CONTENTS

CHAPTER - 1: Basic Concepts of Systems

1.0 Introduction......................................................................................................1.1 1.1 Definition of a System......................................................................................1.1 1.2 System Environment........................................................................................1.3 1.3 Types of Systems..............................................................................................1.5

1.4 Sub Systems..........................................................................................1.7 1.5 Information............................................................................................1.10 1.6 Business Information system................................................................1.15 Self-examination questions.........................................................................1.18 CHAPTER - 2: Transaction Processing System
2.0 Introduction......................................................................................................2.1 2.1 Transaction Processing Cycle..........................................................................2.1 2.2 Components of the Transaction Processing System........................................2.3 Self-examination questions....................................................................................2.7

CHAPTER - 3: Basic Concepts of MIS

3.0 Introduction......................................................................................................3.1 3.1 Concepts of MIS...............................................................................................3.1 3.2 Establishing the information needs in Management Process..........................3.11 3.3 Factors on which Information Requirements Depend.....................................3.13 3.4 Levels of Management and their information Requirements..........................3.15 3.5 Organization Structure and information needs................................................3.18 Self-examination.....................................................................................................3.20

CHAPTER - 4: Systems Approach and Decision Making

4.1 Systems Approach to Management..................................................................4.1 4.2 Decision Making in MIS..................................................................................4.4 4.3 Pervasiveness of Decision Making..................................................................4.5 4.4 Classification of Decisions...............................................................................4.6 4.5 Functional Information Areas..........................................................................4.10 Self'-examination questions..................................................................................4.28

CHAPTER - 5: Decision Support and Executive Information Systems

5.0 Introduction......................................................................................................5.1 5.1 What is a DSS?.................................................................................................5.1 5.2 DSS Goals an Application................................................................................5.2 5.3 Components of a DSS......................................................................................5.5 5.4 The tools of Decision Support System.............................................................5.7 5.5 Examples of Decision Support Systems in Accounting..................................5.10 5.6 Executive Information Systems (EIS)..............................................................5.11 5.7 EIS Roles and Character...................................................................................5.14 5.8 What is an Executive Information System?.....................................................5.15 5.9 Commercially Available EIS Products............................................................5.18 Self-examination questions...................................................................................5.18

CHAPTER - 6: Enabling Technologies

6.0 Client/Server Architecture................................................................................6.1 6.1 The Traditional Computing Model..................................................................6.1 6.2 What is Client/Server?......................................................................................6.3 6.3 Approaches to Client/Server............................................................................6.5 6.4 Components of Client Server Architecture......................................................6.7 6.5 Client/Server Security......................................................................................6.8

6.6 Client/Server Risks and Issues.........................................................................6.9 6.7 Server-Centric Model.......................................................................................6.10 Self-examination questions....................................................................................6.11

CHAPTER - 7: System Development Process

7.0 Introduction......................................................................................................7.1 7.1 What is Systems Development Process?.........................................................7.1 7.2 System Development Life Cycle.....................................................................7.2 7.3 Systems Development Methodology...............................................................7.14 7.4 The Preliminary Investigation..........................................................................7.16 7.5 Requirements Analysis or Systems Analysis...................................................7.24 7.6 System Development Tools.............................................................................7.28 Self-examination questions....................................................................................7.41

CHAPTER - 8: Systems Design

8.0 Introduction......................................................................................................8.1 8.1 Stage III: Systems Design................................................................................8.1 8.2 Designing System Output.................................................................................8.2 8.3 Designing Systems Inputs................................................................................8.14 8.4 Data storage......................................................................................................8.25 8.5 Design of data communications.......................................................................8.25 8.6 System manual..................................................................................................8.26 8.7 Reporting to Management................................................................................8.27 Self-examination questions....................................................................................8.28

CHAPTER - 9: System's Acquisition, software Development and resting

9.0 Introduction......................................................................................................9.1 9.1 Stage IV: Systems Acquisition and Software Development...........................9.1 9.2 Software Acquisition: Make or Buy................................................................9.3 9.3 Steps Involved in Selection of a Computer System.........................................9.5 9.4 Validation of Vendors' proposals.....................................................................9.6 9.5 Software Development.....................................................................................9.13 9.6 Program Design Tools......................................................................................9.18 9.7 Stage V: System Testing..................................................................................9.21 Self-examination questions............................................................................9.22

CHAPTER-10: Systems 10.0 Systems Implementation and maintenance

10.0 Systems implementation.................................................................................10.1 10.1 Equipment installation....................................................................................10.1 10.2 Training Personnel..........................................................................................10.2 10.3 Conversion or Changeover from Manual to Computerized System.............10.4 10.4 Evaluation of the New System.......................................................................10.9 10.5 Systems Maintenance...................................................................................10.10 Self-examination questions..................................................................................10.11

CHAPTER - 11: Design of computerized commercial Applications

11.0 Introduction..................................................................................................11.1 11.1 General Form of Business Application.......................................................11.2 11.2 Accounts Payable.........................................................................................11.2 11.3 Payroll Accounting......................................................................................11.13 11.4 Finished Goods Inventory Control..............................................................11.19 11.5 Sales Order Processing System...................................................................11.25 11.6 Sales Order Processing System: On-Line, Real-Time................................11.32 11.7 Materials Inventory Control.........................................................................11.35 11.8 Work-in-Process Control.............................................................................11.40

11.9 Cost Estimation............................................................................................11.43 11.10 Production Scheduling...............................................................................11.46 11.11 Financial Accounting.................................................................................11.48 11.12 Share Accounting.......................................................................................11.51

CHAPTER 12: Enterprise Resource planning: Redesigning Business

12.0 Introduction..................................................................................................12.1 12.1 ERP-Definition.............................................................................................12.2 12.2 Business Process Reengineering (BRP)......................................................12.7 12.3 ERP Implementation....................................................................................12.11 12.4 Post Implementation....................................................................................12.16 12.5 Sample List of ERP Vendors.......................................................................12.19 12.6 ERP Software Package (SAP).....................................................................12.21 12.7 Case study....................................................................................................12.40

CHAPTER - 13: Controls in EDP Set-Up: General Controls

13.0 Introduction..................................................................................................13.1 13.1 Types Of Controls in a computer-Based System........................................13.1 13.2 General Controls: Operating System Controls............................................13.2 13.3 General Controls: Data Management Controls...........................................13.8 13.4 General Controls: Organization Structure Controls....................................13.14 13.5 General Controls: System Development Controls......................................13.18 13.6 General Controls: System Maintenance Controls.......................................13.19 13.7 General Controls: Computer Centre Security and Control.........................13.23 13.8 General Controls: Internet and Intranet Controls........................................13.29 13.9 General Controls: Personal Computer Controls..........................................13.34 Self-examination questions..................................................................................13.37

CHAPTER 14: Controls in EDP Set-Up: Application controls

14.0 Introduction..................................................................................................14.1 14.1 Input Controls..............................................................................................14.1 14.2 Processing Controls.....................................................................................14.14 14.3 Output Controls............................................................................................14.17 Self-examination questions..................................................................................14.20

CHAPTER - 15: Detection of Computer Frauds

15.0 Introduction..................................................................................................15.1 15.1 Computer Frauds..........................................................................................15.1 15.2 Why should Businesses take computer Fraud Seriously?...........................15.3 15.3 What are the Primary Risks to Business?....................................................15.4 15.4 Internet Frauds.............................................................................................15.6 15.5 The rise in Computer Fraud.........................................................................15.7 15.6 Computer Fraud and Abuse Techniques.....................................................15.9 15.7 Preventing Computer Frauds.......................................................................15.11 15.8 Increase the Difficulty of Committing Fraud..............................................15.13 15.9 Improve Detection Methods........................................................................15.15 15.10 Reduce Fraud Losses.................................................................................15.16 15.11 Prosecute and Incarcerate Fraud perpetrators...........................................15.16 15.12 Detection of Computer Frauds..................................................................15.17 Self-examination questions..................................................................................15.19

CHAPTER - 16: cyber Laws and Information Technology Act 2000

16.1 Brief History.................................................................................................16.1 16.2 Objectives of the Act...................................................................................16.2 16.3 Information Technology Act, 2000.............................................................16.2

CHAPTER - l7: Audit of Information Systems*

17.0 Introduction..................................................................................................17.1 17.1 Auditing Concerns.......................................................................................17.1 17.2 Computer Security.......................................................................................17.5 17.3 Program Development and Acquisition......................................................17.8 17.4 Program Modification..................................................................................17.9 17.5 Computer Processing...................................................................................17.12 17.6 Source Data Controls...................................................................................17.17 17.7 Data Files.....................................................................................................17.20 Self-examination questions..................................................................................17.21

CHAPTER - 18: Information Security

18.0 Introduction...................................................................................................18.1 18.1 Why is Information Security Important?.....................................................18.1 18.2 What is Information Security?.....................................................................18.2 18.3 What are the Principles of Information Security?.......................................18.6 18.4 Protecting Computer-Held Information.......................................................18.10 18.5 What is the Best Approach to Implement Information Security?...............18.12 18.6 Information Security policy Statement Example........................................18.17 18.7 Role of A Security Administrator................................................................18.20 18.8 Key Definitions............................................................................................18.21 Self-examination questions..................................................................................18.22

CHAPTER - 19: use of simple CASE Tools, Analysis of financial statements Digital using Technology
19.0 Introduction..................................................................................................19.1 19.1 What are CASE Tools?................................................................................19.1 19.2 CASE Classification....................................................................................19.3 19.3 CASE Work Benches...................................................................................19.7 19.4 Analysis of Financial Information...............................................................19.13 19.5 Financial Analysis........................................................................................19.15 19.6 Analysis Concepts in SAP...........................................................................19.17 Self-examination questions..................................................................................19.23

1 Basic Concepts of Systems

1.0 INTRODUCTION
The term system is in common parlance. People talk of transport system,educational system, solar system and many others. System concepts provide a framework for many' organizational phenomenons including features of information system.

1.1 DEFINITION OF A SYSTEM

The term system may be defined as a set of interrelated elements that operate collectively, to accomplish some common purpose or goal. One can find many examples of a system. Human body is a system, consisting of various parts such as head heart, hands, legs and so on. The various body parts are related by means of connecting networks of blood vessels and nerves. This systems has a main goal which we may call "living". This, a system can be described by specifying its parts, the way in which they are related, and the goals which they are expected to achieve. A business is also a system where economic resources such as people, money, material. machines, etc are transformed by various organizational processes (such as production, marketing, finance etc.) into goods and services. A computer based information system is also a system which is a collection of people, hardware, software, data and procedures that interact to provide timely, information to authorized people who need it.

Systems can be abstract or physical. An abstract system is an orderly arrangement of interdependent ideas or constructs. For example, a system of theology is an orderly, arrangement of ideas about Good and the relationship of humans to Cod. A physical system is a set of elements which operate together to accomplish an objective. A physical system may be further defined by examples: Physical system Description Circulatory system The heart and blood vessels which move blood through the body'. Transportation system The personnel, machines, and organizations which transport goods. Weapons system The equipment, procedures, and personnel which make it possible to use a weapon. School system The buildings, teachers, administrators, and textbooks that function together to provide instruction for students. Computer system The equipment which functions, together to accomplish computer processing Accounting system The records, rules, procedures, equipment, and personnel, which operate to record data, measure income, and prepare reports. The examples illustrate that a system is not a randomly assembled set of elements; it consists of elements, which can be identified as belonging together because of a common purpose, goal, or objective. Physical systems are more than conceptual construct; the display activity or behavior. The parts interact to achieve an objective. 1.1.1 General model of a system : A general models of a physical system is input, process and output. This is, of course, very simplified because a system may have several inputs and outputs as shown below:

1.2 SYSTEM ENVIRONMENT

All systems function within some sort of environment. The environment like the system is a collection of elements. These elements surround the system and often interact with it' For any given problem, there are many types of systems and many types of environments' Thus, it is important to be clear about what constitutes the system and the environment of interest. For example, a physiologist looking at human system may be interested in studying the entire human body as a system, are not just a part of it (such as the central nervous system only). If the entire human body is the system of interest, the physiologist is likely to define the environment more broadly that he might if the focus was on just the central nervous system. The features that define and delineate a system form its boundary. The system is inside the boundary; the environment is outside the boundary. In some cases, it is fairly

simple to define what part of the system is and what is not; in other cases, the person studying the system may arbitrarily define the boundaries. Some examples of boundaries are: System Boundary Human Skin, hair, nails, and all parts contained inside form the system; all things outside are environment. Automobile The automobile body plus tires and all parts contained within form the system. Production Production machines, production inventory of work in process, production employees, production procedures, etc. form the system. The rest of the company is in the environment. The production system example illustrates the problem of the boundary concept. Is raw material inventory included in the production system? One definition of the production system may include raw material because it is necessary for the purpose being studied; another use may exclude it. A system and its environment can be described in many ways. A subsystem is a part of a larger system. Each system is composed of subsystems, which in turn are made up of other subsystems, each sub-system being delineated by its boundaries. The interconnections and interactions between the subsystems are termed interfaces. Interfaces occur at the boundary and take the form of inputs and outputs. Figure 3 shows examples of subsystems and interfaces at boundaries.

A supra-system refers to the entity formed by a system and other equivalent systems with which it interacts. For example, an organisation may be subdivided into numerous functional areas such as marketing, finance, manufacturing, research and development, and so on. Each of these functional areas can be viewed as a subsystem of a larger organisational system because each could be considered to be a system in and of itself. For example, marketing may be viewed as a system that consists of elements such as market research, advertising, sales, and so on. Collectively, these elements in the marketing area may be viewed as making up the marketing supra-system. Similarly the various functional areas (subsystems) of an organisation are elements in the same supra-system within the organisation.

1.3 TYPES OF SYSTEMS

(i) Deterministic and Probabilistic system: A deterministic system operates in a predictable manner. The interaction among the parts is known with certainty' If one has a description of the state of the system at a given point in time plus a description of its operation, the next state of the system may be given exactly, without error. An example is a correct computer program, which performs exactly according to a set of instructions. The probabilistic system can be described in terms of probable behavior, but a certain degree of error is always attached to the prediction of what the system will do' An inventory system is an example of a probabilistic system' The average demand,

average time for replenishment, etc, may be defined, but the exact value at any given time is not known. Another example is a set of instructions given to a human who, for a variety of reasons, may not follow the instructions exactly as given. (ii) Closed and Open Systems: A closed system is self contained and does not interact or make exchange across its boundaries 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 does not 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. One might wonder why closed systems exist at all. More often, participants in a closed system become closed to external feedback without fully being aware of it. For example, a university may only other 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 programmes, the university may find registrations dwindling and may even have to discontinue certain courses. If university officials had been more responsive to student needs, they might have enjoyed booming enrolments among the population of adult evening students. In organisations and in information processing, there are systems that are relatively isolated from the environment but not completely closed in the physics sense. These will be termed closed systems, meaning relatively closed. For example, systems in manufacturing are often designed to minimize unwanted exchanges with the environment outside the system. Such systems are designed to be as closed as possible, so the manufacturing process can operate without disturbances from suppliers, customers, etc. A computer program is a relatively closed system because it accepts only previously defined inputs, processes them, and provides previously defined outputs. In summary, the relatively closed system is one that has only controlled and well defined inputs and outputs. It is not subject to disturbances from outside the system. Open Systems actively interact with other systems and establish exchange relationship. They exchange information, material or energy with the environment including random and undefined inputs. Olin sl,sterns tend to have form and structure to allow them to adapt to changes in their external environment for survival and growth. Organisations are considered to be relatively open systems. They continuously interact with the external environment, by processes or transformation of inputs into useful output. However, organisation behave as a relatively closed system in certain respects so as to preserve their identity and autonomy. They may ignore many opportunities so as to maintain their core-competence. Organisations are open systems, because they are input output systems. The input consists of finance, physical & mental labour and raw material.

Organisations perform several operations on these inputs and process out products or services' The process of exchange generates some surplus, in the form of profit, goodwill experience and so on, which can be retained in the organisation and can be

used for further input output process' organisations are dependent upon their external environment for the inputs required by them and for disposing of their outputs in a mutually beneficial manner.

1.4 SUB SYSTEMS

The use of subsystems as building blocks is basic to analysis and development. This requires an understanding of the principles, which dictate how systems are built from subsystems. Decomposition: A complex system is difficult to comprehend when considered as a whole. Therefore the system is decomposed or factored into subsystems. The boundaries and interfaces are defined, so that the sum of the subsystems constitutes the entire system. This process of decomposition is continued with subsystems divided into smaller subsystems until the smallest subsystems are of manageable size. The subsystems resulting from this process generally from hierarchical structures (Figure 4). In the hierarchy, a subsystem is one element of supra-system (the system above it).

An example of decomposition is the factoring of an information processing system into subsystems. One approach to decomposition might proceed as follows: l. Information system divided into subsystem such as: a. Sales and order entry b. Inventory c. Production d. Personnel and payroll e. Purchasing f. Accounting and control g. Planning h. Environmental intelligence 2. Each subsystem is divided further into subsystems. For example, the personnel and payroll subsystem might be divided into the following smaller subsystems: a. Creation and update of personnel pay-roll records b. Personnel reports c. Payroll data entry and validation d. Hourly payroll Processing e. Salaried payroll Processing f. Payroll reports for management g. Payroll reports for government 3. If the task is to design and program a new system, the subsystems (major applications) defined in (2) might be further subdivided into smaller subsystems or modules. For example, the hourly payroll processing subsystem might be factored into modules for the calculation of deductions and net pay, payroll register and audit controls preparation, cheque printing, and register and controls output (Figure 5).

Decomposition into subsystems is used to analyse an existing system and to design and implement a new system. In both cases, the investigator or designer must decide how to factor, i.e., where to draw the boundaries. The decisions will depend on the objectives of the decomposition and also on individual differences among designers: the latter should be minimized. The general principle in decomposition, which assumes that system objectives dictate the process, is functional cohesion. Components are considered to be part of the same subsystem if they perform or are related to the same function. As an example, an application program to be divided into modules (subsystems) will divide along major program functions such as accumulating hours worked, calculating deductions, printing a cheque, etc. In design, the identification of functionally cohesive subsystems is the first step. The boundary then needs to be clearly specified, interfaces simplified, and appropriate connections established among the subsystems. 1.4.2 Simplification: The process of decomposition could lead to a large number of subsystem interfaces to define. For example, four subsystems which all interact with each other will have six interconnections; a system with 20 subsystems all interacting will have 190 interconnections. The number can rise quite quickly as the number of subsystems increases. The number of inter connections if all subsystems interact is in general 1/2n (n-I), where n: the number of subsystems. Each interconnection is a potential interface for communication among subsystems. Each interface implies a definition of a communication path. Simplification is the process of organizing subsystems so as to reduce the number of interconnections. Some methods of simplification are: l. Clusters of subsystems are established which interact with each other, then a single interface path is defined from the cluster to other subsystems or clusters of subsystems. An example is a database, which is accessed by many programs, but the interconnection is only through a database management interface. 1.4.3 Preventing Systems Entropy: Systems can run down and decay or can become disordered or disorganized. Stated in system terminology, an increase in entropy takes place. Preventing or offsetting the increase in entropy requires inputs of matter and energy to repair, replenish, and maintain the system. This maintenance input is termed negative entropy. Open systems require more negative entropy than relatively closed systems for keeping at a steady state of organisation and operation, but all the systems described in the text require it. Examples of system maintenance through negative entropy by inputs of matter and energy are:
System Automobile thin Organisation Computer Program Computer data files Employees retire Procedures not followed User dissatisfaction with features Errors Errors and omissions in data field Not all relevant entities included Hire new employees Training and improved supervision, motivation procedures Program enhancements Repair program Review and correct procedures Procedure to identify omission and obtain data Manifestations of entropy Engine won't start Tires too Negative entropy Tune up engine Replace tires

1.4.4 System stress and system change: Systems, whether they be living or artificial systems, organisational systems, information systems, or systems of controls, change because they undergo stress. A stress is a force transmitted by a system's suprasystem that causes a system to change, so that the supra-system can better achieve its goals' In trying to accommodate the stress, the system may impose stress on its subsystems, and so on.

Types of Stress : There are two basic forms of stresses which can be imposed on a system, separately or concurrently: l. A change in the goal set of the system. New goals may be created or old goals may be eliminated. 2. A change in the achievement levels desired for existing goals. The level of desired achievement may be increased or decreased. For example, the goal set for a computer system may change if a requirement is imposed by management (the supra-system) for system data to be shared among multiple users rather than be available only to a single user. Consequences of Stress: When a supra-system exerts stress on a system, the system will change to accommodate the stress, or it will become pathological; that is, it will decay and terminate. Process of Adaptation: Systems accommodate stress through a change in form; there can be structural changes or process changes. For example, a computer system under stress for more shareability of data may be changed by the installation of terminals in remote locations - a structural change. Demands for greater efficiency may be met by changing the way in which it sorts data - a process change. It is very unlikely that system changes to accommodate stress will be global change to its structure and processes. Instead, those responsible for the change will attempt to localize it by confining the adjustment processes to only one or some of its subsystems.

1.5 INFORMATION
Information is data that have been put into a meaningful and useful context. It has been defined by Davis and Olson as-"information is data that has been processed into a form that is meaningful to the recipient and is of real or perceived value in current or progressive decision". For example, data regarding sales by various salesmen can be merged to provide information regarding total sales through sales personnel. This information is of vital importance to a marketing manager who is trying to plan for future sales. The term "data" and 'information' are often used interchangeably. However, the relation of data to information is that of rar.v material to finished product. A data processing system processes data to generate information. Information is the substance on whrch business decisions are based. Therefore, the quality of information determines the quality of action or decision. The management plays the parl of conver'cing the information into action through the familiar process of decision-making. Information has come to occupy a very important position in the survival of a business. Information is a basic resource in the modern society. We are living in an information society whose economy is heavily dependent on the information resources. Organisations spend most of their time generating, processing, creating, using, and distributing information. Information and information systems are valuable organisational resources that must be properly managed for the organisation to succeed. Information is the substance on which business decisions are based. Therefore, the quality of raw materials is crucial. Raw material i.e. data determined quality of output i.e. information. This phenomenon is also known as garbage in garbage out (GIGo). The management plays the part of converting the information into action through the familiar process of decision making. Information has come to occupy a very important position in the survival of business. Indeed, information flows are as important to the survival of a business as the flow of blood is to the life and survival of an individual. Information flows is important for good business decisions and it has been often said that a receipt of a good business is 90%o information and l0o/o inspiration

Some persons define it as a catalyst of management and the ingredients that coalesces the managerial functions of planning, and control. 1.5.1 Characteristics of Information: The important characteristics of useful and effective information are as follows: 1. Timeliness: It is a mere truism to say that information, to be of any use, has to be timely. To take an example, it is well-known that the sugar industry often works on small margins and thus control has to be perfected if sugar mills are to show good profit. Losses in the process of manufacture are sizable and even a small reduction in them will lead to a big increase in production and profit and vice versa. If recovery in sugar mill crushing-20 lakh quintals of sugarcane can be raised from 10% to 10.01%, 2,000 quintals of extra sugar will be produced. Production losses must be very carefully watched on a daily and continuous basis and analysed to find means to minimise them. The MIS must be geared for this purpose. However, it is not always necessary that information is required at such a short interval. Usually, as we proceed from the lower levels to higher levels of management, the time interval necessary for providing decision-impelling information on a routine or on exception basis increases at the strategic level. For example, information at Strategic levels is not needed to monitor the operations of the organization but it is required for deliberations. Therefore, it is not provided on a continuous basis but as and when desired. 2. Purpose: Information must have purposes at the time it is transmitted to, a person or machine, otherwise it is simple data. Information communicated to people has a variety of purposes because of the variety of activities performed by them in business organisations. The basic purpose of information is to inform, evaluate, persuade' and organise. It helps in creating new concepts, identifying problems, solving problems, decision making, planning, initiating, and controlling. These are just some of the purposes to which information is directed to human activity in business organisations. 3. Mode and format: The modes of communicating infonnation to humans are sensory (through sight, hear, taste, touch and smell) but in business they are either visual, verbal or in written forn. Format of information should be so designed that it assists in decision making, solving problems, initiating planning, controlling and searching. Therefore, all the statistical rules of compiling statistical tables and presenting information by rneans of diagram, graphs, curves, etc.. should be considered and appropriate one followed. The reports should preferably be supplied on an exception basis to save the manager from an overload of information. Also, the data should only be classified into those categories, '"which have relevance to the problem at hand. Sales analysis can be conducted by several categories. But the reports should be provided only on those that appear to be significant to decision making. Occasionally, the reports may be required in entirely, for example, for the auditors. Even in this case, the exceptional deviation or variance should be indicated by say, asterisks. It is also desirable to give the analysis of variances to assist the manager in initiating corrective action. Likewise, for such information as Return on Investment (ROI), the summary figures in the entire ROI hierarchy should also be given. This would assist the manager to trace the causes for a rise or fall in ROI. Format of information dissemination is a matter of imagination and perception. It should be simple and relevant, should highlight important points but should not be too cluttered up. Every space in the information format should have current relevance. Often unnecessary waste of space is noticed in the information not required. This should be avoided.

4. Redundancy: It means the excess of information carried per unit of data. For example, 75% of the letters used in a phrase are usually redundant. However, in business situation redundancy may some time be necessary to safeguard against error in the communication process. For example, the correspondence in contracts may carry figure like'4'followed by (FOUR). Rate: The rate of transmission/reception of information may be represented by the time required to understand a particular situation. Quantitatively, the rate for humans may be measure by the number of numeric characters transmitted per rninute, such as sales reports from a district office. For machines the rate may be based on the number of bits of information per character (sign) per unit of time. Frequency: The frequency with which information is transmitted or received affects its value. Financial reports prepared weekly may show so little changes that they have small value, whereas monthly reports may indicate changes big enough to show problems or trends. Frequency has some relationship with the level of management also it should be related to an operational need. For example, at the level of foreman it should be on a daily or weekly basis but, at the management control level, it is usually on monthly basis. Completeness: The information should be as complete as possible. The classical ROI or Net Present Value (NPV) models just provide a point estimate and do not give any indication of the range within which these estimates may vary. Hartz's model for investment decisions provides information on mean, standard deviation and the shape of the distribution of ROI and NPV. With this complete information, the manager is in a much better position to decide whether or not to undertake the venture. Reliability: In statistical surveys, for example, the information that is arrived at should have an indication of the confidence level. Even otherwise also information should be reliable and external source relied upon indicated. Cost benefit analysis: The benefits that are derived from the information must justify the cost incurred in procuring information. The cost factor is not difficult to establish. Using costing techniques, we shall have to find out the total as well as the marginal cost of each managerial statement but benefits are hard to quantify, i.e., they are usually intangibles. In fact, the assessment of such benefits is very subjective and its conversion into objective units of measurement is almost impossible. However, to resolve this problem, we can classify all the managerial statements into many categories with reference to the degree of importance attached, say, (a) absolutely essential statements, (b) necessary statement, (c) normal statements, (d) extra statements' The statements falling in the first category cannot be discontinued whatever be the cost of preparing them. The second category statements may have a high cost but may be discontinued only in very stringent circumstances. The norm2 statements may include those, which can be discontinued ot replaced if their costs are too high. In the last category we may list those statements which may be prepared only if the benefits arising out of them are substantially higher than the costs involved. 10. Validity: It measures the closeness of the information to the purpose which it purports to serve. For example, some productivity measure may not measure' for the given situation, what they are supposed to do e.g., the real rise or fall in productivity' The measure suiting the organisation may have to be carefully selected or evolved' 11. Quality : A study conducted by Adams a management expert, about management attitude towards information system, reveals thatT5o/o of managers treated quantity investments as nearly identical in terms of job performance; yet given a choice, 90ol' of then preferred an improvement in quality of information over an

increase in quantity. Quality refers to the correctness of information. Information is likely to be spoiled by personal bias. For example, an over-optimistic salesman may give rather too high estimates of the sales. This problem, however, can be circumvented by maintaining records of salesman's estimates and actual sales and deflating or inflating the estimates in the light of this. Errors may be the result of : 1. Incorrect data measurement and calculation methods. 2. Failure to follows processing procedure, and, 3. Loss or non-processing of data, etc., To get rid of the errors, internal controls should be developed and procedure for measurements prescribed. Information should, of course, be accurate otherwise it will not be useful; but accuracy should not be made a fetish, for example, the sales forecast for groups of products can well be rounded off to thousands of rupees. Value of information: It is defined as difference between the value of the change in decision behaviour caused by the information and the cost of the information. In other words, given a set of possible decisions, a decision-maker may select one on basis of the information at hand. If new information causes a different decision to be made, the value of the new information is the difference in value between the outcome of the old decision and that of the new decision, less the cost of obtaining the information. Having defined two very important aspects viz. system and information, let us now see what we understand by the term business information system.

1.6 BUSINESS INFORMATION SYSTEMS

As we mentioned earlier, a system is simply a set of components that interact to accomplish some purpose. A business is also a system. Its components marketing manufacturing, sales, research, shipping, accounting and personnel-all work together to provide some goods and services for the benefit of society in general. Each of these components is itself a sub system. However, a business system depends on a more or less abstract entity called an Information System. This system is a means by which data flows from one person or department to another and can encompass everything from inter-office mail and telephone links to a computer system that generates periodic reports for various users. Information System serves all the systems of a business, linking the different components in such a way that the1, effectively work towards the same purpose. The purposes of business information system, like any other system in an organisation, are to process input, maintain files of data about the organisation, and produce information, reports and other outputs. Information systems consist of subsystems, including hardware, software and data storage for files and databases. The particular set of sub-systems used - the specific equipments, programs, files and a procedure constitutes an information system application. Thus, information systems can have purchasing, accounting or sales applications. Since information systems support other organization systems, analysts must first study the organisation systems as a whole and then its information systems in details. 1.6.1 Categories of information systems: Systems Analysts develop several different types of information systems to meet a variety of business needs. 1. Transaction processing systems: The most fundamental computer-based system in an organisation pertains to the processing of business transactions. Transaction processing systems are aimed at expediting and improving the routine business activities that all organisations engage. Standard operating procedures, which facilitate handling of transactions, are often embedded in computer programs that control the entry of data, processing of details and search and presentation of data and information.

The high volume of well-understood transactions associated with the operating level of an organisation' as well as the ability for managers to develop specific procedures for handling them often trigger the need for computer assistance. Transaction processing systems if computerised provide speed and accuracy and can be programmed to follow routines without any variance' Systems Analysts design the systems and processes to handle various activities. 2. Management information systems: Transaction processing systems are operations oriented. In contrast, Management information Systems (MIS) assist managers in decision making and problem solving. They use results produced by the Transaction processing systems, but they may also use other information. In any organisation, decisions must be made on many issues that recur regularly and require a certain amount of information. Because the decision making process is well understood, the manager can identify the information that will be needed for the purpose. In turn the information systems can be developed so that reports are prepared regularly to support these recurring decisions. 3. Decision Support Systems: Not all decisions are of a recurring nature. Some occur only once or recur infrequently. Decision Support Systems are aimed at assisting managers who are faced with unique (non-recurring) decision problems. Often, an important aspect of these decisions is determining what information is needed. In well structured situations, it is possible to identify information needs in advance, but in an unstructured environment, it is difficult to do so. As information is acquired, the manager may realise that additional information is required. In such cases, it is impossible to pre design system report formats and contents. A Decision Support System must, therefore, have greater flexibility than other Information Systems. The decision support system (DSS) is of much more use when the decisions are of an unstructured or semi-structured nature. In this situation the problem area is modelled and various alternatives explored. In its simplest form, the spreadsheet could be considered as a decision-support system. Models can be built using formulae, and variables can be changed to see what would be the outcome. Purpose-built decision support systems usually incorporate more sophisticated modelling using statistical techniques such as linear programming, regression analysis, time series analysis, etc. Ideally, decision support systems should not be seen as stand-alone systems. Data needed for the models may have to be extracted from the transaction database, and therefore the DSS should be seen as an integrated piece of software incorporating database, model base, and user interface (e.g. easy-to-use query language). While the decision-support system can be of use at the tactical level, it is the strategic level that could make best use of it. In reality, this has not been the case, and many strategic managers have passed the model-building down to lower levels of management. This has been in part due to the technical knowledge required to build the models. What the executives need is software that is easy to use, and hence the next development has been that of executive information systems. 4. Executive information systems (EIS) are designed primarily for the strategic level of management. They enable executives to extract summary data from the database and model complex problems without the need to learn complex query languages, enter formulae, use complex statistics, or have high computing skills. The systems are easy to use, incorporating touch screens in some instances, and being graphically based. High level summary data and trend analysis is provided at the touch of a button, using graphics as a way of presenting the information. There are standard templates for these: the executive does not need to construct the query or model. From the executive's PC, telecommunications links are often made to public databases and the

information superhighway, so that external data can be browsed and incorporated into the models. While the executive will frequently start with high-level summary data, if detail is required, there is the opportunity to 'drill down' to the appropriate level and examine what EIS require large amounts of capacity and processing power within both the system and the network, and whilst suppliers' hardware costs per unit of power are failing, the software costs required to support such systems are increasing, and this will be where the efficiencies are required in the future. Although most computer systems may contain some of the above characteristics, they can be differentiated from EIS in a number of ways. Most MIS and operational systems are based on transaction processing carried out by a variety of on-line and batched inputs. Unlike the EIS, information is usually presented in numerical or textual form and reporting is by exception, usually in printed report format. Also, EISs tend to be externally focused, strategically based systems using both internal and external data, whereas other computer systems mainly concentrate on internal control aspects of the organsiation. 5. Expert systems are designed to replace the need for a human expert. They are particularly important where expertise is scarce and therefore expensive. This is not 'number-crunching' software, but software that expresses knowledge in terms of facts and rules. This knowledge will be in a specific area, and therefore expert systems are not general, as are most decision support systems which can be applied to most scenarios, An expert system for oil drilling is not of much use in solving company taxation problems While there may have been a progression from transaction- processing systems, through management information systems, to decision-support and executive information systems' expert systems have arisen largely from academic research into artificial intelligence. The expert system should be able to learn, i.e. change or add new rules. They are developed using very different programming languages such as PROLOG which are referred to as fifth generation languages, or expert systems shells which can make the process quicker and easier. It has been suggested that expert systems would be of greater use in the tactical and strategic level. This has been the case in banking, where expert systems scrutinise applications for loans, and lower level staff accepts the systems decision' This has replaced the somewhat subjective decisionmaking of more senior managers. Each of the above categories of systems will be discussed, in detail, in the subsequent chapters. Self Examination Questions 1. Define in following terms: (i) System (iv) Boundary (ii) Subsystem (v) System stress (iii) Interface (vi) System environment 2. Differentiate between the following: (i) Deterministic and probabilistic systems (ii) Open and closed systems (iii) Sub-system and supra-system 3. Explain the concept of decomposition with the help of an example. 4. Define the term system stress and system change. 5. What is information? What are the characteristics of information? 6. Explain various categories of information systems.

2 Transaction Processing System 2.0 INTRODUCTION

Accounting information systems depend heavily on the flow of data through various organizational subsystems. It is important to manage, control, and speed this movement of data. As accounting data flow through organisational channels, the data might be lost, inaccurately copied, delayed, or misinterpreted. Effective transaction processing systems ensure the capture of appropriate data and accurate information reporting.

2.1 TRANSACTION PROCESSING CYCLE

The term accounting information system includes the variety of activities associated with an organisation's transaction processing cycles. Although no two organisations are identical, most experience similar types of economic events. These events generate various transactions. A transaction processing cycle organises transactions by an organisation's business processes, the nature and types of transaction processing cycles vary, depending on the information needs of a specific organisation. Nevertheless, most business organisations have in common, transactions that may be grouped according to four common cycles of business activity. Revenue cycle: Events related to the distribution of goods and services to other entities and the collection of related payments. Expenditure cycle: Events related to the acquisition of goods and services from other entities and the settlement of related obligations. Production cycle: Events related to the transformation of resources into goods and services Finance cycle: Events related to the acquisition and management of capital funds, including cash. The objective of grouping like transactions is to cluster these transactions together in a way that simplifies information processing. Information processing within transaction processing cycle requires recording, maintaining and reporting on the business activities that make up a business process. For example, the sales process includes such activities as managing customer inquiries, taking sales orders, filling orders, and customer billing. A transaction processing cycle consists of one or more application systems. Application system processes logically related transactions. An organisation's revenue cycle might commonly include application systems involving customer order entry, billing, accounts receivable, and sales reporting. An expenditure cycle might commonly include application systems involving vendor selection of and requisitioning, purchasing, accounts payable, and payroll. A production cycle might include application systems involving production control and reporting, product costing, inventory control, and property accounting. An organisation's finance cycle might include application systems concerned with cash management and control, debt management, and the administration of employee benefit plans. Although usually financial in nature, most transactions also generate statistical data of interest to management. The receipt of a sales order and a notice of the arrival of goods from a supplier are examples of business transactions. Accounting information systems are designed and implemented not only to produce the ledger balances from which financial statements are prepared, but also to produce a wide variety of management and operational information in non-accounting terms. The initial task of an accounting information system is to recognize transactions that should be processed by the system. All financial exchanges with other entities should be reflected in an organisation's financial statements. An accounting information system routinely processes these monetary transactions, as well as internal transactions. Examples of internal economic events that may be processed by an accounting information system are the transfer of assets from inventory to a production process, depreciation calculations, and adjustments to customer invoices and other documents.

Accounting information systems also process transactions that are not directly reflected in those ledger balances that are the basis of financial statements. Customer address changes and employee pay rate changes are examples of important accounting information system processed transactions that do not directly affect an organisation's financial statements. The transaction cycle model of an organisation includes a fifth cycle - the financial reporting cycle. The financial reporting cycle is not an operating cycle. It obtains accounting and operating data from the other cycles and processes these data in such a manner that financial reports may be prepared. The preparation of financial reports in accordance with generally accepted accounting principles requires many valuation and adjusting entries that do not directly result from exchanges. Depreciation and currency translations are two cornmon examples. Such activities are part of an organisations financial reporting cycle. The concept of transaction processing cycles provides a framework for analyzing an organisation's activities. Although different organizations may not include the same application systems within a given transaction processing cycle, the cycle concept provides a basis for categorizing the flow of economic events that are common to all organisations. Transaction cycles offer a systemic framework for the analysis and design of accounting information systems in that there is a similar objective for each of the various cycles. This objective is to be an integral part of an organization's intemal control structure.

2.2 COMPONENTS OF THE TRANSACTION PROCESSING SYSTEM

The principal components of a transaction processing system include inputs, processing, storage, and outputs. These components or elements are part of both manual and computerized systems. Inputs: Source documents, such as customer orders, sales slips, invoices, purchase orders, and employee time cards, are the physical evidence of inputs into the transaction processing system. They serve several purposes: Capture data Facilitate operations by communicating data and authorising another operation in the process Standardize operations by indicating what data require recording and what actions need to be taken Provide a permanent file for future analysis, if the documents are retained. Source documents are typically forms carefully designed for ease of use and accurate data capture. Processing: Processing involves the use of journals and registers to provide a permanent and chronological record of inputs. The entries are done either by hand in simple manual systems (journalised) or by a data entry operator using a PC. Journals are used to record financial accounting transacts, and registers are used to record other types of data not directly related to accounting. Journals are used to provide a chronological record of financial transactions. It is theoretically possible, but not often practice able, to use the two column general ledger as the only book of original entry. However, to effect a division and saving of labour, special journals with special analysis columns are used to record similar and recurring transactions. Some of the more common special journals that may be kept are as follows: sales journal : used to summarise sales made on account

 purchase journal: used to summarise purchase made on account cash receipts journal: used to summarize receipts of cash cash disbursements journal: used to summarise disbursements of cash These four types of journals are often used in conjunction with a separate general ledger to provide a complete bookkeeping system. Special columns can be used in these books of original entry to facilitate recording transactions or for classification of data. The design of special-purpose journals is one of the most important steps in the design of an accounting system. Journals must be carefully designed if they are truly to economize clerical effort and at the same time function as true posting media in routing debits and credits to the ledger. Properly designed journals eliminate numerous postings and at the same time enable one to obtain quickly the total for all major transactions. Storage: Ledgers and files provide storage of data in both manual and computersied systems. The general ledger, the accounts/ vouchers payable ledger, and the accounts receivable ledger are the records of financial account. They provide summaries of a firm's financial accounting transactions. All accounting transactions must be reflected in the general ledger. A debit-credit entry is input for every transaction. Traditionally, this process has been called posting. The general ledger generates a trial balance to test the accuracy of the entire prior record keeping. Computer storage: A file is an organized collection of data. There are several types of files. A transaction file is a collection of transaction input data. Transaction files usually contain data that are of temporary rather than permanent interest. By contrast, a master file contains data that are of a more permanent or continuing interest. To illustrate this difference, consider the posting of sales on accounting to the accounts receivable ledger. Because a sales journal is a chronological record of sales-on-account transactions, it may be called a transaction file. The transaction file consists of raw data concerning sales to customers. Although there may be several sales to the same customer, this will not be known until the transaction data are processed. The process of posting sales to the accounts receivable ledger summarizes sales to an individual customer. Computer Processing: When computers are used for processing, two different modes of processing accounting transactions are possible. These modes are batch processing and direct processing' Batch processing is conceptually very similar to a traditional manual accounting system. Batches of transactions are accumulated as a transaction file. Transaction files are printed to provide documentation of inputs to the accounting system. Transaction files are subsequently posted to ledgers by computer programs. The ledgers are then periodically processed to generate financial statements. The flow of processing in a batch processing computer system is essentially same as in a traditional manual system- source documents to journals (transaction files), journal to ledgers, and ledgers to financial statements. In direct processing, individual transactions are posted directly to ledgers rather than being batched to build a transaction file. A ledger may be periodically processed to generate a listing of transactions that have been posted to it over some period of time. But this transaction file is created as a by-product of posting the ledger. Ledgers are periodically processed to generate financial statements. Processing converts data into information. Management is more interested in summary data such as total sales and total account balance than in the details of a particular sales transaction. Management thus has a permanent interest in the information that is contained in the accounts receivable master file. In contrast, management's interest in transaction files is temporary. Once the data have been

processed to update master file, they are no longer of direct interest to management. Transaction files must be saved, of course, to maintain an audit trail. A reference or table file contains data that are necessary to support data processing. Common examples of reference files used in data processing are payroll tax tables and master price lists. Outputs : There is a wide variety of outputs from a transaction processing system. Any document generated in the system is an output. Some documents are both output and input (e.g.'' a customer invoice is an output from the order-entry application system and also an input document to the customer). Other common outputs of a transaction processing system are the trial balance, financial reports, operational reports, pay cheques, bills of lading, and voucher cheques (payments to vendors). The trial balance lists the balances of all the accounts in the general ledger and tests the accuracy of the record keeping. Thus, it is fundamental to financial control and preparation of financial statements. Financial reports summarize the results of transaction processing and express these results in accordance with the principles of financial reporting. Two common financial reports are the balance sheet and the income statement. In addition to these two reports, a wide variety of financial reports can be prepared to suit the needs of management and others' operational reports summarize the results of transaction processing in a statistical or comparative format. Reports summarizing goods received, goods ordered, customer orders received, and other such activities are essential to the operation of a firm. The nature and content of such reports depend on the nature of a firm and its transaction processing activities. Transaction processing requires the management of accounting data as they flow through AIS. When planning a new system, the developers usually start by designing the outputs from the system. These outputs, and especially managerial reports, then become the goals of the AIS and therefore provide a focus for the prerequisite tasks of data collection and data processing. Poorly designed reports can harm the value of an AIS' Sometimes reports include too much data. To avoid overloading managers with data, an AIS should incorporate elements of good report design. Outputs, then, drive the inputs to an AIS. The fundamental instrument for collecting data in typical AIS is the source document. Source documents should be easy to read, easy to understand, and serve to collect and distribute information as well as establish authenticity or authorisation. For a transaction processing system to gather and process data efficiently, accounting data are often coded. AISs can use codes to identify accounting information uniquely, to compress data, to classify transactions in accounts, and to convey special meanings. Four types of codes are generally used: (1) Mnemonic codes, (2) Sequence codes, (3) Block codes, and (4) Group codes. The choices among these codes and the way these codes are constructed are determined by (l) The code's use, (2) The need for consistency, (3) Considerations of design efficiency, (4) An allowance for growth, and (5) The desire to use standard codes throughout a company.

As discussed earlier, in processing transactions, AISs typically combine similar transactions into a transaction processing cycle. The revenue cycle e.g. processes all transactions related to sales and cash receipts. Important source documents in processing revenues are sales orders, sales invoices, remittance advices, shipping notices, and customer cheques. The revenue cycle outputs many reports. These include customer billing statements and reports concerned with analyzing outstanding debts and sales transactions. In processing purchasing transactions, the AIS is concerned with prompt payment for purchased goods and services. Many source documents initiate accounting entries for the purchasing cycle. These include purchase requisitions, purchase orders, receiving reports, purchase invoices, and bills of lading. The primary output of the purchasing cycle is the cheques for vendors. However, there are many other outputs Some of which relate to inventory control. The personnel function maintains employee records' The payroll function produces pay cheques for employees and a variety of reports for management and government agencies. Managing fixed assets involves tracking purchases, repairs, relocation, and disposition of an organisation,s fixed assets. Several transaction processing systems have been discussed, in detail, in chapter I l. Self Examination questions l. What is a transaction? 2. Explain four common cycles of a business activity. 3. Discuss the various component of a transaction processing system. 4. Explain the following terms: (i) Transaction file (ii) Master file (iii) Reference file (iv) Batch processing (v) Direct processing.

Basic Concepts of MIS

3.0 INTRODUCTION
Management information system deals with information, which is critical for the success of any business organisation. Since time immemorial managers have been using information for discharging important management functions of planning, organising, staffing, directing and controlling. To be useful, information must be capable of being used for informative or inference purposes, argument, or as a basis for forecasting or decision making. Thus, it is imperative for any organisation to provide right information in right quantity, to right persons, (managers) at right time. As organisation expands, problems associated with the data collection and recording, retrieval and its effective communication increase in proportion to the size of the organisation. Hence, a special system has to be instituted to ensure the flow of correct information at regular intervals to various hierarchical management levels. This objective can be achieved by employing management information system. Management information system, or MIS, as it is popularly known is an old management tool' It is being used by business managers as a means for better management and scientific decision-making. However, it has attained new dimensions after the advent of computers. The computer has helped in accurate processing of increased volumes of data at high speed, thereby, permitting the consideration of more alternatives in decision making process. Thus, the managers can augment their basic decision-making and communication skills with computer usage to increase their productivity and performance level.

3.1 CONCEPTS OF MIS

3.1.1 What is MIS? MIS consists of three terms viz management, information and system. The concept of MIS is better understood if each element of term MIS is defined separately. Management Information System Systems Ddxdjdj Management Information

Management: A manager may be required to perform following activities in an organisation: (i) Determination of organisational objectives and developing plans to achieve them. (ii) Securing and organising the human and physical resources so that these objectives could be accomplished. (iii) Exercising adequate controls over the functions. (iv)Monitoring the results to ensure that accomplishments are proceeding according to plan. Thus, management comprises the processes or activities that describe what managers do in the operation of their organisation: plan, organise, initiate, and control operations. In other words, management refers to a set of functions and processes designed to initiate and co-ordinate group efforts in an organised setting directed towards promotion of certain interest, preserving certain values and pursuing certain goals. It involves mobilisation, combination, allocation and utilisation of physical, human and other needed resources in a judicious manner by employing appropriate skills, approaches and techniques. Information: As stated earlier, information is data that have been put into a meaningful and useful context. System: System may be defined as a composite entity consisting of a number of elements which are interdependent and interacting, operating together for the accomplishment of an objective. A business is also a system where economic resources such as people, money, material, machines, etc are transformed by various organisation processes (such as production, marketing, finance, etc.) into goods and services. After having an idea about management, information and system we are in a position to discuss MIS. It is a network of information that supports management decisionmaking. The role of MIS is to recognize information as a resource and then using that resource for effective and better achievement of organisational objectives. The function of MIS can be shown with the help of following diagram:

MIS provided for the identification of relevant information needs, the collection of relevant information, processing of the same to become usable by the business managers, and timely dissemination of processed information to the users of the information for properly managing the affairs of an enterprise by informed decisions. For example, in a competitive market for products manufactured by an enterprise, its management needs information on the pricing policy of the competitors, specially of

competing products, sales techniques etc., to effectively combat the effect of the competition. 3.1.2 Definitions of MIS: There is no consensus on the definition of the term "Management Information System". Few definitions related to the management information system concept are given as follows: Canith defines MIS as: An approach that visualise the business organisation as a single entity composed of various inter-related and inter-dependent sub-systems looking together to provide timely and accurate information for management decision making, which leads to the optimisation of overall enterprise goals. Schwarlz defines MIS as "a system of people, equipment, procedures, documents and communications that collects, validates, operates on transformers, stores, retrieves, and present data for use in planning, budgeting, accounting, controlling and other management process." Frederick B. Cornish states that a proper management information system is structured to provide the information needed when needed and where needed", further, the system "represents the internal communications network of the business providing the necessary intelligence to plan, execute and control." The Management Information Systems operating these days are based on the computer so much that some authorities consider them as inseparable from computers. Thomas R. Prince defines MIS as a "computer based network containing one or more operating systems, provides relevant data to management for decision making purposes and also contains the necessary mechanism for implementing changes of responses made by management in the decision making". As Coleman and Riley states (in MIS : Management Dimensions), an MIS (1) applies to all management levels; (2) and is linked to an organisational sub-system; (3) functions to measure performance, monitor progress, evaluate alternatives or provide knowledge for change or collective action; and (4) is flexible both internally and externally. G.B. Davis defines management information system as "an integrated man/machine system for providing information to support the operations, management and decision making functions in an organisation". The system utilises computer hardware and software, manual procedures, management and decision models, and a database. According to him, managerial information structure must be of a pyramidical shape and it should be in conformity with the pyramidical pattern of the structure of particular organisation i.e. at higher levels, information needed is more filtered and brief but rneaningful but as the level become lower, the information base should get broader. According to Jeronte Kanter, "MIS is a system that aids management in making, carrying out, and controlling decisions." Here MIS is a system that aids management in performing its job. MIS does not imply that it aids all levels of management. Frequently, a computerised MIS is taken to mean a system that reacts instantaneously to top management requests, pouring out data that shows the status of the company at 60second intervals in graphic form on television screens. A Company can employ MIS concepts that focus on middle and operating management rather than top management. 3.1.3 Characteristics of an effective MIS: Important characteristic for an effective MIS are eight in number and are briefly discussed below: 1. Management oriented: It means that effort for the development of the information system should start from an appraisal of management needs and overall business objectives. Such a system is not necessarily for top management only, it may also meet the information requirements of rniddle level or operating levels of management as well.

2. Management directed: Because of management orientation of MIS, it is necessary that management should actively direct the system's development efforts. Mere one time involvement is not enough. For system's effectiveness, it is necessary for management to devote their sufficient time not only at the stage of designing the system but for its review as well, to ensure that the implemented system meets the specifications of the designed system. In brief, management should be responsible for setting system specifications and it must play a key role in the subsequent trade off decisions that occur in system development. (system development process has been discussed, in detail, in Chapter 7). 3. Integrated: Development of information should be an integrated one. It means that all the functional and operational information sub-system should be tred together into one entity. An integrated information system has the capability of generating more meaningful information to management. The word integration here means taking a comprehensive view or a complete look at the inter locking sub-systems that operate within a company. 4. Common data flows: It means the use of common input, processing and output procedures and media whenever possible is desirable. Data is captured by system analysts only once and as close to its original source as possible. They, then try to utilise a minimum of data processing procedures and sub-systems to process the data and strive to minimise the number of output documents and reports produced by the system. This eliminates duplication in data collections and documents and procedures. It avoids duplication, also simplifies operations and produces an efficient information system. However, some duplication is necessary in order to insure effective information system. 5. Heavy planning element: An MIS usually takes 3 to 5 years and sometimes even longer period to get established firmly within a company. Therefore, a hear1, planning element must be present in IMIS development. It means that MIS designer should keep in view future objectives and requirements of firm's information in rnind. The designer must avoid the possibility of system obsolescence before the system gets into operation. 6. Sub system concept: Even though the information system is viewed as a single entity, it must be broken down into digestible sub-systems which can be implemented one at a time by developing a phasing plan. The breaking do'*,n of MIS into meaningful sub-systems sets the stage for this phasing plan. 7. Common database: Database is the mortar that holds the functional systems together. It is defined as a "superfile" which consolidates and integrates data records formerly stored in many separate data files. The organisation of a database allows it to be accessed by several information sub-systems and thus, eliminates the necessity of duplication in data storage, updating, deletion and protection. Although it is possible to achieve the basic objectives of IVIIS without a common database, thus paying the price of duplicate storage and duplicate file updating, database is a definite characteristic of MIS. 8. Computerised: It is possible to have MIS without using a computer. But use of computers increases the effectiveness of the system. In fact, its use equips the use of system to handle a rvide variety of applications by providing their information requirements quickly. Other necessary attdbutes of the computer to MIS are accuracy and consistency in processing data and reduction in clerical staff. These attributes make computer a prime requirement in management information system. 3.1.4 Misconceptions or Myths about MIS: Let us clarify some of the misconceptions of "myths" about MIS.

1. The study of management information system is about the use of computers. This statement is not true. MIS may or may not be computer based, computer is just a tool, just take any other machine. Installing a MIS depends largely on several factors such as, how critical is the response time required for getting an information; how big is the organisation, and how complex are the needs of the information processing. 2. More data in reports means more information for managers: This is a misapprehension. It is not the quantity of data, but its relevance, which is important to managers in process of decision-making. Data provided in reports should meet information requirements of managers. It is the form of data and its manner of presentation that is of importance to business managers. Unorganised mass of data creates confusion. 3. Accuracy in reporting is of vital importance: The popular belief is that accuracy in reporting should be of high order. At the operating level, it is true. Other examples, where accuracy is really important, can be the dispensing of medicine; the control of aircraft; the design of a bridge etc. Accuracy, however, is a relevant but not an absolute ideal. Higher levels of accuracy involve higher cost. At higher decision levels, great accuracy may not be required. The degree of accuracy is closely related to the decision problem. Higher management is concerned with broad decisions on principles and objectives. A fairly correct presentation of relevant data often is adequate for top management decisions. For a decision on a new project proposal, top management is not interested in knowing the project cost in precise rupee terms. A project cost estimated at a fairly correct figure is all what it wants. 3.1.5 Pre-requisites of an effective MIS: The main pre-requisites of an effective MIS are as follows: (a) Database: It can be defined as a "superfile" which consolidates data records formerly stored in many data files. The data in database in organised in such a way that accesses to the data is improved and redundancy is reduced. Normally, the database is sub-divided into the major information sub-sets needed to run a business. These subsets are (a) Customer and Sale File; (b) Vendor file; (c) Personnel file: (d) Inventory file; and (e) General Ledger Accounting file. The main characteristic of database is that each sub-system utilises same data and information kept in the same file to satisfy its information needs. The other important characteristics of data base are as follows: (i) It is user-oriented. (ii) It is capable of being used as a common data source, to various users, helps in avoiding duplication of efforts in storage and retrieval of data and information. (iii) It is available to authorised persons only. (iv) It is controlled by a separate authority established for the purpose, known as Data Base Management System (DBMS). The maintenance of data in database requires computer hardware, software and experienced computer professionals. In addition it requires a good data collection system equipped with experts who have first-hand knowledge of the operations of the company and its information needs. The database structured on above lines is capable of meeting information requirements of its executives, which is necessary for planning organising and controlling the operations of the business concern. But, it has been observed that such a database meets the information needs of control to its optimum. (b) Qualified system and management staff: The second pre-requisite of effective MIS is that it should be manned by qualified officers. These officers who are expert in the field should understand clearly the views of their fellow officers. For this, the

organisational management base should comprise of two categories of officers viz. (l) Systems and Computer experts and (2) Management experts. Systems and Computer experts in addition to their expertise in their subject area should also be capable of understanding management concepts to facilitate the understanding of problems faced by the concern. They should also be clear about the process of decision making and information requirements for planning and control functions. Management experts should also understand quite clearly the concepts and operations of a computer. This basic knowledge of computers will be useful to place them in a comfortable position, while working with systems technicians in designing or otherwise of the information system. This pre-requisite is confronted with a problem viz., procurement of suitable experts. The problem is dealt by recruiting fresh candidates and developing them to meet specific requirements. Also, its is difficult to retain such experts on long term basis as their scope in the job market is quite high. (c) Support of Top Management: The management information system to be effective, should receive the full support of top management. The reasons for this are as follows: l. Subordinate managers are usually lethargic about activities, which do not receive the support of their superiors (top management). 2. The resources involved in computer-based information systems are large and are growing larger in view of importance gained by management information system. To gain the support of top management, the officers should place before top management all the supporting facts and state clearly the benefits, which will accrue from it to the concern. This step will certainly enlighten management, and will change their attitude towards MIS. Their wholehearted support and cooperation will help in making MIS an effective one. (d) Control and maintenance of MIS: Control of the MIS means the operation of the system as it was designed to operate. Some time, users develop their own procedures or short cut methods to use the system, which reduce its effectiveness. To check such habits of users, the management at each level in the organisation should devise checks for the information system control. Maintenance is closely related to control There are times when the need for improvements to the system will be discovered. Formal methods for changing and documenting changes must be provided. (e) Evaluation of MIS: An effective MIS should be capable of meeting the information requirements of its executives in future as well. This capability can be maintained by evaluating the MIS and taking appropriate timely action. The evaluation of MIS should take into account the following points. 1. Examining whether enough flexibility exists in the system, to cope with any expected or unexpected information requirement in future. 2. Ascertaining the views of users and the designers about the capabilities and deficiencies of the system. 3. Guiding the appropriate authority about the steps to be taken to maintain effectiveness of MIS. 3.1.6 Constraints in operating a MIS: Major constraints which come in the way of operating an information system are the following: 1. Non-availability of experts, who can diagnose the objectives of the organisation and provide a desired direction for installing and operating system. This problem may

be overcome by grooming internal staff. The grooming of staff should be preceded by proper selection and training. 2. Experts usually face the problem of selecting the sub-system of MIS to be installed and operated upon. The criteria, which should guide the experts here, may be the need and importance of a function for which MIS can be installed first. 3. Due to varied objectives of business concerns, the approach adopted by experts for designing and implementing MIS is a non-standardised one. Though in this regard nothing can be done at the initial stage but by and by standardisation may be arrived at, for the organisation in the same industry. 4. Non-availability of cooperation from staff in fact is a crucial problem. It should be handled tactfully. Educating the staff may solve this problem. This task should be carried out by organising lecturers, showing films and also explaining to them the utility of the system. Besides this, some persons should also be involved in the development and implementation of the system. 5. There is high turnover of experts in MIS. Turnover in fact arises due to several factors like pay packet; promotion chances; future prospects, behaviour of top ranking managers etc. Turnover of experts can be reduced by creating better working conditions and paying at least at par with other similar concerns. 6. Difficulty in quantifying the benefits of MIS, so that it can be easily comparable with cost. This raises questions by departmental managers about the utility of MIS. They forget that MIS is a tool, which is essential to fight out competition and the state of uncertainty that surrounds business today. 3.1.7 Effects of using Computer for MIS: The effect of applying computer technology to information system can be listed as below: 1. Speed of processing and retrieval of data increases: Modern business situations are characterised by high degree of complexity, keen competition and high risk and reward factors. This invariably calls for systems capable for providing relevant information with minimum loss of time. Manual systems, howsoever well organised, often fail to match the demand for information for decision making. Computer with its unbelievably fast computational capability and systematic storage of information with random access facility has emerged as an answer to the problems faced in modern days management. Processing of data in relevant form and design and retrieval of them when needed in facts requires considerably less time and facilitate the management action and decision making. The speed of computer processing is in new range, i.e., an operation takes only billionths of a second. This characteristic of computer has accounted for as a major factor in inducing MIS development. Computers today are capable of meeting varied type of information requirements of executives. 2. Scope of use of information system has expanded: The importance and utility of information system in business organisations was realised by most of the concerns, specially after the induction of computers for MIS development. Systems expefts in business organisations developed areas and functions, where computerised MIS could be used to improve the working of the concern. This type of applications hitherto are not feasible under the manual system. For example, it was made possible by using an on line real time system to provide information to various users sitting at a remote distance from a centrally located computer system. 3. Scope of analysis widened: The use of computer can provide multiple type of information accurately and in no time to decision makers. Such information equips an executive to carry out a thorough analysis of the problems and to arrive at the final decision. Computer is capable of providing various types of sales reports for example; area wise sales commission of each salesman, product-wise sales, etc. fhese reports are

quite useful in analysing the sales department rvorking and to ascertain their weaknesses so that adequate measures nray be taken in time. In this way, the use of computer has widened the scope of analysis. 4. Complexity of system design and operation increased: The need for highly processed and sophisticated information based on multitudes of variables has made the designing of the system quite complex. During the initial years, after the induction of computer for MIS development, systems experts faced problems in designing systems and their operations. The reason at that time was the non availability of experts required for the purpose. But these days the situation is better. The computer manufactures have developed some important programs (software) to help their users. Besides some private agencies are also there who can perform the task of developing programs to cater to the speciliased needs of their customers, either on consultancy basis or on contract. 5. Integrates the working of different information subsystem: A suitable structure of management information system may be a federation of information subsystem, viz., production, material, marketing, finance, engineering and personnel. Each of these sub-systems are required to provide information to support operational control, management control and strategic planning. Such information may be made available from a common-data-base. This common data base may meet out the information requirements of different information sub-system by utilising the services of computers for storing, processing, analysing and providing such information as and when required. In this way, computer technology is useful for integrating the day-today working of different information sub system. 6. Increases the effectiveness of Information system: Information received in time is of immense value and importance to a concern. Prior to the use of computer technology for information purposes, it was difficult to provide the relevant information to business executives in time even after incurring huge expenses. The use of computer technology has overcome this problem. Now, it is not difficult to provide timely, accurate and desired information for the purpose of decision making. Hence, we can conclude that the use of computer has increased the effectiveness of information system also. 7. More comprehensive information: The use of computer for MIS enabled systems expert to provide more comprehensive information to executives on business matters. 3.1.8 Limitations of MIS: The rnain limitations of MIS are as follows: l. The quality of the outputs of MIS is basically governed by the quantity of input and processes. 2. MIS is not a substitute for effective management. It means that it cannot replace managerial judgement in making decisions in different functional areas. It is merely an important tool in the hands of executives for decision making and problem solving. 3. MIS may not have requisite flexibility to quickly update itself with the changing needs of time, especially in fast changing and complex environment. 4. MIS cannot provide tailor-made information packages suitable for the purpose of every type of decision made by executives. 5. MIS takes into account mainly quantitative factors, thus it ignores the nonquantitative factors like morale and attitude of members of the organisation, which have an important bearing on the decision making process of executives. 6. MIS is less useful for making non-programmed decisions. Such type of decisions are not of the routine type and thus require information, which may not be available from existing MIS to executives.

7. The effectiveness of MIS is reduced in organisations, where the culture of hoarding information and not sharing with other holds. 8. MIS effectiveness decreases due to frequent changes in top management. organisational structure and operational team.

3.2 ESTABLISHING THE INFORMATION NEEDS IN MANAGEMENT PROCESS

The establishment of information need in management process, in fact, means establishing of information requirement of its managers. Broadly such information is necessary to managers for performing the functions of planning and controlling. The task of establishing the information requirements for the aforesaid functions is usually performed by system analysts and system designers. They establish the information requirement by interviewing and analysing the functions, which each executive in the organisation is required to perform. In general the planning information requirements of executives can be categorised into three broad categories viz. (a) environmental, (b) competitive and (c) internal. (a) Environment information: It comprises of the following: (i) Government policies: Information about concessions/benefits, government policies in respect of tax concessions or any other aspects, which may be useful to the organisation in the future period. (ii) Factors of production' Information related with source, cost, location, availability, accessibility and productivity of the major factors of production viz., (l) labour, (ii) materials and parts and (iii) capital. (iii) Technological environment: Forecast of any technological changes in the industry and the probable effect of it on the firm. (iv) Economic trends: It includes information relating to economic indicators like consumer disposal income, employment, productivity, capital investment etc. Such information is valuable for those firms specially whose output is a function of these important variables. (b) Competitive information: It includes the following information. (i) Industry demand: Demand forecast of the industry in respect of the product manufactured and in the area in which the firm would be operating. (ii) Firm demand: Assessment of the firm's product demand in the specified market. It also includes an assessment of firm's capability to meet firm's demand. (iii) The competitive data: Data of competing firms for forecasting demand and making decisions and plans to achieve the forecast. (c) Internal information: Usually includes information concerning organisations' (i) sales forecast, (ii) financial plan/budget, (iii) supply factors, and (iv) policies, which are vital for subsidiary planning at all levels in the organisation. The function of organising requires information for determining structure of work groups and for coordinating their activities. Specifically the information should be suitable for identifying, classifying and grouping activities before assigning them to different work groups. Other information required for the purpose of organising includes-future plans of action, order, budgets, operations, instructions, specifications etc. The information required for organising the activities of the concern may be met mainly from internal sources. Information required to exercise control function usually concerns the functional area, e.g., manufacturing, marketing, finance, personnel etc. Such information can also be made available from the internal sources.

3.3 FACTORS ON WHICH INFORMATTON REQUIREMENTS DEPEND

The factors on which information requirements of executives depend are: 1. Operational function. 2. Type of decision making. 3. Level of management activity. (1) Operational function: The grouping or clustering of several functional units on the basis of related activities into a sub-systems is termed as operational function. For example, in a business enterprise, marketing is an operational function, as it is the clustering of several functional units like market research, advertising, sales analysis and so on. Likewise, production finance, personnel etc. can all be considered as operational functions. Operational functions differ in respect of content and characteristics of information required by them. Information requirement depends upon operational function. The information requirement of different operational functions vary not only in content but also in characteristics. In fact, the content of information depends upon the activities performed under an operational function. For example, in the case of production, the information required may be about the production targets to be achieved, resources available and so on. Whereas in the case of marketing functions, the content of information may be about the consumer behaviour, new product impact in the market etc. The characteristics which must be possessed by a particular information too are influenced by an operational function. For example, the information required by accounts department for preparing payroll of the employees should be highly accurate. (2) Type of decision making: Organisational decisions can be categorised as programmed and non-programmed ones. Programmed decisions: Programmed decisions refer to decisions made on problems and situations by reference to a predetermined set of precedents, procedures, techniques and rules. These are well-structured in advance and are time-tested for their validity. As a problem or issue for decision-making emerges, the relevant pre-decided rule or procedure is applied to arrive at the decision. For example, in many organisations, there is a set procedure for receipt of materials, payment of bills, employment of clerical personnel, release of budgeted funds, and so on. Programmed decisions are made with respect to familiar, routine, recurring problems which are amenable for structured solution by application of known and well-defined operating procedures and processes. Not much judgement and discretion is needed in finding solutions to such problems. It is a matter of identifying the problem and applying the rule. Decision making is thus simplified. Organisations evolve a repertory of procedures, rules, processes and techniques for handling routine and recurring situations and problems, on which managers have previous experience and familiarity. One characteristic of programmed decisions is that they tend to be consistent over situations and time. Also managers do not have to lose much sleep in brooding over them. However, programmed decisions do not always mean solutions to simple problems. Decision-making could be programmed even to complex problems-such as resource allocation problems for example-by means of sophisticated mathematical/statistical techniques. Non-programmed decisions are those, which are, made on situations and problems which are novel and non-repetitive and about which not much knowledge and information are available. They are non-programmed in the sense that they are made not by reference to any pre-determined guidelines, standard operating procedures, precedents and rules but by application of managerial intelligence, experience,

judgement and vision to tackling problems and situations, which arise infrequently and about which not much is known. There is no simple or single best way of making decisions on unstructured problems, which change their character from time to time, which are surrounded by uncertainty and enigma and which deff quick understanding. Solutions and decisions on them tend to be unique or unusual-for example, problems such as a sudden major change in government policy badly affecting a particular industry, the departure of a top level key executive, drastic decline in demand for a particular high profile product, competitive rivalry from a previously little known manufacturer etc. do not have ready-made solutions. It is true that several decisions are neither completely programmed or completely nonprogrammed but share the features of both. (3) Level of management activity: Different levels of management activities in management planning and control hierarchy are-Strategic level, tactical level and operational level. Strategic Level : Strategic level management is concemed with developing of organisational mission, objectives and strategies. Decisions made at this level of organisation to handle problems critical to the survival and success of the organization are called strategic decisions. They have a vital impact on the direction and functioning of the organisation-as for example decisions on plant location, introduction of new products, making major new fund-raising and investment operations, adoption of new technology, acquisition of outside enterprises and so on. Much analysis and judgement go into making strategic decisions. In a way, strategic decisions are comparable to non-programmed decisions and they share some of their characteristics. Strategic decisions are made under conditions of partial knowledge or ignorance. Tactical Level: Tactical level lies in middle of managerial hierarchy. At this level, managers plan, organise, lead and control the activities of other managers. Decisions made at this level called the tactical decisions (which are also called operational decisions) are made to implement strategic decisions. A single strategic decision calls for a series of tactical decisions, which are of a relatively structured nature. Tactical decisions are relatively short, step-like spot solutions to breakdown strategic decisions into implementable packages. The other features of tactical decisions are: they are more specific and functional; they are made in a relatively closed setting; information for tactical decisions is more easily available and digestible; they are less surrounded by uncertainty and complexity; decision variables can be forecast and quantified without much difficulty and their impact is relatively localised and short-range. Tactical decisions are made with a strategic focus. The distinction between strategic and operational decisions could be high-lighted by means of an example. Decisions on mobilisation of military resources and efforts and on overall deployment of troops to win a war are strategic decisions. Decisions on winning a battle are tactical decisions. As in the case of programmed and non-programmed decisions, the dividing line between strategic and tactical decision is thin. For example, product pricing is tactical decision in relation to the strategic decision of design and introduction of a new product in the market. But product pricing appears to be a strategic decision to down-line tactical decisions on dealer discounts. Supervisory Level: This is the lowest level in managerial hierarchy. The managers at this level coordinate the work of others who are not themselves managers. They ensure that specific tasks are carried out effectively and efficiently.

3.4 LEVELS OF MANAGEMENT REQUIREMENTS AND THEIR INF'ORMATION There is no unanimity over the number of management levels. Keith Davis has classified various management levels as trusteeship management, general management, departmental management, middle management and supervisory management. Piffner and Sherwood have classified management levels into four parts-Corporate management, Top management, Middle management and Supervisory management. Many other experts, such as Koontz and O' donnell and Brech have classified these as top level' middle level and supervisory level. In fact, this last classification is preferred over the others by different management experts from analysis point of view. The division of management into three levels is carried out to distinguish the type of tasks, extent of authority and degree of accountability within the hierarchy' (i) Top level (Strategic level): Top management is defined as a set of management positions which are concerned with the overall task designing, directing and managing the organisation in an integrated manner. The structure of top level normally consists of Chairman and members of the Board of Directors, Chief Executive Officer and the heads of the major departments of the company. In fact, this level consists of those executives, whose responsibilities relate to the whole organisation or in other words, they are accountable for effectiveness and efficiency of the operations of the organisation as a whole' Top management's main responsibility is in the direction of determining the overall goals and objectives of the business. It deals mainly with long term plans, policy matters and broad objectives of the company. Also, it establishes a budget frame work under which the various departments will operate' Top management needs information on the trends in the external environment (economic, technological, political and social) and on the functioning of the internal organizational sub-system. Apart from historical information, top management requires ongoing or current information also which is generated through forecasts of the future. Thus, mostly the information utilised by top management is futuristic and external in nature. Much of the information so generated for strategic planning purpose tends to be incomplete and not fully reliable. It may not be available on time. For control purposes, top management receives summary and 'exception reports' (for example on production, sales, cash, profits and so on) from the middle management.

(ii) Middle Level (tactical level): Middle management is defined as a group of management position which tend to overlap the top and supervisory management levels' in the hierarchy. Middle management positions consist of heads of functional departments and chiefs of technical staff and service units. Middle management, therefore, includes such people as the Manager of sales, the manager of purchasing, finance manager, and the manager of personnel, etc. Middle management may be viewed as administrative management in the sense that it is responsible for the elaboration, classification and operationalisation of organisation goals, strategies and policies in terms of action programmes and norms of performance. Middle management is concerned with the task of formulating pragmatic operating policies and procedures for the guidance of supervisory management.

The nature of information required at the middle management level is less diverse and complex. Middle management is fed with information both from top management and supervisory management. Much of the information used by the middle management is internal in nature. Middle management does not require much 'futuristic' information since its decisions are not strategic or long range in nature. For example, the information needs of a sales nranager are : corporate sales goals and targets, strategies and policies for operationalising them, he also needs information on sales potential and trends in different market segments, geographical territories, competitive conditions and so on. Further, he needs information on weekly sales turnover from different zones and for different products, customer complaints, delay in despatches, finished goods inventory position and the like for the purposes of control.

(iii) Supervisory level: Supervisory management is defined as a team of management positions at the base of the hierarchy. It consists of Section Officers, Office Managers and Superintendents, Foreman and supervisors who are directly responsible for instructing and supervising the efforts of clerical and blue collar employees and workers. Supervisory management is also called 'operations management' in the sense that it is concerned with implementing operational plans, policies and procedures for purposes of conversion of inputs into outputs. At the supervisory level, managers are responsible for routine, day-to-day decisions and activities of the organisation which do not require mulct judgement ald discretion. The function and process of the supervisory management are standardised as far as possible. The perspective of supervisory management are generally short-range. It functions in relatively closed environment'

Supervisory management mostly needs internal information on operational aspects of the functioning of activity units. It in fact, generates internal information for example, information on purchases and sales, production, use of resources at the operational level. It also receives information from the middle management levels on operational plans and programmes. The nature of information is routine and structured. It tends to be reliable and relatively complete. There is little element of complexity or uncertainty involved in the information.

3.5 ORGANISATION STRUCTURE AND INFORIVIATION NEEDS

Important characteristics of different levels of management can be listed in the following table:
SI. No. I 2 Focus Planning Focus Control of on Moderate Heavy Heavy Characteristic Top Management Middle Management Operating Management Moderate Heavy

3 4

Time frame Scope activity Nature activity Level complexity measurement Result activity of of of Job of

One to five years Extremely broad Relatively unstructured Very complex many variables Difficult Plan, Policies and Strategies Mostly external effective Creative, administrative Few Intra-division

Up to a year Entire functional area Moderately structured Less complex better defined Less difficult Implementation schedules, performance, yardsticks Internal, more accurate Responsive innovative Moderate number Intra-department

Day-to-day Single sub function or subtask Highly structured Straight forward Relatively easy End product Internal historical, high level of accuracy Efficient Persuasive Many Inter-department

5. 6 7. 8. 9. 10. 11 12

Type of information Mental attributes Number of people involved Department/ divisional interaction

* Source: "Management oriented MIS" by J. Kanter. As one moves higher in the organisation, the problems faced become less structured with a great deal of uncertainty and the procedures used for dealing with the different types of problems vary. [t should also be noted that information requirements would also vary' depending on the level in the organisation and type of the decisions being made' It is vital that an appropriate information flow be directed to the proper decision manager' The types as well as sources. of information will vary by level in the organization. Self-examination Questions 1. Define Management Information System. What is its importance in a business organisation? 2. Define a data base. 3. What are the characteristics of an effective MIS? Discuss the problems faced in installing and operating such a system' 4. Discuss the impact of computers on management information system' 5. Examine the prerequisites of an effective MIS. What are the major constraints in operating it. 6. What are the lir1ritations of management information system? 7. What are the information requirements at different levels of management? 8. Examine the type of information required by entrepreneur for promoting a few project. 9. What are the various factors on which requirement of information depends? 10. Briefly describe various levels of management

4. Systems Approach and Decision Making

4.1 SYSTEMS APPROACH TO MANAGEMENT
The system approach to management is in fact a way of thinking about management problems. It visualises an organisation as a group interacting and interdependent parts with a purpose. Managers are not in a position to deal with individual parts separately since action of one part is going to influence other parts. Each problem should be examined in its entirety to the extent possible and economically feasible, from the point of view of the overall system of which the problem under consideration is one part. Under this approach a manager should make conscious attempt to understand the relationship among various parts of the organisation and their role in supporting the

overall performance of the organisation. Before solving problem in any functional area, or in any specific sector of the organisation, he should understand fully how the overall system would respond to changes in its component parts. To illustrate the concept, consider a firm where various tasks are assigned to several functional departments such as procurement of raw materials, production, warehousing and distribution, marketing, finance and personnel. Let us say that the production department is considering to change the mode of producing number of products from a batch method to a continuous production process. This would allow the department to increase the efficiency of the operation by reducing unit production cost substantially. Should such decision be made? When a manager is confronted with such a problem, he will not consider the production department alone. Rather, he will try to trace all possible direct and indirect effects of the proposed changes on all other parts of the system, such as procurement, warehousing and finance. For example, under a batch process, raw materials can be purchased in lo{s equal to the batch size. Delivery of the raw materials can be scheduled in such a way that they arrive at the factory just in time for the batch to be initiated. Hence, no raw material inventories have to be kept. Under a continuous production process, raw materials will still have to be procured in lots, though may be of different lot sizes. But they will have to be stored and used up gradually by the continuous production process. As a consequence, warehouse space has to be provided for raw materials, and they have to be handled twice before entering the production process. The creation of raw material inventories may also require additional financing. Similarly, under a batch method, finished goods are received at the warehouse in big production lots. Assuming randomly fluctuating sales, finished goods inventories are depleted gradually until a new production lot arrives. Thus, finished goods inventories fluctuate in regular saw tooth fashion. Under the continuous production process, finished goods will arrive at the warehouse in small (may be daily) quantities and for the same patterns of sales, inventories will fluctuate in an irregular fashion increasing when sales are above average. This will affect the amount of warehouse space needed, the frequency of shortages, and the required protection against such shortages. The quality of the finished goods may be different under the two methods, affecting marketing via sales. The number of production workers needed may be different, affecting personnel. Some of these effects may be beneficial, others may be detrimental. Before a final decision is made by the manager the net effect and accompanying indirect changes will be assessed as part of the overall savings produced by the project. In other words, manager determines the effectiveness of the proposed change in terms of the performance of the system as a whole which is essence of the system approach. To solve problems languages must view the organisation as a dynamic whole and they should anticipate the intended as well as unintended impacts of their decisions. By using systems approach management will understand that they do not solve individual problems. Rather, they intervene in a system of interrelated parts and the managerial functions. The procedure usually followed to solve problems by systems approach can be outlined in figure 1. To understand, how the system approach to problem solving is applied, let us consider the problem of long delays between receipts of orders and delivery in some hypothetical company. To seek a solution for the problem by applying systems approach, we would make use of the aforesaid six steps. 1. Defining of the problem: The problem involved here is of inordinate delay between the receipt of orders and their delivery. This problem affects the vendor in

many ways, e.g., a bad reputation, loss of customers, reduction in profitability and even stoppage of due payments. 2. Gathering and analysing data concerning the problem: The problem of delay in meeting orders, in this case, say, arises due to the following reasons: a. Excessive orders in the hand of vendors. b. Shortage of power (fall in production due to shortage of power) 3. Identification of alternative solutions: To over-come the stated problem by system approach, suppose the following two solutions exist. a. Refusal of orders, in case the total size of the orders exceeds the plant-capacity of one shift. b. To run the plant in double shift, to meet the commitment in time. Any shortfall in power supply may be met by installing a generator. 4. Evaluation of alternative solution: Out of the two identified solutions under the preceding step, the second solution say accounts for an overall increase in the profitability of the concern after off-setting additional cost for the generator produced power. It also helps in retaining customers and growth of the concern. 5. Selection of the best alternative: Under this step, management more closely examines the alternatives and puts its stamp on the best possible alternative. In this case say the second alternative is finally chosen. 6. Implementation of the solution: The implementation of the solution requires the necessary policy changes. Besides this, the resources required to run the plant in double shift and installation of a generator also are to be arranged. Finally, appropriate procedures are developed to exercise smooth production and timely supply to customers, the concerned officers are accordingly instructed.

4.2 DECISION MAKING IN MIS In our everyday life, we make several decisions-major and minor-to make our life possible, tolerable and comfortable. Some decisions are conscious and deliberate while others are subconscious and habitual. We make decisions, solve problems, tackle situations and resolve crises. We take initiatives and react to events in the form of decisions and actions. In some situations and in certain stages of our life, we allow others to decide for us and we even plead with others to make decisions on our behalf' normally, we would try to make decisions ourselves so as to have more control on our existence. Of course, when, we feel somewhat helpless and do not have control over the events, we turn to Almighty God and seek His intervention to decide things in our favour. Those who believe in God do so because He is the greatest decision-maker! 4.2.1 Meaning and nature of decision making : In the context of organisation and management, we may define decision-making as a managerial process and function of choosing a particular course of action out of several alternative courses for the purpose of achieving the given goats. It involves committing the organisation to specific courses of action and entails commitment of resources in specified ways. In a sense, decisionmaking is an important step towards reducing the gap between the existing situation and the desired situation, through solving problems and crises, and making tlse of opportunities.

Decision-making underlies much of managerial activity in organisations; decisions may be major or minor, strategic or operational. It is through making decisions and getting them implemented that managers strive to achieve organisational goals. The one most important task of management is to make decisions as may be called for. In all organisations, several problems or situations arise continuously or otherwise. In the context of business enterprises, the situation which call for managerial decision-making are numerous. They include formulation of organisation goals (selection of lines of business, range of products, future direction of growth, diversification, profitability, desired market share and so on), and the ways and means of achieving them (strategies and policies). Decisions are to be made on policies in several areas-marketing, production, finance, personnel, accounting and so on. Managers have to further decide on organisational design, change in design as demanded by circumstances, internal communication, incentive and control systems, balance between the present and the future, social obligations, and the like' Most of the managerial decisions are directed towards making the organisation survive, succeed, grow and prosper. These decisions are means to ensure good performance of the organisation. Some times managers have to make painful decisions for example, reduction of staff through retrenchment, reduction of scale of operations, removal of all employee or officer, withdrawal of products from the market, closing down certain fruits and even winding up the organisation. Some decisions are inevitable and inescapable while for others some freedom and elbowroom to make choices exists. Also, Several decisions have to be made within a limited time and managers are hard pressed to make the choice without perhaps considering all the needed aspects. They may not even be able to wait for collection and analyses of information. These are crisis decisions. Decision-making, in respect of a large number of major or critical decisions is a stressful exercise. Managers tend to experience tremendous strain and pressure in the activity of y such decision making. Some problems prove to be hard nuts to crack. Their origin and dimensions could be mysterious and hard to scrutinise. Gaining a grip over them could be elusive and frustrating. So is the case with the range of alternatives. It is not always eas1, to envisage the likely outcomes of selected moves and decisions. An initially good decision may turn out to be a total fiasco eventually, which would mean a big loss of face and resources. Some managers may even lose their jobs for making bad decisions. 4.3 PERVASIVBNESS OF DECISION MAKING Decision making is one of the most important managerial functions. Managers manage by making decision and getting them implemented in a systematic manner. The character and competence of managers are reflected in the quality of their decisions. Top managers make all the major organisational decisions; they delegate the authority and responsibility for making decisions to the middle and lower level managers. However, it is the responsibility of the top management to create a decision-making system as an integral part of the organisational system. Such a decision making system is created through (a) proper delegation of authority, (b) installation of suitable information system. (c) formulation of organisational policies and procedures, (d) training of subordinate managers to improve their decision making and judgmental skills, (e) creation of an organisational climate conducive to making sound decisions. Decision making is integral to all the managerial processes; setting up goals, formulating strategies and policies, design of organisational structure, motivation and leadership processes, control and communication processes and so on. Thus, it runs through all the managerial functions. Also, there is a close relationship among the

decisions made in performing the various managerial functions. For example, planning decisions affect control decisions and vice versa. Further, major decisions give rise to the need for making subsidiary decisions. Long-range decisions lead to relevant short range decisions. Corporate wide decisions lead to sub-corporate decisions (departmental and sectional decisions). In decision-making, managers have to ensure that the scarce organizational resources are put to the best use. They have to take into account both the external and internal factors. Also, due consideration has to be given to both economic and human factors. For example, the impact of a decision on employee behaviour and interests has to be assessed beforehand. Herbert Simon, a noted management author and a leading thinker on organisations and their management, treats decision making as being the same as management. He regarded the whole spectrum of pre-decisional, decisional and post-decisional activities of managers as synonymous with the functions of managers. Since managers manage by making decisions and getting them implemented, decision making is equated with managing itself. However, one may not go to that extreme. No doubt, decision making is ever-present, inherent and integral to all functions of management in the sense that managers have to make decisions in the areas of planning, organising, direction and control. Even so, the management function goes beyond decision making. 4.4 CLASSIFICATION OF DECISIONS Managers make a variety of decisions in their day-to-day working life without really bothering much about what types of decisions these are. For a better understanding about the nature of decisions, it would be desirable to conceptualise them into a few categories as under: (i) Programmed and non-programmed decisions & (ii) Strategic and Tactical decisions. Type (i) and (ii) of decisions were discussed in detail in chapter-3, section 3.3. (iii) Individual and group decision. 'Many decisions, even critical ones, in organizations are made by individual managers, who assume full responsibility for the consequences of such decisions. In fact, individual managers are vested with enough authority to make a large number of decisions; they are paid for the job. The individual managers at their respective levels-right from the chief executive down to first line supervisor-are called upon to decide many things. They may get information, factual analytical reports, pros and cons of alternatives and suggested courses of action from their subordinates or from specially established committees. But the responsibility and authority or the onus of making the final decision rests with the concerned manager himself. He cannot delegate or abdicate this authority. Group decisions are those, which are made by, more than one manager joining together for the purpose. In an organisation two or more managers at the same or different levels put their heads together, jointly deliberate on the problem, information and alternatives and hammer out a decision for which they assume collective responsibility. Decisions, which have interdepartmental effects- for examples a product related decision affecting manufacturing, purchasing and marketing-departments, are sometimes made by forming a committee, composed of responsible executives of the three departments. Group decision-making is not new in organisations. The Board of Directors is a decision making unit. As a group, the board members make several vital corporate decisions. It is plural executive body. At lower levels, there may be important committees such as management committee, planning committee, and operations committee, comprising of senior managers entrusted with key decision-making and coordinating functions. Thus, in organisations, individual managers as a group make

decisions. Apart from the above mentioned formal groups, mangers at any level may informally involve their subordinates or colleagues in decision-making processes on matters of common concern. For example, the marketing manager may call his area sales managers of a region and pose an important marketing problem to them for collective deliberation and decision-making. He enlists their co-operations and contribution in finding a solution for the problem. This is an exercise in managerial participated decision-making. There may also be cases where a first line supervisor invites his group of rank and file subordinates for a small meeting and converts the group into a decision making unit on a matter affecting the member's interests. He himself keenly participates in the decision-making deliberations but he leaves the final decision to the collective judgement of his group of subordinates. Sometimes, group involvement in decision-making processes may be confined to a few stages like problem identification, collection of information, development of alternative courses of action and their evaluation. The final act of choosing from the alternatives may be reserved by the manager concerned. To this extent, group decision-making is different from group participating in decision making. Several virtues are claimed on behalf of group decision-making as against individual decision-making. The decision-making function and process get enrichment by the pooling of diverse expertise, knowledge, authority and perspectives represented by the group. Elaborate group deliberation and consideration of alternative courses from several angles tend to ensure that decisions of high quality are made. The extent that authority for making decisions is entrusted to the group, it gets diffused among the members. It is more desirable to vest a high degree of decision-making authority in a group than in an individual. The latter may not be able to use it properly' and fully. In the case of some problems of an inter-departmental nature, the group of managers representing the concerned departments are more competent to make appropriate collective decisions, than an individual manager as such. Also, in cases where a manager involves his group o1' subordinates in decision making, the decision so reached tends to enjoy a high degree of acceptance and pragmatism. Their implementation becomes easy. The disadvantages of group decision-making are delays in decision-making, lack of rationality and responsibility among group members, dilution of the quality of decision by compromise and conformity among members of the group and so on. 4.4.1 Steps in the process of decision making: a. Perception or identification of decision problem. b. Diagnosis and definition of the decision problem. c. Specification of objectives. d. Collection of relevant information. e. Search for alternative courses of action. f. Evaluation of alternative courses of action. g. Making the final choice. h. Implementation of the decision. 4.4.2 Decision Making through MIS: A growing number of companies are making effective use of MIS is aiding the decision making process. For example, a major chemical company uses a computer model to simulate an industry segment and the company's potential for a share of market and profitability. A glass company has a corporate financial model that allows executives to test the impact of ideas and strategies on future profitability and to determine the needs for funds and physical resource. Companies have undertaken risk analysis through computes, gaining an integrated picture of the key factors involved in implementing a new policy, and

determining the probabilities of each event's occurring on time and the composite odds for success. Another area is sensitivity analysis or the measurement of the effect of the variation of individual factors on the final result (for example, in certain instances the leverage of an individual factor is high-a 5 per cent increase in sales may trigger a 30 per cent increase in inventory and may have a major impact on the overall result of a program, whereas in another case a 50 per cent fluctuation in one element has minimal effect on the final outcome). A computerised model may incorporate accounting production, transportation, manufacturing, and marketing operations of the company. Such models allow a decision maker to consider a large number of factors in decision-making process, which was not possible in manual system. This highlights the need to reduce skepticism that managers have toward sophisticated computerised decision-making aids. This type of model puts pertinent information into a analytical framework that aids the management decision making process. Some of the benefits offered by this model are listed below: Makes a fairly accurate forecast of net income for one year. Prepares short-term profit plans and long-range projections. Provides preplanning information in budget preparation. Calculates variances between budgeted and actual results. Triggers revised forecasts if not proceeding in accordance with plan. Acts as early warning system for monitoring activities and signaling necessary reactive plans. Indicates effect on income and cash flow by following alternative investment strategies. Assists in planning the addition of new facilities and a host of special studies. Accomplishes all the preceding items with great speed. A few theorists are of the opinion that first step in building a model is to have management information system. There may be disagreement on that point, for (l) the model obviously depends on data fed into it by other information systems within the company, therefore, the model cannot be the first step; (2) if the model is the first step, then there will be few management information systems, because few companies possess the capability or will invest the monetary resources necessary to develop a model. However, there is little doubt that if MIS is going to have a major impact on the strategic planning process of top management, the corporate financial model is a key element. Although the effect of computerised information systems on top management has been relatively limited, their use is rising. There is no question that advance information systems can materially aid the eight-step decision process enumerated previously. A basic example will illustrate the point. Many stocks are listed on the various stock exchanges. The job of the investment counselor is to develop a stock portfolio that best meets the requirements of his client. A computerised information system can materially aid in this process (in fact, such systems are in use at several investments firms). A three-stage system development plan produces the required portfolio. The first stage is the determination of what characteristics or indices are pertinent to evaluating stocks. An analysis of this area introduces such elements as price/ earnings ratio, dividend record, and price performance during recessions. Those elements that are considered pertinent to predicting future value are captured and put in machine-readable format. A system to update and append data with current information is also developed. The second stage involves the categorisation of the stocks based on a predetermined classification scheme. Thus the stocks are ranked according to such categories as high

yield, growth, and volatility, categories that arc pertinent to the requirements of investors. It is obvious that a good deal of professional judgement and expertise is needed to establish the key stock indicators in stage one and the classification scheme in stage two. Stage three involves the categorisation of the investor based on a predetermined classification scheme. The salient elements of such a categorisation include current and anticipated income level, current cash position, investment objectives, and so on. There may be some seemingly intangible but necessary personal criteria: for example, the stocks must be in certain industries. These criteria must be considered beforehand so that the necessary information is contained within the system to make this classification possible. With the completion of the three developmental stages, the resulting model is now able to aid the decision-making process of the investment counselor in selecting a portfolio individually suited to his client. The model permits the counselor to develop circumstances. The computerised system widens the scope of potential stocks and minimises quick and premature decisions, which are often resorted to because the counselor lacks the time or the knowledge and which are unfavourable to his client. There are many parallels in the use of this type of approach to business operation. A direct parallel is an investment decision when many alternative choices are available. Market models and revenue models are extensions of this technique. It is obvious that the type of information analysis does not give the complete answer and thus allow the decision to be made by the computer system. Certain subjective, external factors must also be reflected quantitatively or, if this is not possible, qualitatively. However, the development of this programmed type of analysis in an ever-expanding variety of business operations will give the manager more time to explore the intangible subtleties of problem solving and thus reach better man-machine-based decisions. 4.5 FUNCTIONAL INFORMATION AREAS There are various users of information systems in business as there are number of activities to be performed in order to solve business problems. A business manager should have a general understanding of the major ways information systems are used to support each of the functions of business. He should have a specific understanding of how information systems affect a particular business function or a particular industry that is related to his concern objectives. For example, managerial end users in production department of a large automobile company should have basis understanding of how information systems are used in automobile industry and how they support production activities. Managerial end users are required to make decisions in several areas viz. finance, production, marketing, personnel etc. Figure 2 gives examples of applications in a variety of industries, which are grouped into four major business function categories.

4.5.1 Finance and Accounting System: Finance and accounting, as such, are separate functions but are sufficiently related to be described together. Accounting covers the classification of financial transactions and summarisation into the standard financial statements (profit and loss account and balance sheet). Finance system ensures adequate organisational financing at a low cost so as to maximise returns to shareholders

(owners). It comprises of major functions such as granting of credit to customers, collection process, cash management, financing capital and so on. Financial Decision Making: Financial decision making deals with procurement of funds and their effective utilisation in the business. Thus, there are two important aspects of financial decision-making-first relates to decisions regarding procurement of funds, and the second to decisions regarding effective utilisation of funds in the business. Procurement of funds is a complicated problem as there are number of sources from where the funds may be procured. Funds may be raised from various long-term sources such as equity, debentures, bonds etc., or through various short-term sources such as banks, suppliers, credit, etc. These sources have different characteristics in terms of risk, control and cost. The funds raised by issue of equity shares are best as far as risk is concerned, since equity capital is not to be redeemed (repaid to investors) except when the company is being liquidated. However, equity capital loses its merit when control and cost factors are analysed. Issue of equity shares to general public reduces the control of existing shareholders of the company. At the same time, issue of equity shares is costly. This is because shareholders expect higher returns from their investment in equity shares than returns from other sources. Shareholders not only look for high rate of growth in dividends but also growth in market price of their holdings. Debentures, as source of funds, are comparatively cheaper. A fixed interest is to be paid to debenture holders out of profits before tax. Thus, unlike equity dividend, company is able to generate tax benefit from payment of interest. More over debenture holders have no direct control over the functioning of organisation. Issue of debentures do not dilute the proportionate holding of existing shareholders. However, debentures are risky alternatives as a fixed interest is to be paid notwithstanding the amount of profits or losses, since as per the terms of agreement, interest payments are to be made whether the company earns profit or not. The next set of financial decisions relate to effective utilisation of Funds. There are several long term and short term assets where funds are to be deployed. It is crucial for an organisation to employ funds properly and profitably. The funds are procured at a certain cost with certain level of risk. If they are not utilised in a manner so that they generate incremental income over their cost. There is no point in running the business. Thus, each decision should be properly analysed while investing in fixed assets.

Decision should be based on techniques of capital budgeting and risk measurement while investing in long term assets. Similarly, investment in current assets should be properly monitored. It should be ensured that firm enjoys an optimum level of working capital but does not keep too much funds blocked in inventories, accounts receivables, etc. In Figure 3, flow of information for financial decision making is shown. Accounting system processes several transactions relating to sales, purchases, plant & machinery, stocks, salary and wages and so or1, to provide vital information for financial decision making. The financial system also collects information from internal and external

environment to make decisions in the areas of capital budgeting, working capital, tax, current assets and so on. Financial Decisions: Various financial decisions made with the help of financial information system are as follows: (i) Estimation of requirement of funds: A careful estimation of funds and the timing when they will be required is to be made. This can be done by forecasting all physical activities of the firm and translating them into monetary units. (iii) Capital Structure Decision: Decisions are to be taken to select an optimum mix of different sources of capital structure. There are various options available for procuring funds. Decision maker has to decide the ratio between debt & equity, long term and short term funds etc. He has to ensure that overall capital structure is such that the company is able to procure funds at optimum cost. (iii) Capital Budgeting Decisions: Funds procured from various sources are required to be invested in different assets. With the help of capital budgeting, decision maker can determine feasibility of investment in long term assets. This will help in attainment of financial objective. (iv) Profit Planning: Financial decision concerning profits and dividends are to be taken by decision maker. He has to ensure adequate surpluses in future for growth and distribution of dividends. (v) Tax management: Tax planning is aimed at reducing of outflow of cash resources by way of taxes so that the same may be effectively utilised for the benefit of business. The purpose of tax planning is to take full advantage of exemptions, deductions, concessions, rebates, allowances and other reliefs. (vi) Working Capital Management: Working capital is concerned with investment of long term funds into current assets. Decisions are to be taken for effective financing of current assets required for day-to-day running of the organisation. (vii) Current Assest Management: Policy decisions are taken regarding various items of current assets. Credit policy determines the amount of sundry debtors at any point of time. Inventory policy is to be determined jointly between finance and production department. 4.5.2 Marketing System: The marketing system is aimed at supporting the decisiorr making, reporting and transaction processing requirements of marketing and sales management. The main objective of marketing management system is to develop, promote, distribute, sell and service the products of the organisations and return a profit that is enough to justify the existence of the organisation. To achieve this objective, marketing management needs to make effective marketing decisions in an ever changing environment that is characterised by stiff competition and technological changes. Marketing bridges the gaps between the business firms and its customers, by making available to the customers, the products of the firm. The marketing system is primarily concerned with product market development by taking into account product life cycles, competitive trends, demand of product, changing market needs, share of market required and the economic environment. It is also concerned with the sale of the firm's products to customers. Some marketing executive opine that marketing decision making is primarily an art and cannot be systematised to the point where decisions can be aided by analysis of information. Yet typically a wealth of useful information exists and could be made available to marketing managers. Marketing managers often rely on readymade reports supplied as by-product of other departments, for example reports on accounting, production and inventory control. The emphasis of such information is on past,

however marketing needs information to help in prediction of the future, including information about market trends. The information that marketing management receives is important, however, the information that marketing generates is vital to the rest of the organisation. For example, marketing provides sale forecasts that serve as the basis for production schedules, cash flow projections, and profit plans. Because of this, the impact of ineffective marketing information systems is felt throughout the organisation. Even more important is marketing's role as a companys revenue generating branch. A welldeveloped information system for marketing can give a competitive advantage here by offering better service to customers and better information for market penetration efforts. While even a well developed marketing information system may provide inadequate information, this information usually is better than no information. The marketing information system must be designed to support a marketing management organisation. It consists of following inter-related information subsystems to enhance the decisional capacities in various marketing activities 1. Sales: The objective of the sales manager is to coordinate the sales effort so that the long-run profitability of the company is maximised. Decisions are required in the area of adequate stocks, effective distribution channels, effective motivation of sales personnel, promotion of more profitable products or product lines, and good customer relations. Further these decisions often require intensive interaction with the market place and coordination with logistical operations of inventory and production. Information is required for analysis and support of sales. (a) Sales Support: The marketing information systems, directly or indirectly support selling activity. However, a specialised sales support information system must provide information to sales personnel about the following: l. Products descriptions and performance specifications. 2. Product Prices. 3. Quantity discounts and other product discount information. 4. Sales incentives for salespersons. 5. Sales promotions. 6. Financing plans for customers. 7. The strengths and weaknesses of competitors' products. 8. The histories of customers relations with the company. 9. Sales policies and procedures established by the company. 10. Products that have not yet been introduced. 11. Products inventory levels. 12. Buying habits of consumers. These and other information come from a variety of sources. Product performance specifications, for example, may come from the engineering department. In many companies the inventory control system must provide extremely accurate and continuously up-to-date information about raw materials and finished goods inventory levels and the approximate dates when additional quantities of each material and product will be received and placed in inventory. One way of providing this inventory information is through a periodic status report detailing the quantity of each product on hand as of the end of the preceding period (typically the preceding week or month). Since such report generally arrives well after the end of the period, the report becomes increasingly out of date until it is replaced by the inventory status report after the end of the next period. Information from this type of system is generally obsolete and can cause customer dissatisfaction.

A more sophisticated information system can supply the necessary information about product's availability. So that, the salespersons can inquire directly into the inventory file to determine the quantity of each product on hand. This provides a substantial advantage over competitors who use periodic inventory status reports. (b) Sales analysis: The sales analysis is a major activity in most companies involved irr sales. Its purpose is to provide information for analyses of: l. product sales trends, 2. Product profitability on a product-by-product basis, 3. The performance of each sales region and sales branch, and 4. The performance of respective salespersons. Information for sales analysis is derived primarily, from the sales order entry system; the majority of informations from actual sales transactions and is contained on sales invoices. To fully support the sales analysis system, invoices should contain information about product type, product quality, price discount terms, customer identity and type, sales region, and salesperson. Information from other sources should also be included in the sales reports. Specifically, the sales reports must contain information about the profitability of products, product lines, sales territories, and individual sales persons. Profitability reporting requires information about product administrative and selling costs. 2. Market Research and Intelligence: The objective of marketing research is to investigate problems confronting the other managers in the marketing function. These problems may involve sales, product development, advertising and promotion, customer service, or general marketing management needs. To satisfy these decision-making and reporting requirements, the market research department must either periodically or upon demand gather information from a wide variety of sources. One principal source is the sales system, other major sources are outside the organisation. Marketing research will gather new information which will help in managerial decision making. It investigates past, present and future states of the market place. This includes studies of market and sales potential, market share and the changing satisfactions and needs of current and potential buyers. The investigations undertaken by market research helps in satisfaction of following informational needs of managers: l. Information about the economy and economic trends and the probable impact of these trends on demand for the product. 2. Information about the past sales; and sales trends for the entire industry. 3. Information about potential new markets for products. 4. Information about competitors, its product, strength, weaknesses, new product plans, strategies and so on. The decision maker can use the information provided by marketing research in a number of ways. The information may be of value in decision making; it may be analysed using statistical, economic or psychometric models; or it may be used in combination with models to enable marketing management to pursue "what if' questions. The market research may be distinguished from market intelligence, with the former concentrating on the market place and the latter is concerned about only one aspect of the marketplace, i.e. the organisation's competitors. However, the information that each function requires overlaps, and some come from same source. Moreover, both focus on analysing the information to discuss trends, sudden changes, or threats to the organisation.

3. Advertising and Promotion: The promotion and advertising development devotes its attention to planning and executing advertising campaign and to carrying out various product promotions such as coupons, contests, trade shows and so on. Given a limited budget, advertising and promotion management must allocate resources in the most effective manner through a variety of media to products and locations to accomplish overall sales objective of marketing management. To assist advertising and promotion management art array of information sales people, locations, products, styles sizes and so forth should be analysed. The promotion and advertising information system should store the house of information that managers can combine with their past experience for taking decision on promotion and advertising. By systematically organising and analysing this information, an organisation can eventually establish a body of knowledge about what the market place is like and how it responds to each of several type of promotional activities for each product. However, the complexions of markets can change rapidly, and the information systems should continuously "refresh" and modify this promotion and advertising information base, in light of the most recent information available. 4. Product Development and Planning: Product development involves analysing a possible opportunity for a new product and evaluating preferred specifications and probable market success. Often the market research activity initially perceives the opportunity and passes along information about it to the new product development group. Alternatively, a salesperson who deals directly with customers may become aware of their need for a new product. A customer call reports system may help elicit information about new products needed in the marketplace. For example, explicit questions on the call report, such as "Do customers need exist that our products are not fulfilling completely?" and "Do customers need a product that is not available?" encourage sales persons to think about new product possibilities. During the analysis of new product feasibility, after a probable need has been identified, information from the sales analysis system about past sales of similar or related products may indicate the most desirable characteristics for the new product or the structure of the market for the product. Also, market research can be tailored to gather information about the size and structure of the marketplace for the product and the marketing intelligence information system may help evaluate the market strength and profitability of similar products produced by competitors. The product development department uses all this information to develop specifications for a new product. These specifications may then be passed along to engineering and other groups for cost estimating. Risk profiles, which include estimated costs and revenues for the product over its life cycle, are developed as a basis for deciding whether to produce the product. Product Planning system provides marketing management with packaging, promotion, pricing and style recommendations throughout the life of product. For example, product planning provides information to the sales activity about sales strategies, and the feedback to the sales forecasting. In addition to determining pricing strategies, product planning also decides what new products will be introduced and passes along information about this to the new product development system. 5. Product Pricing System: Product pricing is a complex managerial activity that is affected by product costs, customer demand, market psychology, competitors, prices, and various actions taken by competitors, and so on. Because prices may be determined on a full cost or marginal cost basis which is usually seen as the starting point in setting prices, pricing information systems almost always utilise information about product costs.

Cost information is most directly used when price is cost plus a percentage mark-up. In competitive situations, however, product costs may set a lower limit on product prices. Market research into the strength of demand for each product in the marketplace is also useful for pricing purposes. Of course, a vital ingredient in pricing is information about competitors prices for similar products. In many organisation pricing is done on its "margin maintenance" basis. Gross or contribution margin goals are established for products, and prices are set in accordance with what price will maintain the established margin. Past sales profitability information is useful here to help in determining how much prices should be adjusted for changes in costs in order to ensure that margins are maintained. 6. Customer Service: The objective of marketing department is to satisfy customers with the product. To achieve this objective customer service management provides customers with technical assistance and product maintenance. Decisions are required in the area of training of service personnel, capabilities of equipment and location facilities to serve customers and assist in the dissemination of technical information to these customers. These decisions must be congruent with the marketing management strategy regarding customer satisfaction and service. Information required by a marketing system: The information required for the purpose of planning in the case of a marketing system can be classified into three broad types viz: (i) Environment information (ii) Competitive information (iii) Internal information (i) Environment information required for developing a Marketing System includes following: a. Political and governmental considerations: To forecast market plans, information regarding political stability at any level i.e., at Centre or State; national or international, plays a significant role. Political stability enables executives to guess quite accurately the policies of the government and thus it helps them to reduce the risk while formulating plans for future. Tax considerations, financial policies, the nature and extent of government control and their effects on the organisation are few other important considerations which provide useful information for planning purposes. b. Demographic and social trends: Information about demography, its composition and location is also useful to business organisation for planning its products, services or outputs. c. Economic trends: This includes information related to the GNP level and trend, disposable income of consumers, employment, productivity, capital investment, price and wage levels, governmental economic priorities and numerous other economic indicators which provide valuable planning information for those firms whose output is function of these important variables. (ii) Competitive information: Data relating to business operations of competing firms is quite useful for forecasting individual firm's product demand and making decisions and plans to achieve the forecast. (iii) Internal information: The information available from internal sources is more important than the external one as it affects the planning decisions at different levels in the organisation. The main sources of internal information are: 1. Sales forecast: It provides information about firm's sales plan. It sets the framework on which most of the internal plans are dependent.

2. Financial plan: Such a plan provides useful information for a variety of sub-plans throughout the firm. 3. Supply factor: Manpower, capital, plant and equipment and other supply factors are vital to establish planning premises that provide constraints or boundaries within which planning takes place. 4. Policies: Basic policies remain unchanged in the short run, they provide constraints to planning in the same way as the supply factors. Information required for the purpose of control is different in both type and characteristic from information needed for planning. Planning places greater emphasis on structuring the future, control is based more on the immediate past and specific trends. In the case of a marketing system, the information required for the purpose of control are information concerning the progress of the sales plan, quotas, territories, pricing etc. In other words the information required is meant to measure performance against the sales forecast. In addition, control information may be obtained in other areas of the marketing plan, such as product acceptance, advertising, market research and distribution costs. 4.5.3 Production System: One of the major areas in any kind of enterprise is production and operations management. Generally, production management is the term used to refer to those activities, which are necessary to manufacture products. However, in many companies the area is broad enough to include such activities as purchasing, warehousing, transportation and other operations from the procurement of raw materials through various activities until a product is available to the buyer. In short, the term refers to those activities that are necessary to produce and deliver a service as well as a physical product. The production system generally includes all activities relating to production planning, product engineering, scheduling and operations of production facilities, quality control etc. The decision making is based on information in form of pending sales orders, expected sales, consumer grievances, etc. Production decisions are aimed towards monitoring of in-process inventory, balancing of daily finished and semifinished stocks, correction of any deviations in production performance. The role of production in organisations is to provide a product that the market demands. This means: l. Producing the quantity of products needed by customers. 2. Maintaining the quality of the products established by the product specifications, and 3. Producing products within the cost constraints imposed by the production control system. Production activities involve transforming energy, labour, raw materials, and purchased parts and components into finished products by production or assembly activities. To understand the production process and the nature of the information systems it is necessary to understand production planning, production scheduling and materials requirement planning. Production Planning: It means determining what should be produced, when it should be produced and how it should be produced. It is primarily the responsibility of plant manager, general foreman and various production department foreman to perform the task of production planning. But usually production planning department perform the task of production planning on the basis of sales plan, materials plan etc. A production plan should specify, after establishing in quantitative terms the number of units of each product, which the firm world manufacture during a given period. Such

a document should also specify a suitable mix of styles, sizes, colours, and any other related feature regarding the products to be manufactured under a production plan. Engineering department should specify complete material or parts requirement, the labour operations required for each product, the standard amount of time each operation should consume and the machine at which each operation should be performed. The material requirement may be stated in the form of a document known as "Bill of Materials" whereas labour operations and machine requirement etc. can be indicated on a document known as operation list or Routing Sheet. The timings of production depend upon factors like customers' orders, order priorities, stock position etc. In other words, the main components of a production plan include the following points. l. Breaking up the job into various divisions and sub-divisions leading to the listing of all the operations which would be carried out. 2. Making drawings or processing patterns, etc. that may be required. 3. Drawing up the Bills of Material and the schedule of dates on which the various materials will be required. 4. Listing the tools that will be required and those for which any special procurement or effort is to be made. 5. Making trial runs to locate and remove possible snags. 6. Drawing up the route chart by which the task will be completed and listing the exact methods, tools, machines, materials etc. that will be required for completing each operation. This is technically called routing. 7. Drawing up a detailed time table for the entire activity to be completed. 8. Despatching-issuing instructions for the various activities to be taken up in their proper turn. Production Control: It includes the control of all activities related to expediting, coordinating and controlling the operations of the various production departments or shops. Time standards, cost standards, quality standards etc. are some of the areas, which receive optimum attention for control. Time standards are usually incorporated in the operations list and are controlled by the department foremen by co-coordinating the task of workers and machines. The performance of each shop foreman is judged on the basis of comparison of scheduled unit production with actual unit production. Costs are also controlled by the shop foreman. He controls various costs by properly assigning jobs to workers on the basis of their experience, efficiency, and quality. He has to see that materials are properly used and not wasted. Receipt of substandard material for production should be under close watch. The effectiveness of the foreman and his decisions become apparent from the cost reports prepared by the Cost Accounting Department. This department keeps the shop foreman as well as Plant Manager and General Foreman informed about Cost variations. This type of feedback system plays a positive role in the direction of controlling production costs. Quality control is exercised with the help of a separate quality control department. This function involves testing or inspecting completed items of production or defects in materials or ownership. It is usually performed on sample basis. Basic information requirements of Production Planning & Control System: The main requirements of production planning control system are as follows: l. Firm's policy with regard to production of various products. 2. Sales order, sales forecast, stock position, order backlog. 3. Available labour force with their capabilities. 4. Standards of labour time, material, machine time land over head costs, etc. 5. Schedule of meeting the sales orders, regionwise, territory wise etc.

6. Quality norms for materials to be used and for the finished products. 7. Break-up of the jobs and their resources requirements' Production Scheduling: Planning the specific time at which product items should be manufactured is known as production scheduling. The scheduler must know exact quantities of each product to be produced along with existing resource requirements for each product and the resources available.

Objectives of production scheduling: The information provided by master production scheduling is used for different purposes. The main objectives of production scheduling department are as follows: l. To determine the stages of production in sequential and rational order. 2. To minimise the idle time on the part of the operators and equipments. 3. To assess the extent of need for subcontracting to outside parties. 4. To ensure that completion dates or target dates of completing the production plans are met fully. 5. To study alternative methods of performing the activities so that time taken to perform can be further reduced. An important aspect of control is ensuring that production deadlines are met. The production control information system contains information that indicates the quality of products that should be completed by certain times. Using this information, production personnel can determine when production is behind schedule and can take remedial actions to adjust capacity or estimated completion times. This information also enables the production department to answer inquiries of customers about the progress of their orders. Production schedule is also provided for material requirement planning. This schedule is "costed out" to gain a rough idea of the cash flows that will be required by the production processes during the following periods; this information is forwarded to the finance department for cash planning. The master production schedule is also used as the basis for determining approximately how much capacity will be needed in various work centres to provide a rough capacity requirements plan and for determining types of personnel skills that will be needed to establish a rough personnel requirements schedule. For the next process, information about the bill of materials for each product is combined with this master scheduling information for detailed material requirements planning. Each bill of materials contains a detailed listing of the types and quantities of materials, parts, and components required for the manufacture of one unit of the product. Materials Requirement Planning: It is eye-opening to note that a major cause of production inefficiency is a lack of integrated production planning. Production scheduling, and production control information systems. One approach to improve production efficiency is materials requirements planning (MRP.) MRP integrates several production related information systems so that MRP system can access and extract data from these systems to accomplish production scheduling. MRP's purpose is to greatly improve both inventory management and production scheduling. To achieve the efficiencies of which they are capable, MRP systems require high levels of discipline-such as not requisitioning materials long before they are needed, proper scrap reporting, and using well-defined procedures for implementing and recording changes promptly. Accurate input data also is absolutely necessary; for

example inventory quantity data must be accurate, and interplant transfers must be recorded accurately and promptly. The benefits of a successful MRP system include: l. Significantly decreased inventory levels and corresponding decreases in inventory carrying costs. 2. Fewer stock shortage, which cause production interruptions and time-consuming schedule juggling by managers, 3. Increased effectiveness of production supervisors and less production chaos. 4. Better customer service-an increased ability to meet delivery schedules and to set delivery dates earlier and more reliably. 5. Greater responsiveness to change. MRP gives manufacturing a better feel for the effects of economic swings and changes in product demand can be translated into schedule changes quickly. 6. Closer coordination of the marketing, engineering, and finance activities with the manufacturing activities 4.5.4 Personnel System: The personnel information system deals with the flow of information about people working in the organisation as well as future personnel needs. In most of the organisations, the system is concerned primarily with the six basic subsystems of the personnel function; recruitment, placement, training, compensation, maintenance and health and safety. It is generally accepted that the personnel function is one of the least computerised of all the personnel functions. Automated system may not be necessary for small firms, but large business firms are realizing that computer based personnel information systems are necessary for increasing the operational efficiency of personnel management. The personnel system should be organised on functional basis. It should have the following information sub-systems to increase the operational efficiency of personnel management. 1. Recruitment: Properly managed recruitment sub-system may forecast personnel needs and skills required for recruiting personnel at the proper time to meet organisational manpower needs. Such a sub-system may not only furnish information concerning skills required for company programmes and processes but also maintains the inventory of skills available within the organisation. 2. Placement: This sub-system is concerned with the task of matching the available persons with the requirements. A good placement sub-system makes use of latest behavioural tools and techniques. It ensures that the capabilities of people are identified before being matched with properly organised work requirements. 3. Training and development: As technological changes and demands for new skills accelerate, many companies find that they must develop much of their requirements from internal sources. In addition, a large parl of the workforce must constantly be updated in new techniques and developments. This task is the function of the training and development sub-system. 4. Compensation: This sub-system is concerned with the task of determining pay and other benefits for the workers of the concern. It makes use of traditional payroll and other financial records, government reports and unions expectation before ariving at the final figure ofpay and other benefits for each category of workers. 5. Maintenance: This sub-system is designed to ensure that personnel policies and procedures are achieved. It may be extended to the operation of systems control, work standards which are required to treasure performance against financial plans or other

programmes, and the many subsidiary records normally associated with the colleition, maintenance and dissemination of personnel data. 6. Health & Safety: This sub-system is concerned with the health of personnel and the safety of jobs in the organisation. Sources of Personnel Information: Bulk of personnel information is generated by the accounting department and within the personnel department itself. Besides, other depaftments and the external environment also make their contribution. The Accounting Information System: Payroll processing is the traditional channel of personnel information, The human resource accounting, though hardly prevailing in the Indian industry, can be another new channel. Finally, cost estimation for wage negotiations is another accounting information for the personnel function. Payroll processing: The inputs to payroll processing are the job tickets and the clock cards. The latter indicates the total number of hours an employee spends at work each day. This document serves as the basic input to the payroll calculation and pay slip preparation function. The job ticket is used to reconcile the timing on the clock card and to compute various job statistics discussed below. For payroll of clerical, salaried and sales employees, the job time card is not used as the related expenses are not charged to production in process. However, where it is desired to charge expenses to such specific project as sales promotion, a job time card may be used' For salaried employees, the monthly gross pay is a known constant and for salesmen paid on commission basis, sales data are required for payroll processing. Besides, such adjustments as additions, deletions, amendments etc. constitute another class of input data for payroll processing. The basic output of payroll processing is pay slips and pay cheques. Reports of statistical nature are also complied. Take a production operation for example. The average time spent by each employee on it may be computed and the grand average derived there from. This in comparison to the standard time derived by yields-the efficiency with the operation is being performed. Likewise, the efficiency of an individual employee can be established, This would be a weighted average of is efficiency in all of the various operations he has performed. Such statistics when aggregated over a department provides the departmental efficiencies. These measures can be used to evaluate the performance of the departmental foreman. If a standard cost system is in use then labour cost variances can also be computed. Other types of possible reports and analysis are listed below: i. Reports on absenteeism ii. Analysis of indirect labour by the cost of inspection, material handling, maintenance etc. iii. Reports on actual standard costs by department. iv. Analysis of overtime pay by departments, fringe benefits, salesmen commission, etc. v. Such statistical measures as total number of employees, total hours worked, total labour cost, average wage rate, rate of absenteeism, turnover and total fringe benefit costs. These may be statistically analysed for trends and correlation etc. Cost Estimating for wage Negotiations: The management has the choice of tradeoffs on the following variables during negotiations with the labour unions. Wage raise Paid holiday Contribution to employees, insurance and pension plan Overtime premiums etc. Cost accountants/payroll accountants would be in the best position to make various estimates for the cost implications of trade-off.

The Personnel Department itself generates a great deal of information in the form of personnel files and job specifications. The former would include such data about each employee as below: Physical characteristics Educational background and experience Payroll information Quantitative and qualitative evaluations of his past performance State of health and medical history Result of tests of ability and aptitude, etc. Such information is quite useful for placement of employees for various positions, promotions etc. The job specifications detail of the training and experience for each job. Other information generated within the personnel department may include; aggregate safety and accident statistics, forecasts of manpower requirements by job category within the organisation, records and statistics of training programmes, health services, etc. The departmental supervisors provide useful information about their employees in their merit evaluations, as also information about manpower requirements of their departments. The merit evaluations would throw light on personality, initiative, attitude, judgement, character etc. of the employees. Apart from internal generation, the personnel function also rely on external information sources. These would include: employment agencies, labour unions, various governmental agencies, university placement offices etc. Self-examination Questions l. How system approach can be used for solving problems? 2. What is Decision Making? Describe the support provided by MIS in decision making. 3. Discuss various benefits which are attained by implementing a computerised model for making decision. 4. Briefly discuss various functional information areas. 5. "Finance and Accounting system is backbone of management information system."Explain. 6. Write a note on different sub-systems of marketing information system. 7. Enumerate various information which are required for analysis and support of sales. 8. What is a production information system? Point out basic information requirements for production planning and control. 9. Explain the importance of materials requirement planning. 10. "Personnel information system deals with the flow of information relating to people." Explain. 11. Discuss the source through which personnel department can generate information. 5 Decision Support and Executive Information Systems 5.0 INTRODUCTION During the 1970s, systems designed to help decision-makers devised solutions to unstructured and partially structured problems. These systems largely consist of tools that can be customized-in a variety of ways to solve computationally or clerically intensive problems. Such systems are particularly useful to higher-level managers whose requirements for information are somewhat unpredictable. They are called decision support systems (DSS).

ln this chapter, we begin by defining a DSS and describing the properties that differentiate it from other types of management information systems. Next, we look at the types of processing needs for which a DSS is most useful and some of the software and hardware packages specifically designed for decision support. Finally, we turn to executive information systems (EIS) and explore their potential for improving the quality of strategic-level planning and control. 5.1 WHAT IS A DSS? The term "management information system" was first coined to distinguish the systems that merely process transaction data from systems whose primary purpose is to provide information. The first information-oriented MIS possessed the characteristics of the management reporting systems (MRS); that is, they provided fixed, preformatted information in a standardized way. Typical outputs of this type were computerproduced, hardcopy summary and exception reports that a company's MIS department might circulate periodically to various middle managers. As developments in interactive display technology, micro-computing and easy-touse software systems changed the way in which managers were provided with information - and led to a growing understanding of how technology could support difficult decisions - a new term was coined to distinguish this new system from a report-based MRS. This new term - "decision support system" - resulted from the fact that these systems were more flexible and adaptable to changing decision-making requirements than traditional management reporting system. A decision support system (DSS) can be defined as a system that provides tools to managers to assist them in solving semistructured and unstructured problems in their own, somewhat personalized, way. Often, some type of modeling environment perhaps a very simple environment such as the one accompanying a spreadsheet package is involved. A DSS is not intended to make decisions for managers, but rather to provide managers with a set of capabilities that enables them to generate the information required by them i1 making decisions. In other words, a DSS supports the human decision' making process, rather than providing a means to replace it. Systems that replace human decision making - rather than support it - are sometimes called programmed decision systems. These systems are used to make routine, structured decisions, such as approving loans or credit, reordering inventory, triggering reminder notices, and selecting audit samples, in programmed decision systems, the focus is on doing something more efficiently. On the other hand; in decision support systems, the focus is on helping decision makers become more effective' Technically, a DSS does not need to involve high technology. For example, to a writer, a selected group of journal and text resources at a local library - and a strategy for using those resources - may serve as part of a decision support system. To a novice accountant in a large accounting firm, the advice offered by a senior tax partner might be part of that novice's decision support system.

5.2 DSS GOALS AND APPLICATIONS

The decision support systems are characterised by at least three propertie,: (l) They support semistructured or unstructured decision-making' (2) They are flexible enough to respond to the changing needs of decision makers, and (3) They are easy to use. We will now briefly discuss each of the above mentioned characteristics. (i) Semistructured and Unstructured Decisions: Structured decisions are those that are easily made from a given set of inputs. These types of decisions - such as deciding to issue a reminder notice if a bill is overdue or deciding to sell a stock under a given

set of market conditions - can be programmed fairly easily. Unstructured decisions and semistructured decisions, however', are decisions for which information obtained from a computer system is only a portion of the total knowledge needed to make the decision. The DSS is particularly well adapted to help with semistructured and unstructured decisions. However, it can be designed to support structured decision making as well. A manager, for instance, can browse through data at will (perhaps at a display terminal). When enough information is gathered from this process to supplement other information (perhaps some of it may be non computer-based), a decision can be reached. In a well designed DSS, the depth to which the available data can be tapped for useful information often depends on the time availability and patience of the manager.

In Figure l, it is shown how a semistructured problem might be solved by using a DSS. The problem is first defined and formulated. It is then modeled with DSS software. Next, the model is run on the computer to provide results. The modeler, in reviewing these results, might decide to completely reformulate the problem, refine the model, or use the model to obtain other results. For example' a user might define a problem that involves simulating cash flows under a variety of business conditions by using financial modeling software. The DSS model is then run, providing results. Depending on what the results of the model indicate about cash flow, the user might decide to completely remodel the problem, make small modifications to the current model, run the model under a number of new assumptions, or accept the results. For instance, if the model revealed inadequate cash flows to support organisational operations, model modifications should be developed and run. The modification process might continue for several interactions until an acceptable cash flow is identified. (ii) Ability to adapt to changing needs: Semistructured and unstructured decisions often do not conform to a predefined set of decision-making rules. Because of this, their decision support systems must provide for enough flexibility to enable users to model their own information needs. They should also be capable of adapting to changing information needs. With a formal management reporting systems, specific outputs - usually in the form of hardcopy reports or preformatted display screens -are established well ahead of the time that they are actually used. Such reports are generated by an application system which has to undergo a time consuming system development process which involves a lengthy, customization of application program, supporting documentation, and a run schedule' For example a production manager might make a formal request to the MIS department for a monthly report. The utility of such a report is usually first assessed by a committee and, possibly, a schedule for development is chalked out. After the report is designed and a program is written specifically to generate it, the types of information supplied to the manager by that report are "frozen" if information requirements change substantially by that time, another formal report request must be submitted to get the program rewritten. The whole process thus takes lot of time'

The DSS designer understands that managers usually do not know in advance what information they need and, even if they do, those information needs keep changing constantly. Thus, rather than locking the system into rigid information producing requirements, capabilities and tools are provided by DSS to enable users to meet their own output needs. Flexibility in a DSS is of paramount importance. Information requests made to a DSS will often be relatively unsystematic and distinctive. For example, a sales manager at a display device might request the price of a specific product. A few seconds later, the manager might change his mind and ask for a listing of the vendors of several other products. The next request, a couple of minutes later, may be a ranking of the top salespeople in a particular sales region over the last nvo months. A report might even be requested at the end of the session, combining data from several of these inquiries. Since the demands made by the user on the DSS are not fully predetermined, the user might request information in a variety of formats. In well-designed decision support systems, managers can ask spontaneous questions, as these questions occur to them and receive almost immediate responses for these questions. The manager can make many requests without being sure at any point where the search for information will lead him. The manager often needs a variety of tools to satisfy such requests: formulas, functions, sorts, graphs, formal models, and so on. The output from a DSS may also be used to prepare customised outputs to be examined by other people; for example, a manager preparing presentation graphics for a meeting. (iii) Ease of Learning and Use: Since decision support systems are often built and operated b1, users rather than by computer professionals, the tools that accompany them should be relatively easy to learn and use. Such software tools employ useroriented interfaces such as grids, graphics, non-procedural fourth - generation languages (4GL), natural English, and easily read documentation. These interfaces make it easier for users to conceptualize and perform the decision-making process. As is the case with most computer applications developed during the 1990s, graphical user interfaces (GUI) are becoming more common on decision support systems also. Since general users do not have the skills to interpret cryptic error messages, such tools often liberally employ a number of help aids, for example, useful diagnostics, a help feature, and undo commands Although interactive display devices are not considered a requirement for DSS, many decision support systems employ them. First, display devices provide users with relatively fast, often real-time, responses, thus enabling the process depicted in Figure I to be conducted as rapidly as the user wants. Fast electronic responses facilitate maintaining a chain of thought as the problem solving process takes place; real-time responses assure the user that up-to-date data are being supplied to the decision-making process. In addition, interactive systems enable the user to base each new request on the responses of the system supplied for earlier requests. In non-interactive systems, if a decision must be made within a certain time frame and system turnaround time is slow, managers are often forced to batch together a large number of potentially useful requests. This can involve a lot of extra contingency planning. The point here is that although interactive display devices are not required for a DSS, they do help to make many decision support systems friendly and useful. 5.3 COMPONENTS OF A DSS A decision support system has four basic components: (l) the user, (2) one or more databases, (3) a planning language, and (4) the model base (see Figure 2 below).

(i) The users: The user of a decision support system is usually a manager with an unstructured or semi-structured problem to solve. The manager may be at any level of authority in the organisation (e.g., either top management or operating management)' Typically, users do not need a computer background to use a decision support system for' problem solving. The most important knowledge is a thorough understanding of the problem and the factors to be considered in finding a solution. A user does not need extensive education in computer programming in part because a special planning language performs the communication function within the decision support system. Often, the planning language is nonprocedural, meaning that the user can concentrate on what should be accomplished rather than on how the computer should perform each step. (ii) Databases: Decision support systems include one or more databases. These databases contain both routine and non-routine data from both internal and external sources. The data from external sources include data about the operating environment surrounding an organisation - for example, data about economic conditions, market demand for the organisations goods or services, and industry competition. Decision support system users may construct additional databases themselves. Some of the data may come from internal sources. An organisation often generates this type of data in the normal course of operations - for example. data from the financial and managerial accounting systems such as account, transaction, and planning data. The database lnay also capture data from other subsystems such as marketing, production, and persounel. External data include assumptions about such variables as interest rates, vacancy rates, market prices, and levels of competition. (iii) Planning languages: Two types of planning languages that are commonly used in decision support systems are: ( l) general -purpose planning languages and (2) special purpose planning languages. General-purpose planning languages allow users to perform many routine tasks - for example, retrieving various data from a database or performing statistical analyses. The languages in most electronic spreadsheets are good examples of general-purpose planning languages. These languages enable user to tackle a broad range of budgeting, forecasting, and other worksheet-oriented problems. Special-purpose planning languages are more limited in what they can do, but they usually do certain jobs better than the general-purpose planning languages. Some statistical languages, such as SAS, SPSS, and Minitab, are examples of special purpose planning languages. (iv) Model base: The planning language in a decision support system allows the user to maintain a dialogue with the model base. The model base is the "brain" of the decision support system because it performs data manipulations and computations with the data provided to it by the user and the database. There are many types of model bases, but most of them are custom-developed models that do some types of mathematical functions-for example, cross tabulation, regression analysis, time series analysis, linear programming and financial computations. The analysis provided by the routines in the model base is the key to supporting the user's decision. The model base may dictate the type of data included in the database and the type of data provided by the user. Even where the quantitative analysis is simple, a system that requires users to concentrate on certain kinds of data can improve the effectiveness of decision making. 5.4 THE TOOLS OF DECISION SUPPORT SYSTEMS

The tools of decision support include a variety of software supporting database query, modeling, data analysis, and display. A comprehensive tool kit for DSS would include software supporting these application areas. Examples of software tools falling into these four categories are given in Table l. Data-based Software Model Based Software Statistical Software Display-Based Software Data-based Model Based Statistical Display-Based Software Software Software Software Dbase IV FOCUS NOMAD II RAMIS R: base 5000 SQL Foresight IFPS Lotus I -2-3 Model Multiplan Omnicalc SAS SPSS TSAM Chart Master SASGRAPH TELLAGRAF

Database Languages: Tools supporting database query and report generation use mainframe, minicomputer, and microcomputer-based databases. FOCUS, RAMIS, and NOMAD II, for example, are mainframe-based languages supporting database query report generation, and simple analysis. FOCUS and RAMIS are also available in PC versions. Ingres, Oracle, and Informix are database languages on mair1frames, microcomputers and microcomputers. Managers frequently use microcomputer-based database tools such as MS-Access and R: base 5000. Using a student database and a database query tool, a college administrator could generate the output shown in Figure 3 by asking for a list of courses with tuition greater than Rs.215. This is an example of a simple query requiring a search for records with certain characteristics. Using a database query tool, the user could also generate a report with a title, page headings, column headings, subtotals, and totals.

Model-Based Decision Support Software: Model-based analysis tools such as spreadsheet software enable managers to design models that incorporate business rules and assumptions. Microcomputer-based spreadsheet programs such as Lotussuits and Excel all support model building and "what if?" types of analysis. Mainframe-based spreadsheets such as Megacalc and Omnicalc fulfill the same purpose. Modeling tools like IFPS and Model are designed to support financial modeling an( analysis. A good example of a spreadsheet application is a cash flow analysis. Figure 4 shows a cash flow statement for a small business. The spreadsheet includes formulas that calculate expenses, profits, and cash flow. In developing this spreadsheet, the manager projected that inflation would rise by l0 percent each year. Using this assumption. The free cash flow at the end of five year is Rs.3,351 thousands. By building in different assumptions, such as changes in inflation, operating expenses, and revenues, the manager could use the formulas in the spreadsheet to recalculate values such as total expenses, pretax profit, and cash flow. A spreadsheet is a valuable analysis tool because it makes it possible to analyze the impacts of different what if?" situations.

Tools for Statistics and Data Manipulation: Statistical analysis software such as SAS and SPSS supports market researchers, operations research analysts, and other professionals using statistical analysis functions. Because of the need for increased "number crunching" capabilities. This type of software usually runs on mainframe computers. Microcomputer-based statistical packages are available as well. For example, the micro-based version of SPSS has about the same capabilities as the mainframe version, but it is much slower.

Display-Based Decision Support Software: The final category of decision support software is display-based software. Graphic displays of output generated from MSExcel spreadsheets, for example, are very effective in management presentations. Graphics tools running in a mainframe environment include DISSPLA, TELLAGRAF, and SASGRAPH. Microcomputer-based tools such as Harvard Graphics and PowerPoint display graphics output in the form of pie charts, bar charts, and graphs. One issue concerning decision support systems is the need for integrated tools. Integrated tools provide the ability to generate, manipulate, and statistically analyse data within a single software package. Individual tools supporting isolated decision support functions such as database query or modeling exist, but these tools are not always integrated with each other. An integrated tool can transfer data from a spreadsheet into a graphics program or from a database into a statistics program. For example, one might gather data on the profit percentage contribution of four major customers over the past five years. These data could be stored in a database. Based on these figures, one may like to project the profit percentage and gross income from these customers for the next five years. Using an integrated package like MS-EXCEL which is a microcomputer-based package incorporating spreadsheet, database, and graphics capabilities- one could use data from the database in a spreadsheet and then build a model to generate the desired projections. lf one wants these projections to be displayed in graphics format, using a line graph or bar chart, one could transfer the data in the spreadsheet into a graphics format for display. 5.5 EXAMPLES OF DBCISION SUPPORT SYSTEMS IN ACCOUNTING Decision support systems are widely used as part of an organisation's AIS. The complexity and nature of decision support systems vary. Many are developed in-house using either a general type of decision support program or a spreadsheet program to solve specific problems. Below are several illustrations of these systems. Cost Accounting system: The health care industry is well known for its cost complexity. Managing costs in this industry requires controlling costs of supplies, expensive machinery, technology, and a variety of personnel. Cost accounting applications help health care organisations calculate product costs for individual procedures or services. Decision support systems can accumulate these product costs to calculate total costs per' patient. Health care managers many combine cost accounting decision support systems with other applications, such as productivity systems. Combining these applications allows managers to measure the effectiveness of specific operating processes. One health care organisation, for example, combines a variety of decision

support system applications in productivity, cost accounting, case mix, and nursing staff scheduling to improve its management decision making. Capital Budgeting System: Companies require new tools to evaluate hightechnology investment decisions. Decision makers need to supplement analytical techniques, such as net present value and internal rate of return, with decision support tools that consider some benefits of new technology not captured in strict financial analysis. One decision support system designed to support decisions about investments in automated manufacturing technology is Auto Man, which allows decision makers to consider financial, nonfinancial, quantitative, and qualitative factors in their decisionmaking processes. Using this decision support system, accountants, laagers, and engineers identify and prioritize these factors. They can then evaluate up to seven investment alternatives at once. Budget Variance Analysis System: Financial institutions rely heavily on their budgeting systems for controlling costs artd evaluating managerial performance. One institution uses a computerized decision support system to generate monthly variance repofis for division comptrollers. The system allows these comptrollers to graph, view, analyse, and annotate budget variances, as well as create additional one-and five-year budget projections using the forecasting tools provided in the system. The decision support system thus helps the comptrollers create and control budgets for the costcenter managers reporting to them. General Decision Support System.' As mentioned earlier, some planning languages ttsed in decision support systems are general purpose and therefore have the ability to analyze many different types of problems. In a sense, these types of decision support systems are a decision-maker's tools. The user needs to input data and answer questions about a specific problem domain to make use of this type of decision support system. An example is a program called Expert Choice. This program supports a variety of problems requiring decisions. The user works interactively with the computer to develop a hierarchical model of the decision problem. The decision support system then asks the user to compare decision variables with each other. For instance, the system might ask the user how important cash inflows are versus initial investment amount to a capital budgeting decision. The decision maker also makes judgments about which investment is best rvith respect to these cash flows and which requires the smallest initial investment. Expert Choice analyzes these judgments and presents the decision maker with the best alternative. 5.6 EXECUTTVE TNFORMATTON SYSTEMS (EIS) An executive information system (EIS) - which is sometimes referred to as an executive support system (ESS) - is a DSS that is designed to meet the special needs of top-level managers. Some people use the terms "EIS" and "ESS" inter changeably, but others do not. Any distinction between the two usually is because executive support systems are likely to incorporate additional capabilities such as electronic mail. In this section, we first cover those people in organisations that are considered to be executives and examine the types of decisions they make. Then, we will turn to the nature of executive decisions and the types of information that executives need most. Finally, some of the special characteristics of executive information systems - beyond those of other decision support systems - are discussed. Executives: An executive can probably, best be described as a manager at or near the top of the organisational hierarchy who exerts a strong influence on the course taken by the organisation. The slots in a firm considered to be executive positions vary from company to company. For example, in many firms, the chief information officer (CIO) is usually an executive who participates in key strategic decisions. In other firms, the

CIO is a middle manager (who often has a title other than CIO). And sometimes, the person in charge of an organisation's CBIS is basically a data processing director. 5.6.1 Executive Roles and Decision Making: Most executive decisions fall into one of three classes: strategic planning, tactical planning, and "fire-fighting" activities (see Figure 5). Also, executives need a certain degree of control to ensure that these activities are carried out properly.

Strategic Planning: Strategic planning involves determining the general, long-range direction of the organisation. Typically, the CEO is ultimately responsible for the development of strategic plans, Tactical Planning: Whereas strategic planning addresses the general concerns of the firm, tactical planning refers to the how, when, where, and what issues involved with carrying out the strategic plan. Although executives will not normally be concerned with tactical details, they do need to worry about general tactics. For example, the vice-president of finance must address how the firm can best achieve a balance between debt and equity financing. And the marketing vice-president will need to consider which classes of products the company should produce to be successful in the marketplace. Fire Fighting: Major problems arise sometimes that must be resolved by someone at an executive level. For example, if a company is involved in a big lawsuit that threatens its financial solvency, an executive must get involved. Other possible firefighting activities include damage caused to a major facility, the announcement of an important product by a competitor, a strike, and a sharp reversal of the economy. Many of these events will call for key alterations in plans. Control: In addition to planning and fire-fighting, executive management also needs to exert some general control over the organisation. For example, if the strategic plan calls for a 20 percent increase in profitability, feedback is needed to ensure that certain actions taken within the organisation are accomplishing that objective. Thus, executives will also periodically review key performance data to see how they compare against planned amounts. 5.6.2 The Executive Decision-Making Environment: As discussed in section 3.2, chapter 3, the three main sources for executive information are as follows: I. Environmental information 2. Competitive information 3. Internal information The type of decisions that executives must make is broad. Often, executives make these decisions based on a vision they have regarding what it will take to make their companies successful. To a large extent, executives rely much more on their own intuition than on the sophisticated analytical skills. The intuitive character of executive decision-making is reflected strongly in the types of information found most useful to executives. Five characteristics of the types of information used in executive decision making are lack of structure, high degree of uncertainty, future orientation, informal source, and low level of detail. These are discussed below:

 Lack of structure: Many of the decisions made by executives are relatively unstructured. For instance, what general direction should the company take? Or what type of advertising campaign will best promote the new product line? These types of decisions are not as clear-cut as deciding how to debug a computer program or how to deal with an overdue account balance. Also, it is not always obvious which data are required or how to weigh available data when reaching a decision. For example, how does an executive assess the future direction of the economy if the six sources on which that person typically depends for information each forecast something different? Even the portfolio of decisions that need to be made by the executive is an open issue. Should time be spent, for instance, considering new businesses to enter or should the company concentrate on looking for new markets for existing products? High degree of uncertainty: Executives work in a decision space that is often characterized by a lack of precedent. ? For example, when the Arab oil embargo hit in the mid-1970s, no such previous event could be referenced for advice. Executives also work in a decision space where results are not scientifically predictable from actions. If prices are lowered, for instance, product demand will not automatically increase. Strategic-planning decisions are made in order to shape future events. As conditions change, organisations must change also. It is the executive's responsibility to make sure that the organisation keeps pointed toward the future. Some key questions about the future include: "How will future technologies affect what the company is currently doing? What will the competition (or the government) do next? What products will consumers demand five years from now? Where will the economy move next and how might that affect consumer buying patterns?" As one can see, the answers-to all of these questions about the future external environment are vital. Executives, more than other types of managers, rely heavily on informal source for key information. For example, lunch with a colleague in another firm might reveal some important competitor strategies. Informal sources such as television might also feature news of momentous concern to the executive news that he or she would probably, never encounter in the company's database or in scheduled computer reports. Besides business meals and the media, some other important information sources of information are meetings, tours around the company's facilities to chat with employees, brainstorming with a trusted colleague or two, and social events. Most important executive decisions are made by observing broad trends. This requires the executive to be more aware of the large overview, than the tiny items. Even so, many executives insist that the answers to some questions can on11, be found by mucking through details. 5.7 EIS ROLES AND CHARACTERISTICS Because executives deal primarily with data about the external environment and data that come from informal sources, they are usually less reliant on direct contact with information technology than other types of managers. When information from their company's computers is needed, many chief executive officers make their subordinates retrieve that information. Because executive information needs are more ambiguous than those of other levels of management, computers have historically been less useful to executives. Many executives have little hands-on experience with computers and do not fully appreciate how information technology can improve their personal productivity and decision making skills. Studies on EIS implementation show that thousands of companies have implemented executive information systems. Usually, the executive information systems provide executives with access to financial data, marketing and sales information, human resources information, manufacturing data, and competitive/ strategic information.

Electronic mail, access to external news and databases, word processing, spreadsheet, and automated filing capabilities are also common in business executive information systems. While it is often expensive to develop and maintain an EIS, many organisations feel that enhanced top level decision making is a benefit that more than balances out any costs associated with the system. 5.8 WHAT IS AN EXECUTIVE INFORMATION SYSTEM? An Executive Information System (EIS) is a tool that provides direct on-line access to relevant information in a useful and navigable format. Relevant information is timely, accurate, and actionable information about aspects of a business that are of particular' interest to the senior manager. The useful and navigable format of the system means that it is specifically designed to be used by individuals with limited time, limited keyboarding skills, and little direct experience with computers. An EIS is easy to navigate so that managers can identify broad strategic issues, and then explore the information to find the root causes of those issues. Executive Information Systems differ from traditional information systems in the following ways: They are specifically tailored to executive's information needs. They are able to access data about specific issues and problems as well as aggregate reports. They provide extensive on-line analysis tools including trend analysis, exception reporting. They can access a broad range of internal and external data. They are particularly easy to use (typically mouse or touch-screen driven). They are used directly by executives without assistance. Screen-based - All EISs are delivered through terminals using easy-to-use software. Information tends to be presented by pictorial or graphical means. Information is presented in summary format, e.g. sales for the whole company. There is, however, the facility to 'drill down' to other levels of information to see how the sale figure were arrived at -by geographical location, b1, product group etc. (although ; individual transactions are not usually available). The ability, to manipulate data, to project 'what if outcomes and to work with modeling tools within the system are also evident in EIS. This is particularly so with external information that can be 'superimposed' onto the company's information, e.g. sales forecasts with information from the Meteorological Office about the weather. EIS require large amounts of capacity and processing power within both the system and the network, and whilst suppliers' hardware costs per unit of power are falling, the software costs required to support such systems are increasing, and this will be where the efficiencies are required in the future. Although most computer systems may contain some of the above characteristics, they can be differentiated from EIS in a number of ways. Most MIS and operational systems are based on transaction processing carried out by a variety of on-line and batched inputs. Unlike the EIS, information is usually presented in numberical or textual form and reporting is by exception, usually in printed report format. Also, EISs tend to be externally-focused, strategically-based systems using both internal and external data, whereas other computer systems mainly concentrate on internal control aspects of the organisation. 5.8.1 Purpose of EIS: These are stated below:

(i) The primary purpose of an Executive Information System is to support managerial learning about an organization, its work processes, and its interaction with the external environment. Informed managers can ask better questions and make better decisions. (ii) A secondary purpose for an EIS is to allow timely access to information. All of the information contained in an EIS can typically be obtained by a manager through traditional methods. However, the resources and time required to manually compile information in a wide variety of formats, and in response to ever changing and ever more specific questions usually inhibit managers from obtaining this information. Often, by the time a useful report can be compiled, the strategic issues facing the manager have changed, and the report is never fully utilized. Timely access also influences learning. When a manager obtains the answer to a question, that answer typically sparks other related questions in the manager's mind. If those questions can be posed immediately, and the next answer retrieved, the learning cycle continues unbroken. Using traditional methods, by the time the answer is produced, the context of the question may be lost, and the teaming cycle will not continue. (iii) A third purpose of an EIS is commonly misperceived. An EIS has a powerful ability to direct management attention to specific areas of the organization or specific business problems. Some managers see this as an opportunity to discipline subordinates. Some subordinates fear the directive nature of the system and spend a great deal of time trying to outwit or discredit it. Neither of these behaviours is appropriate or productive. Rather managers and subordinates can work together to determine the root causes of issues highlighted by the EIS. The powerful focus of an EIS is due to the saying "'what gets measured gets done." Managers are particularly attentive to concrete information about their performance when it is available to their superiors. This focus is very valuable to the organization if the information reported is actually important and represents a balanced view of the organization's objectives. Misaligned reporting systems can result in inordinate management attention to things that are not important or to things which are important but to the exclusion of other equally important things. For example, a production reporting system might lead managers to emphasize volume of work done rather than quality of work. Worse yet productivity' might have little to do with the organization's overriding customer service objectives. 5.8.2 Contents of EIS: A general answer to the question of what data is appropriate for inclusion in an Executive information System is "whatever is interesting to executives." Executive information Systems in government have been constructed to track data about Ministerial correspondence, case management, worker productivity, finances, and human resources to name only a few. Other sectors use EIS implementations to monitor' information about competitors in the news media and databases of public information in addition to the traditional revenue, cost, volume, sales, market share and quality applications. Frequently, EIS implementations begin with just a few measures that are clearly of interest to senior managers, and then expand in response to questions asked by those managers as they use the system. Over time, the presentation of this information becomes stale, and the information diverges from what is strategically important for the organization. While the above indicates that selection of data for inclusion in an EIS is difficult, there are several guidelines that help to make that assessment. A practical set of

principles to guide the design of measures and indicators to be included in an EIS is presented below l. EIS measures must be eas1, to understand and collect. Wherever possible, data should be collected naturally as par1 of the process of work. An EIS should not add substantially to the workload of managers or staff. 2. EIS measures must be based on a balanced view of the organization's objective. Data in the system should reflect the objectives of the organization in the areas of productivity, resource management, quality and customer service. 3. Performance indicators in an EIS must reflect everyone's contribution in a fair and consistent manner. Indicators should be as independent as possible from variables outside the control of managers. 4. EIS measures must encourage management and staff to share ownership of the organization's objectives. Performance indicators must promote both team-work and friendly competition. Measures will be meaningful for all staff; people must feel that they, as individuals, can contribute to improving the performance of the organization. 5. EIS information must be available to everyone in the organization. The objective is to provide everyone with useful information about the organization's performance. Information that must remain confidential should not be part of the EIS or the management system of the organization. 6. EIS measures must evolve to meet the changing needs of the organization. 5.9 COMMERCIALLY AVAILABLE EIS PRODUCTS Many EIS generators - EIS development packages - are commercially available. Commander EIS (from Comshare, Inc.), Command Center (from Pilot Executive Software), Executive Edge (from Execucom Systems Corporation), and Express EIS (from Information Resources, Inc.) are among the market leaders in the U.S. RESOLVE is another leading product, especially in Europe. Self-examination questions 1. What is decision support system? 2. Explain, in brief, various characteristics of a decision support system. 3. What are the four basic components of a DSS? Explain them. 4. Explain four categories of software tools available for Decision support systems. 5. 'Decision support systems are widely used as part of an organisation's AIS'. Give examples to support this statement. 6. What is an Executive Information System? 7. What role do executives play in decision making? 8. Discuss the characteristics of the information used in decision making? 9. What purposes are served by an EIS? 10. Outline various principles to be followed while designing an EIS.

6 Enabling Technologies
6.0 CLIENT / SERVER ARCHITECTURE Recently, many organisations have been adopting a form of distributed processing called client/server computing. It can be defined as "a form of shared, or distributed, computing in which tasks and computing power are split between servers and clients (usually workstations or personal computers). Servers store and process data common to users across the enterprise, these data can then be accessed by client system. In this section we will discuss various aspects of client/server technology. But before that, let first look at the characteristics of the traditional computing models and various limitations that led to the client/ server computing. 6.1 THE TRADITIONAL COMPUTING MODEL

(i) Mainframe architecture: With mainframe software architectures, all intelligence is within the central host computer (processor). Users interact with the host through a dump terminal that captures keystrokes and sends that information to the host. Centralized host based computing models allow many users to share a single computer's applications, databases, and peripherals. Mainframe software architectures are not tied to a hardware platform. User interaction can be done using PCs and UNIX workstations. A limitation of mainframe software architectures is that they do not easily support graphical user interfaces or access to multiple databases from geographically dispersed sites. They cost literally thousands of times more than PCs, but they sure don't do thousands of times more work. (ii) Personal Computers: With introduction of the PC and its operating system, independent-computing workstations quickly became common. Disconnected, independent personal computing models allow processing loads to be removed from a central computer. Besides not being able to share data, disconnected personal workstation users cannot share expensive resources that mainframe system users can share: disk drives, printers, modems, and other peripheral computing devices. The data ( and peripheral) sharing problems of independent PCs and workstations, quickly led to the and Control Systems birth of the network/file server computing model, which links PCs and work stations together in a Local Area Network-LAN, so they can share data and peripherals. (iii) File sharing architecture: The original PC networks were based on file sharing architectures, where the server downloads files from the shared location to the desktop environment. The requested user job is then run in the desktop environment' The traditional file server architecture has many disadvantages especially with the advent of less expensive but more powerful computer hardware. The server directs the data while the workstation processes the directed data. Essentially this is a dumb serversmart workstation relationship. The server will send the entire file over the network even though the workstation only requires a few records in the file to satisfy the information request. In addition, an easy to use graphic user interface (GUI) added to this model simply adds to the network traffic, decreasing response time and limiting customer service. Unfortunately two defects limit a file server for multi-user applications. The file server model does not support data concurrence (simultaneous access to a single data set by multiple user) that is required by multi-user applications. If many workstations request and send many files in a LAN, the network can quickly become flooded with traffic, creating a block that degrades overall system performance. (it can only satisfy about l2 users simultaneously). 6.1.1 Client Server Model: Client server technology, on the other hand, intelligently divides the processing work between the server and the workstation. The server handles all the global tasks while the workstation handles all the local tasks. The server only sends those records to the workstation that are needed to satisfy the information request. Network traffic is significantly reduced. The result of this system is that is fast, secure, reliable, efficient, inexpensive, and easy to use. 6.1.2 Origin of Client/Server computing: The first generation of client/server technology began to emerge in the mid 1980s. Application software was an often inhouse program used to connect the clients and database servers. Second generation of client server technology (1990s) was founded on the development of actual client/server applications like integrated enterprise application suites. During this period, information that used to be guarded by corporate information system departments was suddenly

available to everyone through major advances in integrated applications. The third generation of client/server computing, is one marked by an analysis of decentralisation to address problems in security and information storage management. 6.2 WHAT IS CLIENT/SERVER? Client/Server (C/S) refers to computing technologies in which the hardware and software components (i.e., clients and servers) are distributed across a network. The client/server software architecture is a versatile, message-based and modular infrastructure that is intended to improve usability, flexibility, interoperability, and scalability as compared to centralised, mainframe, time sharing computing. This technology includes both the traditional database-oriented C/S technology, as well as more recent general distributed computing technologies. The use of LANs has made the client/server model even more attractive to organisations. 6.2.1 Why Change to Client/Server Computing : Client/server is described as a 'cost reduction technology. This technology allows doing what one may be currently doing with computers much less expensively. These technologies include client/server computing, open systems, fourth generation languages, and relational databases. Cost reductions are usually quoted as the chief reasons for changing to client/server. Hoverer, the list of reasons has grown to include improved control, increased data integrity, and security, increased performance, and better connectivity. The key business in dividing adoption are: Improving the Flow of Management Information Better Service to End-User Departments Lowering IT costs The ability to manage IT costs better Direct access to required data High flexibility of information processing Direct control of the operating system Client/ server has been defined as "the provision of Information that is required by a user, which is easily accessed despite the physical location of the data within the organisation. 6.2.2lmplementation examples of client / server technology: Online banking application Internal call centre application Applications for end-users that are stored in the server r E-commerce online shopping page intranet applications Financial, Inventory applications based on the client Server technology. Tele communication based on internet technologies 6.2.3 Benefits of the Client /Sewer Technology: Client/server systems have been hailed as bringing tremendous benefits to the new user' especially the users of mainframe systems. consequently, many businesses are currently in the process of changing or in the near future wilt change from mainframe (or PC) to client / server systems' Client / Server has become the IT solution of choice among the country's largest corporations' In Fact, the whole transition process, that a change to a client/ server invokes' can benefit a companys long run strategy' People in the field of information systems can use client/server computing to make their jobs easier. Reduce the total cost of ownership'

 Increased Productivity End user productivity Developer productivity Takes less people to maintain a client/server application than a mainframe The expenses of hardware and network in the client/server environment are less than those in the mainframe environment Users are more productive today because they have easy access to data and because applications can be divided among many different users so efficiency is at its highest' Client/server applications make organisations more effective by allowing them to port applications simply and efficiently' Reduce the cost of the client's computer: the server stores data for the clients rather than clients needing large amounts of disk space. Therefore, the less expensive network computers can be used instead. Reduce the cost of purchasing, installing, and upgrading software programs and applications on each client's machine: delivery and maintenance would be from one central point, the sever. The management control over the organisation would be increased. Many times easier to implement client/server than change a legacy application. Leads to new technology and the move to rapid application development such as object oriented technology. Long term cost benefits for development and support. Easy to add new hardware to support new systems such as document imaging and video teleconferencing which would not be feasible or cost efficient in mainframe environment. Can implement multiple vendor software tools for each application. 6.2.4 Characteristics of Client / Server Technology: There are ten characteristics that reflect the key features of a client / server system. These ten characteristics are as follows: l. Client/server architecture consists of a client process and a server process that can be distinguished from each other. 2. The client portion and the server portions can operate on separate computer platforms. 3. Either the client platforms or the server platform can be upgraded without having to upgrade the other platforms. 4. The server is able to service multiple clients concurrently; in some client/server. Systems, clients can access multiple servers. 5. The client/server system includes some sort of networking capability. 6. A significant portion of the application logic resides at the client end. 7 - Action is usually initiated at the client end, not the server end. 8. A user-friendly graphical user interface (GUI) generally resides at the client end. 9. A structured query language (SQL) capability is characteristic of the majority of client/ server systems. 10. The database server should provide data protection and security,. 6.3 APPROACHES TO CLIENT/SERVER As mentioned earlier, a client is "any system or process that can request and make use of data, services' or access to other systems provided by a server" and a server. is any system or process that provides data, services, or access to other systems for clients Most often for multiple clients simultaneously. A simple definition of client

server computing is that server software accepts requests for data from client software and returns the results to the client. The client manipulates the data and presents the results to the user or, acting as a server, sends the results to the client (server) that requested it. Client/server computing is based on the fact that it uses the programmable desktop computer to do most of its application processing. Even though the hardware in client/server computing is important, the focus needs to be on the technology that possible which is the software.

Client / server computing allows applications to be broken down into many different jobs. Each task ca1 be run op a different platform, under a different operating system with a different network protocol. Each task can be developed and maintained separately, accelerating application development. Applications can be divided into six different tasks which i11clude user interface, presentation logic, application logic, data requests and results acceptance, data integrity, and physical data management enabling many different IS professionals to work on the same application at the same time. Client/server computing makes use of the divide and conquer logic. Client/server computing also allows users to access data easily resulting in all the data needed being close to the user. This helps users by allowing them to be more efficient and get applications done quicker than before when they did not have client/server' computing at their disposal. Client/server computing is making workers more productive. Both the client and the server in most of today's client / server networks perform processing. Data storage, database management system, application software, operating system, user interface, and display devices are the major elements of this computing process. Data storage allows the retrieval of certain pieces of data, database management allows the data to be organized, and application software currently provides seamless integration of the two former elements at the user level. Operating system control the resources of the computer system and allocate resources to meet the requests of the users. They control job scheduling, prioritize and allow access to support devices like printers, and provide a communication channel between the client and the server. The user interface allows the end user to communicate with the application program. The interface could be a graphical user interface like Windows /Macintosh or character based as in DOS / UNIX depending on the programming language. The last element in the model is the display device, which is the physical hardware that allows the operator to monitor and communicate with the user interface. This takes the form of a workstation or client. 6.4 COMPONENTS OF CLIBNT SERVER ARCHITECTURE Client: Clients, which are typically PCs, are the "users" of the services offered by the servers described above. There are basically three types of clients. Non-Graphical User Interface (GUI) clients require a minimum amount of human interaction; non-GUIs include ATMs, cell phones, fax machines, and robots. Second, GUI-Clients are formal interaction models usually involving object/action models like the pull-down menus in Windows 3-X. Object-Oriented User Interface (OOUI) Clients take GUI-Clients even further with expanded visual formats, multiple workplaces, and object interaction rather than application interaction. Windows 95 is a common OOUI-Client.

Server: Servers await requests from the client and regulate access to shared resources. File servers make it possible to share files across a network by maintaining a shared library of documents, data, and images. Database servers one their processing power to executed Structured Query Language (SQL) requests from clients. Transaction servers execute a series of SQL commands, an online transaction-processing program (OLTP), as opposed to database servers, which respond to a single client command. Web servers allow clients and servers to communicate with a universal language called HTTP. Middleware: The network system implemented within the client/server technology is commonly called by the computer industry as middleware. Middleware is all the distributed software needed to allow clients and servers to interact. General middleware allows for communication, directory services, queuing, distributed file sharing, and printing, Service-specific software like ODBC. The middleware is typically composed of four layers, which are Service, Back-end Processing, Network Operating System, and Transport Stacks. The Service layer caries coded instructions and data from software applications to the Back-end Processing layer for encapsulating networkrouting instructions. Next, the Network Operating System adds additional instructions to ensure that the Transport layer transfers data packets to its designated receiver efficiently and correctly. During the early stage of middleware development, the transfer method was both slow and unreliable. Fat-client or Fat-server: Fat-client or fat-server are popular terms in computer literature. These terms serve as vivid descriptions of the type of client/server systems in place. In a fat-client system, more of the processing takes place on the client, like with a file server or database server. Fat-servers place more emphasis on the server and try to minimize the processing done by clients. Examples of fat-servers are transaction, Group ware, and web servers. It is also common to hear fat-clients referred to as "2-Tier" systems and fats servers referred to as "3-Tier" systems. Network: The network hardware is the cabling, the communication cords; and the device that link the server and the clients. The communication and data flow over the network is managed and maintained by network software. Network technology is ttot well understood by business people and end users, since it involves wiring in the wall and function boxes that are usually in a closet. 6.5 CLIENT/SERVER SECURITY Security procedures for client server technology is not clearly defined or protected. As they utilise distributed techniques there is an increased risk of access to data and modification. To get secured client/server environment all access points should be known. As the application data may exist on the server or client, a number of access routes exist, which should be examined and checked. To increase the security, an IS auditor should ensure that the following control techniques are in place: Access to data and application is secured by disabling the floppy disk drive. Diskless workstation prevents unauthorized access. Unauthorized users may be prevented from overriding login scripts and access by securing automatic boot or startup batch files. Network monitoring can be done to know about the client so that it will be helpful for later investigation, if it is monitored properly. Various network-monitoring devices are used for this purpose. Since this is a detective control technique, the network administrator must continuously monitor the activities and maintain the devices, otherwise these tools become useless. Data encryption techniques are used to protect data from unauthorized access.

 Authentication systems can be provided to a client, so that they can enter into system, only by entering login name and password. Smart cards can be used. It uses intelligent hand held devices and encryption techniques to decipher random codes provided by client-server based operating systems. A smart card displays a temporary password based on an algorithm and must be re-entered by the user during the login session for access onto the client server system. Application controls may be used and users will be limited to access only those functions in the system that are required to perform their duties. 6.6 CLIENT/SERVER RISKS AND ISSUES The benefits from client/server are truly praiseworthy but there are also risks involved in the transition from mainframe (or PC) to client/server. We can classify these risks into four categories: technological, operational, economic, and political. Technological Risks: The technological risk is quite simple- Will the new system work? The short-term aspect of this question is -will it literally work? But more important is the risk that in the long run the system may grow obsolete. That it will become obsolete is probably inevitable thus the question becomes-how soon will it become obsolete. To resolve this issue the fi1n and the IT consultant/division should understand system standards and market trends and use them in their decision making processes while deciding what system to incorporate into their organisation' Operational Risks: These risks parallel the technological risks in both the short and long run. Respectively, they are: will you achieve the performance you need from the new technology and will the software that you chose be able to grow or adapt to the changing needs of the business. Once again sound planning and keeping an eye to the future are the only remedies for these risks. Economic Risks: In the short run, firms are susceptible to hidden costs associated with the initial implementation of the new client/server system. Cost will rise in the short term since one needs to maintain the old system (mainframe) and the new client server' architecture development. In the long run, the concern centres around the support costs of the new system. Political Risks: Finally, political (people) risks involved in this transition are addressed. Here, the short-term question is-will end users and management be satisfied? The answer to this is definitely not if the system is difficult to use or is plagued with problems. The long run question concerns costs. "Unless the mainframe is completely replaced within the larger organisation, the total cost of transaction processing for the corporation as a whole goes up when one division creates its own independent system and moves off the mainframe. They may have reduced their local cost of transaction processing, but they have increased the cost of processing for divisions remaining on the mainframe, and this creates political problems." There are many layers of complexity and compatibility issues between the client and server. Capabilities of the software such as security and management tools are not as mature as mainframe counterparts. Takes time to become proficient with these tools. Information System departments may balk at giving up control of a centralized computing environment. One of the drawbacks of client/server computing is security. Client/ server computing did not originate with the security that is needed for organizations to operate

in today's environment. But as client/server computing grows into the 2l't century, its security is definitely improving and client / server computing is getting significantly closer to its ultimate goal, which is to "allow every network node to be accessible, as needed by un application and to allow all software components to work together." 6.7 SERVER-CENTRIC MODEL The TCO (total cost of ownership) is one of the greatest concerns in today's enterprise computing environment. In the past, much attention has been focused on the initial acquisition costs to create an enterprise computing system rather than the ongoing costs of ownership. According to may research, companies' acquisition costs although a substantial one-time investment represent only a portion of the total cost of an enterprise computing solution. Today, however, the focus has shifted to recurring costs, often called "soft" costs because they are difficult to quantify. Server-Centric computing is a model, in which applications are deployed, managed, supported and executed 100% on a server. The client handles data entry and information display. It uses a multi-user operating system and a method for distributing the presentation of an application's interface to a client device. With server-based computing, client devices, whether "fat" or "thin" have instant access to business-critical applications via the server without application rewrites or download. This means improved efficiency when deploying business-critical applications. In addition, server-based computing works within the current computing infrastructure and current computing standards, and with the current and future family of Windows-based offerings to improve returns on computing investments-desktops, Networks, applications and training. As the result, server-based computing is rapidly becoming the most reliable way to reduce the complexity and total costs associated with enterprise computing. Traditionally used for centralizing business applications such as general ledger, payroll order entry and point of-sale applications. This recently expanded model now includes Web-based applications where users browse through data over the network. Almost any client device can be adapted for use with server-centric applications. Whether the user is using traditional terminals, GUI/Windows terminals, network computers, or personal computers, the overall solution's performance depends primarily on network bandwidth ad the number of users connecting simultaneously. The more users accessing the server resources, the slower the response time. While other approaches for deploying, managing and supporting business-critical applications across the extended enterprise have been introduced, only the server-based computing model provides today's growing enterprises with the tools and capabilities they need to be successful. This model enables enterprises to: bring heterogeneous computing environments providing access to Windows-based applications-regard less of client hardware, operating platform, network connection or LAN protocol it offer enterprise-scale management tools to allow IT professionals to scale, deploy, manage and support applications front a single location It also provide seamless desktop integration of the user's local and remote resources and applications with exceptional performance.

Self-examination Questions l. Discuss various traditional computing models.

2. What is a client/server model? Why should computing model to a client/server model? 3. What are the benefits of a client/server technology? 4. Enumerate the characteristics of client/server technology. 5. Describe various components of client/server architecture. 6. What are the control techniques that are essential for the security of the client/server environment? 7. What are the risks associated with client/server model? 8. Describe the server-centric model. 7 System Development Process 7.0 INTRODUCTION The purpose of this chapter is to introduce the students to the concepts of system development process. The system development life cycle i.e., the set of activities that a system analyst or designer has to carry out to develop an information system and various approaches of development are also discussed. 7.1 WHAT IS SYSTEMS DEVELOPMENT PROCESS Computer information systems serve many different purposes, ranging from the processing of business transactions{he life blood of many organisations-to providing information needed to decide recurring issues, assisting senior officials with difficult strategy formulation, and linking office information and corporate data. But how do such complex information systems come into existence? Of course, through people. Technology has developed at a rapid race but the most important aspect of any system is human know-how and the use of ideas to harness the computer so that it performs the required tasks. This process is essentially what system development is all about. To be of any use, a computer-based information system must function properly, be easy to use, and suit the organisation for which it has been designed. If a system helps people to work more efficiently they will use it. If not, they will surely avoid it. In business, systems development refers to the process of examining a business situation with the intent of improving it though better procedures and methods. Systems development can generally be thought of as having two major components: systems analysis and systems design. Systems design is the process of planning a new business system of one to replace or complement an existing system. But before this planning can be done, one must thoroughly understand the old system and determine how computers can be used (if at all) to make its operation more effective. Systems analysis, then, is the process of gathering and interpreting facts, diagnosing problems, and using the information to recommend improvements to the system. This is the job of the System Analyst. Consider' for example, stockroom operations of a clothing store. To better control its inventory and gain access to more up-to-date information about stock levels and reordering, the Stores Manager asks a system analyst to computerise the stockroom1 operations. Before the analyst can design a system to capture data, update files and produce reports, he needs to know more about how the store currently operates: what forms are being used to store information manually, such as requisitions, purchase orders and invoices etc, and what reports are being produced and how they are being used. To proceed, the analyst seeks information about lists of reorder notices, outstanding purchase orders, records of stock on hand, and other reports. He also tries to find out where this information originates, whether in the purchasing department, stockroom or accounting department. In other words, he tries to understand how the existing system works and more specifically what the flow of information through the system looks

like. He will also try to know why the stores manager wants to change the current operations. Does the business have problems tracking orders, merchandise, or money etc? Is the system falling behind in handling inventory records? Does it need a more efficient system before it can expand operations? After collecting atl these facts, the analyst begins to determine how and where a computer information system can benefit all the users of the system. This accumulation of information called a system study must precede all other analysis activities. System analysts do more than just solve current problems. They assess. as carefully as possible, what the future need of the system will be and what changes s6ould be considered to meet these needs. They may recommend alternatives for improving the situation. For each alternative, they consider its suitability to the particular organization setting, the support it may get from the employees, time involved in its development and costs and benefits of the system in question. Based on these factors, the analysts recommend to the management, after consulting various managers and employees in the organisation, which alternative to adopt. The management then decides which alternative to accept. Once this decision is made, a plan is developed to implement the recommendations. The plan includes all system design features, file specifications, operating procedures, and design features, and equipment and personnel requirements. The system design is like the blue print for a building, it specifies all the features that should be there in the finished product. 7.2 SYSTEM DEVELOPMENT LIFE CYCLE The process of system development starts when management or sometimes system development personnel realise that a particular business system needs improvement. The system development life cycle method can be thought of as a set of activities that analysts, designers and users carry out to develop and implement an information system. In this chapter, we will examine each of the six activities that make up the systems development life cycle. In most business situations, these activities are all closely related, usually inseparable and even the order of the steps in these activities may be difficult to determine. Different parts of a project can be in various phases at the same time, with some components undergoing analysis while others are at advanced design stages. The systems development life cycle method consists of the following activities: (i) Preliminary investigation (ii) Requirements analysis or systems analysis (iii) Design of system (iv) Development of software (v) Systems testing (vi) Implementation and maintenance (i) Preliminary investigation: A preliminary investigation is undertaken when users come across a problem or opportunity and submit a formal request for a new system to the MIS department. This activity consists of three parts: request clarification, feasibility study and request approval. Generally the requests which are submitted to the MIS department are not clearly stated. Hence, before any system investigations can be considered, the system request must be examined to determine precisely what the originator wants. Thereafter, the analyst tries to determine whether the system requested is feasible or not. Aspects of technical, economic and operational feasibility of the system are covered in the feasibility study. The third part of the investigation relates to approval of the request. Not all requested systems are desirable or feasible. Based on

the observations of the analyst, the management decides which system should be taken up for development. (ii) Requirements analysis or systems analysis: If, after studying the results of preliminary investigation, management decides to continue the development process, the needs of the users are studied. Analysts work closely with employees and managers of the organisation for determining information requirements of the users. Several fact finding techniques and tools such as questionnaires, interviews, observing decision maker behaviour and their office environment etc. are used for understanding the requirements. As details are gathered, the analysts study the present system to identify its problems and shortcomings and identify the features, which the new system should include to satisfy the new or changed user application environment. This step is also ref-erred to as "systems analysis". (iii) Design of the system: During system design, the user requirements that arose from analysing the user applications environment are incorporated into a new systems design. The design of an information system produces the details that state how a system will meet the requirements identified above. The analyst designs various reports/outputs, data entry procedures, inputs, files and database. He also selects file structures and data storage devices. These detailed design specifications are then passed on to the programming staff so that software development can begin. (iv) Acquisition and development of software: After the system design details are resolved, such resources needs as specific type of hardware, software, and services are determined. Subsequently, choices are made regarding which products to buy or lease from which vendors. Software developers may install (or modify and then install, purchased software or they may write new, custom-designed programs. The choice depends on many factors such as time, cost and availability of programmers. The analyst works closely with the programmers if the software is to be developed in-house. During this phase, the analyst also works with users to develop worthwhile documentation for software, including various procedure manual s. (v) Systems testing: Before the information system can be used,it must be tested. Systems testing is done experimentally to ensure that the software does not fail i.e. it will run according to its specifications and in the wav users expect. Special test data are input for processing, and results examined. If it is found satisfactory, it is eventually tested with actual data from the current system. (vi) Implementation and maintenance: After the system is found to be fit, it is implemented with the actual data. Hardware is installed and users are then trained on the new system and eventually work on it is carried out independently. The results of the development efforts are reviewed to ensure that the new system satisfies user requirements. After implementation, the system is maintained; it is modified to adapt to changing users and business needs so that the system can be useful to the organisation as long as possible. The system development life cycle should be viewed as a continuous iterative process that recycles through each stage for many applications. Thus, even when a system is fully specified, designed, purchased and running, it is continually being enhanced or maintained. Enhancement and maintenance may require retuning to one of the earlier stages of system development life cycle. 7.2.1 Achieving systems development objectives: There are many reasons why organisations fail to achieve their systems development objectives. Although we cannot catalog all the reasons, we can summarize a few representative samples here: Lack of senior management support for and involvement in information systems development. Developers and users of information systems will watch senior

management to determine which systems development projects are important and will act accordingly by shifting their efforts away from any project not receiving management attention. In addition, management can see that adequate resources, as well as budgetary control over use of those resources, as well as budgetary control over use of those resources, are dedicated to the project. Shifting user needs. User requirements for information technology are constantly changing. As these changes accelerate, there will be more requests for systems development and more development projects. When these changes occur during a development process, the development team may be faced with the challenge of developing systems whose very purposes have changed since the development process began. Development of strategic systems. Because strategic decision making is unstructured, the requirements, specifications, and objectives for such development projects are difficult to define; and determining "successful" development will be elusive. New technologies. When an organisation tries to create a competitive advantage by applying advanced information technology, it generally finds that attaining systems development objectives is more difficult because personnel are not as familiar with the technology. Lack of standard project management development methodologies. Some organisations do not formalise their project management and systems development methodologies, thereby making it very difficult to consistently complete projects on time or within budget. Over worked or under-trained development staff. Estimates of the backlog of systems development work facing development staffs range up to 4 years! In addition to being overworked, systems developers often lack sufficient education background. Furthermore, many companies do little to help their development personnel stay technically currently; in these organisations, a training plan and training budget do not exist. Resistance to change: People have a natural tendency to resist change, and information systems development projects signal changes -often radical- in the workplace. Business process reengineering is often the catalyst for the systems development project. When personnel perceive that the project will result in personnel cutbacks, threatened personnel will dig in their heels, and the development project is doomed to failure. Personnel cutbacks often result when reengineering projects are really attempts at "downsizing" (or "rightsizing,') Lack of user participation; Users must participate in the development effort to define their requirements, feel ownership for project success, and work to resolve development problems. User participation also helps reduce user resistance to change. Inadequate testing and user training: New systems must be tested before installation to determine that they will operate correctly. Users must be training to effectively utilise the new system. To overcome these and other problems, organisations must execute the systems development process efficiently and effectively. 7'2'2 Approaches to Systems Development: Since organisations vary significantly in the way that they automate their business procedures, and since each new type of system usually differs from any other, several different systems development approaches are often used within an organisation. We will now discuss each of these approaches briefly.

(i) Traditional approach: In the traditional approach of the systems development activities are performed in sequence. Figure-l shows examples of the tasks performed during each phase of the traditional approach. Managers and users are prost likely to interact with systems analysts, systems designers and application programmers when the traditional approach is used. During the preliminary investigation and requirement analysis phases in which user information needs are identified, systems development activities are usually led by a systems analyst. The system analyst may play a less important role during the design and implementation stages. During these later stages they may turn over the project to system designers. If new programs are required to be written or existing programs are to be modified, application programmes become involved during the software development and implementation stages. When the traditional approach is applied, an activity is undertaken only when the prior step is fully completed. Managers and users consider and review the work performed by MIS professionals during each stage of process before proceeding to the next stage. Managers will probably review diagrams, explanation charts and so on, in order to ensure that the work is accurate and complete. If the work is satisfactory managers and users formally sign off or accept the work and allow the systems development team to proceed to the next step. It is important under traditional approach that managers and users should throughly review the work before granting their permission to start the next activity.

The traditional approach is applied to the development of larger computer based information systems such as the transaction processing systems. Because the processing requirements of these systems are well understood, the risk of users and systems analysts misperceiving the system are less than for other types of systems. (ii) Prototyping approaches: The traditional approach sometimes may rake years to analyse, design and implement a system. In order to avoid such delays, organisations are increasingly using prototyping techniques to develop smaller systems such as decision support systems, management information systems and expert systems. The goal of prototyping approach is to develop a small or pilot version called a prototype of part of all of a system. A prototype is a usable system or system component that is built quickly and at a lesser cost, and with the intention of being modifying or replacing it by a full-scale and fully operational system. As users work with the prototype, they make suggestions about the ways to improve it. These suggestions are then incorporated into another prototype, which is also used and evaluated and so on. Finally, when a prototype is developed that satisfies all user requirements, either it is refined and turned into the final system or it is scrapped. If it is scrapped, the knowledge gained from building the prototype is used to develop the real system. Experimenting with the prototype helps users to identify additional requirements and needs that they might have overlooked or forgotten to mention. In addition, with prototyping' users have a clearer visual picture of what the final version will look like and they do not have to sign off on a system which is presented to them in the form of diagrams and specification lists. Decision supports semi-structured or unstructured management decision environment, are ideal for the experimentation and trial-and-error development associated with prototyping. Expert systems are other ideal candidates for

prototyping approach because expert knowledge usually requires continual refinements. Prototyping can also be used in the development of transaction processing system. It is most commonly used during the system design stage, for instance, to develop the mock screen for input etc. Prototyping can be viewed as a series of four steps: Step t; Identify Information System Requirements: In traditional approach, the system requirements have to be identified before the development process start. However, under prototype approach, the design team needs only fundamental system requirements to build the initial prototype, the process of determining them can be less formal and time consuming than when performing traditional systems analysis. (The team can develop the detailed requirements of the system later after users have had time to interact with the prototype and provide feedback.) Step 2: Develop the Initial Prototype: In this step, the designers create an initial base model - for example, using fourth-general programming languages or CASE tools. In this phase, the goals are "rapid development" and "low cost." Thus, the designers give little or no consideration to internal controls, but instead emphasize such system characteristics as "simplicity," "flexibility," and "ease of use." These characteristics enable users to interact with tentative versions of data entry display screens. menus, input prompts, and source documents. The users also need to be able to respond to system prompts, make inquiries of the information system, judge response times of the system, and issue commands. Step 3: Test and Revise: After finishing the initial prototype, the designers first demonstrate the model to users and then give it to them to experiment. At the outset, users must be told that the prototype is incomplete and requires subsequent modifications based on their feedback. Thus, the designers ask users to record their likes and dislikes about the system and recommend changes. Using this feedback, the design team modifies the prototype as necessary and then resubmits the revised model to system users for reevaluation. Thus iterative process of modification and reevaluation continues until the users are satisfied - commonly, through four to six interactions. Step 1: Obtain User Signoff of 'the Approved Prototype: At the end of Step: users formally approve the final version of the prototype, which consists them to the current design and establishes a contractual obligation about what the system will, and will not, do or provide. Approximately half of these approved prototypes become fully functional