Chapter 5

Information Systems In An
Organization

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OBJECTIVES:
– Basic Information System Concepts
– Discuss different level of management
– Discuss different types of reports
– Explain the uses of different types of ISs and
describe their inputs and outputs
– Discuss information systems in the functional
areas of business organizations
– System Development Life Cycle (SDLC)
– Project Management

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5.1 WHAT IS A INFORMATION
SYSTEM(IS)?
• Information system
 An information system comprises of a group of interrelated
components working together to process raw data into
useful information.
 These components may include: hardware, software,
databases, procedures, and people.

– Purpose: to process the raw data into information which is

useful to assist users in making decisions and to manage
operations in an organisation, for example, to produce sales
reports, invoices or purchase orders.

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COMPONENTS OF
AN
INFORMATION
SYSTEM

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COMPONENTS OF AN IS
• Hardware
– Consists of computer equipment used to perform input,
processing, and output activities
– Hardware is a device such as a processor, monitor, keyboard
or printer .
• Software
– Consists of the computer programs that govern the
operation of the computer
– A program or collection of programs that enable hardware
to process data
• Database
– Organized collection of facts and information, typically
consisting of two or more related data files
– A collection of related files or tables containing data.
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COMPONENTS OF AN IS
• People
– People include all the people who manage, run, program, and
maintain the system.
– Users are people who use information system to get information.
E.g. Cashier, Clerk, Manager, CEO and more
– IT /IS personnel are people who develop and maintain computer-
based information system. E.g. programmer, system analyst
• Procedures
– Procedures contain sets of instructions that will tell the human
part how to use and run the system. E.g. operation manual.
– Procedures define the tasks that must be performed by people
who work with the system, including users, managers and
information system staff. 6
 5.2 LEVEL OF USER IN THE ORGANIZATION

 In an organization, users typically fall into one of four

categories:
 Executive management

 Middle management

 Operational management

 Non-management employees

 The types of information that users require often depend on

their employee level in the company.

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5.2 LEVEL OF USER IN THE ORGANIZATION

Executive management (strategic decision)

Middle management (tactical decision)

Operational management (operational decision)

Non-management employees (on the job decision)

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5.2 LEVEL OF USER IN THE ORGANIZATION

Executive management
• Includes the highest management positions in a company.
• Focuses on the long-range direction of the company.
• Executive management oversees middle management.
• Example:
• Chief executive officer
• Chief financial officer (accounting)
• Chief information officer (IT)
• Chief operating officer (H/R, Customer service,
Manufacturing, Distribution, Marketing, Sales,)
• vice president
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5.2 LEVEL OF USER IN THE ORGANIZATION
Executive management
• These managers primarily are responsible for strategic
decisions that centre on the company’s overall goals and
objectives.
• These decisions involve setting organization policies, goals,
and long-term plans, and they affect the organization for many
years.
– Example:
• To decide whether to stop selling some products or
business services
• To decide whether the business should change to / add
a new product line.
• To decide whether the business should enter into to or
exit from market.

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5.2 LEVEL OF USER IN THE ORGANIZATION
Middle management
• Responsible for implementing the strategic decision of executive
management.
• Middle management oversees operational management.
• Example: Human Resource Manager, Marketing Manager

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5.2 LEVEL OF USER IN THE ORGANIZATION
Middle management (tactical decision –
decide from which vendor to purchase material)
Middle management
• Middle management makes tactical decisions, which are
short-range decision that apply specific programs and
plans necessary to meet the stated objectives..
• They affect the organization for a longer period of time
than operational decisions, usually for several months or
a few years.

Example:
Marketing manager makes tactical decision to decide
whether to provide special offers to customer for these 612
months.
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5.2 LEVEL OF USER IN THE ORGANIZATION

Operational management
• Supervises the production, clerical and other non-
management employees of a company.
• Example: Supervisor, officer, stock manager, project
manager.
• They deal with operational decisions. An operational
decision involves day-to-day activities within the
company.

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 5.2 LEVEL OF USER IN THE ORGANIZATION
Operational management
•These decisions should be consistent with and support the
tactical decisions made by middle management.

•These decisions affect the organization for a short period of

time, such as several days or weeks.
Operational management (operational decision-
decide the scheduling and process for building a new type of
product)

Example:
Stock manager (lower-level manager) makes operation
decision to decide whether to reorder more material.
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5.2 LEVEL OF USER IN THE ORGANIZATION

Non-management employees
• Include production, clerical, and other personnel.
• Example: accountant, engineer, secretary, order entry
clerk, cashier.
• Non-management employees frequently need information
to perform their jobs.
• They deal with on-the-job decisions. They have access to
the information necessary to make decisions that
previously were made by managers.
Non-management employees (production employee gather
information regarding how to assemble / build the product )
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 5.2 LEVEL OF USER IN THE ORGANIZATION

Executive management
(strategic decision –
decide when to design and
build new type of product)
Executive
Middle management management
(tactical decision –
decide from which vendor
to purchase material) Operational management
Middle (operational decision-
management decide the scheduling and
process for building a new type
of product)
Operational
management
Non-management employees
(production employee gather
information regarding how
to assemble / build the
Non-management employees
product ) 16

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5.3 GENERAL TYPE OF INFORMATION SYSTEM

A. Transaction processing systems (TPSs)

B. Management information system (MIS)
C. Decision Support Systems (DSS)
D. Executive support system (ESS)

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 A. TRANSACTION PROCESSING SYSTEM (TPS)
Function Input Output
-A system that processes and records day to Transaction data such -processed transaction
day business transactions. A transaction is as quantity of product data such as invoice
a individual business activity. E.g.: being sold. E.g. and delivery order.
payment transaction, order transaction. Product ID, Product
-detail report contains
Name, Order No,
specific information
-TPS is first computerized systems that Customer name etc.
about routine
processes business data. activities
-Company create a TPS by computerizing
an existing manual system for faster
processing, reduced clerical costs and User
improved customer service
Operational
management &
Non-management
employees

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 A. TRANSACTION PROCESSING SYSTEM (TPS)

Transaction Processing System

Example: Order Entry System - process a sales order , record sales,
updates customer’s account balance, and reduce inventory count.

Non management employee – TPS

sales clerk key in a customer sales TPS
software
order. Stored data
(internal data)
input

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EXAMPLES OF TPS

• Flight Reservation System

– The system at an airlines office which processes flight
reservation transactions received from passengers

• Sales Ordering Processing System

– A supermarket which processes goods purchased by
consumers at the check-out points.

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 B. MANAGEMENT INFORMATION SYSTEM (MIS)

Function Input Output

-A system summarizes, compares -Internal data Processed -different types of
data, and generates timely and transaction data from TPS report and responses
accurate information for operational such as Invoice. to queries
and middle management to monitor -Output of TPS becomes
and control the internal operations of the input to the MIS. -summary and
an organization. exception report
E.g.: monthly sales
-The information generated by an MIS External data summary report,
helps managers understand the day-to- -Data is captured from
day operations of the company such as customers, suppliers, User
weekly sales, daily production, competitors, and
monthly operating expenses, etc Operational
stockholders whose . Data
management,
is not already captured by
-Allows the manager to query the Middle management
the TPS
database

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 B. MANAGEMENT INFORMATION SYSTEM (MIS)
Management Information systems (MIS)
-produce reports that recap daily sales activities,
-summarize weekly and monthly sales activities,
-list customers with past due account balances,
-chart slow or fast selling products, External
-highlight inventory item that needs reordering. data
input

MIS MIS
Operational management software Stored data
middle management
input
Transaction Processing System
Example: Order Entry System - process a sales order , record sales,
updates customer’s account balance, and reduce inventory count.

Non management employee – sales clerk TPS TPS

key in a customer sales order. software Stored data
input (internal data)

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 EXAMPLES OF MIS
Industry Examples of MIS Reports Purpose
MIS
Car Sales and Car Sales To assist in hiring
Manufacturing Marketing Summaries workers on the
MIS Report production floor.
Example: when car
sales go up, it is
necessary to hire more
workers

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 C. DECISION SUPPORT SYSTEM (DSS)
Function Input Output
-A system that to help middle and top -Internal data comes -results of
management make decisions that solve from an organization's analysis on
problems by analyzing data from database and own files , (MIS and screen and in
providing the results of the analysis. TPS). printed reports
-External sources data -reports
-Help top management predict what will happen might include typically are
with different decisions. information on interest summary,
rates, population exception
Example: trends, customers reports, drill –
->Management might want to know the effect income, competitors down reports
on company profits if sales increase by 10 % prices, material price ,
and costs go up by 5 %. unemployment rate,
->what would happen if company lowered or fuel rate
raised the price of product.

-This type of information sometimes called the

what-if analysis, and it needs a DSS to support. User
Middle management
Executive management 25
Decision Support Systems (DSS)
•DSS analyzes data and let the management to know the effect on company
profits if sales increase by 10 % and costs go up by 5 %.

customers income, competitors

prices, material price ,
unemployment rate, fuel rate

DSS External
Middle management software data
Top Management input

input input

MIS Current sales,

Stored data price
TPS
Stored data
(internal data)

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APPLICATION OF DSS
• Banks – Customer Profiles
– Banks use DSS to extract data to understand customers’
profiles in order to serve them better and to build loyal
customers
• Retailing – Customer Buying Patterns
– Retailers use DSS to have a better understanding of
consumers buying patterns, preferences and tastes so that
they can serve them better and so that consumers return.

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 D. EXECUTIVE SUPPORT SYSTEM (ESS)
Function Input Output
-A system used to assist top level -Internal data comes -reports are not
management. from an scheduled but
organization's own produced on demand
-summarizes , analyzes & presents files , (MIS and basis.
information to executive decision makers in TPS).
a useful, friendly & customized format -External sources
data might include
-It combines the features & capabilities of information on User
both MISs (summarizing data)and DSSs interest rates,
(analyzing), but with more flexibility and population trends,
better support for strategic decision making Executive
customers income,
which ensures that the company will management
competitors prices,
survive & grow in the future. material price ,
unemployment rate,
fuel rate
(same as DSS)
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 5.4 IS BY FUNCTIONAL AREAS

Accounting Information system

•This system contains many functions which are handled mainly
by the:
– Account Receivable (AR) module : keeps track of sales to
customers (orders, payments, credit status)
– Account Payable module : keeps track of purchases from
suppliers, any payments made (received by the company
or make to suppliers) can be tracked.
– Fixed Asset Module : keeps track of assets used in the
company such as buildings, land, and equipment.

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5.4 IS BY FUNCTIONAL AREAS

Finance System
•It can gather financial data from various departments, and
generate valuable financial reports such as cash flow
statements, budgets, trial balance sheets, and quarterly
financial statements.
– Budgeting Module : allows the individual department
to plan and control their budgets for the coming years
more accurately.
– Cash Management module : helps the company record
and control incoming and outgoing cash more
accurately.

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5.4 IS BY FUNCTIONAL AREAS

Human Resources Information Systems

•Responsible for hiring, training, compensating and
terminating employees
•Some modules involved in HR system include:
– Personnel module: maintains a complete employee
database including contact information, address,
qualification, etc.

– Compensation and Benefits module: helps to calculate

staff monthly salaries and manage fringe benefits given
to staff e.g. health insurance and annual leaves.
– Training module: helps in planning a training calendar
and to monitor staff training and development
programmes.
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 5.4 IS BY FUNCTIONAL AREAS
Sales and Marketing Systems
•The marketing function of a business is responsible for selling goods and
services.
•Some modules involved in sales and marketing information systems :
• Sales analysis: This system determines which products are
selling well and poorly, which sales regions have the best and
worst sales, which salespeople are selling the most and the least,
and so forth.
• Sales forecasting: The purpose of this system is to project future
sales
• Marketing research: This system analyses information gathered
about consumers and products in order to identify trends
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5.5 SYSTEM DEVELOPMENT
• System development is a set of activities used to build an
information system.
• This collection of phases is called the system
development life cycle (SDLC).
• SDLC contain five phases:
– System Planning
– System Analysis
– System Design
– System Implementation
– System Support and Security
• Each system development phase consists of a series of
activities, and the phases form a loop. The fives system
development phase often appear sequentially. 33
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SYSTEM DEVELOPMENT LIFE CYCLE (SDLC)
Planning Phase
•The planning phase for a project begins when the steering
committee receives a project request.
•During the planning phase, four major activities are
performed:
– review and approve the project requests,
– prioritize the project requests,
– allocate resources, such as money, people, and
equipment to approved projects,
– form a project development team for each approved
project.
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SYSTEM DEVELOPMENT LIFE CYCLE (SDLC)

Analysis Phase
•The analysis phase consists of two major activities:
(1) conduct a preliminary investigation
(2) perform detailed analysis.
Preliminary Investigation
•The main purpose of the preliminary investigation, is to
determine the exact nature of the problem or improvement
and decide whether it is worth pursuing.
•Upon completion of the preliminary investigation, the
systems analyst writes the feasibility report.

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SYSTEM DEVELOPMENT LIFE CYCLE (SDLC)
Detail Analysis
•Detailed analysis involves three major activities:
(1) study how the current system works,
(2) determine the users’ wants, needs, and requirements,
(3) recommend a solution.
•While studying the current system and identifying user
requirements, the systems analyst collects a great deal of data
and information.
•Systems analysts use diagrams such as DFD to describe the
processes that transform inputs into outputs and diagrams that
graphically show the flow of data in the system.

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SYSTEM DEVELOPMENT LIFE CYCLE (SDLC)
Data Flow Diagram (DFD)
•DFD graphically show the movement and transformation of data in the information
system.
•A set of DFDs provides a logical model that shows what the system does, not how it
does.
Entity-Relationship Diagram (ERD)
•The ERD is based on entities and data stores in DFDs prepared during the analysis
phase.
•An ERD is a graphical model that depicts the relationships and interactions among
system entities.
•Provides an overall view of the system.
•Unlike data flow diagrams (DFD), entity-relationship diagram (ERD) depicts
relationships, not data or information flow.

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SYSTEM DEVELOPMENT LIFE CYCLE (SDLC)
Design Phase
•The design phase consists of two major activities:
(1) if necessary, acquire hardware and software
(2) develop all of the details of the new or modified information
system.
•The systems analyst may skip this activity if the approved solution does not
require new hardware or software.
•If this activity is required, it consists of four major tasks: (1) identify
technical specifications,
(2) solicit vendor proposals,
(3) test and evaluate vendor proposals,
(4) make a decision.

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SYSTEM DEVELOPMENT LIFE CYCLE (SDLC)

Design Phase
•The next step is to develop detailed design specifications for the
components in the proposed solution.
•The activities to be performed include developing designs for the
databases, inputs, outputs, and programs.

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SYSTEM DEVELOPMENT LIFE CYCLE (SDLC)

Implementation Phase
•The purpose of the implementation phase is to construct, or
build, the new or modified system and then deliver it to the
users.
•Members of the system development team perform four
•major activities in this phase:
(1) develop programs and apps,
(2) install and test the new system,
(3) train users,
(4) convert to the new system.

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SYSTEM DEVELOPMENT LIFE CYCLE (SDLC)

Support and Security Phase

•The purpose of the support and security phase is to
provide ongoing assistance for an information system and its
users after the system is implemented.
•The support and security phase consists of three major
activities:
(1) perform maintenance activities,
(2) monitor system performance,
(3) assess system security.

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SYSTEM DEVELOPMENT LIFE CYCLE (SDLC)

• Information system maintenance activities include fixing

errors in, as well as improving, a system’s operations.
• The systems analyst monitors performance of the new or
modified information system is to determine whether the
system is inefficient or unstable at any point.
• All elements of an information system — hardware,
software, data, people, and procedures — must be secure
from threats both inside and outside the enterprise.

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PROJECT MANAGEMENT

• Project management is the process of planning, scheduling, and

then controlling the activities during system development.
• The goal of project management is to deliver an acceptable system
to the user in an agreed-upon time frame, while maintaining costs.
• Project leaders can use project management software to assist
them in planning, scheduling, and controlling development
projects.
• One aspect of managing projects is to ensure that everyone
submits deliverables on time and according to plan
• Popular tools used to plan and schedule the time relationships
among project activities are Gantt and PERT charts.

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THE END….

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