Fundamental of information system

1. Fundamentals of Information Systems

Data and information processing
This involves converting, analyzing, computing and producing all forms of data, information.
After capturing data, the system must re-organize that data basing on what the organization
wants to use that information for. For example, when an e-commerce website captures data about
your previous purchases via their website. Their system can organize that data inform of prices,
products of interest, categories of interest, period of purchase etc , and this data will be used next
time when a user goes back to that e-store to suggest relevant products.
Data versus information
 Data is defined as raw facts about something represented by characteristics such as
letters, numbers and other symbols. Data takes variety of forms including numeric, text,
voice and images.
 Information is a collection of meaningful facts and figures that can be used as basis for
guidance and decision making. Therefore data is a row fact of information and
information is the processed data. Data is meaningless by itself, but it gives meaningful
information after processed.
 Information is the processed data that man can understand & get knowledge out of it.
 Information can be either digital information or analog information. Analog
information can take any value, whereas digital information can only take a limited
number of different values. For example, as shown in Figure 1 there are digital watches
and analog watches. On the digital watch each number (or digit) can only take one out
of ten different values (the numbers between 0 and 9). On the analogue watch the hands
can be in any position, so there is no restriction on the number of values it can display.
This distinction is important when we are talking about computers because they store
and process digital information only.
1.1.1. Methods of data processing
The type of data processing method is dependent on the volume of task to be accomplished.
There are two ways of data processing.
a. Manual data processing
 This method of data processing is manipulating of data manually. This manual
method is time consuming and less accurate. And also suffers duplicating of work,
limited productivity of employees, lack of control and dishonesty.

Prepared By ALEMESHET K. Page 1

 Fundamental of information system

 This method is used, if the volume of data is low or there is a relatively long time
frame allowed for reporting and if accuracy of result is not critical or if budget is
restriction prohibit the investment in equipment.
 The main tools of manual data processing are brain, pen, paper etc.
b. Electronic (Computer) data processing
 The way of s data processing, that manipulates data more useful form in
computerized ways. This method performs by using electrical machines or computers.
 Some of basic advantages of this method are:
- Accuracy: giving correct result, if we inter correct inputs and
- Speed: taking a few seconds to perform data processing.
 Generally there are two ways of computer data processing. There are:
File processing and database processing
i. File processing: this type of data processing is the way of processing and storing
data in separate files. In this type of data processing: not easy data redundancy and
consistency, difficult to access data, no data integrity and there is no security.e.g.
Ms. Word processing
ii. Database processing: this way of data processing processes related data together by
using database management system (DBMS). In DB processing: There is data
redundancy and consistency, access data can be done easily, provide data isolation,
have data integrity, Concurrent access and security. E.g. of DBMSs are: Ms. Access,
structural query language (SQL) and oracle.
1.1.2. Data Processing Cycle
The data processing cycle represents the chain of processing events in most data
processing applications. It consists of
 Data recording: the original data is first must be recorded in a form readable by the
system.
 Transmission: then the data transmitted to a computer that performs the data processing
functions.
 Reporting: after processing the data, the computer reports summary results to the
program’s operator.

Prepared By ALEMESHET K. Page 2

 Fundamental of information system

 Storing: after reported the result of the data processing the computer stores the original
and modified data.
 Retrieval: after storing the data the final step of data processing cycle is retrieval that
means accessing the stored data.
In general data processing can be classified in to three parts.
 Input: to process the data first enter the correct data in the computer in readable
format
 Processing: after entered the correct data in to the computer in the form of input,
process to get the desired information.
 Output: this is the final part of data processing provides the required information in
readily useable format.
The three steps taken in this order are known as data processing cycle.

Input Processing Output

Figure 3.1 Data Processing cycle

Information Spectrum
 Data  processing Information
 Information  intelligence Knowledge
 Knowledge  experience Wisdom
Basic information system concepts:
– Information system
• Use of the latest IT to collect, organize, and distribute data for use in
decision making.
– Management information system (MIS)
Specifically designed to meet the information needs of managers in daily decision making

– Decision support system (DSS)

Prepared By ALEMESHET K. Page 3

 Fundamental of information system

• An interactive information system that allows users to organize and

analyze data for solving complex and sometimes unstructured
problems.
• Group decision support system (GDSS) facilitates group efforts to solve
complex and unstructured problems.
• GDSSs use groupware.
– Artificial intelligence (AI)
• Computer systems with the capacity to reason the way people do.
– Expert systems (ES).
• Software systems that use AI to mimic the thinking of human experts.
– Intranets and corporate portals.
• Allow employees, by password access, to share databases and
communicate electronically.
– Extranets and enterprise portals.
• Allow communication and data sharing between the organization and
the external environment.
– Electronic data interchange (EDI).
• Uses controlled access to enterprise portals and supporting software to
enable electronic transactions between businesses.
1.1. Attributes of Information
We can classify attributes of information into three categories those are:

1. Usability 2. Delivery 3. Quality

 Relevant  Timely  Accurate

 Simple  Accessible  Verifiable
 Flexible  Secure  Complete
 Economical  Reliable

Prepared By ALEMESHET K. Page 4

 Fundamental of information system

1.2. Business Information

 Deals with the provision and management of information, content and knowledge in
organizations. 
• Business Information is a domain of activity that:
– involves – preparing/producing information sources; collecting, managing and
giving access to them; finding, evaluating and using information, etc.;
– Includes – products (i.e. business information resources), services, systems,
professionals, organizations, needs, users and uses, etc.
• Business information is a type of information
(1) Information FOR (doing) business
• to make informed decisions – short-term, long-term, strategic
• to enhance business, products, technology with current information
• to gain profit, recognition and success
(2) Information ABOUT business (and economics, and related issues)

1.3. Information and decision making

The need for a decision arises in business because a manager is faced with a problem and
alternative courses of action are available. In deciding which option to choose he will need all
the information which is relevant to his decision; and he must have some criterion on the
basis of which he can choose the best alternative. Some of the factors affecting the decision
may not be expressed in monetary value. Hence, the manager will have to make 'qualitative'
judgment’s, e.g. in deciding which of two personnel should be promoted to a managerial
position. A 'quantitative' decision, on the other hand, is possible when the various factors,
and relationships between them, are measurable. This chapter will concentrate on
quantitative decisions based on data expressed in monetary value and relating to costs and
revenues as measured by the management accountant.

Prepared By ALEMESHET K. Page 5

 Fundamental of information system

1. Defining the problem

Take time to properly define the problem. What is the issue to be covered? What is the problem?
What decisions need to be taken? A fish-bone diagram will sometimes help in understanding the
complex interlinkages that create a particular 'problem'. For each of the causes or its effects,
make a list of information or data that will be required, and clarify how that information will lead
to a better decision. 

2. Finding the information

Determine the sources from where information needed for decision-making can be obtained.
What information needs to be taken? Who has that information? Why is that information being
collected by the source? Which component of the problem at hand will it help? Evaluate the
sources to see which of them can provide the best information, and identify the mode and format
in which the information is presented. Keep in mind that different sources provide information in
different formats (for different reasons!). 

Prepared By ALEMESHET K. Page 6

 Fundamental of information system

Information you
Information you
know you don't
know you have
have

Information you Information you

don't know you don't know you
have don't have

Four states of information possession

3. Processing the Knowledge

This where the information gathered is matched with the problem in hand. The relevant
information from each source is extracted and information from multiple sources is organized.
Which parts of the information collected needs to be used? What additional data or information
is needed? How can information be best presented to be able to understand the situation and take
decisions? The collected information is evaluated and integrated for its relevance, validity and
interconnectedness. 

4. Taking the decision

In an interactive and inclusive
process involving all the concerned
parties, form an opinion from the information
collected for its effectiveness and efficiency.
Use it to take the decision. Has the decision taken help in solving the problem at hand? Was the
decision satisfactory and took into account all the views of concerned parties? A decision taken
may need to be examined closely and refined, and modified to meet differing needs over time.

Prepared By ALEMESHET K. Page 7

 Fundamental of information system

Prepared By ALEMESHET K. Page 8