CHAPTER – 1

FUNDAMENTALS OF COMPUTERS

INTRODUCTION

We at present are living in a society generally referred to as knowledge or information based society. This
society is making extensive use of information for almost all kinds of activities. Infact all of us are
experiencing the power of information and the recognition that it is one of the most valuable resource not
only for the society as a whole but especially for the business organizations. The availability of quality
information has become almost essential and crucial for success in today’s complex and competitive
business scenario. The developments in computers in the last 50 years revolutionized the business
operations all over the world and the terms like electronic data processing (EDP) became commonplace.
But it is the developments in communications technology, which took place since late eighties that provided
an impetus to the use of computers in various segments of society and commercial organizations, which
literally caused the revolution. The commercial availability of Internet, called the Net has literally given a
new dimension to the way we look at information, the nature and delivery of products and services and the
way we communicate with each other. They offer the content in colorful graphics with audio, video and
animation effects thereby bringing realism. Internet-based innovations and applications are emerging daily
and the end is not in sight. This revolution is referred by various names by various people. Some call it
Information Age, Digital Age, Information Superhighway, Knowledge Age, etc. We all will agree that by
whatever name we call it, information revolution is taking place and its consequences are benefiting the
whole world. This is happening because of the increasing utilization of computers and communications in
every area.

OBJECTIVES

At the end of this chapter, you would be able to:

 Identify the various components of computer

 Understand the flow of data within a computer
 Know the evolution and generation of computers
 Classify computers based on various criteria
 Understand the data processing and its various types
 Identify the application of computers in business

WHAT IS A COMPUTER?

There are various ways in which a computer can be defined but on the basis of its power the most
generalised and popular definition is - A Computer is an electronic device which processes or manipulates
the data strictly according to the instructions given and produces meaningful results efficiently, effectively
and reliably. Some people refer to a computer as a faithful idiot because of its limitation to perform what it is
directed to do without any consideration of its sense. It has no brain of its own and hence cannot think.
According to the Dictionary of Computers-Penguin, computer is defined as any machine, which can accept
data in, prescribed form, process the data and supply the results of the processing in a specified format as
information or as signals to control automatically some further machine or process. According to Websters'
third new international dictionary (unabridged), computer has been defined as "an automatic electronic
machine for performing simple and complex calculation." On the basis of various definitions we can analyze
that one thing which is common in all these definitions is the process of storage, manipulation and output
by the computer.

WHAT A COMPUTER CAN DO?

A modern computer system can essentially perform arithmetic, logical, input and output operations. It can
carry out the basic operations of addition, subtraction, multiplication and division on finite set of numbers;
perform various logical functions such as comparing any two values; read the data and instructions and

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store them for subsequent use; and produce the results in a form intelligible to the user. Moreover it can
perform millions of computations in a few seconds. It can also handle a large number of significant digits in
its arithmetic operations and provide extremely accurate results. In addition, computer has a perfect
memory and can automatically retrieve the stored information and independently execute the instructions.
In order to solve a specific problem, the computer has to precisely instructed when to start, what data to
use, what algorithm to be adopted and when to stop etc. This series of systematic instructions is called a
program and is written in a language, which the computer can understand called programming language.

HUMAN BEING vs. COMPUTER

The computer has been developed by a human being to perform tasks more efficiently than a human being.
It is therefore worth comparing the two so as to assess the strengths and weaknesses of the two. This shall
be useful in application of computers to those situations where it is most suitable. A comparison of human
being and a computer is shown in Table 1.1 below:

Table 1.1: Computer Vs. Human Being

Activity Computer Human Being

1. Speed of working Extremely High Slow
2. Accuracy Extremely High Very Low
3. Reliability Very High Decreases with increase
in volume of work
4. Ability to think and Not available Can reason heuristically.
handle adhoc situations Solve problem step by
step on the basis of past
experience.
5. Versatility Highly versatile Can be used for variety of
jobs-Not versatile

The above comparison clearly indicates that computers are ideal for activities involving voluminous data,
requiring greater accuracy and reliability and for solving variety of problems. Since computer does not
possess the intelligence of a human being, and are therefore not suitable for handling adhoc or exceptional
situations not defined in the computer. Therefore we must use the computers for applications where its
attributes are superior to those of human being and beware of employing it for jobs where human efforts
are superior.

COMPUTER HARDWARE

The electronic circuitry in a computer system is called computer hardware. This includes all the physical
units such as: CPU, the Input and Output devices, Communication devices and other supporting
equipment's. This is something, which we can see and touch.

COMPUTER SOFTWARE

It refers to the set of systematic instructions given to the computer hardware for performing specific
functions. The set of instructions is called a program and the collection of program is called software. This
is something, which we cannot see or touch but can only feel it. It is the most crucial part of the computer
system. We may have the best of hardware but if the software running on that hardware is not good, the
system will be inefficient. Through efficient software we can perform lot of functions even from an inferior
hardware.

The computer software can be classified into two categories: System Software and Application Software.
System software is the set of programs, which interprets user requests for execution by the hardware. It
acts like an interface between the user and the computer hardware. Some examples are: Operating
System, Compilers and Interpreters, Assemblers, Linkers, System utilities, etc. The hardware
manufacturers, computer suppliers or system software development organizations supply these. The
application software is the collection of programs developed for specific applications or tasks. Programmers

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or end-users develop them for performing some action. Examples of applications are: Payroll, Financial
Accounting, Inventory control, Ticket reservations and cancellations, etc.

COMPONENTS OF A COMPUTER SYSTEM

There are five basic units of a computer system as shown Figure 1.1. These are:

 Input Unit

 Output Unit

 Memory Unit

 Arithmetic and Logical Unit Central Processing Unit or CPU

 Control Unit

--------------------------------------------------------------------------------------
CONTROL ALU
UNIT

OUTPUT
INPUT MEMORY
UNIT
UNIT UNIT

-------------------------------------------------------
C.P.U.

Figure 1.1: Units of a Computer System

The arithmetic and logic unit, memory unit (primary only) and the control unit together are referred as
Central Processing Unit or CPU. The devices attached to the CPU are called "peripheral units" or just
"peripherals". The peripherals and the CPU together form the "hardware" of the computer system.
However, irrespective of the make of the computer, every computer system will have these five basic
components built into its architecture. These units may assume varying forms in various computers. Some
computers may have several different types of the same unit.

Input Unit

The first step in any processing activity is providing data and the instructions for processing the data. Since
computer cannot understand human language, therefore this communication has to be done in a language
which computer can understand. The unit that performs this task of communicating the data and the
instructions (also called as programs) to the computer is referred to as Input Unit. This data is in a coded
form, on an input medium and is read and translated by an input device into a form which computer can
understand i.e. binary digits. Some of the input devices that may be used in different computer systems
are: Punched Cards, Punched Paper Tape, Floppy disks, Magnetic tapes, Magnetic disk, Keyboard, Optical
character readers, Voice recognition, etc.

Output Unit

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The data and the instructions fed into the system through input unit go to the memory of the computer. The
data is processed according to the instructions given and the results are again stored in the memory of the
computer in the form of binary digits 0 and 1. These results have to be communicated to the outside world
in the human acceptable form. This function of communicating (through conversion) the results of
processing to the human being for decision-making is performed by a unit called "Output Unit". Examples of
output devices: Paper tape, Line, Dot Matrix, Inkjet and Laser Printers, Visual Display Screen (VDU),
Floppy disk, Magnetic tapes, disks, Cartridge tape, Graph plotters, Voice output, etc.

Memory Unit

This unit of a computer system stores the data and the instructions fed into it by the input devices. The
intermediate and final results of calculations are stored in the memory of the computer (in the form of
several 0's and 1's) for subsequent transfer to the output devices. There are two types of memory in a
computer system namely: Primary Memory (also referred to as RAM or Random Access Memory) and the
Secondary Memory. The primary memory is an integral part of the computer system. This memory is
volatile memory and is active whenever the computer is switched on. When the computer is switched off,
the information in the primary memory is lost. Examples are Magnetic Core Memory, IC memory, etc.
Sometimes we need to retain some of the useful data, instructions, results and other relevant information,
then we make use of secondary memory or backup memory. This is a non-volatile memory and data
remains intact even if the power goes off. Examples are: Magnetic tape, Magnetic disk, Floppy disk,
cartridge tape, Punched cards etc. Magnetic disk is the most commonly used secondary memory because
of its fast access next to the primary memory. Another type of memory commonly found in a computer
system is called "ROM" or Read Only Memory. The information, which is required to be permanently
resident in the computer, is stored in this memory. Its contents cannot be altered or destroyed by the users.
It is normally used for storing the systems logic such as addition, multiplication etc. These days the new
technologies such as Optical disk technology, CD-ROM, WORM, DVD ROMs are making substantial
contributions and are widely used in applications requiring high secondary storage.

Arithmetic and Logic Unit

This unit performs the arithmetic and logical operations on the data and the instructions, supplied by the
input devices, under the commands from the control unit. The basic arithmetic operations performed are
addition, subtraction, multiplication and division, which are built into the control unit. In addition to
arithmetic calculations, computer can perform logical operations as well e.g. comparing two or more
numbers or letters, making decisions according to defined criteria etc. This is the place where data is
manipulated and the results are communicated to the memory.

Control Unit

This is the most important unit in a computer system. It supervises the entire operation of a computer
system. It acts as a traffic policeman, which controls the traffic of data and electronic signals between
various units and components of the computer. It instructs the input device when to start and stop the input
to memory, it transfers the input information from memory to arithmetic and logic unit, it selects the proper
operations to be carried out, it directs the memory unit when to start and stop the transfer of information to
output unit, etc. Therefore the function of control unit in a computer is to maintain order and direct the flow
of operations in a proper manner. It acts like central nervous system for various units of the computer.

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 Figure 1.2: Data Flow in Computer System

EVOLUTION OF COMPUTERS

Like civilizations, computer has also evolved over a period of time. Some of the important stages of
computer evolution are listed below:

 Abacus is considered the earliest calculating device invented around 600 B.C., it is rack of beads
used to add or subtract by positioning the beads correctly.
 In 1642, Blaise Pascal invented first mechanical adding machine. The innovation and invention
continued according to the needs of the people.
 In 1822 a Professor of Cambridge University, Charles Babbage known as father of computer,
invented "Difference Engine" which can produce reliable tables, as at that time mathematical &
statistical tables were prepared by the clerks which consumed lot of precious time and was also
very much prone to errors.

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  In 1942, he designed a new machine "Analytical Engine" which was planned to be fully automatic
and capable of performing all the basic arithmetical calculations. Somehow this machine was not
produced. But his idea gave most basic fundamentals of computer design.
 In 1937, Haward Aiken of Harvard University, in collaboration with IBM developed "Mark I" the
punched card operated machine which could perform all the arithmetic calculations.
 In 1943 ENIAC (Electronic Numerical Integrator and Calculator) was developed by a design team
headed by Professor Prosper Eckert and John Mauchly of Moore College of Engineering,
University of Pennsylvania. ENIAC was very complex to be programmed but it was capable of
performing calculations more than 200 times of Mark I.
 In 1946 Professor Jon Von Neumann developed EDAVC (Electronic Discrete Variable Automatic
Computer). This computer stored the data and instructions in sequence, in memory in the binary
form (0 & 1). For this reason, modern computers are known as digital computers.
 UNIVAC (Universal Automatic Computer) was the first digital computer installed in Census Bureau
in 1951. By this time the evolution was carried out at different places, but IBM (International
Business Machine) came out first and produced machines for business.

COMPUTER GENERATIONS

Generation of computer means the technological evolution over the period of time, which is categorised into
generations. Computers are classified as belonging to specific "generations". The term generations was
initially introduced to distinguish between different hardware technologies. Gradually it shifted to both
hardware and software as the total systems consists of both of them.

First Generation

In this generation (1946-59) the computers were using vacuum tube circuits to store and process data. The
salient features of this generation were:
 bulky
 produced lot of heat
 no operating systems
 low capacity internal storage
 non consistent and reliable

UNIVAC-I was the first commercial computer, which made use of the vacuum tubes. ENIAC, EDVAC etc.
were the other computers of this generation.

Second Generation

The second generation computers (1959-64) made use of transistors. The transistor is an electronic device
that can transfer data along a pre-determined circuit path. The features of this generation were:

 relatively faster than first generation

 smaller than the first generation computers
 generated lower level of heat
 more reliable
 higher capacity of internal storage
 High cost direct accesses storage
 greater degree of reliability

IBM-1401 computer system is an example of this generation.

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 Table 1.2: COMPUTER GENERATIONS – A COMPARISON

Generatio Years Switching Storage Switching time MFTB * Software Applications

n device device
First 1949-55 Vacuum Acoustic 0.1 to 1 milli 30 mts Machine and Mostly
tubes delay lines second to 1 hr assembly scientific. Later
and late languages. simple
magnetic Simple business
drum. 1 monitors systems.
Kbytes
memory
Second 1956-65 Transistors Magnetic 1 to 10 About High level Extensive
core main microseconds 10 hrs. languages, Business
memory, FORTRAN, Applications.
tapes and COBOL, Engineering
disk Algol,Batch Design
peripheral operating Optimisation
memory.10 Systems Scientific
0 K byte Research
main
memory.
Third 1966-75 Integrated High speed 0.1 to 1 About FORTRAN 4 Database
Circuits(IC) Magnetic microsecond 100 hrs COBOL 68, Management
Cores. PL/I Systems.
Large Timeshared Online
Disks(100 Operating systems
MB) system
1 Mbytes
main
memory
Fourth- 1975-84 Large scale Semicondu 10 to 100 About FORTRAN 77, Personal
First Integrated ctor nanoseconds. 1000 Pascal,ADA,C computers.
phase circuits Memory. hrs. OBOL- Distributed
Microprocess Winches 74,Concurrent systems.
ors(LSI) disk.10 Pascal Integrated
Mbytes CAD/CAM
main Real time
memory.10 control.
00 Mbytes Graphics
disks oriented
systems
Fourth- 1985- Very large Semicondu 1 to 10 nano- About C,C++, Simulation
Second present scale ctor seconds 10,000 JAVA Visualization,
phase integrated memory.1 hrs PROLOG,Micra Parallel
circuits. Over GB main nda, computing,
3 million memory.10 FP Virtual reality,
transistors 0 GB disk Multimedia
pre chip
* MTBF----Mean time between failures of the processor.

Third Generation

The invention of integrated circuits (ICs) around mid 60s laid the foundation for the third generation
computers (1964-71). The features of computers belonging to this generation were:
 used tiny ICs
 relatively very small size
 made use of operating system

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  more reliable
 power efficient and high speed
 high capacity internal storage
 use of high level languages

Example of this generation is IBM-360 series of computer, which made use of Job Control Language (JCL)
and number of compilers.

Fourth Generation

The further developments in IC technology reduced the size of chips giving rise to fourth generation
computer systems. The Fourth generation of computers extended from 1971 and are still active. These are
characterized by the Very Large Scale Integration (VLSI) of transistors. These integrated circuits are so
advanced that they incorporate hundreds of thousands of active components in volumes of a fraction of an
inch. VLSI, which can pack millions of components on a small silicon chip base, has become a reality. It is
LSI and VLSI technology which has led to the development of the microcomputer and the present day
PC's. The salient features of this generation are:

 very fast
 very low heat generation
 smaller in size
 very reliable
 negligible hardware failure
 highly sophisticated

Fifth Generation

The computers, which can think and take decisions like human beings have been characterized as Fifth
generation computers and are also referred as thinking machines. A lot of research and development work
is going on in this area in United States and Japan but it will take some time before such machines are
produced for use by the industry. These machines are going to be based on the concept of Artificial
Intelligence (AI). Artificial intelligence is the activity of providing computers with the ability to act as an
intelligent like humans. AI endeavors to duplicate human reasoning.

CLASSIFICATION OF COMPUTERS

There are many ways in which computers can be classified. The classification may be either on the basis of
type of data they can process (Analog and Digital) or purpose for which they were designed (special
purpose or general purpose) or data processing capability of computers (sizes).

Type of Data:

a. Digital Computers: The digital computers are one, which operates directly on decimal digits, letters
and other symbols. It takes input in the form of numbers, processes the data using standard
arithmetic operations and gives output in the form of numbers, graphics or symbols.

b. Analog Computers: This kind of computers operates by measuring rather than by counting. These
can measure continuous type of data (data which varies over a length of time) and uses a physical
quantity such as electric current to represent and process the data. The various factors such as
current, voltage, length, pressure, temperature, etc. can be directly measured by the analog
computers.

c. Hybrid Computers: A computer that combines the best features of both digital and analog
computers are called hybrid computers. Among the applications are simulating a guided missile
system or space vehicle, etc.

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Purpose:

a. General-Purpose Computers: The general purpose computers are designed to solve a large variety
of applications through the use of the stored program/instructions in its internal storage. However,
this versatility is achieved at the expense of speed and efficiency of the computer. Most digital
computers are general-purpose computers.

b. Special-Purpose Computers: These are built to solve a specific problem. In these machines, the
computer program for solving the problem is built right into the computer. These are operation
specific and are usually made for a single customer. Examples are: automatic teller machines
(ATM) for 24-hours banking, Industrial process system, etc.

Size and Capacity:

a. Micro Computer: A Microcomputer is the smallest general-purpose processing system. Functionally

it is similar to any other large system. Microcomputers are self-contained units and usually
designed for use of one person at a time. Since microcomputers can be easily linked to large
computers, they form a very important segment of the integrated information systems. The
microcomputers are small enough to fit on a desk but large enough to carry around. The cabinets
come in flat or horizontal and vertical or tower type. The cost of Microcomputers is $1100.

b. Mini Computer: A Mini computer is a medium-size computer that is more costly and powerful than a
microcomputer. An important distinction between a micro and minicomputer is that a minicomputer
is usually designed to serve many users simultaneously. A system that supports multiple users us
called multi-terminal, time-sharing system. Minicomputers are popular data-processing systems.
The price range of minicomputers is from $20,000 to $50,000.

c. Mainframe Computer: Computers with large capabilities and very high speed of processing as
compared to micro or minicomputers are known as mainframe computers. They support a large
number of terminals for use by a variety of users simultaneously. They are also used as the central
host computer in distributed data processing systems. For examples: ICL 1900 and 2900 series,
DEC 10 and 20 series. Mainframe computer costs about $40,000.

d. Super Computer: These have extremely large storage capability and computing speed, which is at
least 10 times faster than other computers. While the speed of traditional computers is measured in
terms of millions of instructions per second (MIPS), a super computer is rated in terms of millions of
operations per second (MOPS), an operation is made up of numerous instructions. The main
feature of supercomputer is multiprocessing that enables the computer to perform number of
operations simultaneously. The first supercomputer had 4 CPU's. Today's supercomputers have
hundreds of processors. Typically, the super computer is used for large scale numerical problems
in scientific and engineering disciplines. These include applications in electronics, petroleum
engineering, weather forecasting, structural analysis, chemistry, medicine and physics. Foe
example, CRAY-XMP and PARAM. Supercomputers are priced from $2 million to $20 million.

TRENDS IN COMPUTER DEVELOPMENT

Since the early generations of computers, the efforts are being made to make the computer more user
friendly and easily accessible to all. However these efforts were mainly directed on three specific areas of
technology development:

Size – The size of computers is constantly becoming small and small. This was made possible by the
developments in micro-electronics area and moving from vacuum tubes to transistors to ICs and VLSI.
Today we find that serious efforts are being made at producing smaller and smaller computers such as
laptops, notebooks, palmtops, etc.

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Power or Capability – While reducing the size, the concern was to increase the processing capability or
power of the computers. The processing power of yester-years mainframe computers is available in today’s
ordinary PCs. The processing speed and the storage capacity is constantly getting upgraded.

Cost – Due to increasing penetration of computers in all areas of life, their demand is increasing at a rapid
rate. The cost of computers is also crashing rapidly. The computers of higher power and smaller size are
available at a cost that is several times lower than the earlier systems.

Likewise, the communication technology is also rapidly advancing. The trends are towards developing:

 High Speed Communication Channels

 Flexible Networks supporting multiple devices and media
 Better Communication Devices

These are discussed in detail in relevant chapters.

DATA PROCESSING

Data and Information

Data are basic facts, events, transactions and so on which are recorded by means of observation, counting
etc. They describe the entity about which the facts are collected. Data does not serve any purpose in
decision-making and therefore has no value in itself. For example: in a house-to-house survey, the data is
recorded about various aspects of each family. This is merely data and do not help the decision maker in
any way. The collection of data costs time and money but more the volume of data, less is the uncertainty.

Information is the meaningful form of data. It is the processed data, which convey meaning to the user, and
helps him in taking a decision. It has lot of value. For example, when the household survey data is
organized to get the percentage of families having income in different ranges, % of children studying in
schools, colleges, etc. Information is highly useful and has value for a limited time span. The value of
information begins to diminish with increasing time lag between its collection and usage. Likewise, upto a
certain stage, the addition of more data increases the value of information but after certain stage, the
incremental information value does not change. Management uses relevant information to prepare plans,
control activities and make decisions. Relevant information increases knowledge, reduces uncertainty and
is usable for the intended purpose.

Types of Data Processing

In order to extract meaning from the data, we need to process it. The data processing is a method of
transforming raw data into useful information. This conversion may be brought about by using a set of
equipments. A system or group of devices that converts data into information is called a data processing
system. If the data being manipulated pertains to the business activities, it is referred to as ‘Business Data
Processing (BDP)’. Based on this, the data processing is divided into three types:

 Manual Data Processing

 Electro-mechanical Data Processing
 Electronic Data Processing (EDP)

Data
Raw Data Information
Processing

Figure 1.3: Data Processing

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In manual data processing, the human beings are the processors of information. They collect the data,
manipulate the data and produce reports. This mode makes use of manual means of data storage and
retrieval. This is prone to human errors.

This mode of data processing makes use of electro-mechanical (electrical and mechanical) devices for
calculations such as cash sales registers. These are slower than electronic data processing and are less
error prone as compared to human systems.

In electronic data processing (EDP), the use is made of automatic electronic equipments such as
computers and other related equipments. The processing operates with lease human intervention and
therefore is less error prone. This provides high speed processing of voluminous data. The organizations
that make use of computer as a tool for converting data into useful purpose generally have an independent
department called ‘ EDP Department’. For example, Delhi Vidyut Board, MTNL have separate EDP
Sections for processing data pertaining to various organizational activities such as payroll, consumer billing,
accounting, etc.

Data Processing Cycle

The process of data processing is basically a sequence of steps or activities. These activities can broadly
be classified into three steps:

 Capturing the Input Data

 Manipulating the Data
 Managing the Output Results

Capturing the Input Data: The data must first be recorded. The may be done either using some manual
means in source documents or by using keyboards, ATMs, point of sale (POS) terminals or any direct input
devices. The recorded data must be captured on some electronic media such as floppy, hard disk to make
it acceptable for processing by electronic devices.

Manipulating the Data: Once the data has been captured, it can be manipulated. Data entered for
processing may have to be sorted or classified. This is the form of operation or data manipulation with
which data processing is mainly concerned. For example, in the population survey, we may want to classify
people by age or sex. We may wish to sort lists of names in alphabetical order. We may require grouping of
data as per their employment. This will involve some form of calculation. There are several steps to do the
same.

 Classifying – This involves organizing similar items into groups or classes. It is generally
accomplished by assigning pre-determined abbreviations of codes to the items, e.g. numeric codes
such as PIN, Product Code, etc.
 Calculating – This involves arithmetic manipulation of data by computing new fields or applying
mathematical tools. This is the most common task in data processing.
 Sorting – Usually, it is easier to work with data that is arranged in logical sequence of certain data
fields e.g. first to last, biggest to smallest, alphabetical, etc. This is achieved by sorting process.
 Summarizing – This aims at reducing mass of data to a more concise and usable form. For
example, bar chart showing trends in data, pie chart, etc.

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 Input Collect Data

Organising Sorting Summarizing

Classifying&Calculating

Manipulation
Computer
Storing
Retrieving Communicating

Reproducing
Output

Magnetic Computer
Printer
Disk

Figure 1.4: Data Processing Cycle

Managing the Output Results - All the above forms of data manipulation will produce results. These results
can be organized in the form of summaries e.g., number of children in given area etc. The steps involved
are:

 Storing and Retrieving – Storing the data on magnetic or other devices for future use and retrieving
the same to meet specific needs. This demands the need for high-speed data storage devices
 Communicating and Reproducing – This is the last step in the data-processing cycle. It is
concerned with transferring data from one location to another or from one operation to another, i.e.
communication. The capability of reproducing the results is also endeavored in this stage.

Factors Affecting the Data Processing Methods

The following factors determine the appropriate method for data processing in an organization:

Size and type of business – Volume, Number of People involved, etc.

Timing of Processing – Payroll (Monthly), Invoicing (Immediate or day-end), etc.

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Link between applications – How application activities affect other applications. For example, Sale will
affect sales invoice, stock updation, accounts receivable, etc.

COMPUTERS IN BUSINESS

Computers are everywhere. They provide many opportunities to solve problems to almost all categories of
users including business organizations. They are being used in innovative ways in the industry. If
computers malfunction today, the airplanes, cars, elevators, traffic lights, industrial machines, telephones,
financial activities, assembly lines, etc all would become useless and the whole world would be plunged
into confusion. It is difficult to list all the areas of applications but some of them are briefly discussed below:

Planning: Computers are highly useful in planning function. They serve as useful tool at all the three levels
of planning namely: Strategic, Tactical and Operational. This is made possible by developing computer-
based information systems serving each of these levels of management. This helps in effective and
efficient utilization of resources and control.

Control: Computer is a very powerful tool to control various business processes. This can help a business
organization in traditional areas such as Inventory Control, Production Planning and Control, Assembly line
controls, Financial Controls, etc. Due to their inherent advantage of fast speed processing of voluminous
data, they can compare the targets and performance over a period of time to provide necessary feedback.
They are highly useful in concentrating efforts on deviations or exceptional situations.

Product Design and Manufacturing: The computers are being increasingly utilized in creative processes for
designing and producing products (CAD and CAM). This provides collaborative processes involved in
design of products and services such as architectural walk-throughs, simulation, etc. Through robots, the
assembly lines can be efficiently managed. Even non-human tasks can also be performed through them.

Office Productivity: Computers are being used in improving office productivity through paperless operations
thereby achieving higher efficiencies. The typical uses include, file management, word processing,
spreadsheet applications, maintaining databases, preparing presentation, etc.

Transactions Processing Applications: Computers are of great use in managing with ease the various
business transactions such as: payroll, accounts receivable, accounts payable, sales order processing,
purchase order processing, financial accounting, materials management, personnel record keeping, etc.

WHAT IS INFORMATION TECHNOLOGY (IT)?

Information technology has become a major factor in nearly every aspect of our society. The
personal computer has developed into a powerful tool for gathering, manipulating, and delivering
information. Sophisticated databases allow us to store, collate, and access data. Networks and
telecommunications technology allow us to deliver and retrieve information from around the
world.

Information technology is the healthy synthesis of computer and communication capabilities. IT

merges computing with high speed communications links to transmit data and information from
one place to another. The data may either be simple text and numbers or complicated audio and
colourful video. Simply speaking, It is the technology involved in capturing, manipulating,
communicating, presenting and using data. IT encompasses computers (both hardware and
software) and devices attached to computers as well as communication devices and computer
networks. Information technology has led to the fusion of several industries through devices that
exchange information in digital format. This is called ‘Technological Convergence’ or simply
‘Convergence’. This new dimension has changed the perspective from simple IT to ICT
(Information Communication Technology).

Information Communication Technology (ICT)

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ICT is a powerful tool - a tool that can help build social networks and contribute towards
progressive social change. Increased access to information goes hand in hand with socio-
economic and overall human development. Though the right to seek, receive and impart
information is a basic human right, many people in the developing world are deprived of this very
basic right. Using ICT for Development can be an effective way of reaching out to rural and
remote 'unconnected masses'.

ICT include Telephones, Faxes, Audio Video Equipment, Radio, Television and the Internet. In
true spirit of creating an information society that fits into the information age, efforts are being
made to cross digital divides and provide equal access to every body. ICT has developed into a
full-fledged industry. This includes a host of industry groups such as:

 Telecommunication Broadcasting Industries

 Telecommunication Carriers Industry
 Computer and Related Services
 Record Player, Radio and Television Receiver Industry
 Communication and Other Electronic Equipment Industries
 Office, Store and Business Machine Industries
 Indicating, Recording and Controlling Instruments Industry
 Other Instruments and Related Products Industry

FUNCTIONS OF INFORMATION TECHNOLOGY

Some of us may agree that information technology is the talk of the day and it is entering into all
walks of life and business. But some percentage of people who do not have much exposure on
power of IT, generally question what actually IT can do. It is therefore essential to know what are
the functions performed by information technology. The application of these functions in diverse
situations determines the impact of information technology. There are six basic functions
performed by it.

Data Capture: This is the first or the initiating step for IT to come into picture. The data is
gathered or captured for future use. The captured data is used for various purposes. Some of the
common examples are:

 Voice and Data recorders (black box) captures or records the flight data and other
conversations in the cockpit.

 The issue and receipt of stock in a Inventory system is recorded so as to update the stock
and generate consumption and purchase reports and analysis.

 The electricity or telephone meter data is captured for billing purpose.

The data capture may be done off-line or on-line. The Off-line data capture involves recording the
data from the point of origin, communicating it to the point of processing and then making it
available in electronic form for processing. These intermediate steps permit errors to creep into
the data at various stages. For example, electricity meter data. On the other hand, in on-line data
capture, the data is captured in digital form from the point of source. This reduces the delay and
minimizes the errors in the data thereby making the processing more accurate. For example, bar
coding machines in departmental stores or libraries.

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Data and Information Processing: The processing stage is the one where computers have been
associated to speed up the task with accuracy and reliability. This is the function, which converts
data into information by computing, analyzing and synthesizing the data. This is called data
processing or electronic data processing (EDP). For example, the ledger balancing activities in a
bank, preparing examination results, etc.

The result of data processing is information and when this information is used as an input to
produce another type of information, we call it information processing. For example, data
processing may provide the branch wise and salesman wise sales data from the basic sales
transactions. This branch wise data may be further use to generate charts to seen the relative
and overall performance using charts or cumulating for the whole year.

Other examples of processing are: Word processing, image processing, speech processing, etc.

Generating Decision Making Information: This refers to the function of producing decision making
information i.e. useful information. This may be summarising the organizational data either as
text, numbers or charts.

Data Storage: The data and the information processed by the computer in the above stages need
to be stored for future use. For example, the sales data for each month is required for
consolidation at year-end or quarter end. The stored data and information may be recorded on
some magnetic or optical storage media such as Hard Disk, Magnetic Tape, CD-ROM, DVD, etc.
For example the movies and music albums are stored on audiocassettes or CDs. It is mandatory
to record billing data for electricity and telephone or airline and railway booking data for certain
period of time say 2 to 5 years. A number of devices have been developed to be used as mass
storage devices such as ZIP drives, MO drives, etc. There are tool developed for compressing
the data during the storage process so as to optimally utilize the storage capacity. For example:
Winzip utility.

Data Retrieval: The data that has been stored on some storage device needs to be retrieved to
process or use it. This involves locating and copying stored data from the storage devices for
processing or communication.

Data Transmission: So far we have seen that we can capture the data, process it, generate
decision making information, store and retrieve it from storage devices, all of which are static
tasks that involved no data movement. Sometimes we need to transmit or exchange this data or
information with other users or agencies, we need to move it. The movement of information from
one place to another or from one system to another system is called ‘transmission’. This requires
the use of communication media and communication networks such as LAN, MAN or WAN.
Modem communication networks allow sending and receiving not only text but audio and
streaming video as well. The applications such as video conferencing are possible due to these
networks.

BENEFITS OF IT

The benefits or advantages of information technology are quite evident in various forms from our
day-to-day experience in various business, government and social systems. However the
generalized benefits offered by information technology to business organizations are:

High Speed of Processing: The computers can process the data and take actions in split
seconds. This allows performing voluminous tasks in very short time. For example performing
complex calculations, retrieving data stored long time ago, locating a students record from large

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database, picking up arrival and departure timings of a flight/train, finding the status of your parcel
from thousands and lakhs of parcels booked everyday from all parts of the country all in fractions
of second.

High Consistency: The same actions to be repeated periodically are not possible in manual
systems. The computers offer the biggest advantage of performing a calculation with same
consistency whether it is done today morning or during monsoon season or at 12 ‘o clock
midnight. The same results are produced every time.

Improved Accuracy: The accuracy with which the data is processed is extremely high, impossible
to achieve in a manual system. They are so precise and accurate that they can detect minute
variations that are beyond imagination by human beings. This is more relevant in complex
mathematical computations.

High Reliability: If all the above characteristics are present, they automatically lead to reliable
operations. The consistency and accuracy in operations ensures that with same set of
procedures, you will get the same results every time you execute them. Although the operations
being performed by a computer may be complicated but the principle on which they are based is
very simple i.e. 1s and 0s or Yes and No state of the electronic components.

However, like any other system computers and communication systems are also not perfect.
They may falter or fail. This may happen generally with excessive use, imperfect conditions
(temperature, humidity), unstable power supply, and on top of everything the electronic faults.

COMPONENTS OF IT SYSTEMS

An information technology based system generally is made up of six basic elements. These
elements interact and are closely related to each other. These are:

People: People are the most important users in terms of operators and beneficiaries of the IT
systems. They can be classified as Professionals and End Users. They are responsible for
development, design and operation of IT systems. On the other hand they are the ones who can
complicate a system by various means such as virus, improper design, faulty programming, etc.
Even if you have a well designed and developed system that may fail with dissatisfied people.

Procedures: This refers to the operation of the system to produce results. They describe the
method of processing inputs into outputs as per defined steps. For streamlining this process, we
generally have documentation of the system, which provide the rules, installation steps, file setup
procedures, operational steps and fault identification (diagnostic procedures). For example
system menu, which guides you through steps to perform a specific task. These days we find On-
line help serving this purpose of specifying the procedures and using them whenever you are
stuck.

Data and Information: This is the element, which causes an IT system to exist in an organization.
The data, which is raw facts, gets converted into meaningful information.

Hardware: This is the element that provides tangibility to the system i.e. physical resources
required for a computer and communication system. It includes the Input devices, Output devices,
Storage devices, CPU and the communication hardware.

Software: This is the tangible part of the IT system that enables people to make use of hardware
devices to convert data into information according to the procedures defined in the system. An IT

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system makes use of variety of software, the primary type of which are: System Software and
Applications Software.

Communication: This element provides mobility to the data and information to allow it to be
shared among interested users. A variety of cost-effective and powerful modes of transmission
are being explored world wide with use of variety of communication media. It is this dimension of
IT, which has brought information technology in the forefront after decades of silent growth in the
organizations for routine data processing tasks.

INFORMATION TECHNOLOGY APPLICATIONS

The IT applications can broadly be classified into two types:

Organizational applications – This includes transaction processing systems, enterprise

resource planning systems, data warehousing, office automation, groupware, intranets, etc.

Managerial support applications – This includes decision support systems, data mining, group
support systems, geographic information systems, executive information system, artificial
intelligence, expert systems, neural networks, etc.

The Table 1.3 shows the latest trends in the application of Information technology in the above-
referred areas.

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 Table 1.3: General Information Technology Trends

Trend What It Is Benefits

Constantly improving Computer processing speed and Computers will have increasingly
Cost-performance ratio memory are improving, while greater comparative advantages
computer costs continue to decrease. over people; computers will
As labor costs increase the ratio of economically do more and more
cost to performance of computers routine tasks.
versus manual work improves
dramatically.
Storage and memory CD-ROMS and other storage devices Large memory capacities will
will increase storage of data and support the use of multimedia and
information. other emerging computer
technologies.
Graphical and other A graphical user interface is a set of GUIs improve user friendliness by
user friendly interfaces software features that provides users making the human machine
with direct control of visible objects on interface as simple as possible.
the screen. They thus can use icons,
pull-down menus, windows and a
mouse rather than complex command
syntax.
Client/Server This architecture links personal Allows interconnection of different
architecture computers (clients) to specialized, types of hardware and software. Is
powerful computers (servers), which used to support the internet and
they share via local and global intranets.
networks.
Network computers Computers that do not have a hard Provide the benefits of desktop
(“thin clients”) drive but rather are served from computing without the high cot of
central computer through a network. regular personal computer
hardware.
Enterprise wide An extension of computing Improves relationships with
computing infrastructure that links all of an suppliers, other business partners
organization’s functions and and customers. Enables
sometimes even those of its business organizations to bring products and
partners. services to market more quickly
when the product design process is
online.
Intranets and extranets Intranets are networks within an Intranets improve organizational
organization that use internet communications. Extranets create
technologies to link organizational powerful inter-organizational
communications. Extranets are communication and collaboration
secured networks that connect the systems.
intranets of several business partners.
Data warehousing Gigantic computer warehouses Data warehouses organize data for
(storage) of large amount of data. easy access by end users of the
data. When integrated with the
internet they can be accessed from
any location at any time.
Data mining A sophisticated analysis technique Enables manages to see
that automatically discovers relationships and dynamics in data
previously undetected relationships elements that they had not foreseen
among data. (e.g. how the sales of one produce
might drive the sales of another
product).

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 Table 1.3: General Information Technology Trends (continued..)

Object oriented A style of software development that Can significantly reduce the cost of
environment emphasizes the construction and use both building and maintaining
of self contained units of software computer-based systems.
instruction and data (objects) that can
be used (and reused) as components
of software developed for a variety of
purposes across the organization.
Multimedia and virtual Multimedia is the integration of Provide interesting graphic images
reality various types of media – voice, text, which can be used to improve
graphics, full motion, video and educational ,training, advertising,
animation. Virtual reality uses 3-D communication and decision
graphics to allow users to enter an making materials.
artificial representation of some
environment.
Intelligent systems and Automated rules that execute Increase productivity and ease the
agents preprogrammed decisions or tasks execution of complex tasks.
when encountering specified Intelligent agents help users
conditions in data. navigate the internet access
databases, and conduct electronic
commerce.
Portable computing Use of compact computers in cars, Can be carried almost anywhere.
machines and consumer products. Reduce the time between data
collection and processing.
Expansion of the The integration of television and Completion of the information super
internet and completion computers over a national fiber optic- highway will allow the internet to
of information based network could connect more reach every networked home,
superhighways than 750 million Internet users business, school and other
worldwide in less than 10 years. organization and will change how
we live, learn, and work.
Electronic commerce Business done online; the exchange Can provide a competitive edge and
of products, services, and money with could change organizational
the support of computers and structure, processes, procedures,
computer networks. culture, and management.
Integrated home Integration of home computing, Will facilitate telecommuting and the
computing television, telephone and home use of the Internet.
security systems in one unit.
Electronic document A technique that converts paper- Greatly reduces storage
management based documents to digital electronic requirements and allows the
form via scanning and related documents to be organized and
technologies. manipulated like any other type of
electronic data.
(Source: Turban, Rainer, Potter. Introduction to Information Technology, Wiley)

SELF ASSESSMENT EXERCISES

Short Answer Questions

1. ‘Use of a computer is panacea for all information problems’. Discuss the validity of this statement.

2. Distinguish between the terms Hardware and Software.

3. List the various units that make up a computer system. Discuss how the data flows between various
units.

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4. Why is Control Unit very critical in a computer system?
5. What do you understand by the term ‘Computer Generations’? Compare the features of computers
belonging to various generations.
6. What are the various ways of classifying computers?
7. List the major areas of development in computers.
8. Distinguish among data, information and Knowledge.
9. What is data processing? List its various types giving examples.
10. List the steps involved the process of data processing.
11. What advantages does computerization offers to a business organization?

12. Discuss the benefits of using computers in enterprise resource planning systems.

13. What is Information Technology? Give two examples where it is used.

14. Explain the term ‘Technological Convergence’ giving an example.

15. What do you mean by the term ‘ICT’?

16. List the various functions of Information Technology.

17. What are the de-merits of Information Technology?

18. What advantages does IT offers to a business organization?

19. Name the components of IT systems.

20. Discuss the benefits of using IT in enterprise resource planning systems.

Critical Thinking Questions/Projects

1. Visit any commercial organization using computers. Make a list of hardware and software being used
by them.

2. Make a visit to a nearby departmental store or a bank or a hospital. Study how the activities are being
performed. Identify the role of computers in the way the business is running. Propose how it can
benefit the company.

3. Visit a manufacturing organization near your institution. Perform a study of its manufacturing process.
Can computers can be used in this process, if yes, suggest how? What software will you use for this
purpose?

4. Discuss the changing nature and applications of computers in the last few decades in any two areas of
your choice.

5. Identify at least ten applications of computers in a manufacturing organization. Discuss the most useful
of them in detail

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