UNIT 1 Introduction to Information System

CONTENTS

 Introduction to Data, Information & System

 Information System

 Computer based Information System

 Management Information System

 Dimensions of Information System

 Role of Information System

 Importance of Information System in Business

 Levels of Information System

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UNIT 1 Introduction to Information System

 Introduction to Data, Information & System

Data:
o Data means raw facts or raw material which needs processing.
o Data can be considered as the lowest level of knowledge.
o i.e. number of hours works by employee, number of units sold.

Data Process Information

Information:
o Processed data is called information.
o Information is considered as second lowest level of knowledge.
o Important or useful facts obtained as output from a computer by means of processing
input data with a program is known as Information.
o Information support to achieve desired objectives like planning, organizing, decision
making etc.

Difference:
Data Information
Data is raw material Information is product
Data is unprocessed fact Information is processed data
Data is used as input for computer Information is output of information
system system
Data does not depend on Information Information depends on data
Data is not specific Information is specific
Data is a single unit Information may be group of data
that may represent a category
Data does not carry a meaning Information must carry a logical
meaning

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o The data is raw material which is given as input in the information system to generate
information. The information will have some meaning and will be useful in taking
certain decisions.

System:
o It is a set of components that are interrelated with each other to accomplish a specific
task.
o For example, Banking System has number of components that are interacting with
each other to accomplish task of banking.
Following are components of Banking with their roles:
o Customer Account Management: Responsible for opening and closing a bank account. It
also maintains records of customers.
o Cash Counter: Processing cash deposits and withdrawals
o Cheque / Draft Collection and Processing: Collect and Process cheques and draft.
o Loan Section: Responsible for managing customer loans
o Credit / Debit Card Section: Handles transactions related to credit and debit card.
o Other Examples include University System, Railway Reservation System, etc.

 Information System
o A set of interrelated components that collect, process, store, and distribute information
to support decision making, coordination, and control in an organization is called an
information system.
Elements of Information System
o Inputs
o Processing
o Outputs

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o Feedback
o External Environment
o Boundaries

o Input: Capturing or collecting raw data from within the organization or from its external
environment. Input data will show no meaning and will be just stored in the system.
o Processing: Converting the raw input into a more meaningful form (information). The
process will be different in each and every case. The selection of the process is
dependent on the type of data and the expected output required.
o Output: Transferring the processed information to the people who will use it. The
information system will be of no use until the information which is generated will be
used for decision making. So, the information should be sent to right people in right
format for the best utilization.
o Feedback: Returning output to appropriate members of the organization to help them
evaluate or correct the input stage. If the output is according to the requirement than
the feedback will be positive. If the output is not as per the requirement, then there will
be a need to change the input data or to change the process. So, in each case the
feedback is important.
o External Environment: The Influences that can affect the organization, but which the
organization cannot directly control. Influences can be Supplier, customers, Regulatory
Agencies, Competitor etc.
o A highly effective organization is regularly exchanging feedback with its external
environment it is an open system so that they can get updated with the current situation
in market.
o Boundaries: A system should be defined by its boundaries, the limits that identify its
components, processes, and interrelationships when it interfaces with another system.

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o Systems are normally delimited by boundaries, which separates them from external
environment. In other words, it is the criteria to tell the system what it is allowed to do
and what not.

 Computer based Information System

o An Information System is an organized combination of people, hardware, software,
communication networks and the data resources that collects, transforms and
disseminates information in an organization.

 Management Information System

o An (MIS) provides information that organizations require to manage themselves
efficiently and effectively.
o Management information systems are typically computer systems used for managing
information.

 Dimensions of Information System

o To understand the information system, a manager must understand the organization,
management, and information technology dimension of the systems and their power to
provide solutions to challenges and problems in the business environment.

Organizational dimension of information systems:

o Today most organizations rely on information systems which have become an integral
part of their operations.
o Key elements of any organization are its people, structure, business function, and
culture.
o Structure: Organization chart, groups of specialists, products, geography
o People: Managers, knowledge workers, data workers, production or service workers
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o Business Function: rules for action

o Culture: Customs of behavior

Management dimension of Information System:

o Management is responsible for,
 Formulating action plans to solve business problems
 Ensuring that these plans are executed in an efficient and effective manner.
o The role of management is to identify business challenges and to set the organizational
strategy for meeting these challenges.
o Managers must also allocate resources and co-ordinate work. A major component of
management is leadership.
o This leadership not only extends to managing what already exists, but also taking the
lead in creating new products and services.
o Information systems can play a key role in helping managers meet these objectives.

Technological dimension of Information System:

o Information technology is at the heart of information systems. While organization and
management are important too, it’s the technology that enables the systems for them.
o The information technology is the base technology used these days and it includes the
following mentioned below.
o Hardware (physical components) & Software| (instructions to control the hardware)
o Data management technology: software for organizing and serving data to users,
managing
o Physical storage of media and virtual resources.
o Network and telecommunications technology
o Internet: Network to provide services
o IT infrastructure: platform that the firm can develop

 Role of Information System

o Information systems play a vital role in an organizations’
o overall performance.
o They provide many advantages to their users which range from simple transaction
processing at the operational level to difficult tasks such as
making important and competitive decisions at the strategic level of the organization.
o The three fundamental roles played by information systems in an organization are,
 Information systems support business processes and operations
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 They support decision making of employees and managers

 To help in making plan for competitive advantage

 Importance of Information System in Business

The following are the points which shows importance of information system in
business,
1. Operational excellence
2. New products, services, and business models
3. Customer and supplier relationship
4. Improved decision making
5. Competitive advantage
6. Survival

Operational Level System:

o Supporting operational managers by keeping track of the day-to-day’s elementary
activities and transactions of the organization, such as sales, receipts, cash deposits,
payroll, credit decisions, and the flow of materials in a factory
o To answer routine questions and track the flow of transactions through the
organization. Therefore, information generally must be easily available, current, and
accurate.
o For example, TPS [Transaction Processing System]

Knowledge – level System

o Supporting the organization’s knowledge and data workers, in designing new products,
distributing information, and coping with paperwork in an organization.
o i.e.: - KWS [Knowledge Work System], OAS [Office Automatic System]

Management Level System

o To serve the monitoring, controlling, decision-making, and administrative activities of
middle managers
o Typically providing periodic reports rather than instant information on operations.
o Provides input and plans to meet the strategic needs defined by the senior management
o i.e.: - MIS [Management Information System], DSS [Decision Support System]

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Strategic (Planning) Level System

o Helping senior management deal with and address strategic issues and long-term
trends, both in the firm and in the external environment
o i.e.: - ESS [Executive Support Systems]

 Levels of Information Systems

 Level 1-Transaction Processing Systems (TPS)
 Level 2-Management Information Systems (MIS)
 Level 3-Decision Support Systems (DSS)
 Level 4-Executive Support Systems (ESS) or Executive Information Systems (EIS)

Transaction Processing System (TPS):

o TPS is a computerized system that helps operational management and records daily
routine transactions necessary to the conduct of the business.
o Example: payroll system; production instructions
o Inputs: Transactions or events
o Processing: Sorting; listing; merging; updating
o Outputs: Detailed reports; lists; summaries
o Users: Operational personnel; supervisors

Management Information System (MIS):

o MIS helps middle management in monitoring, controlling and decision making.
o MIS helps in administrative activities
o MIS takes data from TPS
o Example: Weekly, monthly, and annual resource allocation, not five year plans and not
daily details, but something in between.

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o Inputs: Summary transaction data

o Processing: Simple models; low level analysis
o Outputs: Summary reports
o Users: Middle managers

Decision Support System (DSS):

o DSS is used by middle level managers to take some strategic decisions
o DSS focuses on unique problems and how to solve them
o DSS uses the information from TPS, MIS and other external sources like stock, prices etc.
o Example: Could answer the following query “What price should we charge for dairymilk
so that we can maximize our profits, minimize the costs and still remain competitive?”
o Inputs: databases optimized for statistical analysis
o Processing: Interactive; Simulations and statistical analysis
o Outputs: Responses to queries; statistical test results.
o Users: Professionals, staff.

Executive Support System (ESS):

o ESS is also known as Executive Information System (EIS):
o ESS is used by senior managers to take long term decisions and design new strategy.
o ESS becomes helpful to incorporate external data to the business
o ESS addresses the decision which are non-routine
o Example: 5-year operating plan. Answer question like “what are long-term industry cost
trends and how are we doing relative to them?”
o Inputs: Aggregate data. Internal and external
o Processing: Interactive and graphical simulations
o Outputs: Projections
o Users: Senior managers

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