UNIT-2

INFORMATION SYSTEM

Defining Information Systems

Almost all programs in business require students to take a course in something
called information systems. But what exactly does that term mean? Let’s take a
look at some of the more popular definitions, first from Wikipedia and then
from a couple of textbooks:
• “Information systems (IS) is the study of complementary networks of
hardware and software that people and organizations use to collect, filter,
process, create, and distribute data.”[1]
• “Information systems are combinations of hardware, software, and
telecommunications networks that people build and use to collect, create,
and distribute useful data, typically in organizational settings.”[2]

• “Information systems are interrelated components working together to

collect, process, store, and disseminate information to support decision
making, coordination, control, analysis, and viualization in an
organization.”[3]
As you can see, these definitions focus on two different ways of describing
information systems: the components that make up an information system and
the role that those components play in an organization. Let’s take a look at each
of these.

The Components of Information Systems

As I stated earlier, I spend the first day of my information systems class
discussing exactly what the term means. Many students understand that an
information system has something to do with databases or spreadsheets. Others
mention computers and e-commerce. And they are all right, at least in part:
information systems are made up of different components that work together to
provide value to an organization.

The first way I describe information systems to students is to tell them that they
are made up of five components: hardware, software, data, people, and process.
The first three, fitting under the technology category, are generally what most
students think of when asked to define information systems. But the last two,
people and process, are really what separate the idea of information systems
from more technical fields, such as computer science. In order to fully
understand information systems, students must understand how all of these
components work together to bring value to an organization.

Technology
Technology can be thought of as the application of scientific knowledge for
practical purposes. From the invention of the wheel to the harnessing of
electricity for artificial lighting, technology is a part of our lives in so many
ways that we tend to take it for granted. As discussed before, the first three
components of information systems – hardware, software, and data – all fall
under the category of technology. Each of these will get its own chapter and a
much lengthier discussion, but we will take a moment here to introduce them so
we can get a full understanding of what an information system is.
Hardware
Information systems hardware is the part of an information system you can
touch – the physical components of the technology. Computers, keyboards, disk
drives, iPads, and flash drives are all examples of information systems
hardware. We will spend some time going over these components and how they
all work together in chapter 2.
Software

Software is a set of instructions that tells the hardware what

to do. Software is not tangible – it cannot be touched. When programmers
create software programs, what they are really doing is simply typing out lists of
instructions that tell the hardware what to do. There are several categories of
software, with the two main categories being operating-system software, which
makes the hardware usable, and application software, which does something
useful. Examples of operating systems include Microsoft Windows on a
personal computer and Google’s Android on a mobile phone. Examples of
application software are Microsoft Excel and Angry Birds. Software will be
explored more thoroughly in chapter 3.
Data
The third component is data. You can think of data as a collection of facts. For
example, your street address, the city you live in, and your phone number are all
pieces of data. Like software, data is also intangible. By themselves, pieces of
data are not really very useful. But aggregated, indexed, and organized together
into a database, data can become a powerful tool for businesses. In fact, all of
the definitions presented at the beginning of this chapter focused on how
information systems manage data. Organizations collect all kinds of data and
use it to make decisions. These decisions can then be analyzed as to their
effectiveness and the organization can be improved. Chapter 4 will focus on
data and databases, and their uses in organizations.

Networking Communication: A Fourth Technology Piece?

Besides the components of hardware, software, and data, which have long been
considered the core technology of information systems, it has been suggested
that one other component should be added: communication. An information
system can exist without the ability to communicate – the first personal
computers were stand-alone machines that did not access the Internet. However,
in today’s hyper-connected world, it is an extremely rare computer that does not
connect to another device or to a network. Technically, the networking
communication component is made up of hardware and software, but it is such a
core feature of today’s information systems that it has become its own category.
We will be covering networking in chapter 5.

People
When thinking about information systems, it is easy to get focused on the
technology components and forget that we must look beyond these tools to fully
understand how they integrate into an organization. A focus on the people
involved in information systems is the next step. From the front-line help-desk
workers, to systems analysts, to programmers, all the way up to the chief
information officer (CIO), the people involved with information systems are an
essential element that must not be overlooked.

Process
The last component of information systems is process. A process is a series of
steps undertaken to achieve a desired outcome or goal. Information systems are
becoming more and more integrated with organizational processes, bringing
more productivity and better control to those processes. But simply automating
activities using technology is not enough – businesses looking to effectively
utilize information systems do more. Using technology to manage and improve
processes, both within a company and externally with suppliers and customers,
is the ultimate goal. Technology buzzwords such as “business process
reengineering,” “business process management,” and “enterprise resource
planning” all have to do with the continued improvement of these business
procedures and the integration of technology with them. Businesses hoping to
gain an advantage over their competitors are highly focused on this component
of information systems.

The Role of Information Systems

Now that we have explored the different components of information systems,
we need to turn our attention to the role that information systems play in an
organization. So far we have looked at what the components of an information
system are, but what do these components actually do for an organization?
From our definitions above, we see that these components collect, store,
organize, and distribute data throughout the organization. In fact, we might say
that one of the roles of information systems is to take data and turn it into
information, and then transform that into organizational knowledge. As
technology has developed, this role has evolved into the backbone of the
organization.

Types of Information System

A typical organization is divided into operational, middle, and upper level. The
information requirements for users at each level differ. Towards that end, there
are number of information systems that support each level in an organization.
This tutorial will explore the different types of information systems, the
organizational level that uses them and the characteristics of the particular
information system.
Pyramid Diagram of Organizational levels and information requirements
Understanding the various levels of an organization is essential to understand
the information required by the users who operate at their respective levels.
The following diagram illustrates the various levels of a typical organization.

Pyramid Diagram

Operational management level

The operational level is concerned with performing day to day business
transactions of the organization.
Examples of users at this level of management include cashiers at a point of
sale, bank tellers, nurses in a hospital, customer care staff, etc.
Users at this level use make structured decisions. This means that they have
defined rules that guides them while making decisions.
For example, if a store sells items on credit and they have a credit policy that
has some set limit on the borrowing. All the sales person needs to decide
whether to give credit to a customer or not is based on the current credit
information from the system.

Tactical Management Level

This organization level is dominated by middle-level managers, heads of
departments, supervisors, etc. The users at this level usually oversee the
activities of the users at the operational management level.
Tactical users make semi-structured decisions. The decisions are partly based
on set guidelines and judgmental calls. As an example, a tactical manager can
check the credit limit and payments history of a customer and decide to make an
exception to raise the credit limit for a particular customer. The decision is
partly structured in the sense that the tactical manager has to use existing
information to identify a payments history that benefits the organization and an
allowed increase percentage.

Strategic Management Level

This is the most senior level in an organization. The users at this level make
unstructured decisions. Senior level managers are concerned with the long-term
planning of the organization. They use information from tactical managers and
external data to guide them when making unstructured decisions.

Transaction Processing System (TPS)

Transaction processing systems are used to record day to day business
transactions of the organization. They are used by users at the operational
management level. The main objective of a transaction processing system is to
answer routine questions such as;
• How printers were sold today?
• How much inventory do we have at hand?
• What is the outstanding due for John Doe?
By recording the day to day business transactions, TPS system provides answers
to the above questions in a timely manner.
• The decisions made by operational managers are routine and highly
structured.
• The information produced from the transaction processing system is very
detailed.
For example, banks that give out loans require that the company that a person
works for should have a memorandum of understanding (MoU) with the bank.
If a person whose employer has a MoU with the bank applies for a loan, all that
the operational staff has to do is verify the submitted documents. If they meet
the requirements, then the loan application documents are processed. If they do
not meet the requirements, then the client is advised to see tactical management
staff to see the possibility of signing a MoU.
Examples of transaction processing systems include;
• Point of Sale Systems – records daily sales
• Payroll systems – processing employees salary, loans management, etc.
• Stock Control systems – keeping track of inventory levels
• Airline booking systems – flights booking management

Management Information System (MIS)

Management Information Systems (MIS) are used by tactical managers to
monitor the organization’s current performance status. The output from a
transaction processing system is used as input to a management information
system.
The MIS system analyzes the input with routine algorithms i.e. aggregate,
compare and summarizes the results to produced reports that tactical managers
use to monitor, control and predict future performance.
For example, input from a point of sale system can be used to analyze trends of
products that are performing well and those that are not performing well. This
information can be used to make future inventory orders i.e. increasing orders
for well-performing products and reduce the orders of products that are not
performing well.
Examples of management information systems include;
• Sales management systems – they get input from the point of sale
system
• Budgeting systems – gives an overview of how much money is spent
within the organization for the short and long terms.
• Human resource management system – overall welfare of the
employees, staff turnover, etc.
Tactical managers are responsible for the semi-structured decision. MIS systems
provide the information needed to make the structured decision and based on
the experience of the tactical managers, they make judgement calls i.e. predict
how much of goods or inventory should be ordered for the second quarter based
on the sales of the first quarter.

Decision Support System (DSS)

Decision support systems are used by senior management to make non-routine
decisions. Decision support systems use input from internal systems (transaction
processing systems and management information systems) and external
systems.
The main objective of decision support systems is to provide solutions to
problems that are unique and change frequently. Decision support systems
answer questions such as;
• What would be the impact of employees’ performance if we double the
production lot at the factory?
• What would happen to our sales if a new competitor entered the market?
Decision support systems use sophisticated mathematical models, and statistical
techniques (probability, predictive modeling, etc.) to provide solutions, and they
are very interactive.
Examples of decision support systems include;
• Financial planning systems – it enables managers to evaluate alternative
ways of achieving goals. The objective is to find the optimal way of
achieving the goal. For example, the net profit for a business is calculated
using the formula Total Sales less (Cost of Goods + Expenses). A
financial planning system will enable senior executives to ask what if
questions and adjust the values for total sales, the cost of goods, etc. to
see the effect of the decision and on the net profit and find the most
optimal way.
• Bank loan management systems – it is used to verify the credit of the
loan applicant and predict the likelihood of the loan being recovered.

Artificial intelligence techniques in business

Artificial intelligence systems mimic human expertise to identify patterns in
large data sets. Companies such as Amazon, Facebook, and Google, etc. use
artificial intelligence techniques to identify data that is most relevant to you.
Let’s use Facebook as an example, Facebook usually makes very accurate
predictions of people that you might know or went with to school. They use the
data that you provide to them, the data that your friends provide and based on
this information make predictions of people that you might know.
Amazon uses artificial intelligence techniques too to suggest products that you
should buy also based on what you are currently getting.
Google also uses artificial intelligence to give you the most relevant search
results based on your interactions with Google and your location.
These techniques have greatly contributed in making these companies very
successful because they are able to provide value to their customers.

Online Analytical Processing (OLAP)

Online analytical processing (OLAP) is used to query and analyze multi-
dimensional data and produce information that can be viewed in different ways
using multiple dimensions.
Let’s say a company sells laptops, desktops, and Mobile device. They have four
(4) branches A, B, C and D. OLAP can be used to view the total sales of each
product in all regions and compare the actual sales with the projected sales.
Each piece of information such as product, number of sales, sales value
represents a different dimension
The main objective of OLAP systems is to provide answers to ad hoc queries
within the shortest possible time regardless of the size of the datasets being
used.

Experts Systems
Experts Systems include knowledge to assist management in identifying and
fixing problems. These systems are based on artificial intelligence research
concepts.
• Experts Systems is an information system that is built on knowledge.
It acts as an expert counsellor to consumers by utilizing its expertise
in a particular area.
• An expert system's components include a knowledgebase and
software modules. These modules make inferences based on
knowledge and respond to a user's query.

Office Automation System

Office Automation Systems offer a way for data to move from one system to
another without any manual work or human intervention.
In the digital age, office automation systems facilitate data transportation by
bundling huge amounts of data in an ordered manner and shipping them. The
lack of manual efforts makes OAS a technique that mitigates errors, speeds up
business processes and ensures their reliability.
The OAS also makes certain that every process activity is visible to the
management. Thanks to this, businesses can actively figure out and eliminate
any bottlenecks associated with a business process.
The automation in OAS makes it possible to look at the data processing path.
Using this, businesses can stay updated with tasks and predict future data
processing.
OAS can be utilized daily in printing documents, automating emails, and
enhancing communication within an organization.
• Knowledge Management Systems
• A knowledge management system is a type of information system that
stores information for building knowledge for users. This can help in
achieving collaboration between different departments.
• Companies make use of Knowledge Management Systems to properly
organize the documentation, FAQs, and other such information
concerning them. The KMS also makes all the documented company
information easily accessible to its staff and customers, albeit in specified
degrees.
• Documents such as business policies, training material, and generic
customer queries can be assembled in one place and be accessed at all
times.
• A KMS ensures that the business-specific abilities of the staff are
integrated throughout the organization and helps employees to understand
the available information better.
• All the collected information from outside, such as the competitor’s
market share or services, the organization can be stored as well. This
information can then be communicated within the business and be used to
design goals accordingly.

USE OF IT IN BUSINESS DOMAIN

Information technology refers to the tools or machines that makes the
completion of work easy. It involves the use of computers and other
technological equipment to store, retrieve and transmit data.
Business refers to an organization involved in the buying and selling of goods
or services to the customers.
The success of any business depends on some important factors and choosing
the right information technology is one of those significant factors. It is well
known that the organization who invest in technology, choose the correct future.
They have a vision to leads the market share and profit.
Information technology is the only technology which provides the opportunity
to analyze the specific user data and plan the future business journey
accordingly.

Product Development
Information technology helps businesses to identify the changing customer’s
needs more quickly than the traditional research and react strategy. it ultimately
helps the business to respond fast according to the change in the external
environment. Information technology can speed up the time of new products to
hit the market.

Globalization
globalization refers to the integration of markets in the global economy.
Information technology helps businesses initially to grow locally and then
internationally. A business organization can outsource its noncore work to the
other small companies globally and use the network technology for reporting .

Facilitate Fast Payment Transfer

Nowadays currency transfer between two or more parties digitally is the fastest
to settle out any business transaction. It is far cheaper than the traditional way of
sending paper invoices and then settling payment.

Efficient And Effective Storage

Almost every business organization uses computer for data storage of the
business. Computer software like excel and office help in keeping the figures at
fingertips. Accounting software like tally stores the sales information, tax
records, and specialized data for the business.

Ease Of Communication
Communication in the 21st century is done majorly through e-mails.
Communication by email is faster and cheaper than sending a letter by post. The
biggest advantage of communicating with the help of technology is speed. The
speed of communication has increased the speed at which the business can be
done.

Competitive Advantage Over Competitors

companies making proper use of information technology can get the first-mover
advantage. They can create new products that differentiate them from the
existing market. Efficient use of information technology also helps in reducing
the cost per unit through increasing productivity.

Marketing
In the 21stcentury, marketing digitally is a great tool which let us promote our
products and services to the international market while sitting in the comfort of
our home or office. With the help of internet technology, we can increase
presence, advertise, take orders, sell or operate business entirely online.

Major Applications of IT

IT is a term that refers to the use of computers and telecommunications

equipment to analyze, save, retrieve, send, and alter data or information in the
context of a business or other enterprise.

People utilize computers in innovative ways every day. Computers and other
electronic gadgets have become cheaper in recent years. They continue to
become increasingly powerful and user-friendly as information-processing
tools.

Humans are growing increasingly reliant on IT-enabled gadgets to do simple

activities such as memorizing phone numbers to sophisticated duties such as
operating a combat plane. Information technology is used in nearly every area
of our lives. The following are a few of the most important:

1. Science and Engineering

Computers and other microprocessor-controlled technologies are nearly

completely responsible for scientific development in disciplines like
biotechnology.

Meteorologists use supercomputers to forecast future weather by

combining observations of meteorological conditions from a variety of
sources, a mathematical description of atmospheric dynamics, and
geographic data.

In several sectors, computer-aided design (CAD) and computer-aided

manufacturing (CAM) systems have resulted in better products,
particularly if designs are highly precise. Engineers may use computer
algorithms to assess plans for large buildings like power plants and space
stations.

2. Governance

E-government refers to the use of computers to manage transactions and

governmental services offered to individuals in the state rather than
conventional techniques such as paper or traveling from one department to
another.

The computerization of government activities makes it simpler to monitor

and audit government operations, as well as making the administration
more responsive to societal requirements. It also helps to bridge the gap
between the government and the general public.

Touch-screen kiosks, for example, assist in distributing information on

property records, picture identification cards, outstanding bills, and other
topics, allowing even illiterate individuals to make better judgments. India
is the world leader in the efficient use of information technology in
elections.

3. E-Learning

Providing learners with electronic content via the most accessible channels
and via the use of current electronic devices such as computers. In most
elementary schools across the world, computer education is a required
study.
 Students are increasingly dependent on electronic sources of knowledge
rather than physical libraries as more material is digitized every day and
made available to anybody in the world via the internet.

The use of graphics, animations, videos, presentations, and e-learning to

supplement conventional approaches has also changed instructional
practices.

4. Business

E-commerce is an information technology application that benefits

businesses by increasing profits and gaining access to new markets on a
big scale, while also benefiting consumers by increasing access to services
and commodities.

Most major corporations store all of their employees' employment records

in huge databases that are controlled by computer systems. Billing clients,
monitoring payments received and payments to be made, and tracking
supplies needed and products manufactured, stored, transported, and sold
all employ similar programs and databases.

In reality, almost all of the information that businesses require is obtained

via the use of computers and information technology. Almost the majority
of the world's financial transactions are conducted electronically. Newer
technologies in different areas, such as e-commerce startups, have made it
possible for nearly anybody to do ordinary financial transactions while on
the go.

Moreover, Many companies have replaced cash registers with point-of-

sale (POS) terminals on a smaller scale. When each item is sold, these
POS terminals not only generate a sales receipt for the consumer, but also
send information to a computer database to keep track of what's in stock
and what needs to be bought. In today's factories, computers have also
become increasingly crucial.

Hot, heavy, or hazardous activities are now performed by computer-

controlled robots. Boredom or weariness can contribute to low-quality
labor when robots are utilized to do routine, repetitive activities.

5. E-Health

By giving expert sites in many fields of medicine, medical consultations

without having to visit a doctor's office, and illness information.

A scanner, for example, uses computerized axial tomography (CAT) or

magnetic resonance imaging to acquire a sequence of images of the body
 (MRI). The images are then stitched together by a computer to create
detailed three-dimensional images of the body's organs.

Furthermore, the MRI generates pictures that depict changes in body

chemistry and blood flow. The majority of essential life support equipment
is programmed to react in split seconds to changes in the patient's state,
decreasing reaction time and the danger of human mistakes. Robotic
surgery, for example, is a new concept that allows surgeons to operate
from afar.

6. Entertainment

Most people's lifestyles have altered as a result of technology. Games,

streaming music and video, digital television broadcasts, satellite radio,
animated movies, and other forms of entertainment have emerged as a
result of the convergence of various technologies.

These can be accessed via mobile phones, PDAs, notebook computers, or

on television via cable or wirelessly using newer-generation WiFi, CDMA,
or GPRS technologies.