Management Information System (Mgmt 311)

Table of Contents

Contents

Pages

Unit 1: An Overview of Management Information System 1

Unit 2: An Introduction to Concepts of Systems And Organizations 33

Unit 3: Computer Hardware 60

Unit 4: Software 80

Unit 5: Database Management System 99

Unit 6: Telecommunication 118

Unit 7: Common Business Application of Information Systems 146

Unit 8: Information Resource Management 176

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 Unit 1: An Overview of Management Information System

Contents
1.0 Aims and Objectives
1.1 Introduction
1.2 The Evolution of Information System
1.3 Definition of Basic Concepts
1.4 The Purpose of Information Technology
1.5 Users of Information
1.6 The Process of Generation of Information
1.7 The Attributes of Information
1.8 Feature of Information
1.9 Systems
1.10 Subsystems of an MIS
1.11 Summary
1.12 Answer Key to Check Your Progress Exercise

1.0 AIMS AND OBJECTIVES

After studying this unit, the student should be able to:

- explain the development of information system
- define management, information, system and finally management information system
- understand the impact of information technology
- explain the purpose of information technology
- describe the features of information

1.1 INTRODUCTION

A number of trends affect today's business environment. One of them is the transition from an
industrial economy to an information services economy. Beginning with the industrial
revolution, productivity gains in the westerns economy were tied to industrial production and

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manufacturing of goods and services. Since the 1960s, 50 percent of all productivity gains
have been attributable to the use of information technology. The ability to capture, store,
process, and distribute information is critical to most organization.

Today, the traditional organization is being transformed in to the information based

organization, which uses information and information technology to produce significant
changes in work patterns. The organization of the past was highly structured and composed of
many different functions. In this type of organization, each unit maintained its own
information. The organization of the future will have a flexible, changeable structure. Teams
consisting of specialists from various functional areas will work together on projects that
address new market opportunities. Shared information data bases will link individuals to each
other. In the future, manager in the information based organization will become responsible
for using and managing technology. They will use information technology (IT) as a tool to
provide effective customer service, analyze market opportunities, and manage production and
manufacturing operations. IT will become an integral part of business. To understand the
information based company of the future, let's first learn why traditional organizations are
evolving into information based organizations.

1.2 The Evolution of Information Technology

Historically, organizations have become hierarchies of complex functions over time. One of
the fundamental principles influencing the evolution of industrial organizations was
specialization of labor. The division of labor led to the fragmentation of work, with workers in
many different areas – marketing, manufacturing, accounting, and so on – performing
specialized tasks.

A second factor in the development of modern organizations is the command-and-control

structure that can be traced back to early railroad companies, which required predictable, safe
control systems. Today's business bureaucracy, with its formalized operating procedures and
formal lines of authority, evolved from these early railroad organizations. The standard
pyramid, with work broken down by departments – each with its own budget and control
systems – is still a common organizational form today.

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The third factor influencing the performance of modern organizations was the nature of the
post-World War II market: It was a seller's market. Given the unrelenting demand for goods
and services, customers were willing to buy anything that was available. Customer service
was not necessarily a critical success factor.

In the 1990s, the nature of the market has changed. Customers have power over suppliers that
they didn't have before. Part of this customer power comes from access to information. When
prospective car buyers can look up dealer invoice cost on a new auto in Consumer Reports,
they gain new leverage over the dealer.

Information technology provides a means to focus on the customer. By carefully tracing and
analyzing customer buying behavior, companies like Wal-Mart can allocate inventory to meet
customer needs. They can also use information technology to provide better customer service.
Some companies have a customer service network that route customer calls to the same
service representative again and again, thus creating a sense of personal service. Other
companies use a service management network to provide on-line technical service for large
number of services. When a support call is dispatched to service technicians, the system
automatically provides data on the maintenance history of a particular service area. Many
microcomputer vendors give their customers access to bulletin board systems that provide up-
to-date technical information on product features.

Finally, information technology is transforming the scope of doing business. Worldwide

communications networks enable businesses to operate in global markets and to reach new
customers. Information technology also makes it possible to do business 24 a day. Individuals
on project teams may work in distant locations and interact using electronic communication
networks and videoconferencing facilities.

1.3 Definition of Basic Concepts

Management
Management has been defined in a variety of ways, but for our purposes it comprises the
process of activities that describe what managers do in the operation of their organization:

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plan, organize, initiate, and control operations. They plan by setting strategies and goals and
selecting the best course of action to achieve the plan. They organize the tasks necessary for
the operational plan, set these tasks up into homogeneous groups, and assign authority
delegation. They control the performance of the work by setting performance standards and
avoiding deviations from standard.

Because decision making is such a fundamental prerequisite to each of the foregoing

processes, the job of an MIS becomes that of facilitating decisions necessary for planning,
organizing, and controlling the work and functions of the business.

Information
Data must be distinguished from information, and this distinction is clear and important for
our purpose. Data are facts and figures that are not currently being used in a decision process
and usually take the form of historical records that are recorded and field without immediate
intent to retrieve for decision-making.

Data are collections of facts or events represented in the form of symbols, such as digits,
alphabets, pictures, graphs, etc. Capturing, processing and storage of data are the essential
functions of any IT infrastructure. Data are the basic raw materials in the process of
generation of information. Data may be collected from internal sources as well as external
sources.

Information consists of data that have been retrieved, processed, or otherwise used for
informative or inference purposes, argument, or as a basis for forecasting or decision-making.

Information is knowledge that one derives from facts placed in the right context with the
purpose of reducing uncertainty. From the manager's point of view, information serves the
purpose or reducing uncertainty regarding the alternative course of action, in the process of
decision-making. Availability of information regarding the alternative improves the odds in
favor of making a correct decision. Information is recognized as one of the most important
corporate resources.

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1.4 THE PURPOSE OF INFORMATION TECHNOLOGY

This section provides a framework for determining the applications of information technology
that will help you identify applications that have an impact upon the individual, the functional
unit, and the organization as a whole. These applications can be placed into three categories:
those designed to improve efficiency, those designed to improve effectiveness, and those
designed to facilitate transformation.

Efficiency: can be defined as doing things right. An efficient office worker, for example, can
update hundreds of documents per hour. An effective information system can update
thousands of employees or student records per minute. Historically, computer based
information processing systems have supported efficiency by automating routine paperwork
processing tasks.

Effectiveness: can be defined as doing the right things. This means doing the things that need
to be done to achieve important business results. An effective sales manager, for example
focuses on tasks that payoff in increased sales volume. Information systems can help
managers be more effective. For example, a prospect database housed on a PC may enable a
sales manager to identify sales prospects with high potential and direct his staff's attention to
contacting those prospects.

The third objective of applying information technology is transformation. Using information

technology to change the way you do business. This may mean changing the nature of the
product or service being delivered or entirely transforming the way business is done in a
functional unit of the whole organization.

Next we will consider how applications that achieve the objectives of efficiency,
effectiveness, and transformation affect the individual, the functional unit, and the
organization as a whole. The table below summarizes these objectives.

Impact on the Individual

At the individual level, applications of information technology impact efficiency,
effectiveness, and transformation. An individual can use a work-processing program, for
example, to automate retyping letters. A manager can use a spreadsheet to automate routine

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budget calculations. These applications are designed to improve efficiency by providing
automated tools to support specific tasks.

Other applications improve the effectiveness of the secretary or manager. If a secretary uses a
prospect database to merge prospect data with follow up letters on sales calls, the combination
word processing – database application improves effectiveness because these letters can
improve sales – a fundamental objective of the business.

In some ways, transformation is the most challenging outcome of information technology. By

using a portable personal computer, a manager can perform "what-if" analyses for investment
prospects during sales calls. A prospective customer, for example, may be weighing the
advantages and disadvantages of alternative investment options – say, in stocks, bonds, and
mutual funds. Sitting in the customer's living room with a PC in hand, the salesperson can
compare the anticipated yields on different investment alternatives and give the customer a
much better idea of the potential returns on different programs. This capability changes the
way the salesperson sells investments. This is an example of transformation. The table below
summarizes applications of information technology that impact the individual.

A framework for applications of information technology

Efficiency
Individual Functional Unit Organization
Task mechanization Process automation Boundary extension
Effectiveness
Work improvement Functional enhancement Service enhancement
Transformation
Role expansion Functional redefinition Product innovation

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Applications impacting the individual
Efficiency Task mechanization Word processing
Using a spreadsheet to do a budget plan

Effectiveness Work improvement Using a prospect database to generate

sales letters

Transformation Role expansion

Using a portable PC to do "what-if"
analysis for investment clients

Impact on the Functional Unit

Applications that automate specific business processes, such as order entry or credit checking,
are examples of information technology's impact on the efficiency of the business function.
Automated order processing and inventory control systems are other examples of these
applications.

An example of an application that improves the effectiveness of the functional unit is using
computer-aided design to improve the quality of the design of shoes, automobiles, or
airplanes. Improved designs may lead to better sales.

Finally, information technology can transform the nature of the product or service the
functional unit offers. A publishing company may sell business research information on CD-
ROM disks. These disks provide access to enormous volumes of business information via PC.
Hence, this new technology has produced an altogether new product line. Table below
summarizes applications affecting the functional unit.

Impact on the Organization

The last group of applications of information technology has an impact on the organization as
a whole. Linking customers to the order entry system of a supplier can improve efficiency.
For example, furniture retailers can use terminals linked to the order entry system of a
furniture retailers can use terminals linked to the order entry system of a furniture
manufacturer to place orders, check on prices and delivery dates, and manage their own
inventories. This system improves the efficiency of placing orders by cutting down on

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paperwork and enabling retailers to check on available stock before placing orders. The
system also gives the furniture manufacturer a competitive advantage because it links
customers electronically to the order entry system, making it easier to place orders with this
manufacturer than with other suppliers. The second objective of information technology is
effectiveness. The organization can be more effective by providing better service to its
customers.

Information technology can transform the way an organization does business by enabling the
organization to introduce new products and services made possible by technology. Holiday
Inns introduced videoconferencing facilities so its business clients could arrange electronic
meetings with counterparts in other cities. In this way, the hotel chain was able to use a new
technology to open up a new business opportunity.

Numerous organizations are using technology to open us new business opportunities. An

aggressive market research firm used point of sale systems in local grocery chains to record
data on customer buying behavior in response to various advertising and promotional
strategies. Its advertising impact studies were superior to those of its competitors because it
could tie the impact of advertising to an organization’s strategy. The table below summarizes
applications that affect strategy.

As you can see, most applications of information technology are directly linked with
improving business performance. In many cases, they impact the products and services
provided by the business unit.

Functional unit applications

Efficiency Process automation Order entry
Credit checking

Effectiveness Functional enhancement Computer-aided design

Computer-aided manufacturing

Transformation Functional redefinition CD-ROM disks for business research

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Organization wide applications
Efficiency Boundary extension Online order entry linking customers
and suppliers

Effectiveness Service enhancement Online diagnostic databases for

electrical appliances

Transformation Product innovation

Videoconferencing

1.5 Users of Information

Information as we have seen is sent to users. The information generated by an organization
can be valuable to many different people. Users of an organization's information can be:

(a) External
(b) Internal

Bear in mind that information may be relevant to people outside the organization as well as its
internal management and employees. In fact, decisions relating to an organization can be
taken by outsiders.

(a) The organization's bankers take decisions affecting the amount of money they are
prepared to lend.
(b) The public might have an interest in information relating to an organization's products
or services.
(c) The media (press, television etc) use information generated by organizations in news
stories etc., and such information can adversely or favorably affect an organization's
relationship to the environment.
(d) The government (e.g., Department of Trade and Industry) regularly requires
organizational information.
(e) The Inland Revenue Authorities required information for taxation.
(f) An organization's suppliers or customers take decisions whether or not to trade with
the organization.

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Internal users of information include (by status) the following.
(a) The board of the company; or public sector equivalent.
(b) Directors with functional responsibilities.
(c) Divisional general managers, reporting to these directors.
(d) Division heads.
(e) Department heads.
(f) Section leaders or foremen.
(g) Discretionary employees (those who are expected to act on their own initiative to
some extent).
(h) Non-discretionary employees (those work under instruction all the time with little
scope of initiative).
Internal users of information by function are
(a) Marketing
(b) Finance
(c) Administration
(d) Production
(e) Technical
(f) Personnel
(g) Research, etc.

Types of Information
A more functional classification of information is based on the basis of types of decisions.
Information, as required at different levels of management can be classified as: operational,
tactical and strategic.

Information Level
Information within an organization can be analyzed into three levels.

1. Operational information
Operational information relates to the day-to-day operations of the organization and thus, us
useful in exercising control over the operations that are repetitive in nature. Since such

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activities are controlled at lower levels of management, operational information is needed by
the lower management. Examples are such as cash positions and daily sales.

Operational information:
 is derived almost entirely from internal sources
 is highly detailed, being the processing of raw data
 relates to the immediate term
 is task specific
 is prepared constantly, or very frequently
 is largely quantitative

2. Tactical Information
Tactical information helps middle level managers allocating resources and establishing
control to implement the top-level plans of the organization. For example, information
regarding the alternative sources of funds and their uses in the short run, opportunities for
deployment of surplus funds in short term securities, etc., may be required at the middle levels
of management.

Tactical information is
 is derived from a more restricted range of external sources, so is thus primarily
generated internally
 summarized at a lower level – a report might be included with summaries and raw data
as backup
 is relevant to the short and medium terms
 describes or analyses activities or departments
 is prepared routinely and regularly
 is based on quantitative measures

3. Strategic Information
While the operational information is needed to find out how the given activity can be
performed better, strategic information is needed for making choices among the business
options. The strategic information helps in identifying and evaluating these options so that a

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manager makes informed choices, which are different from the competitors and the
limitations of what the rivals are doing or planning to do. Such choices are made by leaders
only. Strategic information is used by managers to define goals and priorities, initiate new
programs and develop policies for acquisition and use of corporate resources.

Strategic information is therefore:

 derived from both internal and external sources
 summarized at a high level
 relevant to the long term
 deals with the whole organization (although it might go in some detail)
 often prepared on an 'ad hoc' basis
 both quantitative and qualitative
 Incapable of providing complete certainty, given that the future cannot be predicted.

1.6 Process of Generation of Information

The process of generation of information involves as series of activities. Broadly speaking,

there are three basic activities:

(a) Data acquisition

(b) Data transformation
(c) Management of information

Data Acquisition
As stated earlier, data are facts expressed with the help of symbols such as alphabets, digits,
graphs, diagrams, pictures, etc., or in any other form. Data may describe an event or it may
represent status of an element of the environment. Whatever may be the source of data, it may
be initially recorded and later verified for accuracy and authenticity. This activity is called
data capture.

Data may be captured by punching with keyboard or scanning with scanning devices, facts
from documents on which they were recorded.

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Data Transformation
Data transformation may be done by performing any of the following operations on data:
i) Rearranging: rearranging data in some specified order is a very common data processing
activity. For example, data regarding stores may be rearranged in order of date of
purchase or in order of value of each unit or in the alphabetic order of names if these are
items. Such a rearrangement is also known as sorting of data. Sorting may add to the
usefulness of data.
ii) Calculating: for a layman, data is processed only by calculating. A series of calculations
performed on numeric values is called computation. This is the logic behind for the
computer to be called computing machine. Calculating involves performing arithmetic
operations (like addition, subtraction, multiplication, division and logic operations).
iii) Summarizing: summarizing is a process of aggregating various data elements, reducing
the bulk of data to a more meaningful form. For example, a finance manager may be
interested in knowing the total number of shares applied for in a public issue. The data in
this regard may be summarized and such summary report may be more useful to him than
the entire statement giving details of each share application received.

Management of Information
After acquisition and/or transformation, the processed data may be either communicated to
end user or may be stored for future reference. If the information is to be communicated to the
user, the format for the reporting must be selected. The format for reporting may include
simple columnar/tabular format or visual formats, such as charts, diagrams, graphs, etc. Once
the report format is decided, appropriate channel of communication need to be selected and
used. In case the information generated is to be used in future it may be stored on some mass
storage medium. Such activities of communicating and/or storing information may be termed
as managing information.

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 1.7 The Attributes of Information

Information adds to relevant knowledge, reduces uncertainty, and supports the decision
making process in an organization. However, to be useful, information must have essential
attributes, both as individual items and as set of information.

The attributes of information are the characteristics that are meaningful to the user of each
individual item of information. That is, each individual item of information can be described
with respect to accuracy, form, frequency, breadth, origin, and time horizon.

Accuracy: information is true or false, accurate or inaccurate. Accurate and true describe
whether information represents a situation, level, or state of an event as it really is. Inaccurate
information is the result of errors, which could have occurred during collection, processing, or
report preparation.

Form: is the actual structure of information. It includes the dimensions of quantifiability

(qualitative or quantitative), level of aggregation (summary form or detailed form), and
medium of presentation (printed or displayed on screen, television).
Frequency: the frequency of information is a measure of how often it is needed, collected,
produced. It may be produced very frequently or very seldom, depending on the users' need.
Information for preparation of federal income tax returns, for example, may be collected only
once in a year.
Breadth: is the scope of events, places, people, and things that are represented by
information. A broad scope of sales information, for example, may include all the sales
territories of a company doing business in the country. A narrow scope may include just one
territory for the company or part of one territory.
Origin: the origin of information is the source from which it is received, gathered, or
produced. Internal information originates from within an organization, and external
information originates outside it – from the government, for example, or from trade
associations.
Time horizon: information is oriented toward the past (historical information), toward present
situations, or toward future activities and events. Historical information provides as
perspective on what happened at an earlier time; it may be examined to see whether progress

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has been made or situations have improved. Companies frequently examine historical
information to see whether current profits, expenses, sales, number of employees, and so on,
have increased, decreased, or stayed the same compared with the past. Future information
helps organizations plan for demands and operating requirements in the years ahead.

The attributes of information that we have just discussed pertain to individual pieces of
information. However, it is common to use several pieces of information together, that is, a
set of information. Certain attributes are associated with sets of information; these
characterize the set for the situation in which it will be used. They are relevance,
completeness, and timeliness.
Relevance: information is relevant if an individual needs it in a particular decision making or
problem solving situation. It is necessary part of the resources used to select a course of
action. The important point is its application to the current situation. A set of information that
was relevant at one time may not be relevant now if it is not actually needed and will not be
used by the recipient. Similarly, information collected and maintained by someone on the
assumption that sooner or later it will be needed is not relevant now because it is not needed
now.
Completeness: if a given set of information tells the user everything that needs to be known
about a particular situation, we say that it is complete. If a report, on the other hand, leaves an
individual with a number of unanswered questions, it is an incomplete set of information.
Although it often appears virtually impossible to gain the desired degree of completeness, we
should try to find systems and procedures that give us the most complete information
possible.
Timeliness: any manager has two important concerns: (1) is the information available when I
need it? And (2) is it outdated when I receive it or when I want to use it? Substantial delays in
the processing of information may significantly reduce its usefulness to a manager.

The attributes of information deal with the quality of information that will be used by
managers. If any of them are substandard, the user is ill advised to rely on them to guide any
actions or activities.

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A Framework for Information Systems
Each of the management levels – operational, tactical and strategic planning requires different
information systems with the characteristics discussed here below:

Operational Systems
At the operational level the primary concern is to collect, validate, and record transactional
data describing the acquisition or disbursement of corporate resources. Financial data on
accounts receivable, accounts payable, payroll, and cash receipts need to be recorded as they
occur. When a sale is transacted, data on the items ordered are recorded, the inventory level
for these items is adjusted, a shipping label and packing slip are prepared and an invoice is
generated. The original transaction – the sale of the item – creates numerous transactions in
order processing, inventory, and billing. Operational level information systems often have the
following characteristics.

 Repetitiveness: the information they produce is usually generated repetitively at

periodic intervals, such as daily, weekly, or monthly.
 Predictability: the information they produce usually does not contain any surprises or
unexpected results for the manager or other users of the system. That is, people are paid
what they were expected to be paid and customers are billed for what they purchased
during the month.
 Emphasis on the past: the information produced usually describes past activities of the
organization. For example, the output of a payroll system describes employees' work.
The checks to vendors describe past purchases by the organization. Customer invoices
describe past sales to customers. Stock reports describe past changes in inventory.
 Detailed nature: the information produced is very detailed. That is, paychecks provide
detailed information on the workweek of each employee and the specifics of each
employee's gross and net pay. Customer invoices specify details regarding purchases
made during the period, the terms under which the purchases must be paid, and the total
amount, taxes, and other charges due.
 Internal origin: the data for operational systems usually spring entirely from internal
sources. That is, the data for paychecks come from internal documents such as time

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 cards and employee master records. The data for customer invoices come from sales
orders and shipping documents.
 Structured form: the form of the data used as input and the form of the information
produced by operational level systems usually very structured. That is, the data on time
cards are carefully formatted in identical fashion on each time card. Or the data on each
customer invoice are carefully formatted in identical fashion. In short, the form and the
format of the data input and the information output of the systems are highly structured.
 Great accuracy: the accuracy of the data used as input to such systems is usually very
high. The data input and information output are carefully checked in a variety of ways.

Tactical Systems
The second level in the framework consists of tactical systems. Tactical systems provide
middle-level managers with the information they need to monitor and control operations and
to allocate their resources more effectively. In tactical systems, transaction data are
summarized, aggregated, or analyzed. Tactical systems are designed to generate a variety of
reports, including summary reports, exception reports, and ad hoc reports.

Summary reports provide management with important totals, average, key data, and abstracts
on the activities of the organization (e.g., List Total regular and overtime hours earned at each
plant, total weekly sales, by salesperson, by product, and sales region).

Exception reports warn managers when results from a particular operation have exceeded or
not met the expected standard for the organization (sales fall by 10% for some employees,
more over time in certain plants).

Ad hoc reports that managers need, usually quickly, that may never be needed again. Ad hoc
reports present information that the manager needs to solve a unique problem.

Tactical information systems differ from operational information systems in their basic
purpose. Their purpose is not to support the execution of operational tasks but to help the
manager control these operations. Tactical information systems often have the following
features.

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Periodic nature: the information from a tactical system is sometimes produced periodically
(e.g., accounts receivable report). Sometimes ad hoc information may also be produced.
Unexpected findings: the information produced by a tactical information system may not be
the information that was expected to be produced.
Comparative nature: the information produced is usually comparative in nature rather than
merely descriptive. Tactical information systems should provide managers with information
that alerts them to variances from accepted standards or results that are not within the normal
range, so that remedial actions can be taken swiftly.
Summary form: the information produced is usually not detailed but in summary form. The
credit manager is not interested in a detailed listing of each customer account and its balance.
Both internal and external sources: the data used for input to the system may not be
confined to source internal to the organization.

Strategic Information Systems

Strategic planning level information systems are designed to provide top management with
information that assists them in making long range planning decisions for the organization;
Strategic planning information systems often have these characteristics:

1. Ad Hoc Basis: the information may be produced either regularly or periodically. For
example, periodic accounting system reports are used by top management in its
planning function. However, strategic planning information is more often produced
when it is needed, on an ad hoc basis.
2. Unexpected Information: the information produced by the system may not be the
information that was anticipated.
3. Predictive Nature: the information produced is usually predictive of future events rather
than descriptive of past events. Long-range planners try to set a course for an
organization through an uncharted future. Their primary task is to choose a route that
will improve the organization's level of success. The information that the strategic
planning system provides should help these planners the risks involved in their choice
of routes.
4. Summary Form: the information produced is usually not detailed but in summary form.
Long range planners are not usually interested in detailed information. They are usually

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 concerned with more global data. (Example, buying trends, overall demographic
characteristics of groups of customers).
5. External Data: a large part of the data used for input to the system may be acquired
from sources external to the organization. (Investment opportunities, rates of borrowed
capital, demographic characteristics of a market make group and economic conditions
must be obtained from data maintained outside the organization).
6. Unstructured Format: the data used for input to the system may contain data that are
unstructured in format. For instance, forecasts of future market trends may use the
opinions of store buyers, salespeople, or market analysts obtained in causal
conversations.
7. Subjectivity: the data used for input the system may be highly subjective and their
accuracy may be suspect. For instance, forecasts of future stock market trends may be
based partly on rumors reported by brokers. Forecasts of the expected market share of
your organization within the industry observers who are basic their opinion on rumors
and on conversations held with a variety of industry personnel are examples of
subjective information.

A comparison of Information Systems at the operational, tactical and strategic planning

levels
Summary of Classification Information Systems
Characteristic Operational Tactical Strategic Planning
Frequency Regular, repetitive Most regular Often ad hoc
Dependability of results Expected results Some surprises may occur Results often contain
surprises
Time period covered The past Comparative Predictive of the future
Level of detail Very detailed Summaries of data Summaries of data
Source of data Internal Internal and external Mostly external
Nature of data Highly structured Some of unstructured data Highly unstructured
Accuracy Highly accurate data Some subjective data Highly subjective data
Typical user First line supervisors Middle managers To management
Level of decision Task oriented Control and resource Goal oriented
allocation oriented

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1.8 FEATURES OF INFORMATION

Information as corporate resource has the following features.

 Information is a value added resource. Just as value is added to a product as it moves
from raw material stage to final product; the same is true of conversion of data into
information.
 Information has a specific cost associated with it just as if it were acquired from the
market. Therefore, it is as essential to acquire and utilize information efficiently as it
would be for any other resource.
 Information is meant to be shared by all associated with the attainment of company's
common goals and they, in turn, contribute to the corporate stock of information.
 Information is exposed to a variety of security risks. Therefore, it has to be protected by
implementing appropriate security policies and procedures without hindering its
seamless flow across its users.
 Most of the information is organization specific and its value depends upon its use by
the decision maker.
 It has a high rate of obsolescence and thus, it must reach the user as early as possible.
Redundant part of this resource must be weeded out of the total stock of information.

1.9 SYSTEMS

A system can be described simply as a set of elements joined together for a common
objective. A system is a collection of people, machines, and methods organized to accomplish
a set of specific tasks. A system is defined as a number of components, entities that form a
whole. These entities interact in such a way as to achieve a goal. It is a set of objects that are
relevant and may not be described in terms of their attributes or component parts.

Systems boundary: all systems have a boundary that separates them from their environment.
The activities in a class include lectures, discussion, testing, grading, and preparation of
assigned course work. When defining a system, you need to establish a boundary. A boundary
may delineate an area of responsibility. This boundary depicts the scope of activities to be
supported by the system.

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Systems and subsystems: systems may consist of numerous subsystems, each of which has
elements, interactions, and objectives. Subsystems perform specialized tasks related to the
overall objectives of the total system. For example, an educational system may consist of
individual courses that are subsystems. Each course provides specific knowledge that is a part
of the overall educational system and contributes to its goals. In a business system, various
functions are the subsystems.

Outputs and inputs: the inner workings of a system or subsystem are organized to produce
outputs from inputs. In this conversion process, some value, or utility, should be added to the
inputs. For example, a training program should produce trained employees with certain skills,
knowledge, or behavior from its inputs – untrained employees. The outputs of one subsystem
usually become inputs into the next.

An interface is a connection at system or subsystems boundaries. Two typical business

systems that interface with each other are inventory control and purchasing.
Systems and their environment: the system's environment consists of its goals, needs and
activities.

Open and closed systems: open systems operate in an external environment and exchange
information and material with that environment. The external environment consists of the
activities external to the system boundary with which the system can interact. An open system
needs to receive feedback to change and continue to exist in its environment.

In contrast, a closed system is relatively self-contained; exchange with its environment does
not occur. Closed systems do not get the feedback they need from the external environment
and tend to deteriorate. For instance, if a training program administrator does not respond to
the needs of environment for trained graduates, students will no longer be able to get jobs and
will go elsewhere for training. Eventually, the training program will be discontinued.

Systems feedback: a system needs feedback to do its job. Feedback is form of control,
because it requires continuing adjustments in the activities of the system. Employees need
feedback to learn how they are doing job goals. Students receive grades or other kinds of

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evaluations from instructors to be whether they are meeting course objectives. the good thing
about feedback it that it usually increases effort.

System entropy and negative entropy: systems can become run down if they are not
maintained. If employees do not have opportunities to learn new concepts and techniques, the
skills they apply to performing job tasks will become out of date. The process of maintaining
a system is negative entropy. Sending automobile mechanic to training classes to learn new
diagnostic techniques is an example of negative entropy. Negative entropy can be achieved
through preventive maintenance checks, such as a yearly physical examination for an
employee or a routine tune up for an automobile.

Systems may be abstract or physical: an abstract system is conceptual, a product of the

human mind. That is, it cannot be seen or pointed to as an existing entity. Social,
technological, cultural systems are abstract systems. None of these entities can be
photographed, drawn, or otherwise physically pictured. However, they do exist and can be
discussed, studied and analyzed. A subsystem is part of a larger system with which we are
concerned. A physical system, in contrast, is a set of elements – rather than ideas or constructs
– that operate in relation to one another to accomplish a common goal or purpose.

Examples of physical systems include:

 Compute systems: collection of hardware elements that work interdependently under

some means to control to process data and produce output reports.
 Communication system: collections of components that can represent and transmit bits
of information from one pointer to another.
 Marketing systems: collection of people, equipment, and procedures that develop,
produce, and distribute commodities, ideas and other entities to consumers or users.

A system must have an objective or goal. It is probably true to say that all systems have more
than one objective. A business organization, for example, might list as its objectives:

 to generate a reasonable financial return for shareholders

 to maintain a high market share
 to increase productivity annually

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  to offer an up-to-date product range of high quality and proven reliability
 to be known as responsible employers
 to acknowledge social responsibilities
 to grow and survive autonomously;

Information Systems
In many ways, information systems have the same characteristics as systems in general. The
major purpose of an information system is convert data into information; information is data
with meaning. In a business context, an information system is a subsystem of the business
system of an organization. Information system can be defined as a set of interrelated
components that sense, communicate, analyze, and display information for the purpose of
enhancing our perception, understanding, control and creative ability.

The information system

a) takes in data from the environment using of the sensing and communication
technologies (INPUT);
b) Analyzes this information using computer hardware and software (PROCESS);
c) Displays this information using computer hardware and software (OUTPUT);
d) Either you or the computer uses this information to act on the environment
(FEEDBACK).

An information system, like any other system, receives inputs of data and instructions,
processes these data according to these instructions, and produce outputs.

Hierarchy of subsystems: the subsystems within an information system can also be organized
into a hierarchy that represents their functions within the overall system. Each subsystem
performs a specialized function.

An information system is an example of both a technical system and a social system. It is a

technical system in that it may contain a large number of machinery (computers, telephones
etc), but it is also a social system given that it may reflect, in the way it is used, the social
structure of the organization. For example, an information system not only exists to record

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transactions but also it is used to provide summary information to senior management to
assess whether the organization is following its long-term strategic objectives.

The information system links the disparate parts of the organization together (persons, groups,
departments, or organization to another).

Elements of Information Systems

Computer Hardware: computer hardware refers to computer systems and other associated
equipment including the communication links that a modern IT installation may need. With
the rapid advancement in computer hardware technology, a large variety of computer systems
with varying sizes, speeds, and functional feature are available. To be able to determine the
hardware resource requirements, it is necessary to properly assess the nature of IT needs, the
volume of data to be processed, sources of data, complexity of data analysis and impact of
other related factors. Such an assessment should also make provisions for expected changes in
these factors in the future.

The following list presents computing power from the least expensive and least powerful to
the most expensive and most powerful.
i) Microcomputers (sometimes called personal computers). Based on a single tiny silicon
chip called a microprocessor that contains all the essential elements of a computer.
 Desktops
 Portables (like laptop, notebook, and palmtop or handheld computers)
ii) Workstations: faster and more powerful than microcomputers, workstations are used
by engineers, architects, scientists, commercial artists, and others who heed computers
for speedy number crunching and graphics
iii) Minicomputers: generally have more speed and power than workstations, but less than
mainframes. They can handle several hundred simultaneous users and can run
multiple programs concurrently.
iv) Mainframes: are the standards for large business and government agencies, although
computer networks composed of smaller computers are threatening to surpass them.
v) Supercomputers: are the largest and powerful computers.

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Software: putting it simply, sets of inter related computer programs are collectively called
computer software. A program is a set of instructions, which enable particular processes to be
performed by a computer. Software is lifeline of the IT infrastructure and it makes the
computer hardware function. Software determines what the hardware does and makes the
hardware perform. Software, thus, is a very important IT resource and must be carefully
selected and properly maintained. Software, being intangible, sometimes gets a back seat in
planning for an IT infrastructure. In fact, improper selection of software may become a major
cause of failure of an IT infrastructure in achieving its objectives. There are two types of
software:

1. System software: programs that control and coordinate the operation of the various
types of equipment in a computer system.
2. Applications software: programs that allow you to apply the computer to solve a
specific problem or perform a specific task (i.e., word processing, spreadsheet, graphics,
database programs).
Procedures
Formal operating procedures are physical components because they exist in a physical form
such as a manual or instruction booklet. Three major types of procedures are required:
1. User instruction (for users of the application to record data, employ a terminal to enter
or retrieve data, or use the result)
2. Instructions for preparation of input by data preparation personnel
3. Operating instructions for computer operations personnel

The procedures play an important role in the smooth and effective utilization of information
resource. They also protect the information resource and maintain its quality. Thus, the
procedures as element of information system refer to the instructions to users regarding the
use of IT infrastructure for normal day-to-day activity and also for handling special situations
such as systems failures and crashes. They include user access permissions and disaster
recovery procedures as well.

Human resources: the effectiveness of an IT infrastructure is a function of the type of IT

personnel available to it. In fact, best of computer hardware, software and data may be spoiled
and may cause havoc if the human resources are not competent, honest or reliable. Qualities

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like competence, honesty and reliability are critical to any work environment. These include
computer operators, systems analysts, programmers, data preparation personnel, information
systems management, data administrators, etc.

The term management information system (MIS) is possible to define in a number of different
ways, some of which are listed below:

(a) 'A computer system or related group of systems which collects and presents
management information to a business in order to facilitate its control.'
(CIMA: Computing Terminology)
(b) 'A system to convert data from internal and external sources into information and to
communicate that information, in an appropriate form, to managers at all levels in all
functions to enable them to make timely and effective decisions for planning, directing
and controlling the activities for which they are responsible
(Lucey: Management Information System).
(c) Management information system (MIS): is an integrated, user machine system for
providing information to support operations, management, and decision making
functions in an organization. The system utilizes computer hardware and software;
manual procedures; models for analysis, planning, control and decision making; and a
database (Davis and Olson: 1985). The fact that it is an integrate system does not
mean that is a single, monolithic structure; rather, it means that the fact parts fit into an
overall design. The elements of the definition are highlighted below:

Management information system is

 an integrated user machine system (some can be performed using machine,
other without machines)
 for providing information
 to support the operations, management, analysis, and decision making
functions
 in an organization
The system utilizes
 Computer hardware and software
 manual procedures

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  models for analysis, planning, control, and decision making and
 a database

Scope of MIS
What is common to these definitions is presented to management. However, this is not the
only function of an organization's information systems. A number of tasks might be
performed simultaneously:

(a) initiating transitions (e.g., automatically making a purchase order if stock levels are
below a specified amount);
(b) recording transactions as they occur (e.g., a sale is input to the sales ledger system);
(c) processing data (e.g., as described in earlier chapters);
(d) producing reports (e.g., summaries);
(e) Responding to enquires.
The objective of an MIS is to provide information for decision making on planning, initiating,
organizing, and controlling the operations of the subsystems of the firm and to provide a
synergistic organization in the process.

1.10 SUBSYSTEMS OF AN MIS

MIS has been introduced as a broad concept referring to a federation of subsystems. Two
approaches to defining the subsystems of an MIS are according to the organizational
functions, which they support, and according to managerial activities for which they are used.

Organizational Function Subsystems

Because organizational functions are somewhat separable in terms of activities and are
defined managerially as separate responsibilities, MIS may be viewed as a federation of
information system – one for each major organizational function. There may be common
support systems used by more than one subsystem, but each functional system is unique in its
procedures, programs, models, etc., typical subsystems for a business organization engaged in
manufacturing are:

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Major functional subsystem Some typical uses
Marketing Sales forecasting, sales planning, customer and sales analysis
Manufacturing Production planning and scheduling, cost control analysis
Logistics Planning and control of purchasing, inventories, distribution
Personnel Planning personnel requirements, analyzing performance,
salary administration
Finance & accounting Financial analysis, cost analysis, capital requirements planning
income measurement
Information processing Information system planning, cost effectiveness analysis
Top management Strategic planning, resource allocation

The database is the primary means of integration of the various subsystems. A data item that
is stored or updated by one subsystem is then available to the other subsystems. For instance,
the sales and inventory information used by the marketing subsystem is supplied through the
logistical subsystem; the same data is used by the manufacturing subsystem for production
planning and scheduling.
Activities Subsystem
Another approach to understanding the structure of an information system is in terms of the
subsystem, which perform various activities. Some of the activities subsystems will be useful
for more than one organizational function subsystem; others will be useful for only one
function.

Activity subsystem Some typical uses

Transaction processing Processing of orders, shipments, and receipts
Operational control Scheduling of activities and performance reports
Management control Formulation of budgets and resource allocation
Strategic planning Formulation of objectives and strategic plans

Note that these activities subsystems correspond to the levels of the pyramid structure that
defines MIS. The relationship of activities subsystems to functional subsystems is illustrated
in the following figure.

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 M P L P F Info Top
a r o e in rma mana
r o gi r a tion geme
k d st s n proc nt
e u ic o ci es s i
t c s n al ng
i t n A
n i e c
g o l c
n o
u
n
t
i
n
g

Activities

Strategic planning

Management Control

Operational Control

Transaction processing Database Management Systems

Database

Relation of activities to functional subsystems

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Inputs, processes and output of MIS at all levels of Management
Inputs Process Outputs
Strategic Plans, competitor information, Summarize Key ratios, ad hoc
overall market information Investigate market analysis,
Compare Strategic plans
Forecast
Tactical Historical, and budget data Compare Variance analysis
Classify Exception report
Summarize
Operational Customer orders Update files Updated files
Programmed stock Output reports Listings, invoices
Control levels
Cash receipt or payments

Check Your Progress Exercise

1. Explain the following terminologies.
(a) Management
___________________________________________________________________________
___________________________________________________________________________
(b) Information
___________________________________________________________________________
___________________________________________________________________________
(c) System
___________________________________________________________________________
___________________________________________________________________________
2. What is the purpose of information technology and explain its impact from individual,
organizational and functional unit view?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

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3. Explain the process of generation of information.
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
4. Discuss the features of information as a corporate resource?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
5. Identify and explain the two forms of software.
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

1.11 SUMMARY

The evolution of computers shows that prediction over 30 years ago that computers would
change organizational structure and the nature of managerial work is coming true. Early
attempts to manage paper work used computers to mechanize tasks such as information
retrieval. In the 1980s and 1990s, organizations learned that information technology could
provide a competitive edge by adding value to products and services. Telephone links to
diagnostic databases, vendor hotlines, and dealer networks supported by telecommunications
links all provide better service to customers. Computer systems can link buyers and sellers,
manufacturers and dealers, and home offices and branch offices.

Today, as most organizations make the transition to become information based organizations;
it is essential for managers to understand emerging technologies and their applications. These
applications should be focused upon efficiency, effectiveness and transformation. The key to
1990s will be using information technology to do things that were altogether impossible
before.

As a future manager, you will want to become thoroughly acquainted with the challenges that
information technology provides. This material will give you an opportunity to learn about

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information systems, to use information systems tools, and to become familiar with the
systems development process all from manager's viewpoint.

1.12 Answer to Check Your Progress Exercise

1. Refer to Section 1.3

2. Refer to Section 1.4
3. Refer to Section 1.6
4. Refer to Section 1.8
5. Refer to Section 1.9

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Unit 2: An introduction to Concepts of systems and Organizations

Content
2.0 Aims and Objectives
2.1 Introduction
2.2 System Concepts
2.3 Systems And Their Environments
2.4 Systems Concepts In Business
2.5 Using The Systems Approach In Problem Solving
2.6 Systems Concepts in Organizations
2.7 Summary
2.8 Answer to Check Your Progress Exercise

2.0 AIMS AND OBJECTIVES

After studying this unit the student should be able to:

- explain the basic systems concepts
- understand systems and their environments
- describe how a system works
- understand systems concepts in business and
- explain how systems concepts in organizations operate

2.1 INTRODUCTION

When you begin the study of information systems, you should become acquainted with a
theoretical framework for understanding their use, development, and effect on organizations;
that is, you need to have an understanding of systems concepts as a foundation for further
study. The word system is often misunderstood-some people think you are referring to a
computer system when you use the term, but you may hear people talk about financial
systems, air-conditioning systems, school systems, and investment systems as well as about

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information systems. A system is a collection of people, machines, and methods organized to
accomplish a set of specific tasks. Information systems which are a major topic in this text
have the same components and characteristics as systems in general.

This unit introduces the concepts of systems, their characteristics, and their interaction with
the environment. As a manager, you’ll constantly be dealing with systems, and you’ll need
feedback about their performance. Information is the feedback you need to determine if
systems are achieving their objectives, operating with the necessary components, and meeting
the necessary standards. Information systems are designed to give managers the information
they require as feedback.

In addition, you will learn about the systems approach to problem solving. As a manager, you
will be dealing with many types of systems and you will be responsible for improving their
performance. For example, you’ll determine if procedures, personnel, and equipment need to
be changed to achieve objectives. Or you’ll need to assess the effect of new equipment on
current work methods, procedures, and origination. The systems approach to problem solving
will help you deal with these kinds of task.

Finally, this unit explains how organizations operate as systems, with unique characteristics,
information flows, and decision processes. You will learn about the components of
organizations and about different types of organizational structures. You will need to
recognize the structures of organizations to understand the decision-making processes that
occur within different types of organization.

2.2 SYSTEMS CONCEPTS

A system is an integrated set of components, or entities, that interact to achieve a particular

function or goal. Systems have characteristics such as boundaries, outputs and inputs,
methods of converting inputs into outputs, and system interfaces, as well will see. Systems are
composed of interrelated and interdependent subsystems. Examples of systems are all round
us – in fact, an excellent example is a college class. The components of the classroom
situation, including an instructor, the students, textbooks, and facilities, all interact to make

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the accomplishment of learning goals possible. (Figure 2-1 depicts a model of a classroom
system.)

A business is also a system. A business uses resources such as people, capital, materials, and
facilities to achieve the goal of making a profit. Business procedures, such as order handling,
marketing research, financial planning, and manufacturing, are the interactions that need to be
managed to achieve this objective.

For a more through understanding of systems, though, you need to be familiar with concepts
like boundary and interface.

System boundaries

All systems have a boundary that depicts its scope of activities. For example, the activities in
a class include lectures, discussion, testing, grading, and preparation of assigned course work.
These activities may represent the boundary of the system for which a teacher is responsible.
Within the system of the classroom, the teacher is responsible for organizing class time,
assigning homework to students, and evaluating student progress. The boundary, then,
delineates an area of responsibility. When defining a system, you must establish a boundary.

System boundaries are established within a business system. A sale manager may be
responsible for managing, motivating, and evaluating the performance of a sales organization.
The owner of the business, however, faces different boundaries and may develop a financial
plan, a marketing strategy, and a long-range business plan.

Systems and subsystems

Systems may consist of numerous subsystems, each of which has elements, interactions, and
objectives. Subsystems perform specialized tasks related to the overall objectives of the total
system. For example, an educational system may consist of individual courses that are
subsystems. Each course provides specific knowledge that is a part of the overall educational
system and contributes to its goals.
Figure 2-1 A classroom system

In p u t Output
Instructor
Students Students
without with 211
knowledge knowledge
and skills and skills
 Students

Textbook and
other course Facilities
materials
Figure 2-2 typical subsystems: An example
In p u t Subsystem A Subsystem B
Output
Students Introduction to Students with COBOL
without data processing computer literacy Programming I Students with
computer programming
literacy Output Output skills
from A to B

In a business system, various functions are subsystems. Marketing, finance, and

manufacturing, for example, are subsystems. Within the marketing subsystem, the sales order
entry and credit-checking functions are subsystems. Each subsystem uses its resources to meet
specific objectives. For instance, in managing the sales order entry function, the supervisor
needs to develop sales order producers, maintain sales order records, and train sales order
personnel.

Outputs and inputs

The inner workings of a system or subsystem are organized to produce outputs from inputs. In
this conversion process, some value or utility should be added to the inputs. For example, a
training program should produce trained employees with certain skills, knowledge, or
behavior from its inputs – untrained employees.

The outputs of one subsystem usually become inputs into the next. The outputs of a course in
introductory data processing concepts, for instance, become inputs into the next course in
COBOL programming. (These two subsystems are depicted in Figure 2-2)

As you’d expect, the outputs of a subsystem have to adhere to certain standards to be

acceptable to the next. If students coming out of the introductory data processing course don’t
understand basic concepts of file organization and file processing, they won’t have the
prerequisite skills needed for COBOL. If they’re not permitted to enter COBOL until they

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meet certain standards, though, the problem would be alleviated. The more exactly standards
are adhered to; the easier it will be to interface the two courses, or subsystems.

An interface is a connection at system or subsystem boundaries. An interface serves as a

medium to convey the output from one system to the input of another system. An example
will help clarify this concept. Two typical business systems that interface with each other are
inventory control and purchasing. If inventory levels drop below a certain level, then
additional stock of these items should be purchased. Purchasing will need to know what
quantity of a particular item to obtain to replenish the stock and information on sales and
inventory turnover to learn which items are in greatest demand so these items can be
replenished on a timely basis. An inventory control system will provide information on stock
to be reordered based upon sales and inventory turnover trends.

However, if the inventory control subsystem triggers erroneous information about the amount
of stock to be reordered, then inputs into purchasing will be wrong. This problem can be
partially overcome by establishing an economic order quantity, or the quantity of an item that
is most economical to buy, for each item in inventory. This quantity, derived from order
history and inventory turnover rate, can serve as a standard and prevent reordering too much
or too little stock.
Subsystem interface and interface problems
In the previous section we discussed how some interface problems can be alleviated through
the development of standards. But you might encounter other types of interface problems.
Sometimes the output of one subsystem is not sufficient to accommodate the needs of the next
subsystem. For example, the production system may not be able to produce enough stock to
meet sales demands during certain peak periods. One way of handling this interface problem
is through the use of slack resources. In this situation, excess inventories can be built up on
purpose to meet the demand for sufficient inventory at peak times.

Another system interface problem can occur between the authoring subsystem and the
editorial subsystem in the development of a textbook. Authors who wait until the last minute
to finish their writing may not be able to produce manuscript fast enough to meet production
schedules, which involve editing, artwork, layout and design, typesetting, and proofreading
tasks. This problem can be avoided in several ways. First, an author may be asked to complete

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several chapters before production activities begin. This is another example of using slack
resources.

Second, an author may be asked to adhere to certain standards for input into the production
subsystem. For example, the author may be asked to create and store all text using a word
processing package that can be transported to a computer-based typesetting system without
rekeying.

Third, an author could hire a library researcher, photo researcher, and typist to provide a
support subsystem to expedite the development of manuscript. This is an example of how
creating a new subsystem can help solve a system interface problem.

Another situation in which a system interface problem can be solved by designing a new
subsystem occurs at a college when it accepts some students with deficiencies in their
academic backgrounds. To bridge the gap between high school and college, a remedial
subsystem can be created to help students develop prerequisite skills for college work. For
instance, students lacking basic writing skills may be required to take a remedial writing class
to learn spelling, grammar, punctuation, and composition skills. On successfully completing
this class, they may receive permission to enroll in classes in literature.

2.3 SYSTEMS AND THEIR ENVIRONMENTS

The system’s environment consists of people, organizations, and other systems that supply
data to or that receive data from the system. Not surprisingly, the environment is perceived
differently by different managers. A sales manager, for example, envisions the system
environment to be the company’s customers and vendors of the products and services being
marketed. But the owner of the business perceives the environment to include the firm’s
competitors, financial institutions that provide resources for expansion, and government
agencies with jurisdiction over company plans and products. Moreover, not only can the
environment be perceived differently by different managers, but also various kinds of systems
don’t always interact with the environment in the same way.

Open and closed systems

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Open systems operate in an external environment and exchange information and material with
that environment. The external environment consists of the activities external to the system
boundary with which the system can interact. An open system needs to receive feedback to
change and to continue to exist in its environment. For example, a marketing system, which is
an open system, operates in an environment of competition. If a competitor introduces new
technology by providing customers with on-line order entry terminals, the marketing function
must adapt to the change in the environment or remain at a competitive disadvantage. One
way of accommodating the change in the environment is to offer a similar on-line order entry
service. The same type of adjustment is necessary when an airline offers a new service, such
as a frequent flier bonus program. Though the new service may temporarily give the air
carrier a competitive advantage, the other airlines soon follow suit and offer a similar
program.

In contrast, a closed system is relatively self-contained; it doesn’t exchange information with

its environment. Closed systems don’t get the feedback they need from the external
environment and tend to deteriorate. For instance, if a training program administrator doesn’t
respond to the needs of the business environment for trained graduates, students may no
longer be able to get jobs and may go elsewhere for training. Eventually, the training program
may be discontinued.

You might wonder why closed systems exist at all. More often than not, participants in a
system become closed to external feedback without fully being aware of it. For example, a
university may only offer graduate courses during the daytime hours because it has always
scheduled these courses in this way. Without recognizing the growing number of working
adults wishing to enroll in evening graduate programs, the university may find registrations
dwindling and may even have to discontinue certain courses. If university officials had been
more responsive to student needs, however, they might have enjoyed booming enrollments
among the population of adult evening students.

System feedback
A system needs feedback to do its job. Feedback is an indicator of how current performance
rates when compared to a set of standards. With effective feedback, continuing adjustments in
the activities of a system can be made to assure that the system achieves its goals. Measuring

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performance against a standard is an effective control mechanism. Employees need feedback
to learn how well they are achieving job goals. Students receive grades or other kinds of
evaluations from instructors that show whether they are meeting course objectives.

The good thing about feedback is that it usually increases effort. For example, tennis players
often perform better when they are keeping score. When salespeople receive positive
feedback, it increases their motivation to achieve a sales quota. Negative feedback may also
serve a useful purpose. Negative feedback is designed to correct or guide activities that are
not consistent with achieving the goals of the system. If sales people are not achieving quotas,
they may want to rethink current sales techniques or reorganize their time. Similarly, if
students receive low grades, they may need to improve study habits, obtain tutoring, or enroll
in courses that better match their abilities or backgrounds.

Product managers also need feedback on how well new products fare in certain markets. They
conduct market research studies in test markets to compare new products with established
products. They can use feedback from these market tests to redesign a new product or identify
target markets for which the product is suitable before its introduction. Sometimes a company
receives feedback after introducing a new product. When Coca-Cola introduced new Coke,
negative feedback from its established customer base forced the reintroduction of its original
formula as Classic Coke.

Trainers in companies also need feedback about how well their programs are equipping
trainees for job tasks. Feedback from supervisors may provide suggestion on what skills
trainees need to perform successfully on the job. For example, employees who take training
program to learn how to use Lotus 1 – 2 – 3, a popular

Environment

Screening Monitoring
A training

Input program system Output

Boundary

Feedback

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 Figure 2-3 A training system and its environment
microcomputer spreadsheet program, may not be taught how to copy formulas from one cell
to a range of cells and may experience difficulty performing this procedure on the job. This
feedback may be used to build more exercise on the copy command into training classes.
Figure 2-3 depicts a training system and its environment. It also shows how feedback from the
external environment can be used to modify or improve the system’s internal workings.

So far we’ve emphasized the constructive aspect of feedback. Sometimes the wrong kind of
feedback is provided, however. This would be true if students were rewarded for the number
of book reports they complete, rather than for the quality of the reports. They may skim books
to get just enough information to complete and submit each report without developing
comprehension and reading skills – the real objectives of the exercise. Or if employees get the
wrong kind of feedback, they may increase their efforts in areas that aren’t useful in achieving
the objectives of the system. For example, if salespeople are rewarded for the number of sales
calls they make instead of the number of sales they close, they will try to fit in as many calls a
day as they can rather than spending the time with each customer to make a sale. As a result,
the company may lose business and not achieve its objectives.

Such considerations make it clear that feedback mechanisms must be designed for effective
control of business functions within an organization. In a business setting, an inventory
manager needs to manage the inventory levels of hundreds of items to avoid shortages of
items in demand and to prevent excess inventory levels of items that do not turn over
frequently. The inventory manager needs feedback to control these inventory levels and
determine when to order new stock of certain items. An inventory control system can
automatically generate a purchase order for stock replenishment when an item in inventory
falls below its recorder point. (The reorder point is the inventory level of an item that signals
when more stock of that item needs to be reordered.) This is an effective control device,
because if inventory level falls below a safe level, incoming customer orders cannot be filled.
However, if excess inventories build up, cash will be tied up unnecessarily.

In short, may information systems provide managers with information they need to allocate
their resources to achieve business goals. By having information about current business

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activities, managers can control production, inventory, and marketing resources and invest
these resources in the most profitable ways. Information on planned versus actual sales, for
example, can be used to detect slow-moving items and cut production of these items. Fast-
moving items should trigger production so the sales function can take advantage of market
demand.

Systems entropy
Systems can run down if they are not maintained. Systems entropy corresponds roughly to
chaos or disorder – a state that occurs without maintenance. If employees do not have
opportunities to learn new concepts and techniques, the skills they apply to performing job
tasks will become out of date. The process of maintaining a system is a process of decreasing
entropy or increasing orderliness. Sending automobile mechanics to training classes to learn
new diagnostic techniques is an example of decreasing entropy. Orderliness can be achieved
through preventive maintenance checks, such as a yearly physical examination for an
employee or a routine tune-up for an automobile, and then taking action as a result of these
regular checks. These checks provide valuable feedback to help detect faults or problems
when none have been anticipated. Diagnostic tools for equipment and machinery help prevent
downtime, which may cause delays in production and cost thousands of dollars in lost
business.

System stress and change

Systems change over time. Some of these changes occur because of identified problems, new
business opportunities, and new management directives. Systems may also change as a result
of stresses. The achievement levels needed to meet existing goals may change. For example,
because of reduced profit margins on sales, a division sales manager may insist on a sales
increase of 10 percent instead of 7 percent to achieve the same profits. The tendency is to
localize the stress so the pressure for adjusting to new demands is felt primarily by one
subsystem, in this case the division sales force.

It is easier to deal with change within one subsystem than within the total system because
stress may require rethinking existing work methods and organization. In this case, the sales
manager may have to develop more effective procedures to improve the profitability of sales.

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The sales manager may recommend cutting down calls to smaller customer accounts and
substituting telemarketing to service their needs. Salespeople might need to reallocate their
time so they can pay special attention to customers who purchase the most profitable product
lines and encourage customers who purchase less profitable lines to look at high-margin
products. All these procedures require a close analysis of the current system, changes in work
procedures, and effective time management.

Another source of system stress occurs if inputs cannot be monitored but the system is
expected to produce the same quality of output. Many colleges and universities screen
applicants using standardized test scores, high school grades, and references. Some
educational institutions, however, have open admission policies that make it possible for all
high school graduates to apply and be admitted. Because admitting candidates without the
necessary academic skills for college study places undue stress on the entire educational
system, colleges with open admission policies typically localize this stress by establishing
remedial programs and hiring specially trained teachers for these students. Students are
expected to pass remedial course work before entering regular college courses.

In a business situation, the same thing happens. New workers participate in training programs
before being placed in positions within the firm. During the training period, they learn
specific job-related practices so they can become productive in the work environment as soon
as possible. After training, they are placed in positions consistent with their skill levels and
backgrounds. This orientation and training process helps minimize the stress that might occur
if the new employees were placed directly into positions within the firm.

Although it is often easier to deal with stress by changing the activities of a subsystem, it is
also important to remember that the subsystem is a part of the whole system and interacts with
other subsystems in achieving overall objectives. It may be necessary to consider the entire
system is responding to a problem and to modify activities in other subsystems as well.

How a system Works

You can get a better idea of how a system works by considering the activities of a
professional baseball team. A professional baseball team consists of components that are
organized to achieve its objectives. One of the major objectives of a baseball club is to win

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games. To achieve this goal, the owner and manager may recruit players, organize training
programs, and develop publicity campaigns. When the team needs a good catcher, the
manager may acquire a new player by making a trade. All these components – players,
management, training, and promotion – interact to enable the ball club to achieve its
objectives.

Systems differ in terms of their goals, components, and characteristics. The objective of one
ball club may be to win games. To achieve this goal, it may recruit highly paid professionals
throughout the season to fill gaps in the lineup. In contrast, the objective of another team may
be to make money. Instead of recruiting highly paid athletes, this second team may enlist
talented rookies, hoping to fill the ballpark with dedicated fans. Each of these two ball clubs
has a different system with different objectives. The measures of success that each club uses
to evaluate its performance vary.

2.4 SYSTEMS CONCEPTS IN BUSINESS

Now that you have a general picture of how a system works, it will be helpful to look more
closely at business systems. The systems approach is a way of analyzing business
organization as a system of interrelated parts designed to accomplish goals. Each subsystem is
both a self-contained unit and a part of a larger system. Managers must understand the goals
of the total system and design the function of subsystems within the total system to make it
possible to accomplish these goals.

More specifically, management is the practice of organizing resources, including people,

materials, procedures, and machines, to achieve objectives. In other words, it entails
organizing subsystems to accomplish specific tasks. Using a systems approach, a manager
organizes various activities of the business into separate organizational subsystems. The
subsystems of the business are connected by resource flows throughout the firm.

An information system as a system

In many ways, information systems have the same characteristics as systems in general. The
major purpose of an information system is to convert data into information – information is

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data with meaning. In a business context, an information system is a subsystem of the
business system of an organization. Each business system has goals, such as increasing
profits, expanding market share, and providing service to customers. The information systems
of an organization should provide information on the day-to-day activities of a business, such
as processing sales orders or checking credit. These systems are called operational systems.
Information systems also must be designed to provide information that lets management
allocate resources effectively to achieve business objectives. These systems are known as
tactical systems. Finally, information systems must support the strategic plans of the business,
and these systems are known as strategic planning systems. But to sum up our discussion so
far, information provides managers with the feedback they need about a system and its
operations – feedback they can use for decision making. Using this information, a manager
can reallocate resources, redesign jobs, or reorganize procedures to accomplish objective
successfully.

An information system consists of components that interact to achieve the objective of

providing information about day-to-day activities that managers can use to control business
operations. Information systems can also be designed to provide information to enable
managers to allocate resources and establish long-range business plans. An information
system contains such elements as hardware, software, personnel, databases, and procedures to
accomplish its objectives. The hardware consists of the computer devices that support data
processing, communications processing, and other computer related activities. Software
consists of the instructions that the hardware uses to process information. Software consists of
the instructions that the hardware uses to process information. Software includes both
application software and system software. Application software consists of the programs
written to support specific business functions, such as order entry, inventory control, and
accounts receivable. System software enables the hardware to process application software
programs. System software consists of the programs that handle such functions as sorting
data, converting programs into the machine language the computer can understand, and
retrieving data from storage areas.

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Subsystems
Operational systems, which are designed to provide information about day-to-day activities,
are composed of subsystems that accomplish specialized tasks. A mail-order business, for
example, needs a system to process customer orders. The order-processing system actually
consists of subsystems set up to handle incoming orders, update inventory levels, and bill
customers. Other subsystems are created to purchase new stock, to handle accounts payable
transactions, and to apply cash receipts from customers to outstanding accounts receivable
balances.

Hardware Software Information

Data
People

Stored data Procedures

Figure 2-4 A model of an information system

Each of these subsystems performs a specialized task that supports the business objectives of
increasing sales and providing customer service.

However, if one of these subsystems breaks down, the overall business will feel the effect.
For example, if the mail-order company does not maintain sufficient inventories, customers
may become frustrated with constant back-orders and shift their business to other mail-order
companies.

Outputs and Inputs

An information system, like any other system, receives inputs of data and instructions,
processes the data according to these instructions, and produces outputs. This information-
processing model can be used to depict any information system.

In an inventory update procedure, the inputs are sales order transactions and an old inventory
master file. During the update procedure, the item quantities for each item on a sale order
transaction are subtracted from the existing inventory level for that item in stock. The new
inventory level is then written to the new inventory master file. The outputs of this system are

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an updated inventory master file, a reorder report, and a sales listing. A reorder report lists any
items in inventory that have fallen below their desired inventory level and provides a
purchasing manager with feedback about items that need to be reordered.

Hierarchy of subsystems
The subsystems within an information system can be organized into a hierarchy to represent
their functions within the overall system. Each subsystem performs a specialized function. In
the order entry and inventory update example, one subsystem may record sales transactions an
input, another subsystem may check customer credit, and another may check inventory
availability. Other subsystems may update inventory, generate a reorder report, and produce
information for billing, and so on.

System Feedback
An information system provides system feedback to a manager about day-to-day activities
and about deviations from planned activity. The manager can use this information to
supervise daily operations, such as credit checking and billing, and to reorganize resources to
achieve objectives more effectively. In the inventory control example, one of the outputs was
a reorder report indicating which inventory items need to be reordered. A purchasing manager
could use this report to reorder additional stock on a day-to-day basis.

Middle managers might want feedback about which items in inventory are moving rapidly
and which items are moving slowly so they can reallocate the investment in inventory to
minimize waste and maximize profitability. The information systems providing feedback that
can be used to allocate resources effectively, such as inventory and personnel, are called
tactical systems.

Subsystem Interfaces
As with other systems, there are interfaces between the subsystems of an information system.
Again, the outputs of one subsystem become the inputs into the next. For example, the outputs
of a sales order entry system become the inputs into an invoicing system. If the outputs of one
system are not correct, however, the next subsystem will be affected. If the price of an item is
entered incorrectly during order entry, then the charges to the customer may be incorrectly
calculated during billing.

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Internal Controls
Good information systems also have internal standards to make sure that data are processed
accurately. Input controls, for example, ensure that input data are valid before they are
processed. Another type of control is a password security procedure designed to protect
against unauthorized access and update of data. All in all, standards make sure the system
works properly. Without controls, the data printed out on reports may be inaccurate and
managers may not be able to trust the information system to provide valid results. If
unauthorized users update data files or if input data are not valid, managers may not even
know that the output generated in reports is invalid, and thus may make decision using
erroneous information.

Effect of the Systems Approach on Information Systems Design

Many of the ideas that are part of the systems approach have implications for the design of
information systems. You can learn about the design of an information system by putting
yourself in the shoes of an owner of a microcomputer dealership, for example. Systems have
objectives, and in this case the owner’s objective is to make a profit on the sales of
microcomputers, software, and related peripheral equipment.

The Structure of an Enterprise

The entire enterprise has been organized into subsystems, including the marketing subsystem,
the service subsystem, and the administrative subsystem. The marketing subsystem promotes
and markets microcomputer products and services. When customers have problems with their
microcomputers or need preventive maintenance, they use the service subsystem. Finally, the
administrative subsystem takes care of billing customers, purchasing equipment and supplies
from vendors, paying vendors, and handling accounting activities.

The marketing subsystem of the dealership is managed by a sales manager who recruits
salespeople, including experienced veterans and new trainees, to demonstrate and sell the
equipment. These salespeople are trained to follow certain procedures, such as giving
equipment demonstrations and making follow-up calls. These procedures are an important

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part of the “system” of selling microcomputer hardware and software. When they are not
followed, profitability suffers.

The sales manager needs an information system to provide feedback on how the system is
working. On a day-to-day basis, he may receive information about salespeople who have
successfully closed sales, about customers who are complaining, and about technical
problems with equipment. This feedback makes it possible to review the procedures and
activities of the current system. For example, if a particular model of microcomputer is
breaking down too often, the sales manager may encourage the salespeople to push alternative
lines of equipment until technical problems are resolved with the manufacturer.

The sales manager also needs to organize personnel resources to achieve the desired
objectives. If a certain salesperson is unable to make quota month after month, a more
effective training program may be needed. If experienced salespeople seem to be selling more
effectively to larger accounts, the sales manager may assign them to these accounts.

You can now see that the information the sales manager uses to monitor and control the
activities of the marketing system is critical to achieving the objectives of the business. Some
of this information may be obtained by word of mouth, and other information may be
generated from a computer. A product profitability report, for example, may give the sales
manager feedback on the product lines that generate the greatest gross profit. Whether the
manager uses informal feedback or computer generated reports, the information is being used
to organize people, procedures, and activities to accomplish objectives.

2.5 USING THE SYSTEMS APPROACH IN PROBLEM SOLVING

An owner of a business like the microcomputer dealership must constantly analyze problems
and reorganize the resources of the system to deal with these problems effectively. The
system approach is a valuable method of problem solving that takes into account the goals,
environment, and internal working of the system. The systems approach to problem solving
involves the following steps:
1. Define the problem.
2. Gather data describing the problem.

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 3. Identify alternative solutions.
4. Evaluate these alternatives
5. Select and implement the best alternative
6. Follow up to determine if the solution is working

We can understand how the systems approach works by applying it to a problem that the
microcomputer dealer might experience.

Define the Problem

The first step in the systems approach to problem solving is to define the problem. Defining
the problem is one of the most important parts of the system study, because if the wrong
problem is identified, the entire effort to change the system will be off track. At the outset,
some of the problems that are identified may be symptoms of the real problem. In order to
distinguish between symptoms and problems, it is necessary to gather data describing the
problem. Let’s say that in this case the owner is concerned about the fact that many of the
salespeople are not meeting their quotas. She decides to start a systems study by collecting
more information about the problem.

Gather Data describing the Problem

The owner may study the environment, current standards, management, input resources, and
internal procedures to gain an understanding of the problem. The first place the owner might
look is the environment. The environment of the microcomputer dealer includes its vendors,
its customers, its competitors, and the local community. From this investigation, the owner
might learn that local competitors are selling comparable microcomputers at prices 10 percent
less than the firm can offer.

Next, she might look at the dealership’s standards to determine if they are valid in the face of
the competitive environment. It might turn out that a goal of increasing gross sales by 10
percent for the year is unrealistic when the competition is cutting price.

Another area that could be analyzed is management. The owner needs to learn if the sales
manager is doing a good job. If the sales manager is not providing salespeople with effective
training the feedback regarding their performance, they may feel frustrated.

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Input resources are another area that should be analyzed. The owner needs to find out if new
sales and technical representatives are being recruited and if these employees are trained to
demonstrate computer equipment and software. If new recruits lack knowledge of the
technical features of the equipment, for example, they will fail to win new business. If sales
materials are not kept up to date, customers may not learn about new product features.

Work methods and procedures also need to be studied. If salespeople are not trained to follow
up on new prospects, the company could lose valuable business. If technical support
personnel cannot diagnose and solve service problems on a timely basis, customers may be
hesitant to purchase more equipment.

One of the major problems identified in this case is that competitors are charging lower prices
for comparable products. Many of the difficulties the dealer has identified are symptoms of
this fundamental problem. To address it, the owner has to identify and evaluate some
alternatives.

Identify Alternative Solutions

Given the fact that competitors have dropped their prices on comparable microcomputers, the
owner needs to identify some alternatives responses. These alternatives might include the
following:

Alternative 1: Investigate alternative manufactures of microcomputers to obtain products at a

lower cost per unit.
Alternative 2: Decrease the cost of sales by introducing mail-order sales supported by
telemarketing. Use salespersons for large accounts only. Cutting the cost of sales efforts
would make it possible to reduce machine prices to a more competitive level.

Alternative 3: Differentiate the products being sold by offering on-line diagnostic support
services for machine failure, service response time within 5 hours on a 24- hour basis, and
annual service checks.

Each of these alternatives supports a slightly different strategy. Finding lower-cost

manufactured goods would represent a cost-cutting strategy. The second alternative, suing
mail-order sales and telemarketing, would also support a low-cost strategy because the cost of

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mail-order sales would be less than the cost of a larger sales staff. Finally, introduction on-line
diagnostic support services would provide a “value-added” feature. Upgraded technical
support would justify slightly higher equipment costs.

Evaluate These Alternatives

The owner evaluates the extent to which each of these alternatives enables the organization to
achieve its objectives. As we saw, the owner’s objective was to increase the overall
performance of sales personnel. Purchasing lower-cost products from suppliers would enable
the owners to cut prices, as suggested in the first alternative, but would create difficulty at the
service end if these microcomputer products where less reliable. This might make it more
difficult for salespeople to meet their objectives.

Introducing a mail-order program would cut the cost of sales overhead. However, the mail
order program would require creating a database of customer prospects and developing
specialized promotional materials. This strategy might free sales representatives to
concentrate on direct sales to high potential accounts while using a less costly strategy to
maintain the business of smaller accounts.

The final alternative would offer customers additional levels of service and technical support
that add value to the firm's products. Because service is one of the key criteria for
microcomputer selection, this strategy might work. However, it is costly and might not satisfy
the needs of economy conscious small businesses that represent a large potential market
share.

Select and Implement the Best Alternative

Let's say that the owner decides to develop and implement a mail order program to reduce the
cost of sales overhead to smaller accounts and to enable sales personnel to focus on high
potential accounts. Because this is a new strategy, the owner would have to recruit new
customer service representatives or train others for telemarketing. Customer prospect
databases would need to be developed and established, as well as a system for shipping
merchandise, billing, and authorizing credit transactions.

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 Follow Up to Determine if the Solution Is Working
The last step in the systems approach to problem solving is follow-up. In the case of the mail
order sales alternative, the owner would need to determine if the system was meeting its
goals. If not, changes in management, standards, resources, and procedures would have to be
made to achieve these objectives. If either one of the other two alternatives were selected, the
owner also would need to follow up to determine if the approach was useful in improving
sales effectiveness.

As you can see from this example, the systems approach to problem solving is an important
technique for the manager. Every manager needs feedback to determine if the goals of the
system are being achieved. One of the most difficult tasks in a systems study is identifying
information that can be used to determine how the system is working. This is as true in an
organization with a simple structure as it is in a more complex organization. The next section
discusses the characteristics of organizations with different structure.

2.6 SYSTEMS CONCEPTS IN ORGANIZATIONS

The organization is also a system. Henry Mintzberg, in his book The Structuring of
Organizations, describes five basic parts of organizations and how they function together as a
system in which material, information, and decision processes flow. Mintzberg also identified
five different types of organizational structures, including the simple structure, the machine
bureaucracy, the professional bureaucracy, the divisionalized form and the adhocracy.

The Five Parts of the Organization

The five parts of the organization are the operating core, the strategic apex, the middle line,
the techno structure, and the support staff, as Figure 2-5 shows. The operating core is
comprised of the operators that carry out the basic work of the organization. They obtain
inputs, transform inputs into outputs, and distribute the outputs. They also provide direct
support for these input, transformation, and output functions. You might think of the
operating core of an automobile manufacturer as the assembly-line workers.

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The administrative component of the organization is made up of the strategic apex, the middle
line, and the techno structure. The strategic apex is top-level management. Top management
is responsible for insuring that the organization services its mission.
Figure 2-5 the five basic parts of organization

Strategic
apex

Middle
line Middle line

Support staff

Operating
core

Top managers are responsible for allocating resources, resolving conflicts, reviewing
activities, disseminating information, and serving as spokespersons for the organization in
dealing with the external environment. Most importantly, they develop the organization's
strategic plans.

The middle line consists of middle level managers who are below top managers in the chain
of command. The middle-line managers are responsible for coordination and control of
activities within their functional units. They allocate resources, initiate change, handle
conflicts, monitor the environment, establish strategy, and negotiate with outsiders – all to
serve the needs of their functional units.

The techno structure consists of analysts who help standardize the work of others within the
organization to control outputs and adapt to the environment. Examples of groups in the
techno structure are work-study analysts who standardize who processes, planning and budget
analysts who standardize outputs, and personnel analysts-trainers who standardize skills used
by the organization.

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The fifth group in the organization, the support staff, is responsible for supporting the
operating core outside the flow of operating work. Support groups include the cafeteria, legal,
payroll, public relations, and research and development staffs.

The Organization as a System of Flows

The five parts of the organization are joined together by flows – of authority, work material,
information, and decision processes. At the operating level, the parts moving the assembly
line are work flows. Control information flows from the operating level to middle
management and serves as feedback. As feedback information passes up through each level of
the hierarchy, it becomes more highly aggregated until it reaches the strategic apex. Typically,
information about exceptions passes upward through the hierarchy until it reaches a manager
who has the formal authority to handle the situation. In addition, commands flow downward
from top and middle management to the operating core.

The communications patterns within organizations vary depending upon the structure of the
organization. In more traditional organizations, information is filtered as it moves upwards
through the hierarchy. In emerging forms of "networked" organizations, informal
communication may link members of a project team who represent diverse areas and who
work in different locations. By learning about their communications patterns, you can
understand how different types of organizations function using feedback from both internal
and external sources.

Types of Organizational Structures

In Mintzberg's analysis, the five types of organizations – the simple structure, the machine
bureaucracy, the professional bureaucracy, the divisionalied form, and the adhocracy – have
unique ways of handling information and communications. As organizations become
information-based, information becomes a shared resource that facilitates interaction among
specialists in diverse areas. As information technology moves onto the desktop of every
manager, it will become a vehicle that supports the transition to the more advanced networked
forms of organization.

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The Simple Structure: What do an automobile dealership, a middle-sized retail store, a small
corporation runs by an aggressive entrepreneur, and brand-new government department have
in common? They are all examples of the simple structure.

In the simple structure, information follows a traditional path through the hierarchy to the
single chief executive, the major decision maker. One possible problem is that the leader may
become so enmeshed in operating-level information that he or she forgets the strategic
direction of the organization.

The Machine Bureaucracy: what do a national post office, a security agency, a steel
company, an airline, and automobile companies have in common? They are all machine
bureaucracies. Characteristics of the machine bureaucracy are a clearly defined hierarchy of
authority, centralized power for decision-making and formal communications throughout the
organization. At the operating core, you will find standardized procedures and a proliferation
of rules and regulations. In the machine bureaucracy, analysts in the techno structure – work
analysts, job designers, quality control engineers, and operations researchers – standardize
work methods and procedures.

The Professional Bureaucracy: Universities, general hospitals, school systems, general

accounting firms, and social work agencies are still another type of organization, the
professional bureaucracy. The professional bureaucracy hires professionals who are
specialists in their fields and gives them control over their work. Professionals work
independently of the colleagues; they work closely with the clients they serve. Professionals
have several tasks: diagnosing a client's need, presenting one or more alternatives, and
proceeding with a particular course of action.

The professional bureaucracy is a democratic form of organization, which means that

information flows are widespread and diverse. Much of the feedback comes from the external
environment. If the faculty of a business program doesn't receive feedback from potential
employers, they may not change programs to prepare graduates with the skills and knowledge
they need to succeed in entry-level positions.

The Divisionalized Form: the divisionalized organization consists of a group of quasi-

autonomous entities coupled together by a central administrative structure. There are

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divisionalized corporations and universities with multiple campuses. A corporation, for
example, may have 15 different divisions – each with its own purchasing manufacturing, and
marketing functions.

The divisionalized structure usually emerges in response to distinct markets. The

divisionalized form works well when different products and services are offered to different
markets. For example, a multidivisional corporation may have divisions selling copiers,
computers, and printing presses to three different markets. Today, the corporate offices of
divisionalized firms provide support services such as financial, legal, personnel services,
market research, and research and development.

The key to managing a divisionalized enterprise is a management information system that

alerts senior management to deviations in business performance. In this way, the strategic
apex can correct fundamental problems of the business, shift resources, and focus on products
and markets where business performance is strong. The tendency of the management
information system that monitors division performance is to focus on such indicators as profit,
sales growth, and return on investment.

The Adhocracy: what do a management consulting firm and an innovative theater project
company have in common? They are both examples of an adhocracy, the fifth type of
organizational structure. The adhocracy combines groups of specialists into small market
based project teams. Each team is a task force designed to conduct a specific project. A high
technology firm, for example, establishes interdisciplinary project teams consisting of highly
trained experts. The adhocracy thrives in a rapidly changing environment with strong
competition.

The function of management in an adhocracy is different from the other forms of

organization. Top managers scan the external environment looking for new projects and sell
their services to potential clients. Managers at various levels of the organization work to
coordinate project-related activities. They serve as peers, not as supervisions. Their influence
is derived from their expertise and interpersonal skills, not their position power.

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 Transition of the Information-Based Organization
The transition to the information-based organization is the transition from a traditional
bureaucratic organization to a networked organization, or adhocracy. The role of information
is different in these two types of organizations. in the traditional organization, information is
"owned" by each functional area. Summary information is transmitted up through the
hierarchy to senior management. In the adhocracy, information is shared. Teams with
representatives from many different functional areas share access to common information
resources, such as customer databases, accounting databases, and product development
databases.

Check Your Progress Exercises

1. Define the following terminologies:
A. system c. open systems
B. subsystem d. closed systems
2. Identify the steps involved in systems approach to problem solving.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
___
3. Discuss the five different types of organizational structures according to Mintzberg
approach.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
___
4. For the following systems identify their boundaries (the activities involved with it).
A. a house
B. a football team
C. a text book
D. a soccer game

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2.7 SUMMARY

This unit has introduced systems concepts that provide a foundation for understanding
information systems in general and management information systems in particular. Managers
have to understand systems, their objectives, their components, and their activities.
Information about how a system is working provides them with the feedback they need to
allocate resources to achieve their business objectives. Depending on the objectives of a
system, its components, standards, and interactions may differ.

We have seen that an information system provides feedback about the activities of the
business. Information systems have the same characteristics as other systems, including inputs
and outputs, processes that transform inputs into outputs, and methods of system control. In
designing an information system, the output must be defined, the interactions must be
established, and the standards of system control must be organized.

A management information system in particular must be designed to provide information for

effective planning and control of business activities. Decision making requires converting
data into information. Information is data that have meaning in the decision-making process.
An information system must be designed to provide feedback for the business system. This
feedback can be used to reorganize, simplify, and improve activities in the business system so
that goals are more effectively achieved. In the information-based organization, it is critical
for managers to define their information needs and to use information as feedback.

2.8 Answer to Check Your Progress Exercise

1. A system is an integrated set of components, or entities, that interact to achieve a particular

function or goal. Systems have characteristics such as boundaries, outputs and inputs…
- Systems are composed of interrelated and interdependent subsystems.
- Open systems operate in an external environment and exchange information and
material with that environment. The external environment consists of the activities
external to the system boundary with which the system can interact.
(For more on this refer back to part 2.2 and 2.3)

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2. - Define the problem.
- Gather data describing the problem.
- Identify alternative solutions.
- Evaluate these alternatives
- Select and implement the best alternative
- Follow up to determine if the solution is working
3. The five types of organizational structure include the simple structure, the machine
bureaucracy, the professional bureaucracy, the divisionalized form and the adhocracy.
4. Refer back to part 2.3 and 2.4

Unit 3: Computer Hardware

Contents

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 3.0 Aims and Objectives
3.1 Introduction
3.2 The Hardware of a Computer System
3.2.1 Primary Storage
3.2.2 Central Processing Unit
3.2.3 Input Devices
3.2.4 Output Devices
3.2.5 Secondary Storage
3.2.6 Others
3.3 Summary
3.4 Answer to Check Your Progress Exercise

3.0 Aims and Objectives

After studying this unit, you will be able to explain

- what a hardware is
- the various components of a computer systems
- the various input devices
- the various output devices
- the various storage devices

3.1 Introduction

A contemporary computer system consists of a central processing unit, primary storage,

secondary storage, input devices, output devices, and communication devices.

The central processing unit manipulates raw data into a more useful form and controls the
other parts of the computer system.

Primary storage temporarily stores data and program instructions during processing, while
secondary storage devices (magnetic and optical disks, magnetic tape) store data and
programs when they are not being used in processing.

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Input devices, such as keyboards or the computer "mouse", convert data and instructions into
electronic form for input into the computer.

Output devices, such as printer, video display terminals, convert electronic data produced by
the computer system and display it in a form that people can understand.

Communication devices provide connections between the computer and communication

networks.

Buses are path for transmitting data and signals between the various parts of the computer
system.

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 3.2 THE HARDWARE OF A COMPUTER SYSTEM

The hardware of a computer system consists of primary storage, central processing unit. Input
devices, secondary storage devices, output devices and communication devices. The
following figure represents the computer hardware.
Figure 3.1: Computer Hardware

Central processing unit

- Arithmetic & logical unit
- Control unit

Input Devices
Secondary storage
- Keyboard
- Magnetic disk
- Computer mouse
- Optical disk
- Touch screen
- Magnetic tape
- Source data automation
Buses

Output Devices
- Printers
- Video display terminals Communication Devices
- Plotters
- Audio output

Primary Storage

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3.2.1 Primary Storage
Primary storage has three functions. It stores all or part of the program that is being executed.
Primary storage also stores the operation systems programs that manage the operation of the
computer. Finally, the primary storage area holds data that are being used by the program.
Data and program are placed in primary storage before processing, between processing steps,
and after processing has ended, prior to being returned to secondary storage or released as
output.

Internal primary storage is often called RAM, or Random Access Memory. It is called RAM
because it can directly access any randomly chosen location in the same amount of time.

The advantage of electronic information storage is the ability to store information in a precise
known location in money and to retrieve it from that same location.

Most of the information used by a computer application is stored on a secondary storage

devices such as disks, and tapes, located outside the primary storage area. In order for the
computer to do work on information, information must be transferred into primary memory
for processing. Therefore, data are continually being read into and written out of the primary
storage area during the execution of a program.

Primary storage is actually composed of semi conductors. A semi conductor is an integrated

circuit made by printing thousands and even millions of tiny transactions on a small silicon
chip. There are several different kinds of semi conductor memory used in primary storage,
RAM, or random access memory, is used for short term storage of data or program
instructions. RAM is volatile: its contents will be lost when the computer's electric supply is
disrupted by a power outage or when the computer is turned off.

ROM, or Read Only Memory, can be only be read from. It cannot be written to. ROM chips
come from the manufacturer with programs already "burned in" or stored. ROM is used in
general-purpose computers to store important or frequently used programs (such as computing
routines for calculating the square root of numbers).

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Other uses for ROM chips are the storage of manufacturer specific micro codes such as the
Basic Input Output System (BIOS) chip used on IBM personal computer, which controls the
handling of data within the machine.

There are two other subclasses of ROM chips: PROM, or programmable read only memory,
and EPROM, or Erasable Programmable Read Only Memory.

PROM chips are used by manufacturers as control devices in their products. They can be
programmed once. PROM chips, therefore can be made universally for many manufacturers
in large production runs.

EPROM chips are used for device control, such as in robots, where the program may have to
be changed on a routine basis with EPROM chips, the program can be erased and
reprogrammed.

3.2.2 Central Processing Unit (CPU)

The central processing unit (CPU) is the part of the computer system where the manipulation
of symbols, numbers, and letter occurs, and it controls the other parts of the computer system.

The CPU consists of central unit and an arithmetic logical unit. Located near the CPU is
primary storage (sometimes called primary memory or main memory) where data and
program instructions are stored temporarily during processing. Three kinds of buses link the
CPU, primary storage, and the other devices in the computer system. The data bus moves data
to and from primary storage. The control bus transmits signals specifying whether to "read" or
"write" data to or from a given primary storage address, input device, or output device. The
characteristics of the CPU and primary storage are very important in determining the speed
and capability of a computer.

1. Arithmetic and Logical Unit

The arithmetic logical unit (ALU) performs the principal logical and arithmetic operations of
the computer. It adds, subtracts, multiplies, and divides, determining whether a number is
positive, negative, or zero. In addition to performing arithmetic function, and ALU must be
able to determine when are quantity is greater than or less than another and when two

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quantities are equal. The ALU can perform logical operations on the binary codes for letters
as well as numbers.

2. Control Unit
The control unit coordinates and control the other parts of the computer system. It reads a
stored program, one instruction at a time, and directs other components of the computer
system to perform the tasks required by the program. The services of operations required to
process a single machine instruction is called the machine cycle. The machine cycle has two
parts: an instruction cycle and an execution cycle.

During the instruction cycle, the control unit retrieves are program instruction from primary
storage and decodes it. It places the part of the instruction telling the ALU what to do next in
a special instruction register and places the part specifying the address of the data to be used
in the operation into an address register.

During the execution cycle, the control unit locates the required data in primary storage,
places it in a storage register, instructs the ALU to perform the desired operation, temporary
stores the result of the operation in the accumulator, and finally places the result into primary
memory. As the execution of each instruction is completed, the control unit advances to and
reads the next instruction of the program.

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 Figure 3.2 : The various steps in the machine cycle ( I – Cycle and E – Cycle)

2. Decode 3. Place into

Instructions Instruction Register

Decoder

1. Fetch Instructions 4. Place into

Address Register
Instruction register

Address register
5. Send data from main
8. Send results to
memory to storage
accumulator
Storage register register

Accumulator

7. ALU performs desired CPU 6. Command ALU to

operation perform desired operation

3.2.3 INPUT DEVICES

The traditional method of data entry has been by keyboarding. Today most data are entered
directly into the computer using a data entry terminal and they are produced online.

For instance, online-airline reservation and customer information systems have reservations
clerks or salespeople enter transaction directly while dealing with the customer, and their
systems are updated immediately. In this manner, a business can eliminate a separate data
entry staff and the associated costs.

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1. Keyboard
Keyboard is the most common input device. Depending on the number of function keys,
keyboard can be categorized as a standard or enhanced. Standard keyboards have 10 function
keys while the enhanced keyboards have 12 function keys.

2.The computer mouse

The "point and click" actions of the computer mouse have made it an increasingly popular
alternative to keyboard and text-based commands. A mouse is a hand held device that is
usually connected to computer by a cable. The computer user moves the mouse around on a
desktop to control the position of the curser on a video display screen. Once the cursor is in
the desired position, the user can push a button on the mouse to select a command. The mouse
can also be used to "draw" images on the screen.

3.Touch Screens
Touch screens are easy to use and are appealing to people who cannot use traditional
keyboards. Users can enter limited amounts of data by touching the surface of a sensitized
video display monitor with a finger or a pointer. With colorful graphics, sound, and simple
menus, touch screen allow the user to make selections by touching specified parts of the
screen.

4. Source data automation

Source data automation captures data in computer readable form at the time and place they are
created. Point of sale systems, optical bar code scanners used in supermarkets, and other
optical character recognition device are examples of source data automation. One of the
advantages of source data automation is that the many errors that occur when people use
keyboards to enter data are almost eliminated.

The principal source data automation technologies are magnetic ink character recognition,
optical character recognition, pen based input, digital scanner, voice input, and sensors.

 Magnetic link character recognition (MICR)

This technology is used primarily in cheque processing for the banking industry. The bottom
portion of a typical cheque contains characters that are pre printed using a special ink.

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A MICR reader translates the characters on cheques that have been cashed and sent to the
bank for processing into digital form for the computer. The amount of the cheque, which is
written in ordinary ink, must be keyed in by hand.

 Optical character recognition (OCR)

This device translates specially designed marks, characters, and codes into digital form. The
most widely used optical code is the bar code, which is used as a point of sale systems in
supermarkets and retail stores.

 Pen based inputs

Handwriting recognition devices such as pen-based "tablets" and "notebooks" are promising
new input technologies, especially for people working in the sales or service areas or for those
who have traditionally shunned computer key boards. These pen based input devices usually
consist of a flat screen display tablet and a pen like stylus.

With pen-based input, users print directly on to the tablet sized screen. The screen is fitted
with a transparent grid of five wires that detects the presence of the special stylus, which
emits a faint signal from its tip. The screen can also interpret tapping and flicking gestures
made with the stylus.

Pen based input devices transform the letters and numbers written by users on the tablet into
digital form, where they can be stored, or processed and analyzed.

 Digital scanners
Digital scanners translate images such as pictures or documents into digital form, and are an
essential component of image processing system.

 Voice input devices

Voice input devices converts’ spoken word into digital form. Voice recognition software
compares the electrical patterns produced by the speaker's voice to a set of pre recorded
patterns. If the patterns match, the input is accepted. Most voice system still has limited
"vocabularies" of several hundred to several thousand words and can accept only very simple
commands.

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  Sensors
Sensors are devices that collect data directly from the environment for input into a computer
system. The sensors continuously measure emission and are linked to micro computers which
send the data collected by the sensors to the central computer for analysis.

3.2.4 OUTPUT DEVICES

The major data output devices are cathode ray tube (CRT) terminals (sometimes called video
display terminals, or VDTs, and printers.

1. CRT
The CRT is probably the most popular form of information output in modern computer
system. It works much like a television picture tube, with an electronic "gun" shouting a beam
of electrons to illuminate the pixels on the screen. The more pixels for screen, the higher the
resolution. CRT monitor can be classified as monochrome or color and by their display
capabilities. Some display only text, whereas others display both text and graphics. Typical
CRT display 80 column and 24 lines of text data. Display devices for graphics often utilize
bit mapping. Bit mapping allows each pixel on the screen to be addressed and manipulated
by the computer. This requires more computer memory but permits finer detail and the ability
to produce any kind of image on the display screen.

2 Printers
Printers produce a printed hard copy of information output. They include impact printers (a
standard typewriter or a dot matrix) and non-impact printers (laser, inkjet, and thermal
transfer printers). Most printers print one character at a time, but some commercial printers
print an entire line or page at a time. Impact printers are slower than non-impact printers.
Laser printers for micro computers can print 4 to 8 pages per minute. Laser printers in large
computers center can print over 100 pages per minute.

3. Other devices
Microfilm and micro fiche have been used to compactly store output as microscopic filmed
images, and they are mainly used by insurance companies or other firms that need to output
and store large number of documents.

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4. Plotters
Plotters are output device using multicolored pens to draw high quality graphic documents.
Plotters are much slower than printers, but are useful for outputting large size charts, maps or
drawings.

5.Voice output device

A voice output device converts digital output data back into intelligible speech, sounds are
prerecorded, coded, and stored on disk, to be translated back as spoken words. For instance,
when you call for information on the telephone, you may hear a computer "voice" respond
with the telephone number you requested.

3.2.5 SECONDARY STORAGE

In addition to primary storage, where information and programs are stored for immediate
processing, modern computer systems need to store information outside of the computer in a
non-volatile state and to store volumes of data too large to fit into a computer of any size
today. The relative long-term storage of data outside the CPU and primary storage is called
secondary storage.

1. Magnetic tape
Magnetic tape is an older device that is still important for secondary storage of large volume
of information. It is used primarily in manufacture batch application and for archiving data.
Generally magnetic tape for large system comes in 14-inch reels that are up to 2400 feet long
and 0.5 inches wide. It is the very similar to home cassette recording tape, but of higher
quality.

The principal advantage of magnetic tape are that it is inexpensive, that it is relatively stable,
and that it can store very large volumes of information. It is a reliable technology because of
several self-checking features, and therefore is an ideal form of backup storage for other more
volatile forms of memory. Moreover, magnetic tape can be used over and over again,
although it does not age with time and computer users must handle it carefully.

The principal disadvantages of magnetic tape are that it stores data sequentially and is
relatively slow compared to the speed of other secondary storage media. In order to find an
individual record stored on a magnetic tape, the tape must be read from the beginning up to

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the location of the desired record. This means that the CPU must read each name from A-Z.
Hence, magnetic tape is not good medium when it is necessary to find information rapidly.
Tape can also be damaged and is labor intensive to mount and dismount.

2. Magnetic Disk
The most widely used secondary storage medium today is magnetic disk. There are two types
of magnetic disks: floppy disks and hard disks. Hard disks are thin steel plates with an iron
oxide coating. In large systems, multiple hard disks are mounted together on a vertical shaft.
Here the read write head (disk and drive) are sealed together. That is why these devices
sometimes are called hard drives. A hard disk is found in the system unit. It is not removable.

Information is recorded on a read from the disk by read/write heads, which literally fly over
the spinning disks.

The read/write heads move horizontally (from left to right) to any of 200 positions called
cylinders. At any one of these cylinders, the read/write heads can read or write information to
any of 20 different concentric circles at the disk surface areas (called tracks). The cylinder
represents the circular tracks on the same vertical line within the disk pack. Read/write heads
are directed to a specific record using an address consisting of the cylinder number, the
recording surface number, and the data record number.

The speed of access to data on a disk is a function of the rotational speed of the disk and the
speed of the access arms. The read/write heads must position themselves, and the disk pack
must rotate until the proper information is located. More advanced and expensive disks have
access speeds of 1.5 – 10 milliseconds.

The read write head of the hard drive will be suspended above disk with a very small amount
(0.00001 inch) of distance between the disk and the head. During power failure, or if you
bumping the system unit or even drop something on it, then the head can touch the disk and
that will be a problem called head crash. Head crash may cause a damage of some data, byte
or totally hard disk.

The advantage of having a hard disk is they have high storage capacity, and are faster. The
storage capacity can exceed up to 50 GB. That means:

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 1 byte = 1 character
1 kilobyte = 1024 characters
1megabyte = 1048576 characters
1 gigabyte = 107341824 characters

3. Floppy disks
Floppy disks are a removable magnetic disks primarily used with microcomputers. The two
most common standard sizes are 3.5 inch and 5.25 inch disks that are made up of polyester
film with magnetic coating.

These disks have a storage capacity ranging from 360 k to 2.8 megabytes and a much slower
access rate than hard disks. Floppy disks and cartridge and packs of multiple disks use a
sector method for storing data. The disk surface is divided into pie-shaped pieces, the actual
number of depending on the system used (some disks used 8 sectors others nine). In most
types of floppy disks, each sector has the same storage capacity (data are recorded more
densely on the inner disk tracks). Each sector is assigned a unique number. Data can be
located using an address consisting of the sector number and an individual data record
number.

Magnetic disks on both large and small computers have several important advantages over
magnetic tape. First, they permit direct access to individual records. Each record can be given
a precise physical address in terms of cylinders and tracks, and the read/write head can be
directed to go to that address and access the information is about 10 to 60 milliseconds. This
means that the computer system does not have to search the entire file, as in a tape file in
order to find a record. This creates the possibility for online information system providing an
immediate response, such as an airline reservation or customer information system. Disk
storage is often referred to as a direct access storage device (DASD).

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Floppy Disks (diskettes) are mobile storage devices (their special feature comparing with hard
disks) and you need to have a floppy drive to use them. A floppy drive is the one that reads
and writes data on the floppy disk. They are inexpensive but their storage capacity is only
about 1.44MB. The following figures illustrate the structure and components of the floppy
disks.

The Structure of Floppy Disks:

Front view: Shatter Back View

Data access area Write-

protect
notch
Label
Hub

Inside the floppy disk

Magnetic coating
media: where the
actual data is
stored.

1. Shatter: is used to protect the data access area from the external environment. If there is
any disturbance, then there will be data loss.
2. The Data Access Area: when the drive reads and writes data, then the data access area is
the area where the read-write head scans the actual data medium, which is the magnetic
film.

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3. Hub: when inserting the disk to the disk drive, the hub will be fit to the drive spindle and
the disk can be spin.
4. Label: part of the disk, just used to write labels for the disk to distinguish it from other
diskettes.
5. Write-Protect Notch: is a hole used to make the floppy disk read only. If it is open, data
cannot be recorded and the diskette is said to be write-protected. It is possible to open or
close the notch by sliding a cover, which is found with the hole.
6. Magnetic Film: this is where data can be read or recorded. Usually iron oxide coated this
part.

A formatted floppy is different from unformatted diskettes with one major thing: the presence
or absence of tracks and sectors on the magnetic film.

A formatted (as a result ready to use) disk has its magnets film divided into thin concentric
circles, called tracks and the tracks themselves are divided into sectors. The drive can not read
and write unless the disk has tracks and sectors. track

In a floppy disk,

1 track = 18 sectors
sector
1 sector = 512 bytes

Since floppy disks have two sides, in one side,

You have 80 tracks and as a result,

1 side = 80 tracks

2 sides = 160 tracks

2 sides = 160  18 = 2880 sectors = 2880512

= 1474560 bytes

4. Optical Disks

Optical disks, also called compact disks or laser optical disks, stores data at densities many
times greater than those of magnetic disks and are available for both micro computers and

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large computers. Data are recorded on optical disks when a laser device burns microscopic
pits in the reflective layer of a spiral track. Binary information is encoded by the length of
these pits and the space between them.

Optical disks can thus store massive quantities of data, including not only text but also
pictures, sound, and full motion video, in a highly compact form. The optical disk is read by
having a low power laser beam from an optical head scan the disk.

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  Compact disk read only memory (CD-ROM)
The most common optical disk system used with micro computers is called CR-ROM. A4.75
inch compact disk can store up to 660 megabytes, nearly 300 times more than a high density
floppy disks. Optical disks are most appropriate for applications where enormous quantities of
unchanging data must be stored compactly for easy retrieval, or for storing graphic linkages
and sounds.

CD-ROM is also less vulnerable than floppy disks to magnetism, dirt or rough handling. CD-
ROM is read only storage. No new data can be written to it. It can only be read. CD-ROM has
been most widely used for reference materials with massive amounts of data, such as
encyclopedias, directories, or online database and for storing multimedia applications that
combine text, sound and images.

 Write once/read many (WORM) (CD-R)

WORM are optical disk systems that allow users to record data only once on an optical disk.
Once written, the data cannot be erased but can be read indefinitely. WORM has been used as
an alternative to micro film for archiving digitized document images. The disadvantages of
CD-ROM and WORM optical disks are then contents cannot be easily erased and written and,
as can be done with magnetic disks, and the access speed is lower than that of magnetic disks.

 Magneto optical disks (CD-RW)

Re-writable magneto optical disks are starting to become cost effective for data storage. The
disk surface is coated with a magnetic material that can change magnetic polarity only when
heated. To record data, a high-powered laser beam heats tiny spots in the magnetic medium
that allows it to accept magnetic patterns.

Data can be read by showing a lower powered laser beam at the magnetic layer and reading
the reflected light. The magneto optical disk is erasable and can be written on nearly a million
times. the access speed of optical disks, while slower than that of a magnetic disks, is
continuing to improve, making the optical disk a very attractive storage technology incoming
years.

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3.2.6 Other Devices

In addition to the main hardware components, we have a number of parts of a computer that
are not mentioned. To state some of them:

a) Motherboard
It is the main board containing the CPU, RAM, ROM and additionally different expansion
slots.

Expansion Slots and Expansion Cards

Most PCs are expandable. Users are able to expand the power and speed of the computer.
How? This is just by adding expansion cards (boards) into your hardware. There are
different kinds of expansion cards and they will be plugged into the expansion slots found
on the motherboard. Examples of expansion cards can be sound card, display adapters,
modem, network cards.

b) Power Supply
Electrical power is needed almost for every components of the PC. And the components will
get their need from the power supply which is found inside the system unit. The power supply
has got usually two sockets at the back of the system unit where you can plug power cable for
the system unit from outside main power source and the other a power cable from the
monitor. Moreover the power supply contains fun to make things cool inside the system unit.

Devices used to Prevent Power Problems

 UPS (Uninterruptible Power Supply): will provide power to the computer for some
period of time (from 5 to 30 minutes) when there is power failure. This is possible
because the UPS has batteries that will be charged and hold electric power. That will
give you time at least to save your data on RAM and shut down the PC properly.

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  Surge Protector (Surge Suppressor):
Whenever there is a power fluctuation (especially when surges occur), these devices can
protect the computer by absorbing the high voltage.

 Line Conditioner (Voltage Regulator)

It protects the computer from insufficient power.

c) Bus
A bus is simply an electronic pathway between the CPU and other devices. It can transmit
electronic information (in fact composed of bits) between devices.

d) Port
A port is a socket at the back of the system unit which can be used to plug a cable from
peripheral devices like monitors, keyboards etc.
Back of the
system unit

Summarizing the PC
RAM

R
O CPU
M

Expansion slots

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Check Your Progress Exercise
1. What are the components of a contemporary computer system?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
2. Discuss the major components of the CPU.
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
3. Explain the difference between primary and secondary storage?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
4. List and describe the major input device?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
5. List and describe the major output devices?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

3.3 Summary

The modern computer system has six major components: a central processing unit (CPU),
primary storage, input devices, output devices, and secondary storage and communication
devices.

The CPU has two components: an arithmetic logic unit and control unit. The arithmetic and
logic unit performs arithmetic and logical operations on data, while the control units controls
and coordinates the other components of a computer.

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The CPU is closely tied to primary memory, or primary storage, which stores data and
program instructions temporarily before and after processing.

The principal input devices are keyboards, computer mouse, touch screens, magnetic ink and
optical character recognition, pen based instruments, digital scanners, sensors and voice input.

The principal output devices are video displays, terminals, printers, plotters, voice output
devices, and microfilm and microfiche.

The principal form of secondary storage is magnetic tape, magnetic disks, and optical disks.

3.4 ANSWER TO CHECK YOUR PROGRESS EXERCISE

1. Refer Section 3.2

2. Refer Section 3.2.2
3. Refer Section 3.2.1 & 3.2.5
4. Refer Section 3.2.3
5. Refer Section 3.2.4

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 Unit 4: Software

Contents
4.0 Aims and Objectives
4.1 Introduction
4.2 Types of System Software
4.2.1 Function of Operating System
4.2.2 Micro Computer Operating Systems
4.2.3 Operating System Capabilities
4.2.4 Language Translation and Utility Program
4.3 Application Software
4.3.1 Generation of Programming Languages
4.3.2 Popular Programming Languages
4.3.3 Fourth Generation Languages
4.3.4 New Software Tools and Approaches
4.4 Summary
4.5 Answer to Check Your Progress Exercise

4.0 Aims and Objectives

After studying this unit, you will be able to explain

- what software is
- the major types of software
- the major functions of operating systems
- the major types of application software

4.1 Introduction

Software is a detailed instruction that control the operations of a computer system. Without
software, computer hardware could not perform the task we associate with computers. The
functions of software are to:

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 1) manage the computer resources of the organization
2) provide tools for human beings to take advantage of these resources; and
3) act as an intermediary between organization and stored information.

A software program is a series of statements or instructions to the computer. The process of

writing or coding programs is termed programming and individuals who specialize in this task
are called programmers.

The stored program concept means that a program must be stored in the computer’s primary
storage along with the required data in order to execute, or have its instructions performed by
the computer. Once the program has finished executing, the computer hardware can be used
for another task when a new program is loaded into memory.

4.2 TYPES OF SYSTEM SOFTWARE

There are two types of software: systems software and application software.

1. System Software
System software is a set of generalized programs that manage the resources of the computer,
such as the central processor, communications links, and peripheral devices. Programmers
who write system software are called system programmers.

Application software describes the programs that are written for or by users to apply the
computer to a specific task. Software for processing an order or generating a mailing list is
application software. Programmers who write Application software are called application
programmers.

The types of software are interrelated and can be thought of as a set of nested boxes, each of
which must interact closely with the other boxes surrounding it. The system software
surrounds and controls access to the hardware. Application software must work through the
system software in order to operate. End users work primarily with application software. Each
type of software must be specially designed to a specific machine in order to ensure its
compatibility. The following figure illustrates the relationship.

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Figure 4.1 : The major types of software

System software
Application Software
 Operating systems
System Software - schedule computer events
- allocate computer resources
- monitor events
Hardware
 Language translator
- interpreters
- compilers
 Utility programs
Application software - routine operations (sort, list,
- programming language print)
- assembly language - manage data (create files,
- Fortran, CoBol, PL/l, BASIC, PASCAL, C merge files)

System software coordinates the various parts of the computer system and mediates between
application software and computer hardware.

The system software that manages and controls the activities of the compute is called
operating system. Other system software consists of computer language translation programs
that convert programming languages into machine language and utility program that perform
common processing tasks.

4.2.1 FUNCTIONS OF THE OPERATING SYSTEM

Operating system is the system software that manages and controls the activities of the
computer. One way to look at the operating system is as the system's chief manager.
Operating system software decides which computer resources will be used, which programs
will be run, and the order in which activities will take place.

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An operating system performs three functions. It allocates and assigns system resources. It
schedules the use of computer resources and computer jobs; and it monitors computer system
activities.
i) Allocation and assignments: The operating system allocates resources to the application
jobs in the execution queue. It provides locations in primary memory for data and
programs and controls the input and output devices such as printers, terminals, and
telecommunication links.
ii) Scheduling: thousand of pieces of work can be going on in a computer simultaneously.
The operating system decides when to schedule the jobs that have been submitted and
when to coordinate the scheduling in various areas of the computer so that different parts
of different jobs can be worked on at the same time.
iii) Monitoring: the operating system monitors the activities of the computer job and may
also keep track of who is using the system, of what programs have been run, and of any
unauthorized attempts to access the system.

4.2.2 Micro Computer Operating Systems

Like any other software, micro computer software is based on specific operation systems and
computer hardware. A software package written for one microcomputer operating system
generally cannot run on another. The microcomputer operating system they have distinct
features – such as whether they support multitasking or graphics work that determine the
types of applications they are suited for. The widely used microcomputers operating systems
are: DOS, Windows 95, Windows NT, OS/2, Unix, and system 7.

i) DOS: (Disk Operating System): is an operating system for 16 bit microcomputers based
on the IBM personal computer standard. DOS was the most popular operating system for
16 bit microcomputers. It is still widely used today with more powerful microcomputers
based on the IBM microcomputer standard because so much available application
software has been written for systems using DOS. (PC-DOS is used exclusively with IBM
microcomputers. MS-DOS, developed by Microsoft, is used with other 16 bit
microcomputers that function like the IBM microcomputer. DOS itself does not support
multitasking and limits the size of a program in memory to 640k.

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 DOS itself is command driven, but it can present a graphical user interface by using
Microsoft windows, a highly popular graphical user interface shell that runs in
conjunction with the DOS operating systems. Windows support multitasking and same
form of networking but shares the memory limitations of DOS.
ii) Windows 95: Microsoft's Windows 95 is a 32 bit operating system designed to remedy
many of the deficiencies of DOS. A 32 bit operating system can run faster than DOS
because it can address data in 32 bit chunks.

Windows 95 provides a streamlined graphical user interface that arranges icons to provide
instant access to common tasks. It can support software written for DOS and Windows but
it can also run programs that take up more than 640k of memory. Windows 95 features
multitasking, multithreading (the ability to manage multiple independent tasks
simultaneously), and powerful networking capabilities, including the capability to
integrate fax, e-mail, and scheduling programs. The operating system requires a fast 386
or 486 microprocessor, 8 megabytes of RAM, and 24-48 megabytes of hard disk storage.
Advanced Microsoft windows operating systems are widely in use today. To name a few:
Windows 98, Window 2000, and Window XP.
iii) Windows NT: is another operating system developed by Microsoft with features that
make it appropriate for critical applications in large networked organizations. Windows
NT uses the same graphical user interface as Windows but it has powerful multitasking
and memory management capabilities. Windows NT can support existing software written
for DOS and Windows, and it can provide mainframe like computing power for new
applications with massive memory and file requirements. It can address data in 32 bit
chunks if required and can even support multiprocessing with multiple CPUs.
iv) OS/2 (Operating System/2): is a powerful operating system used with 32 bit IBM
personal system/2 micro computer workstations that supports multitasking, networking,
and more memory intensive applications than DOS.

OS/2 is being used for more complex memory intensive applications or those that require
networking, multitasking or large programs. OS/2 supports multitasking, accommodates
larger applications, allows applications to be run simultaneously, supports networked
multimedia and pen computing applications, and is much more protected operating
system.

This operating system requires powerful computer hardware – a minimum 80386 or

80486 microprocessor, 4 megabytes of RAM, and a 60 megabytes hard disk. OS/2

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 provides powerful system – like capabilities, such as multitasking and supporting multiple
users in networks.

v) UNIX: was developed at Bell laboratories in 1969 to help scientific researchers share data
and programs while keeping other information private. It is an interactive, multi user,
multi tasking operating system. Many people can use UNIX simultaneously to perform the
same kind of task, or one user can run many tasks on UNIX highly supportive of
communication and networking.

Unix was initially designed for minicomputers but now has versions for
microcomputers, workstations, and mainframes. UNIX can run on many different
kinds of computers and can be easily customized. It can also store and manage a large
number of files. At present, UNIX is primarily used for workstations, minicomputers,
and inexpensive multi-user environments in small businesses, but its use in large
business is growing because of its machine – independence.
vi) System 7: is the latest version of Macintosh system software, features multitasking as
well as powerful graphics capabilities, and mouse driven graphical user interface. An
extension of this operating system called Quick Time allows Macintosh users to integrate
video clips, stereo sounds, and animated sequences with conventional text and graphics
software.

4.2.3 Operating System Capabilities

How is it possible for 1000 or more users sitting at remote terminals to use a computer
information system simultaneously? Can a computer execute only one instruction from one
program at a time? How can computers run thousands of programs? The answer is that the
computer has a sense of specialized operating system capabilities. These includes:
multiprogramming; virtual storage, time sharing; and multiprocessing.

i) Multiprogramming: the most important operating system capability for sharing

computer resource is multiprogramming. Multiprogramming permits multiple
programs to share a computer system's resources at any one time through
concurrent use of a CPU. By concurrent use, we mean that only one program is
actually using the CPU at any given moment but that the input/output needs of

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 other programs can be serviced at the same time. Two or more programs are active
at the same time, but they do not use the same computer resources simultaneously.
With multiprogramming, a group of programs takes turns using the processor.

Consider the following figure

Figure4.2: Single Vs Multiprogramming Environment

Program 1
Operating Program 1 Operating Program 2
System System Program 3
Unused memory Program 4
Unused memory

The above figure shows how three programs in a multiprogramming environment can
be stored in primary storage. The first program executes until an input/output event is
read in the program. The operating system then directs a channel (a small processor
limited to input and output functions) to read the input and move the output to an
output device. The CPU moves to the second program until an input/output statement
occurs. At this point, the CPU switches to the execution of the third program, and so
forth, until eventually all three programs have been executed.
ii) Multitasking: refers to multiprogramming on single user operating systems such
as those in microcomputers. One person can run two or more programs
concurrently on a single computer. For example, a sales representative could write
a letter to prospective clients with a word processing program while
simultaneously using a database program to search for all sales contacts in a
particular city or geographic area. Multitasking allows the sales representatives to
display both programs on the computer screen and work with them at the same
time.
iii) Virtual storage: was developed after some problems of multiprogramming
became apparent. Virtual storage handles programs more efficiently because the
computer divides the programs into small fixed or variable length portions, storing
only a small portion of the program in primary memory at one time.

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 First, although two or three large programs can be read into memory, a certain part of

main memory generally remains underutilized because the programs add up to less than

the total amount of primary storage space available.

Second, given the limited size of primary memory, only a small number of
programs can reside in primary storage at any given time. Only a few statements of
a program actually execute at any given moment. Virtual storage takes advantage
of this feature of processing. Virtual storage breaks a program into a number of
fixed length portions called pages or into variable length portions called segments.
Each of these portions is relatively small (a page is approximately 2 to 4
kilobytes). This permits a very large number of programs to reside in primary
memory, in as much as only one page of each program is actually located there.
Consider the following figure:

Figure 4.3: Virtual storage

Program A Program A

Program B Program B

Program C Program C

As you see from the above figure, all other programs pages are stored on a
peripheral disk unit until they are ready for execution. Virtual storage provides a
number of advantages. First, the central processor is utilized more fully. Many
other programs can be in primary storage because only one page of each program

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 actually resides there. Second, programmers no longer have to worry about the
size of the primary storage area.
iv) Time sharing: is an operating system capability that allows many users to share
computer processing resources simultaneously. It differs from multiprogramming
is that the CPU spends a fixed amount of time on one program before moving onto
another. In a time sharing environment, thousands of users are each allocated a
tiny slice of computer time (2 milliseconds).
v) Multiprocessing: is an operating system capability that links together two or more
CPUs to work in parallel in a single computer system. The operating system can
assign multiple CPUs to execute different instructions from the same program or
from different programs simultaneously, dividing the work between the CPUs.
While multiprogramming uses concurrent processing wi t h one CPU,
multiprocessing uses simultaneous processing with multiple CPUs.

4.2.4 Language Translation And Utility Software

When computers execute programs written in languages such as COBOL, FORTRAN, or C,
the computer must convert these "human readable" instructions into a form it can understand.
Computers interpret binary ones and zeros, and the language translator found in system
software makes the conversion. This type of system software is called a compiler or
interpreter. The program in the high-level language before translation into machine language
is called source code. A compiler translates source code into machine code called object code.

Some programming languages like BASIC do not use a compiler but an interpreter, which
translates each source code statement one at a time into machine code and executes it.
Interpreter languages like BASIC provide immediate feedback to the programmer if a mistake
is made, but they are very slow to execute because they are translated one statement at a time.

An assembler is similar to compiler but is used to translate only assembly language into
machine code. System software includes utility programs for routine, repetitive tasks, such as
copying.

The source code, the program in a high level language is translated by the computer is to
object code so that the instructions can be "understood" by the machine. These are grouped

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into modules. Prior to execution, the object code modules are joined together by the linkage
editor to create the load module. It is the load module that is actually executed by the
computer.

Clearing primary storage, computing a square root, or sorting. If you have worked on
computer and have performed such functions as setting up new files, deleting old files, or
formatting diskettes, you have worked with utility programs.

Utility programs are pre written programs that are stored so that they can be shared by all
users of a computer system and can be rapidly used in much different information system
application when requested.

Figure4.3: The language translation process

Source code program

Compiler

Other object code

modules

Object code

Linkage editor

Load module

Graphical User Interfaces

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Whenever users interact with a computer, even a microcomputer, the interaction is controlled
by an operating system. The user interface is the part of an information system that users
interact with. Users communicate with an operating system through the user interface of that
operating system. Early microcomputer operating systems were command driven, but the
graphical user interface, often called a GUI, has become the dominant model for the user
interface or microcomputer operating systems.

Many graphical user interfaces use a system of pull down menus to help users select
commands and pop-up boxes to help users select among various command options.
Windowing features allow users to create, stack, size, and move around various boxes of
information. Graphical user interfaces can promote superior screen and print output
communicated through graphics.

4.3 Application Software

Application software is primarily concerned with accomplishing the tasks of end users. Many
different programming languages can be used to develop application software. Each has
different strengths and drawbacks.

4.3.1 Generations of Programming Language

To communicate with the first generation of computers, programmers had to write programs
in machine language – the Os and Is of binary code. End users who wanted applications had
to work unit’s specialized programmers who could understand, think and work directly in the
machine language of a particular computer. Programming in Os and Is, reducing all
statements such as add, subtract, and divide into a series of Os and Is, made early
programming a slow, labor intensive process.

Machine language was the first generation programming language. The second generation of
programming languages occurred in the early 1950s with the development of assembly
language. Instead using Os and Is, programmers could now substitute language like acronyms
and words such as add, sub (subtract), and load in programming statements. A language
translator called a compiler converted the English like statements into machine language.

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When the third hardware generation was underway, programming languages entered the third
generation as well. From the mid 1950 – 1970, the first high level languages emerged. These
languages permitted mathematicians for the first time to work with computers through the use
of languages such as FORTRAN.

Mathematicians were now able to define variables with statements such as Z = A + B. The
software translated these definitions and mathematical statements into a series of Os and Is.
COBOL permitted the use of English statements such as print and sort to be used by
programmers, who did not have to think in terms of Os and Is.

These higher-level languages require much faster, more efficient compilers to translate high-
level languages into machine codes.

Fourth generation computer languages emerged in the late 1970s, and their development is
still in progress. These languages dramatically reduce programming time and make software
tasks so easy that non-technical computer users can develop applications without the help of
professional programmers. Fourth-generations tools also include pre-written application
software packages that can be used directly by end users. Using the software package Lotus 1-
2-3, for instance, users can create their own financial spreadsheets and manipulates data
without programmer intervention.

4.3.2 Popular Programming Languages

Most managers need not be expert programmers, but they should understand how to evaluate
software applications and to select programming languages that are appropriate for their
organization's objectives. the more popular high level languages are:

i) Assembly language: is a programming language developed in the 1950s that resembles

machine language but substitute mnemonics for numeric codes.

For example: AR 5, 3
This sample assembly language command adds the content of register 3 to register 5
and stores the result in register 5.

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 ii) FORTRAN (Formula Translator): is a programming language developed in 1956 for
scientific and mathematical applications.
For example: READ (5,100) ID, Quant, PRICE
Total = QUANT * PRICE
This sample FORTRAN program code is part of a program to compute sales figures of
a particular program.

iii) COBOL (Common Business Oriented Language): COBOL is a predominant

programming language for business applications because it can process large data files
with alphanumeric characters.

For example, MULTIPLY QUANT-SOLD BY UNIT-PRICE GIVING SALES-

TOTAL
This sample COBOL program code is part of a routine to compute total sales figures for
a particular item.

iv) BASIC (Beginners All-Purpose Symbolic Instruction Code): BASIC is a general

purpose programming language used with microcomputers and for teaching
programming.
v) PL/l (Programming Language): PL/l was developed by IBM in 1964. It is the most
powerful general-purpose programming language because it can handle mathematical
and business applications with ease, is highly efficient in input/output activities and can
handle large volumes of data.
vi) Pascal: is a programming language used on microcomputers and to teach sound
programming practices in computer science courses. The language is weak at file
handling and input/output and is not easy for beginners to use.
vii) C: is a powerful programming language with tight control and efficiency of execution.
It is portable across different microprocessors etc.

4.3.3 Fourth Generation Languages

Fourth generation languages consist of a variety of software tools that enable end users to
develop software applications with minimal or no technical assistance or that enhance the
productivity of professional programmers.

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Fourth generation languages tend to be non-procedural or less procedural than conventional
programming languages.

The followings the major categories of fourth generation languages: query languages,
report generators, graphics languages, application generators, application software
packages, and microcomputer tools.

Details are as follows:

a) Query Languages: are high-level languages for retrieving data stored in a databases or
files. They are usually interactive, online, and capable of supporting requests for
information that are not predefined. Query languages can search a database or file using
simple or complex selection criteria to display information relating to multiple records.
b) Report generation: are facilities for creating customized reports. They extract data from
files or databases and create reports in many formats. Report generators generally
provide more control over the way data are formatted, organized, and displayed than
query languages. The more powerful report generators can manipulate data with
complex calculations and logic before they are output.
c) Graphics languages: graphic language retrieves data from files or database and displays
them in graphic format. Users can ask for data and specify how they are to be charted.
Some graphics software can perform arithmetic or logical operations on data as well.
d) Application generators: contain pre-programmed modules that can generate entire
applications, greatly speeding development. A user can specify what needs to be done,
and the application generator will create the appropriate code for input, validation,
update, processing, and reporting. Most fill function application generators consists of a
comprehensive, integrated set of development tools: a database management system,
data dictionary, query language, screen painter, graphics generator, reports generator,
decision support/modeling tools, security facilities, and a high level programming
language.
e) Application software packages: a software package is a pre-written, pre-coded,
commercially available set of programs that eliminates the need for individuals or
organizations to write their own software programs for certain functions. There are

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 software packages for system software, but the vast majority of package software is
application software.
Application software packages consist of pre-written application software that is marketed commercially. These packages are available
for major business applications on main frames, minicomputers, and microcomputers. They contain customization features so that they
can be tailored somewhat to an organization unique requirement.

f) Microcomputer tools: some of the most popular and productivity promoting fourth
generation tools are the general purpose application packages that have been developed
for microcomputers, especially word processing spreadsheet, data management,
graphics, and integrated software packages.
 Word processing software: stores text data electronically as a computer file
rather than on paper. The word processing software allows the user to make
changes in the document electronically in memory.

This eliminates the need or retypes an entire page in order to incorporate

corrections. The software has formatting options to make changes in line
spacing, margins, character size, and column width. Microsoft word and Word
perfect are popular word processing packages.
 Spreadsheets: electronic spread sheet software provides computerized version
of traditional financial modeling tools such as the accountant's columnar pad,
pencil, and calculator. An electronic spread sheet is evident when one changes a
value or values, because all other related values on the spreadsheet will be
automatically recomputed.

Many spreadsheet packages include graphics functions that can present data in
the form of line graphics, bar graphs, or pie charts. The most popular
spreadsheet packages are Lotus 1-2-3, Quattro, and Microsoft Excel.
 Data management software: while spreadsheet programs are powerful tools for
manipulating quantitative data, data management system is more suitable for
creating and manipulating lists and combining information from different files.
Microcomputer database management packages have programming features and
easy to learn menus that enable non-specialists to build small information
systems.

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 Data management software typically has facilities for creating files and
databases and for storing, modifying, and manipulating data for reports and
queries. Popular database management software for the personal computer
includes Microsoft Access, Paradox, etc.
 Integrated software packages: combine the functions of the most important
microcomputer software packages, such as word, processing, spreadsheets,
graphics, and data management.

4.3.4 New Software Tools and Approaches

A growing backlog of software projects and the need for businesses to fashion systems that
are flexible and quick to build have spawned a new approach to software development with
"object-oriented" programming tools.

i) Object-oriented programming: combines data and the specific procedures that operate
on those data into one "object". The object combines data and program code. Instead of
passing data to procedures, program send a message for an object to perform a procedure
that is already embedded into it (procedures are termed "methods" object oriented
languages). The same message may be sent to many different objects, but each will
implement that message differently.

For example, an object-oriented financial application might have customer objects

sending debit and credit messages to Account objects. The account objects in turn might
maintain cash-on-hand, accounts payable, and accounts receivable objects.

An object's data are hidden from other parts of the program and can only be manipulated
from inside the object. The method for manipulating the object's data can be changed
internally without affecting other parts of the program. Programmers can focus on what
they want an object to do, and the object decides how to do it.

Object oriented programming is based on the concept of class and inheritance. Class is a
feature of object oriented programming so that all objects belonging to a certain class
have all of the features of that class.

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 Inheritance on the other hand is a feature of object oriented programming in which a
specific class of objects receives the features of a more general class.

Program code is not written separately for every object but for classes, or general
categories of similar objects. Objects belonging to a certain class have the features of that
class. Classes of objects in turn can inherit all the structures and behaviors of a more
general class and then add variables and behaviors unique to each object. New classes of
objects are created by choosing an existing class instead of starting from scratch each
time.

ii) Visual programming: Object oriented programming has spawned a new programming
technology known as visual programming. With visual programming, programmers do not
write code. Rather they use a mouse to select and move around programming objects,
copying an object from a library into a specific location in a program, or drawing a line to
connect two or more objects. The window on technology more fully describes drop and
drag, one visual programming method.

CHECK YOUR PROGRESS EXERCISE

1. What is an operating system? Discuss.
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___
2. What are the major capabilities of an operating system?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___
3. Compare the major microcomputer operating system.
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___

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4. Explain the major types of software.
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___
5. What is graphical user interface? Explain.
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___

4.4 Summary

Software is a detailed instruction that control the operation of a computer system. A software
program is a series of statements or instructions to the computer. Basically, there are two
types of software: system software and application software.

System software manages the computer resources and mediates between application software
and computer hardware.

Application software is used by application programmers and some end users to develop
systems and specific business applications. Applications software works through system
software, which controls access to computer hardware.

System software coordinates the various parts of the computer system and mediates between
the application software and computer hardware. The system software that manages and
controls the activities of the computer is called the operating system. Other system software
includes computer language translation program that converts programming languages into
machine language and utility programs that perform common processing task.

The operating system acts as the chief manager of the information system, allocating,
assigning, and scheduling system resources and monitoring the use of the computer.

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Multiprogramming, Multitasking, Virtual storage, Time sharing, and Multiprocessing, enable
systems resources to be used more efficiently so that the computer can attack many problems
at the same time.

Microcomputer operating systems are starting to develop sophisticated capabilities such as

multitasking and support for multiple users on networks. Leading microcomputer operating
systems include Windows 95, 98, 2000, XP, Windows NT, OS/2, Unix, System 7, and DOS.

There have been four generations of software development: (1) machine languages, (2)
assembly language, (3) high level language, and (4) four generation language.

Fourth generation languages include query language, report generators, graphics languages,
application generators, application software packages, and microcomputer tools.

The new concept of object oriented programming combines data and procedure into one
“object”, which can act as an independent software building block. Each object can be used in
many different systems without changing program code.

4.5 Answer to Check Your Progress Exercise

1. Refer Section 4.2.1

2. Refer Section 4.2.3
3. Refer Section 4.2.2
4. Refer Section 4.2 & 4.3
5. Refer Section 4.2.4

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 unit 5: Database Management System

Contents
5.0 Aims and Objectives
5.1 Introduction
5.2 File Organization Terms and Concepts
5.3 Accessing Records from Computer Files
5.4 Problems with The Traditional File Environment
5.5 Database Management System (DBMS)
5.5.1 Components of DBMS
5.5.2 Designing Database
5.5.3 Requirements of Database System
5.6 Summary
5.7 Answer to Check Your Progress Exercise

5.0 Aims and Objectives

After studying this unit, you will be able to explain

- the meaning of database
- what database management system is

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 - the components of database system
- the merits and demerits of DBMS
- the requirements of DBMS

5.1 Introduction

An effective information system provides users with timely, accurate, and relevant
information. This information is stored in computer files. When the files are properly arranged
and maintained, users can easily access and retrieve the information they need.

Well-managed, carefully arranged files make it easy to obtain data for business decisions
whereas poorly managed files lead to chaos in information processing, high costs, poor
performance, and little, if any flexibility. Despite the use of excellent hard ware and software,
many organizations have inefficient information system because of poor file management.

Database technology can cut through many of the problems created by traditional file
organization. A more rigorous definition of a database is a collection of data organized to
serve many applications efficiently by centralizing the data and minimizing redundant data.
Rather than storing data in separate files for each application, data are stored physically to
appear to users as being stored in only one location. A single data base services multiple
applications.

5.2 File Organization Terms And Concept

A computer system organizes data in a hierarchy that starts with bits and bytes and progresses
to fields, records, files, and database. A bit represents the smaller unit of data a computer can
handle.

A group of bits, called a byte, represent a single character, which can be a letter, a number or
another symbol. A grouping of characters into a word, a group of words, or a complete
number (such as a person's name or age), is called a field. A group of related fields, such as
the student's name, the course taken, the date and the grade make up a record. A group of
records of the same time is called a file. A group of related files make up a database.

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A record describes an entity. An entity is a person, place, thing, or event on which we
maintain information. An order is a typical entity in a sales order file, which maintains
information on a firm's sales orders. Each characteristic or quality describing a particular
entity is called an attribute. For example, order number, order date, order amount, item
number, and item quantity would each be an attribute of the entity order.

Every record in a file should contain at least one field that uniquely identifies that record so
that the record can be retrieved, updated or sorted. This identifier field is called a key field.

Figure5.1 : Hierarchy of Data

Student Database

Course file Financial file

Database
Personal history
file
Course File

File Name Course Date

Grade
Abebe W. MIS01 2/11/04 A
Bekele B. MIS 01 2/11/04 B+
Aster G. MIS 01 2/11/04 C

Name Course Date

Record
Grade
Abebe W. MIS01 2/11/04 A

Field Name Course Date

Grade
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 Byte Abebe W (Name Field)

Bit 0
A computer system organizes data in a hierarchy that starts with the bit, which represents
either a 0 or a 1. Bits can be grouped to form a byte to represent one character, number of
symbol. Bytes can be grouped to form a field and related fields can be grouped to form a
record.

Related records can be collected to form a file and related files can be organized into a
database.

Figure 5.2 Entities and Attributes

Entity = Orders

Attributes

Order Number Order Date Item Number Quantity Amount

1400 04/11/04 1540 10 150

The above record describes the entity called order and its attributes. The specific values for
order and its attributes. The specific vales for order number, order date, item number,
quantity, and amount for this particular order are the fields for this record. Order number is
the key field because each order is assigned a unique identification number.

5.3 Accessing Records From Compute Files

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Computer system store files on a secondary storage devices. Records can be arranged in
several ways on storage media, and the arrangement determines the manner in which
individual records can be accessed or retrieved.

One way to organize records is sequentially. In sequential file organization, data records must
be retrieved in the same physical sequence in which they are stored. In contrast, direct or
random file organization allows users to access records in any sequence they desire without
regard to actual physical order on the storage media.

Sequential file organization is the only file organization method that can be used on magnetic
tape. This file organization method is no longer popular, but some organization still use it for
batch processing applications in which they access and process each record sequentially. A
typical application using sequential files is payroll, where all employees in a firm must be
paid one by one and issued a cheque. Direct or random file organization is utilized with
magnetic disk technology (although records can be stored sequentially on disk if desired).
Most computer applications today utilize some method of direct file organization.

Although records may be stored sequentially on direct access storage devices, individual
records can be accessed directly using the Indexed Sequential Access Method (ISAM). This
access method relies on an index of key fields to locate individual records. An index to a file
is similar to the index of a book, as it lists the key field of each record and where that record is
physically located in storage to expedite location of that record. Records are stored on disk in
their key sequence. ISAM is employed in applications that require sequential processing of
large numbers of records but that occasionally require direct access of individual records.

The direct file access method is used with direct file organization. This method employs a key
field to locate the physical address of a record. However, the process is accomplishing using a
mathematical formula called a transform algorithm to translate the key field directly into the
record's physical storage location on disk. The algorithm performs some mathematical
computation on the record key, and the result of that calculation is the records physical
address.

This access method is most appropriate for applications where individuals records must be
located directly and rapidly for immediate processing only. A few records in the file need to

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be retrieved at one time, and the required records are found in no particular sequence, i.e., on
line hotel reservation system.

5.4 Problems With The Traditional File Environment

Most organizations began information processing on a small scale automating one application
at a time. Systems tended to grow independently, and not according to some grand plan.
Typically, each division of a multi-division company developed its own applications. Within
each division, each functional area tended to develop systems in isolation from other
functional areas. Accounting, finance, manufacturing, and marketing all developed their own
systems and data files.

In the company as a whole, this process led to multiple master files created, maintained and
operated by separate divisions or departments. The traditional file environment is a way of
collecting and maintaining data in an organization that leads to each functional area or
division creating and maintaining its own data files and programs.

Under this file environment, there is no central listing of data files, data elements or definition
of data. The organization is collecting the same information on far too many documents. The
resulting problems are data redundancy, program data dependence, inflexibility, poor data
security, and inability to share data among applications.

i) Data redundancy
It is the presence of duplicate data in multiple data files. Data redundancy occurs when
different divisions, functional areas, and groups in an organization independently collect the
same piece of information.

ii) Program data dependence

It is the tight relationship between data stored in files and the specific programs required to
update and maintain those files. Every computer program has to describe the location and
nature of the data with which it works. These data declarations can be longer than the
substantive part of the program. In a traditional file environment, any change in data requires
a change in all of the programs that access the data.

iii) Lack of flexibility

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A traditional file system can deliver routine scheduled reports after extensive programming
efforts, but it cannot deliver ad hoc reports or respond to unanticipated information
requirements in a timely fashion. The information required by ad hoc requests is "somewhat
in the system" but is too expensive to retrieve. Several programmers would have to work for
weeks to put together the required data items in a new file.

iv) Poor security

Because there is little control or management of data, access to and dissemination of
information are virtually out of control. What limits on access exist tend to be the result of
habit and tradition, as well as of the sheer difficulty of finding information.

v) Lack of data sharing and availability

The lack of control over access to data in this confused environment does not make it easy for
people to obtain information. Because pieces of information in different files and different
parts of the organization cannot be related to one another, it is virtually impossible for
information to be shared or accessed in a timely manner. The following figure illustrates the
traditional file processing.

Figure 5.3 Traditional File Processing

Personal File

Select sales
personnel data
Customer Sales file
master file

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Intermediate
file
 Sort into sequence Print report

5.5 DATABASE MANAGEMENT SYSTEM (DBMS)

A database management system (DBMS) is simply the software that permits an organization,
to centralize data, manage them efficiently, and provide access to the stored data by
application programs. consider the following figure, that illustrates the database concept.

Figure5.4 : Contemporary Database Environment

Integrated human
resources database

Employees
 Name
Personal
 Address Application Personal
Programs
 Position department
 Martial status

Payroll Payroll
Pay roll
application
 Hours worked DBMS programs department
 Pay rate 284
 Gross pay
 Benefits
Benefits
application
programs department
Benefits
 Life insurance
 Pension plan
 Healthcare plan
 Retirement benefit

The DBMs acts as an interface between application programs and the physical data files.
When the application program calls for data item such as gross pay, the DBMs finds this item
in the database and presents it to the application program. Using traditional data files, the
programmer would have to define the data and then tell the computer when they are. The
following figure illustrates the elements of a database management system.

Figure5.5: Database Management System

Application
DBMS
programs Physical
Database
Program 1 Data definition
language

Program 2
Data manipulating
language
Program 3

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 Data directory

A database management system has three components:

 A data definition language
 A data manipulation language
 A data directory

 Data definition language: the data definition language is the formal language used by
programmers to structure of the database. The data definition language defines each data
element as it appears in the database before that data element is translated into the forms
required by the application programs.

 Data manipulation language: most DBMs have a specialized language called a data
manipulation language that is used in comjunction with some conventional third or fourth
generation programming languages to manipulate the data in the database. This language
contains commands that permit end users and programming specialists to extracts data
from the database to satisfy information requests and develop applications. The most
prominent data manipulation language today is SQL, or structured Query language.

 Data dictionary: the third element of DBMs is a data dictionary. This is an automated or
manual file that stores definitions of data elements and data characteristics such as usage,
physical representation, ownership (who in the organization is responsible for
maintaining the data), authorization, and security. Many data dictionaries can produce
lists and reports of data utilization, groupings, program locations, and so on.

Advantages of Database Management System

The advantages of a DBMS are as follows:
 Complexity of the organization's information system environment can be reduced by
central management of data, access, utilization, and security
 Data redundancy and inconsistency can be reduced by eliminating all of the isolated files
in which the same data elements are repeated

286
  Data confusion can be eliminated by providing central control of data creation and
definitions
 Program data dependence can be reduced by separating the logical view of data from its
physical arrangement
 Program development and maintenance costs can be radically reduced
 Flexibility of information systems can be greatly enhanced/by permitting rapid and
inexpensive ad hoc queries of very large pools of information
 Access and availability of information can be increased

5.5.2 Designing Database

There are alternative ways of organizing data and representing relationship among data in a
database. Conventional DBMS uses one of three principal logical database models for
keeping track of entities, attributes, and relationships. The three principal logical database
models are hierarchical, network, and relational. Each logical models has certain processing
advantages and certain business disadvantages.

i) Hierarchical Data Model

The hierarchical data model presents data to users in a tree like structure. Within each record,
data elements are organized into pieces of records called segments. To the user, each record
looks like an organizations chart with one top level segment called the root. An upper
segment is connected logically to a lower segment in a parent-child, but a child can have only
one parent. Consider the following figure.

Figure 5.6 The Hierarchical Data Base

Employee
1 Child

Compensation Job Assignment Benefits

st

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2 Child

Salary Performance Pension Li f e Health

nd

History Rating Insurance

The above shows the hierarchical structure that might be used for a human resources database.
The root segment is "employee" which contains basic employee information such as name,
address, and identification number. Below it are three child segments: compensation
(containing salary and promotion data), job assignment (containing data about job positions
and departments), and benefits (containing data about beneficiaries and various benefits
options). The compensation segments has two children below it: performance rating
(containing data about employee's job performance evaluations) and salary history (containing
historical data about employee's past salaries). Below the benefits segments are child
segments for pension, life insurance, and health care, containing data about these various
benefits plan.

Behind the logical view of data are a number of physical links and devices to tie the
information together into a logical whole. In a hierarchical DBMS the data are physically
linked to one another by a series of pointers that form chains of related data segments.

Pointers are data elements attached to the ends of record segments on the disk directing the
system to related records.

ii) Network Data Model

The network data model is a variation of the hierarchical data model. Indeed data bases can
be translated from hierarchical to network and vice versa in order to optimse processing
speed and convenience.

Where as, hierarchical structures, despite one to many relationships, network structures depict
data logically as many to many relationships. In other words, parents have multiple "children"
and a child can have more than one parent.

A typical many to many relationships in which network DBMS excels in performance is the
student course relationship (See the following Figure)

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Figure 5.7 Network Data Model

Course 1 Course 2 Course 3

Student 1 Student 2 Student 3 Student 4 Student 5

Network structures reduce redundancy and, in certain situations (where many to many
relationships are involved), respond more quickly. However, there is a price for this reduction
in redundancy and increased speed: the number of pointers in network structures rapidly
increases, making maintenance and operation potentially more complicated.

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 iii) Related Data Model
The relational data model, the most recent of these three database models, overcomes some of
the limitations of the other two models. The relational model represents all data in the
database as simple two dimensional tables called relations. The tables appear similar to flat
files, but the information is more than one file can be easily extracted and combined.
Sometimes the tables are referred to as files. Consider the following figure.

Figure 5.8 Relational Data Model

Table (Relation)

Column (Fields)

Order Order Delivery Part Order

Number Date Date Amount Total
Order
1230 04/11/04 24/11/04 3 240
1231 04/11/04 24/11/04 2 150
1232 04/11/04 24/11/04 4 125

Part Part Unit Unit

Number Description Price Price
Part
1230 Compressor 50 4025
1231 Door latch 24.50 2448
1232 Door handle 35.00 1200

Supplier Supplier Supplier Address

Number Name
Supplier
1200 ABC Co. P.O.BOX 2040 A.A
2040 XYZ Co. P.O.BOX 1200 A.A
4050 BCD Co. P.O.BOX 1050 A.A

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The above figure shows a supplier table, a part table and an order table. In each table the rows
are unique record and the columns are fields. Another term for a row or record in a relation is
a tuple. Often a user needs information from a number of relations to produce a report. Here
is the strength of the relational model: it can relate data in any one file or table to data in
another file or table as long as both tables shares a common data element.

Advantages And Disadvantage of The Models

The principal advantage of the hierarchical and network database models is processing
efficiency. For instance, a hierarchical model is appropriate for airline reservation
transactions processing systems, which must handle millions of structured routine requests
each day for reservation information.

Hierarchical and network structures have several disadvantages. All of the access paths,
directories, and indices must be specified in advance. Once specified, they are not easily
changed without a major programming effort. Therefore, these designs have low flexibility.

Both hierarchical and network systems are programming – intensive, time consuming,
difficult to install, and difficult to remedy if design error occurs. They do not support ad hoc,
English languages – like inquiries for information.

The strengths of relational DBMS are great flexibility in regard to ad hoc queries, power to
combine information from difficult sources, simplicity of design and maintenance, and the
ability to add new data and records without disturbing existing programs and applications.

The weakness of relational DBMS are their relatively low processing efficiency. These
systems are somewhat slower because they typically require many accesses to the data stored
on disk to carry out the select, join, and project commands. Selecting one part number from
among millions, one record at a time, can take a long time. Of course, the database can be
indicated and "turned" to speed up pre-specified queries. Relational systems do not have the
large number of pointers carried by hierarchical systems.

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5.5.3 Requirements of Database System
Much more is required for the development of database systems than simply selecting a
logical database model. Indeed, this selection may be among the last decision. The database
is an organizational discipline, a method, rather than a tool or technology. It requires
organizational and conceptual change.

Without management support and understanding, database efforts fail. The critical elements
in a database environment are (1) data administration, (2) data planning and modeling
methodology, (3) database technology and management, and (4) users. The environment is
depicted in the following figure.

Figure 5.8 : Database Environment

Data Database
Administration technology &
management

DBMS

Data planning
and modeling User
methodology

1) Data Administration
Database systems require that the organization recognize the strategic role of information and
begin actively to manage and plan for information as a corporate resource. This means that
the organization must develop a data administration function with the power to define
information requirements for the entire company and with direct access to senior
management.

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Data administration is responsible for the specific policies and procedures through which data
can be managed as an organizational resource. These responsibilities include developing
information policy, planning for data, overseeing logical database design and data dictionary
development, and monitoring the usage of data by information system specialists and end
users groups.

An organization needs to formulate an information policy that specified its rules for sharing,
disseminating, acquiring, standardizing, classifying, and inventorying information throughout
the organization. Information policy lays out specific procedures and accountabilities,
specifying which organizational units share information. While information can be
distributed, and maintaining the information.

2) Data Planning And Modeling Methodology

Because the organizational interests served by the DBMS are much broader than those in the
traditional file environment, the organization requires enterprise-wide planning for data.
Enterprise analysis, which addresses the information requirements of the entire organization
(as opposed to the requirements of individual applications), is needed to develop databases.
The purpose of enterprise analysis is to identify the key entities, and relationships that
constitute the organization's data.

3) Database Technology And Management

Database require new software and a new staff specially trained in DBMS techniques as well
as new management structures. Most corporations develop a database design and
management group within the corporate information system division that is responsible for
the more technical and operational aspects of managing data. The functions it performs are
called database administration. This group does the following:
 Defines and organizes database structure and content
 Develops security procedures to safeguard the database
 Develop database documentation
 Maintains the database management software: in close cooperation with users, the
design group establishes the physical database, the logical relations among
elements, and the access rules and procedures.

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  Users: a database serves a wider community of users than traditional systems.
Relational systems with fourth-generation query languages permit employees who
are not computer specialist to access large databases. In addition, users include
trained computer specialists. In order to optimize access for non-specialists, more
resources must be devoted to training end users. Professional systems workers must
be retained in the DBMS language, DBMS application development procedures, and
new software practices.

Check Your Progress Exercise

1. Discuss in detail the file access methods?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
2. Define database and database management systems.
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
3. List some of the benefits of DBMS.
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
4. Describe the three principal database models and their merits and demerits.
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
5. What are the four key elements of a database environment? Describe each briefly.
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

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5.6 SUMMARY

In traditional file environment, data records are organized using either a sequential file
organization or a direct or random file organization. Records in sequential file can be
accessed sequentially or they can be accessed directly if the sequential file is on disk and uses
an indexed sequential access method. Records on a file with direct file organization can be
accessed directly without an index.

Database management systems (DBMS) are the software that permits centralization of data
management. A DBMS includes a data definition language, a data manipulation language,
and a data dictionary capability. The most important feature of the DBMS is its ability to
separate the logical and physical view of data.

The DBMS retrieves information so that the user does not have to be concerned with its
physical location. This feature separates programs from data and from the management of
data.

There are three principal logical database models: hierarchical, network, and relational. Each
has unique advantages and disadvantages. Hierarchical systems, which support one to many
relationships are low in flexibility but high in processing speed and efficiency.

Network systems support many to many relationships. Relational systems are relatively slow
but are very flexible for supporting ad hoc requests for information and for combining
information from different sources.

Development of a database environment requires much more than selection of technology. It

requires a change in the corporation's attitude toward information.

The organization must develop a data administration function and a data planning
methodology. The database environment has developed more slowly that was originally
anticipated. There is political resistance in organizations to many key database concepts,
especially to sharing of information that has been controlled exclusively by one
organizational group.

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There are difficult cost/benefit questions database management. Often, to avoid raising
difficult questions, database use begins and ends as a small effort isolated in the information
systems department.

5.7 ANSWER TO CHECK YOUR PROGRESS EXERCISE

1. Refer Section 5.3

2. Refer Section 5.5
3. Refer Section 5.5
4. Refer Section 5.5.2
5. Refer Section 5.5.3

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UNIT 6: Telecommunication

Contents
6.0 Aims and Objectives
6.1 Introduction
6.2 Components and Functions of a Telecommunication
6.3. Types of Telecommunications Network
6.4 Use of Telecommunications for Competitive Advantage
6.5 Summary
6.6 Answer to Check Your Progress Exercise

6.0 Aims And Objectives

After studying this unit, you will be able to explain,
- To describe the basic components of a telecommunication
- To describe the three basic network topologies
- The functions of telecommunication
- The types of communication channel, e.t.c.

6.1 Introduction

Telecommunication can be defined as communication of information by electronic means,

usually over some distance.

We are currently in the middle of a telecommunication revolution that has two components:
rapid changes in the technology of communications and equally important changes in the
ownership, control, and marketing of telecommunications services. Today managers need to
understand the capabilities, costs, and benefits of alternative communications technologies
and how to maximize their benefits for their organizations.

297
Change in the telecommunication industry was accompanied by changes in
telecommunication technology. Previously, telecommunications meant voice transmission
over telephone lines. Today, much telecommunications transmission is digital data
transmission, using computers to transmit data from one location to another. Online
information system and remote access to information would be impossible without
telecommunications.

Deregulation and the marriage of computers and communications has also made it possible
for the telephone companies to expand from traditional voice communications into new
information services, such as providing transmission of news reports, stock reports, television
programs, and movies.

6.2 Components and functions of a telecommunications system

A telecommunications system is a collection of compatible hardware and software arranged to

communicate information from one location to another. Figure 6.1: illustrates the components
of a typical telecommunications system. Telecommunications systems can transmit text,
graphic images, voice, or video information. This section describes the major components of
telecommunications systems. Subsequent sections describe how the components can be
arranged into various types of network.

A) COMPONENTS OF A TELECOMMUNICATIONS SYSTEM

The essential components of a telecommunications system are these:
1. Computers to process information.
2. Terminals or any input/output devices that send or receive data.
3. Communications channels, the links by which data or voice are transmitted between
sending and receiving devices in a network. Communications channels use various
communications media, such as telephone lines, fiber optic cables, coaxial cables, and
wireless transmission.
4. Communications processors, such as modems, multiplexer, controllers, and front-end
processors, which provide support functions for data transmission and reception.
5. Communications software that controls input and output activities and manages other
functions of the communications network.

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 Communication
channels
Minicomputer
Terminals

Host Front-end
computer
processor

Multiplexer

Modems

Remote
Modem
installation

Multiplexer

Figure 6.1: Components of a telecommunication system

b) FUNCTIONS OF A TELECOMMUNICATIONS SYSTEM
In order to send and receive information from one place to another, a telecommunications
system must perform a number of separate functions. These functions are largely invisible to
the people using the system. As outlined in table 6.1: a telecommunications system transmits
information, establishes the interface between the sender and the receiver, routes messages
along the most efficient paths, performs elementary processing of the information to ensure
that the right message gets to the right receiver, performs editorial tasks on the data (such as

299
checking for errors and rearranging the format), and converts messages from one format to
another. Lastly, the telecommunications system controls the flow of information. Many of
these tasks are accomplished by computer.

Protocols
A telecommunications network typically contains diverse hardware and software components
that need to work together to transmit information. Different components in a network can
communicate by adhering to a common set of rules that enable them to "talk" to each other.
This set of rules and procedures governing transmission between two points in a network is
called a protocol. Each device in a network must be able to interpret the other device's
protocol.

The principal functions of protocols in a telecommunications network are to identify each

device in the communication path, to secure the attention of the other device, to verify correct
receipt of the transmitted message, to verify that a message requires retransmission because it
cannot be correctly interpreted, and to perform recovery when errors occur. Although
business, government, and the computer industry recognize the need for common
communications standards, the industry has yet to put a universal standard into effect.

Table 6.1: Functions of Telecommunications

Definition
Function
Transmission Media, networks, and path
Interface Path – sender – receiver
Routing Choosing the most efficient path
Processing Getting the right message to the right receiver
Editorial Checking for errors, formats, and editing
Conversion Changing speeds and codes from one device to another
Control Routing messages, polling receivers providing network structure maintenance

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Types of Signals: Analog and Digital
Information travels through a telecommunications system in the form of electromagnetic
signals. Signals are represented in two ways: there are analog and digital signals. An analog
signal is represented by a continuous waveform that passes through a communications
medium. Analog signals are used to handle voice communications and to reflect variations in
pitch.
A digital signal is a discrete rather than a continuous waveform. It transmits data coded into
two discrete states: 1-bits and 0-bits, which are represented on-off electrical pulses. Most
computers communicate with digital signals, as do many local telephone companies and some
larger networks. But if a telecommunications system, such as traditional telephone network, is
set up to process analog signals – the receivers, transmitters, amplifiers, and so forth – a
digital signal cannot be processed without some alternations. All digital signals must be
translated into analog signals before they can be transmitted in an analog system. The device
that performs this translation is called a modem. (Modem is an abbreviation for
MOdulation/DEModulation.) A modem translates the digital signals of a computer into
analog form for transmission over ordinary telephone lines, or it translates analog signals back
into digital form for reception by a computer (See figure below).

Figure6.2 Functions of a Modem

Digital
Analog Digital
1 1
1 1
Computer M o d em M o d em Computer
0 0 0
0 0 0

C) Types of Communications Channel

Communications channels are the means by which data are transmitted from one device in a
network to another. A channel can utilize different kinds of telecommunications transmission
media: twisted wire, coaxial cable, fiber optics, terrestrial microwave, satellite, and wireless
transmission. Each has certain advantages and limitations. High speed transmission media
are more expensive in general, but they can handle higher volumes (which reduces the cost
per bit). For instance, the cost per bit of data can be lower via satellite link than via leased

301
telephone line if a firm uses that satellite link 100 percent of the time. There is also a wide
range of speeds possible for any given medium depending on the software and hardware
configuration.

1) Twisted Wire
Twisted wire consists of strands of copper wire twisted in pairs and is the oldest transmission
medium. Most of the telephone system in a building relies on twisted wires installed for
analog communication. Most buildings have additional cables installed for future expansion,
and so there are usually a number of twisted-pair cables unused in every office of every
building. These unused cables can be used for digital communications. Although it is low in
cost and is already in place, twisted wire is relatively slow for transmitting data, and high-
speed transmission causes interference called cross talk. On the other hand, new software and
hardware have raised the capacity of existing twisted-wire cables up to 10 megabits per
second, which is often adequate for connecting microcomputers and other office devices.

2) Coaxial Cable
Coaxial cable, like that used for cable television, consists of thickly insulated copper wire,
which can transmit a larger volume of data than twisted wire can. It is often used in place of
twisted wire for important links in a telecommunications network because it is a faster, more
interference-free transmission medium, with speeds of up to 200 megabits per second.
However, coaxial cable is thick, is hare to wire in many buildings, and cannot support analog
phone conversations. It must be moved when computers and other devices are moved.

3) Fiber Optics
Fiber optic cable consists of thousands of strands of clear glass fiber, the thickness of a
human hair, which are bound into cables. Data are transformed into pulses of light, which
are sent through the fiber optic cable by a laser device at a rate of 500 kilobits to several
billion bits per second. On the one hand, fiber optic cable is considerably faster, lighter, and

302
more durable than wire media and is well suited to systems requiring transfers of large
volumes of data. On the other hand, fiber optic is more difficult to work with, more expensive,
and harder to install. It is best used as the backbone of a network and not for connecting
isolated devices to a backbone. In most networks, fiber optic cable is used as the high speed
trunk line, while twisted wire and coaxial cable are used to connect the trunk line to
individual devices.

4) Wireless Transmission
Wireless transmission that sends signals through air or space without any physical tether has
emerged as an important alternative to tethered transmission channels such as twisted wire,
coaxial cable, and fiber optics. Today, common uses of wireless data transmission include
pagers, cellular telephones, microwave transmissions, communication satellites, mobile data
networks, personal communications services, personal digital assistants, and even television
remote controls.

The wireless transmission medium is the electromagnetic spectrum. Some types of wireless
transmission, such as microwave or infrared, by nature occupy specific spectrum frequency
ranges (measured in megahertz). Other types of wireless transmissions are actually functional
uses, such as cellular telephones and paging devices that have been assigned a specific range
of frequencies by national regulatory agencies and international agreements. Each frequency
range has its own strengths and limitations, and these have helped determine the specific
function or data communications niche assigned to it.

5) Microwave systems, both terrestrial and celestial, transmit high frequency radio signals
through the atmosphere and are widely used for high volume, long distance, point to point
communication. Because microwave signals follow a straight line and do not bend with the
curvature of the earth, long distance terrestrial transmission systems require that transmissions
be positioned 25 to 30 miles apart, adding to the expense of microwave.

This problem can be solved by bouncing microwave signals off satellites, enabling them to
serve as relay stations for microwave signals transmitted from terrestrial stations.
Communication satellites are cost effective for transmitting large quantities of data over long

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distances. Satellites are typically used for communications in large, geographically dispersed
organizations that would be difficult to tie together through cabling media or terrestrial
microwave.

Conventional communication satellites move in stationary orbits approximately 22,000 miles

above the earth. A newer satellite medium, the low orbit satellite, is beginning to be deployed.
These satellites travel much closer to the earth and so are able to pick up signals from weak
transmitters. They also consume less power and cost less to launch than conventional
satellites.

Other wireless transmission technologies have recently been developed and are being used in
situations requiring mobile computing power. Paging systems have been in common use for
several decades, originally just beeping when the user receives a message and requiring the
user to telephone an office to learn what the message is. By the mid 1980s, however, paging
devices have been able to receive short alphanumeric messages that the user reads on the
pager's screen. Paging is useful for communicating with mobile workers such as repair crews;
one way paging can also provide an inexpensive way of communicating with workers in
offices.

Cellular telephones (sometimes called mobile telephones) work by using radio waves to
communicate with radio antennas (towers) placed within adjacent geographic areas called
cells. A telephone message is transmitted to the local cell by the cellular telephone and then is
handed off from antenna to antenna – cell to cell – until it reaches the cell of its destination,
where it is transmitted to the receiving telephone. As a cellular signal travels from one cell
into another, a computer that monitors signals from the cells switches the conversation to a
radio channel assigned to the next cell. The radio antenna cells normally cover eight-mile
hexagonal cells, although their radius is smaller in densely populated localities. While the
cellular telephone infrastructure has primarily been used for voice transmission, recent
developments have made it capable of two-way digital data transmission.

Wireless network explicitly designed for two way transmission of data files are called mobile
data networks. These radio based networks transmit data to and from hand held computers.
Another type of mobile data network is based upon a series of radio towers constructed

304
specifically to transmit text and data. Ram Mobile Data (jointly owned by Ram Broadcasting
and Bell South) and Ardis (jointly owned by IBM and Motorola) are two publicly available
networks that use such media for national two-way data transmission.

One new wireless cellular technology that should begin to be available for both voice and data
in 1996 is called personal communication services (PCS). PCS uses lower power, higher
frequency radio waves than does cellular technology. Because of the lower power, PCS cells
are much smaller and so must be more numerous and closer together. The higher frequency
signals enable PCS devices to be used in many places where cellular telephones are not
effective, such as in tunnels and inside office buildings. Moreover, because PCS telephones
need less power, they can be much smaller (shirt pocket size) and less expensive than cellular
telephones.

Personal digital assistants (PDA) are small, pen-based, hand-held computer capable of
entirely digital communications transmission. They have build in wireless
telecommunications capabilities as well as work organization software. A well-known
example is the one pound Apple Newton Message Pad. It can be equipped with a special card
that allows it to function as a pager, and when hooked to a cigarette package sized modem, it
will transmit E-mail, faxes, documents for printing, and data to other computers. The Newton
also includes an electronic scheduler, calendar and notepad software, and is able to accept
handwriting input entered through its special stylus.

D) Characteristics of Communications Channel

The characteristics of the communications channel help determine the efficiency and
capabilities of a telecommunications system. These characteristics include the speed of
transmission, the direction in which signals may travel, and the mode of transmission.

1) Transmission Speed
The total amount of information that can be transmitted through any telecommunications
channel is measured in bits per second (BPS). Sometimes this is referred to as the baud rate. A
baud is a binary event representing a signal change from positive to negative or vice versa.

305
The baud rate is not always the same as the bit rate. At higher speeds, a single signal change
can transmit more than one bit at a time so the bit rate will generally surpass the baud rate.

Since one signal change, or cycle, is required to transmit one or several bits per second, the
transmission capacity of each type of telecommunications medium is a function of its
frequency, the number of cycles per second that can be sent through that medium measured in
hertz. The range of frequencies that can be accommodated on a particular telecommunications
channel is called its bandwidth. The bandwidth is the difference between the highest and
lowest frequencies that can be accommodated on a single channel.
Table 6.2 compares the transmission speed and relative costs of the major types of
transmission media

Table 6.2 : Typical Speeds and Cost of Telecommunications Transmission Media

Medium Speed Cost
Twisted wire 300 BPS – 10 MBPS Low
Microwave 236 KBPS – 100MBPS
Satellite 256 KBPS – 100 MBPS
Coaxial cable 56 KBPS – 200 MBPS
Fiber optic cable 500 KBPS – 10 GBPS High

BPS = bits per second KBPS = Kilobits per second

MBPS = megabits per second GBPS = gigabits per second

2) Transmission Modes
Three are several conventions for transmitting signals; these methods are necessary for
devices to communicate when a character begins or ends. Asynchronous transmission (often
referred to as start-stop transmission) transmits one character at a time over a line, each
character framed by control bits – a start bit, one or two stop bits, and a parity bit.
Asynchronous transmission is used for transmitting large volumes of data at high speed
transmission.

Synchronous transmission transmits groups of characters simultaneous, with the beginning

and ending of a block of characters determined by the timing circuitry of the sending and

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receiving devices. Synchronous transmission is used for transmitting large volumes of data at
high speeds.

3) Transmission Direction
Transmission must also consider the direction of data flow over a telecommunications
network. In simplex transmission, data can travel only in one direction at all times. In half
duplex transmission, data can flow two ways but can travel in only one direction at a time. In
full duplex transmission, data can be sent in both directions simultaneously.

4) Communications Processors
Communications processors, such as front end processors, concentrators, controllers,
multiplexers, and modems, support data transmission and reception in a telecommunications
network.

The front-end processor is a small computer (often a programmable minicomputer)

dedicated to communications management and is attached to the main, or host, computer in a
computer system. The front-end processor performs special processing related to
communications such as error control, formatting, editing, controlling, routing, and speed and
signal conversion. It takes some of the load off the host computer. The front end processor is
largely responsible for collecting and processing input and output data to and from terminals
and grouping characters into complete messages for submission on the CPU of the host
computer.

A concentrator is a programmable telecommunications computer that collects and

temporarily stores messages from terminals until enough messages are ready to be sent
economically. The concentrator then "bursts" signals to the host computer.

A controller, which is often a specialized minicomputer, supervises communications traffic

between the CPU and peripheral devices such as terminals and printers. The controller
manages messages from these devices and communicates them to the CPU. It also routes
output from the CPU to the appropriate peripheral device.

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A multiplexer is a device that enables a single communications channel to carry data
transmissions from multiple sources simultaneously. The multiplexer divides the
communications channel so that it can be shared by multiple transmission devices. The
multiplexer may divide a high-speed channel into multiple channels of slower speed or may
assign each transmission source a very small slice of time for using the high-speed channel.

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6.3 TYPES OF TELECOMMUNICATIONS NETWORKS

A number of different ways exist to organize telecommunications components to form a

network and hence provide multiple ways of classifying networks. Networks can be classified
by their shape or topology. Networks can also be classified by their geographic scope and the
type of services provided. Wide area networks, for example, encompass a relatively wide
geographic area, from several miles to thousands of miles, whereas local networks link local
resources such as computers and terminals in the same department or building of a firm. This
section will describe the various ways of looking at networks.

A) Network Topologies
1) Star Network
The star network (see figure6.3) consists of a central host computer connected to a number of
smaller computers or terminals. This topology is useful for applications where some
processing must be centralized and some can be performed locally. One problem with the star
network is its vulnerability. All communication between points in the network must pass
through the central computer. Because the central computer is the traffic controller for the
other computers and terminals in the network, communication in the network will come to a
standstill if the host computer stops functioning.
.

Hub

Point where the

network is failed

Figure 6.3 Star Net Work Topology

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All computers will be attached to a central controller called a hub forming a star like
structure. The hub (sometimes called the concentrator) is a central device and it is a
connector.

Usually, the hub in its end will be attached to a server and all the computers that are
connected with the hub are clients. So any request from the clients will pass through the hub
and reaches to the server. Generally, the hub will act as a traffic controlling the requests from
the clients this topology is advantageous if you specially consider the network failure and
collision of data. If there is any interruption between one of the clients and the hub, then the
other clients will normally work. Second, since there is a dedicated controller, the hub,
collision is much reduced. The disadvantage of this topology is we need to use more cable and
if the hub fails, then the whole network will fail. So the entire network is dependent on the
hub.

2) The Bus Network

The bus network links (see figure 6.4) links a number of computers by a single circuit made of
twisted wire, coaxial cable, or fiber optic cable. All of the signals are broadcast in both
directions to the entire network, with special software to identify which components receive
each message (there is not central host computer to control the network). If one of the
computers in the network fails, non of the other components in the network is affected. This
topology is commonly used for local are networks (LANs), discussed in the following section.

Point where the

network is failed

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Figure 6.4 The Bus Net Work Topology

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The Ring Network
Like the bus network, the ring network (see figure6.5) does not rely on a central host
computer and will not necessarily break down if one of the component computers
malfunctions. Each computer in the network can communicate directly with any other
computer, and each processes its own applications independently. However, in ring topology,
the connecting wire, cable, or optical fiber forms a closed loop. Data are passed along the
ring from one computer to another and always flow in one direction.

The token ring network is a variant of the ring network. In the token ring network, all of the
devices on the network communicate using a signal or "token." The token is a predefined
packer of data, which includes data indicating the sender, receiver, and whether the packer is
in use. The tokens may contain a message or be empty.

A token moves from device to device in the network, and each device examines the token as it
passes by. If the token contains data and is meant for the device, the device accepts the data
and marks the packet as empty. If a computer wants to send a message, it finds an available
token; supplies sender, receiver, and message data; loads the message onto the token; and
marks it as used. If no message is pending, the token passes unchanged. The token ring
configuration is most useful for transmitting large volumes of data between micros and a
larger computer.

Figure 6.5 The Ring Net Work Topology

All the nodes are connected in a loop forming a circular structure, just like a ring. This is very
similar with bus topology, but except the first and the last nodes is connected to each other.
The advantage of the ring topology is we use here again less amount of cable and collision is
reduced than bus since the data flow only in one direction. The disadvantage of this topology
is whenever there is an interruption at some point; the whole network will go down.

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B) Private Branch Exchanges and Local Area Networks
Networks may be classified by geographic scope into local networks and wide area networks.
Local networks consist of private branch exchanges and local area networks.

1) Private Branch Exchange

A private branch exchange (PBX) is a special purpose computer designed for handling and
switching office telephone calls at a company site. Today's PBXs can carry both voice and
data to create local networks.

While the first PBXs performed limited switching functions, they can now store, transfer,
hold, and redial telephone calls. PBXs can also be used to switch digital information among
computers and office devices. For instance, you can write a letter on a microcomputer in your
office, send it to the printer, then dial up the local copying machine and have multiple copies
of your letter created. All of this activity is possible with digital PBX connecting “smart”
machines in the advanced office. Figure6.6 illustrates a PBX system.

Telephones

Copier Printer
PBX

Fax

Figure 6.6 PBX System

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The advantage of digital PBXs over other local networking options is that they utilize existing
telephone lines and do not require special wiring. A phone jack can be found almost
anywhere in the office building. Equipment can therefore be moved when necessary with little
worry about having to rewire the building. A hard-wired computer terminal or
microcomputer connected to a mainframe with coaxial cable must be rewired at considerable
cost each time it is moved. A microcomputer connected to a network by telephone can simply
be plugged or unplugged anywhere in the building, utilizing the existing telephone lines.
PBXs are also supported by commercial vendors such as the local telephone company, so that
the organization does not need special expertise to manage them.

2) Local Area Networks

A local area network (LAN) encompasses a limited distance, usually one building or several
buildings in close proximity. Most LANs connect devices located within a 2000 foot radios
and have been widely used to link microcomputers. LANs require their own communications
channels.

LANs generally have higher transmission capacities than PBXs, using but or ring topologies
and a high bandwidth. A very fast PBX can have a maximum transmission capacity of over 2
megabits per second. LANs typically transmit at a rate of 256 kilobits per second to over 100
megabits per second. They are recommended for applications requiring high volumes of data
and high transmission speeds. For instance, because a picture consumes so many bits of
information, an organization might require a LAN for video transmissions and graphics.
LANs are totally controlled, maintained, and operated by end users. This produces the
advantage of allowing user control, but it also means that the user must know a great deal
about telecommunications applications and networking.

LANs allow organizations to share expensive hardware and software. For instance, several
microcomputers can share a single printer by being tied together in a LAN. LANs can
promote productivity because users are no longer dependent upon a centralized computer
system (which can fail) or upon the availability of a single peripheral device such as a
printer. Finally, there are many new applications – such as electronic mail, graphics, video
teleconferencing, and on line applications – requiring high capacity networks.

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The file server acts as a librarian, storing various programs and data files of network users.
The server determines who gets access to what and in what sequence. Servers may be
powerful microcomputers with large hard disk capacity, workstations, microcomputers, or
mainframes, although specialized computers with large hard disk capacity, workstations,
minicomputers, or mainframes, however specialized computers are now available for this
purpose. The server typically contains the LAN’s network operating system, which manages
the server and routes and manages communications on the network.

The network gateway connects the LAN to public networks, such as the telephone network, or
to other corporate networks so that the LAN can exchange information with networks external
to it. A gateway is generally a communications processor that can connect dissimilar networks
by translating from one set of protocols to another. (A bridge connects two networks of the
same type. A route is used to route messages through several connected LANs or to a wide
area network).

There are four principal LAN technologies for physically connecting devices Ethernet,
developed by Xerox, Digital Equipment Corporation, and Intel; AppleTalk from Apple
Computer Incorporated; token ring, developed by IBM and Texas Instruments; and ARCnet,
developed by Data point. They employ either a Base band or a broadband channel technology.
Base band products provide a single path for transmitting text, graphics, voice, or video data,
and only one type of data at a time can be transmitted. Broadband products provide several
paths so that different types of data can be transmitted simultaneously.

LAN capabilities are also defined by the network operating system. The network operating
system can reside on every computer in the network, or it can reside on a single designated
file server for all the applications on the network. Some of the leading network operating
systems include Novell’s Netware, Microsoft’s LAN Manager, and IBM’s PC LAN
(AppleTalk for networks of Macintosh computers combines’ technology for physically
connecting devices with network operating system functions).

The primary disadvantages of LANs are that they are more expensive to install than PBXs and
are more inflexible, requiring new wiring each time the LAN is moved. LANs require

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specially trained staff to manage and run them. There are four important criteria for evaluating
LANs:
1. How flexible is the system (can new users be added, and how many)?
2. What is the actual performance (as opposed to advertising claims)?
3. What is the true cost of the network, including software, implementation, rewiring,
training, network management, and opportunity cost of use?
4. How reliable will the system be in the face of various sorts of disturbances?

The computers in these networks are usually near to each other. LAN covers a confined area,
usually an office, a building or groups of near-by buildings. Since the nodes (devices attached
to the network) are near to each other, they are connected using cabling system. As a result,
he following two types of networking is generally referred as models of LANs. These two
models are:

a) Client/Server Model
In this model, some nodes are dedicated to serve the others. The dedicated ones are called
servers and the others are referred as clients. Each server here usually is a powerful
computer with a very high speed containing the data and resources needed by the client.
So, clients will send requests asking server to provide data and resources and the servers
will fulfill their request.

Take each computer connected to a client/server model network: it can be a client or a

server, not both. A client computer cannot communicate with another client computer
directly, rather if there is any data to be sent to another client, then it will send the data to
the server and the server is the one who sends actually the data to the mentioned client
computer. Therefore data flow and communication is only between clients and servers. If
a client/server model network has one server and three clients, then the data flow and
communication can be indicated as shown below:

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 Server

Clients

Figure 6.7 Client/Server Model

b) Peer-to-peer Model
In this case, the situation is different from the client/server model because here every
computer has equal responsibility. There is no any dedicated server or dependent clients.
Each computer can be a client and another time a server. Because computer asks data and
resource from another computer the first computer is acting as a client and the second one
as a server.

In another time the same computer that is asked in the previous case can ask in its turn, the
computer that asks it or any other computer in the network for service. And by now this
computer is acting as a client, and the other one as a server. In conclusion, data flow and
communication will be between each computer. If there are three computers in this
network, then the data flow will be like the following:

A double arrow
showing data flow
and communication

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 Figure 6.8 Peer-to-peer Model

3) Wide Area Networks (WANs)

Wide area networks (WANs) span broad geographical distances, ranging from several miles
to across entire continents. Common carriers (companies licensed by the government to
provide communications services to the public, such as AT&T or MCI) typically determine
transmission rates or interconnections between lines, but the customer is responsible for
telecommunications contents and management. It is up to the individual firm to establish the
most efficient routing of messages, and to handle error checking, editing, protocols, and
telecommunications management.

WANs may consist of a combination of switched and dedicated lines, microwave, and
satellite communications. Switched lines are telephone lines that a person can access from his
or her terminal to transmit data to another computer, the call being routed or switched through
paths to the designated destination. Dedicated lines, or non-switched lines, are continuously
available for transmission and the lessee typically pays a flat rate for total access to the line.
The lines can be leased or purchased from common carriers or private communications media
vendors. Dedicated lines are often conditioned to transmit data at higher speeds than switched
lines and are more appropriate for higher volume transmissions. Switched lines, on the other
hand, are less expensive and more appropriate for low volume applications requiring only
occasional transmission.

4) Value Added Networks

Value added networks are an alternative to firms designing and managing their own networks.
Value added networks (VANs) are private, multi-path, data only, third party managed
networks that can provide economies in the cost of service and in network management
because they are used by multiple organizations. The value added network is set up by a firm

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that is in charge of managing the network. That firm sells subscriptions to other firms wishing
to use the network. Subscribers pay only for the amount of data they transmit plus a
subscription fee. The network may utilize twisted pair lines, satellite links, and other
communications channels leased by the value added carrier.

The term value added refers to the extra “value” added to communications by the
telecommunications and computing services these networks provide to clients. Customers do
not have to invest in network equipment and software or perform their own error checking,
editing, routing, and protocol conversion. Subscribers may achieve savings in line charges and
transmission costs because the cost of using the network is shared among many users. The
resulting costs may be lower than if the clients had leased their own lines or satellite services.
VANs are attractive for firms such as Continental Grain because they provide special services
such as electronic mail and access to foreign telecommunications systems.

The leading international value added networks, in addition to GE information Service

Company (GEIS), are Infonet, Telenet, and Tymnet. These networks provide casual or
intermittent users international services on a dial up basis and can provide a private network
using dedicated circuits for customers requiring a full time network. (Maintaining a private
network may be most cost effective for organizations with a high communications volume).

Another way value added networks provide economies is through packet switching. Packet
switching breaks up a lengthy block of text into small, fixed bundles of data (often 128 bytes
each) called packets. The VAN gathers information from many users, divides it into small
packets, and continuously uses various communications channels to send the packets. Each
packet travels independently through the network (this contrasts to one firm using a leased
line, for example, for one hour and then not using it for three or four hours). Packets of data
originating at one source can be routed through different paths in the network, and then may
be reassembled into the original message when they reach their destination. Packet switching
enables communications facilities to be utilized more fully by more users.

Frame relay is a faster and less expensive variant of packet switching. Frame relay is a
shared network service that packages data into “frames” that are similar to packets. Frame
relay, however, does not perform error correction. This is because so many of today’s digital

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lines are cleaner than in the past and networks are more adept at correcting transmission
problems. Frame relay can communicate at transmission speeds up to 1.544 megabits per
second. Frame relay is essentially used for transmitting data. It is not recommended for any
transmissions that are sensitive to varying delay, such as voice or digital video traffic, and it
cannot easily control network congestion. Frame relay works successfully only over reliable
lines that do not require frequent retransmission because of error.

Most corporations today use separate networks for voice, private-lines services, and data, each
of which is supported by a different technology. An emerging networking technology called
asynchronous transfer mode (ATM) may overcoming some of these problems because it can
seamlessly and dynamically switch voice, data, images and video between users. ATM also
promises to tie LANs and wide area networks together more easily (LANs are generally based
on lowest stopped protocols, whereas WANs operate at higher speeds). ATM technology
parcels information into uniform "cells," each with 53 groups of eight bytes, eliminating the
need for protocol conversion. It can pass data between computers from different vendors and
permits data to be transmitted at any speed the network handles. ATM currently requires fiber
optic cable, but it can transmit up to 2.5 GBPS.
The Advantages of Computer Network
There are three main advantages of any network. These are:
a) To share hardware equipments
Expensive hardware devices can be shared using network. For example, in an office if
there are six computers and if there is always a need to print some documents from the
users of those computers, then it is difficult and inefficient to buy a printer for each of
them. Instead, the best thing to do is to construct a network between the computers and
use only one printer, which is also attached to the network. If there is the network, the
users of the network can use the printer, which may be attached to one of the computers.

In the case of LAN, if the model is a client/server model, then the device to be shared will
be connected with the server and if it is a peer-to-peer model it can be attached with one
of the computers. In WAN, it is not common to share hardware devices between countries.
But surprisingly, some very powerful and speedy super or mainframe computers can be
shared to some authorized users.

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b) To share data and software
Data (user file or software) can be shared between connected computers. In LAN, this
capability of sharing data will remove sneaker net (carrying disks to transfer data) and as a
result virus protection. If the model is client/server, then we will have one or more file
servers dedicated to provide only data to clients, but if we are working with peer-to-peer
model, every computer can share data equally with the others in the network. In WAN, the
most visible application of networks is sharing data and communication, because data can
be sent with in a matter of minutes.

c) Communication
Sending and receiving messages is possible in LANs as well as in WANs. In early times,
when people share mainframe computers (at that time there were no PCs), by connecting their
terminals to the mainframe computer (network), further than sharing the power of the
powerful computers, no one was not in a position to think about the network as a tool for
communication.

6.4 Use of Telecommunications For Competitive Advantage

Telecommunications has helped eliminate barriers of geography and time, enabling

organizations to accelerate the pace of production, to speed decision making, to forge new
products, to move into new markets, and to create new relationships with customers. Many of
the strategic applications described in would not be possible without telecommunications in
their strategic plans will fall behind.

Some of the leading telecommunications applications for communication, coordination, and

speeding the flow of transactions, messages, and information throughout business firms are
electronic mail, voice mail, facsimile machines (FAX), digital information services,
teleconferencing, and electronic data interchange.

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1) Electronic Mail
Electronic mail, or e-mail, is the computer-to-computer exchange of messages. A person can
use a microcomputer attached to a modem or a terminal to sent notes and even lengthier
documents just by typing in the name of the message's recipient.

E-mail eliminates telephone tag and costly long distance telephone charges, expediting
communication between different parts of the organization.

E-mail systems present security problems because without adequate protection, electronic
eavesdroppers can read the mail as it moves through a network.

2) Voice Mail
A voice mail system digitizes the spoken message of the sender, transmits it over a network,
and stores the message on disk for later retrieval. When the recipient is ready to listen, the
messages are reconverted to audio form. Various "store and forward" capabilities notify
recipients messages for future use, deleting them, or routing them to other parties.

3) Facsimile Machines (FAX)

Facsimile (FAX) machines can transmit documents containing both text and graphics over
ordinary telephone lines. A sending FAX machine scans and digitizes the document image.
The digitized document is then transmitted over a network and reproduced in hard copy form
by a receiving FAX machine. The process results in a duplicate, or facsimile, of the original.

4) Digital Information Services

Powerful and far reaching digital electronic services now enable networking micro computer
and workstation users to obtain information from outside the firm instanteously without
leaving their desks. Stock prices, historical references to periodicals, industrial supplies
catalogs, legal research, news articles, reference works, weather forecasts, and travel
information are just some of the electronic databases that can be accessed on line. Many of
these services have capabilities for electronic mail, electronic bulletin boards, and for on line
discussion groups, shopping, and travel reservations.

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5) Teleconferencing, Data conferencing, and Videoconferencing
People can meet electronically – even though they are hundreds or thousands of miles apart –
by using teleconferencing, data conferencing, or videoconferencing. Teleconferencing allows
a group of people to "confer" simultaneously via telephone or via electronic mail group
communication software (see figure). Teleconferencing that includes the ability of two or
more people at distant locations to work on the same document or data simultaneously is
called data conferencing. With data conferencing, two or more users at distant locations are
able to edit and directly modify data (text, such as word processing documents, numeric, such
as spreadsheets, and graphic) files simultaneously. Teleconferencing that also has the
capability to let participants see each other "face-to-face" over video screens is termed video
teleconferencing or videoconferencing.

These various forms of electronic conferencing are growing in popularity because they save
travel time and cost. Legal firms might use videoconferencing to take depositions and to
convene meetings between lawyers in different branch offices.

Videoconferencing has usually required special video conference rooms and video cameras,
microphones, television monitors, and a computer equipped with a codec device that converts
video images and analog sound waves into digital signals and compresses them for transfer
over communications channels. Another codec on the receiving end reconverts the digital
signals back into analog for display on the receiving monitor.

6) Electronic Data Interchange

Electronic data interchange (EDI) is the direct computer-to-computer exchange between
two organizations of standard business transaction documents such as invoices, bills of lading,
or purchase orders. EDI saves money and time because transactions can be transmitted from
one information system to another through a telecommunications network, eliminating the
printing and handling of paper at one end and the inputting of data at the other. EDI may also
provide strategic benefits by helping firm “lock in” customers, making it easier for customers
or distributors to order from them rather than from competitors.

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EDI differs from electronic mail in that transmits an actual structured transaction (with
distinct fields such as the transaction date, transaction amount, sender's name and recipient's
name) as opposed to an unstructured text message such as a letter.

For EDI to work properly, four key requirements must be addressed:

a) Transaction standardization: participating companies must agree on the form of the
message to be exchanged. Transaction formats and data must be standardized. The
American National Standards Institute (ANSI) has developed the X.12 data interchange
protocol as a generic, flexible business data interchange standard for EDI, but specific
industries have adopted multiple EDI standards. This can raise problems for inter-
organizational networking, since manufacturing, retail, and banking standards might
collide.
b) Translation software: special software must be developed to convert incoming and
outgoing messages into a form comprehensible to other companies.
c) Appropriate "mailbox" facilities: companies using EDI must select a third party, value
added network with mailbox facilities that allows messages to be sent, sorted, and held
until they are needed by the receiving computer. For example, the insurance field
generally uses Information Network, and office systems tend to use GE Information
Services.
d) Legal restrictions: to comply with legal requirements, certain transactions require
"writing," a "signature," or the "original document" in hard copy form. (EDI messages do
not, for example, deal with warranties or limitations of liability and other conditions of
doing business typically contained in hard copy business documents.) Parties must agree
on the means of verifying that messages are authentic and complete according to the
agreed-on protocol, the point in the transaction when the contract between the two parties
goes into effect, error-checking procedures, and the level of network security to prevent
unauthorized access and use of the system.

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As intelligent agent technology and commercial networks open new electronic
marketplaces, they will lead to more flexible forms of EDI in which exchange of
purchase and sale transactions are not limited to the computer systems of two
organizations.

Check Your Progress Exercise

1. Discuss in detail the components of a telecommunication?

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
2. Discuss in detail the Functions of the telecommunication?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
3. Discuss in brief the telecommunication network?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

4. Bring about the distinction between data conferencing, teleconferencing, and

videoconferencing?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

6.5 Summary

A telecommunication system is a set of compatible devices that are used to develop a network
for communications from one location to another by electronic means. The essential

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components of a telecommunication system are computers, terminals or other input/output
devices, communication channels, communication processors (such as modems, multiplexes,
controllers, and front end processors), and telecommunications software.

Different components of a telecommunication network can communicate with each other with
a common set of rules termed protocols.

Data are transmitted throughout a telecommunications network using either analog signals or
digital signals. A modem is a device that translates from analog to digital and vice versa.

The principal transmission media are twisted copper telephone wire, coaxial copper cable,
fiber optic cable, and wireless transmission utilizing microwave, satellite, low frequency
radio, or infrared waves.

The three common network topologies are the star network, the bus network, and the ring
network. In a star network, all communication must pass through a central computer. The bus
network links a number of devices to single channel and broadcasts all of the signals to the
entire network, with special software to identify which components receive each message. In
a ring network, each computer in the network can communicate directly with any other
computer but the channel is a closed loop. Data are passed along the ring from one computer
to another.

Networks can be classified by their shape or configuration or by their geographic scope and
type of service produced. Local area network (LANs) and private branch exchange (PBXs)
are used to link offices and buildings in close proximity. Wide area networks (WANs) span a
broad geographical distance, ranging from several miles to entire continents and are private
networks that are independently managed. Value added networks (VANs) also encompass a
wide geographic area but are managed by a third party, which sells the services of the
network to other companies.

6.6 Answer to check your progress

1. Refer to Section 6.2

2. Refer to Section 6.2

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3. Refer to Section 6.3
4. Refer to Section 6.4

UNIT 7: COMMON BUSINESS APPLICATION OF INFORMATION SYSTEMS

Contents
7.0 Aims and Objectives
7.1 Introduction
7.2 Financial Information Systems
7.2.1 Operational Financial Information Systems
7.2.2 Tactical Financial Information Systems
7.2.3 Strategic Financial Information Systems
7.3 Marketing Information Systems
7.3.1 Operational Marketing Information Systems
7.3.2 Tactical Marketing Information Systems
7.3.3 Strategic Marketing Information Systems
7.3.4 Tactical And Strategic Marketing Information Systems
7.4 Manufacturing And Production Information Systems
7.4.1 Operational Production Information Systems
7.4.2 Tactical Manufacturing And Production Information Systems
7.4.3 Strategic Planning Manufacturing Information Systems
7.5 Human Resource Information System
7.5.1 Operational Information Systems
7.5.2 Tactical Human Resource Information Systems
7.5.3 Strategic Human Resource Information Systems
7.6 Summary
7.7 Answer to Check Your Progress Exercise

7.0 AIMS AND OBJECTIVES

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After studying this unit the student should be able to:
- explain the need and uses of financial information systems
- understand the importance of marketing information systems
- describe the nature and uses of manufacturing and production information systems
and;
- understand the impact of human resource information systems.
7.1 INTRODUCTION

So far, you have learned about computer information systems, the decision making process,
and the basic computer resources abailable to the manager. What you learned generally
emphasized the organizations. You will apply what you have learned about information
systems, decision-making, and computer system resources to problems in finance, marketing,
manufacturing and production and human resources.

7.2 FINANCIAL INFORMATION SYSTEMS

Whether you are the chief operating office of a large international organization or merely the
supervisor of a small department at one location in that organization, you will find it
necessary to make financial decisions. The financial decisions you may encounter as a
manager are diverse and could include decisions similar to these:

1. Should you purchase a large new piece of equipment or lease the equipment for a
three- year period?
2. How much of your department’s funds should you allocate to telephone usage rather
than travel expenses?
3. How much does your division have on hand at various times during the year and is it
enough to cover the cash expenditures you expect to incur at those times?
4. Should you invest money in new computer equipment or additional merchandise for
resale?
5. How will a 20% utility rate increase affect your budget for the coming year?
6. Should you allow a particular customer to make a large purchase on credit?

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 7. Should your organization decide to offer a new product or service, or should it provide
the same products and services in additional markets?
To make these and similar decisions, you need to understand the basic financial accounting
systems found in most organizations. You must also understand how financial information
systems can help you make improve decisions about the financial problems with in your
purview.

The Financial Management Function

The financial management functions of any organization encompass a number of important
responsibilities. These include monitoring and analyzing the organization’s financial
condition through the management of accounting systems and the preparation of financial
statements and reports. The financial management function is also responsible for the
budgeting process, the management of customer credit, the calculation and payment of
income, payroll, property, excise and other taxes; and the management of appropriate
insurance coverage for the organization’s personnel and assets. Furthermore, the function
must provide for an auditing process to ensure the accuracy of the financial information kept
and to protect the investor’s funds.

The financial management function is also responsible for the management of the
organization’s fixed assets, pension funds, and investment in existing plants and equipment,
subsidiaries, or other investments. The function also includes the evaluation of new
investments and the acquisition of borrowed funds or capital to pay for them.

The financial management function must manage the cash flow of the organization in such a
ways as to ensure that the organization has the necessary funds to operate, that extra cash is
not left idle, and that the organization has the borrowing power to meet its cash needs when
the cash flow is insufficient.

Clearly, the financial management function is very important to the organization. Because of
its importance, financial management personnel require information systems that provide
them with accurate, timely and appropriate information to carry out their functions.

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Like all information systems, financial information systems may be categorized into those that
support operational tasks, those that support tactical decisions, and those that support strategic
planning decisions.

7.2.1 Operational Financial Information Systems

Typically, the applications first computerized by many organizations are accounting systems
designed to produce operational level output. The development of computerized financial
information systems for use in tactical decision making and strategic planning is usually
deferred until the basic operational level information systems are in place and working.

Operational financial information systems produce the routine, repetitive information

products that every organization finds necessary. These products, or output, include
paychecks, checks to vendor, customer invoices, purchase orders, stocks reports, and other
regular forms and reports. Financial operating information systems are typically task oriented.
They focus on processing financial transactions to produce the financial products just
described.

Accounting Systems
The heart of an organization’s financial operating information system is the accounting
system. A computerized accounting system is composed of a series of software modules or
subsystems that may be used separately or in an integrated fashion. The subsystem modules
include:
1. general ledger
2. fixed assets
3. accounts receivable (credit limit, aged accounts receivable reports can be generated)
4. order entry
5. accounts payable
6. inventory
7. purchase order
8. payroll

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When these computerized accounting subsystems are integrated, each subsystem receives data
as input from other subsystems and provides information as output to other subsystems. The
accounting subsystems might be integrated.

7.2.2 Tactical Financial Information Systems

The computerization of accounting systems usually changes the way managers’ view
accounting information. Because a large database of information becomes available in
computerized form and can easily be extracted or manipulated, this information begins to be
viewed as a resource for tactical planning. Suddenly, it becomes possible for managers to get
important summaries and comparisons of accounting data easily and swiftly. In the past this
information would have taken a great deal of time to extract from a manual accounting
system. The result is that managers view the accounting system as more than merely a
producer of checks, invoices, and statements. It becomes repository of important data that can
assist management in decision-making. The computerization of accounting system has helped
to spawn the use by managers of corporate databases to support tactical decisions and
strategic planning. This has led to the development of computer supported financial
information systems for tactical decision making and strategic planning information systems.

The Nature of Financial Information Systems for Tactical Decision Making

Tactical financial information systems support management decision making by providing
managers with regular summary reports, regular exception reports, ad hoc reports, and other
information that will help them

1) control their areas of responsibility and

2) Deploy their resources to pursue organization goals. Whereas operational control
systems are focused on tasks, tactical information systems are focused on resource
allocation.
It is possible to design many computer supported tactical level information systems for the
financial decisions that managers must make. Common systems include budgeting systems,
cash management systems, capital budgeting systems, investment management systems. Each
of these systems will be briefly described.

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 Budgeting Systems
The general ledger subsystems of many computerized accounting systems permit the user to
enter budget amounts by account number. Periodically, (weekly, monthly, quarterly, or
annually) the budgeted amounts (allocations) and the actual amounts spent or received
(actual) for each account are compared and various reports are prepared. For example, the
general ledger subsystem of a mainframe accounting system may provide the reports listed
below.

1. current budget allocations by line item.

2. current budget allocations compared to year to date revenues and expenditures.
3. budget variances by line item type, or the differences between allocations and actual
4. current budget allocations compared to the previous year’s allocations
5. current revenues and expenditures compared to the previous year’s revenues and
expenditures
6. current revenues and expenditures compared to the average of the other units or
divisions of the organization.

Reports such as these may be prepared for a department, a division, a subsidiary, or the entire
organization. The budgeting system permits managers to compare revenue and expense data
against the standard of the budget allocations. It also allows prior fiscal period, other division
or department, industry wide data to be used as standards against which current budget
amounts may be compared.

Cash Management Systems

Important functions of financial management include ensuring that the organization has
sufficient cash to meet its needs, putting excess funds form any period to use through
investments, and providing borrowing power to meet the organization’s cash needs in those
periods when there is an insufficient cash flow.
There are two major reasons why an organization needs cash: for working capital (cash
needed for day to day operations) and for the acquisition of long term assets. To determine if
adequate cash is available for its working capital needs and its long term asset acquisition
plans, the organization must prepare a report of its expected cash flow for the time periods

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being considered. Typically this report shows the cash flow for each month of the coming
year.

A cash flow report shows the estimated amount of cash that will be received and spent each
month. The report shows in which months there will be cash received and spent each month.
The report shows in which months there will be excess funds that might be put to use, and in
which months there will be insufficient funds, required the organization to borrow cash to
meet its working capital or fixed asset acquisition needs.

The information provided by a cash flow helps the manager make decisions about investing,
purchasing, and borrowing money. If this information is placed on an electronic spreadsheet,
the manager may stimulate a number of possible business conditions, such as (1) increasing or
decreasing revenue, (2) increasing or decreasing customer credit problems, (3) deferring the
acquisition of an asset, or (4) repairing existing fixed assets instead of replacing them.
Capital Budgeting Systems
A capital budget contains information about the planned acquisition or disposal of major plant
assets during the current year. The manager may wish to compare the various capital spending
plans in terms of three commonly used evaluation tools: net present value, internal rate of
return, and payback period. These tools can easily be calculated using computer systems.
“What if?” games are performed using software packages.

Investment Management Systems

Investment management – overseeing the organization’s investments in stocks, bonds, and
other securities – is an important part of cash management. Managing investment is also an
important part of an organization’s pension plan management. Whatever the source of the
funds for investments, most organizations invest money in securities of one kind or another.
Careful management of these investments is necessary to ensure the achievements of
organization goals.
Current information systems provide unique ways to manage stock and bond portfolios. These
ways typically involve the sue of external databases that furnish immediate updating of stock
and bond prices, information about the history of each investment, and various portfolio
investment analysis tools to help the manager stay on top of the organization’s investments.
The system may be a simple one in which the manager’s microcomputer is equipped with a

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modem and he or she is provided with a subscription to an investment service. Possible
information that can be generated are current dividend, price history, price stability index,
projected changes earnings, current earnings per share, debt as a percent of capital, dividends
history, industry ranking, low price per year and the like. Tactical financial information
systems give the manager increased control over the financial resources of a department or an
entire organization, and provide considerable support when he or she is deciding the
allocation of financial resources to meet organizational goals.

7.3.2 Strategic Financial Information Systems

You have learned that operational control level information systems are task oriented and that
tactical level information systems are resource allocation oriented. In contrast, strategic
information systems are goal oriented. That is, these systems are concerned about goal and
direction setting for organizations.

Strategic information systems typically include several types of information flows:

1. Financial condition analysis data or an analysis of internally generated information
describing the status of the organization
2. Economic, demographic, and social data or an analysis of externally generated data
describing the present and future environment for the organization
3. Forecasts of the future of that organization in those environments

Two major outcomes of financial strategic planning are the setting of financial goals and
directions for the organization. The former may include setting investment goals and return on
investment goals. The latter may involve deciding on new investment opportunities or on the
mix of capital sources used to fund the organization.

A major source of computerized information about the current and future status of the
organization is the organization’s own financial accounting database. A promising source of
computerized information pertaining to the present and future environment in which the
organization must operate are on line databases for economic, social, demographic,
technological, and political information. Projecting likely scenarios for the organization using
these two categories of data is the art of forecasting. A major purpose of strategic decision-

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making is to use long-range forecasts to reduce the risk involved in major organization
decisions.

Financial Conditions Analysis Systems

Computerized accounting systems provide the user with a variety of reports on which many
ratios and analysis tools may be applied.
Example, working capital = current assets – current liabilities.

Long Range Forecasting Systems

Strategic planners demand forecasts on a variety of factors that will affect organization
performance in the future.
 Forecasting the sales revenue of a potential new product makes important information
available to planners considering the development and marketing of the new the
product.
 Forecasting the financial health of the organization through the long rage budget
estimates – including a variety of possible wage negotiation settlement, actions by
competitors, interest rate fluctuations, fuel costs changes, and different inflation rates
provide planners with opportunities to consider actions that will help the organization
survive bad times or take advantage of a future environment.
 The types of information used in forecasting the future environment of the
organization are many and diverse. They include descriptions of the present economy
and forecasts of the future economy, information on the present demographic structure
of the region or country and forecasts of the demographic structure of the region or
country, and descriptions of the current social structure and social mores and
predictions on the future structure of society and societal mores.

7.3 MARKETING INFORMATION SYSTEMS

Marketing information systems support the major activities of a marketing organization. The
information systems collect data that describe marketing operations, process those data, and
make marketing information available to marketing managers to help them make effective
decisions.

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7.3.1 Operational Marketing Information Systems
Operational marketing information systems primarily produced routine, repetitive, expected,
and regular data that describe past marketing activities. The information they produced is
usually detailed, highly structured, and accurate, and is derived from internal sources.

Sales Information Systems

Salespeople are responsible for many sales activities. They must identify potential customers,
make the customer contact, call on the customer, make the sales, close the sale, and follow up
on the sale. These are the bread-butter sales activities of the salesperson. There are many
information systems that support the salesperson in these activities. Among these information
systems are the following:

Prospect Information System

Locating potential customers is often a time consuming and frustrating part of the
salesperson’s work. The sources of information used to obtain leads about prospective
customers are frequently diverse and may include other customers, other vendors who sell
supporting or ancillary products, newspapers notices, telephone directories, and direct
customer inquiries. The search of directories and other lists of customers may be very time
consuming and yield few customers.

Files of sales leads are often called prospect files. When these files are stored on magnetic
media, they are easier for the salesperson to search or summarize. Outputs of prospect
information systems may include lists of prospects by location, by product category, by gross
revenue, or by other classifications important to the sales force.

Contact Information Systems

Customer contact information systems provide information to the sales force pertaining to
customers, their product or service preferences, sales history data, and a historical record of
sales calls and/or visits. One output of these systems may be a call report showing the number
of sales calls made by a salesperson categorized by size of organization, previous sales, or
some other characteristics, and the number of sales made per customer, per visit, and or per
category.

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 Inquiry Information Systems
When customers make inquiries about the products and services the organization offers, the
inquiries need to be processed, recorded, and stored for analysis or for sales contact. It is
important that inquiries be associated with the actual or potential customer who made the
inquiry, what products or services the query pertained to, when the inquiry was made, and
where the potential customer was located. It is also very important to record these data on a
medium that will allow analysis easily at some future time.

Document Information Systems

 Sales form letters for salespeople so that they can mail well written, clear and effective
letters
 Quotation documents are frequently produced. A document information system
provides marketing personnel with ready-to-adapt documents for their operations. The
system also improves the quality of the documents developed by marketing personnel,
and is likely to increase sales revenue.

Order Entry Systems

A great deal of marketing data is created through the financial accounting system of the
organization. For example, the order entry system provides the marketing manager with the
raw data from which to obtain gross sales by time period, salesperson, product, and territory.
This information may be used for a variety of marketing decisions at several marketing
decision levels. Analysis of product sales through analysis of the sales orders provides the
marketing managers with some of the information on which sales forecasts can be based, for
instance.

Telemarketing Systems
Using the telephone for selling is referred to as telemarketing. Using telemarketing has
become a very important means by which companies have improved the productivity of their
sales force. Using the telephone to initiate contacts, offer products and services, follow up on
sales eliminates travel costs and travel time and lets salespeople reach many more customers
in a given time period than they could have through conventional means.

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Some telemarketing systems include computer support for the automatic calling of parties
and/or the automatic delivering of a voice message to the answering party under the control of
computer system.

Direct Mail Advertising Systems

Many firms generate sales by mailing sales brochures and catalogs directly to customers. To
distribute sales documents rapidly to large numbers of potential customers, most marketing
departments maintain customer mailing lists that are used for mass mailings. The lists may be
drawn from customer files, accounts receivable records, or prospect files, or they can be
purchased from other documents.

Inventory Information Systems

Inventory subsystems of the financial accounting system provide information about inventory
levels, stock outs conditions, stock receipts, stock issues, stock damage, and the location and
distribution of stock within the organization. For example, salespeople should be able to
check the amount of available stock in inventory before closing a sale with a customer. Thus,
the inventory information system provides important data regarding stock levels to the order
entry system.

Distribution Information Systems

If the organization uses its own distribution system, information about its effectiveness must
be collected and reported to management. Information should also be maintained about the
acquisition, repair, use and allocation of equipment.

Credit Information Systems

An operational level credit information system usually provides the salesperson or credit
manager with information pertaining to the maximum allowable credit that should be granted
to a customer. This information is ordinarily integrated with the order entry subsystem of the
financial accounting system. The credit information system may manage information on the
credit history of customers; this data can include information from external sources, such as
credit agencies.

7.3.2 Tactical Marketing Information Systems

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Tactical information systems differ from operational marketing information systems in that
they may provide produce information not only on a regular basis but also generate ad hoc
reports, create unexpected as well as expected output, produce comparative as well as
descriptive information, provide summary information as opposed to detailed data, included
both internal and external data sources, and processes subjective as well as objective data.

Examples of tactical marketing information systems that will be discussed in this part of the
paper include those that support the development and management of the sales force, the
management of advertising and promotion campaigns, the distribution and delivery of
products sold, and product pricing.

Sales Management Information System

A major objective of sales manager is to reach the sales goals set by top management. To
accomplish this objective, sales managers must make many tactical decisions, such as sales
territories should be shaped, how the sales force should be allocated within those territories,
and what emphasis should be placed on the products offered and customers served. Sales
managers must decide how to reward salespeople to encourage increased sales efforts, which
market segments should be emphasized to best reach sales goals, and which products and
services will best appeal to each segment. They also must monitor the progress of the sales
effort to determine if their decisions were correct or if they need to change their tactical plans.

To make these decisions effectively, sales managers should have at their disposal a great deal
of data about the sales histories of each salesperson, territory, product, and market segment.
Managers can use these data – provided by sales management information systems – to
develop reports analyzing sales activities that help them make decisions about salespeople,
territories, products, and customers. Analysis of past sales efforts might reveal, for instance
that the greatest volume of sales is obtained when certain products are emphasized with
certain market segments. This information may be obtained from a report that correlates
product or service categories with customer categories.

Through the use of these reports, marketing managers may adjust advertising media,
promotion schemes, sales calls, and sales approaches to emphasize selected products to very
narrowly defined market segments to maximize gross sales.

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In addition to planning future campaigns, sales managers need information to control current
campaigns. The manager monitoring sales progress may wish to recursive daily, weekly, or
monthly reports on the sales achievement of each salesperson with averages calculated for the
entire sales force. This information might be used to evaluate salesperson effectiveness, the
success of the sales reward system, or the appropriateness of the shape of the territories
assigned. A report showing the percentage of each salesperson’s sales by market segment and
by product along with averages for the total sales force would display the current
effectiveness of each salesperson in selling the organization’s products to each customer
group.

The manager can compare sales, product, customer, and territory information from one
department against external benchmarks of success, such as the organization as a whole or
industry averages. The manager, for example, may wish to compare staff deployment to the
deployment of marketing staffs in other marketing departments within the organization or to
the industry as a whole. The marketing manager might also view the amount of money spend
in the department on salespeople versus support staff and then compare those amounts to the
amounts spend by other marketing departments in the organization or to the industry as a
whole. If sales data are added to expense data, the marketing manager can compare the
productivity of the industry. Comparisons that indicate poor productivity might lead the
marketing manager to compare the productivity of each salesperson to the average for the
department. This comparison, in turn, might lead to decisions changing the configuration of
sales territories, training for specific salespeople, product emphasis for certain territories,
market segment emphasis for certain sales personnel, or a variety of other remedies.

These examples should not imply that the marketing manager’s job can be performed merely
by projecting historical information on current problems. If all marketing decisions could be
made merely by referring to the past performance of salespeople with customers and products
within territories, marketing managers would not be needed at all. The marketing manager
must bring to the table not only historical information, trends, and probabilities, but also
considerable knowledge of the current environment. In the end, the marketing manager must
make decisions based on less than all of the information desirable. Marketing information

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systems do not make the decisions for marketing managers, they provide information to
support those managers in the decision making process.

Advertising and promotion information systems

Advertising and promotional tactics also need to be developed by marketing managers to

implement strategic sales goals set by top management. Managers must decide which
advertising media and promotional devices to use to reach the selected market segments,
when these media and devices should be used, and what overall mix of promotional activities
should be deployed to achieve sales goals. Advertising and promotion information systems
assist managers in these tasks.

To decide what advertising and promotional tactics to use, marketing managers need such
information as market segment history, the effectiveness of previous advertising and
promotional efforts on each market segment, and the sales history of products by market
segment. Historical data on the effectiveness of various advertising and promotional
instruments and the sales of products by market segment are not follproof methods for
forecasting future success. Past profiles and trends may not necessarily be projected into the
future. The areas of advertising and promotion contain too much managerial art for projection
of past data to be perfectly successful. However, the past success of specific advertising and
promotion campaigns for specific products and customers is very important information for
the manager.

Production Pricing Information Systems

Product pricing information systems are important because the price of a product or service
affects the sales volume and profitability of the organization. While the marketing manager
usually selects a price that will at least recover production costs, the price chosen is
constrained by the prices of competitors for similar products or services and for alternative
products or services. To make pricing decisions, the marketing manager should have
information pertaining to the expected demand for the product or similar products, the desired
profit margin for the organization, the costs of producing the product or providing the service,
and the prices of competing products.

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To help marketing manager price products and services, some organizations develop a pricing
model that allows him or her to input data on a variety of forces affecting prices such as
expected competitive prices, expected consumer price indexes, expected consumer disposable
income, volume of expected advertising expenditures. The model then uses arithmetic
algorithms that represent the organization’s assumptions about the interrelationship of each of
these factors. This makes it possible for the manager to “play” with the inputs to identify the
recommended price for a product under a variety of possible conditions.

Distribution Channel Decision Support Systems

Deciding how the organization’s products and services will be delivered to the ultimate
consumer is another important tactical decision that must be made. The organization needs to
determine if it wishes to sell all or some of its products and services directly to its customers,
use middlemen, or both. If direct sales are considered, then the choice of trade channels or
channels within that delivery mode – for example, sales force, direct mail, telemarketing, and
so on – must be decided on. If middlemen are chosen to distribute the product or service, the
choice of the channel will be affected by how well the channel distributes the products or
services among the organization’s targeted market segments.

To support the marketing manager, the marketing information system should provide a
distribution channel decision support systems. This system should provide information such
as the costs of using the various distribution channels, the time lags caused by the various
channels, the reliability of the various channels in delivering the products and service, and the
marketing segment saturation provided by the channels.

7.3.3 Strategic Marketing Information Systems

To develop an overall marketing plan, an organization may engage in a verity of tactical and
strategic planning activities. The strategic activities include segmenting the market into target
groups of potential customers based on common characteristics or needs or wants, selecting
those market segments the organization wishes to reach, planning products and services to
meet those customers’ needs, and forecasting sales for the market segments and products.

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 Sales Forecasting Information System
Strategic sales forecasting usually includes several varieties of forecasts: forecasts of sales for
the entire organization, forecasts of sales for each product or service, and forecasts of sales for
a new product of service. The results of these sales forecasts will often be further categorized
by sales territory and sales division. Regardless of the type of forecasts, sales forecasts are
usually based on more than historical data; they are not merely projections of past trends.
Sales forecasts are also based on assumptions about the activities of the competition,
government action, shifting customer demand, demographic changes and movements, and a
variety of other pertinent factors, including even the weather. Errors in sales forecasting will
have many implications in the other aspects of the organization.

Product Planning and Development Information Systems

The major objective of product planning and development information systems is to make
information about consumer preferences obtained from the marketing research system
available for the development of new products. The primary output of planning and
development activities is a set of product specification. The specifications will serve as inputs
for other decisions such as product design.

7.3.4 Tactical and Strategic Marketing Information Systems

Two important information gathering systems provide support for both tactical and strategic
marketing decisions. These two information systems are marketing research systems and
information systems that collect data about the organization’s competitors.

Marketing Research
In large organizations, research departments conduct and manage marketing research. In small
companies, marketing research may be completed by outside consultants or by personnel who
must wear several hats. Regardless of how the function is completed, the results of marketing
research provide important inputs to tactical and strategic decision making.

Inputs to marketing research are heavily derived from sources external to the organization.
These inputs include such widely diverse sources of customers as customers, potential
customers, census and demographic data, industry or trade data, economic data, social trend
data, environmental data, and scientific and technological data. These data may be obtained

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through such means as direct mail surveys of customers, personal and telephone interviews of
consumers, library searches of governmental and industry reports, searches of the databases of
information utilities, and reports filed by sales personnel.

Marketing research personnel make heavy use of statistical methodology in analyzing the data
collected and in reporting the information to the organization. Obtaining totals, counts, and
averages in terms of consumer responses to questions, correlating social and economic
characteristics of customers with their buying practices, completing times series analysis of
past industry wide sales to determine the projected sales of a product, and testing hypothesis
about consumer response to differing product packaging represent only some of the statistical
procedures that are used to analyze information for marketing managers.
Typical of the activities of a marketing research department are:
1. conducting trend analysis of the sales of products and services identical or similar to
those offered by the organization to identify products or services that are on the ascent
or descent
2. analyzing population and target group characteristics, especially for trends or changes
in data that could affect the organization
3. analyzing and identifying consumer preferences, including the testing of products and
services
4. determining and analyzing customer satisfaction with the organization's existing
products and services
5. estimating market share for all or each product and service offered.

The results of marketing research are often presented graphically, in the form of tables, charts,
and graphs.

Competitive Tracking Information Systems

To ensure that the marketing mix offered by your organization will continue to be effective in
satisfying customers, you must keep abreast of major competitors and their marketing
activities. Market share is likely, in the end, to be the greatest for the organization that
provides the marketing mix most closely matching a given market segment's needs and wants.
Thus, knowledge of competitor prices, products, sales, advertising, and promotions must be

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gathered if the organization is to avoid falling behind the competition in the eyes of the
customers. This task is carried out through competitive tracking information systems.

Information about competitor activities is also obtained from informal sources, through such
activities as reading trade journals and newspapers, visiting competitor distribution outlets,
and talking to competitor offers and employees at conventions. Salespeople in most
organizations are encouraged to provide feedback about competitor activities by filing field
reports. The information they obtain may be gathered through observation of competing
salespeople or by seemingly casual questions that addressed to customers. Information about
the competition may also be gathered more systematically by conducting keyword searches in
external databases or information utilities.

7.4 MANUFACTURING AND PRODUCTION INFORMATION SYSTEMS

Purpose: manufacturing systems encompasses all the activities necessary to ensure

production. These activities may include the evaluation of sites for production; the planning,
development, and maintenance of production facilities; and the setting of production goals to
meet the requirements of the sales forecast generated by the marketing system.

Manufacturing and Production Information Systems

Manufacturing and production information systems provide the data necessary to plan,
organize, operate, monitor, control and otherwise manage production systems.

7.4.1 Operational Production Information Systems

There are numerous operational production information systems. Many are part of the
financial accounting system of organization. For example, purchasing, accounts payable,
inventory, order entry, accounts receivable, and payroll subsystems of the accounting system
provide information to support manufacturing and production activities. The next section
briefly describes some major operational production information systems.

Purchasing Information Systems

To produce goods and services, you must have the right quantity of raw materials and
production supplies on hand. Furthermore, you will want to procure these materials and

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supplies at the lowest cost and have them delivered at the right time. To assist in this function,
the purchasing information system has to maintain data on all phases of the acquisition of raw
materials and purchased parts used in production.

Receiving Information Systems

When shipment of purchased goods and supplies are received, they must usually be inspected
and verified and the information about their status passed on to the accounts payable,
inventory, and production departments. Delivery dates should also be noted so that data on
delivery times can be collected. This type of information is supplied by receiving information
systems.

Quality Control Information Systems

Quality control information systems provide information about the status or production of
goods as they move from the raw material state, through goods in process, to the finished
goods inventory.

Shipping Information System

At the other end of the production process, there is a need to place finished goods produced
into inventory and to ship those on order to customers. There are many records and
documents that are used to assist and monitor in the inventorying and shipping processes – for
example, shipping reports and packaging slips. The information from the shipping system
affects the inventory and accounts receivable systems.

Cost Accounting Information Systems

A variety of operational information subsystems of the financial accounting system collect
and report information about the resources that are used in the production processes so that
accurate costs of production can be obtained on products and services. Cost accounting
systems monitor the three major resources used in production: personnel, materials, and
equipment and facilities. Payroll information systems and materials information systems
provide information about the costs of these resources.

7.4.2 Tactical Manufacturing and Production Information Systems

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Tactical information systems include inventory management and control systems, capacity
planning, production scheduling, and product design and development.

Inventory Management and Control Information Systems

The management and control of raw materials, goods in process, and finished goods
inventories is an important part of production system. Careful management and control of
these inventories will usually provide considerable savings to the organization. Inventory
management and control systems use information from operational information systems, such
as the shipping and receiving systems, purchasing systems, and order entry systems.

Maintaining inventories at their proper level eliminates production shutdowns from lack of
materials and lost sales from lack of finished goods. Ordering too much and ordering too little
are costly in terms of inventory carrying costs and ordering costs respectively. Thus, the best
or economical order quantity (EOQ) strikes a balance between carrying costs and
procurement costs.

The computation of EOQ for each item in inventory would be a very large and tedious task if
done manually. Also, for many inventory items, the manager may wish to play "What if?"
formulas games with the values in the EOQ. Without computers, these tasks would be
laborious and may prove too time consuming to keep the order process fine-tuned to current
data.

Capacity Planning Information Systems

In addition to ensuring that there will be enough raw materials on hand for forecasted
production, the production manager must also see to it that there will be enough production
capacity available to meet production goals. The purpose of capacity planning is to make
certain that there is sufficient personnel, space, machines, and other production facilities
available at the right time to meet the organization's planned production. Managers also utilize
capacity to minimize capacity in excess of planned production needs.

Production Scheduling Information Systems

The purpose of the production schedule is to allocate the use of specific production facilities
for the production of finished goods to meet current or forecasted orders. To manage the

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scheduling process, a number of scheduling tools have been developed. Two of these are
Gantt and PERT charts and there are project software packages at this time.

Product Design and Development Information Systems

Numerous tactical decisions must be made to design and develop a product, especially a new
product. The design engineering team usually depends on product specification information
derived from customer surveys, target population analysis, or other marketing research
information systems. The team also depends on data from the quality control information
systems. Teams may use other computerized systems for designing new products as well.
Software used for design, testing and manufacture of product is commonly available these
days.

7.4.3 Strategic Planning Manufacturing Information Systems

As we just discussed, production information systems are primarily operational and tactical in
nature. They are concerned with providing information to monitor and control the production
of goods and services and to allocate resources to complete production processes.
Manufacturing information systems are typically strategic in nature.

For example, the decision to construct a plant addition or a totally new plant, the selection of
the plant site, and the creation of general plans for the design and layout of the facility are top
management decisions. Decisions of this magnitude will require the commitment of a large
amount of capital and other resources over a long period of time and thus are strategic
planning decisions. Such decisions are not made lightly.

The decision to locate a plant site requires a great deal of information that is external to the
organization. Facilities planning information systems support top management decisions in
this area. Some of the information needed is relatively quantitative – for example, the
availability and cost of trained or experienced labor and the degree to which it is unionized,
the availability and cost of transportation for raw materials and finished goods, the availability
of suitable sites and the cost of land, the proximity of raw materials suppliers and/or finished
goods customers, the availability and costs of power, and the rate of property and incoming
taxation.

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Other information used in locating a plant may be qualitative in nature – for example,
community attitudes toward an organization of the type of wishing to locate there and the
quality of community services, such as education and training opportunities.

The final decision concerning plant may be made using some form of weighted average
technique, in which factors such as those listed above are ranked and the total scored for
several potential sites computed. It may also be made on largely emotional factors by top
management.

7.5 HUMAN RESOURCE INFORMATION SYSTEMS

The human resource management function is concerned with the individuals who constitute
the organization. From the standpoint of the organization, the function is responsible for the
acquisition and effective use of the individual, the function is concerned with the well being,
growth, and development of each worker. To achieve these ends, human resource
management departments perform a variety of activities. The major activities of the personnel
function in an organization include:
1. recruiting employees
2. evaluating applicants and employees
3. selecting, placing, promoting, terminating, and transferring employees
4. analyzing and designing jobs
5. training and development reports
6. producing required governmental reports
7. managing employee wage and benefit plans
8. planning short and long term staffing needs
To perform these activities, managers rely on a number of operational, tactical, and strategic
information systems.

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7.5.1 Operational Information Systems
Operation human resource information systems provide the manager with data to support the
routine, repetitive personnel decisions that occur regularly. There are several operational level
information systems that collect and report personnel data. These include information systems
pertaining to the organization's positions and employees, and about governmental regulations.

Payroll Information Systems

The financial information system, through its payroll subsystems, collects and reports data
pertaining to human resources that is largely operational in nature. Payroll files often contain
a great deal of information about employees – including information about employees pay
rates, wage classifications, and seniority – that can be used to managers making human
resource decisions.

Position Information Systems

A job is usually defined as a group of like or similar positions. A position, on the other hand,
consists of tasks performed by one worker. The purpose of a position information system is to
identify each position in the organization, the job category in which the position is classified,
and the employee currently assigned to the position. Reference to the position information
system allows a personnel manager to identify the details about unfilled positions. Position
information systems also allow the personnel manger to identify human resource problems.

Employee Information Systems

The personnel department must maintain information on each of the organization's employee
for a variety of reporting purposes. One part of this information system is a personnel file,
which usually contains personal and organization related information such as name, address,
sex, material status, citizenship, years of service or seniority data, education and training,
previous experience, employment history within the organization, salary rate, salary or wage
grade, and retirement plans.

Another part of an employee information system is an employee skills inventory. The skills
inventory contains information about every employee's work experience, work preference,
test scores, interests, and special skills or proficiencies. The skills inventory system provides
information for many decisions.

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 Employee Evaluation Information Systems
Many organizations review the work of employees on a regular basis to make decisions
regarding merit pay, pay increases, transfer, or promotion. Typically, a new employee is
evaluated at the end of the first four months and other employees are evaluated semiannually.
These reviews provided by the employee evaluation information systems are often called
performance appraisals. The data for performance appraisals are frequently collected by
administrating employee appraisals forms to each employee’s immediate superior. The forms
may also be given to peers, the employees themselves, and even customers or clients.

Applicant Selection and Placement Systems

After job and the employee requirements for those jobs have identified and after a suitable
pool of job candidates has been recruited, the candidates must be screened, evaluated, selected
and placed in the positions that are open. To ensure compliance with federal, state, and local
employment laws, these procedures must be fully documented and carried out in a structured
manner. Thus, data pertaining to interviews, examinations, and placement decisions should be
collected and kept according to the requirements of the various laws and regulations of acts.

7.5.2 Tactical Human Resource Information Systems

Tactical information systems provide managers with support for decisions that emphasize the
allocation of resources. Within the human resource management area, these decisions include
recruiting decisions, job analysis and design decisions, training and development decisions,
employee compensation plan decision, and labor negotiation decisions.

Job Analysis and Design Information Systems

The information inputs to the job analysis and design information system include data
obtained from interviews of supervisors and workers and affirmative action guidelines. Inputs
also include information from sources externals to the firm, such as labor unions, competitors,
and governmental agencies. The outputs of the job analysis information system are job
descriptions and job specifications.

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 Recruiting Information Systems
To develop recruitment plan and monitor its success, a recruiting information system is
necessary to collect and process the many different types of information needed to construct
the plan. These include a list of unfilled positions; the duties and requirements of these
positions; lists of planned employee retirements, transfers or terminations; information about
the skills and preferences of current employees; and summaries of employee appraisals. The
source of recruitment, affirmative action plans, information about the success of recent
recruitment activities must also be included in the information systems.

Compensation and Benefits Information Systems

Fringe benefit is anything in addition to the basic salary and over time pay to an employee.
Information on the benefits and compensation packages will help managers to make informed
decisions.

Employee Training and Development Systems

To support the management and training function, it is important to keep information about
current and potential instructors; current and potential students; the content and scheduling of
courses, seminars, and workshops; and the success of past efforts, as measured by tests,
student ratings, and supervisor follow ups. This information system should permit tactical
decisions regarding the nature of training and development programs. This system must use
the other sources of human resource information systems.

Labor Negotiations Information Systems

Negotiating with the union requires information gathered from many of the human resource
information systems already discussed. In addition, negotiators need information from the
financial accounting system and from external spruces including competitor wage agreements
and appropriate economic data for the industry, employee group, and geographical region.

The personnel team completing the negotiating needs to be able to obtain numerous ad hoc
reports that analyze the organization’s and union’s positions within the framework of the
industry and current economic situation. it is also important that the negotiating team be able
to receive ad hoc reports on a very timely basis, since additional questions and tactics will
occur to the team while the negotiations are underway.

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7.5.3 Strategic Human Resource Information Systems
Human resource planning is conducted to ensure that the organization has the right kinds and
the right numbers of people at the right places at the right time to achieve its objectives. There
are two types of human resource planning that are strategic in nature. These are manpower
planning, or staffing planning, and program planning.

Manpower Planning
Organizations that are involved in long term strategic planning, such as those planning to
expand into new market areas, or to construct new factories or offices in new locations, or to
add new products, will need information about the quantity and quality of the work force that
is available to achieve their goal. Manpower planning serves this purpose. This type of
planning involves identifying the human resources needed to meet the organizational
objectives specified in the strategic plan. This means forecasting the supply and demand of
the required work force. These forecasts are estimates of the characteristics, quantity, and
pricing of the labor force needed to achieve the long-term plants of the organization.

To forecast human resource needs, information will be required to answer a number of

planning questions, including the following:
1. What should the labor force of the organization look like to meet the strategic plan?
What kinds of skills, experiences, knowledge, and other qualities should the
organization’s human resources possess? In other words, what are the job descriptions
and specifications required by the strategic plan?
2. What quantities of human resource with the qualities already identified are needed to
carry out the strategic plan? In other words, how many positions for each job title are
needed for the strategic plan?
3. What are the current human resources of the organization and how do they help the
organization’s strategic needs for human resources?
4. What other human resources are available to achieve the strategic plan?

Identifying the types and quantities of workers needed for the strategic plan is forecasting the
demand for human resources. Identifying the human resources available internally and
externally is forecasting the supply of those human resources. Forecasting demand and supply

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can be done on a macroeconomic level or a microeconomic (more specific to the
organization) level.

Program Planning
A second strategic planning function is to develop the policies, procedures, and activities that
will achieve the human resource needs spelled out in the manpower plan. Two key activities
in program planning are job analysis and design and recruiting. Job analysis and design is
essential to describe the work force required by the organization.

Recruiting plans must be developed to acquire the right kinds of workers in the right amounts
to fill the jobs described. Where there are insufficient workers with the right skills, training
programs may have to develop, or the jobs may have to be redefined to fit the skills of the
available work force.

Check Your Progress Exercise

1. Define the following terms:
A. Financial information systems
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
___
B. Marketing information systems
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
___
C. Human resources information systems
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
___
2. List down at least five (5) sub system modules of accounting systems.

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 ________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
___
3. Explain the term telemarketing.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
___
4. What is the purpose of manufacturing and production information systems?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
___
5. List some of the major activities of personnel functions in an organizations.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
___

7.6 SUMMARY

In this unit you have learned about the different levels of managers and how information
systems support these functions. The activities of an organization include day to day
operations, effective allocation of resources, and strategic planning. Information systems are
designed to support decisions at these three levels. Operational information systems process
transactions describing the acquisition and disbursement of corporate resources. First line
supervisors use operational systems to monitor day-to-day activities. Accounts receivable,
accounts payable, and payroll systems are examples of operational systems.

Tactical information systems provide middle managers with the information they require to
allocate resources needed to achieve organizational goals. Often, these tactical systems

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summarize or aggregate data generated from operational systems. Strategic planning systems
help senior managers identify organizational goals. Information for strategic planning often
comes from external sources such as demographic date and competitive industry statistics.

Information systems have evolved with in organizations over the past 20 to 25 years. This
growth involves the construction of operational, tactical, and strategic planning information
systems to support the managers of the business. However, the growth of data processing
systems involves more than technology and applications. It requires user involvement in
application development, the organization and management of an MIS function, and the
development of effective planning and control strategies.

7.7 ANSWER TO CHECK YOUR PROGRESS EXERCISE

1. Refer to sections 7.2, 7.3, and 7.5

2. The sub systems module of accounting includes:
a. General ledger
b. Fixed assets
c. Accounts receivable (credit limit, aged accounts receivable reports can be generated)
d. Order entry
e. Accounts payable
f. Inventory
g. Purchase order
h. Payroll
3. Using the telephone for selling is referred to as telemarketing. Using telemarketing has
become a very important means by which companies have improved the productivity of
their sales force.
4. Purpose of manufacturing & production systems encompasses all the activities necessary
to ensure production. These activities may include the evaluation of sites for production;
the planning, development, and maintenance of production facilities; and the setting of
production goals to meet the requirements of the sales forecast generated by the marketing
system.
5. The major activities of the personnel function in an organization include:

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- recruiting employees
- evaluating applicants and employees
- selecting, placing, promoting, terminating, and transferring employees
- analyzing and designing jobs
- training and development reports
- producing required governmental reports
- managing employee wage and benefit plans
- planning short and long term staffing needs

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 Unit 8: Information Resource Management

Contents
8.0 Aims and Objectives
8.1 Introduction
8.2 Structure of Information Systems Functions
8.2.1 The Organizational Location of Information Systems
8.2.2 The Internal Structure of Information Systems
8.3 Managing System Development
8.4 Managing System Operations
8.5 Managing End User Computing
8.6 Summary
8.7 Answers to Check Your Progress Exercise

8.0 AIMS AND OBJECTIVES

After studying this unit, you should be able to:

- better understand the structure of the information systems
- explain the major functions of information systems
- know how managing system development effort and its technology looks like
- describe the management of system operations and
- Understand managing end users computing.

8.1 INTRODUCTION

Computer information systems are often large and complex. With the advent of
minicomputers and personal computers, computer systems are being dispersed to a large
number of points at far-flung locations. Computer technologies such as electronic mail,
decision support systems, and personal computers, application development by users,
computer networks, and computer integrated manufacturing are causing monumental changes
in the conduct of business activities. Managers who successfully manage these technologies
will be winners in the competitive business arena.

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Management of the information systems resource has been significant changes in recent years.
In the 1960s and 1970s, information systems managers gradually increased their power and
influence within most organizations. Typically, they moved from managerial positions within
another function, such as accounting, to vice-presidential positions within the information
systems function. These managers were looked upon as experts in information processing,
and they held the keys to the computer resource. In recent years, distributed data processing
and application development by users have resulted in a challenge to the power of the
information systems manager. With users directly purchasing hardware and either purchasing
or creating software, many see the role of the information systems manager changing to that
of a consultant, an advisor, and a coordinator. However, centralized computer facilities will
continue to exist, especially for large databases that support many users concurrently. The
challenge of administering centralized database and communication networks with distributed
computing will continue to provide information systems managers with a crucial role in the
management of business organizations.

This unit first discusses the structure of the information system function. It then looks at
managing system development. Finally, it covers the management of system operations,
including system maintenance, data processing (DP) operations, the physical security of
computer operations, and managing end-user-computing.

8.2 STRUCTURE OF THE INFORMATION SYSTEMS FUNCTION

This examination of the management information systems function is broken down into two
major areas: the location of the information systems function within the structure of the
organization, and the internal structure of the information systems function itself.

8.2.1 The Organizational Location of Information System

Typically the information systems function is located in one of two areas in an organization.
The chief information systems executive may report to the vice president and controller as
depicted in Figure 8-1, or he or she may report directly to the president as vice president and
chief information officer, as depicted in Figure 8-2. There are advantages and disadvantages
to both of these organizational locations for the information systems functions.

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The controller, being the chief financial officer in a corporation, is looked upon as the
primary provider of financial management information. In addition, functions in the
controller's areas such as payroll, accounts payable, and accounts receivable are often the first
applications to be computerized.
President

Vice President Vice President Vice President & Vice President

Manufacturing Engineering Controller Marketing

Director of Director of Director of

Budgeting Information General
System Accounting

Figure 8-1: Chief information systems

Therefore, the information systems function often originates and matures within the
controller's organization. The primary disadvantage of having the chief information systems
executive report to the controller is that the computer resource may be dominated by and used
primarily to solve problems within the accounting area. Therefore, other functions such as
marketing, engineering, and production applications of the computer may be neglected. The
primary advantages of having the chief information systems executive report to the controller
are that accounting is an information-oriented discipline and accountants are well trained in
the area of control. These skills of accounts may produce a computer system that is well
controlled and easy to audit.

Many large, mature information systems organizations are separate and have a chief
information officer who is a vice president and reports directly to the president, as illustrated
in Figure 8-2. This location for the information systems function helps ensure that each
functional area receives unbiased attention from the information systems department. Today,

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with computers penetrating many aspects of all functions, it is particularly important that the
chief information systems executive be a member of the unbiased vice presidential level of
management.

President

Vice Vice Vice President Vice Vice

President President Chief Information President & President
Manufacturing Engineering officer Controller Marketing

Figure 2-2 Chief information systems executive reporting to the president

8.2.2 The Internal Structure of Information Systems

The organization of the information systems function itself varies from firm to firm,
particularly between small and large firms. Figure 8-3 depicts a typical information system
organization in a large firm. In small organizations, many of the functions identified in this
figure are consolidated or do not exist. For example, a small firm may purchase all of its
software, so it has no need for the systems and programming function and the systems
software function.

As shown at the manager level of Figure 8-3, six distinct functions should be carried out
within information systems or arranged through outside sources. A specific information
systems organization chart may look quite different from Figure 8-3. However, the major
functions that an information systems organization is concerned with are covered in the
figure.

The information center is responsible for coordinating and supporting application

development by end users. The people in the center are technical experts on the software that
users typically employ without programming, such as Lotus 1-2-3 and FOCUS. They act as
consultants to assist the user in application development without programming. Since the
personal computer is used in this effort, the coordination of personal computing is often

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carried out by the information center. The personal computer has brought several challenge,
including managing the personal computer. The responsibilities of the personal computer
coordination group are listed in Figure 8-4.

The systems software department installs and maintains system software such as operating
systems and database management systems. The people in this department are technical and
very highly skilled programmers who rarely deal directly with users.

Application software is developed by, or selected and purchased with the help of, the systems
and programming department. The people in this department interact heavily with users as
they develop users applications.

The technical support staff is in charge of maintaining hardware and establishing data
processing standards. These standards are very much like the procedures for the data
processing function. They include such things as program, data, and application naming
conventions, procedures for maintaining the integrity of communication systems, and
guidelines that govern the content of user procedure manuals.

The data processing operations department manages the day-to-day operations of the
computer hardware. Employees of this department also monitor the processing of computer
jobs and assist when human intervention, such as mounting tapes, is required.

A function that is relatively new in most large information systems organizations is that of
database administration (DBA). The DBA department is responsible for coordinating the
database and providing for data security.

The information systems steering committee is made up of high-level managers from each
function within the business, including marketing, accounting, information systems,
manufacturing, and so on. Its purpose is to guide the overall direction of information systems.
For example, the steering committee decides the priorities for implementing specific
application systems. Much of the high level planning for information systems is either
performed or approved by the steering committee. Ideally, the steering committee provides
the broad perspective and guidance necessary to ensure that the information systems resource
supports the objective of the business as a whole.

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363
 Senior Vice President with
Information Systems
Responsibility

Information
Systems Steering
Committee
Information
Systems
Director

Information Systems Systems and Technical Data Database

Center Software Programming Support Processing Administrator

Manager Manager Manager Manager Manager

Personal Systems Documen Systems Programming Hardware/ Standards & Librarian Data Entry Computer Input/
Computer Programme -tation Supervisor Supervisor Network Quality Supervisor Operations Output
Coordination r Maintenance Control Supervisor Control
Service Supervisor Supervisor Supervisor
Project Project
Application Data Entry Suit Control
Leaders Leaders
Dev't by Personnel Supervisor Clerks
End Users
Support Systems Programme
Supervisor Equipment
Analysis r
Operators

Figure 2-3: Large information systems organizations

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Figure 2-4 Responsibilities of the personal computer coordination group

 Standardizing hardware purchases

 Standardizing software purchases
 Providing PC access to mainframe databases
 Preventing the redundant development of software
 Preventing the redundant creation and storage of data
 Assuring that data sorted on personal computers are secure
 Providing personal computer training
 Maintaining the firm's in-house "personal computer store" where users can try out a wide
variety of PC hardware and software.

8.3 MANAGING SYSTEM DEVELOPMENT

Perhaps the most important aspect of managing the system development effort is the system
development methodology used. A structured methodology, blended with system prototyping
and application development by users, should be used to develop any new system.

Another aspect of managing system development is the process by which development efforts
are controlled. Most system development organizations use a project management approach.
Under the project management approach, each application development of significant size is
assigned to a project development team. This team is usually headed by a senior systems analyst,
or sometimes by a user department manager, who has system development experience. Sufficient
resources in the form of programmers, systems analysts, hardware, and software are assigned to
the team to complete the project. The team approach to management is being applied to all areas
of information systems management.

Each project is assigned its own financial budget and time schedule. The financial budget
performance is tracked by periodic reports, which compare actual expenditures to budgets.
Schedule performance is managed and controlled through a project schedule performance tool
such as program evaluation and review technique (PERT), critical path management
(CPM), or Gantt charts. PERT and CPM are scheduling methods that use networks consisting

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of activities that consume resources and take time, and events that mark the beginning and end of
each activity. These methods allow the minimum amount of time in which a project can be
completed and the critical path to be determined.

A Gantt chart can be a valuable measurement tool in complex project. It aids in scheduling and
coordinating and provides a visual means of evaluating progress. Since preparing a Gantt chart
does not require extensive effort or data, the potential benefits generally exceed the cost.

8.4 MANAGING SYSTEM OPERATIONS

In addition to managing system development, the director of information systems is responsible

for managing the operation of information systems. This task involves overseeing system
maintenance, data processing operations, and the physical security of the system.

System Maintenance
System maintenance is the correction of errors discovered in programs and the modification of
programs to satisfy changed user requirements of conditions. Changes in programs are often also
necessary when new hardware is introduced. System maintenance has become a challenge for
many information systems organizations. In many cases it consumes 70 to 80 percent of the
systems and programming resources. Such situations leave few resources for developing new
systems. Methods for decreasing the cost of system maintenance are of paramount concern to
information systems managers.

As with managing systems development, the adoption of a structural system development

methodology greatly enhances the ability to manage system maintenance. Efficient and effective
system maintenance requires an understanding of the program to be modified. Programming
personnel must be able to effect the change by changing the program statements in a confined
and isolated area of the program. If a change requires modification in many different areas of the
program or system, then system maintenance becomes an almost impossible task. Structured
methodologies produce modular programs. Each module is an independent and self contained as
practical. Therefore, changes are likely to affect only a restricted area of one module.

Often organizations have programs that meet their needs but are difficult to maintain because
they are non-modular or they use unstructured code. These organizations may hire firms that

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specialize in rewriting programs to restructure these programs in a modular form that follows
structured programming standards. Some programs are rewritten manually, but COBOL
programs are often restructured using other programs that do not require human intervention.
Rewriting can often extend the life of a program for several years.

Active data dictionaries also simplify system maintenance by restricting both the number and
location of program changes. Active data dictionaries allow data to be defined in one location.
The data definitions are then used by all programs that process those data. The programs use
each data item by referring to a data name. The physical format of the data, including their type
(character or numeric) and their length, must be known to each program that uses them. Thus,
the physical format definition of a data item is also stored in the active data dictionary. The term
active is used since each program actively uses the data dictionary for data definitions.

Requests for changes in programs originate with users and should be made on a formalized
change authorization form. On this form the user identifies the program or system to be changed
and outlines the changes desired. This form requires authorization signatures, which must be
obtained before the changes are made. Authorization signatures are typically required from user
management and form the systems and programming manager, and are sometimes required from
the data processing steering committee. Figure 8-5 shows a change request and authorization
form.

Actual changes to programs must be well managed and controlled. After the changes have been
made, the system is thoroughly tested using the same set of tests used when the system was
developed. The tests are modified to reflect changes and are then run before the changed system
is implemented.

Data Processing Operations

Managing data processing operations is much like managing any production shop within an
organization. Management is concerned with maintaining sufficient capacity to process the
computer jobs. Users of the resource are charged for the resources they use. Personnel are hired,
managed, and sometimes dismissed, and the machines are maintained in operable condition.
REQUEST FOR SYSTEM MODIFICATION
User Name:

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Department:
Telephone No.:
System Name:
Module(s) to be changed (if known):

Please describe the change(s) desired and explain the reasons thereof:

Signature Approved Rejected Comments

____________________
Requestor
____________________ ____________________________________
_________________
Dept. Manager
____________________ ____________________________________
_________________
IS Liaison Officer
____________________ ____________________________________
_________________
Manager, Systems
and Programming

Figure 8-5 Change requests in an authorization form

Processing capacity may be limited by any number of factors including primary storage size,
secondary storage size, CPU power, number of terminals, and so on. Any of these can become a
bottleneck that limits the capacity of the computer system. Data processing management
monitors these resources and determines if one is likely to become a bottleneck in the future.
Additional resources usually can obtained at a reasonable price if the potential capacity if the
potential capacity bottleneck is identified promptly. Software monitors such as IBM's system
management facilities help determine the usage levels of various system resources. For example,
managers can determine the percentage of time various terminals are used and the time of the
day they are used. They can also determine if the CPU is running close to its maximum capacity
at any given point during the day. Trends of system resource utilization enable managers to
project when various resources will be used at their capacity and, therefore, when expansion

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should be planned. Hardware monitors are also sometimes used to detect bottlenecks and to
determine utilization levels for various devices.

An effective way to ensure that the computer resources is used efficiently is to charge users for
their use of the various computer resources including CPU time, disk space, tapes, printing, and
son on. Under a user building system, the DP operations department is set up as a service center
to the rest of the firm. Its services are available to anyone in the firm who is willing to pay for
those services. Rates for the services should be similar to the rates charged if the user contracted
for data processing services outside the firm with, for example, a service bureau.

Physical Security
In many companies today the information systems resource is a crucial asset. Even a temporary
loss of this resource through fire, sabotage, or other disaster can be costly. You will likely soon
learn firsthand the need for contingency planning, with backup of files. After you have worked
for several days on an electronic spreadsheet, program, or word processing file, you will
accidentally lose or erase it. Each term, one or more of my students indicate that they have lost
their boxes of disks. Typically, many days of work are stored on those disks, and they have not
been backed up. One such experience usually teaches the importance of planning for disasters.
Imagine the cost to a large business if it lost all its files in a fire and no file backups had been
made!

File backup is a technique for recovering from a disaster after it occurs. This section examines
physical security that helps prevent disasters from occurring. It covers five areas within physical
security: entry, sabotage, fire, natural and environmental disaster, and power controls.

Entry Control: A well designed entry control system controls entry to the computer facility.
Only operations personnel are allowed to enter the computer facility itself. Programs and data
that are manually delivered to the computer room are passed through a window. (Most programs
and data today are transmitted electronically to and from the computer, and thus require input
data and program change control rather than entry control). Entry control is usually done
through locked doors to the computer room. These doors are opened through various means,

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such as a plastic card with a magnetic strip similar to a credit card, or a combination of both a
plastic card and a memorized entry code.

Plastic cards and key can be lost or misplaced, and thus may be used by someone other than the
person authorized to use them. Providing 100 percent positive identification of each person
entering a computer facility is difficult. Firms have tested, and are using, a wide variety of
techniques and machines to provide positive identification. One machine examines the pattern of
each person's fingerprints. (You cannot misplace your fingerprints!) But it has been found that a
photocopy of a person's fingerprints can trick the machine into unlocking the door. Another
machine works similar to the fingerprint machine, except each person has to kiss the machine!
Lip prints also uniquely identify a person. But aside from its obvious drawbacks, this machine
can also be misled by a photocopy of a person's lip prints. A third machine shines light into each
person's eyes and identifies him or her based on the retinal patterns within the eyeballs. Although
this technique is harmless, employees probably would not accept it. Eventually, though,
machines that are highly reliable in identifying individuals will be developed.

Sabotage Control: physical sabotage of the hardware, programs, and data is prevented to a large
extent though passwords and by physical entry controls over the computer facility itself. In
addition, firms that specifically design a secure computer facility usually provide sabotage
control by constructing the computer room to bombproof specifications. When computers were
first used in the 1950s and 1960s, it was common to have large glass windows in the walls of the
computer center so that a firm could show off its computer facilities. A saboteur could have
easily tossed a bomb through those windows.

Fire Control: the most likely physical threat to a computer facility is fire. The best fire control
procedure is to store backup copies of data and programs at another location and to arrange for
emergency use of alternative computer hardware in case of a fire. In addition, many computer
centers use a fire suppression gas known as halon. The halon is released by fire and smoke
detection systems, and it is effective in suppressing fires. The primary disadvantage of halon is
that it is very expensive. An accidental release of the gas may cost a firm several thousand
dollars just to replace the gas. Other, less expensive gases are available, but they are impractical
because they are poisonous to operations personnel. Halon is a nonpoisonous gas.

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Natural and Environmental Disaster Control: natural and environmental disasters should be
considered when choosing, the site for a computer room. Disaster control provides protection
against such catastrophes as floods, hurricanes, bursting pipes, and so on. Water can destroy the
sensitive electronic equipment in a computer room. Fire control water sprinklers on floors above
the computer room are an environmental hazard that is sometimes overlooked. Water leaking
down through pipe holes and other crevices onto computer equipment, tapes, and disks can be
very damaging. For this reason, the floor above the computer room should be thoroughly sealed
to prevent water leakage.

Power Control: large computer systems should have uninterruptible and controlled power
systems. Plugging such computer systems directly into electrical lines is not a good idea. If the
power goes off, even momentarily, the data and programs stored in semiconductor primary
storage are lost because semiconductor storage is volatile. Furthermore, power spikes (increases
in the current voltage) can heavily damage a computer system. Power spikes are often caused by
electrical thunderstorms. Some computer centers guard against these types of power spikes by
shutting down computer operations during electrical thunderstorms. However, in many situations
shutting down the computer during electrical thunderstorms is not a viable alternative.

Many organizations use power supply systems to provide power control. These systems consist
of batteries and backup generators. The batteries are continuously charged by the incoming
electrical service, and the computer draws its power from the batteries. The computer is insulated
by the batteries from the electrical service lines, and can thus avoid power spikes. In the case of a
power outage, the batteries are sufficient for a short duration. Long power outages are covered
by the backup generator system.

Personal computers can be protected against power spikes and electrical noise with inexpensive
devices that shut the power off when these electrical disturbances occur. Uninterruptible power
systems can also be purchased for PCs, but they are expensive.

8.5 MANAGING END USER COMPUTING

In this unit we will cover some of the concepts surrounding the primary issue in end-user
computing: How do you divide the responsibilities for end user computing between the end user

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and the central information systems organization? In the early days of personal computers and
end-user computing there was very little control in management of end user computing. In fact,
some argued that end user computing should be managed with a laissez-faire approach; that is,
end users should be free to purchase and use whatever personal computer hardware and software
they deemed necessary without any management from the central information systems
organization. The arguments for a laissez-faire approach revolved around the contention that end
users best knew what hardware and software suited their tasks and that to control end-user
computing would stifle the creativity and innovation of end users.

Most experts today would agree that a laissez-faire approach to end user computing is the
prescription for a disaster consisting of duplicate systems, incompatible systems, and corrupt and
lost data. Thus, in addition to the support and consulting that the central information systems
organization should provide to end users, the central information systems organization and end
users must arrive at some division of the responsibilities for end user computing. There are
potential negative consequences if the central information systems organization dominates end
user computing and there are also negative consequences if end users dominate end user
computing.

The particular responsibilities, that information systems and users will have depends on the
individual organization. However, we can list the minimum responsibilities of each group.
Central information systems should have responsibility for the following:

1. Large multi-user databases

2. Information center consulting
3. Implementing and maintaining the network
4. Procedures to compare the costs of internal development of systems projects versus
outsourcing
5. A list of preferred hardware and software and their suppliers
6. A guide and detailed checklist for the questions that should be asked when purchasing
any hardware or software
7. An inventory of all information systems hardware and software

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 8. A plan for the career paths of information systems professionals throughout the
organization
9. An information systems master plan that outlines the strategic plan for information
systems development

As a minimum users should have the following responsibilities to fully participate in all
information systems development and maintenance efforts that affect them: To receive, review,
and approve all expenditures of funds for information systems that are being developed or are in
operation for the user departments' benefits.

As organizations becomes more dependent on computer systems, managing information system

resources become more critical. Many of you will be involved in varying degrees in information
systems resource management. Sometimes we start to believe that to manage information
systems we must stay on the cutting edge by adapting all the latest technology. It is important to
remember that many firms are successful with a more conservative approach.

Check Your Progress Exercises

1. What are the two possible locations for an information system department with in the firm?
How do they differ?
_____________________________________________________________________________
_____________________________________________________________________________
_______________________________________________________________________
2. Identify the major functions with in an information systems organization.
_____________________________________________________________________________
_____________________________________________________________________________
_______________________________________________________________________

3. What are the basic tasks for managing the operations of information systems?
_____________________________________________________________________________
_____________________________________________________________________________
_______________________________________________________________________
4. List out the five areas that physical security cover.

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_____________________________________________________________________________
_____________________________________________________________________________
_______________________________________________________________________
5. What are the minimum responsibilities of central information systems and of end users in the
management of end user computing?
_____________________________________________________________________________
_____________________________________________________________________________
_______________________________________________________________________

8.6 SUMMARY

- In recent years the role of the information systems manager has changed as users have
become more actively involved in data processing.

- The information systems function may be located within the controller's organization where
the controller is considered to be the primary provider of information. On the other hand,
many organizations treat information systems as a separate function with a vice president
who reports directly to the president.

- A structured system development methodology should be used. Normally system

development is carried out using the project management approach for project control. If a
structured methodology is used for system development, program maintenance becomes an
easier task. However, all changes must be authorized and properly documented in order to
prevent confusion and chaos.

- Active data dictionaries substantially reduce the number of program changes that must be
made when the format of data changes.

- Operations should be constantly monitored to detect bottlenecks and inefficiencies. User

billing should be used to ensure efficient use of resources.

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- Physical security of the computer system is a major responsibility of systems management.
Procedures should be implemented for both the prevention of disasters and recovery from
disasters like fire and flooding.

- Determining the responsibilities of central information systems versus end users is one of the
key questions in the management of end user computing.

8.7 ANSWER TO CHECK YOUR PROGRESS EXERCISE

1. Chief information systems executive reporting to the vice president.

Chief information systems executive reporting to the president.
For more on this refer to part 8.2

2. The organizational location of information system and

The internal structure of information system functions

3. System maintenance
Data processing operations
Physical security of the system

4. Entry, sabotage, fire, natural & environmental disaster and power controls.

5. Large multi-user databases

Information center consulting
Implementing and maintaining the network
A list of preferred hardware and software and their suppliers
An inventory of all information systems hardware and software …
For more detail on this refer back to part 8. 5

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