Chapter 1: INFORMATION SYSTEMS

Topic focus:
 ISs and the organisation
 Managing the information resource
 Intergrating IT into business

1.1 Information Systems and Business

An Information System is an organised portfolio or a formal system for obtaining, processing
and delivering information in support of business operations and management of an
organisation.

Definition: An Information System is a set of inter-related components that collect, retrieve,

process, store and disseminate information to support planning, decision making, co-ordination,
and control.

Information Systems also help managers and workers analyse problems, visualise complex
subjects and create new products.

Information Systems contain information about significant people, places and things within the
organisation or in the environment surrounding it. Every day people buy goods and services
from businesses - who buys what, why they buy it, how much it costs, what it is selling and how
much inventory is left are all questions that when answered produce large amounts of data for
businesses manageable when computers are applied.

Business Information system

A business system is concerned with accomplishing specific business goals. For example, a
factory as a business system with the goal of manufacturing products, can be broken down into
smaller components or sub-systems e.g. a maintenance sub-system concerned with the
maintenance of the factory buildings; another concerned with control and assembly of products
that the organisation sells; another for processing the customer orders, billing customers and
paying employees.

The information system for the sub-system that bills customers, would probably keep track of
each customer's name and address, recent sales to the customer, recent payments from the
customer and the total amount the customer owes. An information system can be computerised
or manual or some combination of the two.

All businesses need an information system to operate but do not have to include computers. For
most modern businesses, however, the computer plays an integral part in this process.
Computers have enabled organisations to develop capabilities to collect and store large
amounts of data for use in conducting and enhancing their businesses.

Information Systems and What they do?

ISs can be broadly classified into two: Operations Support (OSS) and Management Support
Systems (MSS).
 OSS= TPS, PCS, OAS
 MSS= IRS, DSS, EIS
Operational Support Systems assist in the day-to-day activities of an enterprise by keeping
track of its resources and commitments. The primary function of office support systems is thus
transaction processing.
Management support systems assist the various levels of management in their tasks.

1. Transaction processing systems for operational DP that are needed e.g. to register
customer orders and produce invoices and payroll checks. Day to day activities-
transactions

2. Office information system which support and co-ordinate knowledge work in an office
environment by handling documents and messages in a variety of forms.

3. Management reporting systems capable of producing reports for specific time scales,
designed for managers responsible for specific functions in a firm.- MIS, MRS

4. Decision support systems (DSS) expressly designed for the support of individual and
collective decision making.

5. Executive Information Systems (EIS) which support the work of senior executives and of
company goals by giving them access to a variety of summarised company data against a
background of general information on the industry and the economy at large.

Information Systems in an organisation:

ESS

DS
Management
S
MRS
Knowledge level

s
Operational support TPS

The widening scope of ISs

Over time, information systems have come to play a larger role in the life of organisations. Early
systems brought about largely technical changes that were relatively easy to accomplish. Later,
systems affected managerial control and behaviour; now systems influence core institutional
activities concerning products, markets, suppliers, customers. (see diagram)
Activities of Information Systems
These include: input, processing and output

ENVIRONMENT

Input Processing Output

Feedback

Transformation process

Computer Based Information Systems (CBIS)

These are information systems that utilise computers and telecommunications technology in the
capture, processing, storage, manipulation, and dissemination of information.
The output of information systems takes various forms:
i. Printed reports
ii. Graphic displays
iii. Video displays
iv. Sounds
v. Data to feed other information systems
Need for CBIS
CBIS are built for the purpose of solving significant business problems as they are seen in
organisations. It is important to note that the study of Information Systems is centred on
building systems to solve business problems. We need to understand not only the systems that
exist now (and why) but also the way to build systems in the future and the skills we all need to
have.
Components of Business Information Systems
An information system is an integral part of an organisation and is a product of three
components:
i. Technology
ii. Organisations
iii. People
 One cannot understand or use information systems effectively in business without
EXTERNAL ENVIRONMENT

Organisation
People

IS

Technology

The view taken above constitutes the sociotechnical view of information systems.

1.2 The Sociotechnical View

Sociotechnical view of organisations

The view of organisations as ‘sociotechnical systems’ was developed by Trist and the Tavistock
Institute arising from considerations that any production system requires both a technological
organisation i.e. equipment, processes, methods, among others and a work organisation is not
seen just as a technical or social system but a structure of human activities around a variety of
technologies.

These technologies determine the technical subsystems and vary across the board
For example, the differing skills, procedures, machinery/equipment and the layout of facilities
required in an electronics company, a car manufacturer, a college, a hospital, etc. present a
variety of technologies operated by an equal variety of personnel.

Sociotechnical theory suggests that the organisation consists of 4 inter-related elements –

tasks, people, structure and technology as indicated below;

TECHNOLOGY

STRUCTURE PEOPLE

TASKS
The more traditional approaches to organisations and their problems have tended to
concentrate on one or other of the sub-systems with little or no recognition of the other.

The sociotechnical perspective of ISs

This is an approach to information systems, borrowed from the sociotechnical view of
organisations, involves the coordination of technology, organisations, and people where the
three go through a mutual adjustment and discovery as systems are developed.

In the sociotechnical view, IT, organisations, and individuals go through a process of mutual
adjustment and discovery as systems are developed. In many instances, the technology must
be altered to fit the unique needs of each business. Often, organisational changes must be
invented, and then implemented. Besides, retraining of employees must take place to develop a
successful and useful system.

1.3 Organisations and management

Management is the process of designing and maintaining an environment in which individuals
working together in groups accomplish efficiently selected aims/ goals and objectives. Managers
are charged with the responsibility of taking actions that will make it possible for individuals to
make their best contribution to group objectives. Managing is concerned with productivity, that
is, effectiveness and efficiency in the enterprise.

Effective managing is the concern of the company manager, school H/M, College Principal, VC,
manager…

Management applies to:

 Small and large scale organisations
 Profit and non profit-making enterprises
 Manufacturing as well as service industries.

Organisations are formal, social units devoted to the attainment of specific goals. Organisations
use certain resources to produce outputs. The resources include capital, materials, labour,
machinery, and information. These help the organisation to meet various objectives- financial,
social, economic.

The classical way to understand management is to consider the managerial functions: planning,
organising, staffing, leading and control etc. Decision-making, monitoring and co-ordination are
information-intensive aspects of these managerial functions

The organisation brings together people, structures, technology, and tasks.

It’s the goal of MIS to support both the organisations as a whole and its individual business units
in the achievements of their objectives. When an IS does not fit the organisational unit it is
intended to support, the system development project is likely to fail. Thus an MIS must fit the
organisation management.

Information Systems support diverse aspects of individual and group knowledge work e.g.
Electronic Mail, data processing, communication, -- variety.
Management process:

PLAN EXECUTE CONTROL

This posits that the manager’s role is:

1. To PLAN for something to take place
2. To MAKE and issue decisions and to EXECUTE the plans.
3. To monitor the results of the executed plan or is necessary modify the plan.

NOTE: Management is a process, which takes place at all levels in an organisation. It is not a
preserve of people with the title “manager” section leaders, supervisors, heads of department all
carry out managerial functions although not all may be of the same type or of equal importance.
Management concerns itself not only with organisation structures and tasks, but also beliefs,
values vis-à-vis the government.

1.4 Formal and Informal Information Flow

Formal system: these are information systems that rely on mutually accepted and relatively
fixed definitions of data and procedures for collecting, storing, and processing and
disseminating information.
Example: a manual file of customer names and addresses, or an alphabetical card catalogue in
a Library, is a formal information system because it is established by an organisation and
conforms to organisational rules and procedures. Meaning that each entry in the system has
the same format of information and the same content. E.g a payroll sub-system in an accounts
system.

Formal information is structured and clearly defined.

Informal system: by contrast lacks the features of formal systems. It is unstructured and not
clearlydefined For example, students in a college form small groups of friends, which have
information systems. In these informal information systems, there is no agreement on what is
information, how it will be sorted, and what will be stored or processed. Basically gossip
networks.

Like office gossip networks, groups of friends freely share information on a large and constantly
changing set of objects, topics, and personalities. These open, informal systems are quite
important – very powerful and flexible for an organisation.
Informal communication takes place at all levels from discussions, telephone calls, meetings,
observation, etc. The informal network – grapevine- is flexible and can convey inner feelings –
nuances – that are lost in formal communication.

Informal information flow is speedier and can cater for local problems more readily that formal
information flow. It has been evidenced, through research, that, at higher levels of
management, informal channels, particularly concerned with external information, are of greater
importance than the formal MIS. The information specialist is prone to exaggerate the
importance of written information compared to face-to-face conversation.

Much information in an organisation is informal. Any formalised IS operates within the context of
informal information channels – ‘interpersonal networking’, gossip or conversations with the
suppliers’ truckers at the loading dock. Not all information flows requirements are capable of
computerisation; i.e. some information problems do not necessarily require IS.

A formal IS relies on procedures, established and accepted by the organisation practice, for the
collecting storing, processing and accessing of data in order to obtain information. Formal
systems don’t have to be computerised but those with any appreciated organisational impact
usually are.

To run successful business, the people in-charge must continually make decisions based not
only on current information about their business, but also on external information say on
competitors, changes in government policy, market forces etc.

Managers often use an information system to help them plan, organise, and direct their
organisations. If this information is wrong or unreliable, late, lengthy or confusing; their
decisions will inevitably be faulty. Decisions might not even be made at all. This can be quite
costly to a business as it may lead to losses or even the collapsing of the organisation. Modern
trends are focused on formal organisational CBIS

1.5 Data, Information and Knowledge

Data: are facts, images or sounds that may or may not be pertinent or useful for a particular
task. In themselves, they may not make much meaning In our everyday lives, we receive data
from newspapers, radio and TV, from advertisements, billboards, and from other people. The
data bombards us constantly that we may not pay attention to all raw facts that can be shaped
and formed to create information.

Information: is data whose form and content are appropriate for a particular use. These are
data that have been shaped or formed by humans into a meaningful and useful form.
Converting data into information by formatting, filtering, and summarising is a key role of
information systems. People need knowledge to use information effectively.

Knowledge: is a combination of instincts, ideals, rules, and procedures that guide actions and
decisions. It is the stock of conceptual tools and categories used by humans to create, collect,
store and share information.

People use knowledge about how to format, filter and summarise data as part of the process of
converting data into information useful in a particular situation.
They interpret that information, make decisions, and take actions. The results of these
decisions and actions help in accumulating knowledge for use in later decisions.

Methods for converting data into information for decision making:

1. Select the data pertinent to the situation and remove any irrelevant data.
2. Combine the data to bring it to useful level of summarisation.
3. Highlight exceptions that may bias the results or explain clearly what the data really say.
4. Display the data in an understandable way – develop models that convert data and
assumptions into explanations of past results or projections of future results.

Relationship between Data, Information and Knowledge

Accumulate
Knowledge

KNOWLEDGE

DAT Format, filter Interpret, RESULTS

INFORMATI
A summarize Decide, Act
ON

Operational and managerial

1.6 The Information Resource

Information is an essential resource in any organisation and is as important as machines,
people, capital. It’s the indispensable link that puts all components of the business together for
better organisation and co-ordination. An organisation succeeds by bringing together and
managing certain resources in a productive way. The traditional list of resources comprises
human, financial and material resources. However, information has come to be recognised as
another resource, one that’s crucial to management and others in the organisation hence
growth in IRM.

Information Resource Management (IRM)

This has arisen out of the realisation that information is a valuable resource that must be
managed well. Formal information systems are a vehicle for information management. This
entails an organisational approach to information as a resource.

IRM is a broad approach to managing information as a corporate asset. This is possible chiefly
due to information specialists ability to organise all the data reflecting the past, present and
projected operations of an enterprise into databases, controlled by specialised collection of data
reflecting major aspect of a firm’s activities. The organisation of data into databases and the
IRM approach to information form a solid foundation for the integration of Information Systems.
IRM has been facilitated by the developments in databases, networks, distributed data
processing, Internet and advances in programming.
Major forces have been:
 Globalisation
 Liberalisation
 Competition in all industries

Organisations now invest in information management for strategic advantage. (see following
topics).

Why managers need to understand IRM:

 To guide IS resource management- systems planning, implementation and control
 To understand capabilities of ISs and how they can be applied to solve business problems.
 To provide leadership in information handling

1.6.1 The Need for Information

In order to carry out effectively the four management functions of planning, organising, leading
and controlling, management needs to make sound decisions. And yet, if it is to be effective,
decision-making cannot be carried out in a vacuum, it has to be based upon sound information.
Where such information is provided for management, the quality of decision-making is bound to
be enhanced.
In turn, this will inevitably lead to better performance by the organisation, which will thereby be
more likely to achieve its goals. This can be in terms of management information – the
reports, summaries, and statistics, which allow a manager to make better decisions, and
operating information- invoices, statements, despatch notes and payslips.

1.6.2 Qualities of Information

1. Relevance
2. Concise.
3. Complete
4. Timely
5. Accurate
6. Up-to-date
7. Well presented
8. Cost effective
9. Communicated to the right person
Summary: accuracy, relevance and timeliness

1.6.3 Functions of Information

The general function of information is improving knowledge. Besides, it assists management in
other ways as:
a) Reduction of uncertainty
b) Aid to planning, monitoring and
c) Means of communication
d) Memory supplement
e) Aid to simplification

1.6.4 The value of Information

Information has no value in itself; its value derives from the value of the change in decision
behaviour caused by information being available; without the cost of producing information.
We tend to think that more information, earlier or more up to date information, more accurate
information, etc. is all better information. This may be true only if it improves the resulting
decisions. Otherwise, it has no value.

The user of the information plays a key role. Data capture, handling, recording and processing
incur costs and do not produce value. It is only when data are communicated and understood
by the recipient –transformed into information – that value arises. This also requires that
information is utilised to improve decision making.

To ensure that information does have value means considering both the user and the
problem/decision being dealt with.