Database
S
Activity
IM
4.3 Types of Databases
Activity
4.4 Database Management
4.4.1 Objectives of Database Management
M
4.4.2 Functions of Database Management

4.4.3 Major Components of Database Management
N
Activity
4.5 Database Models
Activity
4.6 Summary

N O T E S
IMPLEMENTING DATABASE MANAGEMENT

IN A GENERAL HOSPITAL IN NIGERIA
Healthcare in the General Hospital of Nigeria, as in many other

countries, is confronted with a growing demand for medical treat-
ment and services. The medical records must appropriately have
all of the patients’ medical history. Physicians must maintain flaw-
less records, because this document serves a number of purposes.
In spite of the important function of the medical record, it has

come under severe threat due to the manual system of medical
record keeping. This system involves taking down patient data
on pieces of papers, which are then put into the files and filed in
cabinets. One problem is the missing pieces of information. There
are pieces of information the doctors could not find in the paper
file of patients’ visits.
S
Physicians and their office staff have stated that they spent more
time looking for patient information than the patient. Another
IM
major consideration is the physical safety of the data being stored.
Threats exist externally in the form of natural disasters. Also, the
security involved in patient’s privacy is another issue.
A study on hospital patient database management system was de-

M
signed to transform the manual way of searching, sorting, keep-

ing, and accessing patient medical information (files) into Elec-
tronic Medical Records (EMR) to solve the problems associated
with the manual method.
N
This new system is designed for medical practitioners/physicians

to keep track of all patients’ medical record/information such as
diagnosis, drugs prescribed, admission and discharge informa-
tion, etc. The new system will take care of the long processes and
tedious work involved in tracing and retrieving a patient’s record
in the old system. In a nut shell, this will improve the efficiency of
management of daily work, because it will provide the required
information on time.

DATABASE MANAGEMENT 89
N O T E S
LEARNING OBJECTIVES

> Explain the meaning of database
> Discuss the types of databases
> Discuss database management and describe various data-
base models
4.1 INTRODUCTION
In an organisation, on an everyday basis, a lot of data is generated. If
that data is not managed properly, a lot of relevant data related to the
organisation might get lost. Data can be generated internally, such as
employee data, or can be collected externally, such as customer infor-
S
mation or sales data. Database management helps an organisation in
effectively managing its data resources.
IM
For an organisation, private or public, whether it is a banking transac-
tion or a rail/air ticket booking application, database plays an import-
ant. Till a few years back, databases were managed in a traditional for-
mat, where data was usually stored in textual or numeric form. Now,
we can store audio, video, and pictures in databases. These databases
M
are generally referred to as multimedia databases. In addition, we can

even store maps, weather data, and satellite information in what is
called Geographical Information Systems (GISs), which is a combina-
tion of cartography, statistical analysis, and database technology.
N
This chapter starts by introducing the concept of a database and its

usage in an organisation. Next, it discusses the types of databases.
Thereafter, the chapter explains the various functions and objectives
of database management. Further, it discusses the major components
of database management. Towards the end, various database models
have been discussed in the chapter.
4.2 MEANING OF DATABASE

Before we study database and database management, we need to look
at the meaning of some of the terms that are used frequently while
discussing database management i.e., data and information.
DATA
Data, in the simplest term, is a collection of raw facts and figures. The
term “data” originates from the plural of a Latin word ‘datum’, which
means something given. It is the key ingredient for any database sys-
tem. In fact, data is necessary for a database system to produce any

N O T E S
type of information. Data represents facts, observations, assumptions,

and occurrence. To be more specific, data represents facts, observa-
tions, assumptions and occurrence regarding people, processes, func-
tions, and events related to an organisation’s internal and external
environment. Data has to be in a structured form, i.e., in a form that
some relevant information can be derived by processing it. The infor-
mation generated by processing of data helps in supporting business
processes in terms of decision making and improved efficiency.
Data can be of various types from the perspective of an organisation.

Mainly, there are five types of data, which are depicted in Figure 4.1:
Text
S
IM
Pre-specified
Graphics
Information
Types of
Data
M
Video Audio
N
Figure 4.1: Types of Data
The types of data are discussed as follows:

Text: It refers to data that is in the form of alphabets and numbers,
for example, employee identification (ID) number, which is a unique
number of identification for employees working in an organisation.
Graphic: It refers to pictorial or any other graphical form of data,
for example, a picture of employees working in an organisation.
Audio: It refers to data that is in the form of sound, for example, a
recorded audio message from a CEO for the employees.
Video: It refers to data that is in the form of a combination of pic-
ture and sound, for example, a video of the production floor on a
particular day.
Pre-specified Information: It refers to data in any of the above
forms, which have been used for a previous process in an informa-
tion system, for example, details of employee attendance.

N O T E S
In an organisation, data may be generated from multiple sources.

However, it must be evaluated to belong to one of the types of data
and must be properly validated before it is analysed for informa-
tion. Data can be from both internal and external sources. Follow-
ing are sources that can be categorised as internal or external:
Data from Internal Sources: This category includes data for da-
tabase systems that exist within an organisation. Since the sources
of such data exist within an organisation, they are comparatively
easier to collect.
Internal data can be sourced from the following divisions of an
organisation:
Accounting and financial details, for example, financial plan-
ning of the current year
Sales reports, for example, daily sales details
S
Organisational policy and procedures, for example, list of
working and non-working days
Business events, for example, minutes of board meeting
IM
Information from an intranet, for example, opinion poll about
an anticipated change in an organisation
Previously obtained data, for example, monthly income data
while calculating profits
M
Research and development reports, for example, training

needs
Data from External Sources: This includes data that is sourced
N
from outside the organisation. There are various sources outside

an organisation that prevail in the business organisation and have
significant impact on organisational functioning. These sources
provide data that is very significant for the decision making pro-
cess of an organisation.
External data can be obtained from the following sources outside
of an organisation:
Supplier details providing data about raw material supplied by
them
Competitor details providing data about the competitive envi-
ronment prevailing in the market
Customer details providing data about products procured by
them and details about consumer behaviour
Market reports, including data about market conditions
Data is viewed from an organisational point of view in the follow-
ing two ways as depicted in figure 4.2: (insert diagram)

N O T E S
View Level
View 1, View 2, ............., View n
Logical Level
Physical Level
Figure 4.2: Different levels of Abstraction

(Source: http://www.expertsmind.com/learning/data-views-assignment-help-7342872808.aspx)
Logical View: This represents an external view of data, i.e., the
S
view presented to a user of data, who is not concerned by how the
data is stored internally in the storage. The logical view of data re-
IM
fers to a data format that is meaningful to the user of the data and
also to the software programmes that process it. This view allows
the user to understand the data from his/her perspective. There
can be a number of logical views depending upon the user of the
system. Every user can view a data differently based upon his/her
need. Different departments of an organisation can read the same
M
data and draw different conclusions.

Physical View: This represents an internal view of data, i.e., how
the data is stored internally in the storage. The physical view of
N
data represents the physical structure of data, which signifies

where and how the data has been stored in the system. This view
is used by an internal system of computers and by system experts
to make efficient usage of storage in the system. There is only one
physical view, and in most cases, it does not change. It is of signifi-
cance to database administrators who manage the database.
For example, ABC University has a huge database of colleges affiliat-

ed to it, including undergraduate colleges. The data related to all the
colleges and students enrolled in the university is stored centrally at
one location in the university server. All the data in the database is
organised in such a way that the contents can be accessed, managed,
and updated for smooth functioning of the university. This centralised
storage of data is referred as the physical view of data.
From the database, we can track all the undergraduate colleges that
conduct examination under this university, the departments in each
college, the students enrolled in each college, etc. The different con-
clusions drawn from the same database refer to the logical view of
data.

N O T E S
INFORMATION
Processed and interpreted data is called information, i.e., data has been
evaluated and worked upon, and some conclusions have been drawn
from it. Information is created when data is organised into charts,
summaries, averages, and ranked lists, which help an organisation
to make decisions. Decisions based on this acquired information are
referred to as “informed decisions”. Information is organised, struc-
tured, and derived by processing data collected from various sources.
Information has a specific meaning in context with from where the
data has been derived. Collection of information contributes to knowl-
edge. Information can be directly used for decision making in an or-
ganisation, for example, the pattern of business transactions in a day.
Information for one purpose can be used as data for another pur-
pose. For example, when you purchase something from a departmen-
tal store, a number of data items are put together, such as name of
S
items purchased, number of items purchased, price, tax, and the to-
tal amount paid. Separately, these are all data items, but collectively,
these items represent information about a business transaction from
IM
an organisational point of view.
Now, after studying the basic terms of database management, let us

discuss database in the following section.
Database refers to the organised collection of data in a logical and

M
integrated manner. The data in a database is related in a meaningful

way. This collection of data forms a basis for data storage, and the
data can be accessed for information processing. Thus, database is
N
organised in a way that it can be easily accessed, managed, and up-

dated with recently collected data. A database provides data for many
business applications as and when required.
Examples of databases are as follows:

Train booking database
Employee details database
Sales database
Airlines booking database
Cricket database
The main features of a database are as follows:

It should be well organised.
It should be related.
It should be easily accessible/retrievable.
It should provide an easy data-processing base.

N O T E S
Figure 4.3 depicts a centralised database providing data to different

computers:
Figure 4.3: A Database
S
(Source: http://www.riceconsultingllc.com/database-building.php)
A database can also be defined as a repository of data that is of interest

to an enterprise and using which one can retrieve or store data effi-
IM
ciently. It reduces the redundancy in terms of storage space, which,
in turn, reduces data inconsistency. It is a storage that implements
data integrity, i.e., checks the correctness of data, thereby enhancing
the efficiency of the database system. A database system hides the
complexity of its internal storage structure from its user by providing
M
a user-friendly interface. It also supports a multiuser environment,

wherein multiple users can interact with the interface of a database
through simple query language.
N
1. The main difference between data and information is that

information is raw whereas data is processed. (True/False)
2. __________ is organised, structured, and derived by processing
data collected from various sources.
ACTIVITY
Create a database of your friends and their personal details such as

addresses, phone numbers, etc. manually as well as in your com-
puter system. Note the difference in both methods with respect to
addition, retrieval, and updation of any data in both forms.
4.3 TYPES OF DATABASES

In a real-world scenario, there are different types of databases that are
used to store organisational data, depending on different components

N O T E S
such as type of data to be stored, organisational environment, and cost

of implementation. Based on these criteria, there are some emerging
databases that are in demand nowadays.
Figure 4.4 shows the types of databases:
Distributed
Database
Object
Mobile
-oriented
Database
Database
Type of
S
Databases
Semantic Temporal
Database Database
IM
Deductive Multimedia
Database Database
M
Figure 4.4: Types of Databases

N
Now, let us discuss these databases in the following section:

Distributed Database: It is a database that is stored in different
places in a physical network, i.e., it is distributed over a network.
It is stored in servers, which are placed at different locations in a
network. It can also exist in a distributed manner in different loca-
tions of an intranet. Usually, in this case, databases are replicated
and stored at different locations. This leads to the disadvantage
that any changes in the master database are not reflected in the
distributed copies of the database. Therefore, to make these data-
bases up-to-date, two processes are created, namely, replication
and duplication.
In case of replication, the changes in every database are calculat-
ed, and based on the result, the databases are updated without
modifying the existing data. In the duplication process, any chang-
es made in the master database are implemented in other databas-
es in different locations in a timely manner. Replication proves to
be more expensive than duplication, because manipulation of data
in every database involves more resources than that required in
duplication.

N O T E S
A distributed database has a huge application in the case where

business data needs to be shared using the Internet. It helps to
keep a huge set of data in a distributed manner, decreasing the
cost of an organisation.
Figure 4.5 depict a distributed database:
Distributed Database
Manufacturing Headquarters
MFG.ACME.COM HQ.ACME.COM
S
IM
SALES.ACME.COM
Sales
M
N
Figure 4.5: Distributed Database

(Source: http://docs.oracle.com/cd/B19306_01/server.102/b14231/ds_concepts.htm)
Object-oriented Database: In an object-oriented database, data

is defined in terms of objects, i.e., as they exist in the real world.
The object concept originates from the concept of class, which is
an essential feature of object-oriented programming. Thus, an ob-
ject-oriented database implements the concept of object-oriented
programming languages such as java, c++, etc. It implements all
the functionality of an object-oriented programming such as en-
capsulation, inheritance, and polymorphism.
The main objective of using an object-oriented database is to store
the data that is evolved during the execution of a programme as
an object. An instance of a class, called an object, is created at run
time. This object is not a permanent entity, because it is created
and stays only during the run time of the programme. To make
these objects persistent, an object-oriented database is used, which
stores the data in the form of an object during the run time of the
programme. Thus, an object-oriented database helps to keep track

N O T E S
of all the necessary objects that are created during the execution of
a programme. Figure 4.6 show an object-oriented database:
Author
Users/
OODB Structure topLevelFolder Groups Site
Author Author Author Author Author Author Author

Discussion Link Host Folder Node Chat ?
(deprecated) custom
Node-based
Multiple Objects
attachments
Author
Massage Multiple
Author attachments
Massage Multiple
Optional nested folders
Author attachments
to any depth
Massage Multiple
attachments
Figure 4.6: Object-oriented Database

(Source: http://webxrox.blogspot.in/2011/04/why-oodb-object-oriented-database-is.html)
S
IM
The main aim of an object-oriented database is to reduce the over-
head of converting information representation in the database to
an application-specific representation. Unlike a traditional data-
base, an object model allows for data persistence and storage by
storing objects in the databases. The relationships between var-
M
ious objects are inherent in the structure of the objects. This is

mainly used for complex data structures, for example, 2D and 3D
graphics, which must otherwise be flattened before storage in a
relational database.
N
Temporal Database: Temporal databases are used in an area

where timing is an important factor. It deals with the time factor
while storing data in a database. For example, while managing da-
tabase for a hospital management system, a patient’s data is re-
corded. Time is an important field in this case, because it defines
the duration for which the patient has been served. Thus, a data-
base developer can convert a simple database to a temporal data-
base by implementing the time field.
Temporal databases can be developed depending on two timing
constraints:
Valid Time: It describes the time duration for which a fact is
true.
Transaction Time: It defines the time when the fact currently
exists in the database.
A temporal database can be a valid time database, where each ta-
ble contains a field, valid time, which stores the duration of the

N O T E S
data valid in a certain context. In these databases, time field ap-

pears as a three-dimension axis. Tables can also be categorised
into:
Event Table: Event table contains the instant timestamp of an
event.
State Table: State table contains the state of the data. State
table also contains the duration of the data for which the data
is valid.
Multimedia Database: Multimedia database has the ability to
store multimedia data, which represents any data other than al-
phanumeric data. Multimedia data comprises media data such as
image file, text file, video file, audio file, etc.
A multimedia database generally stores two types of multimedia
data:
S
Static Data: Static multimedia data includes text files or image
files.
Dynamic Data: Dynamic multimedia data represents audio or
IM
video files. These databases are generally large in size, because
multimedia data takes large space in storage.
The need for separate multimedia databases arose, because other
databases failed to handle multimedia data due to their volume
M
constraint. These databases prove to be helpful in fields, such as

scientific projects or any library project, where the data is in media
form and large.
Data can be stored in this type of database in either a structured
N
format or an unstructured format. Structured format stores the

data with a predefined format, whereas in case of unstructured
data, it follows no format. In the latter, the format allows storing
different types of data types such as raw data, registering data,
and descriptive data. Raw data implies data in unformatted form
that is represented in binary form. Registering data describes a
data that follows a certain format to identify a media file, such as
its extension “.jpg” and “.png”. Descriptive type of data defines the
structure of the multimedia file to make the data retrieval process
faster.
There are two types of multimedia databases:
Linked Multimedia Database: This stores multimedia data on
a requirement basis. This type of multimedia database is linked
to either the Internet or some storage media such as Compact
Disc Read-Only Memory (CD ROM) or magnetic tape. It fetch-
es data from these storage spaces on user requirement only.
Therefore, the database itself requires small storage space.

N O T E S
Embedded Multimedia Database: This stores all the media

files in the database itself. Here, data retrieval speed is faster
as it can be fetched easily from the database itself, but it re-
quires a huge space to store all the media files.
Deductive Database: These are cutting-edge databases that in-
corporate the idea of artificial intelligence in a traditional database
model such as the relational database. These types of databases
are developed to merge the idea of logical programming and the
relational model that supports the idea of artificial intelligence,
and can work with a large database. Deductive databases support
queries, reasoning, and application development on databases.
Semantic Database: Semantic databases represent an object-ori-
ented database model that stores the information in a natural way
and has an information-handling system that is used for the man-
agement of information. It is a type of knowledge database that
stores the meaning of information in the form of an object. In this
S
database, each element is related with every other element, de-
pending on the meaning of the user’s information. It captures the
meaning of the user’s information and provides a high-level de-
IM
scription of that information.
The benefit of using a semantic database is that it offers informa-
tion about data, which is called metadata. Metadata of data can be
beneficial to an organisation. In this database, each data is related
M
to every other data, thus, any complex business-related data can

be fetched easily. This database has some extra features, such as
business calculation capability, that allow users to generate a re-
port for an organisation easily.
N
A semantic database supports different types of objects such as

concrete objects and abstract objects. A concrete object represents
a string or characters, whereas an abstract object is tangible in na-
ture and holds the tangible item or organisational events.
Mobile Database: Mobile databases incorporate data from various
mobile devices connected through the Internet or wireless net in a
centralised server. Thus, if the user wants data from different wire-
less or connected servers in the Internet, he/she can have a mobile
database that stores data from these network components, so that
this data can be accessed offline.
It is similar to a distributed database system, where the centralised
servers are updated on the basis of two processes, namely, the rep-
lication process and the synchronised process. Similarly, in mobile
databases too, data from various mobile devices is replicated on
the centralised servers. On the other hand, the synchronised pro-
cess matches both the centralised servers and mobile devices to
manipulate the data at every side, so that all of them can update

N O T E S
themselves without updating the stored information. Unlike the

replication process, synchronisation is a two-way process, where
updation takes place at both ends.
In mobile databases, the mobile computing devices are not fixed
at any location. Thus, one needs to provide a cost-effective way to
fetch the data from these wireless devices.
Mobile databases consist of four components:
Hosts whose locations are fixed
A centralised server whose location is also fixed
A base station that is stable in a network
Mobile devices whose location changes randomly
When a user wants to get data from a mobile device, he/she fires a
query, which, in turn, is fired by the base station to get the data from
S
the mobile components in its range. After accumulating the data, it
stores the data in the centralised server and gives the result to its user.
Sybase is one of the applications of mobile database.
IM
3. Which of the following is not a type of database?

a. Multimedia database
M
b. Deductive database
c. Temporal database
N
d. Temperate database
4. Temporal databases can be developed depending on two
timing constraints: ______ time and _______ time.
5. A mobile database is similar to a distributed database system,
where the centralised servers are updated on the basis
of two processes, namely, the replication process and the
synchronised process. (True/False)
ACTIVITY
List the various practical implementations of each type of database.

Take the help of the Internet.
4.4 DATABASE MANAGEMENT

Manual database management system has long been in use for record-
ing and maintaining the data of an organisation, prior to the advent of

N O T E S
electronic database management systems. However, the manual sys-

tem had various shortcomings. To begin with, all the data and records
were entered manually in the system, which was error prone and led
to lots of human errors. Secondly, multiple copies of the same data had
to be maintained related to different departments of an organisation,
which led to redundancy of data. Redundancy of data makes it error
prone, because in case of updation, the data might get updated in one
place and might get overlooked at the other, leading to discrepancies
in the system. Thirdly, searching for a particular data manually in the
registers proved to be a time-consuming process.
Database Management System (DBMS) emerged as an electronic

solution to all these preceding problems. In DBMS, data is record-
ed and maintained electronically in the database, and the features of
DBMS make data maintenance tasks easy to handle. Thus, while da-
tabase refers to a collection of related data and information, DBMS
refers to a collection of software and hardware systems that help in
S
maintaining, managing, and querying the data stored in the database.
DBMS has the following characteristics:

IM
Enables creation of database and allows addition and deletion in
database files
Allows addition, deletion, and modification of data in the database
Ensures easy retrieval of data collectively or selectively
M
Enables sorting of data stored in the database

Allows manipulation of data stored in the database by applying
various mathematical functions
N
Provides functionality for generation of various reports required

by an organisation
Maintains data consistency and data integrity by removing ambi-
guities throughout the database and thereby controls redundancy
of data
Enforces rules on the data as defined by users
Enables sharing of data among different users
Provides backup and recovery procedures to ensure there is no
data loss in case of system failure
Maintains a central repository of data, so that data can be con-
trolled centrally
Supports data manipulation and provides user-friendly interfaces
to users to access and manipulate data easily
Provides data abstraction, i.e., hides the unnecessary intricacies of
how the data is stored in the database from users

N O T E S
Ensures data security, so that no unauthorised user might access

private data of an organisation
NOTE
The preceding listed characteristics are supported by almost all the

DBMSs such as Oracle, MySQL, and Microsoft Access.
4.4.1 OBJECTIVES OF DATABASE MANAGEMENT
DBSM or database management has been developed while keeping a

few objectives in perspective. These objectives have been in place to
ensure ease of data storage and retrieval, and to provide a user-friend-
ly interface.
A DBMS has the following objectives, as depicted in Figure 4.7:
S
Physical independence
IM OBJECTIVES OF DATABASE MANAGEMENT
Logical independence
Ease of use
M
Speed of access
Centralised administration
N
Limiting redundancy
Integrity verification
Data sharing
Data security
Figure 4.7: Objectives of Database Management
Let us discuss these objectives further:

Physical Independence: This signifies that the physical level is
kept separate from the conceptual level and may be modified inde-
pendently of the latter. This means that the user does not need to
see all the hardware components of the database, which is simply
hidden from the user’s perspective.

N O T E S
Logical Independence: This signifies that the conceptual level can

be edited without disrupting the physical level. In other words, the
database administrator must be able to make changes in the data-
base without affecting the user’s interface.
Ease of Use: This refers to providing a user-friendly approach.
Even users who are not familiar with the details of database man-
agement must be able to describe their query without referencing
the technical aspects of the database.
Speed of Access: This refers to the speed with which data can be
accessed from the database. The DBMS must be able to provide
the result to user queries as fast as possible. DBMS utilises algo-
rithms i.e. pre-defined functions to enhance the speed of search-
ing data in the database to obtain this objective.
Centralised Administration: This refers to the database adminis-
tration handled by a database administrator centrally. DBMS en-
S
ables users to retrieve, add, and update data; and verify its integrity
in a centralised manner. The data is stored and managed centrally,
thus, all the users have access to the same data, and there is no
IM
discrepancy in the data used by different users.
Limiting Redundancy: This refers to reducing the redundancies
of data in a database. Data is stored centrally, thus, it ensures mi-
nimising errors on any updations and also prevents wastage of
memory. The DBMS has this inherent feature to be able to avoid
M
redundant information whenever possible.

Integrity Verification: This refers to enforcing and maintaining
the integrity of data. The data must be internally coherent, and
N
when some elements reference other elements, the referential in-

tegrity must be enforced.
Data Sharing: This refers to data sharing between different de-
partments of an organisation. DBMS is able to share the same data
with multiple users and provide them real-time access to the da-
tabase.
Data Security: This refers to maintaining security of the database
by authorising users by granting them access rights. DBMS is ca-
pable of managing each user's data access rights and checks them
against any random intrusion by unauthorised users.
4.4.2 FUNCTIONS OF DATABASE MANAGEMENT
DBMS involves various functions that are vital for successful database
management. Based on the functions incorporated in a DBMS, the
selection of a DBMS is made. There are various DBMSs provided by
different vendors in the market such as Oracle, Sybase, and Microsoft.
A choice is made on the basis of the functions provided by each.

N O T E S
DBMS has some standard functions, which are shown in Figure 4.8:
Retrieve and
Update Data
Support
Concurrent
Updates
Recovery of
Data
Data
Security
Data
Integrity
S
Figure 4.8: Functions of DBMS
A database would not be able to work effectively without any of the

IM
functions shown in Figure 4.7. Each of these functions plays an im-
portant role in database management.
Let us discuss the major functions of DBMS further:

Retrieve and Update Data: It is the main function of a DBMS. Re-
M
trieving data is to take out the data from the database on the basis
of user requirement. It is the most important and indispensable
function of database management. Updating data in a database
includes adding new records, deleting existing ones, and changing
N
data within a record. It is not necessary for the user to be aware

of how DBMS carries out these functions, but he/she needs to be
aware of when and how to query/update the data from the data-
base.
Support Concurrent Updates: DBMS supports concurrent up-
dates, so that important data is not lost or inaccurate. It is import-
ant when a data is stored at multiple places. If that data is updat-
ed at one place then its copy elsewhere in the database needs to
be updated too. Also, if multiple users are updating the database
simultaneously, then these updates must occur simultaneously.
There are various features of DBMS, such as locking, two-phase
locking, and time stamping methods, which are used by DBMS to
support these concurrent updates and ensure that the updates are
done accurately. The DBMS is responsible for proper storage of
updates.
Recovery of Data: It refers to one of the most important securi-
ty-related functions of DBMS. In case of a system failure, i.e., a
computer crash, a fire, or natural calamity, DBMS is able to re-

N O T E S
cover the database, so that the data is not lost. System crash may
also occur if a user might enter incorrect information, invalidating
or making records inconsistent. In this scenario, if a database is
destroyed or damaged in any way, the DBMS must be able to re-
cover the previous correct state of the database, and this process
is called recovery. The easiest way to achieve this is to take regular
backups of data. These regular backups can be scheduled for a set
time, so that in the case of a disaster, the database can be restored
to a previous stable state.
However, any data or changes made after the last backup would be
lost, which can prove to be problematic. To counter this problem,
DBMS has a feature called Journaling. Journaling involves keep-
ing a log of all the updates made to the database. It is maintained
in a file separate from the database and can be used to re-update
the database up to the last update after it is recovered from the
backup.
S
Data Security: Providing security to the database is a very signif-
icant feature of DBMS. It ensures that no unauthorised users are
allowed to access the database without proper permission. DBMS
IM
uses features, such as encryption, authentication, authorisation,
and views, to provide security to the database. An unauthorised
person is not given permission to access any data from the data-
base.
M
Authentication involves providing all authorised users with unique

IDs and passwords, so that the database administrator can iden-
tify the person accessing the database using these parameters. If
a password is not entered correctly, a user is denied access. Au-
N
thorisation is a set of rules that are defined by the DataBase Ad-

ministrator (DBA) to specify levels of access that an individual or
a group is allowed. Some users may only be allowed to view data,
while others may be allowed to both view/make changes in it.
Data Integrity: Data integrity provides a set of rules to ensure that
incorrect or inconsistent data is not entered in the database. There
are various types of integrity that DBMS provides. Some ensure
correct data type, while others ensure legal values and formats.
Key integrity is an important function of DBMS that enables to
enforce data integrity. It ensures that the primary key of a record
remains unique and allows the record to be identified uniquely.
4.4.3 MAJOR COMPONENTS OF DATABASE MANAGEMENT
There are several components of DBMS that enable it to work smooth-

ly. The main components of DBMS are depicted in Figure 4.9:

N O T E S
COMPONENTS OF DBMS
Data Application Data

Data Definition
DBMS Engine Manipulation Generation Administration
Subsystem
Subsystem Subsystem Subsystem
Figure 4.9: Components of DBMS
A description of these components is as follows:

DBMS Engine: It is a core service for storing, processing, and se-
curing data. It is an interface between a user and the physical da-
tabase. DBMS Engine involves accepting queries/commands from
different DBMS users and converting them, so the database can
understand them. DBMS Engine then interacts with the physical
database to produce the result. It can access the database and the
S
data dictionary, because these are available in the storage device.
Data Definition Subsystem: This component of DBMS enables
IM
only authorised users to create and maintain the data dictionary
and define the structure of the files in a database as to how the
data will be stored in the database.
Data Manipulation Subsystem: This subsystem enables users to
add, change, and delete data in a database and query it for deci-
M
sion making processes in an organisation. Various software tools

are available within the data manipulation subsystem that are the
primary interface between the user and the data contained in a
database. Using these tools, a user can specify his/her logical data
N
requirements, which can then be fulfilled by this subsystem.

Application Generation Subsystem: This subsystem contains
facilities to enable users to develop transaction-intensive applica-
tions. Usually, a user is required to perform a detailed series of
tasks to perform a transaction on a database. An application gen-
eration subsystem facilitates users to create such applications with
easy-to-use data-entry screens, programming languages, and in-
terfaces.
Data Administration Subsystem: This subsystem helps users
manage the overall database environment by providing facilities
for database backup and recovery, security management, query
optimisation (fast retrieval of data), concurrency control (simulta-
neous request for retrieval of data), and change management.

N O T E S
6. Physical independence of database signifies that the

conceptual level can be edited without disrupting the physical
level. (True/False)
7. Which of the following is not a component of DBMS?
a. Data Integrity
b. Data Definition Subsystem
c. Data Manipulation Subsystem
d. Data Administration Subsystem
8. ___________involves keeping a log of all the updates made to a
database to avoid data loss in case of system failure.
S
ACTIVITY
Discuss the pros and cons of any four DBMS, such as Oracle, MS
IM
Access, etc., with respect to their objectives and functions.
4.5 DATABASE MODELS

M
Database modeling refers to the process of designing a database. As

mentioned earlier, a database is a collection of relevant and related
data, which can be interpreted to result in information significant for
an organisation. Database design is the structure of a database in da-
N
tabase management. This structure of a database is defined by data

modeling. There are various models of databases, which can be used
to design a database.
Data modeling involves defining data elements, the structures of data

elements, and relationships among them. For example, in an organisa-
tion, every employee has a unique employee code, which is generated
in a specific manner. Thus, employee code is a data element, its format
is its structure, and the department the employee works in defines
one of the relationships besides others such as designation, personal
details, etc.
The data necessities, which are required to strengthen the efficien-

cy of an organisation, are defined and analysed using data modeling.
Wherever data analysis is required in business processes, the stan-
dard data modeling is suggested.
In other words, data modeling is used in the following cases:

To help in managing data as a resource

N O T E S
To support the integration of a database system

To provide a basis for designing databases
A database model refers to the structure of the database and defines

how the data is structured within the database. It also defines the op-
erations that can be performed on the data present in the database.
There are various database models that are prevalent in DBMS; these
are depicted in Figure 4.10:
Hierarchical
Model
DATABASE
S
MODELS
Relational Network
IM
Model Model
Figure 4.10: Database Models
Each of these database models structure data differently. Let us brief-

M
ly explore these database models in the following section:
HIERARCHICAL MODEL
N
In a hierarchical model, data is organised in a tree structure, in which

a single root called the parent record has multiple leaves called child
records. A record is a collection of related fields, each of which has an
individual value. Thus, a hierarchical model uses a tree structure to
represent relationships among different records in a database. Figure
4.11 shows a hierarchical model:
Company
Users Machines Devices Applications
Marketing Personnel
Figure 4.11: Hierarchical Model

(Source: http://technet.microsoft.com/en-us/library/bb727070.aspx)

N O T E S
In a database using the hierarchical model, records are connected to

each other using links. A link relates exactly two records. Here, all the
records are organised in a hierarchical order having a parent-child
relationship. Every record in the structure can have only one parent
record, but can be linked to one or more than one child record. Thus,
all the records are linked in a 1:N relationship, i.e., 1 represents one
parent record and N represents the number of child records.
RELATIONAL MODEL
The relational model was introduced by E. F. Codd to replace the tree

and the network structure approaches for modeling data in databases,
as used by hierarchical and network models, respectively. This model
uses operations from relational algebra and relational calculus, such
as projections, unions, and joins, to define the relationships between
the data entities. Figure 4.12 shows a relational model:
Hypothetical Relational Database Model
S
IM
PubID Publisher PubAddress
03-4472822 Random House 123 4th Street, New York
04-7733903 Wiley and Sons 45 Lincoln Blvd, Chicago
03-4859223 O’Reilly Press 77 Boston Ave, Cambridge
03-3920886 City Lights Books 99 Market, San Francisco
AuthorID AuthorName AuthorBDay

345-28-2938 Haile Selassie 14-Aug-92
392-48-9965 Joe Blow 14-Mar-15
M
454-22-4012 Sally Hommings 12-Sept-70

663-59-1254 Hannah Arendi 12-Mar-06
ISBN AuthorID PubID Date Title

1-34532-482-1 345-28-2938 03-4472822 1990 Cold Fusion for Dummies
1-38582-995-1 392-48-9965 04-7733903 1965 Macrame and Straw Tying
N
2-35921-499-4 454-22-4012 03-4859223 1952 Fluid Dynamics of Aquaducts

1-38278-293-4 663-59-1254 03-3920886 1967 Beads, Baskets & Revolution
Figure 4.12: Relational Model

(Source: https://www.ibm.com/developerworks/webservices/library/x-matters8/)
In a relational model, data is organised and represented using tables,

called relations, consisting of rows and columns. The columns of the
relations are termed as ‘attributes’ and individual rows are termed as
‘tuples’. Attributes represent properties of entities represented in a
relation. Attributes can be allowed to take a value from a set of values,
called the domain for that attribute. Tuples represent a particular in-
stance of the entity represented in the relation.
All the relations in a relational model must possess a set of properties,

which are listed as follows:
All the rows/tuples in a relation should be distinct, which implies
that no two rows can have identical values in all the attributes.
The items in a particular column are of the same kind, which im-
plies that a particular column can hold only the same type of val-
ues for different tuples.

N O T E S
The ordering of rows and columns in the relation is insignificant.

Every column in the relation has a distinct name that uniquely
identifies the column in the relation.
NETWORK MODEL
The network model is a database model that is considered as a flexi-

ble way of representing data and their relationships. A distinguishing
feature of this model is that while in a hierarchical database model,
data is represented as a tree of records with each record having one
parent record and many children, the network model allows each re-
cord to have multiple parent and child records. The network model, in
comparison to the hierarchic model, allows a more natural modeling
of relationships between entities. Figure 4.13 shows a network model:
S
Store
IM
Customer Manager Salesman
M
Order Items
N
Figure 4.13: Network Model

(Source: http://creately.com/blog/diagrams/database-modeling-basics/)
Although the network model was widely implemented and used, it

failed to become dominant. The relational model has always been the
more favoured network model by database administrators due to the
extra productivity and flexibility provided by the relational model.
This led to the gradual decline of the network model in corporate or-
ganisation usage.
9. In the relational model, data is organised and represented

using tables, which are also called ________.
10. The network model allows each record to have multiple parent
and child records. (True/False)
ACTIVITY
In a group, discuss the various features of the three database mod-

els and list their differences and similarities.

N O T E S
4.6 SUMMARY
Database refers to the organised collection of data in a logical and
integrated manner.
Data, in the simplest term, is a collection of raw facts and figures.
Processed and interpreted data is called information.
Different types of databases are used to store organisational data,
depending on different components such as type of data to be
stored, organisational environment, and cost of implementation.
DBMS refers to a collection of software and hardware systems that
help in maintaining, managing, and querying data stored in a da-
tabase.
In DBMS, data is recorded and maintained electronically in a da-
tabase, and the features of DBMS make data maintenance tasks
easy to handle.
S
DBMS was developed to ensure ease of data storage and retrieval
and to provide a user-friendly interface.
IM
Database modeling refers to the process of designing a database.
It involves defining data elements, the structures of data elements,
and the relationships among them.
M
KEY WORDS
Data: Data is a collection of raw facts and figures.

Information: Processed and interpreted data is called information.
N
Database: Database refers to the organised collection of data in

a logical and integrated manner.
Physical Independence: This signifies that in a database, the
physical level is kept separate from the conceptual level and
may be modified independently of the latter.
Logical Independence: This signifies that in a database, the con-
ceptual level can be edited without disrupting the physical level.
Recovery of Data: In case of a system failure, i.e., a computer
crash, a fire, or a natural calamity, DBMS is able to recover the
database, so that the data is not lost. This is referred to as recov-
ery of data.
Data Security: Data security to the database ensures that no
unauthorised users are allowed to access the database without
proper permission.
Data Integrity: Data integrity provides a set of rules to ensure
that incorrect or inconsistent data is not entered in the database.
DBMS Engine: It is a core service for storing, processing, and
securing data and acts as an interface between a user and the
physical database.

N O T E S

1. Discuss the different types of databases.
2. Elaborate your understanding of database management.
3. Discuss the various objectives of DBMS and state the importance
of each with respect to an organisation.
4. Describe the major components of a DBMS. Explain with the
help of a diagram.
Topic Q.No. Answers
S
Meaning of Database 1. False
2. Information
IM
Types of Databases 3. d. (Temperate database)
4. valid, transaction
5. True
M
Database Management 6. False

7. a. (Data Integrity)
8. Journaling
N
Database Models 9. Relations

10. True

1. Different types of databases are used to store organisational data,
depending on different components such as type of data to be
stored, organisational environment, and cost of implementation.
Refer to section 4.5.
2. Manual database management system has long been in use for
recording and maintaining data in organisations prior to the
advent of the electronic database management systems. Refer to
section 4.6.
3. DBMS was developed keeping a few objectives in perspective.
These are to ensure ease of data storage and retrieval, and
provide a user friendly interface. Refer to section 4.6.1.
4. Several components of DBMS enable it to work smoothly. Refer
to section 4.6.3.

N O T E S

SUGGESTED READING
Pratt, P. and Adamski, J. (2000). Concepts of database management.
1st ed. Cambridge, Mass.: Course Technology.
Date, C. (1981). An introduction to database systems. 1st ed. Read-
ing, Mass.: Addison-Wesley Pub. Co.
McFadden, F., Hoffer, J. and McFadden, F. (1991). Database man-
agement. 1st ed. Redwood City, Calif.: Benjamin/Cummings
Pub. Co.
Korth, H. and Silberschatz, A. (1986). Database system concepts.
1st ed. New York: McGraw-Hill.
E-REFERENCES
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Encyclopedia Britannica, (2013). computer network. [online] Avail-
able at: http://www.britannica.com/EBchecked/topic/130637/com-
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puter-network [Accessed 16 Jun. 2014].
Ibm.com, (2014). Choosing a database management system. [online]
Available at: http://www.ibm.com/developerworks/webservices/li-
brary/ws-dbpick/ [Accessed 17 Jun. 2014].
Encyclopedia Britannica, (2013). relational database (computing).
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[online] Available at: http://www.britannica.com/EBchecked/top-

ic/496814/relational-database [Accessed 17 Jun. 2014].
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C H A
5 P T E R
TYPES OF INFORMATION SYSTEMS
CONTENTS
5.1 Introduction
5.2 Different Types of Information Systems
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Activity
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5.3 Operations Support Systems
5.3.1 Transaction Processing Systems
5.3.2 Process Control System
5.3.3 Enterprise Collaboration System
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Activity
5.4 Management Support Systems
5.4.1 Management Information System
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5.4.2 Decision Support System

5.4.3 Executive Information System
Activity
5.5 Functional Information Systems
Activity
5.6 Other Types of Information Systems
5.6.1 Expert System
5.6.2 Knowledge Management System
5.6.3 Strategic Information System
5.6.4 Business Information System
5.6.5 Integrated Information Systems
Activity
5.7 Summary

N O T E S
OUTSOURCED TRANSACTION PROCESSING

SERVICES FOR US LOGISTICS COMPANY
Morgan Stanley Corps. is a large provider of logistics services in

the US, with over 40 years of experience and a combined fleet of
over 10,000 trucks and trailers, with a national business across 47
states in the US, apart from Canada and Puerto Rico. The compa-
ny's reputation was built on the strategic objective of anticipating
customer needs and fulfilling them on a proactive basis, ensuring
superior levels of service quality.
However, the company was dealing with many problems in trans-

action-processing activities. The company evaluated its transac-
tion-processing activities and found some gaps in it.These gaps
were leading to many discrepancies such as billing inaccuracies,
cash-on-delivery inconsistencies, differences in Electronic Data
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Interchange (EDI), quick turnarounds in processing Bills of Lad-
ing (BOL), and loss of valuable time and substantial amounts of
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revenue due to incomplete or inaccurate information in BOLs.
The Morgan Stanley Corps. outsourced a small part of its trans-

action-processing activities to Outsource2india (O2I), a leading
provider of outsourced business processing services dedicated
to quick, accurate, and quality data processing solutions, across
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multiple industrial segments.
Trained personnel of O2I with advanced knowledge of logistics

management, client-specific requirements, and a stringent qual-
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ity assurance policy at every stage of the process ensured the ac-
crual of immediate and tangible benefits to the client's business.
The gains from outsourcing a part of the company's transac-

tion-processing activities to O2I resulted in the following suc-
cesses:
Improvement of Turnaround Time: A fully-automated sys-
tem, which tracks specific BOL requirements, and a trained
team of data processors ensured that all BOLs are processed
on the same day as they are received, within an average pro-
cessing time of 12 hours or less.
Significant Reduction in Error Rates: When O2I took over
transaction processing on behalf of the client company, BOL
errors were in excess of double digits. Within 3 months of
O2I handling the process, error rates were reduced to fewer
than 10% of the total processed transactions. At present, error
rates stand at 3% or less, given the process refinements, qual-
ity-control checks, and system automation.

TYPES OF INFORMATION SYSTEMS 117
N O T E S
Reduction in Operational Losses and Revenue Leakage: The

timely and accurate processing of BOLs have resulted in the
client saving substantial costs on non-delivery, wrong or de-
layed delivery of freight, deterioration of service levels, and
revenue losses due to incomplete or inaccurate documenta-
tion.
Increase in Productivity: The BOL is a critical document,
without which the unloading and processing of shipments
for further delivery cannot be undertaken. A direct benefit of
outsourcing BOL generation to O2I was the reduction of idle
time for dock personnel and truck drivers, waiting for BOLs
to be received and validated, and for unloading manifests to
be created. Truck drivers do not have to wait for hours to take
delivery of their designated shipments and the company saves
money on driver payments, which are based on hourly rates.
Increased productivity and reduction of idle time also ensure
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driver retention and increased volumes of freight transactions.
(Source: http://www.outsource2india.com/logistics/case-studies/transaction-process-
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ing-services.asp)
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N O T E S
LEARNING OBJECTIVES

> Define different types of information systems
> Describe Operations Support Systems
> Explain Management Support Systems
> Describe functional support systems
> Discuss other types of information systems
5.1 INTRODUCTION
“A system which assembles, stores, processes, and delivers informa-
tion relevant to an organisation (or to a society), in such a way that
the information is accessible and useful to those who wish to use it,
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including managers, staff, clients and citizens”.
Buckingham et al (1987)
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An information system, with respect to an organisation, can be de-
fined as a set of correlated components that collect (or retrieve), pro-
cess, store and distribute information to support decision making and
control in an organisation. Thus, an information system basically con-
trols the flow and maintenance of information in an organisation. It
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contains information about people, places and things within the or-
ganisation and also in the environment surroundings. It identifies un-
seen patterns of data, a valuable resource, to explore information that
is necessary for effective decision making in the organisation. With
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the help of this information, an organisation keeps updating itself to

remain competitive and prepare its growth path.
On a large scale, the term ‘information systems’ is a scientific field

that studies and addresses the range of strategic, managerial, and op-
erational activities. These activities are involved in the collecting, pro-
cessing, storing, distributing and using the information and its related
technologies in organisations.
An organisation uses different types of information systems to make

effective decisions. The selection of the information system largely de-
pends on the requirement of the organisation.
The emergence of information systems has an interesting history be-

hind it, which spans five decades. Today, the World Wide Web (WWW),
the Internet, or Local Area Network (LAN), in case of business, are
considered the backbone of information systems. EDI, EIS, ERP, SCM
and a host of other acronyms are used to describe new ways in which
information systems can be employed to grow the business.

N O T E S
Over forty years ago, the business arena of the US was undergoing
post-war growth with industrial revolution. The experience to grow
the economy came from that of producing war machines during World
War ll. Operations Research (OR) was the new field that developed out
of this push to win the war. In the after math of war, highly-experienced
workforces involved in OR were released from government work,
thus unleashing an experienced and highly-skilled field into business
and industry. This propelled the US towards an era of prosperity and
growth, which lasted over twenty-years. This era also saw the birth of
the first practical computers or Turing Machines, which were used for
cracking German codes and giving allied forces advanced warning of
enemy movements. By today's standards, these first computers were
not practical, cost half a million dollars, and were far less powerful
than a pocket calculator of today. However, these first computers gave
operations researchers the stimulus to begin the simulation of larger
and more complicated systems. These helped to enhance the use of
capital expenditures into profitable ventures in business and industry.
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This background from the early days of simulation, OR, and new tech-
nologies gave birth to the areas of what is today known as Information
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Systems.
This chapter starts by discussing different types of information sys-

tems. Further, it explains Operations Support Systems (OSS). Further
ahead, it explains Management Support Systems (MSS). In addition,
it explains functional support systems. The chapter concludes by ex-
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plaining some other important types of information systems.
DIFFERENT TYPES OF
5.2
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INFORMATION SYSTEMS
An information system is a group of hardware, software, data, people
and procedures that are designed to produce information that helps
the regular, small, and large activities of users in an organisation.
Information systems are usually divided into five categories:

Office information systems
Transaction Processing Systems
Management Information Systems
Decision Support Systems
Expert systems
Information systems work as a support system for operations, knowl-

edge work, and management in organisations. Functional information
systems that deliver a specific organisational function, such as mar-
keting or production, have been replaced by cross-functional systems.
Such systems can be more useful in the development and delivery of
products and can be gauged more thoroughly with respect to business
outcomes.

N O T E S
Figure 5.1 shows the types of information systems and their categories:
Executive
Information
System
Management Decision
Reporting Support
Systems Systems
MANAGEMENT SUPPORT
Office
Business Knowledge
Information
Intelligence Management
Systems
Systems Systems
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SUPPORT OF KNOWLEDGE WORK
Transaction
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Processing
Systems
OPERATIONAL SUPPORT
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Figure 5.1: Types of Information System and their Categories
Figure 5.1 shows different information systems, which lie in differ-

ent categories. The Transaction Processing System (TPS) comes un-
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der the operational support category. Business Intelligence, Office

Information System, and Knowledge Management Systems (KMS)
fall under the category of knowledge support. The management sup-
port category contains Executive Support System, MSS, and Decision
Support System (DSS).
1. The TPS comes under the knowledge support category. (True/

False)
2. The management support category contains ESS, ______ and
DSS.
3. Which of the following does not fall under the category of
knowledge support?
a. Business Intelligence
b. Office Information System
c. KMS
d. None of these

N O T E S
ACTIVITY
Study the history of information systems and its evolution over a

period of time. Discuss with your friends.
5.3 OPERATIONS SUPPORT SYSTEMS

Operational Support System is a collection of computer programmes
or an IT system, which is used by communications service provid-
ers for monitoring, controlling, analysing and managing a computer
or telephone network system. OSS software is specifically designed
for telecommunications service providers and especially used for
supporting network processes to preserve network inventory, con-
figure network components, and deliver services and manage faults.
With the development of new broadband and Voice over Internet Pro-
tocol (VoIP) systems, OSS and network management are now func-
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tional in home networks. An OSS is also known as a Business Support
System (BSS).
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Information systems have been performing various business opera-
tions such as accounting and production. Systems that support busi-
ness operations are gathered under the category of OSS. There are
three main divisions of OSS, which are discussed as follows.
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5.3.1 TRANSACTION PROCESSING SYSTEMS
Transaction Processing Systems gather, store, alter and retrieve the

transactions of an organisation. A transaction is an event that produc-
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es or changes data that is eventually stored in an information system.

Some examples of TPSs are selling goods with the help of a Point-Of-
Sale (POS) system, processing credit card payments, or making a ho-
tel reservation. TPSs differ in features from other types of information
systems, in which they directly support business operations.
The most important information processes of a TPS are gathering and
storing data. If a TPS is used to record a sale transaction and produce
a receipt, the transaction data is collected at the POS terminal and
then stored in an online database.
The four important features of a TPS are as follows:
Rapid Response: It is critical for a TPS to have a rapid response
time with fast performance. Businesses cannot let customers wait-
ing for a TPS to respond. The total amount of time from the input
of the transaction to the production of the output must be a few
seconds or less.
Reliability: Many organisations depend greatly on their TPS. A
system failure can disturb operations or even stop business. The
failure rate of a TPS must be very low to be effective. If a TPS fails,

N O T E S
then quick and accurate recovery of data must be possible. This

makes backup and recovery procedures essential.
Inflexibility: A TPS executes every transaction in the same way,
irrespective of the user, the customer, or the time of day. With a
flexible TPS, there would be too many opportunities for non-stan-
dard operations. For example, a commercial airline requires to
consistently accept airline reservations data from numerous travel
agents. It would be difficult and problematic to accept different
transaction data from different travel agents.
Controlled Processing: The processing in a TPS must support an
organisation's operations. For example, if an organisation assigns
roles and responsibilities to specific employees, then the TPS
should impose and control this requirement.
A TPS lowers the organisation's costs by reducing the number of
times the data must be handled and by performing timely updates to
the database.
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There are two types of data processing, which are discussed as follows:
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BATCH TRANSACTION PROCESSING
Batch transaction processing collects the transaction data together as

a group or batch and processes it later. It has a time delay. Transac-
tions are collected but not processed until it is suitable or cost-effec-
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tive to process them. Waiting for a large amount of data usually results
in lesser processing costs per transaction. The transactions are col-
lected as a batch and stored offline on a magnetic tape or on paper.
The time delay before processing a batch run could be a few minutes,
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hours or even days.

Batch processing is used when a time delay does not affect or de-
crease the usefulness of the results. This approach is used for mak-
ing pay cheques and other forms of paper output. Batch processing
is performed by large organisations using a mainframe or mid-range
computer. It includes a large batch of an identical data type, such as
payroll or stock information.
For example, a payroll application gathers data for each employee.
This data consists of the hours worked and overtime earned by the
employee. This data is processed in batches by updating a payroll
master file. After the master file is updated, the pay slips are generat-
ed for all employees in the organisation. Batch programmes are often
run at night, when the demand for the information system is lesser.

N O T E S
There are three disadvantages in batch processing, which are as fol-

lows:
All processing must wait until a preset time. The processing sched-
ule is predetermined.
Errors found during the processing cannot be corrected.
Sorting the transaction data is costly and time consuming.
REAL-TIME TRANSACTION PROCESSING
Real-time transaction processing is the instant processing of data. It

provides instant confirmation of a transaction but needs access to an
online database. Real-time processing includes a terminal or work-
station to input data and show the outcome of the TPS. It utilises a
computer network to connect the terminals to the mainframe comput-
er and to retrieve the online database. Real-time processing contains
numerous users, who are simultaneously performing transactions to
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change data. Even though each user is processing a very small num-
ber of records, their requests are being made at the same time. For
example, airline reservation systems and banking transaction systems
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are two common examples of real-time processing.
The two major concerns with real-time processing are as follows:

Concurrency ensures that two users cannot modify the same data
at the same time, which means one user cannot alter a particular
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piece of data before another user is done with it.

Atomicity guarantees that all the steps involved in a transaction
are completed successfully as a group. If even one step fails, no
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other step should be completed.
Examples of real-time transaction processing are as follows:

Reservation systems are used widely in any type of business in-
volved in establishing a service or product to be used in a future
time by the customer.
POS terminals are used by retail stores to sell goods and services.
They send inventory data to a central database when a sales trans-
action is complete.
A library loan system is used to record and keep track of items
rented from the library.

N O T E S
Figure 5.2 shows a transaction processing system:
Employee Data To General Ledger
Employee/File Payroll Management

Database System reports
Employee Number
Name
Address To government agencies
Pay rate
Gross pay
Employee paychecks
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Federal tax
FICA
Medicate
State tax
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Net pay
Online
Earnings (YTD)
queries
Payroll data on master file
Figure 5.2: Transaction Processing System

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(Source: http://nofieiman.com/wp-content/lectures/MIS2.pdf)
5.3.2 PROCESS CONTROL SYSTEM

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A Process Control System (PCS) monitors and controls physical pro-

cesses in an organisation. It manages manufacturing environment
and electronically controls the process based on restrictions defined
by the user. In a typical PCS, a measuring device is used to detect
gas or liquid present in a manufacturing environment. The frequency
signature of the specific gas or liquid is sent to the receiver, where it
is converted to a digital signal and then identified by the processor.
This identification is used for system tasks by the host controller and
automation system.
For example, underground mining plants use such systems. These

systems have electronic sensors that can monitor the pressure and
send warnings automatically, if the pressure is near the danger level.
It can also locate water sources in a particular range in a mining field.

N O T E S
Figure 5.3 shows an automatic process control system:
Hot Water Out
T.T.
Water Heater Signal

Cold Controller
Water In
Set
Point
Burners
Gas Supply
Automatic Gas Control Valve
OP16-997
Figure 5.3: Automatic Process Control System

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(Source: http://ot-group.help-out.net/t229-examples-of-process-control)
Figure 5.3 shows a simple automatic controller system which has the
following components:
The temperature transmitter (T.T) determines the temperature of
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the hot water and changes it to a standard level.

A signal is sent from the transmitter to the controller, the signal
could be pneumatic or electrical.
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The controller keeps the temperature of the hot water at a pertic-

ular point set (set point) by the operator.
The controller adjusts automatic control valve with the help of an
output signal line similar to the input line from the transmitter.
The controller can alert the operator by alarming signal if the system
fails. It can also switch off the gas supply if the water starts to boil.
Therefore, process control system provide a completely automated

contol over a process which makes business more productive and ef-
ficient.
5.3.3 ENTERPRISE COLLABORATION SYSTEM
Enterprise Collaboration System (ECS) can be defined as an infor-

mation system that is used to enable well-organised sharing of docu-
ments and knowledge between business teams and individuals in an
enterprise. ECS tools consist of the Internet, groupware, and different
software/hardware and internal/external networks. An ECS works
best in a collaborative working environment.

N O T E S
Therefore, ECS enables us to work effectively by helping us to per-

form the following:
Communicate: Share information with each other
Coordinate: Coordinate individual work efforts and use the shared
resources efficiently
Collaborate: Work together cooperatively on joint projects and as-
signments
For example, engineers, business experts, and consultants may team

up virtually for a project. The team may collaborate through the Inter-
net and extranet, using e-mail, video conferencing, discussion forums,
and a multimedia database that displays information regarding work
progress at the project website. The ECS may use the computer sys-
tems that are networked to various servers that store project, corpo-
rate, and other databases. Additionally, these servers provide various
software resources, such as Web browsers, groupware, and applica-
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tion, which help the team to collaborate till the project is complete.
The demand for better enterprise collaboration tools in business is
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increasing due to the capabilities and potential of the Internet. Figure
5.4 depict some software tools for electronic communication, electron-
ic conferencing and collaborative work management:
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ECS Tools
Enterprise
Collaboration
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Systems
Collaborative
Electronic Electronic
Work
Communications Conferencing
Management
Tools Tools
Tools
e-Mail Data Conferencing Calendaring and
Instant Messaging Voice Conferencing Scheduling
Voice Mail Videoconferencing Task and Project
Faxing Discussion Forums Management
Web Publishing Chat Systems Workflow Systems
Paging Electronic Meeting Document Sharing
Systems Knowledge Management
Figure 5.4: ECS Tools

(Source: http://staff.uob.edu.bh/files/781231507_files/ch5p2.pdf)
The ECS tools are discussed further as follows:

Electronic Communication Tools: These consist of e-mail, voice
mail, paging, faxing, Internet phone system, Web publishing, etc.

N O T E S
These tools allow you to electronically send messages, documents

and different files such as text, data, voice and multimedia files.
Electronic Conferencing Tools: These help people communicate
and collaborate while working together. Different conferencing
methods enable the members of a team to exchange their ideas
with each other at any time. These tools consist of voice conferenc-
ing, video conferencing, chat messengers and discussion forums.
Collaborative Work Management Tools: These help people to
manage and control group activities regarding work. These tools
contain calendar and scheduling system, task and project manage-
ment, workflow system and knowledge management tools.
4. The most important information processes of a TPS are

gathering and storing data. (True/false)
5. Which of the following is not a feature of a TPS?
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a. Rapid response
b. Reliability
c. Slow response
d. Inflexibility
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6. ECS tools consist of the Internet, groupware, different_________,

and __________ networks.
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ACTIVITY
With the help of the Internet, study at least two types information
systems and discuss them with your friends.
5.4 MANAGEMENT SUPPORT SYSTEMS

Management Support Systems are the systems used by management
to support managerial decision making. MSS are computer-based sys-
tems that provide information that is useful for the management. MSS
are a collection of all advanced computer technologies for supporting
solutions of managerial problems. Emergence of new technologies
and better information distribution has helped in providing more al-
ternatives for management. The scenario of rapidly changing global
economies and markets produces greater uncertainty.
Thus, to be able to maintain a competitive advantage requires a fast-

er response. MSS also enhances the decision-making power of man-
agement by checking "what if" scenarios to determine the best use

N O T E S
of manpower. Using MSS, one can study worker productivity based

on comparisons to a pre-set standard and the average worker. With
MSS, one can obtain real-time feedback on our operations to be able
to make quick and informed decisions.
There are a large number of systems development methods for MSS,

which are:
MIS
DSS
EIS
Let us discuss each of these systems in the following section.
5.4.1 MANAGEMENT INFORMATION SYSTEM
Management Information System (MIS) is a computer-based system
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that provides information to the management, to help in decision-mak-
ing and effective business management. MIS is one of the fastest grow-
ing concepts in the business environment. It influences decision-mak-
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ing patterns and strategic business planning significantly.
One of the popular definitions of MIS, given by Schwartz, is:
“MIS is the system of people, equipment, procedures, document

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and communication that collects, validates, operates on, transforms,

stores, retrieves and presents data for use in planning, budgeting, ac-
counting, controlling and other management processes”.
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There are two terms in MIS, ‘management’ and ‘information systems’,

which should be understood separately. Management is the process
of planning, organising, directing, and controlling the resources of
an organisation to attain business objectives effectively. Information
system refers to a set of interrelated components that collect, store,
process, generate and disseminate information for effective business
decision making.
MIS collects data from various sources, processes it, and transforms it
into meaningful and useful information.
Figure 5.5 shows the structure of MIS:
Information System Management

Management
(Data, Process, (Planning, Organising,
Information System
Information) Directing, Controlling)
Figure 5.5: Structure of MIS
The data is collected from various internal and external sources and
then processed using technical and analytical measures. This pro-

N O T E S
cessed data is called information. This information helps in various

levels of decision making thereby improving organisational effective-
ness. Figure 5.6 shows how data flows through the MIS:
Transaction Processing Systems Management Information Systems

Order
Order processing MIS Files
file system
Sales
data
Materials
Production resource Unit
master planning product
file system cost data
MIS Managers
Product
change Reports Online Displays
General data
Accounting and Dashboards
ledger
files system Expense
data
Figure 5.6: Data Flow in MIS
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(Source: http://nofieiman.com/wp-content/lectures/MIS2.pdf)
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MIS plays a significant role in contemporary managerial working,
because it serves various needs of managerial functions. It helps to
perform complicated managerial functions efficiently. MIS provides
support to management functions at all levels of an organisation. It
has become a necessity due to the following reasons:
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Increased Complexity of Business: With rapid changes in tech-

nologies, business environment also underwent a change, which
increased the complexity of functions to be performed by every
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department and overall organisation.

Increased Competition: The level of competition increased with
the changing business environment. Thus, it is now a challenge
to not only be a profitable business but also to remain successful.
Increased Complexity and Burden on Management: The deci-
sion-making managerial functions have become more complex
and need better analytical approach and expertise.
Information Technology: The emergence of electronic business
requires an organisation to be updated with IT revolutions. MIS
utilises this technological change for the growth of an organisa-
tion, being able to perform with less effort yet derive more efficient
information.
MIS serves the information needs of managers to make various man-

agement decisions. The various functions of MIS are discussed as fol-
lows:
Collecting Data from Various Sources: It refers to gathering data
from various internal as well as external sources. Internal sources
are financial reports, sales records, etc. External sources are sup-

N O T E S
pliers, competitors, customers, newspapers, magazines, and so on.

The data is collected on both papers as well as in electronic form.
Storing Data: It refers to storing and retrieving data as and when
required.
Processing Data: It refers to processing of data i.e, applying var-
ious functions, such as calculating, sorting, classifying, analysing,
comparing and summarising, the collected data.
Generating Information: It refers to transforming the collected
data into useful and meaningful information after processing. The
information generated after processing of data must be well struc-
tured and organised.
Disseminating Information: It refers to segregating the informa-
tion produced into various departments, depending upon their re-
spective requirements to help them in performing their functions
efficiently.
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Storing Information: It refers to saving the generated information
back in the database for future references. The same information
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can be further processed for generating more results, if required.
Some examples of MIS are as follows:

Sales management systems
Inventory control systems
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Budgeting systems
Management Reporting Systems (MRS)
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Personnel (Human Resource Management) systems
5.4.2 DECISION SUPPORT SYSTEM
Decision making plays a significant and vital role in carrying out

the activities of an organisation successfully. The process of decision
making involves identifying and selecting the best possible alterna-
tive from various available options. It is a problem-solving technique,
wherein a viable solution is attained for the prevailing problem. There
are certain principles that are taken into consideration by an organi-
sation for an effective decision-making process. These are as follows:
The people participating in the decision-making process need to
understand the purpose of the process.
All the people involved in the decision-making process need to
have a significant interest in the issues being discussed.
All the people participating in the process should welcome the mu-
tual learning that arises from the process i.e., the process should
prove to be educational for the participants.

N O T E S
The participants involved in the process must not be forced to do

so but rather be interested and willingly volunteers to be a part of
the process.
All the participants in the process must be presented with an equal
opportunity to participate and design the collaborative process.
They should be able to access the relevant information with an
equal chance and should be provided with an opportunity to par-
ticipate effectively in the process.
The process should be designed in such a way that it meets the
requirements of the given situation.
The process should be flexible, so that it can accommodate the
changing issues, data requirements, political environment, and
the constraints such as time and meeting arrangements.
The values, ideas, and interests of the participants who are knowl-
edgeable about the problem should be respected in the collabora-
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tive process.
The participants who initiated the process should be accountable
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to the process.
There are deadlines that need to be respected throughout the pro-
cess.
There has to be a commitment by all the participants to reach at an
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effective decision through the process, which has to be monitored

regularly.
Figure 5.7 shows decision processing system:

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PC
Ship file (e.g.,
speed, capacity)
Port distance
restrictions file
Fuel consumption
Analytical cost file
models
database
Ship charter hire

history cost file
Port
Outline expense file
queries
Figure 5.7 Decision Support System

(Source: http://www2.sta.uwi.edu/~anikov/info1500/lectures/02-IITF-lect-information-sys-
tems-and-business-processes.pdf)

N O T E S
Figure 5.7 is an example of a shipment organisation that is using deci-

sion support system.
TYPES OF DECISIONS
A decision is defined as a judgement, conclusion, or resolution reached

by selecting the best alternative among two or more options for some
specific action or purpose. Decisions can be of various types depend-
ing upon the field where they are being applied. They can be catego-
rised under various heads. In any organisation, the management is
divided into different levels like strategic level, managerial level and
operational level. These levels define the decisions taken in the organ-
isation. The accuracy and quality of information also differ as per the
level of decision making. Therefore, managers should have a proper
understanding of all the levels of decisions.
Thus, decisions can be categorised as follows:
S
Unstructured Decision/Strategic Level Decision: This refers to
the decisions taken at the top-management level. These decisions
IM
define the broad objectives and strategic planning of an organi-
sation for profit making. These decisions are called unstructured
decisions, because they are not well defined, and there is ample
scope of various sub decisions based on these decisions. Such deci-
sions are taken to have a long-term approach from a business per-
spective and are taken at the executive level of the organisation,
M
where managers focus on the strategic issues faced by the organi-

sation in the long term. There is no specific set of rules and proce-
dures followed in these decisions. Instead the focus is on solving
N
the problems, which are complex, non-routine, and are long-term

requirements of the organisation. The decision makers at this lev-
el include President, Chief Executive Officer (CEO), and Board of
Directors. For example, the decision of entry into a new market
segment within diversification strategy.
Semi-structured/Managerial Decision: This refers to the deci-
sions taken by managers at the control level of business. The de-
cisions at this level are neither structured nor unstructured, be-
cause these can be pre-specified to the extent their nature allows.
Decision making at this level is said to be semi structured, because
problems and solutions are clear, and expertise is also required
in taking semi structured decisions. Managers at this level focus
on monitoring and controlling activities of operational level and
providing information to the business level management. For ex-
ample, introduction of a new feature in an existing product.
Structured/Operational Decision: This refers to decisions that
are usually taken at the operational level, where routine day to
day business process occurs. The decisions taken at this level are
based on certain rules and predefined procedures, which are spec-
ified in advance before taking the decisions. Thus, decisions taken

N O T E S
at this level are not only highly structured but also repetitive and
are related to day-to-day activities. To meet the requirements of
decision makers at this level, information systems are designed to
improve the efficiency of the business processes. For example, de-
termination of quantity of raw material.
5.4.3 EXECUTIVE INFORMATION SYSTEM
An Executive Information System (EIS) is a type of MIS that facili-

tates and supports information and decision-making needs at the se-
nior executive level. EIS provides easy access to internal and external
information relevant to organisational goals. It is commonly consid-
ered a specialised form of DSS. The emphasis of EIS is on graphical
displays and easy-to-use user interfaces. It offers strong reporting and
drill-down capabilities. In general, EIS is an enterprise-wide DSS that
helps top-level executives analyse, compare, and highlight trends in
important variables, so that they can monitor performance and iden-
S
tify opportunities and problems.
EIS is not a piece of hardware or software. It is basically an infrastruc-

IM
ture from where operational data and up-to-the-minute details are
supplied to a firm's executives. The operational data is first gathered
and sifted from various databases and then transferred to an execu-
tive level. The information mix presented to executives typically in-
cludes financial information, work in process, inventory figures, sales
M
figures, market trends, industry statistics, and market price of the

firm's shares. This information may even include suggestions related
to what needs to be done. EIS differs from a DSS in that it is targeted
at executives and not managers.
N
Previously, EIS was developed as computer-based programmes on

mainframe computers to provide a company’s description, sales per-
formance, and/or market research data for senior executives. Howev-
er, earlier, senior executives were not computer literate and were not
skilled in handling computer-based information. Moreover, EIS data
earlier supported only executive-level decisions and not necessarily
the entire company or enterprise.
Current EIS data is available taking into consideration the entire or-
ganisation. Further, it is facilitated by personal computers and work-
stations on LANs. Executives and employees are now more computer
literate and have been trained since to handle such kind of informa-
tion. Thus, employees can access company data to help decision mak-
ing in their individual workplaces, departments, divisions, etc. This
allows employees to provide their inputs and ideas both above and
below their company level.
EIS has a few advantages and disadvantages, which are discussed as

follows:

N O T E S
Advantages of EIS:
It is easy for upper-level executives to use; no extensive computer
experience is required in operations.
It provides timely delivery of company summary information, so
that management can make decisions promptly.
Information that is provided is better understood.
It improves tracking information.
It Offers efficiency to decision makers.
Disadvantages of EIS:
It is system dependent.
It has limited functionality, by design.
It causes information overload for some managers.
S
Its benefits are hard to quantify.
It involves high implementation costs.
IM
It may become slow, large and hard to manage.
It needs good internal processes for data management.
It may lead to less reliable and less secure data.
Example of EIS:
M
EISs tend to be highly individualised. They are usually custom made

for a particular client group keeping in mind their specific require-
N
ments. However, a number of off-the-shelf EIS packages also exist,

and many enterprise-level systems offer a customisable EIS module.
7. MSS enhances the decision-making power of management

by checking “what if” scenarios to determine the best use of
manpower. (True/False)
8. EISs are usually custom made for a particular client group
keeping in mind their specific requirements. (True/False)
9. Management is the process of planning, ________, directing,
and __________the resources of an organisation to obtain
business objectives effectively.
10. Which of the following is not a category of decision?
a. Structured/operational decision
b. Structured/managerial decision
c. Semi-structured/managerial decision
d. Unstructured decision/strategic level decision

N O T E S
ACTIVITY
Take a case study of any business organisation from the Internet.

Discuss business decisions that are taken in the organisation at
MIS, DSS and EIS levels, respectively.
5.5 FUNCTIONAL INFORMATION SYSTEMS

Functional Information System is a type of information system that
is based on various business areas such as production, marketing, fi-
nance and human resource. These areas are regarded as functional
areas of business. Each functional area needs applications to execute
all information processing related to the function. Popular functional
areas of business organisations are:
Financial Information System: Financial information system is
S
a part of organisational MIS. It helps in the decision-making pro-
cess of financial functions at the level of an organisation. It also
helps in performing various activities such as financial planning
IM
and financial forecasting. These activities determine the financial
performance of an organisation in the future. Therefore, an organ-
isation should have an effective and efficient financial MIS.
Marketing Information System: It provides information about
various functions of the marketing system of an organisation.
M
Marketing is another functional area of a business organisation.

Marketing information system is a set of efficient procedures and
methods that helps organisations to gather, evaluate, sort and cre-
N
ate reports for making effective marketing decisions.
Using a marketing information system, you can retrieve the following

information related to the market:
Recurring Information: It comprises information such as custom-
er expectations, changing requirements, and the market share of
the product. Organisations need this information on a daily basis.
Monitoring Information: It includes information related to the
market. This information is obtained by various information
sources such as magazines, articles, government reports and an-
nual reports.
Requested Information: It is the information that is generated in
response to explicit requests by the marketing department of an
organisation. It may consist of information related to competition
strategies and market share.
Production/Manufacturing Information System: Manufacturing
or production information system delivers information on produc-
tion and operation activities of an organisation. It simplifies the
decision-making process of production managers of an organisa-

N O T E S
tion. The main decisions to be taken in a manufacturing system

are listed as follows:
Product design
Product development and maintenance
Product
Human Resources Information System: It supports the functions
of human resource management of an organisation. The human
resource management functions are also known as personnel
management. HRIS delivers information to an organisation about
its workforce management. It provides different human resource
functions, such as recruitment, selection, training and develop-
ment, performance evaluation and appraisal, and compensation,
of an organisation.
S
11. Which of the following is not a popular functional area of a

business organisation?
IM
a. Purchase information system
b. Marketing information system
c. Financial information system
M
d. Human resources information system

12. ________ information system is a part of an organisational
MIS.
N
13. Human resource information system delivers information on

production and operation activities of an organisation. (True/
False)
ACTIVITY
With the help of the Internet, choose an organisation and make an

observation of how information system is applied in various func-
tional areas of the organisation such as production, marketing, fi-
nance and human resource.
OTHER TYPES OF INFORMATION

5.6
SYSTEMS
There are various other supporting information systems. They are as
follows:
Expert System
KMS

N O T E S
Strategic Information System (SIS)

Business Information System (BIS)
Integrated Information Systems
Let us discuss each of them further.
5.6.1 EXPERT SYSTEM
An expert system is specialised computer software, which is designed

to provide answers to a specific problem or clarify uncertainties in
areas where normally human experts would need to be consulted.
Expert systems use Artificial Intelligence (AI) to solve the problems
within a specialised domain. In another sense, these systems are a
traditional application and/or subfield of AI.
The first expert system was developed by Edward Feigenbaum and
S
Joshua Lederberg of Stanford University in California, US, in 1965.
It was designed to analyse chemical compounds. In the current sce-
nario, expert systems are being used for commercial applications in
IM
diverse fields such as medical diagnosis, petroleum engineering and
financial investing.
To achieve apparent intelligence, an expert system has two compo-

nents to rely on:
M
Knowledge Base: A knowledge base is an organised collection of

facts related to a particular system’s domain.
Inference Engine: An inference engine evaluates and interprets
N
the organised collection of facts in the knowledge base to reach a

conclusive answer.
An expert system involves classification, diagnosis, monitoring,
designing, scheduling, and planning tasks for specialised areas. A
knowledge base acquires the contained facts from human experts
through interviews and observations. The facts are then repre-
sented in the form of “if-then” rules (production rules): “If a con-
dition is true, then a particular inference can be made (or some
action taken)”.
In an expert system, the knowledge base includes thousands of rules

based on which conclusions are drawn. A conclusion is not a certainty,
thus, a probability factor is attached to the conclusion of every pro-
duction rule. For example, a system for the diagnosis of eye diseases,
based on information supplied to it, might conclude with a 90% prob-
ability that a person has glaucoma. There might be other conclusions
with lower probabilities. An expert system might display the sequence
of rules through which it arrived at its conclusion. A user can use this
sequence to appraise the credibility of its recommendation. This also
proves to be useful for students as a learning tool.

N O T E S
Along with simple production rules, human experts also usually em-
ploy heuristic rules, or “rules of thumb”. For example, a credit man-
ager might know an applicant with a poor credit history, but a clean
record since acquiring a new job, might actually be a good credit risk.
Expert systems try to incorporate such heuristic rules. They must be
open for changes and must have the ability to learn from experience.
In spite of their being experts in their domain, expert systems still re-
main supplements rather than replacements for human experts.
5.6.2 KNOWLEDGE MANAGEMENT SYSTEM
With the continuous influx of information, a business has to deal with

huge amounts of information on a daily basis. The summarised in-
formation on a specific subject develops into knowledge on that sub-
ject. This knowledge is stored and used by organisations for future
reference in business activities. Thus, this organised knowledge helps
create a knowledge base for them. This knowledge base needs to be
S
updated on a continuous basis, so that any obsolete information does
not mislead the management. Management refers to the knowledge
IM
base as and when required for understanding of concepts incorporat-
ed by information.
Knowledge management is an effective management of knowledge in

an organisation and efficient communication of the same to the man-
agement. This efficient knowledge management results from acquir-
M
ing, sharing and updating knowledge across the organisation. The

process of knowledge management involves sourcing internal and ex-
ternal information that is explicit as well as tacit and transforming it
into valuable knowledge for the organisation. This knowledge is made
N
available to all the employees with a learning objective. In this way,

knowledge management deals with communication and learning.
Thus, in a nut shell, knowledge management deals with acquiring

knowledge from various knowledge sources and developing a knowl-
edge base that fulfills the communication and learning requirements
of an organisation.
KNOWLEDGE ACQUISITION
Acquisition of knowledge is the very first step in knowledge man-

agement. The process of acquiring knowledge is called ‘knowledge
engineering’, and people involved in this task are called ‘knowledge
engineers’. The flow of knowledge in an organisation can be in two
directions: top to bottom and bottom to top. There are two different
approaches adopted by knowledge engineers while acquiring knowl-
edge in these two directions.
The methods followed in knowledge acquisition from top level to bot-

tom are as follows:

N O T E S
Interview Method: It involves general interviews, personal inter-

views, object-oriented interviews and structured interviews.
Questionnaire Method: It involves open and closed-ended ques-
tions to be answered.
Group Discussion Method: It involves a knowledge-sharing dis-
cussion on some topic; the ideas and thoughts of participants help
in knowledge creation.
The methods followed in knowledge acquisition from bottom to the

top level are as follows:
Observation Method: It involves observation of process and em-
ployee performance in the process.
Protocol Method: It involves identification of general formulae
while solving a problem in an organisation. This information helps
in creating thumb rules in problem solving.
S
Expert Opinion: It involves expert or a group of experts sharing
their ideas and opinions about a particular situation. This informa-
tion also helps in forming principles of solving problems.
IM
Knowledge engineers, in the process of acquiring knowledge, must
keep in mind some aspects, such as:
Method selection and knowledge acquisition is a skill.
Paper work and documentation are important. However, it should
M
not be a time consuming process in knowledge acquisition.

Continuous improvement in knowledge acquisition methods with
the feedback of participants is necessary.
N
KNOWLEDGE BASE
Similar to a database, knowledge base represents the organised
storage of knowledge with or without the use of computers. Knowl-
edge base facilitates in accessing knowledge whenever required. The
knowledge base, in addition to knowledge, also contains rules, princi-
ples, theories, best practices and other forms to organise knowledge.
For an organisation, knowledge is a resource of efficiency improve-
ment.
Knowledge resource is similar to any other natural resource. Let us
take the similarities between a knowledge resource in an organisation
and water resource in our nature. Water resource is a necessity of life,
but it needs to be managed and stored properly. Similarly, in any or-
ganisation, knowledge resource is also required to be managed and
stored properly, so that the existing knowledge is used in an efficient
manner.
A knowledge base is generally managed through computers. There
are a number of knowledge-based software that an organisation can

N O T E S
develop to support its knowledge base. Thus, knowledge management

requires developing a knowledge base to effectively manage knowl-
edge in an organisation.
5.6.3 STRATEGIC INFORMATION SYSTEM
Strategic systems are designed to give competitive advantage to an or-

ganisation. Strategic systems are information systems that have been
developed in response to corporate business initiatives. Following
business perspective, strategically, these systems may deliver a prod-
uct or service that is:
Costs lower than others
Can be differentiated from others
Focuses on a particular market segment
Shows innovation, to gain competitive edge
S
SIS or strategic information management is a salient feature in the
world of Information Technology (IT). It enables businesses and or-
ganisations in categorising, storing, processing, and transferring in-
IM
formation they create and receive. The system also includes tools for
helping companies in applying metrics and analysing tools to their
information database. This enables the system to recognise opportu-
nities for growth and focus on ways to improve operational efficiency.
A SIS alters the way an organisation performs business. It offers an

M
organisation a clear competitive edge and leads to higher profits or in-

creased market share. Most strategic systems enable an organisation
to be an effective competitor. Rapid diffusion of technological change
N
makes it difficult for an organisation to maintain a competitive advan-

tage, thus strategic development of information systems helps main-
tain the dynamic capability of an organisation.
Characteristics of SIS are:

It significantly changes business performance.
It contributes to attaining a strategic goal.
It fundamentally changes the way a company performs business.
It changes the way it competes in the market and the way it deals
with its customers or suppliers.
EXHIBIT
Competitive Advantages of Strategic Systems
Strategic systems link business and computer strategies. Using

these systems, new business strategies are developed and are real-
ised using IT. There is general agreement that strategic systems are
used for gaining competitive advantage. Some of the common ways
of gaining competitive advantage are:

N O T E S
Providing a Service or a Product at a Lower Cost: Providing

a service or a product at a lower cost does not necessarily mean
the lowest cost in the market. It refers to a cost estimated with
respect to the quality of the product or service that is both lu-
crative in the marketplace and still yields sufficient return on
investment. The cost considered here is the overall cost of all or-
ganisational activities for the delivery of that product or service.
Deliver a Product or Service that is Differentiated: Here, dif-
ferentiation entails adding unique features to a product or ser-
vice that creates a competitive edge in the market. Usually, add-
ing such features might add to the cost of the product, because
a lowest-cost product seldom has the best differentiation. Thus,
a strategic system helps customers to perceive and decide that
differentiation rather than focus on the cost.
Focus on a Specific Market Segment: Here, the idea is to iden-
tify and create something new in the market space that has not
S
been captured yet. IT is able to provide the capabilities to de-
fine, expand, and fill particular market segments.
IM
Innovation: Innovation deals with developing new and appre-
ciably different products or services through the use of IT, for
example, automatic credit card handling machines at service
stations and Automatic Teller Machines (ATMs) at banks etc.
These innovative techniques not only attract customers but also
M
open up entirely new fields of business.
5.6.4 BUSINESS INFORMATION SYSTEM

N
Business Information System can be defined as a group of interre-

lated components that works collectively to carry out input, process,
output, storage and control actions to convert data into information
products. These products can then be used to support forecasting,
planning, controlling, coordinating and helping in decision making
and operational activities in an organisation.
In terms of components that are required to undertake this activity,

there are five basic resources: people, hardware, software, communi-
cation and data. The people resource includes users and developers
of information systems and also those who help in maintenance and
operating the system such as information system managers and tech-
nical staff.
The hardware resource includes computer systems and other periph-

eral devices such as printers, scanners, etc. Software resources refer
to software programmes and associated manuals. Communication re-
sources include computer networks and the hardware and software
required to support it. A data resource refers to the data an organisa-
tion has access to such as databases and files.

N O T E S
In most organisations, BIS makes extensive use of IT. Computerised

BIS has become popular and widespread due to the speed, accuracy
and dependability they impart to the organisation as a whole. They
also have high degrees of flexibility due to their ability to be pro-
grammed to be able to carry out a variety of tasks. However, BIS also
has a few disadvantages such as the lack of creativity, which humans
possess and a lack of innovation and intuition in their decision-mak-
ing processes.
TYPES OF BUSINESS INFORMATION SYSTEMS
BIS can be divided into two categories of systems that support an or-
ganisation’s everyday business activities. These systems also lend sup-
port in managerial the decision-making process. The two categories of
BIS are:
Operations Information System (OIS): These systems are con-
S
cerned with process control, transaction processing and commu-
nications.
MIS: These systems are concerned with providing support to
IM
managerial decision making.
This division of BIS has been useful for managers using BIS. How-
ever, with progress in inter-organisational e-commerce and Electron-
ic Data Exchange (EDI), now this demarcation does not accurately
M
reflect the system being used within an organisation. For example,

e-business and enterprise planning systems cut across both opera-
tional and management systems to provide businesses with more in-
tegrated information systems.
N
5.6.5 INTEGRATED INFORMATION SYSTEMS
An integrated information system can be explained as an expansion

of a basic information system by incorporating a portion of the func-
tional or technical elements of one information system into another.
This can be achieved through improvisation of system design of an
information system to inculcate broader capability by functionally or
technically relating two or more information systems.
BENEFITS OF INTEGRATED INFORMATION SYSTEMS
In many organisations, a system grows gradually, adding new equip-

ment or software as and when the need arises. This often leads to a
confused mix of incompatible and inefficient systems.
Sometimes, different departments, such as marketing and finance,

each enter the same or related data into a system separately. This re-
sults in duplication of efforts as well as data. This also leads to wast-
age of storage space. Although separate data might hold information,
summarising and bringing it together to get the whole picture can be

N O T E S
a challenge. This can cause confusion or frustration for customers,

suppliers or employees.
Integrated systems help in minimising these problems by planning

ahead about how the needs of an organisation might change in the fu-
ture and how the systems should grow. To enable a smooth transition,
one can take care of the following:
The system should be designed such that information can be
shared. For example, by using software applications that work on
the local network.
The system should enable the sharing of hardware, such as print-
ers and scanners, by setting up a networking system in the organ-
isation.
The system should be studied thoroughly by system administra-
tors and should take into consideration customer and supplier
requirements for system expansion. These must be pre-judged to
S
adjust any changes needed for expansion in the future.
It is in the interest of an organisation to explore all the technologies on

IM
offer and choose the right solution for the business. This kind of plan-
ning helps an organisation to develop a well-integrated system and be
able to deliver major benefits, such as:
Integrated systems that grow with the growth of an organisation
M
rather than needing to be replaced at every step

Robust systems that can handle errors and increase efficiency
Systems that have better access to information, leading to a more
N
responsive service and enhanced relationships with customers

and suppliers
Systems utilising the employees’ time optimally, leading to greater
job satisfaction among employees
Systems with reduced costs
To understand integrated systems, let us take an example of Canon,

which prides itself in the research field and carries out development
of new technologies. Companies which set out, through their products
and services, to help other companies become and remain efficient
operators, need to be at the forefront of innovation and good practice
themselves.
Canon has research centres located in Europe (for example, France,

the UK) the US and Japan. It operates in a highly competitive envi-
ronment and recognises the importance of managing its processes to
ensure that its new products come to market quickly, are of the high-
est technical specifications, and can be competitively priced.
To ensure this, Canon has an efficient information management strat-

egy that is an essential component of business success. In the contem-
porary scenario, businesses have large amounts of documentation,

N O T E S
e-mails, and other paperwork circulating around them. Over time,

Canon has developed skills and technologies to take control of this
potential information overload, the know-how to manage it, and the
ability to share it throughout the organisation and beyond. Canon has
used its technology, understanding, and systems integration skills to
help improve its own business processes, to become more efficient,
more productive, and more profitable.
It understands the important contribution of integration of information

and communications systems for effective working, thus, Canon is well
placed to help other organisations improve their own information man-
agement systems. With its history of technological innovation in fields of
state-of-the-art integrated IT, office, and imaging systems, Canon seeks
to continually provide solutions that best meet customer requirements.
EXHIBIT
S
Types of Information Systems With Examples
Type of Information System Example

IM
Operations Support Systems Cisco Operations Support Systems,
TELCO OSS systems, NetAct OSS
Management Support Systems Infosys’ TalentEdge Learning Man-
agement solution , IBM Tivoli Deci-
sion Support System
M
Functional Information System Oracle Human Resources Manage-

ment System, Oracle Hyperion Fi-
nancial Management
N
Other Information System Oracle Knowledge Management

System, PXDES (Pneumoconiosis
X-Ray Diagnosis Expert System),
DXplain
14. Expert systems use AI to solve problems within a specialised

domain. (True/False)
15. The summarised information on a specific subject is called
________ on that subject.
16. Which of the following methods in knowledge acquisition
involves open and closed-ended questions to be answered?
a. Interview Method c. Questionnaire Method
b. Protocol Method d. Expert Opinion
17. Integrated systems need not grow with the growth of an
organisation. (True/False)

N O T E S
ACTIVITY
With the help of the Internet, study other information systems and
their areas of implementation with respect to a business enterprise.
Discuss with your friends.
5.7 SUMMARY
An information system is a group of hardware, software, data, peo-
ple and procedures, which is designed to produce information that
helps the regular, small and large activities of users in an organi-
sation.
An OSS is a collection of computer programmes or an IT system,
which is used by communications service providers for monitor-
ing, controlling, analysing and managing a computer or telephone
S
network system.
TPS gathers, stores, alters and retrieves the transactions of an or-
IM
ganisation.
A PCS monitors and controls physical processes in an organisa-
tion, manages manufacturing environment and electronically con-
trols the process based on restrictions defined by the user.
An ECS can be defined as an information system that is used to en-
M
able well-organised sharing of documents and knowledge between

business teams and individuals in an enterprise.
MSS is the system used by management to support managerial
N
decision making.
MIS is a computer-based system that provides information to the
management to help in decision making and effective business
management.
Decision making plays a significant and vital role in carrying out
the activities of an organisation successfully.
An EIS is a type of MIS that facilitates and supports information
and decision-making needs at the senior executive level.
Functional information system is based on various business areas
such as production, marketing, finance and human resource.
Expert systems use AI to solve problems within a specialised do-
main. In another sense, these systems are a traditional application
and/or subfield of AI.
Knowledge management is an effective management of knowl-
edge in an organisation and efficient communication of the same
to the management.

N O T E S
Strategic systems are designed to give competitive advantage to

the organisation.
BIS can be defined as a group of interrelated components that
work collectively to carry out input, process, output, storage and
control actions to convert data into information products.
An integrated information system can be explained as an expan-
sion of a basic information system by incorporating a portion of
the functional or technical elements of one information system
into another.
KEY WORDS
Batch Processing: Batch transaction processing collects the

transaction data together as a group or batch and processes it
later.
S
Real-time Transaction Processing: Real-time transaction pro-
cessing is the instant processing of data.
IM
Point Of Sales Terminal: POS terminals are used by retail
stores to sell goods and services.
Management Information System (MIS): MIS is a comput-
er-based system that provides information to the management
to help in decision-making and effective business management.
M
Unstructured Decisions: These decisions are called unstruc-

tured decisions because they are not well defined and there is
ample scope of various sub decisions based on these decisions.
N
Artificial Intelligence (AI): The theory and development of

computer systems able to perform tasks normally requiring hu-
man intelligence, such as visual perception, speech recognition,
decision making and translation between languages.
Knowledge Base: Similar to a database, knowledge base rep-
resents the organised storage of knowledge with or without the
use of computers.

1. Define information systems. Differentiate various information
systems with respect to organisational level at which they are
used.
2. Discuss various OSSs in brief with an example of each.
3. What is MIS? Discuss its application areas in detail.
4. Describe DSS, explaining its principles for an effective decision
making process.

N O T E S
5. What do you mean by functional information systems? Explain

with the help of examples.
6. What are expert systems? Explain their implementation in a
business scenario.
7. Discuss integrated information systems and how they are useful
for the growth of an organisation?
Topic Q.No. Answers

Different Types of 1. False
Information Systems
S
2. MIS
3. d. None of these
IM
Operations Support 4. True
Systems
5. C
6. software/hardware, inter-
nal/external
M
Management Sup- 7. True

port Systems
8. True
N
9. Organising, controlling
10. B
Functional Informa- 11. A
tion Systems
12. Financial
13. False
Other Types of 14. True
Information Systems
15. Knowledge
16. C
17. False

1. An information system is a group of hardware, software, data,
people and procedures, which is designed to produce information
that helps the regular, small and large activities of users in an
organisation. Refer to section 5.4.

N O T E S
2. An OSS is a collection of computer programmes or an IT

system, which is used by communications service providers for
monitoring, controlling, analysing and managing a computer or
telephone network system. Refer to section 5.5.
3. MIS is a computer-based system that provides information to the
management to help in decision making and effective business
management. Refer to section 5.6.1.
4. Decision making plays a significant and vital role in carrying
out the activities of an organisation successfully. The process
of decision making involves identifying and selecting the best
possible alternative from various available options. Refer to
section 5.6.2.
5. Functional information system is a type of information system that
is based on various business areas such as production, marketing,
finance and human resource. Refer to section 5.7.
S
6. An expert system is specialised computer software that is
designed to provide answers to a specific problem or clarify
uncertainties in areas where normally human experts would
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need to be consulted. Refer to section 5.8.1.
7. An integrated information system can be explained as an
expansion of a basic information system by incorporating a
portion of the functional or technical elements of one information
M
system into another. Refer to section 5.8.5.

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SUGGESTED READINGS
Sarngadharan, M. and Minimol, M. (2010). Management informa-
tion system. 1st ed. Mumbai [India]: Himalaya Pub. House.
Stair, R. and Reynolds, G. (2006). Fundamentals of information sys-
tems. 1st ed. Boston: Thomson/Course Technology.
E-REFERENCES
Encyclopedia Britannica, (2014). information system. [online]
Available at: http://www.britannica.com/EBchecked/topic/287895/
information-system
Chris-kimble.com, (2014). Different Types of Information System
and the Pyramid Model. [online] Available at: http://www.chris-kim-
ble.com/Courses/World_Med_MBA/Types-of-Information-System.
html.

C H A
6 P T E R
ENTERPRISE RESOURCE PLANNING (ERP)
CONTENTS
6.1 Introduction
6.2 Defining ERP
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Activity
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6.3 Evolution of an ERP System
Activity
6.4 Benefits of an ERP System
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Activity
6.5 ERP Implementation
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Activity
6.6 Reasons for the Failure of ERP Implementation
Activity
6.7 Summary

N O T E S
ERP IMPLEMENTATION AT IBM
International Business Machines (IBM) is a US-based technology

giant that manufactures and markets computers and its peripher-
als. The organisation realised that to maintain the position of one
of the leading PC (Personal Computer) makers in the market, it
needs to customise its services in a better way. Thus, the company
implemented a configure-to-order Enterprise Resource Planning
(ERP) system, which helped in supplying information related to
products and orders placed by customers to all the divisions of
IBM throughout the world.
The ERP system implemented by IBM is an online network of

communication. When a customer places an order with IBM for
a PC, the ERP system enables the customer to select his/her own
configuration of the product from the company’s website. This
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system has a great real-time applicability in information process-
ing. Thus, a customer finds it very convenient to place an order.
IM
However, the functions run by the system are somewhat complex.
When the order is placed through the website, it passes to IBM’s
order-fulfillment division located in the UK and its e-commerce
division in Boulder and Colorado, US. Simultaneously, the order
is also updated in various other divisions at different locations,
such as the production management division in Raleigh (North
M
Carolina), sales team in Southbury, and product database division

in New York. After updating all these divisions, which are involved
in this inward sales process, the order placement information gets
N
back to the customer. The journey of this order placement also be-
gins functional processes at each division to provide value-added
services and on-time delivery.
Similar ERP systems of configure-to-order have also been adopt-

ed by other market leaders such as Dell and Apple.

ENTERPRISE RESOURCE PLANNING (ERP) 151
N O T E S
LEARNING OBJECTIVES

> Define ERP
> Discuss the evolution of an ERP system
> Identify the benefits of an ERP system
> Explain ERP implementation
> Describe the reasons for the failure of ERP implementation
6.1 INTRODUCTION
Anish wants to buy a pair of shoes for himself, but he is not finding
the time to visit a store. Thus, he searches an online shopping site on
the Internet, selects a pair of shoes from a wide variety of options, and
S
pays for them using his debit card. He receives the bill for the shoes
on his e-mail and receives the delivery at his home within five days.
How does this type of purchasing process work? How and when is the
IM
storehouse of the organisation informed about the requirement of the
product, or how does the finance department know that the payment
is made, or the sales department know that a product needs to be de-
livered? All this information is passed to different departments at the
same time. This is made possible by implementing an ERP system.
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Enterprise Resource Planning refers to an integrated information

system used for managing the internal and external resources of an
organisation. It supports the day-to-day business operations and the
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decision-making process of an organisation. An ERP system attempts

to automate the various business operations of an organisation such
as supply chain management, inventory control, production schedul-
ing, sales support, customer relationship management, financial and
cost accounting, and human resource management. It is designed to
enhance the competitive strength of an organisation by generating
and disseminating timely and accurate information throughout the
organisation.
Successful implementation of an ERP system results in reduced pro-

duction cycles, increased flexibility, higher customer satisfaction, en-
hanced decision-making capability, improved productivity, etc. How-
ever, many studies have advocated that ERP implementation is not
always successful. There are a number of factors that can be held re-
sponsible for the failure of an ERP system. Some of these factors in-
clude lack of top management support, lack of planning, selection of
an inappropriate ERP system, etc. A detailed analysis of these factors
can help an organisation to implement an ERP system successfully.
In this chapter, you will study about ERP and its evolution. In addi-
tion, you will also study the benefits of an ERP system. The chapter

N O T E S
elaborates the implementation of an ERP system. In the end, the rea-

sons for the failure of ERP implementation are discussed.
6.2 DEFINING ERP

ERP refers to an information system that controls and integrates the
different business functions of an organisation. It is a multi-module
application that integrates the activities of different departments such
as production, finance, human resource, and marketing. The objective
of an ERP system is to maintain a smooth flow of management infor-
mation throughout an organisation, thereby enabling the manager to
make effective decisions.
ERP integrates the functions of different departments of an organi-

sation. In addition, it ensures that all departments are automatical-
ly updated about the occurrence of an event. For example, when an
order is placed by a customer, ERP automatically updates all the in-
S
terrelated departments, such as production, finance, and inventory
control, about the order. Apart from this, ERP enables an enterprise
IM
to allocate resources efficiently, which further helps in enhancing the
profitability of the organisation.
Figure 6.1 shows an ERP system:

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CRM Module
Finance Module
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Inventory Module
Purchase Module
Production Module
Sales Module
Figure 6.1: ERP System

(Source: http://www.pstpl.com/services.html)
Before implementing the ERP project, an enterprise should establish

clear goals that can be achieved through such implementation. The
implementation of an ERP project requires support from many peo-
ple such as employees, package and hardware vendors, communica-
tion experts, etc. The ERP project of an enterprise can be successful
if all these people are well-versed with the actual working of an ERP
system.

N O T E S
In general, there are two types of ERP systems that are implemented
by organisations. These systems are discussed as follows:
Commercial ERP Package: These packages are quite expensive
and suitable only for large-scale organisations. Most of the well
known ERP vendors, such as Oracle, SAP, and Microsoft, provide
commercial ERP packages. For implementing these packages, or-
ganisations need to change their existing technology and business
processes and provide extensive training to its employees, so that
they can work with the package. Some of the commercial ERP
software are Microsoft Dynamics AX, Microsoft Dynamics NAV,
and mySAP ERP.
Open Source ERP Package: These packages are available free of
cost. Open source ERP packages are easy to use. Organisations
need not change their existing tecnology for implementing it. In-
stead, they can change the code of the ERP package to make it
compatible with the existing business processes. Thus, the imple-
S
mentation of an open source ERP package does not affect the regular
working of an organisation. Some of the open source ERP packages
are Compiere, ERP5, and Fisterra.
IM
DEFINITION
According to Deloitte Consulting, “ERP is a packaged business soft-

ware system that enables a company to automate and integrate the
M
majority of its business processes; share common data and practices

across the enterprise; and produce and access information in a re-
al-time environment.”
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As per the American Production and Inventory Control Society

(2001), “ERP system is a method for the effective planning and con-
trolling of all the resources needed to take, make, ship, and account
for customer orders in a manufacturing, distribution or service com-
pany.”
According to Nah and Lau (2001), “ERP is a packaged business soft-

ware system that enables a company to manage the efficient and ef-
fective use of resources (materials, human resources, finance, etc.) by
providing a total, integrated solution for the organisation’s informa-
tion-processing needs.”
1. ERP is a ____________ application that integrates the activities

of different departments such as production, finance, human
resource, and marketing.
2. MySAP ERP is an open source ERP package. (True/False)

N O T E S
ACTIVITY
Using the Internet, identify five manufacturing organisations that

have implemented commercial ERP packages.
6.3 EVOLUTION OF AN ERP SYSTEM

How was information managed before the existence of ERP? Also, if
there was already a method for managing information earlier, then
why were ERP systems developed? ERP evolved as a result of con-
tinuous advancement in technology and radical changes in the ways
organisations used to conduct their businesses in earlier times.
Table 6.1 shows the historical milestones of ERP:
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TABLE 6.1: HISTORICAL MILESTONES OF ERP
Year Technological Evolution
With Respect to ERP
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Before Organisations used different inventory control methods and
the 1960s models, such as Economic Order Quantity (EOQ), fixed order
quantity, periodic order method, and optional replenishment
method, for managing their business processes.
1960s Organisations started using software packages for controlling
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and managing their inventory. However, these packages were

not very effective.
1970s The Material Requirements Planning (MRP) system was in-
vented, which helped organisations in identifying the materials
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requirement for producing products, reducing inventory levels

and lead time, and maintaining on-time delivery performance.
Later on, with the addition of various software tools, the func-
tions of the MRP system were enhanced, and it was also used
for performing activities such as sales planning, customer or-
der processing, capacity planning, etc. This enhanced version of
MRP system was known as closed-loop MRP.
1980s The MRP II system, an assimilated form of various other sys-
tems, such as financial accounting system, manufacturing
system, material management system,etc., was invented. It
enabled an organisation to estimate the material and capacity
requirements for producing products and transform these re-
quirements to financial information. However, there were cer-
tain drawbacks of the MRP II system such as limited focus on
manufacturing activities, assumption of repetitive production
set ups, and ineffective budgetary and costing controls.
1990s Drawbacks of MRP II led to the evolution of ERP, which inte-
grates the flow of information within the different departments
of an organisation such as finance, production, marketing, and
human resource. ERP enabled organisations to streamline their
business processes, improve workflow, and increase customer
satisfaction.

N O T E S
3. EOQ is an inventory __________ method.

4. MRP was developed in __________.
ACTIVITY
Using the Internet, identify an organisation that has first imple-

mented MRP system and then replaced it with the ERP system.
Identify the reasons for the same.
6.4 BENEFITS OF AN ERP SYSTEM

Are you aware of the advantages of using an ERP system in an organ-
S
isation? An ERP system provides several direct and indirect benefits
to an organisation. Some of these benefits are discussed as follows:
Reduced Lead Time: Lead time is the amount of time taken be-
IM
tween the placing of an order and the receipt of products by a cus-
tomer. For example, when an organisation places an order for raw
materials with a supplier, the time given by the supplier to deliver
the order, such as within 15 days, is considered the lead time.
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The ERP system helps an organisation to reduce the lead time of

products by managing inventory effectively and providing updat-
ed information about the lead time of its different products. This
further helps in reducing inventory costs, increasing the probabil-
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ity of timely delivery of products, acquiring new customers, and

retaining the existing ones by achieving a high level of customer
satisfaction.
Timely Delivery of Products: An ERP system helps an organisa-
tion to ensure on-time delivery of products to customers by inte-
grating various business functions and automating different tasks.
For example, if an ERP system is implemented in an organisation
and a customer places an order, the information regarding the re-
quirement of a product will instantly pass from the sales depart-
ment to the production department. Further, the production de-
partment plans the delivery of the product to the customer and
passes it to the concerned department. Thus, the department han-
dling the delivery of the product is able to prepare for the same
in advance, so that as soon as they receive the product, they can
deliver it on time to the customer. This helps in enhancing custom-
er satisfaction and building healthy relationships with customers.
Minimised Cycle Time: The amount of time taken to process a
customer’s order and deliver the product to the customer is called
cycle time. A long cycle time may result in undue delays in the
delivery of products to customers. An ERP system helps an or-

N O T E S
ganisation to reduce cycle time by informing a customer about the

availability of a product within a few seconds. For example, when
you visit a movie theatre and ask for the availability of tickets, the
operator checks the availability on his/her system and provides
you the required information within a few seconds.
Moreover, an ERP system integrates the activities of different de-
partments in an organisation. This helps the departments to get
updated information about an event that may take place within
the organisation. Thus, an ERP system enables organisations to
reduce cycle time between the placing of an order and the receipt
of the order to a large extent.
Better Customer Satisfaction: An ERP system enables an organ-
isation to deliver its products on time, provide customised and
high-quality products and services, and respond to customer que-
ries and problems quickly. This further helps in increasing the sat-
isfaction level of customers. For example, you purchase a product
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but have problems while operating it. Thus, you called the custom-
er service department of the organisation from where you have
purchased the product.
IM
The customer service representative asks you the model num-
ber of the product and your personal details. He/she enters the
details in the ERP system and derives detailed information about
the product you have purchased and thus is able to provide you a
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solution. You neither need to be present at the customer service

department to have a problem solved nor do you need to visit the
department again and again. Your problem gets resolved within
minutes using the ERP system.
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Improved Supplier Performance: An ERP system contains fea-

tures that help an organisation to manage supplier relations and
track vendor activities. For example, an ERP system can help an
organisation to check whether the product received from the ven-
dor contains the quantity and quality mentioned by the organi-
sation while placing the order. For this, the store manager, who
received the product, needs to check the information related to the
order placed in his/her system using the ERP system and match
it with the product recieved. Nowadays, most organisations make
an agreement with their suppliers for procuring good-quality raw
materials at lower prices. An ERP system helps an organisation in
controlling and managing agreement-related activities.
Increased Flexibility: An organisation needs to modify its prod-
ucts, services, or overall business strategy according to the ev-
er-changing wants, tastes, and preferences of its customers. For
example, an organisation needs to modify its products, services,
or overall business strategy according to the ever-changing wants,
tastes, and preferences of its customers.

N O T E S
In addition, itt also needs to be flexible enough to use different

production methods, such as Configure-To-Order (CTO), Assem-
ble-To-Order () (ATO), and Engineer-To-Order (ETO), to meet the
changing requirements. An ERP system enables an organisation
to remain flexible and respond to frequent changes in market con-
ditions by maintaining a flow of internal and external information
across all the departments and automating different processes.
Reduced Quality Costs: The cost of quality is not related to the
amount spent on producing quality products or services, rather, it
is associated with preventing defects in products and services. If
there are defects in products, an organisation needs to rework on
them, which increases the overall cost of the organisation. For ex-
ample, rework on a product may involve the retesting of assembly,
rebuilding of a tool, and reprocessing of a loan operation. This may
result in additional costs for an organisation. An ERP system helps
an organisation to identify these defects at the designing stage of
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a product and rectify them before the product reaches a customer.
The cost incurred for rectifying defects at the designing stage of a
product is lower than the cost incurred at the final stage.
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An ERP system ensures that all the functional departments of an
organisation follow a benchmark for maintaining the required
product quality, thereby assisting organisations in improving their
production processes.
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Improved Resource Utility: An organisation needs to determine

its production capacity accurately for using its resources effective-
ly. If the actual production capacity exceeds the desired produc-
tion capacity, the resources are not utilised completely. On the oth-
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er hand, if the actual production capacity is less than the desired

production capacity, the organisation is not able to deliver prod-
ucts on time. This may adversely impact the goodwill of the organ-
isation. For example, a customer asks for 10 pieces of a product of a
particular brand, but the retailer tells the customer that he/she can
only buy them after six months, because the organisation is yet to
manufacture them. In this case, the customer buys the product of
a different brand and does not prefer to buy any product of the
previous brand in future.
An ERP system facilitates effective utilisation of resources by en-
abling an organisation to plan and schedule its production pro-
cess properly. It uses master production schedules and material
requirement plans for allocating resources as per the production
requirements.
Improved Information Accuracy and Decision-making Capa-
bility: An ERP system helps an organisation to collect and inte-
grate required information. In addition, it facilitates a free flow of
information among the different departments of an organisation.

N O T E S
This information helps departments to take several crucial deci-

sions such as selecting a product to be produced, determining the
different sources of funds, and selecting the right technology for
production purposes.
NOTE
Cycle time is often confused with lead time. However, there is a

marked disparity between the two. Cycle time starts when work
begins on the request of a customer and ends when the product is
ready for delivery. On the other hand, lead time is the amount of
time taken between the placing of an order and the actual receipt of
products by the customer.
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5. What do you mean by lead time? .
6. ERP systems increase the total quality cost of an organisation.
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(True/False)
ACTIVITY
Using the Internet, identify a service organisation that benefits

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from ERP system implementation.

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6.5 ERP IMPLEMENTATION

The process of implementing an ERP system in an organisation is
called ERP implementation lifecycle or ERP lifecycle, which compris-
es a number of phases. Figure 6.2 shows the phases of an ERP imple-
mentation:
Pre-evaluation Package Project

Gap analysis
screening evaluation planning phase
Implemen-
Re-
Testing tation team Configuration
engineering
training
End-user Post-imple-
Going live
training mentation
Figure 6.2: Different Phases of an ERP Implementation

N O T E S
The different phases of an ERP implementation are discussed as fol-

lows:
1. Pre-evaluation Screening: It includes examining all the
available ERP systems. Among these systems, those which are
able to meet the organisation’s requirements, are selected.
2. Package Evaluation: It involves a deep analysis of all the
shortlisted ERP systems to select the final system. It is the most
important phase, because the success of an ERP implementation
highly depends on the selection of the right system. An
organisation should select an ERP system that is as per its
requirements.
3. Project Planning Phase: It involves formulating a detailed plan
for implementing an ERP system. A project plan specifies the
resources required for implementing an ERP system, the timeline
for the completion of the implementation process, the targets
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that need to be achieved by implementing the ERP system, etc.
In addition, the project planning phase involves developing a
contingency plan, identifying control measures, and deciding
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methods for the evaluation of the ERP system.
4. Gap Analysis: In this phase, an organisation develops a model
that states its current status and future targets. Using this
model, the organisation can anticipate any functional gaps and
cover them.
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5. Re-engineering: This involves the complete restructuring of

business processes, technology, functions, etc. However, while
implementing an ERP system, the term re-engineering is used in
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two different contexts. In the first context, re-engineering is used

as a downsizing tool. Generally, the top-level executives of an
organisation implement an ERP system to reduce the number of
employees. However, in reality, the ERP system modifies the job
responsibilities of employees, because it automates all business
activities. Therefore, an ERP system should be considered as an
investment and cost-cutting measure instead of a downsizing
tool.
In the second context, the term re-engineering is used to signify
the integration of Business Process Reengineering (BPR) with the
ERP system. BPR brings changes in the roles and responsibilities
of employees, which are required for the implementation of an
ERP system.
6. Configuration: It is the functional phase of the ERP
implementation lifecycle. In this phase, an ERP system is
synchronised with the existing system of an organisation. For
this, the organisation should properly analyse all its business
processes, so that it can achieve its overall objectives.

N O T E S
7. Implementation Team Training: In this phase, the

implementation team is trained for implementing the ERP
system successfully in the organisation. The training is given on
the working of the ERP system and its implementation. After
the implementation of the ERP system, the vendor and external
consultants leave the organisation. In such a case, it is important
for the organisation to give proper training to its employees to
avoid any contingencies during the working of the ERP system.
8. Testing: In the testing phase, the ERP system is verified by
creating real situations. These real situations can be related to
system overloads, invalid data entry, hacking attacks, etc. If the
ERP system is unable to pass the testing phase, the required
changes should be made in the system.
9. Going Live: In this phase, the ERP system is made available
to all the employees in the organisation. At this stage, the ERP
system is ready to be used technically and functionally. In this
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phase, the old system is replaced by the new ERP system to
perform the various business functions.
10. End-user Training: In this phase, the employees who need
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to work on the ERP system are identified and segregated into
groups, so that they can be trained to work on the new system.
This training also focuses on the methods an employee needs to
use in case the ERP system does not work properly.
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11. Post-implementation: The post implementation phase involves

continuous evaluation of the ERP system implemented in the
organisation. To receive the full benefits of the ERP system, it is
important that the system is accepted in the entire organisation.
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Moreover, the system should be upgraded from time to time.
7. In which of the following phases do organisations develop a

model that states its current status and future targets?
a. Package evaluation
b. Gap analysis
c. Project planning phase
d. Re-engineering
8. In the ___________ phase of ERP implementation, the ERP
system is verified by creating real situations like system
overloads, invalid data entry, hacking attacks, etc.
ACTIVITY
Using the Internet, find out a real life example of ERP system im-
plementation in a manufacturing organisation.

N O T E S
REASONS FOR THE FAILURE

6.6
OF ERP IMPLEMENTATION
“One of the findings of our 2013 ERP Report is that most ERP projects
take longer than expected, cost more than expected, and fail to deliver
expected business benefits. In addition, in our 2013 ERP Report: Organ-
isational Change and Business Process Management, we find that 41%
of organisations experience some sort of material operational disrup-
tion at the time of their go-live”.
-Panorama Consulting Solutions
An ERP system often fails at the initial stages of its implementation,

or it is not able to provide the desired results. Some of the reasons for
the failure of ERP implementation are as follows:
Lack of Top Management Support: The top management of an
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organisation plays a vital role in the implementation of an ERP
system by providing the required resources, reassigning jobs to
employees, changing work processes, etc. For example, if the top
IM
management of an organisation does not support the ERP system
implementation, the use of resources, such as men and materi-
als, will not be allowed for this purpose. If allowed, the required
amount of resources may not be provided. In such a case, it be-
comes difficult to complete the ERP implementation process suc-
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cessfully. In addition, if the top management supports ERP imple-

mentation, employees automatically need to support it. Thus, it is
important that the top management of an organisation is aware of
the importance of implementing an ERP system.
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Improper Planning and Budgeting: The implementation of an

ERP system requires detailed planning of the budget to be allocat-
ed, procedures to be used for the implementation, etc. If the plan
for ERP implementation is not formulated properly, it can lead to
disastrous situations such as insufficient funds, ineffective proce-
dures, lack of support of team members, etc. This can result in the
failure of ERP implementation. For example, the complete imple-
mentation of an ERP system in the organisation takes two years,
but the plan prepared for the implementation is for one year. In
such a case, the ERP implementation will fail, because either the
implementation will not be complete, or, if it is completed, it will
not provide the desired benefits to the organisation.
Inappropriate ERP System: Different organisations have different
environments, work cultures, and procedures. In addition, the ob-
jective of implementing an ERP system varies across different or-
ganisations. Thus, while selecting an ERP system, an organisation
should determine whether the system is able to fulfil its objectives.
In addition, an organisation needs to determine whether the im-
plementation of an ERP system is feasible with the existing tech-

N O T E S
nology and working environment.For example, Evick Enterprises

implemented the production module of an ERP system to increase
its production efficiency. This resulted in increased profits. Ob-
serving this, Bowler Enterprises, a rival organisation of Evick, also
implemented the production module of the ERP system, without
determining their own requirements of implementing the system.
This implementation involved huge cost and time, and even after
implementing it, Bowler Enterprises is not able to compete with
Evick Enterprises.
Resistance from Employees and Lack of Training: Employees
may resist ERP implementation in case proper training is not pro-
vided to them. This is because they may fear that the implemen-
tation will lead to increased workload. In addition, some employ-
ees may also develop job insecurity, because the ERP system can
perform their work. Thus, an organisation should provide proper
training to its employees on the functioning of an ERP system.
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ERP implementation is more successful in an organisation where
employees are willing to learn new things and are flexible to
change. On the contrary, the implementation of an ERP system
IM
fails in an organisation where employees resist any type of change
in the working environment. For example, employees of an organ-
isation refuse to work on the new ERP system, because tasks take
longer to complete on the new system, and it is difficult to under-
stand. As a result, the organisation is not able to benefit from the
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ERP implementation. In this case, the organisation needs to pro-

vide training to its employees on how to work on the system, mak-
ing them aware about the benefits of the ERP system.
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Most problems faced while implementing an ERP system can be over-

come if organisations follow a step-by-step approach. The steps that
should be followed by an organisation are mentioned as follows:
1. Define the objectives and targets of implementing an ERP
system.
2. Define the role of different departments in the implementation
of an ERP system.
3. Formulate a project team for the implementation of an ERP
system.
4. Select the ERP vendor.
5. Select the ERP system as per the requirements and the objectives
of ERP implementation.
6. Implement the ERP system (as discussed in section 6.7 ERP
Implementation).
7. Monitor the performance of the ERP system.

N O T E S
Sometimes, organisations also hire an outside experienced consul-

tant. This consultant acts as a coordinator between the ERP vendor
and the organisation. The consultant should have experience in ERP
implementation. However, the availability of an experienced consul-
tant is low. Therefore, it is preferred that an organisation should select
employees with the required technical skills and train them to work in
coordination with external consultants.
9. ERP implementation is not affected by top management

support. (True/False)
10. Planning and budgeting play an important role in successful
ERP system implementation. (True/False)
ACTIVITY
S
IM
Using the Internet, identify a real life example where ERP system
implementation has failed due to lack of training.
6.7 SUMMARY
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ERP refers to an information system that controls and integrates

different business functions of an organisation. Drawbacks of MRP
II led to the evolution of ERP in the 1990s.
N
An ERP system helps an organisation in reducing lead time and

cycle time, delivering products on time, providing better customer
satisfaction, improving supplier performance, increasing flexibili-
ty, reducing quality costs, etc.
The different phases of an ERP implementation cycle are pre-eval-
uation screening, package evaluation, project planning, gap anal-
ysis, re-engineering, configuration, implementation team training,
testing, going live, end-user training, and post-implementation.
The implementation of an ERP system may fail due to lack of top
management support, improper planning and budgeting, selec-
tion of an inappropriate ERP system, lack of training, ineffective
work culture of an organisation, and ineffective communication.
To implement an ERP system successfully, an organisation needs
to take various steps, such as defining the objectives, targets, and
roles of different departments involved in the ERP system; select-
ing a project team, vendor, and an appropriate ERP system; com-
municating the implementation plan to the project team; imple-
menting the system; and monitoring its performance on a regular
basis.

N O T E S
KEY WORDS
ERP System: An information system that helps an organisation

to control and integrate the activities of its different departments.
MRP System: A system that helps an organisation to estimate the
requirements of materials for manufacturing its products using
master production schedule, bill of materials, and list of materials.
Closed-loop MRP: An enhanced version of MRP that can per-
form activities such as sales planning, customer order process-
ing, capacity planning, etc.
MRP II System: An integrated form of various systems such as
financial accounting system, manufacturing system, and mate-
rial management system.
Lead Time: The amount of time taken between the placing of
an order and the receipt of products by a customer.
S
Cycle Time: The time that starts when work begins on the request
of a customer and ends when the product is ready for delivery.
IM
1. Define the term ERP and discuss its function in organisations.
M
2. How did the need for ERP systems arise?

3. What benefits can an organisation gain by implementing an ERP
system?
N
4. When and why can ERP implementation fail?
Topic Q. No. Answers

Defining ERP 1. Multi-module
2. False
Evolution of an ERP Sys- 3. Control
tem
4. 1970s
Benefits of an ERP System 5. Lead time refers to the amount
of time taken between the plac-
ing of an order and the receipt
of products by a customer.
6. False

N O T E S
Topic Q. No. Answers

ERP Implementation 7. b. Gap analysis
8. Testing
Reasons for the Failure of 9. False
ERP Implementation
10. True

1. ERP system is a system that helps in the smooth flow of
information throughout an organisation by integrating the
different business processes. Refer to section 6.24.
2. Drawbacks of MRP II led to the evolution of ERP system in 1990.
S
3. An ERP system helps an organisation deliver products on time
to customers. Refer to section 6.6.
IM
4. ERP implementation can fail due to various reasons, such as
lack of top management support and inappropriate ERP system.

M
SUGGESTED READINGS
Thomas F. Wallace and Michael H. Kremzar (2001), ERP: Making
N
It Happen: The Implementers’ Guide to Success with Enterprise

Resource Planning.
Simha R. Magal and Jeffrey Word March (2012), Integrated Busi-
ness Processes with ERP Systems.
Leon, Alexis (2008). ERP Demystified.
E-REFERENCES
Evolution of ERP. Retrieved from http://www.erppandit.com/Evo-
lution-of-ERP.html.
ERP implementation Lifecycle. Retrieved from http://www.slide-
share.net/apurvgourav/erp-implementation-life-cycle.
ERP Benefits - Operational Control, Management Control and
Strategic Planning. Retrieved from http://www.sysoptima.com/
erp/erp_benefits.php.
The real reasons why ERP systems fail. Retrieved from http://www.
reliableplant.com/Read/10733/real-reasons-why-erp-systems-fail.

CASE STUDY
N O T E S
FAILURE OF ERP IMPLEMENTATION AT

HERSHEY FOODS CORPORATION
Hershey Foods Corporation is one of the leading manufacturers

of quality chocolates and non-chocolate confectionary items in
North America. The organisation implemented SAP ERP just
before Halloween in 1999. Halloween is the peak season for the
chocolate and candy industry. The implementation of an ERP sys-
tem in Hershey led to a significant decrease in its revenue and the
efficiency of its operations. Reasons for the failure of ERP imple-
mentation at Hershey are:
Insufficient Training of Employees: Employees were not
trained properly to work with the newly-implemented ERP
system. In addition, they were not aware of the benefits of the
ERP system. As a result, employees resisted ERP implemen-
S
tation.
Unrealistic Implementation Timeline: The original timeline
for ERP implementation was 4 years, which was reduced to
IM
2.5 years later on. Consequently, some of the major activities,
such as scope management, project planning, project schedul-
ing, etc., were not performed properly.
Improper Go-live Schedule: Implementation of ERP system
M
in the peak season was one of the major reasons for its failure.
This is because chocolates and candies are most in demand
during Halloween. However, due to the implementation pro-
cess, the business processes of Hershey were hampered. As
N
a result, Hershey was not able to fulfil customer demands on

time.
QUESTIONS
1. According to you, what is the appropriate way for

implementing an ERP system?
2. When should an organisation implement an ERP system?

C H A
7 P T E R
ELECTRONIC DATA INTERCHANGE (EDI)
CONTENTS
7.1 Introduction
7.2 Introducing EDI
S
Activity
IM
7.3 Standards of EDI
Activity
7.4 Transmission Modes of EDI
7.4.1 Value Added Network
M
7.4.2 Internet/AS2
7.4.3 Web EDI
7.4.4 Direct EDI/Point-To-Point
N
7.4.5 Mobile EDI

7.4.6 EDI Outsourcing
Activity
7.5 Advantages and Disadvantages of EDI
Activity
7.6 Summary

N O T E S
INTRODUCTORY CASELET: EDI SERVICE HELPS WILEY

X EYEWEAR MANAGE EXPLOSIVE GROWTH
Two decades ago, a start-up company, Wiley X Eyewear, entered

an almost non-existent niche market, safety glasses and goggles.
Approached by the FBI to develop shooting glasses, the company
soon found itself making protective eyewear for the US military.
Business mushroomed after September 11, 2001, when American
troops were mandated to use protective eyewear. Wiley X has sold
more than two million units for operations, Enduring and Iraqi
Freedom, to date.
Wiley X sells primarily to large retailers, such as exchanges on

military bases. Thus, it has relied on Electronic Data Interchange
(EDI) technology for many years. The system it had been using,
however, did not integrate with the company’s ERP accounting
S
solution. That meant that its 600+ orders per week had to be man-
ually entered into its systems twice, a task that required two full-
time employees and was prone to human errors too.
IM
John Barrett, COO, knew there had to be a better solution. New
EDI services have automated all interfaces with its ERP busi-
ness solution. When EDI orders arrive at Wiley X, a functional
acknowledgement is generated for the customer. Then, purchase
M
orders are transmitted by Wiley X to its buyers. They are already

formatted for ERP, thus, they are read by the financial software
without human intervention. A similar process occurs with in-
voices and advance shipping notices.
N
The invoice is the final document that is transmitted.
Order accuracy in Wiley X is now 100% because of the elimination

of the human factor. Data-entry tasks that required 16 work hours
a day have decreased to three. Moreover, the new EDI has made
it possible for Wiley X to double its EDI volume by adding several
huge new customers. Speed and reliability have improved too.

ELECTRONIC DATA INTERCHANGE (EDI) 169
N O T E S
LEARNING OBJECTIVES
After studying this chapter, you will be able to:

> Define the meaning of EDI
> Discuss the standards of EDI
> Describe various transmission modes of EDI
> Explain the advantages and disadvantages of EDI
7.1 INTRODUCTION
Electronic Data Interchange is the computer-to-computer exchange
of business documents in a standard electronic format between busi-
ness partners. Over a period of time, the cost of technology declined,
and subsequently, the use of computers increased. This greatly re-
S
duced the time to process internal transactions. However, delays still
existed in the form of data transfer and data-entry into computers.
EDI proved to be a solution to these problems. Being an automated
IM
process, EDI vastly increased the speed of systems and improved the
accuracy of entering information into the user’s computer system.
Earlier, businesses interacted through telephone and mail. Both are

slow medium and need human intervention. EDI helps organisations
M
in the following ways:

Uses direct links between computer systems to minimise trans-
mission delay
N
Reduces human errors and saves time

Enables organisations to have better communication between
them
Helps in increasing efficiency and improving customer service by
cutting costs and maximising productivity and profitability
Solves business problems
Offers cost savings and strategic benefits
Provides a competitive edge
Improves market share of an organisation
Helps in lowering costs of an organisation by reducing inventory
through timelier ordering and minimising overstocking
EDI was first introduced in the 1960s in the US transportation indus-

try. At the outset, EDI was used to eliminate the discrepancies that
occurred while working on three-four different operations systems
and to create standardisation between customer and vendor. The suc-
cessful implementation of EDI in the transportation industry led to
its being embraced by the US grocers and then by the automotive

N O T E S
industry. The retail industry is another force behind EDI. Retailers,

such as Wal-Mart, Home Depot, JC Penney, Price Costco, and Sears,
demand EDI compliance from their suppliers. Big organisations are
able to save millions of dollars by implementing EDI at all levels. They
are able to procure the cost from their operations using EDI, which
decreases the price of goods for consumers and benefits them.
EDI is based on a set of international standards, such as X12 and ED-

IFACT, which are used for standardised document content and struc-
ture. Every industry has its own set of guidelines to implement these
standards. X12 is the primary standard used in the US, while EDI-
FACT is the primary standard in Europe.
This chapter starts by introducing the concept of EDI. Next, it discuss-

es the international standards of EDI. Thereafter, the chapter explains
the various transmission modes of EDI. Towards the end, a few advan-
tages and disadvantages of EDI have been discussed.
7.2 INTRODUCING EDI

S
IM
Electronic Data Interchange is a widely-used technology for comput-
er-to-computer automated exchange of business documents between
business partners. The transfer of documents takes place in a stan-
dard electronic format between dissimilar applications. Using EDI
techniques, documents, such as purchase orders, advance ship notic-
M
es, invoices, and other business documents, can be exchanged direct-

ly between business partners, without human intervention, from one
business system to another.
N
There has been a major transformation in the way businesses ex-

change documents after the introduction of EDI. By shifting focus
from paper-based exchange of business documents to electronic, busi-
nesses have experienced major benefits such as reduction in admin-
istrative cost, reduction in errors, fast order-to-cash cycles, and in-
crease in processing speed. Moreover, this leads to improved relations
with business partners too.
In business systems, EDI has replaced postal mail, fax, and e-mail. Al-
though e-mail uses an electronic approach, it is still handled by people
rather than computers for exchanging documents. Human interven-
tion involves errors and also slows down the processing of documents.
On the other hand, EDI is an automated process in which documents
can get transferred directly to the specific suitable application on the
receiver’s computer, for example, the Order Management System, and
processing can start immediately.
Before the introduction of EDI, a typical manual process in a business

environment used to be as depicted in Figure 7.1, with people and
paper involved:

N O T E S
Customer You
You
Customer creates order sends order receive order
enter order
Your FAX Your

customer’s internal
internal system
system Your customer Your customer You send You create
enters invoice receives invoice invoice invoice
Figure 7.1: Manual System of Data Interchange

in Business Processes
(Source: http://www.edibasics.co.uk/what-is-edi/)
After the introduction of EDI, business processes became as depicted

in Figure 7.2, with no paper and people involved:
S
IM
EDI Documents
Your partners internal systems Your internal system
M
Figure 7.2: Business Systems After Introduction of EDI

(Source: http://www.edibasics.co.uk/what-is-edi/)
EXHIBIT
N
Important Terms Related to EDI
Let us be familiarised with a few terms related to EDI:

Business Documents: Such documents are typically exchanged
between businesses, such as purchase orders, invoices and
advance ship notices, bills of lading, customs documents, in-
ventory documents, shipping status documents, and payment
documents, etc. Out of these, the most common documents ex-
changed using the EDI technique are purchase orders, invoices,
and advance ship notices.
Standard Format: By definition, EDI documents are processed
by computers without the intervention of humans. Thus, a
standard format is required for the computer to be able to read
and understand the documents and transfer them. A standard
format defines every piece of information a document carries
and its format. For example, for numbers, it is defined whether
the number is an integer or decimal; for dates, it is mentioned
whether the date is in mmddyy format, in ddmmyy format, or in
any other format.

N O T E S
In the absence of a standard format, each organisation would send

documents using its own organisation-specific format, and the re-
ceiving organisation’s computer system would not recognise it. The
scenario is similar to two persons talking in different languages,
each not understanding the other’s language. For both of them to
communicate with each other, they should talk in a common lan-
guage. Thus, there are several EDI standards that have been de-
fined. They are as follows:
ANSI (American National Standards Institute)
EDIFACT (Electronic Data Interchange For Administration,
Commerce and Transport)
Tradacoms
ebXML. (Electronic Business using eXtensible Markup Lan-
guage)
S
Every standard has different versions, for example, ANSI 5010 is
a version of ANSI, and EDIFACT version D12 is a version of EDI-
IM
FACT. When two businesses decide to exchange documents using
the EDI technique, there has to be an agreement on the use of a
specific EDI standard and version. Businesses usually implement
an EDI translator to translate the incoming document in EDI for-
mat to a format understandable by their internal applications, so
M
that the processing of documents can be carried out straight away.

An EDI translation can be carried out either by in-house software
or through an EDI service provider.
N
Business Partners: The two different companies between

whom documents are exchanged using the EDI technique are
referred to as business partners or trading partners.
HOW EDI WORKS
EDI was first implemented in the purchasing operations of a business.

Before its implementation, a purchasing system of an organisation
used to enable buyers to access their materials list and review their
requirements. The buyers would then create purchase orders, print
them, and then mail them. The supplier would receive the purchase
order and enter it manually into their order system. The material
would be shipped, and an invoice would be printed, which would then
be mailed back to the supplier.
In such a purchase-delivery setup, the whole process depends on the

speed of the mail and the backlog pending at the supplier’s order-en-
try system. The whole cycle could take a week even if the purchased
materials were shipped and received on the same day the purchase

N O T E S
order was received. With the introduction of EDI, the whole scenario
changed dramatically. Purchase managers still prepare their materi-
al requirements list and create purchase orders. However, instead of
taking a print and mailing them, the purchase orders are automati-
cally transmitted directly to the supplier’s system over an electronic
network using EDI.
The purchase order is automatically received at the supplier’s end

and posted. This whole process enables the material to be shipped
the same day the purchase order is sent. Moreover, suppliers are also
able to send their shipping documentation electronically to the buyer
on the same day even prior to the actual arrival of the material at the
buyer’s end, providing the buyer with accurate receiving documents.
The additional advantage for the supplier is that now the invoice can
be sent directly to the customer’s accounts payable system. This accel-
erates the payment process from the buyer to the supplier.
1. EDI is a manual system. (True/false)

S
IM
2. The two different companies between whom documents are
exchanged using the EDI technique are referred to as _______.
M
ACTIVITY
Study a case study of a business organisation from the Internet and

enumerate the differences in its working before the implementa-
N
tion of EDI and after its implementation in the business process.
7.3 STANDARDS OF EDI

EDI provides a technical platform for commercial “conversations” be-
tween two business entities. EDI encloses the whole data interchange
spectrum, be it transmission, message flow, document format, or soft-
ware needed to interpret the documents. Thus, defining standards be-
comes a necessity.
EDI standards are formats defined for EDI documents to specify

what, how, and where information fits within an EDI document. If in-
formation is missing or is in the wrong place, an EDI document might
not get processed correctly. EDI standards are determined by the type
of industry a business organisation belongs to and the standards fol-
lowed by the trading partners.

N O T E S
Trading partners, before implementing EDI, must set up a trade

agreement that defines all the parameters of EDI, which are discussed
as follows:
Along with defining parameters for external EDI exchange, every
partner in an EDI trade agreement must also define the methods
to translate internal data to and from EDI-formatted documents
received from outside.
Trading partners must also be in agreement on the communication
media being used and arrange the method for transmitting informa-
tion. For this, dedicated communication links, such as a Value Added
Network (VAN) or the Internet, may be used.
Every trading partner must provide for system recovery in case of
failure or error, ensure security of the system, and maintain timely
responses.
The sender system must convert data from their internal system for-
S
mat to the EDI format for transmission of data. The receiver system,
on the other hand, must be ready to receive the transmitted data in
IM
a timely fashion, as agreed upon by trading partners. The data can
be received instantaneously or at regular time intervals. The receiv-
er system then converts the EDI transmitted data to the format rec-
ognised by an internal system for further processing. Usually, every
transmission set represents a single business form. The format con-
M
sists of the following sections:

The form contains a header area, where preliminary information,
such as business name, address, date, etc., is mentioned.
N
In the next section, the actual transaction information, i.e., the

item, description, quantity, etc. are mentioned. In this section,
each line corresponds to a segment, and each item in the segment
is a data element.
In the end is the summary data, which contains the control in-
formation. Each data element is identified by a unique reference
number that is present in the EDI master data element list. Al-
though the structure of each message is strictly defined, there is a
scope of variable length data.
EDI standards have been defined to be independent of any commu-

nication media. Thus, the EDI data transfer can take place using any
electronic media from magnetic tape to telecommunication. It must
be ensured that a valid connection has been established between the
sender and the receiver before any transaction can occur. Moreover,
methods of error checking and recovery must be established between
both the sides to safeguard against loss of data.

N O T E S
Figure 7.3 shows the various standards followed in EDI:
ANSI ASC
X12
VICS EANCOM
VDA UN/EDIFACT
Standards
of EDI
S
Tradacoms HIPAA
IM
SWIFT ODETTE
RosettaNet
M
Figure 7.3: Standards of EDI

N
The EDI document standards in business are discussed as follows:
ANSI ASC X12
The American National Standards Institute (ANSI) chartered the Ac-

credited Standards Committee (ASC) X12 to develop uniform stan-
dards for EDI in 1979. Originally, ANSI X12 was started to support
companies across different industry sectors in North America. How-
ever, more than 300,000 companies worldwide follow X12 EDI stan-
dards in daily business transactions today.
In the ANSI ASC EDI standard, the data structure and content are
defined for business transactions to be transmitted between comput-
er applications. The data is grouped to represent all the information
required for a particular business function such as a purchase order.
The business form in ANSI ASC X12 specifies standard data elements
with data dictionaries that specify name, length of data field, descrip-
tion, data type, and meaning.

N O T E S
UN/EDIFACT
United Nations (UN)/Electronic Data Interchange for Administra-

tion, Commerce, and Transport (EDIFACT) is a set of internationally
agreed-upon standards that was developed by the UN. The UN Centre
for Trade Facilitation and Electronic Business (UN/CEFACT) is re-
sponsible for the maintenance and further development of this stan-
dard.
EDIFACT provides a set of guidelines for the electronic interchange

of structured data particularly related to trade in goods and services.
The EDIFACT standard defines a set of syntax rules for interactive ex-
change of information and provides a set of standard messages, which
enable exchange of electronic business documents across countries
and industries. EDIFACT is used widely across Europe because many
companies adopted it early.
EDIFACT consists of data elements (a value), segments (a logical
S
group of data elements), and messages (a collection of segments relat-
ing to a business function), and rules for combining all of these.
IM
EANCOM
The EANCON (EAN + Communication) was developed by European

Article Number (EAN) General Assembly in 1987 on the then emerg-
ing international UN/EDIFACT standard. Originally, EANCOM was
M
being developed for the retail sector. Over a period of time, EANCOM
has now grown into the most widely-used subset of UN/EDIFACT and
has implementations in a variety of other industrial sectors such as
N
healthcare, construction, and publishing.
The EANCOM standard provides a logical sequence of messages used

in business and agreed upon by the trading companies to adapt to
their needs. EANCOM standards are followed in business areas such
as master data, commercial transactions, report and planning, and
transporter. Thus, the EANCOM standard covers almost all the func-
tions required to effect a complete trade transaction. EANCOM stan-
dards include price catalogue, purchase order, invoice, etc. related
to trade transaction; message to move the goods related to transport
services; and messages used in the settlement of trade transactions
through the banking system.
HIPAA
The Health Insurance Portability and Accountability Act (HIPAA) was

developed by the US Congress in 1996. The HIPAA was initiated for
establishing national standards for electronic healthcare transactions
and for establishing national identifiers for health providers, health

N O T E S
insurance plans, and employers. The HIPAA standards encouraged

widespread use of EDI in the US healthcare system to improve the
efficiency and effectiveness of the North American healthcare system.
ODETTE
The Organisation for Data Exchange by Tele Transmission (ODETTE)

is a group that takes care of the interests of the automotive industry
in Europe. The organisation belongs to Europe and is an equivalent
of the Automotive Industry Action Group (AIAG) in North America.
ODETTE defines and develops standards and recommendations to
improve the flow of goods, services product data, and business infor-
mation across the whole automotive value chain. It is responsible for
developing communication standards, such as Odette File Transfer
Protocol (OFTP) and OFTP2.0, constant improvement processes,
such as Materials Management Operations Guideline/Logistics Eval-
uation (MMOG/LE), and automotive-specific document standards.
ROSETTANET
S
IM
The RosettaNet is a document standard that is based on XML (Exten-
sible Markup Language), which defines guidelines for message trans-
fer, business processes interface, and implementation frameworks for
interactions between companies. RosettaNet is a syndicate of major
computer, consumer electronics, semi-conductor manufacturers, tele-
M
communications and logistics companies integrating to develop and

maintain e-business process standards across industries. These stan-
dards follow a common e-business language to regulate processes be-
N
tween supply chain partners across the globe. These standards enable
business partners of all sizes to connect electronically, so that they
can process transactions and move information within their extended
supply chains.
SWIFT
The Society of Worldwide Interbank Financial Telecommunication

(SWIFT), headquartered in Brussels, was established in 1973. SWIFT
was started to create a worldwide financial messaging network be-
tween banks and financial institutions. It also provides software and
services to financial institutions, which are used on the SWIFTNet
network, which is basically the infrastructure that is used to exchange
financial documents. FIN, InterAct and FileAct are some of the soft-
ware used to encode the SWIFT documents for transmission on EDI.
By the end of November 2008, SWIFT has networked 8740 financial
institutions across 209 countries. The SWIFT document standard con-
sists of four areas, payments, trade services, securities, and trading.

N O T E S
TRADACOMS
Tradacoms is one of the earliest-developed EDI standards. It was pri-

marily used in the UK retail sector. Originally, it was introduced in
1982 as a precursor to EDIFACT and was maintained and further de-
veloped by the UK Article Numbering Association, now called GS1
UK. This standard is now obsolete in the retail sector since the devel-
opment of the EDIFACT EANCOM subsets in 1995 but still proves to
be effective in a majority of the retail EDI traffic in the UK.
VICS
The Voluntary Inter-industry Commerce Standard (VICS) is a subset

of the ANSI ASC X12 national standard. The standards developed
by VICS are used by the general merchandise retail industry across
North America. VICS EDI standards are implemented by thousands
of companies, department and specialty retail stores, mass merchan-
S
disers, and their respective suppliers.
VDA
IM
VDA is responsible for developing standards and tools to serve the
needs of companies within the German automotive industry. The VDA
has developed over thirty standards to meet the need of companies
such as Volks Wagon, Audi, Bosch, Continental, and Daimler AG.
M
3. Which of the following is not an EDI document standard?

N
a. ANSI ASC X12

b. EAN
c. VICS
d. RosettaNet
4. The HIPAA was developed by the US Congress in 1996. (True/
False)
ACTIVITY
From the Internet, find out about the works done by institutes such
as ANSI and EDIFACT. Make a note about their field of work.
7.4 TRANSMISSION MODES OF EDI

EDI is the structured transmission of data between organisations by
electronic means. There are many transmission modes that are en-
forced by EDI for smooth data exchange across a trading community.

N O T E S
From the point of view of an organisation, whether using EDI for the
first time or expanding an existing EDI infrastructure to support busi-
ness partners across the globe, the transmission mode being utilised
for EDI depends on the needs of the business, its technical capabili-
ties, and its budget. Hybrid EDI transmission modes are also imple-
mented by many big companies to connect with their business part-
ners, depending upon the size and frequency of their transactions.
Transmission modes of EDI are of the following types:

EDI via VAN
EDI via Internet/AS2
Web EDI
Direct EDI/Point-to-point
Mobile EDI
EDI Outsourcing
S
Figure 7.4 shows various transmission modes of EDI:
IM
Direct EDI/Point-to-point
Transmission Modes of EDI
EDI via VAN

M
EDI via AS2

N
Web EDI
Mobile EDI
EDI Outsourcing
Figure 7.4: Transmission Modes of EDI
7.4.1 VALUE ADDED NETWORK
The Value Added Network (VAN) is a commercially owned, secure,

and private network, which can be used by trading partners to send
and receive EDI documents between them. Organisations availing
VAN are each provided with a mailbox by VAN service organisations.
The VAN service organisations act as intermediaries during EDI doc-
ument exchange. The documents are sent and received from the mail-

N O T E S
box and the concerned organisation checks the mailbox periodically

to retrieve its documents. Usually, an alerting service is offered by the
VAN providers, so that a sender is notified when its messages have
been sent successfully and also sends an alert to the recipient to in-
form that a new message is waiting.
VAN is generally a preferred mode of transmission for EDI due to val-

ue-added services such as auditing, tracking capabilities, and in some
cases, formatting services, which VAN providers can provide. The
vast majority of EDI still occurs through VAN in spite of the influx
and growth of flexible low-cost approaches such as Web EDI or EDI
via AS2. Although companies also try to implement a hybrid strategy
where different types of EDI are implemented as per the requirement
of a business, VAN remains the core to these installations.
Along with secure communications, some of the additional services

provided by EDI via VAN are:
S
Full mailbox service: Messages are automatically routed to the
correct mailbox. Trading partners connect to the VAN to retrieve
their messages.
IM
Inspection and Authentication of All EDI Messages: The VAN ver-
ifies the identity of the trading partner and the validity of the mes-
sage.
Full Audit Trail: All EDI messages are tracked and recorded.
M
Message Notification: Trading partners are notified when the mes-

sage enters their mailbox.
N
Ancillary Services: VAN providers offer an extensive range of ser-

vices, including data backup and recovery, document mapping,
and compliance.
7.4.2 INTERNET/AS2
AS2 or Internet/AS2 is also one of the most popular methods for trans-
porting EDI data securely and reliably over the Internet. In this trans-
mission mode, two computers are involved, a client and a server. They
are connected in a point-to-point manner through the Web. AS2 uses
digital certificates and data encryption to secure the data and create
an “envelope” for the EDI data, enabling it to be sent securely over
the Internet.
EDI via AS2 is a point-to-point transmission mode, thus, it necessi-

tates the organisation’s server that is on the receiving end to be always
“listening out” for messages directed to it. It is similar to a telephone
without an answering machine; the incoming message is lost if the
server is not available to take the call. Thus, organisations that want to
avail the benefits of AS2 decide to outsource it to an EDI network pro-
vider to be available always and receive EDI transmissions non-stop.

N O T E S
Availing the resources of an EDI network provider provides the fol-

lowing benefits to an organisation:
The AS2 mandates can be followed without actually incurring the
expense of the AS2 infrastructure, such as software, hardware,
firewalls, and expertise, which would otherwise be needed to im-
plement AS2 in the organisation.
The EDI network provider takes care of the exchange of AS2 set-
up information.
The EDI network provider carries out AS2 testing for the organi-
sation and its business partners.
Documents are exchanged in real-time, because there is a point-
to-point connectivity.
The organisation benefits from the EDI network provider’s infra-
structure, skills, and security without the need to invest in these
itself.
7.4.3 WEB EDI
S
IM
Web EDI takes the help of an Internet browser for carrying out EDI. In
Web EDI, paper documents are replicated as Web forms. These forms
contain fields for users to enter information. After the form is filled
with all the relevant information, the form gets converted automati-
cally into an EDI message. This message is then sent over the Internet
M
using secure Internet protocols such as File Transfer Protocol Secure

(FTPS), Hyper Text Transport Protocol Secure (HTTPS), or AS2.
Web EDI is one of the easiest modes of EDI transmission, because
the trading partners are not required to install specific EDI software.
N
Neither do they have to manage the complex EDI environment. Thus,

it enables the participation of all trading partners in EDI; even those
from countries where IT and EDI skills are limited.
Web EDI is simple and easy to implement, thus it allows small and me-
dium-sized businesses to create, receive, reply, and manage electronic
documents using a browser. The Web forms allow an easy way of com-
munication between diverse businesses and comply with their trad-
ing partners’ requirements adhering to business rules. Thus, trading
partners all over the world can easily avail EDI without dedicating IT
resource to their EDI implementation.
7.4.4 DIRECT EDI/POINT-TO-POINT
Direct EDI or Point-to-Point EDI establishes a single secure line be-

tween two business partners. An organisation communicates with
each of its business partners individually thus having to manage hun-
dreds or thousands of separate connections. In this approach, a busi-
ness and its partners are connected directly through the Internet, us-
ing the same communication method or protocol. If different business
partners are using different communication protocols, this approach

N O T E S
becomes complex and resource intensive. Usually, different trading

companies use different protocols. Thus, the system must be able to
support all of the different, required protocols.
7.4.5 MOBILE EDI
Mobile EDI is a transmission mode that enables the exchange of EDI

documents through mobile devices. This mode has benefits, for exam-
ple, a sales person is able to see the status of a delivery to a supplier
while on the road, or a business manager is able to review supplier
performance while in a meeting.
The limitation of the mobile device is its only drawback. The quali-
ty and size of the screen for most mobile devices are relatively poor.
However, with the advent of the iPad and other tablet computers the
scenario is changing, and a lot can be achieved with mobile computing
devices. It is not an overstatement to say that these devices are chang-
S
ing the way users interact with their organisations.
IM
7.4.6 EDI OUTSOURCING
For businesses that prefer to outsource their EDI processes, EDI out-
sourcing is an option, which is also called managed services. Man-
aged services is the outsourcing of an organisation’s EDI process to
a third-party provider. Sometimes, implementing and managing an
M
EDI platform can be a daunting task for an organisation. It requires

heavy capital investment in hardware, software, and also in technical
skills. The key reason for outsourcing of EDI is the reduction in cost of
investing in the organisation’s own infrastructure, while ensuring that
N
there is access to the right level of skills to deliver the required service.
5. In ______, documents are sent and received from the

mailbox, and the concerned organisation checks the mailbox
periodically to retrieve its documents.
6. Which of the following is the additional service provided by
EDI via VAN?
a. Full mailbox service
b. Full Audit Trail
c. Ancillary Services
d. All of the above
7. Web EDI takes the help of Microsoft Word for carrying out
EDI. (True/False)
8. In Web EDI, the message is sent over the Internet using secure
Internet protocols such as ________ or _________.

N O T E S
ACTIVITY
With the help of the Internet, study various transmission modes

of EDI. Discuss their classification according to their best suitable
business areas of implementation.
ADVANTAGES AND
7.5
DISADVANTAGES OF EDI
EDI not only has advantages in its favour but also faces a few disad-
vantages. Let us discuss them in the following sections.
ADVANTAGES OF EDI
Implementation of an EDI system has benefits when creating/sending
S
purchase orders, advanced shipment notifications, or automatic in-
voicing. Several immediate advantages can be realised by exchanging
documents electronically, which are as follows:
IM
Speed: EDI requires little or no human intervention, thus, the in-
formation moves more rapidly between computers, lending speed
to the whole system. If the EDI process is directly integrated into
an organisation’s accounting or Enterprise Resource Planning
(ERP) system, the direct data flow accelerates the processing of
M
orders, packing, shipping, invoicing, etc.

By implementing EDI, the transactions that take 5 days by pa-
per mails can be completed in less than an hour. For example, an
N
American automotive corporation reduced the process cycle time

by 97%, i.e. the process that used to take 30 days was reduced to 24
hours. A major retailer reduced its order cycle time by 75%, from
24 days to 6 days.
Accuracy: In EDI, the information is passed directly from one com-
puter to another. This direct transmission from computer to com-
puter, without any human intervention and not having to re-en-
ter the information, eliminates the chances of data-entry errors.
Moreover, there are negligible chances of the receiving computer
to invert digits or add an extra digit in the incoming information.
Thus, the overall accuracy in the system is ensured.
According to a research, paper-based processes often lead to as
much as 5% of the data on an invoice being inaccurate. Accuracy
in data leads to an efficient supply chain management in the or-
ganisation. Some estimates indicate that implementation of EDI
can result in 30% faster delivery time to customers.
Economy: EDI proves to be economical for an organisation, be-
cause the cost of sending an electronic document is comparable
to a regular first class postage. In addition, there is a reduction in
the overall cost by eliminating the errors due to re-keying of data,

N O T E S
human handling, routing, and delivery. This leads to a net and sub-
stantial reduction in the cost of a transaction.
According to a research, implementing EDI has reduced the cost
by almost two-third of its paper-based equivalent.
Another research puts the cost at 70 times less. A leading Amer-
ican company reported that there is a reduction in its order pro-
cessing costs from $38/order to $1.35/order with EDI. A study from
the European market states that by taking 10 minutes less to pro-
cess for every electronic invoice saves 120 euro per invoice every
year. Similarly, in the UK, it was found that UK grocers saved £14
on every electronic order.
Increase in Business Efficiency: Automated system with no pa-
per-based tasks leads to employees being free to concentrate on
higher-value tasks and be more productive. EDI has an immedi-
ate processing of error-free business documents, thus, it leads to
S
less re-working of orders. There are fewer stock outs and less can-
celled orders. Buyers can take advantage and bargain for better
payment terms and discounts. Similarly, sellers can also benefit
IM
from improved cash flow and reduced order-to-cash cycles. Re-
duction in order processing time and delivery times results in hav-
ing to maintain reduced inventory levels.
A research reports that there is as much as a 50% saving on human

M
resources after the use of EDI. According to another study, a reduction

in an average of 10% inventory leads to a major cost-saving benefit for
an organisation as maintaining an inventory often accounts for 90% of
product costs.
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DISADVANTAGES OF EDI
Although the benefits of EDI are irresistible and have been oft repeat-
ed in boardrooms around the world, it has a downside too. In small to
mid-sized companies, there is still far less acceptance and reluctance
to implementation of EDI.
Following are a few disadvantages of EDI:

Expense: Business application systems are complex and expen-
sive and are regarded as peripheral functions of a business. They
were not considered as being fully integrated into all business ac-
tivities. Thus, although implementing EDI leads to substantial sav-
ings for an organisation, for small to mid-sized companies, the cost
of re-designing and deploying software business applications to
incorporate EDI into an existing system proves to be a deterrent.
Network Complexity: Besides computer systems, EDI needs a ba-
sic infrastructure to transmit and receive information to and from
a wide variety of customers or suppliers. A heavy investment in

N O T E S
computer networks hardware and software is required. To be able

to send and receive electronic documents, there must be a specific
point-to-point electronic path for the documents. Thus, companies
are required to invest in the development of extensive and expen-
sive networks. This need to develop extensive telecommunication
capabilities proves to be another deterrent for widespread EDI im-
plementation in small to mid-sized companies.
9. With human intervention in EDI, information moves more

rapidly between computers, lending speed to the whole
system. (True/False)
10. For implementing EDI, a heavy investment in computer
network ________ and __________ is required, which proves to
be its major disadvantage.
ACTIVITY
S
IM
Take a case study of a business enterprise from the Internet and
study the expenses incurred in implementation of EDI. Against the
expenses also study the profit originated by the enterprise after
EDI implementation.
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7.6 SUMMARY
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EDI is the computer-to-computer exchange of business documents

in a standard electronic format between business partners.
EDI standards are formats defined for EDI documents to specify
what, how, and where information fits within an EDI document.
The ANSI chartered the ASC X12 to develop uniform standards
for EDI in 1979.
UN/EDIFACT is a set of internationally agreed-upon standards
that was developed by the UN.
The EANCON was developed by EAN General Assembly in 1987.
The HIPAA was developed by the US Congress in 1996.
The ODETTE is a group that takes care of the interests of the au-
tomotive industry in Europe.
The RosettaNet is a document standard that is based on XML,
which defines guidelines for message transfer, business process-
es interface, and implementation frameworks for interactions be-
tween companies.

N O T E S
The VAN is a commercially owned, secure, and private network,

which can be used by trading partners to send and receive EDI
documents between them.
AS2 or Internet/AS2 is also one of the most popular methods for
transporting EDI data securely and reliably over the Internet.
Web EDI takes the help of an Internet browser for carrying out
EDI. Paper documents are replicated as Web forms.
Direct EDI or Point-to-Point EDI establishes a single secure line
between two business partners.
Mobile EDI is a transmission mode that enables the exchange of
EDI documents through mobile devices.
Managed services are the outsourcing of an organisation’s EDI
process to a third-party provider.
Several immediate advantages can be realised by exchanging doc-
S
uments electronically. They are speed, accuracy, economy, and in-
crease in business efficiency.
IM
Disadvantages of EDI are expense and network complexity.
KEY WORDS
American National Standards Institute (ANSI): ANSI is a pri-

M
vate non-profit organisation that oversees the development of

voluntary consensus standards for products, services, process-
es, systems, and personnel in the US.
N
Electronic Data Interchange for Administration, Commerce,

and Transport (EDIFACT): EDIFACT is the international EDI
standard developed under the UN.
Extensible Markup Language (XML): XML is a markup lan-
guage that defines a set of rules for encoding documents in a
format that is both human-readable and machine-readable.
The Society of Worldwide Interbank Financial Telecommu-
nication (SWIFT), - SWIFT is a member-owned cooperative
through which the financial world conducts its business opera-
tions with speed, certainty, and confidence.
Value Added Network (VAN): VAN is a hosted service offering
that acts as an intermediary between business partners sharing
standards based or proprietary data through shared business
processes.

N O T E S

1. Discuss in detail any three standards followed by EDI.
2. Highlight the differences in data interchange in the manual
system and the EDI technique in business processes.
3. Discuss various transmission modes of EDI.
4. Discuss the various advantages and disadvantages of EDI.

Topic Q.No. Answers

Introducing EDI 1. False
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2. Business partners
Standards of EDI 3. b. EAN
IM
4. True
Transmission 5. VAN
Modes of EDI
6. d. All of twhe above
7. False
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8. File Transfer Protocol Secure

(FTPS), Hyper Text Transport
Protocol Secure (HTTPS)
N
Advantages and 9. False

Disadvantages of
EDI
10. Hardware and software
1. EDI provides a technical platform for commercial “conversations”

between two business entities. Refer to section 7.5.
2. There has been a major transformation in the way business
organisations exchange documents after the introduction of
EDI. Refer to section 7.4.
3. There are many transmission modes that are enforced by EDI
for smooth data exchange across a trading community. Refer to
section 7.6.
4. EDI not only has advantages in its favour but also faces a few
disadvantages. Refer to section 7.7.

N O T E S
SUGGESTED READINGS
Hinge, K. (1988). Electronic data interchange. 1st ed. New York:
AMA Membership Publications Division, American Management
Association.
Kimberley, P. (1991). Electronic data interchange. 1st ed. New York:
McGraw-Hill.
E-REFERENCES
EDI Basics, (2011). What is EDI (Electronic Data Interchange)? |

EDI Basics. [online] Available at: http://www.edibasics.com/what-
is-edi/ [Accessed 25 Jun. 2014].
S
Top of Form
Bottom of Form
IM
Accellos, (2014). EDI 101. [online] Available at: http://www.accellos.
com/edi-101/ [Accessed 25 Jun. 2014].
Top of Form
Bottom of Form
M
Sis.pitt.edu, (2014). Electronic Data Interchange: Joan O. Pupik.

[online] Available at: http://www.sis.pitt.edu/~mbsclass/standards/
pupik/edidef.html [Accessed 25 Jun. 2014].
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C H A
8 P T E R
DATA WAREHOUSING, DATA MINING,
AND BUSINESS INTELLIGENCE
CONTENTS
8.1 Introduction
8.2 Data Warehousing
S
8.2.1 Need for Data Warehousing
8.2.2 Goals of Data Warehouse
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8.2.3 Constituents of Data Warehouse
Activity
8.3 Definition of Data Mining
8.3.1 Data mining parameters
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Activity
8.4 How Data Mining works?
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8.4.1 Types of relationships

Activity
8.5 Architecture of Data Mining
Activity
8.6 Functionalities of Data Mining
Activity
8.7 Classification of Data Mining system
Activity
8.8 Meaning of Business Intelligence
8.8.1 Evolution of Business Intelligence
8.8.2 Importance of Business Intelligence in Organisations
8.8.3 Business Intelligence in Contemporary Organisations
Activity

CONTENTS
8.9 Summary
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DATA WAREHOUSING, DATA MINING, AND BUSINESS INTELLIGENCE 191
N O T E S
DATA WAREHOUSING SOLUTION FOR ONE OF

EUROPE’S LARGEST FINANCIAL SERVICES GROUPS
One of the big clients of Infosys required a business intelli-

gence solution to; strengthen the mortgage administration pro-
cesses, provide better sales cycle management, mortgage prod-
uct performance analysis, financial forecasting according to sales
demands, fraud detection and general mortgage operational re-
porting. The client is one of Europe’s largest financial services
groups in corporate and commercial banking, retail banking,
credit cards and general insurance. The company sells mortgages
to corporate and retail customers with the help of different chan-
nels. These mortgage systems run on diverse technology plat-
forms and monitor different business processes.
The client needed to consolidate the mortgage administration
S
processes for all brands and Business Intelligence (BI) for various
brands. It wanted to satisfy better sales cycle management, mort-
IM
gage product performance analysis, financial forecasting based
on sales demands, fraud detection and general mortgage opera-
tional reporting. It was facing many challenges to overcome these
situations, but the biggest challenge was to provide scalable ar-
chitecture for consolidating huge amounts of data. Thus, Infosys
delivered a highly scalable solution.
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Infosys designed and implemented a data warehouse solution for

extracting information from the mortgage sales application and
N
administrative systems of different brands and storing them in

a single data warehouse database. This resulted in an extremely
scalable solution that met the following requirements:
Transaction volume expected: 73 Million per year; annual
growth rate of 110%
Size expected: 180 GB at the end of Year 1; annual growth rate
of 45%
Infosys adopted an iterative phased approach to implement the

solution that included the following phases:
Business requirements analysis
Data warehouse dimensional modelling
Architecture design
ETL (Extract, Transform and Load) and business intelligence
reporting development and implementation

N O T E S
The implementation of the highly scalable solution led to the fol-

lowing benefits by meeting the requirements:
Transaction volume expected: 73 Million per year; annual
growth rate of 110%
Size expected: 180 GB at the end of Year 1; annual growth rate
of 45%
(Source: http://www.infosys.com/consulting/information-management/case-studies/Pag-
es/data-warehousing-solutions.aspx)
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N O T E S
LEARNING OBJECTIVES

> Describe data warehousing
> Define data mining
> Discuss how data mining works
> Explain the architecture of data mining
> Describe the functionalities of data mining
> Discuss the data mining system
> Explain Business intelligence
8.1 INTRODUCTION
S
An organisation needs to deal with data in its day- to- day operations
and it has to perform various calculations on data to get the desired
information. Organisations use various methodologies for storing, re-
IM
trieving and analysing data to run its business successfully. Some of
these methodologies are data warehousing, data mining and business
intelligence.
Data warehouses are used to combine data located in different data-

bases. A data warehouse stores huge amount of data by specific cat-
M
egories so it can be accessed, interpreted, and sorted easily by users.

Warehouses allow business experts and managers to work with enor-
mous stores of transactional or other data for responding quickly to
N
markets and increasing the effectiveness of business decisions.
According to a study, every business will have a data warehouse with-

in ten years. But simply storing data in a data warehouse does not
make any substantial difference for an organisation. The organisation
benefits when it can extract meaningful trends and patterns from the
data. For finding meaningful trends and patterns data mining is used
by the organisations.
Data mining (also known as knowledge discovery) is the process of

analysing data from different sources and summarising it into valu-
able information. This information can be used to increase revenue,
cuts costs, or both. The main objective of data mining is to identify the
patterns that are hidden in a huge amount of data and interpret them
to useful information. Data warehousing and Data mining play major
roles in business intelligence.
Business Intelligence (BI) is used to analyse organisation’s data and

turning it into meaningful information to make effective decisions for
business. BI software for data mining takes advantage of data mining
and data warehousing to help in collecting information faster and in a

N O T E S
more constructive manner. The BI software searches the information

from various sources which are of interest to business and provide the
information you need.
This chapter begins by discussing about data warehousing. Next, it

explains the concepts of data mining. In addition, it explains the types
of relationships in data mining, architecture of data mining, and func-
tionalities of data mining. Further, the chapter discusses the classifica-
tion of data mining. The chapter concludes by explaining the business
intelligence and its importance in organisations.
8.2 DATA WAREHOUSING

Why do contemporary organisations have so much of interest in data
warehousing?
In every industry from retail to service sector, from manufacturing
S
companies to government organisations and from finance companies
to banks, data warehousing is changing the way business operations
are conducted and decisions are taken in organisations.
IM
In an organisation, different databases are used to extract current
and historical data to further store it in a data warehouse. A data
warehouse is a centralised hub of the data. This data is subject-ori-
ented, integrated, time-variant and non-volatile so that anyone such
M
as business experts and end users can utilise it. A data warehouse is
a combination of data from different enterprise sources. Thus, data
warehouse can be simply defined as a collection of data to support the
information system process. Data warehouse stores very large amount
N
of data to retrieve information that helps in decision making. Oper-

ating systems help to extract data from the data warehouse. These
operating systems support flexible access to data required. However,
in data warehouse the retrieval of data is fast but data insertion is
comparatively slow.
Data warehouse is a key data storage mechanism and plays a very cru-
cial role in an organisation’s information system. Although data ware-
house and database both are used to store data but the data warehouse
is more efficient than a database. In data warehouse, we can store
huge amount of data as compared to a database. Data warehouse is
more effective in providing the organisation the required information.
8.2.1 NEED FOR DATA WAREHOUSING
Every organisation must use data warehousing if it deals with huge

amount of data. In order to implement data warehousing in an organ-
isation we need some additional hardware and software tools. These
tools might seem expensive at first, but they deliver more value that
they cost.

N O T E S
An organisation has a critical need to implement data warehousing.

The followings are some important factors that prove the need for
data warehousing:
Tables are hard to use for data access and analysis as they are
mainly used to enhance data entry and validation performance.
Data warehousing is the best way to integrate valuable data from
different sources into the database of a particular application.
Developing and storing metadata becomes easy with data ware-
houses, which is otherwise a hectic process as there is no definite
place to store it.
There are so many data fields such as rolled-up general ledger bal-
ances on computer screens which are frequently needed by the
users. These fields are provided by the data warehouse not data-
bases and business experts become habitual of these fields.
S
Reporting and analysis functions in databases often give poor per-
formance. Therefore, data warehousing should be used for report-
ing and analysis.
IM
BI users perform various calculations on data and might misuse
or corrupt the transaction data which makes data warehousing a
necessity.
These factors prove that data warehousing is much needed in organi-

M
sations. Since, data warehousing has become more economical in the

past few years, organisations can take complete advantage of data
warehousing by implementing it in business and manage their data
efficiently.
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8.2.2 GOALS OF DATA WAREHOUSE
A data warehouse serves many purposes in an organisation. It has a

number of goals that help an organisation to manage the business ef-
fectively. These goals are discussed as follows:
Data integration: The data warehouse integrates data retrieved
from different subject areas across time in such a way that users
of the warehouse can easily obtain facts about the organisation’s
business.
Data standardisation and normalisation: Standardisation and
normalisation of data are the essential ways of making a data
warehouse really valuable.
Accessible Information: The data warehouse must provide con-
tents that are understandable and clear to the business user. The
contents of the data warehouse need to be as meaningful as pos-
sible. The tools that provide access to the data warehouse must
be easy to use and their time to return query results to the user
should be the minimum.

N O T E S
Consistent Information: A data warehouse should present the

organisation’s information consistently. It means that all the data
should be complete and provide full information after processing.
Consistency also indicates that common definitions for the data
warehouse contents are available for users.
Adaptive and resilient to change: Change is an inevitable part of
an organisation and cannot be avoided. User requirements, busi-
ness circumstances, data, and technology are all the factors that
are meant to change with time. The data warehouse must be de-
signed to manage and control this unavoidable change.
Secure support for information: The data warehouse must pro-
vide security to the organisation’s information. It also must effec-
tively manage the access to the organisation's confidential infor-
mation.
Foundation for improved decision making: The ultimate goal of
S
data warehousing is to provide efficient support for decision mak-
ing. The data warehouse must be provided the appropriate data as
input in order to provide effective decision making.
IM
8.2.3 CONSTITUENTS OF DATA WAREHOUSE
A data warehouse is made of various constituents or components that

are essential to make it work efficiently. These components are com-
M
bined together to make an effective data warehouse. The components

of a data warehouse are discussed as follows:
Source systems and Databases: Source Systems are data provid-
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ers of transaction/production raw data, from where the details are

extracted to make it appropriate for data warehousing. The sourc-
es can be quite diverse:
Production Databases like Oracle, Sybase, SQL
Excel Sheets
Database of small time applications like in MS Access
ASCII/Data flat files
Data Staging Area: The data staging area is the place where
cleansing and grooming of data is performed after it is extracted
from the Source Systems. Data staging comprises most of the cru-
cial activities of a data warehouse. These activities are also char-
acteristically the biggest analytical and technical task of a project.
These activities are extraction and transformation.
ETL-Data Extraction: Data extraction is an activity, which ex-
tracts the data from numerous data sources. Most of these sources
are production systems used for transaction level work.

N O T E S
ETL-Data Transformation: If data extraction is mining the raw

material of iron, data transformation is to create the steel products
from it. The transformation ensures that the transaction level raw
data is converted into a form without losing details so that it can be
loaded into the data presentation area. The data presentation area
is considered to be a set of integrated data marts. A data mart is a
subset of the data warehouse and represents select data regarding
a specific business function (Inmon, 1999).
ETL-Presentation Area: This area is the depository where the

data is finally loaded after being processed in the process of ex-
traction and transformation. This area turns into the final source
for information for several reasons such as queries and advanced
data modelling.
Dimensional Model: The presentation area has different data

model than that of a production system. This is known as dimen-
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sional model. It is the method of organising data in a data ware-
house.
IM
Meta Data: Meta data can be described as data about data that
describes the data warehouse. It is employed to building, main-
taining, managing and using the data warehouse. It includes all
the business and technical designs, rules and locations etc. of all
the data starting from the extraction to final data usage.
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End User Tools and Applications: Data is prepared for usage.

There are many applications in which the data can be given as
input and there are also tools that make it happen. These tools
N
consist of the reporting, publishing, analysis, modelling and min-

ing tools.
Data-Warehouse Administration and Tools: Data warehouse is

a big platform, which has a large number of users, data sources
and data targets. It has to be administered for better performance,
timelines and availability, similar to the production systems. This
also consists of activity logging, data security, backing-up and ar-
chiving.
Data- Marts: A data mart can be considered as a data repository

that holds data of only one subject area such as finance, marketing,
or sale.
OLAP Servers & Data Marts: While the data warehouse can be
accessed for any end-user tool`s application, it also provides in-
formation to OLAP Layer. For example, Human Resource Depart-
ment might want to have its own data mart in their own separate
servers due to confidential information.

N O T E S
1. A data warehouse is a centralised ______ of the data.

2. Reporting and analysis functions in data warehouses often
give poor performance. (True/False)
3. Which of the following is not a component of a data warehouse?
a. Data Staging Area
b. Dimensional Model
c. Data mining
d. Meta Data
ACTIVITY
S
Differentiate between data warehouse and data marts. You can uti-
lise the Internet for any related searches.
IM
8.3 DEFINITION OF DATA MINING
Data mining is the process of digging through huge amount of data
and analysing it for extracting the useful meaning of the data. Data
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mining tools analyse the pattern of the customers and predict be-
haviours and future trends which allow organisations to make prac-
tical, knowledge-driven decisions. Data mining tools can be used to
answer business questions that are usually time consuming to resolve.
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These tools dig up databases for hidden patterns and find predictive
information that business experts may miss because it does not fall
within their expectations.
For example, one grocery chain used the data mining software to anal-
yse buying patterns of local people. They discovered that when men
bought bread on Fridays and Saturdays, they also purchased beer.
Further analysis showed that these shoppers typically did their week-
ly grocery shopping on Saturdays. On Fridays, however, they only
bought a few items. This pattern showed that they purchased beer
for the upcoming weekend. The grocery chain could use this newly
discovered information in various ways to increase their profit. For in-
stance, they could relocate the beer display closer to the bread display
and also ensure that beer and bread were sold at full price on Fridays
and Saturdays.
Data mining tools and techniques are used by many companies such
as retail, finance, health care, manufacturing transportation, and
aerospace to take advantage of historical data. Using pattern recogni-
tion technologies and other useful techniques such as statistical and
mathematical techniques to examine information available in the data

N O T E S
warehouse, data mining helps analysts to recognise important facts,

relationships, trends, patterns, exceptions and irregularities that
might otherwise go unnoticed.
8.3.1 DATA MINING PARAMETERS
Data mining is used to sort through data to recognise patterns and

establish relationships between data. Data mining parameters help in
establishing a relationship between data from different sources.
Data mining parameters include the following points as depicted in

the Figure 8.1:
Classes
S
IM
Sequential Data Mining
Clusters
Patterns Parameters
M
Associations
N
Figure 8.1: Data Mining Parameters

Classes: Stored data is used to discover data in predetermined
groups. For example, a restaurant chain could extract customer
purchase data to find out when customers visit and what they usu-
ally order. This information can be used to increase customers by
providing them daily specials.
Clusters: Data items are grouped on the basis of logical relation-
ships or consumer preferences. For example, data can be mined to
find market segments or consumer attractions.
Associations: Associations can be identified using data mining.
For example, a customer usually buys bread with the milk. Here
bread and milk represent an association.
Sequential patterns: Using data mining we can anticipate behav-
ior patterns and trends. For example, an outdoor equipment re-
tailer could predict a backpack will be purchased if a consumer is
purchasing sleeping bags and hiking shoes.

N O T E S
4. Data mining is the process of ________ through huge amount

of data and _________ it for _________ the useful meaning of
the data.
5. Which of the followings is not a data mining parameter?
a. Classes
b. Associations
c. Clusters
d. Dimensions
6. Using data mining, we can anticipate behavior patterns and
trends. (True/False)
S
ACTIVITY
List some more details about data mining parameters. You can take
IM
the help of Internet for any related searches.
8.4 HOW DATA MINING WORKS?

M
Have you wondered how through data mining business experts are
able to predict what is going to happen next? The technique that is
used to perform these acts is called modelling.
N
Modelling is simply an activity in which we build a model based on

data from situations where you know the answer of the situation and
then apply this model to other situations where the answer is not
known. Modelling techniques have been applied for a very long time,
but recently the computational power to automate modelling tech-
niques for working directly on the data, is available.
Consider the example of building a model, the director of marketing

for a telecommunications company wants to focus his marketing and
sales efforts on segments of the population that can become big users
of long distance services. He has good information about his custom-
ers, but it is impossible to detect the common features of his best cus-
tomers because of many variables. From the existing database of cus-
tomers, he can retrieve the information such as age, sex, credit history,
income, zip code, occupation, etc. using data mining tools, such as
neural networks, he can identify the characteristics of those custom-
ers who make many long distance calls. For instance, he might learn
that his best customers are youngsters between the age of 19 and 28
who make around $45,000 per year. This, information and knowledge
is his model for high value customers, and he can make budget ac-
cordingly and manage his marketing efforts.

N O T E S
There are various types of information about the customers that you
can retrieve with the help of data mining.
Figure 8.2 show the different types of customer information about a

particular customer.
S
IM
M
N
Figure 8.2: Different Types of Customer information

(Source: http://www.dr4ward.com/dr4ward/data-mining/)
8.4.1 TYPES OF RELATIONSHIPS

Data mining provides the link between transaction and analytical sys-
tem. It analyses relationships and patterns in transaction data based
on end user queries. The different types of data mining tools are avail-

N O T E S
able such as statistical, machine learning, and neural networks. Gen-

erally, any of four types of relationships are seen:
Regression: Regression creates a relationship between a depen-
dent or outcome variable and a group of predictors. In other words,
it maps a data item to prediction variable. Regression is supervised
learning that partitions the data into training and validation data.
Time Series Analysis: It examines the value of an attribute which
changes over the time. It comprises ways and means for analysing
time series data to extract meaningful statistics and other charac-
teristics of the data.
Prediction: Many data mining tools can predict states of future
data based on historical and current data. Prediction machine
comprises flooding, machine learning, speech recognition, and
pattern recognition.
Summarisation: It can be defined as the abstraction or generali-
S
sation of data. Data is summarised and abstracted which results in
a smaller set that provides the general overview of data. For exam-
ple, long distance calls made by a customer can be summarised as
IM
total minutes, total calls, total cost etc.
7. Data mining analyses _______ and ________ in transaction are

data based on end user queries.
M
8. Data mining restricts the link between transaction and

analytical system. (True/False)
9. ___________ can be defined as the abstraction or generalisation
N
of data.
ACTIVITY
Utilising Internet search and study how organisations use data

mining to retrieve useful information.
8.5 ARCHITECTURE OF DATA MINING

Data is stored in databases or data warehouse systems or both. This
raises the need of a data mining system or architecture that connects
or disconnects with databases and data warehouse systems.
Figure 8.3 shows types of data mining architecture
Types of Data Mining Architecture
No-Coupling Loose Coupling Semi-Tight Coupling Tight Coupling
Figure 8.3: Types of Data Mining Architecture

N O T E S
Let us discuss these different possible types of data mining architec-

ture in the following section:
No-coupling: In this architecture, data mining system does not

use any functionality of a database or data warehouse system. A
no-coupling data mining system accesses data from a specific data
sources such as file system. It uses major data mining algorithms
to process data and then it stores the results into the file system.
This data mining architecture does not adopt any advantage of da-
tabase or data warehouse which are already very efficient in or-
ganising, storing, accessing and retrieving data. Flat file process-
ing is an example of this architecture.
Loose Coupling: In this architecture, data mining system retrieves

data from a database or data warehouse, it uses data mining algo-
rithms to process data and then it stores the result in those systems.
This architecture is primarily used for memory-based data mining
S
system that does not need high scalability and performance.
Semi-tight Coupling: In this data mining architecture, data min-

IM
ing system not only links database or data warehouse system but it
also has various features of database or data warehouse to perform
some data mining tasks such as sorting, indexing and aggregation.
In this architecture, some intermediate result can be stored in a
database or data warehouse system for improving performance.
M
Tight Coupling: In this data mining architecture, database or data

warehouse is considered as an information retrieval component
of data mining system using integration. All the features of a data-
N
base or data warehouse are utilised to perform data mining tasks.

This architecture provides system scalability, high performance
and integrated information.
10. _________ is considered a poor architecture for data mining

system however it is used for simple data mining processes.
11. In Loose coupling architecture, data mining system uses
________ or data _________ to retrieve data.
12. Semi-tight coupling architecture provides system scalability,
high performance and integrated information.(True/False)
ACTIVITY
Form a group of students and discuss data mining architecture.

Present your discussion points in a short note.

N O T E S
8.6 FUNCTIONALITIES OF DATA MINING

For businesses, data mining is used to discover patterns and relation-
ships in the data in order to help make better business decisions. Data
mining can help spot sales trends, develop smarter marketing cam-
paigns, and accurately predict customer loyalty. Specific uses of data
mining include the following as depicted in Figure 8.4:
Market
segmentation
Trend Customer
analysis churn
S
IM
Market
Fraud
basket
detection
analysis
M
Interactive Direct
marketing marketing
N
Figure 8.4: Uses of Data mining in Organisation

Market segmentation – It refers to identifying the common traits
of customers who purchase the same products from your company.
Customer churn – This is predicting which customers are expect-
ed to leave your company and use the product of a competitor.
Fraud detection – It is recognising which transactions are most
expected to be deceitful.
Direct marketing – It is recognising which prospects should be
added in a mailing list to gain the highest response rate.
Interactive marketing – This is predicting what an individual is
interested in seeing on a website.
Market basket analysis – It is understanding which products or
services are commonly being purchased together. For example,
butter and bread.
Trend analysis – This is revealing the difference between the pur-
chase of a typical customer within the last and the current month.

N O T E S
13. Market basket analysis determines which ________ or ________

are commonly being purchased together.
14. Data mining recognises which transactions are most expected
to be deceitful. (True/False)
15. Which of the following functionality of data mining reveals the
difference between the purchase of a typical customer within
the last and the current month?
a. Market segmentation
b. Trend analysis
c. Interactive marketing
d. Direct marketing
ACTIVITY
S
IM
Explore the Internet and list some more functionalities of data
mining.
CLASSIFICATION OF DATA MINING

M
8.7
SYSTEM
Data mining is a field that consists of a set of disciplines, including da-
tabase systems, statistics, machine learning, visualisation, and infor-
N
mation science. Additionally, depending on the data mining approach

used, we can also apply other techniques, such as neural network
methods for data mining. The data mining system may also integrate
techniques from spatial data analysis, information retrieval, pattern
recognition, image analysis; signal processing, computer graphics,
web technology, economics, or psychology depending on the kinds of
data to be mined or on the given data mining application.
Because of the variety of disciplines contributing to data mining, data

mining research is likely to produce a large variety of data mining
systems. Therefore, a distinct classification of data mining systems is
needed. This kind of classification may help potential users in differ-
entiating data mining systems and identifying system depending on
their needs.
Data mining systems can be classified according to various criteria, as

follows:
Classification using the kinds of databases mined: You can classi-
fy a data mining system according to the kinds of databases mined.
Database systems themselves can also be classified according to
different criteria such as data models, types of data, or applications

N O T E S
involved, each of this may need its own data mining technique.
Therefore, data mining systems can be classified accordingly.
For instance, if we classify according to data models we may have

a system which could be relational, transactional, object-oriented,
object-relational, or data warehouse mining system. If we classify
according to the types of data, we may have a spatial, time-series,
text, or multimedia data mining system, or a World Wide Web min-
ing system. Other system types comprise heterogeneous data min-
ing systems, and legacy data mining systems.
Classification using the kinds of knowledge mined: We can clas-

sify data mining systems according to the kind of knowledge they
mine, i.e. on the basis of data mining functionalities, such as char-
acterisation, discrimination, association, classification, clustering,
trend and evolution analysis, deviation analysis, similarity analy-
sis, etc. A complete data mining system usually provides numer-
S
ous integrated data mining functionalities.
Furthermore, we can also categorise data mining systems on

IM
the basis of granularity or levels of abstraction of the knowledge
mined, including generalised knowledge, primitive-level knowl-
edge or knowledge at multiple levels. An advanced data mining
system should simplify the detection of knowledge at various lev-
els of abstraction.
M
Classification using the kinds of techniques utilised: We can also

classify data mining systems according to the fundamental data
mining techniques employed. We can describe these techniques
N
according to the degree of user interaction involved (For example,

autonomous systems, interactive exploratory systems, query-driv-
en systems), or the methods of data analysis employed (For ex-
ample, database-oriented or data warehouse-oriented techniques,
machine learning, statistics, visualisation, pattern recognition,
neural networks, and so on). A sophisticated data mining system
usually adopts numerous data mining techniques, or forms an ef-
fective, integrated technique which is a combination of the merits
of a few individual approaches.
16. A complete data mining system usually provides numerous

________ data mining functionalities.
17. An_______ data mining system should ________ the detection
of knowledge at various levels of abstraction.
18. A sophisticated data mining system usually adopts numerous
data mining techniques, or forms an effective, integrated
technique.(True/False)

N O T E S
ACTIVITY
Form a group of students and discuss the classification of the data

mining system. Present your findings in a short note.
8.8 MEANING OF BUSINESS INTELLIGENCE

Business intelligence (BI) is an umbrella term that consists of differ-
ent types of business software applications. These software applica-
tions are used to analyse an organisation’s raw data. The raw data is
the data that business records in the daily transactions of an organ-
isation. Data may come from different activities such as interactions
with customers, management of employees, execution of operations
or administration of finance. BI is made up of various associated ac-
tivities, including data mining, online analytical processing, querying
and reporting.
S
Figure 8.5 shows the activities involved in business intelligence:
IM
BUSINESS INTELLIGENCE
Performance Enterprise Data

M
Management Reporting Mining

N
Data
Ware House
Extract, Transform, Load
TRANSACTIONAL DATABASES
Figure 8.5: Activities Involved in Business Intelligence
Organisations use BI for improving the decision making process, re-

ducing costs and identifying new business opportunities. BI provides
corporate reporting and a set of tools to extract data out of enterprise
systems. Also, CIOs (Chief information Officer) of organisation use
BI to recognise unproductive business processes that are suitable for
re-engineering.
BI tools enable users to analyse data themselves instead of waiting

for IT experts to run complex reports. This simplification of BI use

N O T E S
allows non-technical business users to utilise BI tools.BI enables you

to make effective use of data and information to make better business
decisions.
BI comprises the following elements:

Reporting: It is a process of retrieving data, formatting it and de-
livering it to the organisation internally and externally.
Analysis: It is a process of identifying patterns and creating rela-
tionships in a group of data.
Data mining: It represents mining of original information from
data.
Data quality and interpretation: It represents greater or lesser
connection between data and the real-world objects.
Predictive analysis: It is a branch of data mining, which predicts
probabilities and trends in business.
S
Reporting and analysis are the most crucial part of business intelli-
gence and most BI vendors compete by adding and improving these
IM
features to their solutions.
8.8.1 EVOLUTION OF BUSINESS INTELLIGENCE
BI has evolved and emerged as the critical need of every organisation.

M
Introduction of BI have minimised the use of traditional systems of

analysis and data interpretation such as manual data gathering and
analysis and mainframe computers.
N
Let us discuss how BI has evolved through recent years in the follow-
ing section.
Reduced Dependency on IT Experts: Today, BI is no longer solely
controlled by IT departments in an organisation other business
users are also able to control the BI tools. It is positive change to-
wards reducing the dependency of business users on IT experts.
Therefore, business user’s community can have an active role in
BI processes. With the rise of powerful desktop BI tools such as
Tableau, Tibco Spotfire, and SAS Visual Analytics, it is now possi-
ble for users to have BI on their desktops computers that used to
be reserved for enterprise-level tools. These tools are not the re-
placement of enterprise BI tools. Rather, they provide users more
flexibility to explore and discover new possibilities in decision
making and reporting.
Unrestricted Reporting: Latest BI tools have destroyed the no-
tion of restricting users to the reports they have been given. In
many organisations, users now can freely explore data and create
the reports they desire. Obviously, there are still limitations on the
consumption of system resources for a user and security still en-
sure users can only access data for which they have authorisation.

N O T E S
However, users are no longer restricted to experiment with new

metrics and new views of data as they once were. This allows users
to explore, experiment and innovate with data.
Advanced Visualisation: The arrival of advanced visualisations
and dashboards has also altered the situation in a positive way. The
range of visuals available has expanded from the standard tables
to pie and bar charts. Moreover, where graphics used to be mostly
static, today's graphics can be linked together to give users an in-
teractive experience with the data in real time. For example, if you
click on one country in a map it can automatically filter the data on
all other components of a report to show data of just that country.
This flexibility permits faster insights.
Independent of SQL Logic: BI tools are no longer limited to just
standard SQL logic. Many BI tools contain more advanced analyt-
ics such as predictive modelling algorithms. Additionally, the grow-
ing use of non-SQL processes using platforms such as Hadoop and
S
Teradata Aster has changed the situation. Such platforms have ex-
panded the types of processing that can be useful for data before
it is passed to users using a BI tool. Now, complex programming
IM
construct are added in a BI process which makes deeper range of
analytic processing possible. This increases the realms that can be
explored in business.
After going through all these changes come forth the picture of mod-
M
ern business intelligence environment.
BI is not just a standard SQL-based reports provided by IT. BI has

turned out to be a self-service, visual, interactive environment that
N
includes some advanced analytics. As deep analytic tools continue to

enhance their reporting capabilities and reporting tools continue to
add deeper analytics, the lines of which tools do what are blurring.
Also blurring is the line between the role of IT and business users.
Although this evolution can be disturbing for some users at first,

the organisations that make themselves comfortable with the new
changed instead of resisting it will find it beneficial eventually. This is
because we cannot presume how effective the new methods are until
we use them ourselves.
8.8.2 IMPORTANCE OF BUSINESS

INTELLIGENCE IN ORGANISATIONS
Business Intelligence is a concept that contains the delivery and inte-

gration of relevant and useful business information in an organisation.
Organisation use business intelligence to identify noteworthy events
and monitor business to adapt quickly to their changing environment.
BI can improve the decision making processes at all levels of manage-
ment by providing effective BI trainings. It also improves the tactical
and strategic management processes.

N O T E S
Figure 8.6 shows the importance of BI in an organisation:
Consumer
Behavior Insights
Improved Visibility
Actionable Information
Improved Efficiency
Figure 8.6: Importance of BI in Organisation
S
Consumer Behavior Insights: One of the main advantages of im-
plementing business intelligence software is the fact that it will
IM
enhance the organisation’s ability to analyse the current consumer
buying trends. After finding out what your consumers are buying,
you can use this information to develop products that match the
current demands and improve your profitability as you can attract
valuable customers.
M
Improved Visibility: BI enables you to control over various im-

portant process in an organisation. Therefore, you should invest
in a good business intelligence system. Business intelligence soft-
N
ware enhances the visibility of these processes and makes it possi-

ble to recognise areas that need to be improved. In addition, if you
have a situation where you have to go through many pages in your
detailed periodic report to assess the organisation’s performance,
you can save time by skilled intelligence analysts using the BI soft-
ware.
Actionable Information: A business intelligence system consists

of an analytical tool that provides you the insight to make success-
ful strategies for your organisation.
This is because the BI system is able to discover key trends and

patterns in organisational data and makes it easier for you to es-
tablish relationships between different areas of business. It also
helps you to understand the implications of different organisation-
al processes better and improve your ability to recognise appro-
priate opportunities in an organisation. It further allows making
effective plans for the future.
Improved Efficiency: One of the important reasons for investing

in an effective business intelligence system is because it can im-

N O T E S
prove efficiency of organisation which leads to the increased pro-

ductivity. Business intelligence can be used to share information
across different departments in your organisation. It reduces the
time in reporting processes and analytics. This simplification of
information sharing reduces the duplication of duties within the
organisation and improves the accuracy and usefulness of the data
produced by different departments.
In order to obtain all the benefits of an effective business intelligence

system, organisations need to ensure investing in skilled BI person-
nel and software designed for analytical proficiency and availability. It
also needs to be ensured that the selected system can analyse both the
content and context of data.
8.8.3 BUSINESS INTELLIGENCE IN

CONTEMPORARY ORGANISATIONS
S
A successful BI solution can enhance the productivity of your organ-
isation. It supports your processes and best practices and allows em-
ployees to boost the power of the entire organisation. The right BI
IM
solution provides financially accurate information and the ability to
use it in your organisation. This empowers you to make effective busi-
ness decisions that can impact an organisation in the best way possi-
ble.
M
For instance, there are many restaurant chains such as Hardee’s,

Wendy’s, Ruby Tuesday and T.G.I. Friday’s who are the big users of
BI software. They use BI software to make strategic decisions, such as
new products to add to their menus, dishes to remove and underper-
N
forming stores to close. BI is also used by these restaurants for tacti-

cal matters such as re-negotiating contracts with food suppliers and
recognising chances to improve unproductive processes. Restaurant
chains are very operations-driven and BI words as a central compo-
nent to help them run their businesses. These restaurants are among
the leading group of companies among all industries that are truly
getting real value from these systems.
One crucial component of BI—business analytics—is essential to the

success of companies in a wide range of industries, and more famous-
ly essential to the success of professional sports teams such as the
Boston Red Sox, Oakland A’s and New England Patriots
In retail, Wal-Mart uses huge amount of data and category analysis

to dominate the industry. Amazon and Yahoo are another example
of such organisations. They are not just e-commerce sites they are
tremendously analytical and follow a "test and learn" approach to
business changes. Capital One, another organisation runs more than
30,000 experiments a year to recognise desirable customers and price
credit card offers.

N O T E S
19. Organisations use BI for __________ decision making process,

_______ costs and _________ new business opportunities.
20. _________ a process of retrieving data, formatting it and
delivering it to the organisation internally and externally.
21. Business Intelligence is a concept that contains the delivery
and integration of relevant and useful business information in
an organisation. (True/False)
ACTIVITY
Make a short note on the latest trends in business intelligence. You

can utilise the Internet for any related searches.
8.9 SUMMARY
S
IM
Data warehouse can be simply defined as a collection of data to sup-
port the information system process. It stores very large amount of
data to retrieve information that helps in decision making.
A data warehouse is made of various constituents or components
that are essential to make a data warehouse work efficiently. These
M
components are combined together to make an effective data

warehouse.
Data mining is the process of digging through huge amount of data
N
and analysing it for extracting the useful meaning from the data.
Data mining tools and techniques are used by many companies
such as retail, finance, health care, manufacturing transportation,
and aerospace to take advantage of historical data.
Data mining is a field that consists of a set of disciplines, including
database systems, statistics, machine learning, visualisation and
information science.
BI is an umbrella term that consists of different types of business
software applications.
Organisations use BI for improving the decision making process,
reducing costs and identifying new business opportunities.
A successful BI solution can enhance the productivity of your or-
ganisation. It supports your processes and best practices and al-
lows employees to boost the power of the entire organisation.

N O T E S
KEY WORDS
ASCII: It an acronym of American Standard Code for Informa-

tion Interchange with a character encoding scheme.
Hadoop: It is a software framework for scalable and distributed
programming.
Teradata: It refers to a fully scalable relational database man-
agement system developed by Teradata Corp.
Neural Network: It refers to a type of artificial intelligence that
attempts to imitate the functioning of the human brain.
Standardisation: It refers to a process in which files are first
parsed and then interpreted to a common format.
Normalisation: It refers to a process in which fields and tables
of a relational database are organised to minimise redundancy.

S
IM
1. What do you understand by data warehousing? Explain.
2. Why do organisations need data warehousing? Discuss.
3. What is data mining? Discuss.
M
4. How does data mining work? Explain.

5. Elaborate on the architecture of data mining.
6. Explain the functionalities of data mining.
N
7. Discuss the classification of data mining.

8. Define business intelligence?
9. Explain the importance of business intelligence in contemporary
organisations.
Topic Q.No. Answers

Data Warehousing 1. hub
2. False
3. c. Data mining
Definition of Data Mining 4. digging, analysing, extracting
5. d. Dimensions

N O T E S
Topic Q.No. Answers

6. True
How Data Mining Works? 7. relationships, patterns
8. False
9. Summarisation
Architecture of Data 10. No-Coupling
Mining
11. database, warehouse
12. False
Functionalities of Data 13. products, services
Mining
14. True
15. b. Trend analysis
S
Classification of Data 16. integrated
Mining System
IM
17. advanced, simplify
18. True
Meaning of Business 19. improving, reducing, identifying
Intelligence
20. Reporting
M
21. True
N

1. Data warehouses are used to combine data located in different
databases. A data warehouse stores huge amount of data by
specific categories so it can be accessed, interpreted, and sorted
easily by users. For details refer to section 8.4 Data Warehousing.
2. Organisations have a huge amount of data and to deal with it,
data warehousing is needed. For details refer to section 8.4.1
Need for Data Warehousing.
3. Data mining is the process of digging through huge amount of
data and analysing it for extracting the useful meaning of the
data. For details refer to Section 8.5 Definition of Data Mining.
4. Data mining is able to predict what is going to happen next using
the technique called modelling. For details refer to Section 8.6
How Data Mining Works?
5. Data is stored in databases or data warehouse systems or both.
This raises the need of a data mining system or architecture that
connects or disconnects with databases and data warehouse
systems. For details refer to Section 8.7 Architecture of Data
Mining.

N O T E S
6. Data mining is used to discover patterns and relationships in the

data in order to help make better business decisions. For details
refer to Section 8.8 Functionalities of Data Mining.
7. A variety of disciplines contribute to data mining, as a result
data mining research is likely to produce a large variety of data
mining systems. Therefore, a clear classification of data mining
systems is needed. For details refer to Section 8.9 Classification
of Data Mining System.
8. Business Intelligence is a concept that contains the delivery
and integration of relevant and useful business information in
an organisation. For details refer to Section 8.10 Meaning of
Business Intelligence.
9. Organisation use business intelligence to identify noteworthy
events and monitor business to adapt quickly to their changing
environment. For details refer to section 8.10.2 Importance of
S
Business Intelligence in Organisations.

IM
SUGGESTED READINGS
Bibliography: Ponniah, P. (2001). Data warehousing fundamentals.
1st ed. New York: Wiley.
M
Bibliography: Seltzer, M. (2014). Data Mining for Dummies. 1st ed.

For Dummies.
N
E-REFERENCES
Data Warehousing. Retrieved from: http://www.1keydata.com/da-
tawarehousing/datawarehouse.html
Definition of Data Mining. Retrieved from: http://www.anderson.
ucla.edu/faculty/jason.frand/teacher/technologies/palace/datamin-
ing.htm
Classification of Data Mining. Retrieved from: http://www.tutorial-
spoint.com/data_mining/dm_systems.htm
Meaning of Business Intelligence. Retrieved from: http://www.
cio.com/article/40296/Business_Intelligence_Definition_and_Solu-
tions

CASE STUDY
N O T E S
BUSINESS INTELLIGENCE IN PRACTICE: BI HELPS

DUNKIN’ DONUTS EXPAND GLOBALLY
Dunkin’ Donuts restaurant chain is one of the America’s most pop-

ular restaurants. It is famous for its donuts, coffee and other baked
goods. The restaurant chain has been using BI tools to look for the
best franchises worldwide. A large proportion of Dunkin’ Donut’s
more than 5,000 U.S. franchises are located in Boston, New York,
and Northeast locales but Dunkin’ Donuts is planning to expand its
business by having 8,000 to 15,000 franchises worldwide. Starbucks
has 12,000 stores worldwide and is the biggest competitor of Dunkin’
Donuts. In order to win the race for global expansion Dunkin’ Donuts
is using a new BI system that helps in closing fast franchise deals.
This gets more important in the competition with Starbucks as it
does not franchise. Due to this Starbucks is not inhibited for finding,
and signing up, appropriate and willing franchise operators.
S
Dunkin’ Donuts sales staff and managers use a dashboard-type BI
system, developed within six weeks by Oco Inc. for managing infor-
mation about franchise operators which include the stage of each
IM
potential deal and their financial state. With the help of this tool sys-
tem, they can recognise the problematic areas so that they can keep
deals on track. They can retrieve geographical view and information
of the region where deals are facing problems, and then drill down
into a specific account for determining the core problem. They can
also detect the potential deals that are too close to happening. Man-
M
agers tracked some of the key metrics including the average cycle
time for getting a franchise deal done, the size of deals, and average
cycle time for different types of deal.
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Such analysis depends on the clean data retrieved from the data ware-
house. Oco used the technology based on an artificial intelligence engine
that accesses data from various sources and then cleans and organise it
into an intellectual data schema. This schema is used to extract custom-
er data from Dunkin’ Donuts multiple systems and clean it up in a data
warehouse. Updated information is fed daily into data warehouse.
Dunkin’ Donuts CIO Dan Sheehan compares the system to a customer
management system along with a scorecard. According to him, “It’s a
huge win in terms of instant access to who and what is in the pipeline.
When you look at a.m. market, we have been a leader in the Northeast.
Now we will take the leadership and go across the country and the
world”.
(Source: Compiled from Business Wire, 2007, and Weier, 2007)
QUESTIONS
1. Suggest how BI was able to resolve the problem for

Dunkin’ Donuts?
2. Do you think adopting BI was the right approach for
Dunkin’ Donuts? Discuss.

C H A
9 P T E R
DECISION SUPPORT SYSTEM
CONTENTS
9.1 Introduction
9.2 Introducing Decision Support System
S
9.2.1 Evolution of DSS
9.2.2 Components of DSS
IM
9.2.3 DSS Architecture
9.2.4 Analytical Models in DSS
9.2.5 Characteristics of DSS
Activity
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9.3 Types of DSS

Activity
N
9.4 Tools and Technologies Supporting DSS

Activity
9.5 DSS and Outsourcing
Activity
9.6 Group Decision Support Systems
Activity
9.7 Summary

N O T E S
DECISION SUPPORT SYSTEM IN THE

AGRICULTURE INDUSTRY
The agriculture industry is considered a high risk and unpre-

dictable industry due to weather and market fluctuations. The
agriculture business mainly comprises cultivation of agricultur-
al products and animal husbandry. However, a large number of
businesses depend upon agricultural products for their raw ma-
terials. Thus, organisations depending on agricultural products
also share the risks faced by the agriculture industry. To mitigate
these risks and facilitate decision-making, the idea of agricultural
Decision Support System has been developed. The DSS system
provides information to agri-businesses and helps the agriculture
industry in the following ways:
It helps farmers reduce their loss through weather forecast.
S
For example, a weather forecast about hailstorm can help
farmers in making pre-arrangements to save the crop.
IM
It provides expert knowledge regarding which crop to grow in
which season based on weather and market demand inputs,
for maximum benefit at minimum risk. For example, cultiva-
tion of mushrooms involves minimum effort; thus, market de-
mand for this crop can be easily met.
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It helps in analysing seeds and taking care of growing crops.

For example, seed quality can be analysed and decisions re-
garding pesticides and other measures to save crops from un-
foreseen loss can be made easily.
N
It provides knowledge regarding the best market to sell agri-

culture products to get the maximum benefit. For example,
DSS provides information about when the local market price
for sugarcane is less than the price offered by the government.
Equipped with such information, a farmer can sell the prod-
ucts to the government.

DECISION SUPPORT SYSTEM 219
N O T E S
LEARNING OBJECTIVES

> Explain Decision Support System (DSS)
> Identify the different types of DSS
> Describe the tools and techniques supporting DSS
> Discuss details of the outsourcing of DSS
> Define Group Decision Support System (GDSS)
9.1 INTRODUCTION
Decision making can be defined as a process of choosing the best al-
ternative amongst all the available alternatives to resolve a particular
problem. The decision-making process includes reasoning ability and
S
knowledge of a high level. In organisations, formerly, this process was
restricted to the top level management, but today, with the decentral-
isation of authority, employees who work at different levels in the or-
IM
ganisation participate in the decision-making process. Every decision
made by an organisation includes a high degree of risk, because an
ineffective decision may harm the performance of the organisation.
DSS is a type of information system that helps in the decision-mak-

M
ing process of an organisation. It helps an organisation to detect the

problem, create alternatives, analyse these alternatives, and choose
the best course of action. Apart from this, DSS also enables an organ-
isation to monitor and control the performance of the selected course
N
of action.
The chapter starts with a discussion on DSS along with its character-
istics. The components of DSSs that generate it along with various
models for understanding are also explained in the chapter. Further,
the chapter elaborates on the classification of DSS and the various
tools and technologies utilised for its functioning. The chapter also
discusses DSS and outsourcing. Towards the end, the chapter ex-
plains Group Decision Support System (GDSS).
INTRODUCING DECISION SUPPORT

9.2
SYSTEM
In an organisation, decisions are made on a daily basis. Some of these
decisions consist of allocating jobs to employees, deciding daily tar-
gets, prioritising daily tasks, etc. In small organisations, a manager is
able to easily take such decisions. However, in a large organisation, it
is difficult for a manager to take instant and spontaneous decisions
such as selecting a suitable vendor for raw material or purchasing a
machine. In these cases, managers need to assess the different options

N O T E S
available, such as different vendors or machines, and select the best

option. DSS is used by organisations to achieve this purpose, because
it helps in storing and analysing the huge databases of large-scale or-
ganisations
DSS is an interactive information system that delivers information to

business experts and managers for making effective decisions. In oth-
er words, it is a computerised information system designed to help in
the decision- making process. DSS provides support to organisations
in the decision-making process by providing useful information. It
helps in gathering, analysing, interpreting, and reporting information
for the selection of the best solution to the business problem. DSS
supports data integration from different sources within the organi-
sation and supplies analytical information, needed to make a better
business decisions.
The advantages of DSS are as follows:
S
It helps the decision-making process of an organisation and en-
ables it to make a better selection from the available outcomes.
IM
It allows the organisation to perform a ‘what-if’ analysis, which
shows a logical view of decision making. DSS not only displays
alternatives but assesses them in coordination with dominant sit-
uations.
It saves the time and effort involved in a business process of an
M
organisation, which leads to enhancement in productivity of the

organisation.
Figure 9.1 shows a DSS:
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Management
Personnel
Management Information System Accounting
Information:
Computer Production
reports
system:
Data model results Decisions
data
what if?
processing Marketing
analysis
Distribution
Other areas
Quantitative
techniques
What-if? analysis
Figure 9.1: DSS

(Source: http://www.emeraldinsight.com/journals.htm?articleid=851021)

N O T E S
DSS is applied in different fields for different purposes. Some of the

applications of DSS are as follows:
Clinical DSS (CDSS) is a DSS used for medical diagnosis.
DSS is also used in business and management. Executive dash-
board and other business performance software help in taking de-
cisions faster, identifying negative trends, and allocating business
resources in an efficient way.
DSS can be applied in production and marketing of agricultural
products. For instance, the DSSAT4 package enables quick assess-
ment of several agricultural production systems for supporting the
decision-making at the farm and policy levels.
Modern DSS addresses all the aspects of forest management.
These aspects include log transportation, harvest scheduling to
sustainability, and ecosystem protection.
S
Another application of DSS is seen in the form of the Canadian
National Railway system. With the help of DSS, Canadian Railway
is able to reduce the incidence of derailments at the same time
IM
other companies were experiencing an increase.
DEFINITION
According to Hicks, “DSS is an integrated set of computer tools that

M
allow a decision-maker to interact directly with computers to create

information useful in making decisions”.
According to Keen and Scott-Morton (1978), “A DSS couples the in-

N
tellectual resources of individuals with the capabilities of the comput-

er to improve the quality of decisions. It is a computer-based support
system for management decision makers who deal with semi-struc-
tured problems”.
9.2.1 EVOLUTION OF DSS
Do you know when DSS made its first appearance in the market? The
concept of DSS was introduced by Meador and Ness (1974) in their
article, ‘An Application to Corporate Planning’. In ‘A Study of Computer
Aided Decision Making in Organisations’, Keen has stated that there
are two main areas of research from where concepts of decision sup-
port have developed. The first area comprises research about organi-
sational decision making, and the second contains research in the field
of technology, which is associated with interactive computer systems,
between 1950s-1960s.
The initial involvement in this field turned out as a classic manage-

ment information system, which was able to provide pre-defined man-
agement reports to support decision making processes. This develop-
ment introduced DSS with ad hoc and interactive support in decision

N O T E S
making by 1970. A research was conducted in this field to update the

DSS with advanced technology. The rising of micro-computers and
advanced operating systems by the 1980’s modified DSS with more in-
teractive system development. Using artificial intelligence, the trend
of a knowledgeable system was developed. In 1987 a breakthrough
was achieved with successful application of Gate Assignment Display
Systems (GADS) in the aviation industry. In this system, the airport
schedule was integrated, which helped in reducing travel delays.
In the 1990’s, changes occurred in technology from mainframe-based

DSS to client-server-based DSS. The desktop OLAP (Online Analytical
Processing) tools were introduced. Other than this, an object-oriented
technology was also introduced by the vendors to create a technology for
reusable decision-support capabilities. In 1994, the network infrastruc-
ture was upgraded by many organisations. According to Powell, Data-
base Management System (DBMS) vendors realised that decision sup-
port differs from Online Transactional Processing (OLTP). They started
S
the use of real OLAP capabilities into their databases. In 1995, data
warehousing and the World Wide Web started to influence practitioners
and academics who were interested in decision support technologies.
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9.2.2 COMPONENTS OF DSS
Nowadays, many organisations are dependent on numerous decision

support tools, techniques, and models to perform their daily business
M
operations. DSS is able to facilitate the decision-making process of an

organisation due to the various components involved in it. These compo-
nents perform different types of work and facilitate the decision-making
process of an organisation. Figure 9.2 shows the components of DSS:
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Database Management System
Knowledgebase Management System
Model Management System
User Interface Management System
Figure 9.2: DSS Components
The different components of DSS are discussed as follows:

Database Management System: Database is a collection of all the
data obtained from various internal and external sources by an or-

N O T E S
ganisation to take sound business decisions. However, managing

huge databases manually is not possible for an organisation. Thus,
organisations employ DBMS for managing huge databases, so that
it can be used while taking various business decisions. It also helps
in reducing cost and data redundancy and increasing data control
and sharing. There are five different data models for the database
component of DSS. These are record model, relational model, hi-
erarchical model, network model, and rule model. The record of
flat file model is common in DSS, which uses time series data.
Knowledgebase Management System: It provides intelligence
and support for collecting useful information. A large number of
decisions are made on a day-to-day basis, which range from simple
to complex. These decisions involve the use of knowledge, which
forms the basis of the decision-making process. A billing and doc-
ument management system is an example of Knowledgebase Man-
agement System.
S
Model Management System: It provides various techniques and
skills to produce reliable, insightful, and useful results. A model is
the abstract representation for any subject or thing. The modelling
IM
component gives decision makers the ability to analyse the prob-
lem. It supports by giving access to various models for decision
support. Various techniques provided by DSS may include statisti-
cal method, sensitivity analysis, and computer simulation.
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User Interface Management System: It is a framework where

an interaction between human beings and computers takes place.
User interface refers to a system that provides a means of:
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Input: Allows users to manipulate the system

Output: Allows the system to give the results of the user’s ma-
nipulation
9.2.3 DSS ARCHITECTURE
DSS architecture is formed by including the structure of dialogue

management and database management. There are four components
of DSS architecture, which are as follows:
DSS Network: It involves multiple dialogues, modelling, and data-
base components, which are able to communicate with each other
through a network interface.
DSS Bridge: It is a standard interface with local dialogue and
modelling components, which are able to link modelling and data-
base components remotely.
DSS Sandwich: It consists of a single dialogue and database com-
ponent, where multiple-model components are linked with the ar-
chitecture.

N O T E S
DSS Tower: It involves more vertical components, called tiers,

with tools for data extraction. A DSS tower integrates diverse da-
tabase components. The rest of the tower architecture is similar to
a network structure.
9.2.4 ANALYTICAL MODELS IN DSS
Analytical models are mathematical models used for determining the

relationship between the variables in a data. In DSS, four types of an-
alytical models are used, which are discussed as follows:
Goal-seeking Analysis: It allows reversing the process done with
what-if and sensitivity analysis. This analysis starts with determin-
ing the goal that is the desired result and then identifying the val-
ues of the variables. It is also called ‘how-can’ analysis, because it
facilitates the analysis of how the desired outputs can be achieved
with the given variables of input.
S
What-if Analysis: It supports the capability of conditional analysis
of the available alternatives. Users of DSS can analyse the rela-
tionship among variables to arrive at the best productive decision
IM
alternative. For example, the change in the level of inventory pur-
chased is related with its excess and shortage. With the use of DSS,
a production manager can make decisions about inventory to be
ordered.
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Sensitivity Analysis: It is a special type of what-if analysis. This

system allows estimating the effect of change in one variable with
respect to change in another variable. This process can be repeat-
edly analysed. These systems are of major help when any of the
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factors are supposed to be constant, or when decision makers are

not sure about the assumptions made in the process of decision
making. For example, while deciding about the inventory level, a
decision maker can use one spreadsheet to do a what-if analysis
and can use another spreadsheet to check the different options
analysed.
Optimisation Analysis: It is a complex goal-seeking analysis. In
this analysis, there is no specific goal determined. The goal or de-
sired output is to be optimised with the value of variable under
certain conditions. This process is repeated till the desired value
of variables is derived. For example, the lowest cost of material
purchased can be determined keeping the optimised quality and
price of material.
9.2.5 CHARACTERISTICS OF DSS
DSS is a computer-based system that supports the decision making

process of an organisation. Some of its characteristics are discussed
as follows:

N O T E S
DSS software is able to interact with the end user while providing
information. This feature increases its efficiency from just being a
provider of reports to a provider of interactive support for business
professionals. It could select relevant data from among the entire
data store to compile it while providing information support.
DSS is a knowledge-based system, thus, it acts as a storage of
shared knowledge from individual users, experts, and various
business models for identifying and solving problems, and making
decisions.
DSS helps in maintaining the integrity of data along with flexibil-
ity, so that it can match the decision maker’s choice, storing and
retrieving the data and ensuring the consistency and accuracy of
the collected data.
DSS stores information in a powerful database, which can be eas-
ily distributed and is accessible to individuals throughout the or-
S
ganisation. DSS also helps in an easy access to historical informa-
tion related to various decisions made by an organisation.
DSS reduces wastage of time and energy. In DSS, data is directly
IM
entered into the software, which helps in reducing the possibility
of miscalculation and errors.
DSS helps in analysing the future in a given set and trend of cir-
cumstances with its reasoning capability. In a given trend of mar-
M
ket situations, a DSS can forecast a market’s bulls and bears in the
coming month.
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1. What is the model management system?

2. DSS Tower is one of the components of DSS. (True/False)
ACTIVITY
Using the Internet, identify a manufacturing organisation that has

derived benefits by implementing DSS.
9.3 TYPES OF DSS

DSS is implemented by an organisation for different purposes. For
example, an organisation that exists only online requires a system that
helps it in taking decisions related to customers and Web technology.
Based on the purpose of implementation, DSS can be categorised into
different types, as shown in Figure 9.3:

N O T E S
Model-driven DSS
Communication- driven DSS
Types of DSS
Data-driven DSS
Document-driven DSS
Knowledge-driven DSS
Web-based DSS
Figure 9.3: Classification of DSS
The different types of DSS are discussed as follows:

Model-driven DSS: It manipulates data to generate statistical and
financial reports as well as simulation models. This helps decision
makers in analysing the decisions and making choices among dif-
ferent alternatives. The model-driven DSS follows what-if analysis
S
as an analytical tool. This type of DSS is helpful in analysing the
effect of change in certain variables towards the efficiency of busi-
ness. It can be used on a standalone PC, client/server, or the Web.
IM
Some examples of model-driven DSS are statistical, financial, op-
timisation and/or simulation models.
Communication-driven DSS: It enhances decision making by facili-
tating a free flow of information among groups and people. This type
of DSS basically supports group decision making. This type of DSS
M
can be implemented by using the Web or client-server technology.

The communication-driven DSS can range from a simple e-mail to
a complex Web conferencing application. Examples of communica-
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tion-driven DSS are online chats, collaboration, and meetings.

Data-driven DSS: It focuses mainly on internal as well as external
data for decision making, which is obtained from data warehouses.
Managers and other staff members largely depend on data-driven
DSS, because they consider the database useful for making differ-
ent types of decisions. This type of DSS can be implemented by
using a mainframe or client-server technology. This system utilises
online analytical processing tools for data analysis. Examples of
data-driven DSS are Geographic Information System (GIS), which
represents geographical data through maps.
Document-driven DSS: It is common for large user groups that
serve the purpose of searching Web pages and documents on a de-
fined set of keywords. This type of DSS converts documents into
useful data for business. The document-driven DSS uses data that
cannot be easily standardised and stored. It utilises the different
forms of data such as oral, written, and visual. Oral data is derived
basically from conversations. Written data is based on all types
of written documents, such as reports, e-mails, and other written
correspondence, while visual data can be obtained from TV com-
mercials and news reports. The data obtained from these sources
is not standardised. Thus, mangers need DSS tools to convert this
data into meaningful information.

N O T E S
Knowledge-driven DSS: It provides advice related to various

business decisions. It is implemented by using client/server sys-
tems. Knowledge-driven DSS is usually designed to recommend
actions to users. It helps in analysing huge amounts of data for de-
termining the hidden patterns and recommendations. An example
of knowledge-driven DSS is a diagnostic system used in labora-
tories for determining the disease of a patient, which enables the
doctor to suggest the best treatment for the disease.
Web-based DSS: The DSS that uses a Web browser is known as a
Web-based DSS. All types of DSS can be Web based. The technolo-
gies used to implement a Web-based DSS are client/server system
and the Web. These are operated through the interface of a Web
browser, even though the data is confined to a data warehouse.
3. _________________ focuses mainly on internal as well as
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external data for decision making, which is obtained from
data warehouses.
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4. Mention the technologies used to implement Web-based DSS.
ACTIVITY
Using the Internet, identify an example of Web-based DSS in a re-

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al-life scenario.
TOOLS AND TECHNOLOGIES

9.4
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SUPPORTING DSS
Various tools and technologies are used for making the working of DSS
easy and effective. Some of these tools and technologies are shown in
Figure 9.4:
Extraction, Transformation,
and Loading (ETL)
Online Analytical
Processing (OLAP)
Relational Online Analytical

Processing (ROLAP)
Multidimensional Online Analytical

Processing (MOLAP)
Hybrid Online Analytical

Processing (HOLAP)
Dialogue Management
Figure 9.4: Tools and Technologies Supporting DSS

N O T E S
The tools and technologies supporting DSS are discussed as follows:

Extraction, Transformation, and Loading (ETL): The ETL pro-
cess helps in identifying the required data taken from different
sources such as database systems and the applications of data-
base. This data is then extracted from a source to transform it
for use. Depending on the source system’s capabilities (for exam-
ple, operating system resources), some transformations may take
place during this extraction process. After extracting data, it has to
be physically transported to the target system or an intermediate
system for further processing. Depending on the chosen way of
transportation, some transformations can be done during this pro-
cess too. For example, an SQL statement, which directly accesses
a remote target through a gateway, can concatenate two columns
as part of the SELECT statement, which leads the manager to take
a particular decision.
Online Analytical Processing (OLAP): It is a significant improve-
S
ment in model-based management, which manipulates data from
a variety of sources that has been stored in a static data warehouse.
The software can cause various views and representations of the
IM
data, and this helps in making the context explicit. OLAP can pull
the data, create pictures, and make the user see the model run. It
creates various models and helps in finding out the best. It facili-
tates analysis of information presented in multidimensional views
and hierarchies.
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Relational Online Analytical Processing (ROLAP): It is useful

when we need to handle large data and try to leverage functional-
ities inherent in the relational database. This methodology relies
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on manipulating the data stored in the relational database to give

the appearance of traditional OLAP’s slicing and dicing function-
ality. In essence, each action of slicing and dicing is equivalent to
adding a “WHERE” clause in the SQL statement.
Multidimensional Online Analytical Processing (MOLAP): It
stores data in a multidimensional cube. It gives excellent perfor-
mance and can perform complex calculations. In a management
decision support system, the managers need to look into the sum-
mary rather than the details report.
Hybrid Online Analytical Processing (HOLAP): It is another
technological attempt to pick out the advantages of MOLAP and
ROLAP and combine those in this tool. HOLAP utilises cube tech-
nology for performing with speed. Whenever information detail is
required, HOLAP is able to “drill through” from the cube into the
underlying relational data.
Dialogue Management: It is the hardware and software compo-
nent that creates the user interface for the DSS. Software support
for dialogue is in terms of packages. It can be accessed through
high-end languages and can be used to construct the user interface

N O T E S
and data definition language that describes the dialogue compo-

nent of DSS architecture. It also focuses on command language and
menu dialogues that create a restrictive context for building DSS.
5. ETL stands for which of the following?

a. Extraction, Transformation, and Loading
b. Extraction, Transformation, and Levelling
c. Extraction, Transformation, and Landing
d. Extraction, Transformation, and Locking
6. ______________ is the hardware and software component that
creates the user interface for DSS.
S
ACTIVITY
Using the Internet, find out an example wherein ETL is used as a

supporting technology for DSS.
IM
9.5 DSS AND OUTSOURCING
Full time resourcing remains viable for only large business organisa-
M
tions, where the range of research and development can justify the
ongoing investment. To streamline business processes, organisations
can outsource activities that are not considered core business func-
tions. In many organisations, software development is considered a
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non-core activity. The term ‘software acquisition’ has been used to

describe situations where a customer contracts with a software de-
velopment organisation for the complete development of a software
product. Outsourcing involves contracting with outside consultants,
software houses, or service bureaus to perform system analysis, pro-
gramming, or other DSS-development activities. The outsourcer
should be evaluated as a long-term asset and a source of ongoing value
to the organisation.
Some of the benefits of outsourcing of DSS projects are:

It facilitates low-cost development of products/services.
It provides access to expertise on new technologies.
It allows organisations to release resources for other projects.
It enables organisations to focus on specialised business processes
instead of relative business processes.
Outsourcing of DSS has become risky in sensitive industries, such

as defence and healthcare, due to regulations set by the government
such as Health Insurance Portability and Accountability. Most of these
risks are as follows:

N O T E S
An organisation relinquishes control of an important capability to

an outside organisation.
Contracts for DSS services may be long term, and this may block
the organisation into a particular service provider.
Relying on external sources for new and complex techniques can
lead to low knowledge among in-house staff.
Small and medium-sized organisations can outsource the operation

of some decision-support services, provided they maintain control of
decision support data. Outsourcing of decision-support services has
been there since the early days of DSS. Time sharing provided access
to capabilities when organisations could not afford to provide DSS in-
house. From a managerial perspective, outsourcing avoids the need to
directly manage IT, and it may be more cost effective than in-house IT.
However, outsourcing may create strategic vulnerabilities. Increasing
the strategic vulnerability of an organisation because of short-sighted
S
outsourcing decisions is definitely undesirable.

IM
7. Outsourcing of DSS projects allows organisations to release
resources for other projects. (True/False)
8. Outsourcing of DSS is considered risky for the healthcare
sector. (True/False)
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ACTIVITY
Using the Internet, find out two organisations that have outsourced
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DSS.
9.6 GROUP DECISION SUPPORT SYSTEMS

Group Decision Support System refers to an interactive comput-
er-based system designed for supporting decisions taken by a group
or team instead of an individual. It is important for decision makers
to select the most suitable method of decision making and maintain
proper interaction with other decision makers of the group. GDSS
enables individuals involved in the decision-making process to com-
municate and exchange knowledge among each other. For example,
Hewlett Packard (HP) has used GDSS for solving the communication
issues among its engineers. This arises because they work in different
countries and locations and meet once a year. Thus, they are unable
to get suggestions or discuss any issues or new technology with each
other. GDSS enables these engineers to conduct frequent meetings
using electronic conferences. In such conferences, they can discuss
professional and organisational issues, which further help them devel-
op better products for the organisation.

N O T E S
Some of the characteristics of GDSS are as follows:

An organisation can design GDSS according to the requirements
of the group involved in the decision-making process.
GDSS enables group communication, that is, it provides interac-
tive support to the whole group or team of decision makers. This
is more practical, because most of the time, decision making is a
group task in business. All the participants in decision making can
give comments at the same time.
GDSS helps the group or team members to comment on an issue
without displaying his/her identity.
GDSS involves techniques that improve coordination among
group members in an organisation. In this way, it improves deci-
sion making.
GDSS involves an automated system for record keeping and main-
S
taining. GDSS supports decision making by providing records au-
tomatically whenever required.
GDSS helps a group to make efficient decisions without incurring
IM
heavy costs.
Applications of GDSS are as follows:

A common example of GDSS is the file drawer system, which acts
as a data access model. Individuals using file drawer system de-
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pend on their computers for getting information that can be used

for making educated decisions.
Suggestion model is another example of GDSS. Computer use
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available data for making suggestions to potential methods for

completing a task.
Accounting models, a GDSS model, is commonly used by groups
that perform risk management functions. This system determines
the outcomes of various decisions. These systems are used by
accountants and financial planners while developing a financial
strategy.
Representational GDSS is used by groups that are able to create
simulations of hypothetical situations.
9. __________________refers to an interactive computer-based

system designed for supporting decisions taken by a group or
team instead of an individual.
ACTIVITY
Using the Internet, identify the application of GDSS in a service

organisation.

N O T E S
9.7 SUMMARY
DSS is an interactive information system that delivers information
to business experts and managers for making effective decisions.
The different components of DSS are DBMS, knowledgebase
management system, model management system, and user inter-
face management system.
The four components of DSS architecture are DSS network, DSS
bridge, DSS sandwich, and DSS tower.
DSS can be categorised into different types: model-driven DSS,
communication-driven DSS, data-driven DSS, document-driven
DSS, knowledge-driven DSS, and Web-based DSS.
Tools and technologies supporting DSS are ETL, OLAP, ROLAP,
MOLAP, HOLAP, and dialogue management.
Outsourcing involves contracting with outside consultants, soft-
S
ware houses, or service bureaus to perform system analysis, pro-
gramming, or other DSS-development activities.
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GDSS refers to an interactive computer-based system designed
for supporting decisions taken by a group or team instead of an
individual.
M
KEY WORDS
Artificial Intelligence: A system characteristic that allows it to

work intelligently in decision-making situations with the help of
its knowledge base and technical capabilities.
N
Online Transactional Processing (OLTP): It is a real-time pro-

cessing business transaction with the help of the Web.
Client-server Technology: An application that divides tasks or
workload between the service providers (servers) and request-
ers to access the service (clients).
SQL: A standard computer language used for accessing and
manipulating databases.
Outsourcing: The contracting of non-core business processes
by an organisation to another organisation to reduce its cost
and use resources for other purposes.

1. Explain the concept of DSS.
2. What are the different types of DSS?
3. Explain the different tools and technologies supporting DSS.
4. Discuss whether outsourcing of DSS is effective.

N O T E S
Topic Q.No. Answers

Introducing Decision 1. Model management system is a
Support System component of DSS that provides
different techniques and skills to
produce reliable, insightful, and
useful results.
2. False
Types of DSS 3. Data-driven DSS
4. Client/server system and the Web
Tools and Technologies 5. a. Extraction, Transformation,
S
Supporting DSS and Loading
6. Dialogue management
IM
DSS and Outsourcing 7. True
8. True
Group Decision Support 9. Group Decision Support System
Systems (GDSS)
M

1. DSS is an interactive information system that delivers information
to business experts and managers for making effective decisions.
N

2. The different types of DSS are model-driven DSS,
communication-driven DSS, data-driven DSS, document-driven
DSS, knowledge-driven DSS, and Web-based DSS. Refer to
section 9.5.
3. Different tools and technologies supporting DSS include ETL,
OLAP, ROLAP, MOLAP, HOLAP, and dialogue management.
4. Outsourcing of DSS has become risky in sensitive industries,
such as defense and healthcare, due to regulations set by
the government such as Health Insurance Portability and
Accountability. Refer to section 9.7.

N O T E S
SUGGESTED READINGS
Power, D. J. (2002). Decision Support Systems: Concepts and Re-
sources for Managers. West Port, USA: Greenwood Publishing
Group.
Ravindranath, B. (2003). Decision Support Systems and Data
Warehouses. Daryaganj, New Delhi: New Age International (P)
Ltd.
E-REFERENCES
Decision Support System. Retrieved from http://it.toolbox.com/
wiki/index.php/Decision_Support_System.
Group Decision Support Systems. Retrieved from https://sites.
S
google.com/site/groupdssteam/group-decision-support-systems.
IM
M
N

CASE STUDY
N O T E S
DECISION MAKING IN HEALTHCARE SECTOR
In healthcare, decisions are primarily of two types, namely lower

level decisions and higher level decisions. The lower level deci-
sions are related to the patient management, diagnosis and treat-
ment, record keeping, finance and inventory management. These
decisions are taken by the doctors and nurses. On the other hand,
the high level decisions are related to the laboratory applications
or medical imaging applications. These decisions are taken by the
management of the hospital along with its owner. Numerous hos-
pitals and nursing homes employ different DSS for taking the two
types of decisions. As a result, it becomes difficult to integrate the
information and data of the separate DSS and provide accurate
and up dated information to the customer.
To overcome this problem, DSS was designed by UK General
S
Practice and is named as Prescribing Rationally with Decision
support In General Practice Study (PRODIGY). This system is
able to sustain all types of decision making in the healthcare sec-
IM
tor. PRODIGY helps the healthcare sector in the following ways:
It provides quick access to the information related to patients,
including their symptoms and their medical history.
It helps in keeping track of billing, accounts receivable, pay-
M
roll and accounts payable.

It also provides information on the medical insurance of the
patients, including their policy and payment options.
N
It helps in diagnosis by providing a dictionary of health prob-

lems to the healthcare professionals.
QUESTIONS
1. What is the requirement of DSS in the healthcare sector?

2. Do you think DSS is effective in healthcare? Comment.

N
M
IM
S
C H
10 A P T E R
CUSTOMER RELATIONSHIP MANAGEMENT
CONTENTS
10.1 Introduction
10.2 Define CRM
S
Activity
IM
10.3 Components of CRM
Activity
10.4 Three Phases of CRM
M
Activity
10.5 Benefits and Challenges of CRM
N
Activity
10.6 New Trends in CRM
Activity
10.7 Summary

N O T E S
CRM AT SINGAPORE AIRLINES
Singapore Airlines (SIA) is one of the world’s largest airlines,

which is well known for its superior customer services. It started
non-stop trans-Pacific flights from Singapore to Los Angeles in
2004. These flights are convenient and provide efficient customer
services. SIA interacts with its customers on a regular basis with
the help of its more than 25,000 employees. In addition, it ensures
comfortable journeys, better customer services, and quality food
for passengers, irrespective of business or economy classes.
However, increasing the competition in the airline industry led to

a number of challenges for the organisation. Some of these chal-
lenges are adoption of the same customer strategies, reduction
in fares, and heavy discounts on tickets by its competitors. More-
over, competitors of SIA also started taking customer feedback
S
on a regular basis to make significant improvements in their ser-
vices. This has resulted in the loss of several valuable customers
of SIA, because they switched to other brands. To overcome these
IM
challenges, SIA decided to implement a CRM strategy to bring
back the confidence of its customers. This strategy focused on the
following aspects:
Understanding customer needs and preferences clearly
M
Employing people who are efficient and committed towards

the organisation’s customer philosophy
Organising training and development programmes for em-
N
ployees to develop their skills

Maintaining a smooth flow of communication within and out-
side the organisation
Offering special discounts and concessions on fares to customers
Asking customers to provide their valuable feedback
Focusing on creating value for customers and maintaining
long-term relationships with them
SIA has changed the whole flight experience by focusing on cre-

ating customer value. In addition, regular training and develop-
ment programmes of employees help in dealing with customers
in a better way.

CUSTOMER RELATIONSHIP MANAGEMENT 239
N O T E S
LEARNING OBJECTIVES
After studying this unit, you will be able to:

> Define CRM
> Identify the different components of CRM
> Explain the three phases of CRM
> Identify the benefits and challenges of CRM
> Determine the new trends in CRM
10.1 INTRODUCTION
While taking a decision, an organisation needs to ensure that the deci-
sion should have a positive impact on its customers. If the customers
are not satisfied with the decision or if the decision puts a negative ef-
S
fect on the customer’s perception about the organisation, the survival
of the organisation in the long-run is difficult. This is because, in such
a case, customers start switching to other organisations for products
IM
and services.
After realising the importance of customers, organisations started es-

tablishing a unique brand identity and providing excellent customer
service for grabbing customer attention. Organisations that were ini-
M
tially focused on earning high profits are now shifting their priority to-
wards managing cordial relationships with their customers. For this,
organisations need to interact with customers regularly to understand
their needs, tastes, and preferences.
N
Customer Relationship Management (CRM) refers to a tool that en-

ables an organisation to strengthen relationships with its customers.
It helps an organisation to identify the needs and expectations of cus-
tomers and fulfil them. This helps in achieving a high level of cus-
tomer satisfaction. In other words, CRM is a business strategy that
emphasises the retention of customers by meeting or exceeding their
expectations.
The chapter begins by explaining the concept of CRM in detail. Next,

it discusses the components of CRM. In addition, the chapter elabo-
rates on the three phases of CRM. It also discusses the benefits and
challenges of CRM. In the end, the chapter explains the new trends in
CRM.
10.2 DEFINE CRM

You might have received calls from your mobile service provider re-
garding the usage of your mobile number, including information, such
as average number of STD calls and local calls you have made from
your mobile in a period of one month, offering you plans and offers

N O T E S
based on this information. How are these service providers able to

provide such detailed information about your number when they have
so many customers in your locality itself? How are they able to main-
tain such a huge database and call the right person with the right in-
formation? This is possible only because of CRM.
CRM refers to a business strategy that enables organisations to bet-

ter serve the needs of their customers, improve customer service, and
achieve a high level of customer satisfaction. This further helps in
maximising customer loyalty and retention. It encompasses a number
of technologies used to streamline customer interaction, which helps
in finding, acquiring, and retaining customers. The CRM system of an
organisation integrates information from all data sources to provide a
holistic view of each customer in real time.
However, the implementation of CRM involves high cost and efforts,

because organisations need to spend a large amount in purchasing an
S
appropriate CRM system, hiring consultants, and training employees.
Thus, it is essential for an organisation to establish clear CRM objec-
tives before its implementation. Some of these objectives include the
IM
following:
Streamlining marketing and sales processes
Providing better customer services
Acquiring new customers and retaining existing ones
M
Improving organisational efficiency and productivity

Reducing operational costs
N
DEFINITION
According to Gartner, “CRM is a business strategy designed to opti-

mise profitability, revenue, and customer satisfaction”.
As per Price Waterhouse Cooper (PWC), “CRM is a business strat-

egy that aims to understand/appreciate, manage, and personalise the
needs of the organisation’s current and potential customers”.
According to Jill Dyche, “CRM is the infrastructure that enables the

delineation and increase in customer value and the correct means by
which to motivate valuable customers to remain loyal and buy again”.
According to Paul Greenberg, “CRM is a philosophy and a business

strategy, supported by a system and a technology, designed to improve
human interactions in a business environment”.

N O T E S
1. Which of the following is not an objective of implementing a

CRM system?
a. Collecting and storing customer-related information
b. Acquiring new customers
c. Providing better customer services
d. Increasing the sales of the organisation
ACTIVITY
Using the Internet, identify a manufacturing organisation that de-

rived benefits by implementing CRM systems.
10.3 COMPONENTS OF CRM
S
IM
CRM is not a single system; it includes various components that work
together to build healthy relationships with customers. These compo-
nents are shown in Figure 10.1:
M
CRM Software
N
Business Processes
Users
Hardware and Operating System
Figure 10.1: CRM Components
The components of CRM are discussed as follows:

CRM Software: It automates business processes related to func-
tional areas of CRM such as marketing, customer support, sales,
etc. The CRM software includes various modules such as customer
contact management, direct marketing, sales automation, call cen-
tre applications, and helpdesk.
Business Processes: The business processes of an organisation
can be divided into three levels, namely, strategic planning, man-
agement control, and operational control. An ERP system stream-

N O T E S
lines the business processes at all the levels of an organisation,

while the CRM system improves business processes at manage-
ment control and operational control levels.
Users: The CRM system cannot perform on its own unless it is
operated by its users. The main users of the CRM system are em-
ployees, customers, and business partners.
Hardware and Operating System: Generally, CRM software runs
on UNIX, an operating system. Besides, Windows NT and Linux
are also used for running CRM software.
2. What is the function of CRM software?

3. A CRM system can run on the Linux operating system.
(True/False)
ACTIVITY
S
IM
Using the Internet, identify the hardware and operating system re-
quirements for implementing a Microsoft CRM system.
M
10.4 THREE PHASES OF CRM

Most organisations implement CRM in phases. This is done to deter-
mine whether implementing CRM is beneficial for their organisation
N
or not. Generally, CRM is implemented in three phases, which are dis-

cussed as follows:
Acquire: A new customer is an important source of revenue for
an organisation. Therefore, it is essential for any organisation to
acquire new customers. Customer acquisition is a process of ob-
taining new customers or converting prospects into customers. It
involves identifying processes and procedures to locate, qualify,
and win new customers. The customer acquisition process of an
organisation can be successful if an organisation focuses on the
needs and expectations of prospective customers and establishes
a rapport with them.
Retain: Customer retention is all about maintaining long-term
business relationships with customers. In other words, customer
retention is an activity that is undertaken by an organisation to
reduce customer defections. This is possible if an organisation fo-
cuses on fulfilling the requirements of customers and exceeding
their expectations.
The customer retention activity of an organisation begins by es-
tablishing a rapport with customers and continues throughout the

N O T E S
lifetime of the relationship. The ability of an organisation to retain

its customers is not only related to the quality of its products but
also related to the service extended by the organisation towards
their existing customers and the reputation that the product builds
in the market.
Develop: Customer development is the process of increasing the
value of retained customers. Many organisations try up-selling
and cross-selling their products for enhancing the value of their
customers. Cross-selling involves selling additional products or
services to existing customers, while up-selling is an attempt to
offer higher-priced products to existing customers. Generally, cus-
tomers do not give any positive response to products that are not
related to their requirements. In such a case, an organisation may
need to go for a down-sell option, which involves providing prod-
ucts at lower prices.
S
4. Converting prospective customers into new customers using

IM
marketing tools is called ___________________.
5. Cross-selling is the selling of higher-priced products to existing
customers. (True/False)
M
ACTIVITY
Using the Internet, identify an organisation and explain how it has

N
implemented CRM in the three phases.
10.5 BENEFITS AND CHALLENGES OF CRM

CRM helps an organisation to achieve higher customer satisfaction
and retain its customers. Apart from this, it provides several other
benefits to an organisation, which are listed as follows:
Gathering and storing information related to customers
Creating effective communication channels between the customer
and the organisation
Maintaining detailed information about every customer
Identifying new sales opportunities by analysing the changing cus-
tomer needs and preferences
Improving market share and profit margins by acquiring more
customers
Enhancing customer loyalty
Fulfilling customer requirements

N O T E S
Though CRM has so many benefits, all organisations are not able to
implement CRM and derive the required benefits. This is because of
the different challenges that an organisation needs to face while im-
plementing a CRM system. Some of these challenges are shown in
Figure 10.2:
Lack of Guidance
Integration Problem
Inaccurate Data
S
Employee Problems
IM
Figure 10.2: Barriers to CRM Implementation
The barriers to CRM implementation are explained as follows:

Lack of Guidance: This barrier occurs when CRM objectives are
M
not defined before its implementation. Lack of guidance may fur-

ther lead to conflicts among the employees of different depart-
ments. In such a case, CRM cannot be implemented properly in
N
an organisation. Therefore, it is essential for an organisation to

establish clear CRM objectives, which help its employees in under-
standing the purpose of CRM implementation and taking actions
accordingly.
Integration Problem: It occurs during the collaboration of differ-
ent business processes of an organisation. All the business prob-
lems of an organisation cannot be solved by using a single CRM
application. Therefore, an organisation needs a customised CRM
application to solve its problems. In such a case, it becomes diffi-
cult for CRM vendors to integrate all the business processes of an
organisation and provide a single solution.
Inaccurate Data: A successful implementation of a CRM system
requires accurate data to get precise results. Any inaccuracy in
data may lead to incorrect conclusions.
Employee Problems: Employees are generally reluctant to adopt
change in their working style. Sometimes, employees think that
CRM is not beneficial for their success. This lack of support from
employees becomes a hurdle in a successful CRM implementation.

N O T E S
6. A successful implementation of the CRM system requires

accurate data to get precise results. (True/False)
7. How is lack of guidance a barrier to CRM implementation?
ACTIVITY
Using the Internet, find out a real-life example of CRM implemen-

tation failure. Also, identify the reasons for the same.
10.6 NEW TRENDS IN CRM

CRM is a business strategy used by an organisation to develop strong
S
relationships with its customers. However, in the past few years, CRM
solutions have been evolving rapidly to keep pace with the latest ad-
vancements in the marketing strategy of organisations.
IM
One of the major emerging trends in CRM is that organisations have
started investing in their most important assets, which are custom-
ers. As lean manufacturing techniques force production departments
to become more customer oriented, CRM is driving sales, marketing,
and business development departments to have a deep understanding
M
of customer priorities. With this renewed focus, organisations are able

to better serve the needs of their customers and retain them.
Some of the emerging trends in CRM, which many organisations are

N
using to increase their customer base and maximise their return on

investment, are as follows:
Social CRM: It is an emerging trend in CRM that is adopted by
many organisations to build long-term relationships with their cus-
tomers. It is an application of social media to manage all customer
interactions. Social CRM helps an organisation to perform sales
and marketing activities through social networking sites such as
Facebook, Twitter, and LinkedIn. Following are the advantages of
social CRM:
Providing better customer support
Managing business processes
Conducting market research
Launching a product
Managing brand reputation
Mobile CRM: It is an application that allows remote employees
to interact with customers and access and update their data, us-
ing mobile devices such as smart phones and tablets. It is widely

N O T E S
used by travel and retail organisations. The advent of a number

of smart phones worldwide has led organisations to use mobile
phones as a key medium for customer engagement. The benefits
of Mobile CRM are:
Allowing an organisation to reach out to its customers quickly
Increasing the sales productivity and effectiveness of an organ-
isation
Helping an organisation in following up processes
Improving lead conversion rates, thereby gaining a competi-
tive edge
Reducing cost associated with sales staff turnover
Global CRM: The world economy has witnessed a frequent shift
in trade patterns and culture. Earlier, countries were confined to
its national territory and were restricted to cross-border trading.
S
However, over the past few decades, cross-border business has ex-
perienced remarkable growth. This growth is contributed to ad-
vancement in communication and information technologies, pri-
IM
vatisation and deregulation of economies, and emergence of global
organisations. CRM in these global organisations has become in-
creasingly significant.
Global CRM (GCRM) is a strategic application of processes and
M
practices for managing relationships between customers and or-

ganisations operating in multiple countries. Handling customers
in a global environment is a challenging task for an organisation
due to differences in customer requirements, level of competition,
N
and regulatory framework.

Today, several organisations have become global, thus, there is
a need to deeply understand the requirements of customers and
maintain effective communication with them. GCRM enables or-
ganisations to identify customer needs and build strong relation-
ships with them. Apart from this, GCRM helps organisations in the
following ways:
Achieving Global Efficiency: Refers to one of the major advantag-
es of GCRM. By expanding globally, an organisation can lower its
costs and improve its performance. In this context, GCRM helps
an organisation to identify the most profitable customers by pro-
viding useful information about them.
Attaining Multi-market Flexibility: Implies that a global organ-
isation needs to respond to changes in the international market.
Therefore, it is essential for a global organisation to understand
the differences among different markets to attain a competitive
edge in the long run. GCRM provides information related to dif-

N O T E S
ferent markets, which helps global organisations to get first-mover

advantages.
Achieving Worldwide Learning: Refers to another important
advantage of GCRM. For achieving a competitive edge, a global
organisation needs to be aware of current trends and the latest
technologies used in the international market. GCRM helps a glob-
al organisation to collect information related to current market
trends.
8. Which of the following is not a new trend in CRM?

a. Mobile CRM
b. CRM software
c. Global CRM
d. Social CRM
S
9. Global CRM helps an organisation to achieve global efficiency.
IM
(True/False)
ACTIVITY
M
Using the Internet, identify an organisation that has implemented

GCRM.
N
10.7 SUMMARY
CRM refers to a business strategy that enables organisations to
better serve the needs of their customers, improve customer ser-
vice, and achieve a high level of customer satisfaction.
The components of CRM are CRM software, business processes,
users, and hardware and operating systems.
CRM is implemented in three phases, which are acquire, retain,
and develop.
CRM helps an organisation to achieve higher customer satisfac-
tion and retain its customers.
Some of the challenges to CRM implementation are lack of guid-
ance, integration problem, inaccurate data, and employee prob-
lems.
Social CRM is adopted by many organisations to build long-term
relationship with their customers.

N O T E S
Mobile CRM is an application that allows remote employees to in-

teract with customers and access and update their data, using mo-
bile devices such as smart phones and tablets.
GCRM is a strategic application of processes and practices for
managing relationships between customers and organisations op-
erating in multiple countries.
KEY WORDS
CRM: A strategy used by organisations for providing better ser-

vices to its customers and increasing the level of customer sat-
isfaction.
Social CRM: An application used by organisations to build
long-term relationships with their customers using social media
websites such as Facebook and Twitter.
S
Mobile CRM: An application adopted by organisations to con-
nect and interact with its customers using mobile devices such
as smart phones and tablets.
IM
Global CRM: An application used by organisations to build re-
lationships with customers located in different geographical ar-
eas.
M

1. Define the term CRM.
N
2. What are the different components of CRM?

3. Discuss the three phases of CRM.
4. What are the new trends in CRM?
Topic Q.No. Answers

Define CRM 1. d. Increasing the sales of organisation
2. CRM software automates the business
process of an organisation related to the
functional areas of CRM.
Components of 3. True
CRM
4. Customer acquisition
Three Phases of 5. False
CRM

N O T E S
Topic Q.No. Answers

6. True
Benefits and 7. Lack of guidance leads to conflicts
Challenges of among employees of different depart-
CRM ments with respect to CRM implemen-
tation, which further hinders the imple-
mentation process.
8. b. CRM software
New Trends in 9. True
CRM

1. CRM refers to a strategy adopted by organisations for building
strong relationships with its customers. Refer to section 10.4.
2. CRM software, business processes, users, and hardware and
S
operating systems are the different components of CRM. Refer
to section 10.5.
IM
3. The three phases of CRM are acquire, retain, and develop. Refer
to section 10.6.
4. The new trends in CRM include Social CRM, Mobile CRM, and
Global CRM. Refer to section 10.8.
M
SUGGESTED READING
10.10
FOR REFERENCE
N
SUGGESTED READINGS
Thomas F. Wallace and Michael H. Kremzar (2001), ERP: Making
It Happen: The Implementers’ Guide to Success with Enterprise
Resource Planning.
Simha R. Magal and Jeffrey Word March (2012), Integrated Busi-
ness Processes with ERP Systems.
E-REFERENCES
What is CRM? Retrieved from http://www.crmasiasolutions.com/
online-business-solutions-articles/6-crm-concepts/76-what-is-
crm-basic-concepts-of-crm-solutions.html.
The CRM Concept. Retrieved from http://www.gallopercrm.com/
en/galloper/concept.php.
HowStuffWorks “Customer Relationship Management (CRM)”.
(n.d.). HowStuffWorks. Retrieved from http://money.howstuff-
works.com/business-communications/sales-technique7.htm

CASE STUDY
N O T E S
CRM STRATEGY OF AMAZON.COM
Amazon.com, Inc. is one of the largest multinational, e-commerce

enterprises with its headquarter in Seattle, Washington. Amazon.
com was initially started as an online book store. However, over the
passage of time, the enterprise expanded its business by introduc-
ing several other products such as DVDs, CDs, MP3, computer soft-
ware, video games, electronics, apparel, furniture, food, and toys.
Amazon.com has achieved a high level of customer loyalty and
satisfaction by providing personalised Web pages and easy selec-
tion of products at low prices. Amazon.com has a large database
of customers. It collects information related to the buying habits
and the last purchasing experience of customers. Using this in-
formation, it provides customised products to its customers and
makes continuous product innovation. The CRM strategy of Am-
azon.com focuses on the following aspects:
S
Collecting useful customer information
Having deep insight into customer needs and expectations
IM
Building a strong and reliable brand
Creating value for customers at each interaction with them
Achieving a high level of customer satisfaction
Generating economies of scale
M
Targeting the mass market for earning high sales revenue

Rating customers on the basis of their current and future
potential
N
Using innovative ways to strengthen customer relationships
For maintaining a sound CRM strategy, Amazon.com has taken

the following measures:
Diversifying into a wide range of products
Delivering more information about products to potential and
existing customers
Enhancing visibility of products on the Internet
Using advanced technology for providing better customer
support
Expanding operations by developing partnerships with other
online retailers and content providers
QUESTIONS
1. How did Amazon.com gain a high level of customer

satisfaction and loyalty?
2. What lessons can new enterprises learn from the success
story of Amazon.com?

C H
11 A P T E R
SUPPLY CHAIN MANAGEMENT
CONTENTS
11.1 Introduction
11.2 Meaning of Supply Chain
S
Activity
IM
11.3 Define SCM
11.3.1 Objectives of SCM
11.3.2 Components of SCM
11.3.3 Difference between Logistics Management and SCM
M
Activity
11.4 Scope of SCM
N
Activity
11.5 Benefits and Challenges of SCM
Activity
11.6 New Trends in SCM
Activity
11.7 Summary

N O T E S
WHIRLPOOL
Whirlpool brand is a household name associated with reliable

household appliances. However, its delivery performance dropped
in the year 2000 and was anything but reliable. The supply chain
was failing to meet expectations, inventory quantities were either
too low or too high, or they had the wrong items in inventory, or
they had the right inventory but delivered to the wrong place.
These inconsistencies were troubling their retail partners as well
as customers. It became clear to executive leadership that these
were supply chain management issues that had to be fixed. Many
of these problems that led to the crisis were a result of the compa-
ny’s geographic expansion and business acquisitions.
Due to these supply chain issues, the company’s overall availabili-

ty rate – which measures, how often a product is in the right place
S
at the right time – was only 83% in 2000. According to industry
standards, this was considered a dismal failure. The unfortunate
irony of the whole scenario was that availability was low even
IM
while the total inventory levels were often too high. In terms of
supply chain management, Whirlpool was at a competitive disad-
vantage.
To solve these problems, the Whirlpool supply chain management

M
and IT teams undertook the mammoth task of replacing their

existing production scheduling and distribution systems with a
streamlined, standardised solution. The new system provided a
centralised platform for master scheduling, inventory planning
N
and deployment planning. It also provided collaborative tools for

forecasting and replenishment. This new supply chain manage-
ment system proved to be efficient and cost effective for all de-
partments of the organisation. While the improved system was
implemented in phases – starting in North America – the initial
enhancements led to dramatic advances in supply chain manage-
ment. With the new system, Whirlpool was able to reduce fore-
casting errors by 50% and inventories of finished appliances by
more than 20%, while saving 5% on warehouse and transporta-
tion costs. Furthermore, its overall availability rate rose from 83%
to 93%, and reached 97% within five years of implementation.
(Source: http://www.usanfranonline.com/resources/supply-chain-management/supply-
chain-management-case-study-whirlpool/#.U66osWS6ZkQ)

SUPPLY CHAIN MANAGEMENT 253
N O T E S
LEARNING OBJECTIVES

> Define the meaning of supply chain
> Describe supply chain management
> Discuss the scope of supply chain management
> Explain the benefits and challenges of supply chain
management
> Discuss new trends in supply chain management
11.1 INTRODUCTION
A supply chain is a network that involves the functions of procure-
ment of raw materials, transformation of these raw materials into in-
S
termediate and finished products, and then lastly distribution of the
final products to customers. A supply chain is a combination of var-
ious facilities like supply, manufacturing, assembly, distribution and
IM
logistics facilities. Supply chain exists in both manufacturing as well
as service sectors.
Supply Chain Management (SCM) is an information system approach

to managing the supply chain procedures like flow of information, ma-
M
terials and services from raw materials suppliers through manufac-

turing units and warehouses to the end customers. SCM has emerged
as the key to increased productivity and competitiveness in manufac-
turing and service enterprises.
N
The major decisions taken during SCM are categorised as follows:

1. Procurement (supplier selection, optimal procurement
policies, etc.)
2. Manufacturing (plant location, product line selection, capacity
planning, production scheduling, etc.)
3. Distribution (warehouse location, customer allocation, demand
forecasting, inventory management, etc.)
4. Logistics (selection of logistics mode, selection of ports, direct
delivery, vehicle scheduling, etc.)
5. Global decisions (product and process selection, planning
under uncertainty, real-time monitoring and control, integrated
scheduling)
As a business idea, the supply chain was developed in 1990s, when

‘logistics’ as a process came to be recognised. An integrated supply
chain was created for the first time ever which enabled the suppliers
to coordinate their information systems with those of their custom-
ers to be able to serve them better. Traditionally, organisations had a

N O T E S
warehouse mentality, with products being hoarded in warehouse as

security of supplies being the main requirement. As warehouses re-
organised, so did the supplies and suppliers. The pace of change in
technology meant that there was no longer security in having supplies
in-house and on the shelf. For example, in the 1990s, price of semicon-
ductor plunged from over $70 each to less than $1 in a single year.
Thus, managing the supply became a prime concern instead of hoard-

ing it and keeping it secure. The supply chain became a threat to com-
peting organisations.
Supply chain management is rapidly emerging as a significant point of

differentiation for organisations that have relied on their own brands
and their own advertising. Earlier supply chain was a work behind the
scene, not visible. Nonetheless now it is moving from behind to the
forefront. The impact of supply chains is rapid and wide spread. Large
companies are being impacted and benefitted by implementation of
S
the supply chain as an agent of change. Supply chain management
is evolving every day. It is becoming a significant part of producing a
branded good or service. With the customers getting more and more
IM
selective and demanding, the supply chain shall be forced to evolve
again.
This chapter starts by introducing the concept of the supply chain

in organisations. Next, it discusses the supply chain management,
M
its objectives and components. Thereafter the chapter discusses the

scope of supply chain management. Next, it explains the benefits and
challenges of supply chain management. Towards the end, some new
trends in supply chain management have been discussed.
N
11.2 MEANING OF SUPPLY CHAIN

According to the Council of Logistics Management, supply chain is
“The process of planning, implementing and controlling the efficient,

cost-effective flow of raw materials, in process inventory, finished goods
and related information from the point of origin to the point of consump-
tion for the purpose of conforming to customer requirements.”
A supply chain is a system or network of facilities in which people,

activities, information and resources are involved to enable a smooth
movement of a product or service from supplier to customer. Specifi-
cally, supply chain encompasses the steps that include procuring raw
materials or natural resources, transforming these materials into in-
termediate and finished products, and then distributing the finished
products to customers. Supply chains exist in both sectors, be it man-
ufacturing or service sector. It is a crucial process in any organisation
as having an efficient and optimised supply chain leads to cost savings
for an organisation. Very often confusion arises between logistics and
supply chain, but they refer to two different scenarios. Logistics refers

N O T E S
to the distribution process within the departments of an organisation

whereas a supply chain includes multiple organisations such as sup-
pliers, manufacturers and the retailers.
If an organisation manufactures a product from raw material pur-

chased from suppliers, and that product is sold to customers then,
simply put, we have a supply chain scenario. Some supply chains are
simple, while others can be rather complex and complicated. The
complexity of a supply chain is directly linked to the size of an organi-
sation and the intricacy and numbers of items that are manufactured.
Supplier
S
Raw Materials
Manufacturing
IM
Distribution
Customer Customer
M
Figure 11.1: Supply Chain

(Source: http://organisations.weber.edu/sascm/)
N
Figure11.1 shows an example of a very simple supply chain. Raw ma-

terial is procured from suppliers, transformed into finished goods in
a single step, and then transported to distribution centers, and ulti-
mately, consumers. A realistic supply chain may have multiple end
products with shared components, facilities and capacities.
A simple supply chain consists of several elements that are linked by

the movement of products along it. They are as follows:
Customer: The customer is the first in the chain of events when he/
she decides to purchase a product that is being offered for sale by
an organisation. The customer comes in contact with the sales de-
partment of the organisation for placing the order for the selected
product. The sales manager enters the sales order for the required
quantity to be delivered on a specific date. If the requested product
has to be manufactured, the sales department forwards the order and
includes a request that needs to be fulfilled by the production facility.
Planning: The sales order containing the request for a product is
combined with other sales orders. At this stage all the sales order

N O T E S
are combined by the planning department and a production plan

is geared up to produce the requested products and fulfil the cus-
tomer’s orders. To start the manufacturing process the company
then has to purchase the raw materials needed.
Purchasing: At this stage, the list of raw materials and services
needed in order to fulfil the customer’s order is sent to the pur-
chase department. The purchase department in turn creates pur-
chase orders for raw materials and services needed. These pur-
chase orders are sent to selected suppliers to deliver the necessary
raw materials to the manufacturing site for the specified date.
Inventory: At this stage, the requested raw materials are received
from the suppliers, checked for quality and moved into the ware-
house. Along with the raw material, an invoice for the supplied raw
material is also sent to the organisation for the delivered items.
The raw materials are stored in the warehouse until they are re-
quired by the production department to initiate the production for
S
the requested product.
Production: At this stage, the production starts in accordance with
IM
the production plan. The raw materials are moved from the ware-
house to the production floor area. Here the products ordered by
the customer are manufactured using the raw materials procured
from the suppliers. After the production is over, the manufactured
product is tested again against the quality standards and stored
M
back in the warehouse till the time of delivery to the customer.

Transportation: This stage comes into the picture after the fin-
ished product arrives in the warehouse. The distribution depart-
N
ment decides the most efficient method of transportation to deliv-

er the products to the customers so that the goods are delivered on
or before the specified date in perfect condition. After the goods
are received by the customer, the organisation sends an invoice for
the delivered products to the customer for receiving the payment.
1. Supply chains exist in both sectors, be it________ or ________.

2. Logistics refers to the distribution process within the
departments of an organisation whereas a supply chain includes
multiple organisations such as suppliers, manufacturers and
the retailers. (True/False)
ACTIVITY
Study the supply chain of a small enterprise and enumerate the

elements that are a part of a simple supply chain. You can utilise
Internet for any searches.

N O T E S
11.3 DEFINE SCM
DEFINITION
According to Institute for Supply Management: put this in a box

as these are definitions
“The design and management of seamless, value-added process across
organisational boundaries to meet the real needs of the end customer”
According to the Supply Chain Council:
“Managing supply and demand, sourcing raw materials and parts,
manufacturing and assembly, warehousing and inventory tracking,
order entry and order management, distribution across all channels,
and delivery to the customer.”
S
Supply Chain Management (SCM) is a specialised process that is im-
plemented in organisations to ensure that their supply chain is ef-
ficient and cost-effective. As we saw in the previous section, supply
IM
chain is the collection of steps that an organisation adopts to trans-
form raw components into the final product. SCM is the combination
of art and science that go into improving the supply chain of the or-
ganisation by finding the raw components it needs to make a required
product or service and deliver it to customers.
M
There are two basic ideas behind the core concept of supply chain
management. The first idea is that behind every product that reach-
es an end user is a cumulative effort of multiple organisations. These
N
organisations form part of what is collectively referred as supply

chain. The second idea is that although supply chains have existed
since a long time, most of the organisations involved in it, have been
concerned about the processes that went on within their “four walls.”
Very few organisations understood, much less managed, the chain of
processes that were required to ultimately deliver the final products to
the customer. This resulted in ineffective and disjointed supply chains.
Thus, SCM is collective management of all supply chain activities to

achieve a singular target of optimising all the links in supply chain.
Organisations that are part of the supply chain must make a conscious
effort to develop and run supply chains in the most effective & efficient
ways possible. SCM activities encompass all the fields from product
development, sourcing, production, and logistics, to the information
system required to coordinate these activities. Thus SCM can also
be defined as the synchronisation of an organisation’s processes and
those of its suppliers to correlate the flow of materials, services, and
the information with customer demand. The organisations that are
part of a supply chain are “linked” together through physical process-
es and information process. Physical processes include manufactur-
ing, movement, and storage of goods and materials. These processes

N O T E S
are more visible part of the supply chain. Then there are informa-
tion processes which are not as visible but very important. These pro-
cesses enable the supply chain partners to coordinate their long-term
plans, and to control day-to-day flow of goods and material through
the supply chain.
11.3.1 OBJECTIVES OF SCM
The primary objective of every supply chain is to maximise the overall

value generated by the system. The value is defined as the difference
between the worth of the final product to the customer and the effort
expended in filling the customer’s request. This value is strongly cor-
related with supply chain profitability, for commercial supply chains,
the difference between the revenue generated by the customer and
the overall cost across the supply chain.
The supply chain is designed with the ultimate objective of maximis-
S
ing efficiencies, reducing costs, and increasing profits, by proactively
ensuring that the right product is delivered at the right place at right
time. The main objective of SCM is to improve the overall organisa-
IM
tion performance and customer satisfaction by improving product
and service delivery to the customer.
A well designed supply chain is expected to perform with the follow-

ing strategic objectives:-
M
1. To maximise overall value generated

2. To look for sources of revenue and cost
N
3. To replenish material and product when required

4. To improve cost quality
5. To shorten time between order and delivery
6. To meet customer demand for guaranteed delivery of high
quality and low cost with minimal lead time
7. To optimise pre and post production levels
8. To reduce transportation costs
9. To provide flexible planning and control mechanism
10. To reducing working capital
11. To be able to take off the balance sheet
12. To accelerate cash-to-cash cycles
13. To increase inventory turns
14. To solve supplier’s problems
15. To improve customer service performance
16. To reduce pre & post production inventory

N O T E S
17. To minimising variance by means of activities like standardisation,

variety reduction, etc.
18. To minimise total cost of operation & procurement
19. To ensure and implement product quantity control
20. To achieve maximum efficiency in using labour, capital & plant
utilisation
21. To design and implement flexible planning and control
procedures
22. To achieve synchronisation
11.3.2 COMPONENTS OF SCM
By now, we know that supply chain management is the management

of the process of converting raw materials into a finished product or
S
service as required by a customer and deliver it to him/her.
There are five basic components of SCM as depicted in Figure 11.2:

IM
Components of Supply Chain Management
M
Planning Sourcing Making Delivering Return

N
Figure11.2: Components of Supply Chain Management
Now, let us discuss these components in the following section:

Planning: It is the first step towards effective management of the
supply chain. It is the strategic activity of SCM. An organisation
must have a perfect plan in place to manage all the resources that
are required to meet the customers demand for their requested
product or service and in turn satisfy the customer. SCM planning
must be carried out in such a way that it is cost effective for the
organisation and deliver high quality product and value to cus-
tomers.
Sourcing: The raw materials procured, to manufacture the prod-
uct for the customers, must adhere to the quality standards fol-
lowed by the organisation. The suppliers or vendors chosen for
delivering the goods and services must be reliable and chosen with
utmost care. To ensure the quality and timely delivery of goods,
supply chain managers must develop a good inter-personal rela-
tionship with vendors. They must also prepare a mutually agreed
upon set of pricing, delivery margin and payment processes with

N O T E S
suppliers. SCM managers must ensure that the vendors supply the
inventory as per the demand and keep a check on the quality of
the material supplied. They should also verify shipments, transfer
them to the manufacturing department and authorise their pay-
ments.
Making: This step involves manufacturing of the required product
from the procured raw material. During this step, the supply chain
managers schedule and manage the activities associated with pro-
duction, testing the end product, packaging it and preparing it for
delivery to the customer. Organisations can measure the product
quality levels, production output and worker productivity during
this step.
Delivering: This step involves selecting an efficient channel for
delivering the finished goods stored in the warehouses to the cus-
tomers. An efficient distribution system is required for perform-
ing this step. The distribution has to be carried out as soon as the
S
product is manufactured and ready in the warehouse. This step
also involves preparation of an invoice for delivered a good to re-
ceive payments from the customers.
IM
Return: This step involves that phase of the supply chain where
the organisation receives defective and excess products back from
customers. This phase of the supply chain has to be implemented
carefully and efficiently so as not to affect the relations with the
M
customers. A responsive and flexible network has to be in place

to handle this situation of defective goods as it can sometimes be
problematic part of the supply chain for many organisations.
N
11.3.3 DIFFERENCE BETWEEN LOGISTICS

MANAGEMENT AND SCM
Supply chain management and logistics are two functional areas in an

organisation that often seems to overlap. Different companies have a
different outlook towards them and define them differently. On one
hand, logistics deals with strategy and coordination between marketing
and production departments and on the other hand the focal point of
supply chain management is purchase and procurement. Supply chain
management includes factors that are related to inventory, materials
and production planning too in its concept, whereas logistics include
factors relating to demand management and forecasting in its concept.
According to experts, logistics management is considered a part of the

supply chain management that includes planning and implementing
the flow and storage of goods, services in order to meet the demands
of the consumers. In other words, we can say that supply chain man-
agement takes care of all the logistics management activities as well.
Supply chain management is a wider concept that encompasses de-

signing, planning, execution, control and monitoring of supply chain

N O T E S
activities with the primary objective of creating net profit and leverag-
ing worldwide logistics. Logistics can be considered as managing the
flow of goods and services between the point of origin and the point of
consumption to meet the requirements and specifications of custom-
ers. Logistics management is also referred by names such as materials
management, channel management or distribution management.
Figure 11.3 shows the differences between logistics management and

supply chain management
Logistics
Pur- Pro- Distri-

chasing duction bution
Supplier Firm Customer
S
Supply Chain
IM
Pur- Pro- Distri-
chasing duction bution
Supplier Focus Corp. Customer

M
Figure 11.3: Supply Chain Management and Logistics Management

(Source: http://www.econstor.eu/bitstream/10419/59779/1/329895168.pdf)
Following tables11.1 compiles the differences between logistics and

N
supply chain management:
TABLE 11.1: DIFFERENCE BETWEEN LOGISTICS

MANAGEMENT AND SUPPLY CHAIN MANAGEMENT
Logistics Management (LM) Supply Chain Management
(SCM)
Logistics management is con- SCM encompasses all the activities
cerned with providing goods & associated with movement of goods
services when and where they are from raw material stage to the end user
required
Logistics is used within a single Supply chain management requires
organisation coordination and implementation be-
tween various organisations in the
supply chain
Logistics is considered a subset of Supply chain management is an exten-
supply chain management sion of logistics management
Logistics adds value when inven- Effective SCM helps in reducing oper-
tory is correctly positioned to facil- ating costs, improves asset productivi-
itate sales ty and reduces order cycle time

N O T E S
TABLE 11.1: DIFFERENCE BETWEEN LOGISTICS

MANAGEMENT AND SUPPLY CHAIN MANAGEMENT
Logistics Management (LM) Supply Chain Management
(SCM)
The concept of Logistics manage- The concept of Supply chain manage-
ment is relatively old ment is relatively new
Logistics management is a nar- Supply chain management is a broad-
rower concept er concept
3. Which of the following is not a component of SCM

a. Planning
b. Making
c. Retailing
S
d. Return
4. Logistics management is also referred by names such as
IM
________ management or ________ management.
5. Logistics management is an extension of supply chain
management. (True/False)
M
ACTIVITY
Take a case study of a big business organisation and study the dif-
ference in its logistics and supply chain departments. Present your
N
findings in a short note.
11.4 SCOPE OF SCM

Contemporary business world is a world of cut-throat competition.
Every business tries to be different in its field by distinguishing itself
from others. This difference can be successfully achieved by meticu-
lous implementation of supply chain management in the organisation.
Each and every organisation, irrespective of its industry, depends
upon an effective supply chain to keep the business transactions alive.
The four major areas of supply chain management include location,
production, inventory and transportation (or distribution).
The increasing importance of supply chain management in organisa-
tions has led to a number of courses being offered. Training in this
useful course is very beneficial. It benefits a huge section of the indus-
try of logistics such as planners, working executives and managers. It
also provides an opportunity to identify the intricacies of supply chain
management and its inflexibility. One can even analyse consumer
needs, and study the role of communication and IT in the supply chain.

N O T E S
Logistics and supply chain throws career prospects and renders am-
ple amount of jobs. Currently, supply chain softwares are very popu-
lar. Inventory management is also a part of the supply chain network
and is used to protect the production system from any kind of distur-
bance. It also helps to prevent the organisation from running out of
stocks, goods and materials. It basically focuses on managing asset
management, visibility of inventory, forecasting inventory, inventory
valuation, carrying cost of inventories, replenishing lead time, physi-
cal inventory, management of future asset prices, return of damaged
goods, accommodating and demand forecasting of physical inventory.
The primary goal of inventory management is to maintain a balance

between the competing requirements to attain the optimum inventory
levels. Inventory management is a continuous practice with respect
to an organisation. It tries to maintain a comprehensive collection of
merchandise and also aids in controlling other issues such as ship-
ping, handling materials and ordering.
S
IM
6. Which of the following are among the major areas of supply
chain management
a. location
b. Production
M
c. Inventory
d. All of these
N
ACTIVITY
Study the scope of supply chain management in the field of defence.

Present your findings in a short note. You can utilise Internet for
any related searches.
11.5 BENEFITS AND CHALLENGES OF SCM

Supply Chain Management (SCM) can offer tremendous benefits to
any organisation that relies on smooth planning and execution of re-
lated functions to attain long-term profitability and maintain a com-
petitive edge. Here are some of the key benefits that SCM incorpo-
rates:
BENEFITS:
Reduced Costs: With the help of SCM a defective process, one that
increases the cost without increasing the value of the final prod-
uct, is easy to identify. These processes are wasteful and do not add

N O T E S
value to the product. Once identified they can be easily eliminated

whenever possible, thus effecting the overall costing of the prod-
uct favourably. SCM also improves inventory management.
Increased Efficiency: Wastage of resources contribute heavily to-
wards increasing the production cost of organisation. This is often
the result of improper planning. An organisation that implements
supply chain management is able to considerably reduce the wast-
age and in turn increase the efficiency of its operations as only
value adding activities are encouraged and included. This ensures
the smooth flow of organisation’s processes and output is in sync
with the company's needs.
Increased Output: An organisation that implements supply chain
management in its operations are able to cultivate good inter-per-
sonal relationships with its suppliers and customers, ensuring
timely fulfilment of orders. An organisation that is known for its
timeliness in payments towards its suppliers and in fulfilling or-
S
ders towards its customers is popular and shall attract more cus-
tomers. Organisation will grow as a result of increased output and
sales.
IM
Increased Profits: Businesses are in existence to make a profit in
the market. An organisations’ profit can be increased by ensur-
ing that costs are kept as low as possible. By implementing supply
chain management cost can be drastically reduced due to elimina-
M
tion of wasteful processes. Since these are a part of operating costs

for the company, savings costs in turn reflect on the increased
profits by the business.
N
CHALLENGES:
The key challenges faced by an organisation in the supply chain man-

agement are as follows:
Customer service: Customer is the key in the supply chain. Sup-
ply chain management is called effective if it delivers the right
product in the right quantity in the right condition with the right
documentation to the right place at the right time and at the right
price to the customer. Thus the major challenge is to overcome
these factors and rectify any problem arising at any of these stages
and ensure smooth supply chain in the organisation.
Planning and Risk Management: Business world keeps changing
everyday. There are new product launches, global sourcing, new
acquisitions, changing credit availability, the need to protect intel-
lectual property, etc., that supply chains must be planned accord-
ingly and evaluated regularly to incorporate these changes and,
if required, redesigned. Supply chain risk must be identified and
quantified.

N O T E S
Cost control: Another challenge that supply chain faces is from

the ever increasing operating costs of businesses. There is a con-
stant rise in freight prices, upgrades in technology, rise in labour
rates, increase in healthcare costs, and rise in commodity prices
and so on. These challenges are to be overcome by supply chain
managers by taking correct decisions if the objectives of the organ-
isation are not achieved.
Supplier relationship management: Different departments in an
organisation sometimes follow different methods of implementing
and measuring a performance and its results. Suppliers on the oth-
er hand might follow some other method to assess a performance.
This can lead to a problem if the results do not match. A few SCM
provide a common language for supply chain classification and
analysis that makes the assessment easy for participants and on
common grounds and parameters to communicate, benchmark ef-
forts, and enhances the evaluation of best practices.
S
Talent: Supply chain managers must have a thorough understand-
ing of the key skills needed for supply chain management roles. To
keep abreast with latest trends and updates in the supply chain
IM
requires job qualifications, methods for developing future talent
and leaders, and the ability to efficiently source specific skill sets.

M
7. An organisation that implements supply chain management is

able to considerably reduce the wastage and in turn increase
the efficiency of its operations as only value adding activities
N
are encouraged and included. (True/False)
ACTIVITY
Utilising Internet search for a case study of a business enterprise

and study the benefits of incorporating SCM. Against the benefits
also study the challenges faced by the enterprise due to SCM. Pres-
ent your findings in a short note.
11.6 NEW TRENDS IN SCM

The main objective of a business enterprise is to satisfy the end-consum-
er(s) by providing the right product, in the right condition at the right
time and to maximise its profit by optimum use of its resources. The em-
phasis on the use of supply chain to compete and gain market share is
enormous and thus the spending and activity in this area are prominent-
ly on the rise. Thus supply chain excellence is being accepted widely as
an element of overall business strategy. There is a constant upgradation
in technology and processes required for achieving the same.

N O T E S
There are six key trends that are creating significant impact on supply
chain design and performance as depicted in Figure 11.4.
Demand
planning
Closer
integration
and
Globalisation
collaboration
with
suppliers
Trends
in SCM
Shortened
Increased
and more
competition
complex
and price
S
product life
pressures
cycles
Outsourcing
IM
Figure 11.4: Key Trends in SCM
M
Let us discuss these trends in detail in the following section:

Demand Planning: With the increase in sources and capacities
for manufacturing, more and more organisations are moving away
N
from focusing their efforts on resource -level production planning.

They are adopting a more demand driven approach by trying to
influence and manage demand more efficiently. An efficient and
advanced demand planning system and proper strategies can help
uncover data and identify trends floating in organisations’ infor-
mation systems.
Globalisation: In recent times, there has been a vast improvement
in communication and communication systems. This has brought
globalisation to a regional level and is hugely impacting the way
business is now managed and transacted at all levels. Of all the
areas of business, the trend of the global business environment
has impacted the supply chain the most. The increased integration
of a global customer and supplier base has significantly impacted
all aspects of business like manufacturing, distribution, sourcing
of materials, invoicing and returns. Thus, globalisation has many
companies realising that their existing processes and technology
are not flexible enough and have fallen short for incorporating this
new business environment.
Increased competition and price pressures: Owing to increased
competition and continued commoditisation of many products, or-

N O T E S
ganisations need to work on finding innovative ways to distinguish

themselves amongst other similar products in the market. Influx of
other innovative products and brand equity no longer allow a busi-
ness to be complacent and command a higher price in the market.
Thus, in order to compete in this market significant improvements
in supply chain re-design and technology is required.
Outsourcing: Some organisations are realising that outsourcing is
the latest trend in the market and can prove to be advantageous
for the growth of the organisation. A part or all of a supply chain
can be outsourced to increase its efficiency. With improvements in
areas like information media, cost and quality of global manufac-
turing and distribution, and product design capabilities, organisa-
tions are going in for gaining additional synergies by outsourcing
their supply chain.
Shortened and more complex product life cycles: There is al-
ways a demand and pressure on business organisations to develop
S
new innovative products and float them in the market frequently
without affecting the market of existing products, which are still
in high demand. In order to meet this growing demand from both
IM
customers and consumers sides, organisations require a more effi-
cient product lifecycle management processes. An effective prod-
uct lifecycle management process would lay emphasis on manag-
ing new product introduction, discontinuation of product, design
for manufacturability and leveraging across their entire product
M
and infrastructure characteristics.

Closer integration and collaboration with suppliers: Many or-
ganisations are moving towards more intense collaboration be-
N
tween stakeholders' customers and suppliers for the extended

supply chain. The collaboration is carried out to increase the ex-
posure of an organisation throughout the supply chain to make
better management decisions and decrease supply chain costs in
return. Collaboration enables key people associated with key pro-
cesses throughout the supply chain to update themselves with the
information required to make critical business decisions with the
best available information.
8. Some organisations are realising that ________ is the latest

trend in the market and can prove to be advantageous for the
growth of the organisation.
ACTIVITY
Study the forthcoming trends in the field of SCM and enumerate

their probable impact on the existing scenario.

N O T E S
11.7 SUMMARY
A supply chain is a system or network of facilities in which peo-
ple, activities, information and resources are involved to enable
a smooth movement of a product or service from supplier to cus-
tomer.
Supply Chain Management (SCM) is a specialised process that is
implemented in organisations to ensure that their supply chain is
efficient and cost-effective.
The primary objective of every supply chain is to maximise the
overall value generated by the system.
There are five basic components of SCM; planning, sourcing, mak-
ing, delivery, return.
Supply chain management and logistics are two functional areas
S
in an organisation that often seems to overlap.
Logistics deals with strategy and coordination between marketing
IM
and production departments and on the other hand the focal point
of supply chain management is purchase and procurement.
Supply Chain Management (SCM) can offer tremendous benefits
to any organisation that relies on smooth planning and execution
of related functions to attain long-term profitability and maintain
M
a competitive edge.
The key challenges faced by an organisation in the supply chain
management are: customer service, planning and risk manage-
N
ment, cost control, supplier relationship management and talent.

There are six key trends that are creating significant impact on
supply chain design and performance: demand planning, global-
isation, increased competition and price pressures, outsourcing,
shortened and more complex product life cycles, closer integration
and collaboration with suppliers.
KEY WORDS
Supply chain: A supply chain is a network that involves the

functions of procurement of raw materials, transformation of
these raw materials into intermediate and finished products,
and then lastly distribution of the final products to customers.
Logistics Management: Logistics management is concerned
with providing goods & services when and where they are re-
quired.
Procurement: The act of obtaining or buying goods and ser-
vices, procurement includes preparation and processing of a
demand as well as the end receipt and approval of payment.

N O T E S
Inventory: Inventory is an itemised catalogue or list of tangible

goods or property or the intangible attributes or qualities.
Distribution: Distribution is the movement of goods and ser-
vices from the source through a distribution channel, to the cus-
tomer.
Globalisation: Globalisation is the worldwide movement to-
wards economic, financial, trade and communications integra-
tion.
Outsourcing: The subcontracting of noncore activities to free
up cash, personnel, time and facilities for activities in which a
company holds a competitive advantage.
S
1. What are the different stages of supply chain? Explain each with
respect to an organisation.
2. State the differences between logistics management and supply
IM
chain management giving example.
3. Discuss the benefits and challenges faced by supply chain
management in an organisation.
4. Write a short note on new trends in supply chain management.
M

N
Topic Q.No. Answers

Meaning of Supply Chain 1. Manufacturing, service
2. True
Define SCM 3. C
4. materials , channel
5. False
Scope of SCM 6. d
Benefits and Challenges of 7. True
SCM
New Trends in SCM 8. outsourcing

1. A supply chain is a system or network of facilities in which
people, activities, information and resources are involved to

N O T E S
enable a smooth movement of a product or service from supplier

to customer. Refer to Section 11.4 Meaning of Supply Chain
2. Supply chain management and logistics are two functional areas
in an organisation that often seems to overlap. Refer to Section
11.5.3 Difference between Logistics Management and SCM.
3. Supply Chain Management (SCM) can offer tremendous benefits
to any organisation that relies on smooth planning and execution
of related functions to attain long-term profitability and maintain
a competitive edge. Refer to Section 11.7 Benefits and Challenges
of SCM
4. The main objective of a business enterprise is to satisfy the end-
consumer(s) by providing the right product, in the right condition
at the right time and to maximise its profit by optimum use of its
resources. Refer to Section 11.8 New Trends in SCM.
S
IM
SUGGESTED READINGS
Hugos, M. (2003). Essentials of supply chain management. 1st ed.
Hoboken, N.J.: John Wiley & Sons.
Mentzer, J. (2004). Fundamentals of supply chain management. 1st
M
ed. Thousand Oaks, Calif.: Sage Publications.
E-REFERENCES
N
Murray, M. (2014). Introduction to Supply Chain Management.

[online] About.com Logistics / Supply Chain. Available at: http://
logistics.about.com/od/supplychainintroduction/a/into_scm.htm
Business-Software.com, (2014). [online] Available at: http://www.
business-software.com/article/benefits-of-supply-chain-manage-
ment/
Big-topics.com, (2014). Components Of Supply Chain Management
| BIG-TOPICS.COM. [online] Available at: http://www.big-topics.
com/2011/04/components-supply-chain-management/

CASE STUDY
N O T E S
DELOITTE
Deloitte, a division of an international engineering group, spe-

cialises in medical devices. Its market was becoming much
more demanding and its competitors were raising their game.
This led to highlighting shortfalls in its performance. The cur-
rent shape of Deloitte has largely formed through acquisitions.
Thus, many of its processes are fragmented, wherein each prod-
uct line is treated as a mini-business. Although this has some
advantages, it becomes difficult to co-ordinate customer han-
dling or to reduce costs by sharing back-office systems. The
company also recognised that it was carrying too much inven-
tory and yet it was missing its delivery targets. Each of busi-
ness units was trying to improve its own performance individ-
ually but as a whole little wholesale progress was being made.
Supply chain division was initiated and geared to find short-term
S
inventory reductions and service improvements that could be
generated from the supply chain within its existing framework
of disparate IT support systems. The Deloitte division was not
IM
willing to invest in technology without understanding what was
wrong with its existing processes and what advantages the new
integrated technology would bring. The main focus was on stabi-
lising and standardising the processes across the entire business.
Analysis of root cause with acknowledged delays and problems
M
along both the internal and external supply chain was carried out.
For the first time, the entire operation was examined, across four
European countries and the USA as a whole. Alternative manu-
facturing and replenishment models were looked at and the out-
N
come projected in terms of inventory reduction and impact on

service levels. Better adherence to demand-focused production
schedules meant that expediting costs could also serve as cut.
With more accurate planning, sea-freight could replace air-freight
and a better rate of on-time delivery could still be achieved.
Operational improvements to warehousing were also suggested,

which was outsourced to a third-party, but not performing well.
A detailed action plan to improve response to customers was also
developed. By implementing these recommendations, the divi-
sion made real progress in following areas:
Customer service: levels are expected to rise significantly
from their current range of 86%-95% to a consistent 98.5%,
with a corresponding financial benefit in reduced cost of lost
sales running into several millions pounds.
Lead- times: stock replenishment lead-times for sales affili-
ates are expected to be cut by up to 75%.

CASE STUDY
N O T E S
Inventory: global inventory levels of both raw materials and

finished goods are expected to be reduced by over 11%.
Operating costs: global supply chain operating costs are ex-
pected to reduce by 14%.
(Source: http://www.deloitte.com/view/en_gb/uk/e2db54544e0fb110VgnVCM100000ba-
42f00aRCRD.htm)
QUESTIONS
1. How did Deloitte improve its functioning from its

processes being fragmented to be integrated as a whole?
(Hint: Supply chain division of Deloitte was initiated
and geared to find short as well as long term service
improvements).
S
2. What are the important factors in the supply chain
that lead to improvement in overall functioning of an
organisation? Explain. (Hint: Adherence to demand-
IM
focused production schedules helps in expediting costs
and cutting down inventory)
M
N

C H
12 A P T E R
BUILDING AND DEPLOYING AN INFORMATION SYSTEM
CONTENTS
12.1 Introduction
12.2 Architecture of an Information System
S
Activity
IM
12.3 Software Development Lifecycle
Activity
12.4 Software Development Models
12.4.1 Waterfall model
M
12.4.2 Prototype model

12.4.3 Incremental model
12.4.4 Spiral model
N

Activity
12.5 Requirement Analysis & Design Considerations
Activity
12.6 Software Testing
Activity
12.7 Deploying an Information System
Activity
12.8 Summary

N O T E S
ORACLE IMPLEMENTATION FOR A

GLOBAL ELECTRONICS CONGLOMERATE
The North American subsidiary of a global electronics conglom-

erate is one of the biggest clients of infosys. The client enter-
prise has estimated revenue base of over US$1 billion dollars.
It employs around 1,000 people who work in multiple office lo-
cations with a very large number of warehouses. The parent
company manufactures and advertises the semiconductors, dis-
play and storage devices for markets like computing, wireless,
networking, automotive and digital consumers. It is the third
largest semiconductor company in the world in terms of global
sales for the year 2002. It is critical for the growth of the organ-
isation to create value for customers by continuously improv-
ing business processes and deliver products on time. This was
S
a big challenge for the company because of the nature of the
industry which works on exteremely short time span. There-
fore, perfect on-time delivery record is a crucial success factor.
IM
The legacy system the company has been using lacked the flexi-
bility to enable its operations to absorb market fluctuations. And
therefore, the need to implement a robust business process to stay
ahead of competition, reduce overhead costs, and improve cash
flow occured. The diverse existing sytems built on several tech-
M
nology platforms had to be integrated from a technical point of

view.
The company was facing the following challenges:

N
Keeping up with reduced distribution times of rival organisa-

tions was tough and customer service enhancement was also
very difficult.
Legacy systems of the client were proving to be a big problem
in the synchronisation of its operations with market fluctua-
tions.
As the customer is in an extremely short life-cycle industry,
the delivery time must be improved while keeping inventory
levels and costs low.
The client was running its business on distinct systems. It was
using a large number of satellite systems that were not inte-
grated with the host system.
Company was operating on disparate systems which increased
the complexity, as there were many satellite systems running
independent of the host.
The Infosys team had a very big challenge to integrate the new
system with the satellite systems and put all new processes in
place in a very short time period.

BUILDING AND DEPLOYING AN INFORMATION SYSTEM 275
N O T E S
Infosys used its proprietary IntERPrize methodology, strong Or-

acle Applications consulting and a unique global delivery model
to overcome all the challenges. It set about to integrate Oracle
ERP with custom applications for helping the client improve their
business processes. Infosys had to perform the following tasks:
Evaluation and implementation of Warehouse Management
System (WMS) / Transport Management System (TMS) solu-
tion.
Standardisation of performance metrics across the organisa-
tion to streamline the client’s internal processes. Infosys was
involved in business process definition, programmes manage-
ment, project management, package evaluation, package im-
plementation, key user training and post-production support.
Infosys finished the implementation in a record 18 months, which
S
was 50 percent faster than the timeline given by competitors. It
also displayed a significant increase in ROI for the client. Some
other benefits are as follows:
IM
The implementation provided high visibility to the supply
chain and improved demand planning and execution.
The cash flow has improved significantly due to real-time pro-
cesses. A large number of processes have been automated,
M
which led to increasing efficiency and reduced overhead costs.

The client’s on-time delivery record improved due to process-
es and applications implemented by infosys.
N
The understanding of business processes improved after the

implementation, which led to continuous incremental chang-
es.
A WMS/TMS package was modified along with an online ana-
lytical processing (OLAP) tool, resulting in an improved inte-
grated system.
(Source: http://www.infosys.com/industries/high-technology/case-studies/Pages/ora-
cle-implementation-global.aspx)

N O T E S
LEARNING OBJECTIVES

> Explain the architecture of an Information System
> Define software development lifecycle
> Describe software development models
> Explain requirement analysis & design considerations
> Discuss software testing
> Discuss the process of deploying an information system
12.1 INTRODUCTION
Have you ever booked a movie ticket online? How do you get so much
information about movies such as show timings, ticket price, theatres
S
at one place? All this is possible due to the information system man-
aged by the organisations. They build an information system and pro-
IM
vided it`s access to users. Now, you can reserve your seats for mov-
ies at a theater anytime. However, this puts forth another question
that how we are able to access all the information so easily by using
some organisation’s information system. This is because the organ-
isation have deployed their service on a server which is a computer
programmes that provides services to other computer programmess.
M
Information system (IS) is a procedure that is utilised to process data

and provide useful information. An organisation needs to take full ad-
vantage of IS to get maximum benefits. In order to obtain maximum
N
benefits from IS you need to utilise all its capacities. IS is an essential

requirement for an organisation it helps in managerial tasks such as
making effective decisions for an organisation. IS helps in communi-
cation and accomplishes the information needs of an organisation in
defining goals. IS is available for all the users after it is deployed. De-
ploying, means distributing the system among various end-users. Us-
ers can access the information system and utilise the information pro-
vided by it to make better decisions in the organisation. Deployment
of information system increases the accessibility of the information
and users can access and retrieve information anytime and anywhere.
The chapter starts by discussing the architecture of information sys-

tems. Next, it defines the software development life cycle. Further, it
explains the software development models such as the waterfall mod-
el, prototype model, incremental model and the spiral model. Further
ahead, it discusses the requirement analysis and design consider-
ations. In addition, it explains the software testing. The chapter con-
cludes by explaining the process of deploying an information system.

N O T E S
ARCHITECTURE OF AN
12.2
INFORMATION SYSTEM
Information system architecture defines the business processes rules,
systems structure, technical framework and product technologies for
organisational information system. Information system architecture
generally includes four layers:
Business process architecture
Systems architecture
Technical architecture
Product delivery architecture
The architecture of the information system includes the hardware and

software used to provide the solution to the end users of the services.
The architecture represents the design and contents of a computer
S
based system. The architecture may contain information such as in-
ventory of current hardware, software and networking capabilities,
future strategies and plan for upgrading out dated equipment and
IM
software.
Information system architecture determines data to be stored, func-

tions of the system, location of the components, timing of activities
and events occurring in the system, and the essence of the system.
M
Let us explore some basic components of information system archi-

tecture:
Information: The term information is used to distinguish it from
N
data. Data is facts and figures. When you deal with the information
system, there is no one correct answer to the given question. In-
formation of all shapes and size is considerable. For example, web-
sites, documents, software applications, images and other types
of information. Metadata also play important roles in information
system architecture. It is used to describe and represent content
sources such as documents, people, processes and organisations.
Structuring, organising and labelling: Structuring means the de-
termination of suitable level of granularity for information in your
website. Organising involves grouping these components together
in distinct categories. Labelling signifies giving a name to these
categories and navigation links that redirect to them.
Finding and managing: Finding is an important factor to deter-
mine the success of information system architecture. If the in-
formation is not found by browsing, searching or asking then the
system is failed. The organisation and the people who manage
business are also important for the architecture. Information sys-
tem architecture must provide a balance between the objective of
business and user requirements. Efficient content management
with clear policies is essential.

N O T E S
Art and Science: Science is playing an important role in identi-

fying the user need by analysing their behaviours and patterns.
This is useful to improve the information system but we should
also rely on experience, intuition and creativity to determine us-
ers’ requirements. This is considered the art of information system
architecture.
1. The architecture represents the _________ and ________ of a

computer based system.
2. Information system architecture generally includes two
layers. ________ (True/False)
ACTIVITY
Search for details on layers of information system architecture. You
S
can take the help of Internet for any related searches. Present your
IM
12.3 SOFTWARE DEVELOPMENT LIFECYCLE
A Software Development Life Cycle (SDLC) is basically a series of
steps, or phases that provides software development models and man-
M
ages the life cycle of software application. A software development

process involves various approaches. These approaches are used
during the software development process and are also called software
development models. Example of these development models are wa-
N
terfall model, incremental model and an iterative model. Now, each of

these development models follows a life cycle to ensure the success of
a software development process.
Software development life cycle (SDLC) models consist of phases of

the software development and the execution order for these phases.
Each phase delivers an outcome which is required by the next phase
in the life cycle. Also, requirements are gathered to create a design. In
the development phase code is written considering the design. Then,
testing is performed on software after coding and development to veri-
fy the product of the design implementation against the requirements.
Every software development life cycle model consists of six phases as

depicted in Figure 12.1:
Requirement
Implementation
gathering and Design Testing Deployment Maintenance
or coding
analysis
Figure 12.1: Phases of Software Development Model

N O T E S
BENEFITS OF THE SDLC PROCESS

The SDLC improves the quality of a product by making it cost-ef-
ficient, effective and productivity.
AT the end of each stage a proper review is created that allows
maximum management control.
It helps in creating detailed system documentation.
This documentation helps in assuring that system requirements
can be traced back to specified needs of organisation.
The products can be reviewed to check whether they conform to
user’s requirements of not. Further changes can be made if the
product is not as per the requirements to meet the customer re-
quirements.
Now, let us discuss these phases in the following section:
S
1. Requirement gathering and analysis: In this phase meetings
are held by managers, stakeholders and users for determining
the requirements such as:
IM
Who will use the system?
How will they use the system?
What data should be the input?
What data should be the output?
M
These requirements are further analysed for their validity. It

is also identified that whether these requirements could be
incorporated in the system to be developed or not.
N
At the end, a Software Requirement Specification (SRS)

document is prepared to be used as guidelines for the next phase
of the model.
2. Design: In this phase, the system and software design is prepared,
with the help of the SRS document. System design is created for
specifying hardware and system requirements. It also defines
overall system architecture. This system design specification is
used as input to the next phase.
3. Implementation / Coding: After receiving system design
documents, the task is divided in modules and development of
the software is initiated. Software developer writes code for the
software required for this phase. It is also the longest phase of
SDLC.
4. Testing: Once the coding is done in the software goes through
the testing phase. In this phase, the product is checked against
the requirements to ensure that the product is working in
accordance with the requirements. Also, in this phase different
types of testing such as unit testing, integration testing, system
testing and acceptance testing are performed.

N O T E S
5. Deployment: In this phase the final product after testing is

delivered and deployed at the customer site.
6. Maintenance: After the deployment of the software at the client
site the customers start using the developed product. When
customers use the product many problems come up and need to
be resolved. In this phase, the developed product is maintained
by taking care of the problems.
SDLC IMPLEMENTATION
Two popular ways to implement SDLC is using two types of SDLC –

waterfall and agile. The main difference between these two models is
that the waterfall model is a sequential process model and comes with
a well detailed plan and requirements. The agile model does not have
strict guidelines like the waterfall model; adjustments can be made
throughout the process.
S
Agile software development gives advantages that a waterfall model
does not address. Waterfall model is based on sequential processes
IM
whereas an agile model focuses on the ability to adjust and response
time for changing requirements. In agile model, we can make changes
to the completed phase which is not possible in the waterfall model.

M
3. Which of the followings is not a phase of SDLC?

a. Testing
N
b. Documentation
c. Deployment
d. Design
4. ___________ document is prepared to be used as guidelines.
ACTIVITY
Form a group of students and discuss the software development life

cycle. You can take the help of the Internet for any related searches.
Present your discussion points in a short note.
12.4 SOFTWARE DEVELOPMENT MODELS

Software development models comprise work practices, tools and
techniques that are required to develop software. These development
models are very efficient and enable software developers to build cost
effective and reliable software to satisfy maximum number of custom-

N O T E S
er requirements. Software development models are used for organis-

ing and creating documentation of the structure and flow of the data
through a systematic process.
Software development process has changed with the time by incor-

porating additional definitions, process models, structures and ap-
proaches to software development activity.
All the software development organisations need software process

modelling for developing high quality software. In order to improve
the capability of software development in an organisation, continuous
process improvement should be the main focus. The documentation
of the software processes must be created for future reference. As long
as the organisation is developing high quality products in minimum
time and cost, it is not necessary to follow a different model. But it is
an essential need of an organisation to follow a well-defined develop-
ment model.
S
Now, let us discuss different types of software development models in
the following sections.
IM
12.4.1 WATERFALL MODEL
In this model, each phase must be completed before moving to the

next phase. This model is primarily used in small projects with no in-
M
determinate requirements. In this model, after every phase a review

is done to determine the accuracy of the product. If in the phases proj-
ect functions well then the project is continued else the project is dis-
carded. In this model, the testing is done after the development of the
N
product is complete. Figure 12.2 shows a waterfall model.
Requirements
Design
Implementation
Verification
Maintenance
Figure 12.2: Waterfall Model

(Source: http://narbit.wordpress.com/2012/06/10/the-differences-between-life-cycle-models-ad-
vantages-and-disadvantages/)

N O T E S
ADVANTAGES OF WATERFALL MODEL:

This model is very simple and easy to use.
It can be managed easily due to the stiffness of the model.
In this model, phases are not overlapped and only one phase is
completed at a time.
It is suitable for small project where the requirements are clear
and understood.
DISADVANTAGES OF WATERFALL MODEL:

In this model, if the application reaches the testing phase, it is very
difficult to change something in the previous phases.
In this model, a working product is not obtained until late in the
life cycle of the product.
In this model, the amount of risk is high.
S
It is not considered a good model for complex and object-oriented
projects.
IM
It is an unsuitable model for projects with long gestation period.
It is unsuitable for the projects with changing requirements.
12.4.2 PROTOTYPE MODEL

M
Waterfall model does not deliver a working model until a late stage.
Therefore, you cannot detect any severe error at an early stage. The
solution to this problem is to develop a working prototype with the
available requirement details. This prototype is shown to the custom-
N
er to get feedback. If the customer approves the prototype only then

the actual product is developed else the prototype is discarded and
another prototype is made. A prototype is very fundamental version
of product with very basic and limited features.
Figure-12.3 shows the steps involved in the prototyping model:
Quick plan
Communication
Modeling
Quick design
Deployment
Delivery
Construction
& Feedback
of prototype
Figure 12.3: Steps in Prototyping model

(Source: http://www.whatsupnew.com/wp-content/uploads/prototyping-model-1.png)

N O T E S
ADVANTAGES OF PROTOTYPE MODEL:

In this model, users actively participate in the development.
In this model, users get a better understanding because a working
model of the system is provided to them.
In this model, errors can be detected in early stages.
In this model, user feedback is available quickly which leads to
better solutions.
In this model, missing functionality can be easily identified.
DISADVANTAGES OF PROTOTYPE MODEL:

It involves implementing and then repairing the method of build-
ing systems.
It may increase the complexity of the project as the requirements
S
of the project may change beyond the original plan.
The process of prototyping is slow.
IM
12.4.3 INCREMENTAL MODEL
In incremental model, we divide the requirements in various versions

or build. In this model we follow multiple development life cycles such
as multi-waterfall cycle. These cycles are divided into various small-
M
er modules. Each module goes through the SDLC. During the first
module, a working version of the software is produced. Therefore, this
model provides you a working version of software early in the life cy-
N
cle. Every subsequent build of the module adds new functions to the
previous build. This process continues till you get the complete sys-
tem.
For example consider this Figure 12.4:
1 2 3
Figure 12.4: Incremental Model

(Source: http://istqbexamcertification.com/what-is-incremental-model-advantages-disadvan-
tages-and-when-to-use-it/)
Figure 12.4 shows the example of Incremental model in software de-

velopment. In this model, we add pieces to the module one by one
while keeping in mind that each piece is complete in itself. Therefore,
we keep adding pieces until we obtain the final product.

N O T E S
Figure 12.5 shows the phases of Incremental model:
Build 1
Design &
Testing Implementation
Development
Build 2
Design &
Requirements Testing Implementation
Development
Build N
Design &
Testing Implementation
Development
Incremental Life Cycle Model
S
Figure 12.5: Phases of Incremental Model
(Source: http://istqbexamcertification.com/what-is-incremental-model-advantages-disadvan-
tages-and-when-to-use-it/)
IM
ADVANTAGES OF INCREMENTAL MODEL:
It provides working software in an early stage of SDLC.
It is very flexible as it is not costly to modify scope and require-
M
ments.
It is easy to test and debug the product during a smaller iteration.
In this model customer can give feedback to each build.
N
It minimises the initial delivery cost.

In this model, it is easier to manage risk because software modules
that have risks involved are identified and handled during the it-
eration.
DISADVANTAGES OF INCREMENTAL MODEL:

It requires good planning and design.
Before breaking down the project in small builds we require a
clear and complete definition of the entire system
It is costlier than the waterfall model in terms of total cost.
12.4.4 SPIRAL MODEL
The spiral model can be described as the combination of linear se-

quential and iterative approach used for the software development
process. In the spiral model, software development is done in a se-
ries of developed builds. In initial stage iterations, the build or module
could be a prototype. A more complete version of the software is pro-
duced in the later stages.

N O T E S
In spiral model the following steps are involved for each phase:
Setting goals and objectives: It refers to setting up of goals, alter-
natives and constraints.
Estimating risks: It specifies key risks identified and steps for risk
reduction.
Developing and validating: It specifies the selection of an appro-
priate development model.
Planning: It specifies the review of project and in this stage deci-
sion is made to move to the next stage or not.
The objectives and prototype are refined during the phase execution.
Risk management and identification gets more precise. Therefore,
product planning becomes productive and quality oriented.
Figure 12.6 depicts a spiral model:
Planning Risk Analysis
S
IM
Risk Analysis
Requirements
Gathering
Prototyping
M
ost
Project C Coding
Customer
N
Evaluation Testing
Evaluation Engineering
Figure 12.6: A Spiral Model

(Source: http://istqbexamcertification.com/wp-content/uploads/2012/01/Spiral-model.jpg)
The spiral model delivers iteration in development; this allows the

customer to cancel the project at multiple points. Spiral model is used
in large scale software. Every stage of the spiral model consists of risk
analysis and assessment. This also signifies that the cost to use spiral
model can become too much as the risk analysis is performed at each
spiral phase.
ADVANTAGES OF SPIRAL MODEL:

It contains a big amount of risk analysis, thus the risks are avoided.
It is beneficial for large projects.

N O T E S
It consists of strong approval and documentation control.

In this model, you can add new functionality later.
In this model, you get the product early in the SDLC.
DISADVANTAGES OF SPIRAL MODEL:

It could be an expensive model to use.
In this model, risk analysis needs highly specific expertise.
In this model, risk analysis phase determines the success of
the project.
It is not suitable for small projects.
5. In __________ model each phase must be completed before
S
moving to the next phase.
6. In which of the following models, we divide the requirements
IM
in various versions or build?
a. waterfall model
b. prototype model
c. spiral model
M
d. incremental model
7. A _________ is very fundamental version of product with very
basic and limited features.
N
8. In the spiral model, software development is done in a series

of developed builds. ______ (True/False)
ACTIVITY
Differentiate between waterfall model and prototype model. Pres-

ent the points in a short note.
REQUIREMENT ANALYSIS & DESIGN

12.5
CONSIDERATIONS
System requirements determine the criteria a system must meet. The
first stage in systems engineering and software development process
is analysis and definition. In this stage, we break down the function-
al and non-functional requirements for a basic design view to have
a flawless system development process framework. A detailed re-
quirement analysis process includes various entities such as business,
stakeholders and technology requirements.

N O T E S
Well organised requirement analysis consists of four types of activity

as depicted in the Figure 12.7:
Requirements Requirement
Elicitation Analysis
Requirement
Management
Change
Management
Requirements
Attributes
Requirements Requirements Requirements

Specification
S
Validation Tracing
IM
Figure 12.7: Activities in Requirement Analysis
(Source: http://www.prim.osd.mil/cap/req-analysis-def.html?p=1.1.7.1)
M
Requirements Elicitation: It involves collecting information,

understanding the stakeholder requirements and expressing re-
quirements of high level.
N
Requirements Analysis: This activity involves examining the high

level requirements and determining their clarity and complete-
ness. Then a strategy is defined by it to deal with these issues.
Requirements Specification: In this activity the behaviour of a
system in development is defined and the methods for require-
ments documentation are also determined.
Requirements Validation: In this activity sessions are held with
users, stakeholders and functional experts to discuss the issue
resolution plans for the requirements that conflict before projects
reach the development phase.
Requirements Analysis and Definition have the ability to improve

existing requirements to assess their influence on current business
processes, systems and modifications. It can also be applied in future
design efforts to meet growing information technology, systems inte-
gration and business needs. Efforts for future design that include up-
grades are analysed using the Fit/Gap analysis activities. Fit/Gap anal-
ysis determines the difference between current and proposed systems.
Requirements analysis happens throughout the development lifecycle
of a project. It is an essential part of a project’s success.

N O T E S
DESIGN CONSIDERATIONS
Software requirement analysis (SRA) usually results in a specifica-

tion. We use design to develop a working system from this specifica-
tion. There are various types of software design. Therefore, there are
many factors that need to be considered while designing a software
module. These factors are:
Compatibility: Software compatible to the older products. It also
means it is able to work with other products that are designed to
operate with another product. For example, Microsoft Office 2010
is backward-compatible with older version of itself which is Mic-
rosoft Office 2007.
Extensibility: One should be able to add new features in software
without making many changes to the existing software. For exam-
ple, you can add extra features to your web browser by adding
plugin or extension software. Popular example of these types of
S
software is adobe flash player.
Fault-tolerance: The software is capable to handle failure and
IM
recover from component failure quickly. For example, medical
systems often use emergency power backup as fault-tolerance
mechanism.
Maintainability : The software is able to be restored to a particu-
lar condition within a specified period of time. For example, anti-
M
virus software updates its definition of virus, to maintain the effec-

tiveness of software.
Modularity: The software includes independent components
N
which could be implemented and tested in isolation which is bet-

ter for software maintainability. Then the components can be in-
tegrated together to form a desired software system. This enables
us to divide work in a software development project. For example,
accounting software can be divided in different components such
as financial, tax, management and audit. All these components can
be developed and tested separately and then integrated together
to form a complete software.
Packaging: The printed material such as the box and manuals
should be designed according to the target market to improve us-
ability. Information regarding compatibility and system require-
ments should be given on the package.
Reliability: The software should perform a required task under
specified conditions for a specified period of time.
Reusability: The software should be capable of having additional
features in future with little or no modifications.
Robustness: The software should be able to work under arduous
conditions such as unpredictable or invalid input. For example, it
can be designed to work in low memory conditions.

N O T E S
Security: The software should be able to handle harmful acts and

effects.
Usability: The user interface of software must be easier to under-
stand its target customers. The parameter should be given to default
values so that the selection of an option becomes easier for users.
9. The first stage in systems engineering and software

development process is __________ and ___________.
10. _______ analysis determines the difference between current
and proposed systems.
ACTIVITY
S
List the benefits of requirement and analysis. You can take the help
of the Internet for any related searches.
IM
12.6 SOFTWARE TESTING
Software testing is a process whereby we execute a programmes to
determine whether the programmes has errors or not. It can also be
M
considered as the process to evaluate the quality of software. The

main objective of software testing is to find out whether the software
runs as per the requirements of not. It matches the actual result of the
software with the expected result. In addition to finding errors it also
N
detects the situation that can impact users negatively.
Software testing improves the quality, reliability and maintenance of

the software. It consists of various stages such as planning, designing
and executing. Planning the test cases is the first stage in software
testing. The need for testing plan occurs when there is a communica-
tion gap between developer and user and the user requirements are
not clear.
Software testing is a very important phase in the software develop-

ment life cycle. It verifies and validates the outcome of the software
against the user specification. Verification is done to check whether
the product is going in the right direction or not. Validation is done to
check whether a suitable product is being developed or not. The basic
requirement for software testing is to achieve a superior quality prod-
uct by identifying and removing software defects. There are many dif-
ferent types of testing available, few of which are discussed as follows:
Black box testing: In this testing the internal system design is
not known to the testers. Tests are created on the basis of require-
ments and functionality.

N O T E S
White box testing: In this type of testing knowledge of the internal

system design and code is essential. It is also known as Glass box
Testing.
Unit testing: It is done to test individual software components or
modules. Usually, programmes performs this type of testing not
testers, as it requires deep knowledge of the internal programmes
design and code.
Incremental integration testing: It is continuous or repetitive
process of testing as new and fresh functionality is added to the
software application.
Integration testing: In this testing individual software modules
are combined and tested as a group.
Functional testing: In this type of testing we ignore the internal
parts and focus on the output to check if it is as per requirement
or not.
S
System testing: In this testing the whole system is tested as per
the requirements.
IM
Acceptance testing: It is done to check the acceptability of the sys-
tem. The goal of this test is to examine the system’s compatibility
with the business requirements and evaluate whether it is accept-
able for delivery or not.
Alpha testing: Alpha testing is performed at developer’s site. It is
M
a testing of an application that is almost complete but still minor

changes can be made if needed.
Beta testing: This testing is typically done by end-users. It is the
N
final testing before an application is released for commercial use.
11. Software testing improves the _________, _________, and

_________ of the software.
12. In __________ testing the internal system design is not known
to the testers.
ACTIVITY
Differentiate between black-box testing and white-box testing.
12.7 DEPLOYING AN INFORMATION SYSTEM

In every software development model, deployment and maintenance
is the final phase of SDLC. Deployment is an activity that makes a
software system available for users. A software system is deployed on

N O T E S
the server. A server is a computer programmes that provides services

to other computer programmes. These computer programmes could
be on the same or different computers. Once the system is deployed
on server the users can access the system and use it.
Let us consider an example where you have an application that con-

verts a temperature from Celsius to Fahrenheit and Fahrenheit to Cel-
sius. You can use this application for your own benefit in your per-
sonal computer. However, if you decide to share this application with
other people, they can also utilise the application and benefit.
Deploying an information system is similar to deploying any other

software system. When you deploy an information system you make it
available for all the users. These users could be internal and external.
For example, a railway reservation system is a type of information sys-
tem that is used by thousands of people regularly to obtain informa-
tion regarding trains but if it was not deployed on any server we will
S
never be able to access the information on it.
The successful deployment of information systems is an important

IM
task for any organisation. The deployment is a process that executes
the operational plans made at the end of the information systems
planning process. The deployment process is a major stage that is
performed after the investigation, analysis, and design stages of the
systems development process. Deployment comprises various activi-
M
ties such as acquisition, testing, documentation, installation and con-

version. It also includes the training of end users to make them able to
use the new information system. Even an effectively designed system
can fail if it is not deployed properly or too difficult for users to under-
N
stand. The main activity of deployment is acquiring hardware, soft-

ware and external IS services. These resources can be acquired from
various vendors in the computer industry. Many large organisations,
educational institutes, and government agencies tie up these comput-
er system vendors and get reasonable discounts.
Therefore, in order to make information accessible to everyone an or-

ganisation needs to deploy its information system.
13. ________ and _________ is the final phase of SDLC.

14. A server is a computer programmes that provides services to
other computer programmes. ______ (True/False)
ACTIVITY
Utilising the Internet find out about the deployment of the informa-
tion system in an organisation.

N O T E S
12.8 SUMMARY
Information system architecture defines the business processes
rules, systems structure, technical framework, and product tech-
nologies for organisational information system.
The architecture of the information system includes the hardware
and software used to provide the solution to the end users of the
services.
Software development life cycle (SDLC) models consist of phases
of the software development and the execution order of these
phases.
Different types of software development model are Waterfall mod-
el, Prototype model, Incremental model and Spiral model
Requirement analysis consists of four types of activity Require-
ment Elicitation, Requirement Analysis, Requirement Specifica-
S
tion and Requirement Validation.
The factors which need to be considered while designing a soft-
IM
ware model are compatibile, extensibility, fault –tolerance, main-
tainability, modularity, packaging, reliability, reusability, robust-
ness, security and usability.
Software testing is a process in which we execute programmes to
determine whether the programmes have errors or not.
M
Deployment is an activity that makes a software system available

for users. A software system is deployed on a server.
N
KEY WORDS
Architecture: The art or practice of designing and building

structures.
SRS: Software Requirement Specification is a document hav-
ing a description of the behaviour of a system to be developed.
Version: It refers to a unique name of the number given to the
states of computer software.
Errors: It refers to the difference between actual output and
expected output.
Framework: A basic structure that works as a guideline to the
main system.

1. Describe the architecture of an information system.
2. Explain the software development life cycle.

N O T E S
3. Discuss the various types of software development model.

4. What are requirement analysis and design considerations?
Discuss.
5. What is software testing? Explain different types of software
testing.
6. What do you mean by deployment of an information system?
Please explain.
Topic Q.No. Answers
S
Architecture of an 1. design, contents
Information System
2. False
IM
Software Development 3. b. Documentation
Lifecycle
4. SRS
Software Development 5. waterfall
Models
M
6. d. incremental model
7. prototype
N
8. True
Requirement Analysis & 9. analysis, definition
Design Considerations
10. Fit/Gap
Software Testing 11. quality, reliability, maintenance
12. Black box testing
Deploying an Information 13. Deployment, maintenance
System
14. True

1. Information system architecture defines the business processes
rules, systems structure, technical framework, and product
technologies for organisational information system. Refer to
Section 12.4 Architecture of an Information System.
2. Software development life cycle (SDLC) models consist of phases
of the software development and the execution order for these
phases. Refer to Section 12.5 Software Development Lifecycle.

N O T E S
3. Software development models comprise work practices, tools

and techniques that are required to develop software. Refer to
Section 12.6 Software Development Models.
4. System requirements determine the criteria a system must meet.
The first stage in systems engineering and software development
process is analysis and definition. Refer to Section 12.7
Requirement Analysis & Design Considerations.
5. Software testing is a process in which we execute programmes to
determine whether the programmes have errors or not. Refer to
Section 12.8 Software Testing.
6. Deployment is an activity that makes a software system available
for users. Refer to Section 12.9 Deploying an Information
System
SUGGESTED READINGS
S
IM
Bibliography: Perry, W. (2006). Effective methods for software test-
ing. 1st ed. Indianapolis, IN: Wiley.
Bibliography: Mishra, J. and Mohanty, A. (2012). Software engi-
neering. 1st ed. New Delhi, India: Dorling Kindersley.
M
E-REFERENCES
Software development lifecycle. Retrieved from: http://www.tuto-
N
rialspoint.com/sdlc/sdlc_tutorial.pdf
Software Development Models. Retrieved from: http://istqbexam-
certification.com/what-are-the-software-development-models/
Software Testing. Retrieved from: http://softwaretestingfunda-
mentals.com/

C H
13 A P T E R
MANAGING INFORMATION SYSTEMS
CONTENTS
13.1 Introduction
13.2 Infrastructure Management
S
Activity
IM
13.3 Maintenance of Information Systems
Activity
13.4 Management of Changing Requirements
M
Activity
13.5 Incidence/Incident Handling
N
Activity
13.6 Disaster Recovery and Business Continuity Planning
Activity
13.7 Summary

N O T E S
GOODBODY SURVIVES RISING FLOOD WATERS
Goodbody is one of Ireland’s major financial services firms. It is a

leader in corporate finance, wealth management and capital mar-
kets. To maintain its position, it requires robust business continu-
ity management. In October 2011, the company’s plans were put
to the test. A series of flash floods hit Western Europe in late 2011.
The Irish capital city of Dublin was particularly hard hit with
many businesses and financial service firms affected.
On October 25th, 2011, around 8 p.m., SéanCroston, head of IT

for Goodbody, received a call telling him there was two inches of
water in the basement of his company’s head offices. He instruct-
ed a team to investigate and asked to be kept updated. In thirty
minutes, the water was three feet high and rising. At this stage it
was decided to invoke their business continuity plans. Goodbody
S
had a collaboration with HP recovery center for disaster recovery.
Croston did not wait for the company’s infrastructure to be over-

IM
whelmed before making call to HP. He was not prepared to risk a
moment’s downtime.
The biggest damage for Goodbody was to their reputation and

loss of standing with their clients and that was more than the
M
loss of revenue from losing a day’s trading. Thus relocation plans

were activated. By 1 a.m. the water had risen to 12 feet, knocking
out the air conditioning, door access, elevators, heating, building
management system and water supply. The communications in-
N
frastructure, though submerged, continued to work, but could

drop at any moment. The flood water was within three inches of
the fuel supply of the secondary generator, located on stilts in the
basement.
The company’s response team relocated to the HP Recovery Cen-

ter, 20 minutes from the head office, making ready 25 seats in a
dedicated closed dealing room, available as part of Goodbody’s
Business Continuity contract.An additional 42 seats were as-
signed to general operations staff. After two hours, dealing opera-
tions were up and running – just three hours after the initial call.
The remainder of the business was on-stream within four hours.
Those not transferred to the HP Recovery Center were asked to
work at home via remote access, while a reduced team operated
from the main site. The head office was fully operational within
ten days
(Source:http://h20195.www2.hp.com/v2/GetPDF.aspx%2F4AA2-8148ENW.pdf. )

MANAGING INFORMATION SYSTEMS 297
N O T E S
LEARNING OBJECTIVES

> Explain the meaning of infrastructure management
> Describe the maintenance of information system
> Explain the management of changing requirement
> Discuss incident handling
> Describe disaster recovery and business continuity planning
13.1 INTRODUCTION
A business enterprise is divided in various areas such as operations,
management, decision-making, and marketing. Every business area
is influenced by technology. The use of technology in business en-
S
terprise contributes highly in productivity, efficiency, effectiveness,
and overall growth of the organisation. An information system is one
such part of technology which has become an indispensable element
IM
of organisational decision-making. It has emerged as a highly effec-
tive combination of information technology and people activities that
support operations, management, and decision-making. Although, in
the past information technology tools were quite expensive and so-
phisticated, with continuous innovations in the field of information
M
technology they became more economical and user-friendly. Business

enterprises were now able to afford and implement them in their reg-
ular operations.
N
Businesses use information systems at all levels of operation to collect,

process and store data. Management aggregates this data and dissem-
inates it in the form of information required to carry out the daily op-
erations of business enterprise. Everyone who works in business uses
information systems, be it someone who pays the bills or the person
who makes employment decisions. An automobile dealer could use
the information system to maintain a computer database for keeping
track of which products sell best. A retail store might use a comput-
er-based information system to sell its products over the Internet. In
fact, many businesses concentrate on the alignment of various aspects
of information system with business goals to achieve competitive edge
over other business enterprises.
Infrastructure management, maintenance of information system,

management of changing requirements, incident handling, disaster
recovery and business continuity planning are all part of information
system. They all deal with different aspects of the management infor-
mation system.
This chapter starts by describing the concept of infrastructure man-

agement. Next, it discusses the maintenance of information systems.

N O T E S
Thereafter the chapter discusses management of changing require-

ments. Next, it explains incident handling. Towards the end, disaster
recovery and business continuity planning have been discussed.
13.2 INFRASTRUCTURE MANAGEMENT

Infrastructure Management (IM), from the perspective of an organi-
sation’s information system, is defined as the management of essen-
tial operation components, such as organisation policies, processes,
equipment, data, human resources and external contacts, for overall
effectiveness.
To exist and thrive in contemporary cut-throat competitive digital

world, organisations have to rely on complex, interrelated information
systems infrastructure. The organisation’s information system infra-
structure components are depicted in Figure 13.1:
S Hardware
IM
Human
Software
Resources
M
Information
System
N
Infrastructure
Communication
and
Collaboration Services
Data and
Facilities Knowledge
Figure 13.1: Components of infrastructure management.

(Source: http://www.prenhall.com/behindthebook/0132335069/pdf/Jessup_CH04.pdf)
DEFINITION
“Infrastructure, in itself, can be defined as the basic physical and

organisational structures and facilities, like buildings, roads, power
supplies etc., required for the operation of a society or business enter-
prise.”

N O T E S
Infrastructure is different for different sectors of the business enter-

prise. For some enterprises, infrastructure might refer to intercon-
necting hardware and software and not necessarily to computers and
other interconnected devices only. However, for other organisations
information technology enterprise, infrastructure might be viewed as
all those devices that support the flow and processing of information.
The Internet, infrastructure is considered to be the physical hardware
that is used to interconnect computers and users. It includes the trans-
mission media, like telephone lines, cable television lines, satellites,
antennas, as well as routers, aggregators, repeaters, and other devices
that control transmission paths. Software needed to send, receive and
manage the transmission signals is also included in infrastructure.
Infrastructure management can sometimes be divided into following

three categories as depicted in Figure 13.2:
S
Categories of Infrastructure Management
IM
Systems Network Storage
Management Management Management
M
Figure 13.2: Categories of infrastructure management

Systems management: The management of the information tech-
nology systems in an organisation is referred to as systems man-
N
agement. Systems management starts with collecting require-

ments, procuring equipment and software according to it and then
distributing it to where it is required. It also includes configuring
the equipment with the latest software, maintaining it, enhancing
it with service updates etc. System management incorporates a
problem-handling process and ensures the objectives of organisa-
tion as a whole is being met. The systems management department
is often referred to as management information systems (MIS) or
simply information systems (IS).
Network management: Networking basically refers to construc-
tion, design, and use of a network, with respect to information
technology. Networking includes the components required for
setting up a network like cabling, hub, bridge, switch, router etc.
telecommunication protocol and software for implementing and
managing the network. It also includes establishing operational
policies and procedures required for the smooth network. Network
management encompasses activities, methods and procedures,
and tools that are associated with the operation, administration,
maintenance and provisioning of networked systems.

N O T E S
Storage management: Storage management is a combination of

technologies and processes required by organisations to optimise
the performance of their data storage resources. As the amount of
digital data stored in computer systems all over the world is almost
doubling every year, there is constant pressure on organisations to
expand their storage capacity. Since doubling the storage capacity
every year is an expensive proposition, storage management solu-
tions are implemented in order to reduce cost and to improve the
security and capabilities of the existing storage. Storage manage-
ment technologies, enable organisations utilise their existing stor-
age optimally leading to lower costs both one-time capital invest-
ment associated with storage devices and the on-going operational
costs for maintaining them.
THE NEED FOR INFRASTRUCTURE MANAGEMENT
Along with basic infrastructure, businesses rely majorly on informa-
S
tion systems infrastructure for decision making and business process-
es, and for formulating competitive strategy. Business processes are
the actions that an organisation has to perform to reach their business
IM
goals. Most of the organisation’s business processes are dependent on
their information systems infrastructure although at different degrees.
Organisation’s management require an infrastructure management to
support a variety of activities. Reliable communication networks are
needed to support collaboration between suppliers and customers, ac-
M
curate and timely data and knowledge is required to gain business in-
telligence, and information systems is needed to aid decision making
and support business processes. These are all part of infrastructure
N
management.
USES OF INFRASTRUCTURE MANAGEMENT
There are many uses of infrastructure management. A few of them are

compiled below:
To reduce duplication of effort
To ensure adherence to standards
To increase the flow of information throughout an information
system
To encourage adaptability necessary for a changing environment
To ensure interoperability among organisational and external
entities
To maintain effective change management policies and practices

N O T E S
1. Which of the following is not a category of infrastructure

management?
a. System management
b. Network management
c. Resources management
d. Storage management
2. Networking basically refers to ________, _________ and use of
a network, with respect to information technology.
ACTIVITY
Study the infrastructure of a business enterprise and see how infra-
S
structure management helps in the growth of an organisation. You
can take the help of Internet for any related searches.
IM
MAINTENANCE OF
13.3
INFORMATION SYSTEMS
M
Maintenance, in general, refers to the changes that are made to a

system to correct or enhance its functionality. In Management Infor-
mation System, after the systems implementation phase, there is a
maintenance phase. Maintenance is another form of control. It is an
N
ongoing activity and keeps the MIS effective and efficient within cost
constraints. Maintainability of a system can also be defined as the ease
with which software can be implemented, corrected, adapted and en-
hanced.Maintenance is directed towards reducing errors due to de-
sign, reducing errors due to environmental changes and improving
the system’s scope and services.
Once the system has been placed into operation, system maintenance
takes over. It is an on-going process in maintenance of a system. While
designing information strategy plans, it becomes very clear for an or-
ganisation that systems maintenance is the longest and the costliest
phase of the system`s life cycle. The whole system life cycle main-
tenance has high implications on an organisation and needs special
attention. The structure of an organisation must be flexible enough to
support the maintenance of already existing systems along with the
implementation of new technologies.The system should be evaluated
and monitored timely for required maintenance, thus mostly leading
to lowering or containing maintenance costs.

N O T E S
Depending on the effect each has on an organisation's informa-

tion strategy plan, system maintenance can be categorised into four
groups. These are shown in Figure 13.3:
Corrective Maintenance
Customised Maintenance
Enhancement Maintenance
Preventive Maintenance
Figure 13.3: Categories of system maintenance
S
Corrective Maintenance: Irrespective of how efficiently designed,
developed, tested and implemented a system or application may
be, errors will inevitably occur. Corrective maintenance pertains
IM
to fixing or correcting problems in the system. The problems dealt
within corrective maintenance are those that were notidentified
during the implementation phase, like the omittance of a user-in-
teractivity feature or the improper functionality of it.
M
Customised Maintenance: Customised maintenance pertains to

either the creation of new features orchanging an existing one to
adapt as per the requirement of the organisation or of the users,
e.g.,changes on the organisation's tax code or internal regulations.
N
Enhancement Maintenance: Enhancement maintenance per-

tains to enhancing or improving the performance of the system.
This is done either by adding new features to the system or by
changing existing ones, like, conversion of text-based systems to
Graphical User Interface (GUI).
Preventive Maintenance: Preventive Maintenance is regarded
as one of the most cost effective of all. If performed timely and
properly, preventive maintenance can avoid major problems in the
system, like the Y2K bug, also called Year 2000 bug or Millenni-
um Bug. It was a problem in the coding of computerised systems
that were projected to create havoc in computers and computer
networks around the world at the beginning of the year 2000 (in
metric measurements K stands for thousand). Due to preventive
measures taken well in advance in the beginning of 1999, like pro-
gramming corrections, very few major failures occurred in the
transition from December 31, 1999, to January 1, 2000.
Information systems that are in operation must be maintained reg-

ularly. As we know by now, maintenance of information system is a
continuous process of making required changes and modifying the

N O T E S
system to satisfy organisational and user needs. The maintenance of

systems is done at two levels, with respect to cost as well as achieved
objectives. They are:
Hardware maintenance: In hardware maintenance, the main aim
is to keep the equipment of the system in working order without
changing its functionality. Traditionally, hardware maintenance is
covered in maintenance contracts with equipment manufacturers.
Software maintenance: In software maintenance, the main aim is
directed at maintaining the applications software. Software main-
tenance also includes any modifications in a software product
even after it has been turned over to operations. The cost of this
maintenance over the useful life of an application is usually twice
its development cost.
Software maintenance is done in three steps:

1. First, understand the software to be modified and identify the
S
parts of software that needs maintenance.
2. Secondly, modify the identified components of the application
IM
without adversely affecting the rest of the system.
3. Thirdly, test and validate the modified components, as well as
the entire system for proper functioning.
There are three types of activities involved in software maintenance:

M
a. Perfective maintenance: Modifying the application according

to changing user and organisational needs, thereby improving
system efficiency and enhancing documentation.
N
b. Adaptive maintenance: Modifying the application to adapt it to

a new hardware or software environment. For example, moving
an application from a mainframe to a client/server environment,
or converting from a file to a database environment.
c. Corrective maintenance: checking and correcting errors that are
discovered during system operations.
Maintenance is performed in four major steps. They are as depicted

in Figure 13.4:
Obtaining maintenance requests
Transforming requests into changes
Designing changes
Implementing changes
Figure 13.4: Steps to carry out maintenance.

N O T E S
Obtaining maintenance requests: A maintenance request is ob-

tained in case a problem arises in the system.
Transforming requests into changes: The problem behind the
request is identified, analysed and according to it a plan is devel-
oped.
Designing changes: The required changes according to the plan
are designed.
Implementing changes: The designed changes are incorporated
in the system.
MAINTENANCE COSTS
Numerous factors influence the cost of maintenance. The three most

important of them are as follows:
Defects: Defects refers to the number of unknown errors that exist
S
or emerge in the system after it is installed. Since corrective main-
tenance is one of the major maintenance activities, the number of
defects detected in a system contribute highly towards cost related
IM
to maintaining a system i.e., if there are a large number of defects
in the system when it is installed, maintenance costs will likely be
high. Conversely, if no errors are detected in the system after it is
installed, then maintenance costs will be relatively low.
M
Customers: Second factor that influences maintenance costs is

the number of customers in a given system. In general, the greater
the number of customers, the greater the maintenance costs.
Documentation quality: A third major contributing factor to
N
maintenance costs is the quality of system documentation. With-

out quality documentation, maintenance efforts can increase ex-
ponentially, thus increasing the cost of maintenance.
3. Systems maintenance is the longest and the costliest phase of

the system`s life cycle. (True/False)
4. In ________maintenance, the main aim is to keep the
equipment of the system in working order without changing
its functionality.
ACTIVITY
Take a case study of a business enterprise from the internet and

study how maintenance cost affects the overall budget of the sys-
tem.

N O T E S
MANAGEMENT OF CHANGING
13.4
REQUIREMENTS
Changes are inevitable, more so in the world of information system.
It is imperative for a project manager to establish a formal process
for submitting, evaluating, and approving changes and their resultant
impact on the project. If changes are not managed properly from the
beginning, the project will run behind schedule, have cost overruns
and, as a result, decreased project quality.
Requirements change continuously throughout the software develop-

ment lifecycle. Since requirements specification is a dynamic process,
it usually does not cease until the end of the product implementation.
The number and type of changes required might decrease towards the
later stages of the project design, but the changes never entirely stop
until product release and after. It is practically impossible to freeze the
S
user requirements at an early point in the development process. Im-
plementing and managing changes in a systematic and planned man-
ner is crucial to the success of any project.
IM
The changes affect both functionality of the system as well as wider
business goals of an organisation in which the system is developed.
They also influence overall project cost, resources, and project sched-
ule. Whenever there is a change needed for a requirement, there are
many scenarios of the project that get affected by this change, such
M
as design components, test cases, and source code. Thus it is essen-

tial that changes to requirements are carefully followed, analysed and
their effects on the existing system are assessed before going for a
N
change.
There are various objectives for managing changes to requirements.

These can be summarised as follows:
Identifying the reason for the changes in the requirements speci-
fication
Identifying responsible parties for the change
Tracking the history of change in the requirements specification
Analysing the impact of change on the system
Communicating the change among team members
Making a report of the changes in the requirements specification
Requirements management, within an organisation, aspires to pro-

vide consistency, predictability, and repeatability of the activities.
There should be proper guidance for controlling the costs, prioritising
the requirements and standardising the requirement analyses meth-
ods, so that requirement changes can be easily and effectively incor-
porated throughout the project and product lifecycle.

N O T E S
Following activities as depicted in figure 13.5 are to be incorporated

in the requirements change process whenever a change is needed in
the requirement:
Assign responsibilities
Manage changes
Document rationale
Trace requirements
Communicate the change
S
Establish baselines
IM
Figure 13.5: Activities in Requirement Change Process
Assign responsibilities: In every project, there are individuals
who are assigned the role of project manager or project leads that
has the administrative rights to maintain the project and manage
M
the required changes. These individuals assess the change request

and once the change request is approved, they assign certain other
individuals specific tasks of carrying out the appropriate modifica-
N
tions.
Manage changes: Managing changes in requirement is an activity
which involves tasks such as identifying, analysing, tracking and
reporting proposing changes and finally approving those chang-
es in the product specification. As project evolves, there may be
changes in requirements or the requirements may expand to in-
corporate modifications in project scope or design. Whenever a
request comes to add a new feature or to enhance an existing fea-
ture, a request for change is designed to modify the existing re-
quirement specification.
Since the changes to the requirements create an impact on the
project’s overall cost, allocated resources, and its planned sched-
ule for the delivery, a thorough assessment should be carried out
through content review by designated individuals or representa-
tives before finalising the change request. Once requirements are
finalised, a formal notification of the change is a must and may be
sent by e-mail.

N O T E S
Document rationale: Documentation is an iterative process and

is necessary and required at every step of the entire information
system.While establishing requirement changes, documentation
contains specifications or prototypes for change, specify how the
information change is going to be captured and represented and
validation criteria as to how each requirement will be verified. Rep-
resentation formats may include formats other than simple text,
like graphic files, screen shots, short cuts to certain context which
are embedded in a third-party application or any other format that
might be useful in defining or understanding requirements.
Trace requirements: Requirements traceability is an important
technique in any requirements management process as it provides
relationships between requirements, design and implementation
of a system. This in turn helps in managing the effect of change on
the system and ensures the success of the delivered systems.
There are numerous relationships that exist between require-
S
ments, design, components and others. It is critical to manage these
relationships to be able to provide a comprehensive requirements
management capability for supporting the system engineering life
IM
cycle. When the requirements change, its impact should be stud-
ied on the analysis, as well as the design model. After determining
the impact of changes the updates to the project schedule should
take place. A decision making structure should review the changes
and determine what to do to incorporate the required changes.
M
Every step must have a test case associated with it. The entire sys-
tem should be tested before implementation. Although testing is
often considered as boring, tiresome activity by many developers,
N
however lack of testing is one of the major factors in failed and in

trouble projects.
Communicate the change: Any change in requirements must be
communicated to the entire team involved in the process. Changes
to the requirements specification that have not been communicat-
ed to the entire group lead to troubled system. Communications
failures typically occur when system developers either drop a fea-
ture or change a performance requirement without telling the rest
of the team. Thus to avoid this an automated email-notification
system that offers instantaneous team communication will prove
to be beneficial and all affected parties are notified of the change
in a timely manner.
Establish Baselines: Once the requirements changes specifica-
tions have been verified and all the reviews are completed success-
fully then it will be approved by the customer and then it is ready
to be baselined. Baseline is the tested version of a set of require-
ments that represent a required system. It serves as the basis for

N O T E S
further development that can be incorporated only through formal

change control procedures. Baselining involves simply labelling
a set of requirements for specific versions and freezing them as
such before moving to the next phase of development. Approvals
might be required from all major functional groups on the devel-
opment team, including project management, architecture group,
quality department, and testing group. Once a change is done and
requirements are updated and approved, the team rules out a re-
quirements freeze (baseline) as the next step, and a new baseline
is created. When a new baseline is created:
The approved changes are incorporated into the Requirements
Document
The approved changes should be distributed to all parties who are
impacted
The requirements change history is maintained
S
All project plans, and other affected components are updated to
reflect the changes
IM
5. Requirements do not change throughout the software

development lifecycle. (True/false)
M
ACTIVITY
Create a small software project on your college and study the im-
N
pact of changing requirements on it at every stage of its develop-

ment.
13.5 INCIDENCE/ INCIDENT HANDLING

Incident handling is a generalised term that pertains to the response
to an attack, by a person or organisation. An incident has to be han-
dled in an organised and careful manner to be able to recover com-
pletely else otherwise it would lead to total disaster. In the field of
computer security and information technology, incident handling or
incident management incorporates the monitoring and detection of
security events on a computer or computer network, and the execu-
tion of proper responses to those events.
There are two common forms of system attacks:

Virus outbreak
System compromise

N O T E S
The following sequence of steps should be followed in the case of both

of the above types of attack:
Preparation
Identification of Attack
Containment of Attack
Recovery and Analysis
Figure 13.6: Sequence of steps for incident handling.

Preparation: To be able to recover from any kind of system attack,
both methods to prevent attack as well as how to respond to it
S
are important. To minimise the potential damage from an attack,
some level of preparation is required. The preparation includes
taking regular backup copies of all key data, monitoring and up-
IM
dating software regularly, and having a strong security policy in
place and well documented. Regularly-scheduled backups help in
minimising any major loss of data in case of an attack. Updation
of anti-virus software regularly, helps in keeping system protec-
tion up-to-date. A well-documented security policy that outlines
M
the responses to incidents and the responsibilities of the personnel

involved will prove to be helpful in the event of an attack, as a reli-
able set of instructions.
N
Identification of Attack: On one side, preparation is an important

step towards minimising the effects of an attack, on the other, the
identification of an incident is the first important post-attack step in
incident handling. To identify an incident becomes more and more
difficult as the complexity of the attack grows. Several character-
istics of an attack need to be identified- the fact that an attack is
occurring, its effects on local and remote networks and systems and
it origination - before it can be properly contained.
Containment of Attack: Once an attack has been identified, mea-
sures to minimise the effects of the attack must be taken. In con-
tainment, the user or administrator aspire to protect other systems
and networks from the attack and limit the damages done by the
attack. This phase includes the methods that are used to stop the
attack or virus outbreak. Once the attack has been contained, the
final phases are recovery and analysis.
Recovery and Analysis: During this phase users assess the extent
of damage that has been incurred, what data has been lost and
what the current scenario in post-attacksystem is. Once it is as-
sured that the attack has been contained, it is time to conduct an

N O T E S
analysis of the attack. The questions like- why did it happen? Was
it dealt with promptly and properly? Could it have been handled
better? - have to be answered. The analysis phase helps the users
and administrators to determine the reason behind the attack and
the best course of action to be taken to protect against such future
attacks.
INCIDENT HANDLING - VIRUSES

Preparation: System viruses, as we all know, can cause irrepara-
ble harm to important files and records. Small office users and
home users are relatively at higher risk than larger organisations
because these users usually work on one computer or store their
important data in a single location. In a larger organisation, data
is usually spread across many systems in several locations Thus a
virus outbreak in a home or small office can permanently destroy
important data. Therefore creating backups of all data is very cru-
S
cial for any organisation. In addition to that backup disks must be
kept in a separate location, away from the computer, to ensure that
in case of an incident like fire or theft of hardware, a backup copy
IM
of all data is still available.
The second very crucial step in preparing for a virus attack is to in-
stall anti-virus software. A number of anti-virus software are easily
available, easy to install and operate and are affordable. New vi-
M
ruses are created frequently, so users must update their anti-virus

software on a regular basis.
Identification of Virus Attack: Viruses are very potent and fright-
ening since they spread very quickly to 'friendly' computers. Early
N
identification of an incident of a virus attack is crucial to ensure

that the virus does not spread to other computers. It is also im-
portant that users be familiar with the symptoms of a virus attack.
They might range from mass e-mailing file destruction to other
malevolent actions the results of which can be seen as an immedi-
ate effect. Scheduling the anti-virus software to do real-time scan-
ning of files and to periodically perform complete system scans
helps in both preventing and identifying viruses.
Containment: Containment of the virus is crucial in limiting its
adverse effects. Many virusesautomatically spread themselves. To
contain a non-replicating virus is fairly easy. The administrator, or
user, must disconnect network access including shared directories
and other components that may allow the virus to infect files and
programs on other machines. In case the anti-virus software fails
to clean the system or does not have the features required to per-
formthe cleansing, it is advisable to try other software packages
that may provide more comprehensive coverage. If the system has
been altered beyond repair, then the last resort is to clear the sys-
tem entirely and reinstall the operating system and software.

N O T E S
Recovery and Analysis: Viruses can cause a varying degree of de-

struction- some viruses exist merely to replicate;others attach to
and destroy files and programs. Generally, anti-virus software can
restore files to their original state, but there are exceptions.Once
the systems have returned to their full operation, analysis should
be done to determine where it failed. Is it due to faulty anti-virus
software, or due to the frequency and reliability of updates? Was
opening files from an unknown or untrusted source- allowing the
system to become infected? Once the attack was identified, were
appropriate and sufficient steps taken to minimise the damage
that the system sustained? Thus analysing the incident enables
the user to learn from the incident and ensure that it does not hap-
pen again.
SYSTEM COMPROMISE
Preparation: System compromise is a system attack in which an
S
intruder breaks into a computer and is able to use that computer,
either by sitting directly in front of it or from a remote network.
The attacker then gains total access to a system and the data con-
IM
tained therein including files, applications etc. Managing system
compromise can prove to be more difficult than managing virus
outbreaks. Similar to virus attack, all vital information should be
backed up on a regular basis. Software updates are crucial and
must be maintained. To prevent unauthorised intrusion into a
M
system, users must implement firewalls. Firewalls are extremely

important in preventing unauthorised individuals from accessing
network services and resources.
N
Identification: Systems compromise attacks are usually indicated

by missing or modified content in files, any random changes to the
system configuration and services, greater memory and disk usage
and unidentified network connections. The attackers usually hide
any indications that reveal of a system attack by replacing files and
programs with data will protect the attacker. Applications that act
normally at one time and strangely on the other indicate an unau-
thorised intrusion as do the files and programs whose time, date
or size stamps may have been modified. Comparison with their
parallel backup copies may reveal changes in files.
Containment: An administrator is responsible for containment of
an intrusion. First, the administrator must freeze the current sys-
tem as soon as he/she suspects an intrusion. Freezing would be to
disconnect the system from the network, stop the operating sys-
tem and not allow anyone to use the system. This is done because
when an operating system runs and users work on the system, files
automatically get modified and updated depending on the open
applications. Normal functioning often erases important data that
could have been used to detect and trace an intrusion. Therefore it

N O T E S
is very crucial to stop the system as soon as possible after an attack

is discovered.
Recovery and Analysis: The most overwhelming process of clean-
ing up and recovering an attacked system is to format the hard
disk and re-install the operating system and required software
once again. This is a faster approach towards returning a system
to its normal functioning. The other slower and more painstaking
approach is to compare each and every individual file and pro-
gram against a backed up copy to determine if any modifications
have been made. For analysis part, it is important to determine the
cause of the intrusion and once the cause is established, changes
should be made to the system to avoid future attacks by the same
source. The changes might include updating affected software,
change access control mechanism that allows only authorised us-
ers, update systems and networks to be able to use the services
like firewalls and intrusion detection systems. A combination of
S
these changes will provide a safer and more secure working envi-
ronment and safeguard against future intrusions.
IM
6. Which of the following are common forms of system attacks?

a. Virus outbreak c. Both of them
M
b. System compromise d. None of them

7. Incident handling is a generalised term that pertains to the
response to an attack, by a person or organisation. (True/
N
False)
ACTIVITY
Take a case study of an organisation from the internet and study

how it subverted virus attack and made preparation to prevent it.
DISASTER RECOVERY AND BUSINESS

13.6
CONTINUITY PLANNING
Business Continuity and Disaster Recovery, in short BCDR or BC/
DR, are both closely related business practices. They pertain to an
organisation's preparation for any unforeseen risks during continued
operations. These both i.e. business continuity and disaster recovery,
have been combined into a single term to acknowledge the fact that
both business executives and technology executives need to work in
collusion with each other rather than developing plans in isolation.

N O T E S
Disaster recovery and business continuity planning are both mecha-

nisms that enable organisations to be ready for any kind of unforeseen
events that might disrupt their normal functioning—whether it is a
hurricane or a simple power outage due to a digging in the basement.
The role of management in this scenario would range from inspecting
the plan, to furnish input and support, to help implementing the plan
into action during an emergency.
Typically, disaster recovery refers to the distinct steps that are under-
taken to bring the organisation back to its normal operation in case
of any calamitous natural disaster or a national emergency. During
this time, in the case of information technology, the steps for disaster
recovery would involve restoration of servers or mainframes with the
help of backups, re-establishment of private branch exchanges (PBX)
and gear up the local area networks (LANs) to be able to meet basic
and immediate business requirements.
S
Similarly, business continuity encompasses those mechanisms and
procedures that must be implemented by an organisation to ensure
that critical functions continue to operate during as well as after a
IM
disaster. Conceptually, this seems similar to disaster recovery plan
(DRP). However, business continuity also takes into account more ex-
tensive planning that focuses on long term or recurrent challenges
to organisational success. Recurrent business continuity problems
might include illness or departure of key team members, breakdown
M
of supply chain, catastrophic failures or critical malware infections.

Keeping in mind the ever-changing business objectives, one crucial
requirement for disaster recovery is to undertake timely audit of the
N
disaster recovery capacity of an organisation. The main purpose of

these audits is to find out how an organisation's disaster recovery
plans are in sync with its actual objectives. While conducting the au-
dit, there are few factors that are taken into considerations such as
alternate site designation, training of personnel, and insurance issues.
There are a number of procedures and processes that are followed by
the auditor or team performing the audit, to achieve the objectives of
the audit and the audit plan contains the same.
Disaster Recovery: Disaster Recovery (DR) is a critical process
for any organisation. It is brought into place in case of an event of
either a natural disaster or a disaster caused by humans occurs.
Disaster recovery process helps an organisation to recover access
to its software, data, and/or hardware that is required to resume
the original performance of normal, critical business functions.
Generally, Disaster Recovery Plans, or DRPs, primary focus is on
recovering the data, software, or hardware that has been damaged
or lost and brings them back to as close to the original as before
the disaster struck. There is one more vital element of any organ-

N O T E S
isation that DR needs to focus on i.e., manpower that composes

much of any organisation. A building fire might largely affect vi-
tal data storage of an organisation; whereas an epidemic illness is
more likely to have an impact on manpower. Thus DRP needs to
take into consideration both types of disaster while creating a DRP
and include in their contingencies plans how they will cope with
the sudden and/or unexpected loss of their key personnel as well
as how to recover their data.
Generally, Disaster Recovery Plan (DRP) is part of a bigger, more
extensive program known as Business Continuity Planning (BCR).
To make sure that all the key personnel are familiar with the ac-
tions that they need to take in case a disaster strikes, the DR plan
must be practiced. These plans need to be adaptable and must be
routinely updated, i.e., in case new people, a new branch office,
or new hardware or software are added to an organisation, these
must be incorporated into the organisation's disaster recovery
S
plan without any difficulty and without any major changes in the
existing plan. Thus organisations must take into considerations all
these facets if they want to minimise their damage and maximise
IM
their recovery after a disaster.
Business Continuity Planning: Business Continuity Planning
(BCP)consists of the plans that an organisation can prepare for and
help in disaster recovery. These are a compilation of the steps that
will have to be implemented to help the organisation recover should
M
any type of disaster occurs. The plan is agreed upon in advance by

management and key personnel of the organisation. These pro-
grams prepare for multiple problems. The plan is detailed in nature
N
and clearly outlines the actions that an organisation or particular

members of an organisation need to take at the time of disaster. The
plan helps in recovering/restoring the organisations’ critical opera-
tions that may have been either completely or partially interrupted/
damaged during or after a disaster. It is highly recommended that
these plans need to be practiced regularly as well as outlined timely
in order to be fully effective in disaster recovery.
In general terms, Business Continuity Plan or BCP is guideline for
an organisation to guard itself against future disasters that could
affect its long-term health adversely or hamper the accomplish-
ment of its primary mission. BCPs take into consideration those
disasters as well that can occur on multiple geographic levels- ei-
ther local, regional, or national-disasters like fires, earthquakes,
or pandemic illness. BCPs should include everything from techno-
logical viruses to terrorist attacks and plan for them. The primary
objective of BCP is to help expedite the recovery of an organisa-
tion's crucial functions and manpower in the aftermath of these
types of disasters. Advanced planning in this manner can help an
organisation minimise the amount of loss in case of a disaster and
also reduce the downtime of its systems.

N O T E S
DIFFERENCE BETWEEN DISASTER RECOVERY

AND BUSINESS CONTINUITY PLANNING
While developing plans, from an organisational perspective, to deal
with major events that an organisation faces there are two different
terms - Business Continuity Plan and Disaster Recovery Plan- that
come into picture. Although they are both targeted at a similar goal
but are different in their approaches. There is quite a difference be-
tween the two plans and it is important for an organisation to clearly
understand what sort of planning each requires.
Disaster recovery is the process under which a business resumes it
functioning to its original state after a disruptive event. A disruptive
event might be something huge-like an earthquake or a tsunami or
the terrorist attack on the World Trade Center-or something small,
like malfunctioning of computer systems caused by a computer vi-
rus. As part of the business continuity process an organisation will
normally develop a series of DRPs. DRP are relatively more technical
S
plans that are developed for specific groups within an organisation to
help recover a particular business application. The most well known
example of a DRP is the Information Technology (IT) DRP.
IM
Business continuity planning is a set of plans that are in place to make
sure that an organisation keeps making money, even after a big disas-
ter like natural calamity or in case of smaller disruptions like illness
or departure of key personnel, supply chain problems or any other
challenges that businesses come across from time to time.
M
Despite this difference, the two terms are interconnected and come
under a single acronym, BC/DR, because of their many common con-
siderations.
N
8. ____________ refers to the distinct steps that are undertaken

to bring the organisation back to its normal operation in case
of any calamitous natural disaster or a national emergency.
ACTIVITY
Take a case study of an organisation from the internet and observe

how it has reacted and overcome a natural disaster. Present your
13.7 SUMMARY
Infrastructure Management (IM), from the perspective of an or-
ganisation’s information system, is defined as the management
of essential operation components, such as organisation policies,
processes, equipment, data, human resources and external con-
tacts, for overall effectiveness.

N O T E S
Infrastructure management can be divided into following three

categories; system management, network management, storage
management.
Maintenance, in general, refers to the changes that are made to a
system to correct or enhance its functionality.
Maintenance is carried out in four major steps. They are obtaining
maintenance requests, transforming requests into changes, de-
signing changes, implementing changes.
Requirements change continuously throughout the software de-
velopment lifecycle.
Requirements management, within an organisation, aspires to
provide consistency, predictability, and repeatability of the activ-
ities.
Incident handling is a generalised term that pertains to the re-
S
sponse to an attack, by a person or organisation.
There are two common forms of system attacks: Virus outbreak,
System compromise
IM
The sequence of steps that should be followed in the case incident
is: preparation, identification of an attack, containment of an at-
tack, recovery and analysis.
Business Continuity and Disaster Recovery, in short BCDR or BC/
M
DR, are both closely related business practices and pertain to an

organisation's preparation for any unforeseen risks during contin-
ued operations.
N
KEY WORDS
Infrastructure Management: Infrastructure management is

defined as the management of essential operation components,
such as organisation policies, processes, equipment, data, hu-
man resources, and external contacts, for overall effectiveness.
Virus: A piece of software code which is capable of copying it-
self and typically has a detrimental effect, such as corrupting
the system or destroying data.
Defects: Defects refers to the number of unknown errors that
exist or emerge in the system after it is installed.
Disaster Recovery: Disaster recovery process helps an organ-
isation to recover access to its software, data, and/or hardware
that is required to resume the original performance of normal,
critical business functions.
Business Continuity Planning: Business Continuity Planning
(BCP) consists of the plans that an organisation can prepare for
and help in disaster recovery.

N O T E S

1. Discuss the three categories of infrastructure management and
their respective contribution in management of organisation
infrastructure.
2. Describe how the information system is maintained in an
organisation. What are the steps that re undertaken to do the
same?
3. What are the sequences of steps that need to be followed in the
case of system attack? Write a short note on incident handling.
4. Differentiate between disaster recovery and business continuity
planning.
S
IM
Topic Q.No. Answers
Infrastructure 1. C, resources management
Management
2. construction, design,
M
Maintenance of 3. true
Information Systems
4. hardware
N
Management of Changing 5. False

Requirements
Incidence/ Incident 6. C
Handling
7. True
Disaster Recovery and 8. Disaster recovery
Business Continuity
Planning

1. Infrastructure management can sometimes be divided into
following three categories. Refer to Section 13.4.
2. Maintenance, in general, refers to the changes that are made to a
system to correct or enhance its functionality. Refer to Section 13.5.
3. Incident handling is a generalised term that pertains to the response
to an attack, by a person or organisation. Refer to Section 13.7.
4. Business Continuity and Disaster Recovery, in short BCDR or
BC/DR, are both closely related business practices. Refer to
Section 13.8.

N O T E S
SUGGESTED READINGS
Hudson, W., Haas, R. and Uddin, W. (1997). Infrastructure manage-
ment. 1st ed. New York: McGraw-Hill.
Oriyano, S. and Gregg, M. (2011). Hacker techniques, tools, and in-
cident handling. 1st ed. Sudbury, Mass.: Jones & Bartlett Learning.
Snedaker, S. (2007). Business continuity & disaster recovery for IT
professionals. 1st ed. Burlington, MA: Syngress.
E-REFERENCES
Handling, A. (2014). An Introduction to Incident Handling | Syman-

tec Connect. [online] Symantec.com. Available at: http://www.sy-
mantec.com/connect/articles/introduction-incident-handling.
S
Conferences.embarcadero.com, (2014). Managing Requirements
Changes in SDLC. [online] Available at: http://conferences.embar-
IM
cadero.com/article/32153
Pic.dhe.ibm.com, (2014). Help - Rational DOORS. [online] Avail-
able at: http://pic.dhe.ibm.com/infocenter/doorshlp/v9r5/index.
jsp?topic=%2Fcom.ibm.rational.doors.integrating.doc%2Ftop-
ics%2Fc_manage_change_req.html.
M
N

C H
14 A P T E R
CASE STUDIES
CONTENTS
Case Study 1 Management Information System at Dell

Case Study 2 Information System in Restaurant
S
Case Study 3 Use of Internet in E-Commerce by Ebay
Case Study 4 Optimised Database Management for Tong Yang Group
IM
Case Study 5 Air-Asia - Strategic Role of Information System in Business
Case Study 6 ERP Implementation in a Global Electronics Conglomerate
Case Study 7 EDI implementation in xicor INC.
Case Study 8 Data Mining at Walmart
Case Study 9 CRM at Titan
M
Case Study 10 Supply Chain Management in Mcdonald’s

Case Study 11 Deployment of Information System at Careers & Future
Case Study 12 Cadbury Crisis Management
N

CASE STUDY 1
N O T E S
MANAGEMENT INFORMATION SYSTEM AT DELL
This Case Study discusses about Dell’s use of Management In-

formation System. It is with respect to Chapter 1 of the book.
Dell was founded in 1984 by Michael Dell. Dell Computer

Corporation manufactures personal computers, computer
peripherals and software. It is a part of the leading producers
of computers in the world. Dell deals directly with its custom-
ers by selling products through the Internet and mail-order
catalogues instead of retail outlets. The company is located in
Round Rock, Texas. As Dell was selling computers directly to
customers using advertisement in magazines and catalogues,
the company can set its products’ price lower than those sold
through retail stores. During the first year of the company,
sales reached nearly $6 million which later became $34 mil-
S
lion in the next year.
Although the company was progressing rapidly but it experi-

enced a number of obstacles that were affecting profits bad-
IM
ly. The company launched a new range of notebook comput-
ers, but due to quality problems and insufficient production
planning company had to stop selling for a year. Profit was
decreasing and the company was in serious problem. The
management was worried about decreasing revenue and it
M
had to take a major step to overcome the situation. The man-

agement decided to implement information processing tools
in the company. Information processing is the analysis and
N
organisation of data. It is widely used in areas such as busi-

ness, engineering and science where computers are used.
Businesses use data processing for tasks such as payroll

preparation, accounting, record keeping, inventory control,
sales analysis and the processing of bank and credit card
account statements. The information system that Dell uses
comprises computers, the Internet, maps, spreadsheets,
models and databases. The operational level map is the most
appropriate tool for an information system. Using the infor-
mation system, decision on organisational operations can be
initialised and made. Maps can be used to identify the coun-
try or region from which information is acquired. Maps can
be in the form of charts that can also provide necessary infor-
mation. For tactical level of Dell, databases are the most suit-
able tool for information processing. The Internet is the most
appropriate information system for strategic level. Using the

CASE STUDY 1: MANAGEMENT INFORMATION SYSTEM AT DELL
CASE STUDY 1
N O T E S
internet company can find out trends and strategies of competi-

tors. The organisation can analyse the trends and strategies used
by other companies and formulate an appropriate strategy. Dell
also implemented inventory control systems. Inventory control
systems are the primary and essential need of the individual busi-
nesses. Dell used the up to date inventory control system which
prevented many problems to arise. This inventory control system
ensures that anything requested by the customer will always be
available to them at any point of time. Dell received numerous
benefits from the information system. The system enables the
company to strategise and conquers any problems and threats
from competitors. The system also helps the company in analys-
ing and processing the required information.
(Source: http://www.mbaknol.com/management-information-systems/
case-study-management-information-system-at-dell/)
S
QUESTIONS
1. How did information system help Dell to improve its

IM
business operations?
(Hint: Using the information system, decision on
organisational operations can be initialised and made)
2. Was it the right decision to implement an inventory control
M
system? Provide your opinion and justify the same.

(Hint: Yes, It was the correct decision to implement an
inventory control system. Inventory control systems are
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the first and essential need of the individual businesses.

It ensures the availability of products which are in great
demand and manages the stock efficiently)

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S
CASE STUDY 2
N O T E S
INFORMATION SYSTEM IN RESTAURANT
This case study discusses the application of computer based informa-

tion system at a restaurant. It is with respect to Chapter 2 of the book.
Eat-n-Treat is a family restaurant spread in a very large area. The
restaurant started giving its service with a few staff members such
as managers, chefs, waiters and waitresses. The customer base
in the beginning was not particularly impressive, but soon peo-
ple started liking the taste of its food. The restaurant was getting
popular and added numerous customers in a few weeks. Restau-
rant management decided to increase its staff member to provide
better service to the customers. It also increased the menu items
in its menu to attract more customers. Every activity was being
done manually such as taking customers’ order, managing staff
and inventory control. Ats the competition is always tough in the
restaurant business, Eat-n-Treat soon realised that the customers
S
have to wait for a long time to get their orders and even tables.
Thus, customers were moving to other restaurants which were
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nearby. Management was concerned about solving this issue as
soon as possible as the revenue was decreasing rapidly.
After an intense discussion on the situation, the management de-
cided to computerise the entire system. Soon they implemented a
fully computer based information system to manage the business
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effectively. Now, a waiter takes the order from customers and then
enters the order in an online system through the six computers
located in the restaurant dining room. The order is transferred
to a printer. Every printer is assigned a different task to manage
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orders efficiently without any confusion. If a customer orders

salad, the order goes to the cold item printer. Likewise, if a cus-
tomer orders a hot item such as pizza then the order goes to the
hot item printer. Similarly, order for drink is sent to bar printer.
Customers’ bill is automatically generated by the system. Also,
incase food items in the kitchen are going to be out of stock then
the head chef sends out the out of stock message. This message
is displayed on the computer systems in the dining area which
notify the waiters about the availability of a particular food item.
This makes the process faster and enables waiters to give better
service to customers.
Other significant benefits of the system help management to plan
and control their business. The system provides minute-by-min-
ute information on the food items ordered and helps management
to decide which item is selling the most to make menus according
to the customer’s taste. The system also helps in controlling cost
by comparing the weekly sales totals with food costs.
(Source: http://www.mbaknol.com/management-information-systems/case-study-on-mis-
information-system-in-restaurant/)

CASE STUDY 2
N O T E S
QUESTIONS
1. Do you think implementing an information system was

the only alternative to the restaurant problems?
(Hint: Computer based information system helps to
manage the business effectively)
2. How can the tablet computers enhance the efficiency
of staff in processes such as taking orders from the
customers? Justify your opinion with an example.
(Hint: Tablet computers are portable computing devices
and can be carried by the employees to establish a strong
communication with each other which leads to a better
control over business operations)
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CASE STUDY 3
N O T E S
USE OF INTERNET IN E-COMMERCE BY EBAY
This Case Study discusses about eBay’s use of Internet for e-com-
merce. It is with respect to Chapter 3 of the book.
eBay, founded in the year 1995 by Pierre Omidyar, is considered a
pioneer in the online auction industry. In online industry, people
are grouped together on a local, national and international basis
to serve the purpose of creating a person-to-person community.
Here, every individual can have an equal access through the same
medium called Internet. eBay offers wide varieties of products
and services for bargain hunters, hobbyists, collectors and sellers.
By changing the way people engage in trading, eBay has changed
the face of e-commerce from its inception. Today, eBay continues
to be the brand preference with over 39 market presence and with
$60 billion of the total value of sold items on the site’s online trad-
ing platform.
S
To start with, eBay introduced several crucial innovations tai-
lor-made for the Internet at the business level, a strategy which
IM
was conceived to be an improvisation. The online auction busi-
ness model is the forte of eBay which served as the facilitator of
trade between a buyer and a seller in a highly individualistic man-
ner. This model developed by eBay proved to be an important
extension of e-commerce. It offered millions of buyers a low-cost
M
opportunity to engage in a new type of economic activity.

eBay’s growth was supported by word of mouth publicity. It also
made acquisitions which aided in the expansion and improve-
ment of the company’s services. eBay currently is the first ranked
N
online auction company among its contemporaries, with nearly

one-third of U.S. Internet users registered on its site. The compa-
ny is proving to be a substantial business threat internationally as
well, competing in the Asian, European and Latin American mar-
kets. The online auction industry commands significant revenues
that continue to increase with every passing year.
The business model of eBay focused on creating and maintain-
ing a person-to-person trading community. By implementing this
model, eBay has been able to build strategic partnerships. It con-
tinues to make new changes and improvements, and focuses on
its internal and external environments for possible future oppor-
tunities. Due to all this they have the privilege of being the world’s
largest online auction company.
At present, they have over 94.9 million registered users in more
than 150 different countries. eBay founder Pierre Omidyar also
did not foresee the tremendous possibilities that eBay had when
it was first conceived.
(Source: http://www.mbaknol.com/information-systems-management/case-study-
ebay%E2%80%99s-business-model/)

CASE STUDY 3
N O T E S
QUESTIONS
1. Compare eBay with other online e-commerce sites and

analyse why eBay holds top-spot in this industry?
(Hint: eBay is a pioneer in its field and continues to evolve
with time)
2. Analyse how an e-commerce business has an advantage
vis-a-vis a normal retail business located in a country.
Suggest examples besides eBay that justify your stand.
(Hint: E-commerce business uses the Internet as its
backbone which is accessed by billions of people around
the world)
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CASE STUDY 4
N O T E S
OPTIMISED DATABASE MANAGEMENT

FOR TONG YANG GROUP
This case study discusses about database management. It is with

respect to Chapter 4 of the book.
Tong Yang, a 50-year-old Taiwanese company, specialises in the
manufacturing of interior and exterior plastics and sheet metal
components for the automotive industry. Due to its dedication
to research and development, strong marketing and innovation,
Tong Yang has become the largest automotive parts manufacturer
in Taiwan. The company has also forayed into foreign markets
by setting up manufacturing plants and distributions centers in
Taiwan, China, Thailand, USA and Europe. The company has its
headquarters in Taiwan which coordinates and integrates the re-
sources at all its branches. At present Tong Yang is the largest
collision auto-parts supplier in the world. For continual growth,
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efficient allocation of resources is imperative as it allows Tong
Yang to be globally competitive.
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Since Tong Yang was rapidly expanding its business, so was the
volume of data increasing at a rate of 30-40GB on average per
month. The performance of the database began to suffer and
there were many user-related issues that began to increase. Tong
Yang Group decided to address these problems, because 80% of
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its business revenue is generated from overseas orders. It became

crucial to adopt a more robust and reliable database management
solution to enhance database performance to satisfy the demands
of global expansion as well as meet the requirements of the users.
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The challenges that Tong Yang faced was firstly, to maintain the
reliability and speed of performance while downsizing the space
occupied by its large database in order to lower the cost of its
storage equipment; secondly, to avoid any disruption to their nor-
mal operations or loss of orders during the transition to the new
system.
Tong Yang tied up with consultant, AdvancedTEK International,
to undertake a detailed evaluation of new storage hardware and
Information Management (IM) software. There were four major
criteria which needed special attention:
system reliability
cost saving
ease of management
ease of expansion.
Both decided that archiving technology offered by the HP Data-
base Archiving software was a cost-effective and efficient solution
for the above problems. Not only would it enhance the perfor-

CASE STUDY 4
N O T E S
mance of the database, it would also reduce the high cost associ-
ated with increase in storage space.
HP Database Archiving software provides high-speed search
and retrieval of database information without adversely affecting
critical business processes. It supports large-scale and complex
databases and can handle voluminous data with integrity and
consistency. In addition, it retains data for long terms to meet
industry-specific regulations. Infrastructure costs are controlled
because of not having to invest in costly hardware and constant
server upgrades to accommodate the high storage requirement.
The HP Database Archiving software also helps reduce the size
of the primary production database. Historical data is stored in
a secondary, online archive database which reduces the load of
retaining a large volume of historical data online in production
databases. Simultaneous access to production and archived data
S
through is still achieved by using Combined Reporting applica-
tion. Thus the performance of the application software that man-
ages the on-going growth of data is enhanced and better managed.
IM
By being the pioneer in the automotive industry to adopt the HP
Database Archiving software in Taiwan, Tong Yang has gained a
significant competitive edge in the local automobile industry as
well as on the global platform.
M
With the implementation of Database Archiving software by HP

in 2008, Tong Yang enjoyed:
a 7% growth in business in 2009 despite the economic recession.
N
an immediate 10% increase in efficiency in handling orders

(Source: http://h20195.www2.hp.com/V2/GetPDF.aspx%2F4AA1-6534ENW.pdf)
QUESTIONS
1. Describe the problems faced by Tong Yang group due to

its expanding business all over the world. What were the
remedial actions taken by them to overcome them?
(Hint: Volume of database increased at a very high
rate thus adversely affecting the performance of the
organisation.)
2. Study database management techniques implemented
by any other MNC for handling large volumes of data in
house in an efficient manner. Prepare notes and compare
them with that of Tong Yang.
(Hint: Ashok Leyland/ Atlas Cycles)

CASE STUDY 5
N O T E S
AIR-ASIA - STRATEGIC ROLE OF INFORMATION

SYSTEM IN BUSINESS
This case study discusses about Air Asia’s use of information system
in business. It is with respect to Chapter 5 of the book.
S
IM
Air Asia an airlines company was established in 2001 by Mr. Tony
Fernandes, the CEO of Air Asia. It provides low cost service to the
passengers. Therefore, it is the leading low fare airline in Asia. It
won the ‘Asia Pacific Airlines of the year 2003’ by the Centre for
Air Pacific Aviation (CAPA). The company made its impression
on customer’s minds with the slogan “Now Everyone Can Fly”. It
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has flown over 55 million passengers across the region. It is also

increasing its network through its associate companies. Air Asia
has a vision to serve 3 billion people who are not being served
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well due to poor connectivity and high fare price and become the
largest low cost airlines in Asia. Its main objective is to create a
globally recognised brand. In order to become the best company
it has to maintain the highest quality product or service, embrace
technology to reduce cost, and enhance service levels.
Air Asia business strategy emphasises on cost leadership and

targeting price sensitive customer markets. The main goal of Air
Asia is to attain bigger cost advantages than the competitors by
continuously exploring areas for cost reduction along its value
chain. Operation management of the airline industry is very com-
plex because of its continuous daily operation, larger network in
supply chain and some overpowering external variables such as
government regulations and weather condition. These issues af-
fect the performance of the airline. This creates the requirement
for implementing advanced planning and scheduling system.
Air Asia implemented APS (Advanced Planning and Scheduling)

system. APS system is an information system which works as a
brain of supply chain activities by leveraging activities in relation
with the requirement of customers and suppliers.

CASE STUDY 5
N O T E S
It helped Air Asia to optimise its supply chain management as it

clusters and classifies customer orders, forecasts future fulfilment
requirements, set order priorities and checks resources availabil-
ity. APS system supports visibility across the supply chain in the
area of cross functional scheduling and planning with suppliers
and customers. APS system further enhanced Air Asia’s process-
es performance and it also analysed the optimal flying routes de-
ciding new destinations for Air Asia to work in future.
(Source: http://www.mbaknol.com/management-case-studies/case-study-of-air-asia-stra-
tegic-role-of-information-system-in-business/)
QUESTIONS
1. Do you believe that the decision made by Air Asia to

implement APS system was suitable for its situation?
(Hint: APS system supports visibility across the supply
S
chain in the area of cross functional scheduling and
planning with suppliers and customers.)
IM
2. Other than implementing APS system what kind of
information system could be implemented?
(Hint: Operational information systems)
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CASE STUDY 6
N O T E S
ERP IMPLEMENTATION IN A GLOBAL ELECTRONICS

CONGLOMERATE
This Case Study shows the implementation of ERP systems in a

subsidiary of Global Electronics Conglomerate. It is with respect to
Chapter 6 of the book.
A North American subsidiary of a global electronics conglomer-
ate has a revenue base of USD 1 billion and employs more than
1000 people spreading across the world. The parent company is
the third largest semiconductor company in the world. It manu-
factures and markets semiconductors, display and storage devic-
es for computer systems, and wireless, networking, automotive
and digital consumer markets.
However, the subsidiary is not able to handle the market fluctua-
tions and change in customers’ needs and preferences due to lack
of flexibility. As a result, it is not able to deliver the products on
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time to the customers. Naturally, there was a need of implement-
ing a robust business process to move ahead of the competitors,
IM
reduce overhead costs and improve cash flow. From the perspec-
tive of technology, the various existing systems that were built on
heterogeneous technology platforms needed to be integrated.
Consequently, the organisation decided to implement an ERP
system. For this purpose, the organisation approached Infosys, a
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global leader in consulting, technology, and outsourcing solutions.

During the implementation of an ERP system in the organisation,
the Infosys team finds the following problems with the business
processes of the organisation:
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It was difficult to keep pace with the reduced distribution time

of the competitors
The company found it difficult to enhance customer services
The client`s legacy systems hampered synchronisation of op-
erations with market fluctuations
Being in the short life-cycle industry, the ‘on-time delivery’ re-
cord of the client needed to be improved while maintaining
low inventory levels and costs
A large number of satellite systems were not integrated with
the host system
To overcome the above problems, the Infosys team started to in-
tegrate best-in-class Oracle ERP with customised applications to
help the client company in improving their business practices.
The team was equipped with its proprietary IntERPrize method-
ology, and strong Oracle Applications’ consulting and its unique
global delivery model. As a part of the process, the team evaluat-
ed and implemented Warehouse Management Solutions (WMS)
and Transport Management Solutions (TMS). Also, team stan-
dardised performance matrices across the organisation in order

CASE STUDY 6
N O T E S
to streamline the internal processes. Moreover, some of the other

tasks of the team included defining business process, managing
programs and projects, evaluating and implementing packages
and training key users.
Equipped with IntERPrize, a team consisting of 45 experts from
Infosys finalised the approaches and methodologies for imple-
menting Oracle Application R11.0.3 to gain process efficiencies.
The team is first streamlined the manufacturing, distribution, pro-
curement and financial accounting processes of the client compa-
ny. These processes in turn were integrated with i2 Technologies’
Demand Planner, a forecasting and planning tool. In addition, an
innovative enterprise WMS / TMS product from HK Systems was
evaluated and implemented for improving the efficiency of order
execution, outbound visibility, and reverse logistics. (The applica-
tions of i2 Technologies and HK Systems run on Sun Solaris 5.6
and Windows NT platforms.). In addition, they prepared an en-
S
terprise-wide data model for standardising performance metrics
across the organisation and streamlining their internal business.
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The implementation process was completed in a record 18 months.
Implementation of ERP significantly improved the ROI of the cli-
ent company. Some of the other tangible benefits included high vis-
ibility to the supply chain and improved demand planning and ex-
ecution. Real-time processes significantly improved cash flows. In
M
addition, because of the automation of a large number of processes

has increased efficiency and reduced overhead costs. The imple-
mented processes and applications also improved ‘on-time deliv-
ery’ record of the company. The evolution of a WMS/TMS package
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along with an Online Analytical Processing (OLAP) tool resulted

in improved integrated systems. Training of key users increased
their understanding of business processes, resulting in incremen-
tal changes since post-implementation.no reference provided
(Source: http://www.infosys.com/industries/high-technology/case-studies/Pages/ora-
cle-implementation-global.aspx)
QUESTIONS
1. What is the need of implementing the ERP system in the

organisation?
(Hint: The organisation is not able to provide products on
time to its customers.)
2. Do you think the implementation of ERP is the only
option for the organisation? Comment.
(Hint: In the present case, one of the main problems
of the organisation is the disintegration of its business
processes and ERP helps in integrating them.)

CASE STUDY 7
N O T E S
EDI IMPLEMENTATION IN XICOR INC.
This Case Study discusses about EDI imlementation. It is with re-

spect to Chapter 7 of the book.
Xicor Inc., a Milpitas, California based is a manufacturer of

mixed-signals circuit products. These products are used by elec-
tronic product manufacturers throughout the world in a wide
range of applications, including telecommunications, comput-
er, industrial, automotive electronics and military products. The
products serve a variety of design needs such as:
Memory products for handheld devices and communications
infrastructure equipment, instrumentation, transportation
and industrial applications.
Digital potentiometers for system tuning.
S
Supervisory chips for management and timekeeping.
Supervisory chips for system tuning, system management and
power management.
IM
Battery management ICs that help to extend the time between
charges for devices powered by Lithium Ion batteries.
Xicor maintains a complex distribution system, in order to serve

its widespread and diverse market. Domestically, Xicor maintains
M
a network of independent sales representatives, national and re-

gional stocking distributors and OEM customers. Overseas, Xi-
cor maintains an international network of independent stocking
N
sales representatives who collectively account for well over half

the company’s sales. Xicor defers recognition of sales and related
costs until the products are actually sold by the distributors and
stocking sales representatives. This complicates the business ac-
tivities further.
An accurate and prompt information flow such as data on sales,

purchase orders, inventory levels, collections and more is required
to be able to maintain production levels and profitability. Almost
since the company’s inception in 1978, this has meant commu-
nicating to and from the field by fax and email, with a few sales
offices adopting freestanding Harbinger EDI systems in the late
1990s to accommodate orders from EDI-enabled specific major
accounts, such as Hamilton Avnet. But it had limited capabilities.
A solution was needed that could enable e-business -- a solution

that could tie together disparate e-commerce universes that are
separated by geographic, cultural and technological consider-
ations. ACOM’s solution, EZConnect for EDI/XML (formerly
known as Paragon), came up as a solution.

CASE STUDY 7
N O T E S
EZConnect for EDI/XML is a complete SQL-based EDI system

that connects applications in real time to build, import/export and
print (if desired) trading partner data. EZConnect integrates di-
rectly with any ODBC-compliant database and is fully extendible,
scalable and flexible to fit most any EDI system need. It supports
EDI standards and is compatible with all VPNs, VANs and propri-
etary networks. The solution includes:
Translation and mapping software
A trading partner management tool
Security module
A documentation tool
It even includes a relational database for non-stored partner
documents.
(Source: http://www.acom.com/ecommerce/CS_E_Xicor.html)
QUESTIONS
S
IM
1. Describe how EDI proved to be useful Xicor in maintaining
a flow of information in its complex distribution system.
(Hint: EDI enables fast system to system transfer of data
without human intervention)
M
2. In what other ways can Xicor maintain a fast and reliable

network for better communication?
(Hint: Developing the LAN and WAN and setting up an
intranet)
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CASE STUDY 8
N O T E S
DATA MINING AT WALMART
This case study discusses about application of data mining in

Walmart. It is with respect to Chapter 8 of this book.
Walmart is a large retail corporation established by Sam Walton

in 1962. It runs a huge chain of discount stores and retail outlets
worldwide. Today, it has become world’s number one retailer. It
is also the world’s largest company in terms of annual revenue. It
generated $421 billion in 2011. The company became the largest
private employer and holds the record for employing 2.2 million
employees. Walmart is not just the largest retailer in the world,
but it has also acquired the top position on the Fortune 500 list
which implies that the company has generated revenue greater
than any other company in the United States.
Target and Kmart are the biggest rivals of the Walmart and were
S
founded in the same year. In the beginning the rival companies
expanded rapidly while the growth of Walmart comparatively
slower. The situation changed when Walmart’s shares began trad-
IM
ing on the New York Stock Exchange in 1972. Since then Walmart
opened 276 stores in 11 states by the end of 1970’s. Apart from
this, the information systems used by the company played a huge
role in its growth.
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The Walmart uses its information system to obtain the most cur-
rent information about the customer requirements, best ideas
from employees, and sharing useful information with the employ-
ees. Information technology is also an essential part of Walmart’s
N
success. It incorporates a fully computerised system that recognis-

es each sold item, finds its right price in the database, creates an
accurate sales receipt for the customer, and stores sales informa-
tion to record inventory and analyse sales. The company avoids
overstocking the inventory if the item is selling slowly. Walmart’s
inventory and distribution system are considered one of the best
in the world. The company has invested more than $600 million in
its information systems.
The company deals with a huge amount of data on a daily ba-

sis. Therefore, it needed a technique to extract useful informa-
tion from the large amount of data. Walmart uses data mining
for mining its enormous data to get useful information under all
sorts of changing environmental conditions. Data mining helps
the organisations to identify hidden pattern in a group and dis-
cover unknown relationship in the data. It protects a retailer from
the situations such as too much inventory and not enough inven-
tories. For example, the company’s data mining efforts informed
the buyers that during the time of predicted hurricane customers

CASE STUDY 8
N O T E S
stock up some certain products. It is easy to guess the demand of

batteries and bottled water will increase during this time but the
company also learned that sales of pop-tart will increase seven
times before the storms hit and beer is the highest selling prod-
uct. This insight information has led to large amount of supply of
beers and toaster pastries into gulf states whenever word of big
storm surfaces.
Data mining also helps the company to strengthen the operational

forecasts which help in predicting things like how many cashiers
are needed at a given store at a particular time in a year.
(Source: http://www.prenhall.com/divisions/bp/app/alter/student/useful/ch1walmart.html
http://biolab.uspceu.com/datamining/WalMart.pdf)
QUESTIONS
S
1. Explain how data mining played an important role in
Walmart’s success and placed it ahead of competitors.
(Hint: Using data mining the organisations can make
IM
better decisions by analysing market trends. It helps the
organisations to identify hidden pattern in a group and
discovers unknown relationship in the data)
2. Compare the working of Walmart with any other organisation
M
which has successfully implemented data mining.

(Hint: Big Bazaar)
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CASE STUDY 9
N O T E S
CRM AT TITAN
This Case study deals with the application of CRM at Titan. It is

with respect to Chapter 10 of the book.
Titan Industries, established in 1984, the leading manufacturers
of wrist watch in India. When Titan entered the market, it was
considered to be a novice in the field of watches. At that time,
HMT had huge market share. However, HMT targeted only upper
middle and higher classes of the society. Titan adopted the con-
cept of classy showrooms and fashionable franchises by targeting
all classes of the society. As a result, it emerged as a market leader
in a short period of time. Since then, Titan has been following
the philosophy of creating a positive experience for customers by
providing them quality after sales services.
The aftersales services of Titan are based on 3R’s, which are dis-
cussed these 3R’s as follows:
S
Repair the hurt feelings of customers: Implies that the or-
ganisation strives to handle customer complaints with utmost
priority and care through quality interaction. For this, Titan
IM
takes into account the following aspects:
Recruiting the right front-line personnel and training
them to provide excellent customer service, improving the
customer interaction process, enhancing operational pa-
rameters, and maintaining world-class ambience at show-
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rooms. It is done by considering various aspects, which are

shown in the following table:
Personnel Customer Interac- Operational Interiors
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Capabilities tion Process Parameters

Influential Welcoming Measuring the Maintaining
personality customers performance elegant décor
of processes
Responsive- Giving atten- Checking
ness tion to custom- Tracking furniture con-
ers positive or ditions
Sound product negative
knowledge Understanding performance Displaying
the problems of trends products
customers
Generating Ensuring the
Building strong revenue per availability of
customer rela- customer clean filtered
tionships water
Calculating
Resolving cus- overall rating Taking care
tomer queries by evaluating of proper
quickly customer lighting
Trying to add feedback Providing
value product
brochures to
Receiving cus- customers
tomer feedback
Channeling
music
Maintaining the same ambience across all the stores

CASE STUDY 9
N O T E S
Repair the watch: Implies that for ensuring high quality cus-
tomer service, Titan operates fully equipped service centers
with highly trained and experienced service engineers. Ev-
ery service engineer of the organisation receives training on
technical skills, product knowledge, and complaint handling
techniques. Titan has received ISO 9001 certification, which
ensures that the organisation follows a systematic process for
all repair activities. Moreover, the organisation has certain key
performance measures, such as if a product has 60 per cent
fault, it should be repaired in less than 20 minutes and if there
is 95 per cent of fault, the problem should be resolved in less
than 4 days. Similarly for 99 and 100 percent fault, the maxi-
mum repair time taken should not exceed by more than 7 and
15 days respectively. Titan offers a stand-by watch to the cus-
tomers in case the repair time exceeds 7 days.
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Repair the damage caused to Titan’s reputation: Implies
that Titan strives to regain its position by achieving a high
level of customer satisfaction. For this, the organisation takes
IM
customer feedback on a regular basis and makes continuous
improvements in its products. Moreover, the organisation mo-
tivates customers by providing special discount offers and in-
troducing easy exchange schemes.
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QUESTIONS
1. What CRM activities are conducted at Titan Industries?

N
(Hint: Titan Industries has employed 3R’s approach as its

CRM strategy for providing quality aftersales services to
its customers.)
2. Is 3R’s the only strategy adopted by Titan as its CRM
approach? Comment.
(Hint: Titan uses various other techniques for maintaining
a long term relationship with its customers. Some of these
techniques include membership cards, a potential customer
bank, taking regular feedback from customers, etc.)
This case study can be broken down into parts like
Challenge, the Solution, Results. Somewhere a mention
of how they created Brand loyalists and how Samsung
broke the market for Nokia and other iphone users. No
mention of Iphone is made int he case study. Include
some statistics to prove the point made.
Overall more facts can be included to make it interesting.
Likewise including different types of CRM can also help
e.g Analytical , Social , e-CRM

CASE STUDY 10
N O T E S
SUPPLY CHAIN MANAGEMENT IN MCDONALD’S
This Case Study discusses about Supply Chain Management. It is

with respect to Chapter 11 of the book.
McDonald’s, a US-based fast food chain, was started as a drive-

in restaurant by two brothers, Richard and Maurice McDonald
in California, US in the year 1937. It has restaurants all over the
world. It serves burgers and other fast food customised to local
tastes. The philosophy of McDonald’s has been ‘one world, one
burger;’ i.e., each and every burger must be consistent in terms of
cost and quality. To maintain consistency and to meet such high
standards, it is imperative to have an excellent supply chain man-
agement system.
All over the world (including India), approximately 85% of Mc-

Donald’s restaurants are owned and operated by independent
S
franchisees. Despite this, McDonald’s is able to run the show
seamlessly by procuring nine different ingredients used in mak-
ing its burger from over 35 suppliers from all over India through
IM
a massive value chain.
This US giant manages the show so perfectly with the help of a

brilliantly articulated food chain, which extends from its outlets
right up to farms all across India. Similar to other parts of the
M
world, McDonald’s has a very well orchestrated supply chain in

India too, called the ‘Cold Chain’.
When McDonald’s opened its first outlet in India, between 1992

N
and 1996, it worked overtime to put the perfect supply chain in

place. To maintain standardisation, it trained the local farmers
to produce lettuces or potatoes to its specifications and worked
with each vendor to get the perfect cold chain in place. It was ex-
plained to all the suppliers precisely why only one particular size
of a pea was acceptable (if the peas were too large, they would pop
out of the patty and get burnt).
Going by its experience in other countries McDonald’s was aware

that supply chain management was undoubtedly the most im-
portant factor for running its restaurants successfully. That is why
McDonald’s worked on its supply chain management well ahead
of its formal entry into the market of India. In 1996, when McDon-
ald’s entered India, it started its business by looking for a distri-
bution agent who would act as a hub for all its vendors. Mum-
bai-based Radhakrishna Foodland Private Limited (RFPL) was
chosen for the job. The iceberg lettuce from Ooty, mutton patties
from Hyderabad and sesame seed buns from Punjab, all ingredi-
ents of McDonald’s burger, were all delivered to RFPL’s distribu-
tion centre (cold storage) in its refrigerated vans. RFPL stored all
these ingredients in controlled conditions in Mumbai and New

CASE STUDY 10
N O T E S
Delhi and supplied them to McDonald’s outlets on a daily basis.
McDonald’s sources its ingredients from all parts of India. The

farmers are instructed to harvest iceberg lettuce using a new cul-
ture farming technique. This variety of lettuce is similar to the
one McDonald’s uses elsewhere in the world. To meet its consis-
tent demand, McDonald’s helped Trikaya Agriculture grow the
lettuce throughout the year and even in rain-shadow areas. The
crop gets harvested within 45 days, depending on the weather. It
is harvested early in the morning and immediately stored in vacu-
um pre-coolers installed at the farm. The pre-cooler brings down
the temperature of the lettuce from 26º to 3º.
These ingredients are transported at a particular temperature to

ensure freshness and adequate moisture content of the food in
the cold chain. The trucks are designed specifically to maintain
the temperature in the storage chamber throughout the journey
S
and the drivers are instructed not to switch off the chilling system
to save electricity, even in the event of a traffic jam.
IM
(Source: http://www.icmrindia.org/casestudies/catalogue/Operations/OPER001.htm)
QUESTIONS
1. Describe how maintaining a high standard of supply

M
chain management helped McDonald’s keep a stronghold

in the fast food market in the world?
(Hint: McDonald’s has a very well orchestrated supply
chain in called the ‘Cold Chain’)
N
2. Similar to McDonald’s find another MNC food giant that

has a strong hold in the pizza market by maintaining
high standards of ingredients through an efficient supply
chain. Study its supply chain process and present your
(Hint: Domino’s/ Pizzahut)

CASE STUDY 11
N O T E S
DEPLOYMENT OF INFORMATION SYSTEM

AT CAREERS & FUTURE
This case study discusses about deployment of an information sys-

tem. It is with respect to Chapter 12 of the book.
Careers & Future is an institution that offers professional cours-

es and provides class in various IT domains. It was established
in 2006. During that time, the demand for professional courses
in various IT technologies was on peak therefore the institution
easily became popular among students and IT professionals. The
professionals who were working in various IT sectors opted for
the specialised courses to enhance their skill set. However, the
customers were experiencing some problems in the services and
benefits provided by the institution. The current information sys-
tem of the company was particularly not very effective. One of the
major problems that customers were experiencing was timing. As
S
most of the customers were IT professionals they were not able
to attend classes during weekdays and thus, wanted to enroll for
weekend classes.
IM
However, it was not possible for the institution to distribute the
weekend time slot to each and every student because of large num-
ber of students. Another issue was the location of the institution
which made it difficult for the students travelling long distances
M
to attend classes. Timing for each session was one hour which was
insufficient for some students. Due to this, the students were not
able to put forth their queries regarding the concepts taught by
instructors. Eventually many students started missing their class-
N
es and this further extended the period of overall course because

the topics remained uncovered.
The management of the institution was concerned about these

problems and decided to take a certain step to deal with the sit-
uation. The institution decided to create an online information
system for the students. It created an information system using
website and hosted it on the Internet. The students were given
usernames and passwords to access their accounts. With their ac-
counts, they could access study material and notes online. The
institution also started providing online classes using video con-
ferencing. The management also decided to deploy a grievance
portal and forum for students where students could ask their
queries to instructors and register their complaints. Using these
services students could also provide feedback about services.
The answers to their queries were given using the online bulletin
board on the website.

CASE STUDY 11
N O T E S
QUESTIONS
1. Why did the institution opt for improving online services?

Was it the right step? Give suitable reasons for you answer.
Also list the steps that would have been followed by the
institution to develop and deploy the software system.
(Hint: Deployment is the process to make a service
available to everyone)
2. Which would be the best software development model to
develop such software system and what kind of testing
should be performed on the system? Justify your answer
with the help of a suitable example.
(Hint: Waterfall model, Beta testing)
Since this chapter is about building and deploying IS
S
we could probably ask questions about the steps used
in order to take the system from a face to face to online
mode. What SDLC model do you think they would have
IM
used? What tests could they have undertaken to test the
model (e.g. beta testing).
M
N

CASE STUDY 12
N O T E S
CADBURY CRISIS MANAGEMENT
This Case Study discusses about disaster recovery and business

continuity. It is with respect to Chapter 13 of the book.
Cadbury is a British multinational confectionery company owned
by Mondelez International. It was established in Birmingham in
1824, by John Cadbury who sold tea, coffee and drinking choco-
late. It has its headquarters in Uxbridge, London, and had spread
its business in more than fifty countries worldwide. It is best
known for its confectionery products including the Dairy Milk
chocolate, the Creme Egg, and the Roses selection box.
In October 2003, just a month before Diwali, the Food and Drug
Administration (FDA) Commissioner received complaints about
some infestation in two bars of Cadbury Dairy Milk. Cadbury
Dairy Milk is Cadbury India’s flagship brand with over 70% mar-
S
ket share. FDA Commissioner ordered an enquiry and went di-
rectly to the media with a statement. Over the following 3-weeks,
adverse media coverage touched a high. In India, where Cadbury
IM
is synonymous with chocolate, the company’s reputation and
credibility was under intense scrutiny and on stake. Sales vol-
umes came down drastically in the first 10 weeks, although it was
the festival season. Retailer stopped stocking, employee morale –
especially that of the sales team – was shaken. The challenge was
M
to restore confidence in the key stakeholders (consumers, trade

and employees, particularly the sales team) and build back credi-
bility for the corporate brand through the same channels (the me-
dia) that had questioned it.
N
In defense, Cadbury issued a statement that the infestation was

not possible at the manufacturing stage and poor storage at the
retailers was the most likely cause of the reported case of worms.
But the FDA didn’t buy that. There were allegations and count-
er-allegations between Cadbury and FDA. Due to the heat of neg-
ative publicity,Cadbury’s sales melted by 30 per cent at a time
when it usually experienced a festive spike of 15 per cent. For the
first time, Cadbury’s advertising went off air for a month and a
half after Diwali, following the controversy.
REMEDY:
To rebuild credibility and restore confidence among the key

stakeholders, a focused and intense communication program was
conducted over the next six months. The results:
The key message that the infestation was a storage-linked
problem, not manufacturing related, found widespread accep-
tance, with the help of media. Across the board, media carried
Cadbury’s point-of-view on the issue.

CASE STUDY 12
N O T E S
Sales volumes improved and restored to pre-crisis levels eight

weeks after the launch of new packaging – a deliberate and
concrete step taken by the company to minimise the inci-
dence of infestation. This reflected consumer confidence in
the brand and the company.
There was significant improvement in ratings amongst con-
sumers on parameters like company’s image, responsiveness
of the company and behavioral parameters like intention to
buy Cadbury chocolates.
The remaining two helped to restore faith in the corporate brand

among the trade and employees.
(Source: http://www.mbaknol.com/management-case-studies/case-study-cadbury-cri-
sis-management-worm-controversy/)
QUESTIONS
S
1. Describe the initiatives taken by Cadburys to re-establish
its credibility in the market.
IM
(Hint: In the time of crisis it acted smartly and used media
power to put forth its point-of-view)
2. Could Cadbury have handled this crisis in any other
better way?
M
(Hint: An organisation as big as Cadbury that too in

packaged food, must have disaster recovery plans ahead
of time)
N

N
M
IM
S

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Dean TOC Reviewer

Associate Dean Content Reviewer

Author : Mr. Sanjeev Saxena

NMIMS Global Access - School for Continuing Education

CHAPTER NO. CHAPTER NAME PAGE NO.

1 Introduction to Information System 01

2 Components of Information Technology 27

7 Electronic Data Interchange (EDI) 167

8 Data Warehousing, Data Mining, and Business Intelligence 189

9 Decision Support System 217

10 Customer Relationship Management 237

11 Supply Chain Management 251

12 Building and Deploying an Information System 273

13 Managing Information Systems 295

14 Case Studies 319

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Introduction to Information System: Need of Information in Managing Business; Evolution of

Components of Information Technology: Computer Systems Hardware; Software Concepts; Net-

Types of Information Systems: Introduction to Information Systems; Operations Support Sys-

Managing Information Systems: Infrastructure Management; Maintenance of Information Sys-

NMIMS Global Access - School for Continuing Education

INTRODUCTION TO INFORMATION SYSTEM

1.4 Definition of an Information System

1.4.3 Functions of Information Systems

NMIMS Global Access - School for Continuing Education

NMIMS Global Access - School for Continuing Education

IMPLEMENTATION OF INFORMATION SYSTEM

The Red Indian automobiles company was launched by three

Management of Red Indian Automobiles realised that their car

After a long discussion the company decided to hire an Informa-

of the outcome. The new computerised information system was

mobiles. Data analysis provided the company useful information

Eventually, customers started coming back to the company and

NMIMS Global Access - School for Continuing Education

After completing this chapter, you will be able to:

system is a set of activities and components that are organised togeth-

Thus, an information system is a combination of hardware, software,

and infrastructure to enhance the decision making ability of managers

The purpose of MIS is to keep business management updated with

This chapter starts by discussing the significance of information in

NMIMS Global Access - School for Continuing Education

1.2 MEANING OF INFORMATION

The word information is derived from Latin word “informare” which

Thus, information is a compilation of facts which have been organised

1.2.1 DIFFERENCE BETWEEN DATA AND INFORMATION

For example, in an organisation a very large number of employees

data related to birth), educational (such as qualification) and physical

TABLE 1.1: TYPES OF DATA

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TABLE 1.2: DIFFERENCE BETWEEN

Information is of great importance for an organisation to function suc-

tion cannot function properly. In addition, lack of effective and proper

interpret this as rudeness which might never be the intention of or-

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Information makes money: Information helps an organisation to

SELF ASSESSMENT QUESTIONS

1. The continuous and steady flow of information helps an

and information. Present your findings in a short note.

1.3 CONCEPT OF SYSTEM

A system can be described as a set of components which are interde-

Now, let us consider some of the features of a system in the following

NMIMS Global Access - School for Continuing Education

3. A system can be defined as a set of _ which are