ICS 2210: SYSTEMS ANALYSIS AND DESIGN

Introduction

WHAT IS AN INFORMATION SYSTEM?

An information system is an arrangement of people, data, processes, information presentation,
and information technology that interact to support and improve day to day operations in a
business as well as support the problem solving and decision making needs of management and
users.
Information system can be further defined as a set of interrelated components that collect or
retrieve, process, store and distribute information to support decision making and control in an
organization.
All information systems (IS) operate in the same basic fashion whether they include a
computer or not. However, the computer provides a convenient means to execute the four main
operations of an information system. The four main activities are:
 Entering data into the IS (input),
 Changing and manipulating the data in the IS (data processing),
 Getting information out of the IS (output)
 Storing data and information (storage).
Besides the four main operations, feedback is also needed to return the output to the appropriate
people or activities in the organization to evaluate and refine the input.

Storage

Input Process Output

Feedback
Figure 1.1 Diagram showing the four main operations
The first step in producing information is collecting and introducing data into the IS, known as
input. Input captures or collects raw data from within the organization or from its external
environment. Data are streams of raw facts representing events occurring in organizations or the
physical environment before they have been organized and arranged into a form that people can
understand and use. An input device is the tools used to enter data into an IS. Input devices
include the keyboard, infrared devices that sense bar codes, and voice recognition systems.

The second step in producing information is processing. This is the step where computer
contributes to the efficiency of the data processing, which is essential to a robust IS. In this step,
computer helps in converting the raw input into a more meaningful form through various

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methods like conversion, manipulation and analysis. The computer’s speed and accuracy let
organizations process millions of pieces of data in several seconds.

Output is the information an IS produces and displays on an output device in the format most
useful to an organization. Information is data that have been shaped into a form that is
meaningful and useful to human beings. A good IS must be able to produce information that
carries the following characteristics:
 Relevant – information must pertain to the problem at hand.
 Complete – partial information is often worst than no information.
 Accurate – erroneous information may lead to disastrous decisions.
 Current – decisions are often based upon the latest information available.
 Economical – in a business setting, the cost of obtaining information must be considered as
one cost element involved in any decision.
The information needs to be transferred to the people or activities where it will be used. The
most widely used output device is the video display, or video monitor, which displays output
visually. However, computers can communicate output through speakers in the form of music of
speech and can also transmit it to another computer or electronic device in computer-coded form
for later interpretation.

One of the greatest benefits of using computers is their ability to store vast amount of data and
information. Computer stores information on both devices that are internal to the machine and
those that are external.
Feedback is output returned to appropriate people or activities in the organization to evaluate and
refine the input.
The four basic components of the computer system within an IS:
 Input device that introduces data into the IS.
 The computer processes data through the IS.
 Output device that displays the information produces by the IS.
 Storage device to store data and information.
In addition to the above components, communication also occurs between computers.
Communications technology lets users not only access multiple input, output and storage devices
with a single computer, but access data and resources of more than one computer as well.

TYPES OF INFORMATION SYSTEMS

Information systems can be classified in many ways, but for our purposes here, we will consider
their classifications based on the mode of processing, on the system objectives, and on the nature
of interaction of the system with its environment.

Classification by mode of processing

 Batch processing systems: The transactions are collected as they occur, but processed
periodically, say, once a day or week.
 On-line batch systems: The transaction information is captured by on-line data-entry
devices and logged on the system, but it is processed periodically as in batch processing
systems.

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  On-line Real-time systems: The transaction data capture as well as their processing in
order to update records (and generate reports) is carried out in real-time as the transaction
is taking place.

Classification by System Objectives

 Transaction Processing Systems: Their objective is to process transactions in order to

update records and generate reports, ie., to perform score-keeping functions.
 Decision Support Systems: Their objective is to support the managerial decisions.
Usually, these systems are based on a model of the decision-making domain, and utilize
techniques from management science, finance or other functional areas of business in
order to build such models. These systems are also used often for attention-directing
purposes, ie., for directing the attention of managers to a problematic aspect of
operations.
 Expert Systems: These systems incorporate expertise in order to aid managers in
diagnosing problems or in problem-solving.

Classification based on the nature of interaction with environment

 Transformational Systems: These are systems that transform inputs received from the
environment in order to generate reports (output).
 Reactive Systems: These are systems ``characterized by being, to a large extent, event-
driven, continuously having to react to external and internal stimuli" (Harel, 1987).

The components of accounting systems such as payroll, general ledger are, it should be obvious,
usually batch processing systems, and also transaction processing systems that are
transformational systems. Systems for determination of sample sizes for audit testing, on the
other hand may be decision support systems. Systems aiding provision for doubtful accounts (or
loan loss reserves for financial institutions) may be expert systems

MAJOR TYPES OF INFORMATION SYSTEMS

Due to different interests, specialties and levels in an organization, there are different kinds of
systems. No single system can provide all the information an organization needs. Organization
and information systems can be divided into strategic, management, knowledge and operational
level. All the above mentioned levels of an organization can be further divided into five
functional areas: sales and marketing, manufacturing, accounting, finance and human resources.
Figure 2.1 below shows the one way to depict the kinds of systems found in an organization.

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 Kind of Information System Group Served

Strategic Senior
Level Managers

Management Middle
Level Managers

Knowledge and
Knowledge Data Workers
Level

Operational Operational
Level Managers

Manufacturing Finance Accounting Human

Resources

3.1 Operational Level Information Systems

The information system that is involved at operational level of an organization is
Transaction Processing Systems. Transaction processing systems (TPS) are the basic business
systems that serve the operational level of the system. A transaction processing system is a
computerized system that performs and records the daily routine transactions necessary to the
conduct of the business. A TPS is any system that records transaction (a business event: a sale, a
purchase, the hiring of a new employee). TPS is the entry point where data are entered at its
source at the time of transactions take place. TPSs are interfaced with applications that provide
clerical workers and operational managers with up-to-date information.
At the operational level, tasks, resources and goals are predefined and highly structured.
The decision to grant credit to customer, for instance, is made by a lower-level supervisor
according to predefined criteria. All that must be determined is whether the customer meets the
criteria.
The following table shows the specific types of application information systems that
correspond to operation level:

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 Functional Area Systems
Sales and Marketing  Order tracking
 Order processing
Manufacturing  Machine control
 Plant scheduling
 Material movement control
Finance  Securities trading
 Cash management
Accounting  Payroll
 Accounts payable
 Accounts receivable
Human Resources  Compensation
 Training and development
 Employee record keeping

The following description and diagram shows a payroll TPS, which is a typical
accounting transaction processing system found in most firms.
Employee data (various departments)
To general ledger: wages and salaries

Payroll Management
system reports
Government documents

Payroll master file Employee checks

A payroll system keeps track of the money paid to employees. The master file is
composed of discrete pieces of information (such as a name, address or employee number) called
data elements. Data are keyed into the system, updating the data elements. The elements on the
master file are combined in different ways to make up reports of interest to management and
government agencies and paychecks sent to employees. These TPS can generate other report
combinations of existing data elements.

Other typical TPS applications are identified in the following table:

Types of TPS Major functions of system Major application systems

Sales and Marketing  Sales management  Sales Order
systems  Market research Information System
 Promotion  Market Research
 Pricing System
 New products  Pricing System
Manufacturing/Production  Scheduling  Materials Resource
systems  Purchasing Planning Systems
 Shipping/receiving  Purchase Order

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  Engineering
 Operations
Finance/Accounting  Budgeting
systems  General ledger
 Billing
 Cost accounting
Human Resource systems  Personnel records
 Benefits
 Compensation
 Labor relations
 Training
Other types  Admissions
 Grade records
 Course records
 Alumni
Control Systems
 Quality Control
Systems
 General Ledger
 Accounts
Receivable/Payable
 Budgeting
 Funds Management
Systems
 Payroll
 Employee Records
 Benefit Systems
 Career Path Systems
 Registration Systems
 Student Transcript
System
 Curriculum Class
Control Systems
 Alumni Benefactor
System

The table above shows that there are five functional categories of TPS: sales/marketing,
manufacturing/production, finance/accounting, human resources and other types of TPS that are
unique to a particular industry. All organizations have these five kinds of TPS (even if the
system is manual). TPS are often so central to a business that TPS failure for a few hours can
spell the demise of a firm and perhaps other firms linked to it. Manager needs TPS to monitor
the status of internal operations and the firm’s relations with the external environment. TPS are
also major producers of information for the other types of systems. For example, the payroll
system illustrated before will supplies data to the company’s general ledger system, which is
responsible for maintaining records of the firm’s income and expenses and for producing reports
such as income statements and balance statements.
Information inputs for TPS are normally transactions and events. The processing process
for TPS is to sort, list, merge or update the data based on the transactions or events. Information
output from TPS is detailed reports, lists or summaries.

3.2 Knowledge Level Information Systems

Two types of information systems are categorized under the knowledge level of an
organization, which are Knowledge Work Systems (KWS) and Office Automation Systems
(OAS). These two types of systems serve the information needs at the knowledge level of the
organization. KWS is a system that aid knowledge workers in the creation and integration of
new knowledge in the organization. OAS can be computer systems such as word processing, e-
mail systems and scheduling systems, which are designed to increase the productivity of data
workers on the office. KWS aid knowledge workers whereas OAS primarily aid data workers
(although they are also used extensively by knowledge workers).

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 In general, knowledge workers are people who hold formal universities degrees and who
are often members of a recognized profession, like engineers, doctors, lawyers and scientists.
The job for knowledge workers consists creating new information and knowledge, promote the
creation of new knowledge and ensure that new knowledge and technical expertise are properly
integrated into the business. Meanwhile, data workers typically have less formal, advanced
educational degrees and tend to process rather than create information. The job for data workers
are principally to use, manipulate and disseminate information, which consists primarily of
secretaries, accountants or filing clerks. OAS is information technology applications designed to
increase the productivity of data workers by supporting the coordinating and communicating
activities of the typical office. OAS coordinates diverse information workers, geographic units
and functional area. The system communicates with customers, suppliers and other organization
outside the firm and serves as a clearinghouse for information and knowledge flows.
The following table shows the specific types of application information systems that
correspond to knowledge level:

Type of system Applications

Knowledge Work Systems
Office Automation Systems
 Engineering Workstations
 Graphics Workstations
 Managerial Workstations
 Word Processing
 Document Imaging
 Electronic Calendars

Examples of KWS are like computer aided design (CAD) and robotics systems. CAD
systems eliminate many manual steps in design and production by performing much of the
design work on the computer. Examples of OAS are like word processing systems, desktop
publishing systems and document imaging systems. Word processing systems are an office
automation technology that facilitates the creation of documents through computerized text
editing, formatting, storing and printing. Desktop publishing systems is a technology that
produces professional quality documents combining output from word processors with design,
graphics and special layouts features. Document imaging systems is the systems that convert
documents and images into digital form so that they can be stored and accessed by the computer.
Information inputs for OAS are like documents and schedules mean while for KWS are
like design specification and knowledge based. The processing process for OAS normally
involves document management, scheduling and communication whereas for KWS, it involves
modeling and simulations. Information output for OASs are normally documents, schedules and
mails meanwhile for KWS are models and graphics.
The following figure 3.2 shows an example of an imaging system (a system that converts
documents and images into digital form so that they can be stored and accessed by the
computer). Document imaging systems are widely used knowledge applications. It converts
documents and images into digital form so that they can be stored and accessed by the computer.
The system is made up of a network consisting image scanner, optical storage units, a mainframe
computer and a local area network to link representatives’ workstations and the scanner
workstations located in the firm. Files and documents can be viewed on-line from desktop
computers. This system is believed to reduce the amount of time it would take with a paper-

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based system, save paper and save cost and customer’s services can be improved as the
electronic documents can be assessed more rapidly.

Document
database IBM Disk
mainframe storage

Image
workstation
Image On-line
Local index optical disks
Area
Network
Scanning
workstation
Figure 3-2

3.3 Management Level Information Systems

For management level of an organization, two types of information systems involved,
which is Management Information System (MIS) and Decision Support System (DSS).
Management Information Systems (MIS, information system at the management level of
an organization that serve the functions of planning, controlling and decision making by
providing routine summary and exception reports) serves the management level of the
organization, provides managers with reports and in some cases with on-line access to
organization’s current performance and historical records. Most of the systems oriented almost
exclusively to internal, not environmental or external events. MIS primarily serve the functions
of planning, controlling and decision making at the management level. Generally, they are
dependant on underlying TPS for their data. MIS summarize and report on the basic operations
of the company. The basic data from TPS are compressed and are usually presented in long
reports that are produced on a regular schedule. Figure 3.3 shows how a typical MIS transforms
transactions level data from inventory, production and accounting into MIS files that are used to
provide managers with reports.
MIS usually serve managers interested in weekly, monthly or yearly results – not day-
today activities. MIS generally address structured questions that are known well in advance but
the systems are not flexible and have little analytical capability. Most MIS uses simple routines
such as summaries and comparisons as opposed to sophisticated mathematical models or
statistical techniques.
Some of the characteristics of MIS are as follows:
 MIS support structured decisions at operational and management control levels. However,
they are useful for planning purpose of senior management staff.
 MIS are generally reporting and control oriented. They are designed to report on existing
operations and therefore to help provide day-to-day control of operations.
 MIS rely on existing corporate data and data flows.
 MIS have little analytical capability.
 MIS generally aid in decision making using past and present data.
 MIS are relatively inflexible.
 MIS have an internal rather than an external orientation.

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 Transaction Processing System Management Information Systems
Order
processing
system Sales Data

Order file

Unit
Materials
resource product MIS Reports Managers
planning cost
Production systems data
master file Product
change
Figure
data
3-3
General
Ledger
Expense
system
data
Accounting file

Figure 3.3

Decision Support Systems (DSS, information system at the management level of an

organization that combine data and sophisticated analytical models or data analysis tools to
support semi-structured and unstructured decision making) also serve the management level of
the organization. DSS helps manager make decisions that are semi-structured, unique or rapidly
changing and not easily specified in advance. Besides using internal information from TPS and
MIS, they often bring in information from external sources like current stock prices or product
prices of competitors. DSS have more analytical power than other systems. They built explicitly
with a variety of models to analyze data, or they condense large amounts of data into a form
where they can be analyzed by decision makers. DSS are normally designed in a way where the
user can work with them directly, which means the system explicitly include user-friendly
software. DSS are interactive where the user can change assumptions, ask new questions and
include new data.
Some of the characteristics of DSS:
 DSS offers users flexibility, adaptability and quick response.
 DSS operate with little or no assistance from professional programmers.
 DSS provide support for decisions and problems whose solutions cannot be specified in
advance.
 DSS use sophisticated data analysis and modeling tools.

The following figure 3.4 show an example of DSS that operates on a powerful PC and is
used daily by managers who must develop bids on shipping contracts:

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 Ship file (e.g.
speed, capacity)
Personal
computer Port distance
restrictions file
Analytical models
database Fuel consumption
cost file
Graphics

Reports Ship charter hire

history cost file

Port expense file

Figure 3.4

The following table shows the specific types of application information systems that
correspond to management level:

Functional Area MIS DSS

Sales and Marketing Sales Management Sales Region Analysis
Manufacturing Inventory Control Production Scheduling
Finance Annual Budgeting Cost Analysis
Accounting Capital Investment Analysis Pricing/profitability Analysis
Human Resources Relocation Analysis Contract Cost Analysis

Information input for MIS are summary transaction data, high-volume data and simple
models. For DSS, the information input are low-volume data or massive databases optimized for
data analysis, analytic models and data analysis tools. Processing for MIS are routine reports,
simple models and low-level analysis, meanwhile for DSS are interactive, simulations and
analysis. Information outputs for MIS are summary and exception reports. For DSS, the
information outputs are special reports, decision analysis or responses to queries.

3.4 Strategic Level Information Systems

Senior managers use Executive Support System (ESS) to make decisions. ESS serve the
strategic level of an organization and address unstructured decisions and create a generalized
computing and communications environment rather than providing any fixed application or
specific capability. ESSs are designed to incorporate data about external events but they also
draw summarized information from MIS and DSS. They filter, compress and track critical data,
emphasizing the reduction of time and effort required to obtain information useful to executives.
ESSs employ the most advanced graphics software and can deliver graphs and data from many
sources immediately to a senior executive’s office or to a boardroom. Unlike other types of
information systems, ESSs are not designed primarily to solve specific problems. Instead, ESSs
provide a generalized computing and telecommunications capacity that can be applied to a
changing array of problems. While many DSS are designed to be highly analytical, ESS comes
with less analytical capabilities. Since ESSs are designed to be used by senior managers who

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often have little, if any, direct contact or experience with computer-based information systems,
they incorporate easy-to-use graphic interfaces.
Figure 3.5 below shows an example of an ESS which consists of workstations with
menus, interactive graphics and communication capabilities that can access historical and
competitive data from internal corporate systems and external databases:

ESS workstattions

 Menus
 Graphics
 Communications
 Local processing

ESS workstattions Internal data External data ESS workstattions

 TPS/MIS data
 Financial data
 Menus  Office systems  Menus
 Graphics  Modeling /  Graphics
 Communications analysis  Communications
 Local processing  Local processing

Figure 3.5

Information input for ESSs are aggregate data from external and internal sources.
Processing for ESSs are graphics, simulations and interactive between user and the system.
Information outputs for ESSs are projections, responses to queries.

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 INTRODUCTION TO DECISION MAKING
Everybody makes decisions. It's a natural part of life, and most of the time we don't even think
about the process. In an organization, decisions are made at every level. The level at which the
decision is made can also determine the complexity of the decision in relation to the input of data
and output of information.

Levels of Decision Making

In Chapter 2 we discussed the various types of Information Systems and how they relate to the
levels of an organization. We can also relate those Information Systems to the types of decisions
managers make.

 Strategic Decision Making. These decisions are usually concerned with the major
objectives of the organization, such as "Do we need to change the core business we are
in?" They also concern policies of the organization, such as "Do we want to support
affirmative action?"
 Management Control. These decisions affect the use of resources, such as "Do we need
to find a different supplier of packaging materials?" Management-level decisions also
determine the performance of the operational units, such as "How much is the bottleneck
in Production affecting the overall profit and loss of the organization, and what can we do
about it?"
 Knowledge-Level Decision Making. These decisions determine new ideas or
improvements to current products or services. A decision made at this level could be "Do
we need to find a new chocolate recipe that results in a radically different taste for our
candy bar?"
 Operational control. These decisions determine specific tasks that support decisions
made at the strategic or managerial levels. An example is "How many candy bars do we
produce today?"

Types of Decisions: Structured versus Unstructured

Some decisions are very structured while others are very unstructured. You may wake up in the
morning and make the structured, routine decision to get out of bed. Then you have to make the
unstructured decision of what clothes to wear that day (for some of us this may be a very routine
decision!). Structured decisions involve definite procedures and are not necessarily very
complex. The more unstructured a decision becomes, the more complex it becomes.

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 Types of Decisions and Types of Systems

FIGURE 4.4

Information systems support different decisions at different organization levels

One size does not fit all when it comes to pairing the types of systems to the types of decisions.
Every level of the organization makes different types of decisions, so the system used should fit
the organizational level, as shown in Figure 4.4.

It's easy to develop an information system to support structured decision making. Do you
increase production on the day shift or hold it to the swing shift; do you purchase another piece
of equipment or repair the old one? What hasn't been so easy to develop is a system that supports
the unstructured decision making that takes place in the upper echelons of a company. Do we
expand into foreign markets or stay within the confines of our own country; do we build a new
plant in Arizona or Alabama; do we stop production of a long-time product due to falling
demand or boost our marketing? The ability to create information systems to support the latter
decisions is long overdue.

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 Stages of Decision Making

Some people seem to make sudden or impulsive decisions. Other people seem to make very
slow, deliberate decisions. But regardless of appearances, the decision-making process follows
the same stages of development and implementation. Let's use the example of purchasing a new
television, using Figure 4.5.

FIGURE 4.5

The decision-making process.

 Intelligence. You identify the facts: You don't have a television or the one that you do
have isn't any good. You intuitively understand what the problem is and the effect it's
having on you. You missed your favorite show last night.
 Design. You design possible solutions: You could watch the television in your neighbor's
apartment or you could purchase a new one for yourself. Your neighbor will get annoyed
if you keep coming over. On the other hand, you won't be able to go on vacation if you
use your money to buy a new television.
 Choice. You gather data that helps you make a better decision: Your neighbor doesn't like
the same shows you like or she's getting rather tired of you being there. You also
determine that televisions cost a lot of money so you figure out how you can afford one.
You choose to purchase a new television instead of watching your neighbor's.

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  Implementation. You implement the decision: You stop at the appliance store on your
way home from work and carry out your decision to purchase a new television.
 Feedback. You gather feedback: You're broke but you can watch anything you want!

Of course this is a simplified example of the decision-making process. But the same process is
used for almost every decision made by almost every person.

Information Systems help improve the decision-making process by

 providing more information about the problem

 presenting a greater variety of possible alternatives
 showing consequences and effects of choices
 measuring the outcome of different possible solutions
 providing feedback on the decision that is made

Bottom Line: Different types of decisions require different types of systems. All
decisions follow the same pattern although some may be more complex and
require several iterations of the decision-making stages.

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