MBA Trim2-Mis Notes

INTRODUCTION TO INFORMATION SYSTEMS

1. Information systems are too important to be left to computer specialists. Do you
agree? Why or why not?

Information systems development and usage involves organization, management, and technology
dimensions. It is important to understand who will use the information systems and how the information
systems will be used to facilitate decision making and control within the organization. Computer
specialists understand the technology and definitely play an important role within the development and
maintenance of information systems. Computer specialists have an in-depth technology background, but
may not be well versed in the business or its operations. This is why computer specialists should
function as part of a team, and this team should have the hybrid strength of many different skills and
personalities. The team should definitely understand the business, the business requirements, and the
goals for the information systems.

2. Why are information systems essential in business today? Describe four trends in the
global business environment that have made information systems so important.

The emergence of a global economy, transformation of industrial economies, transformation of the
business enterprise, and the emergence of the digital firm make information systems essential in
business today. These trends present the business firm and its management with several new
challenges.

As a growing percentage of the advanced industrial economies in the United States, Europe and
Asia depends on imports and exports, information systems supply both communications and
analytic instruments for engaging in trade and for managing businesses that are spread throughout
the world.

The major industrial powers in the United States, Europe and Asia are being transformed from
industrial economies to knowledge- and information-based service economies. In such economies,
information systems and technology have become critical to these economies, and in this day and
age, they have become essential to economies that primarily remain reliant upon manufacturing.

Development of the power and capabilities of information systems has transformed the possibilities
for organizing and managing business enterprises. Businesses of this style are less hierarchical
(flatter) and are more decentralized, allowing them to rely more on informal commitments and
temporary task forces. Many managers have become more reliant upon individuals who report to
them for decision making as these reportees have more learning and current knowledge. Also,
more and more under this transformation, companies are becoming more customer-oriented.

The emerging technology and the organizational redesign that has accompanied it have created the
condition for the emergence of the digital firm. While firms of this type are still few and far
between, they are growing in number. Perhaps more important right now, almost all larger firms
and even many smaller ones have become reliant upon the digital firm technology for much of
their activity, including relations with customers and suppliers.

3. What is an information system? Distinguish between a computer, a computer
program, and an information system. What is the difference between data and
information?

Information system is a set of interrelated components that work together to collect, process,
store, and disseminate information to support decision making, coordination, control, analysis, and
visualization in an organization. A computer system is the physical equipment used for input,
processing, and output activities in an information system. Computer programs provide the
computer with necessary instructions on how to process the data into information. Data are raw
facts; these raw facts, in their current form, are not in a useful format. Information is data that
have been processed into a useful, meaningful form.

A computer and an information system are not equivalent. Information systems have
management, organization, and technology dimensions. Computers and programs are technology
components of an information system. Without addressing the organization and management
dimensions, the technology components are relatively useless. For instance, you can purchase a
computer and software, but unless you have determined how the technology will be used to help
manage and organize your work, you essentially have a decorative box for your desk.

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4. What are the organization, management, and technology dimensions of information
systems?

Organization: Information systems are part of organizations, and in some cases (such as credit
card companies and financial information services), they are the organization. Information
systems will have the SOPs and the culture of an organization imbedded within them.

Management: Information systems supply tools and information needed by managers to allocate,
coordinate and monitor their work, make decisions, create new products, and services and make
long-range strategic decisions.

Technology: Management uses technology (hardware, software, storage, and telecommunications)
to carry out their functions. It is one of the many tools managers use to cope with change.

5. What is the relationship between an organization and its information systems? How
has this relationship changed over time?

Notable changes occurring over time include a growing interdependence between the organization
and its information systems and a movement from primarily technical changes to include both
managerial and institutional changes. There is a growing interdependence between the
organization and its information systems. Often, a change in the business's strategy, rules, or
procedures requires changes in the information systems software, hardware, databases, and
telecommunications. An organization’s present and future accomplishments depend in many
respects on what its systems will permit it to do now and later. Also, system projects are
increasing in reach and scope. Whereas early information systems addressed primarily technical or
operational issues, contemporary information systems are integral to the management and
strategic goals of the firm. Today information systems affect a much larger part of the
organization itself, such as organizational products, objectives, and structure. More and more
business activities at all levels involve the use of information systems.

6. Describe some of the major changes that information systems are bringing to
organizations.

Information systems are driving both daily operations and organizational strategy. Powerful
computers, software, and networks, including the Internet, have helped organizations become
more flexible, eliminate layers of management, separate work from location, and restructure work
flows, giving new powers to both line workers and management. The flattening of organizations is
probably one change that students are likely to cite, particularly with the concern over downsizing.
The parallel increase in information and in the decision power of line workers (empowerment) also
increased the workers’ corresponding work satisfaction as management span of control is
broadened. The empowering of the line worker means managers can spend more time thinking
more strategically.

7. What are the key management challenges involved in building, operating, and
maintaining information systems today?

The five key management challenges include the:

• Strategic business challenge
• Globalization challenge
• Information architecture and infrastructure challenge
• Information systems investment challenge
• Responsibility and control challenge.

The strategic business challenge encourages us to realize that we must be able to use information
technology to design organizations so that they are competitive, effective and digitally-enabled.
The globalization challenge facing us is that we must ascertain how firms can understand the
systems requirements of a global economic environment. The information architecture and
infrastructure challenge is that we must be able to help the organization develop an information
architecture that is able to support the company goals when both the business conditions and the
technologies are changing so rapidly. The information systems investment challenge is for us to
know how the organization can determine the business value of systems. Finally, the responsibility
and control challenge is for us to understand how organizations can ensure that their information
systems are used in an ethically and socially responsible way.
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DATABASE MANAGEMENT SYSTEMS

8. Why is file management important for over all system performance?

Information cannot be used effectively if it is stored in a disorganized, inflexible manner. Without
proper file management, it may be difficult and even impossible to extract information from an
automated system. Retrieving a simple report can be timely and costly, if the information is not
properly managed. File management must also be flexible enough to accommodate new pieces of
information or to combine different pieces of information in changing ways. When computer files
are poorly managed, poor performance, high costs, and minimal flexibility will result.

9. List and describe each of the components in the data hierarchy.

The data hierarchy includes bits, bytes, fields, records, files, and databases. Data are organized in
a hierarchy that starts with the bit, which is represented by either a 0 (off) or a 1 (on). Bits can be
grouped to form a byte to represent one character, number, or symbol. Bytes can be grouped to
form a field, such as a name or date, and related fields can be grouped to form a record. Related
records can be collected to form files, and related files can be organized into a database.

10. Define and explain the significance of entities, attributes, and key fields.

An entity is a person, place, thing, or event on which information can be obtained. An attribute is
a piece of information describing a particular entity. A key field is a field in a record that uniquely
identifies instances of that unique record so that it can be retrieved, updated, or sorted. For
example, a person’s name cannot be a key because there can be another person with the same
name, whereas a social security number is unique. Also a product name may not be unique but a
product number can be designed to be unique.

11. Define a database and a database management system.

A database is a collection of data organized to service many applications efficiently by storing and
managing data so that they appear to be in one location. It also minimizes redundant data. A
database management system (DBMS) is special software that permits an organization to
centralize data, manage them efficiently, and provide access to the stored data by application
programs.

12. Name and briefly describe the three components of a DBMS.

Data definition language, data manipulation language, and data dictionary are the three
components of a database management system.

The data definition language is the formal language used by programmers to specify the
content and structure of the database. The data manipulation language is the language used to
manipulate data in the database. It contains commands that permit end users and programming
specialists to extract data from the database to satisfy information requests and develop
applications. The data dictionary is an automated or manual file that stores definitions of data
elements and data characteristics such as usage, physical representation, ownership,
authorization, and security.

13. List some benefits of a DBMS.

A DBMS can reduce the complexity of the information systems environment, reduce data
redundancy and inconsistency, eliminate data confusion, create program-data independence,
reduce program development and maintenance costs, enhance flexibility, enable the ad hoc
retrieval of information, improve access and availability of information, and allow for the
centralized management of data, their use, and security.

14. Describe the principal types of databases and the advantages and disadvantages of
each.

The principal types of databases include relational, hierarchical, network, and object-oriented. The
relational database model organizes data into two dimensional tables. The relational model can
relate any piece of information in one table to any piece of information in another table as long as
the two tables share a common data element (such as an employee number). Because relational

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DBMS can easily combine information from different sources, they are more flexible than the other
DBMS structures. Access paths to data are not pre-specified, so they can easily respond to ad-hoc
inquiries with less extensive programming. The main problem with relational DBMS is poor
processing efficiency. Response time can be very slow if large numbers of accesses to data are
required to select, join, and extract data from tables. Developments in relational technology, such
as indexing, are starting to overcome this problem.

The hierarchical database model stores data logically in a vertical hierarchy resembling a tree-like
structure. An upper record is connected logically to a lower record in a parent-child relationship. A
parent segment can have more than one child, but a child can only have one parent. Hierarchical
DBMS are good for treating one-to-many relationships. They can store large numbers of segments
and process information efficiently, but they can only deliver information if a request follows the
linkages of the hierarchy. Their disadvantages are their low user-friendliness, inflexibility, and
programming complexity. They are good for high-volume, rapid response systems, such as airline
reservation systems.

The network model stores data logically in a structure that permits many-to-many relationships.
Through extensive use of pointers, a child segment can have more than one parent. Network
DBMS reduce redundancy and, like hierarchical databases, they process information efficiently.
However, they are inflexible and are very complex to maintain and program.

The object-oriented DBMS stores data and the procedures acting on the data as objects that can be
automatically retrieved and shared. Object-oriented databases can store complex types of
information, but are slower at processing larger numbers of transactions when compared to
relational DBMS. Object-relational databases combine the capabilities of the relational database
with the storage capabilities of an object-oriented database.

15. What is normalization? How is it related to the features of a well-designed relational
database?

Normalization is the process of creating small stable data structures from complex groups of data
when designing a relational database. Normalization streamlines relational database design by
removing redundant data such as repeating groups. A well-designed relational database will be
organized around the information needs of the business and will probably be in some normalized
form. A database that is not normalized will have problems with insertion, deletion, and
modification.

16. What is a distributed database, and what are the two main ways of distributing data?

A distributed database is one that is stored in more than one physical location. A distributed
database can be partitioned or replicated. When partitioned, the database is divided into
partitions, so that each remote processor has access to the data that it needs to serve its local
area. These databases can be updated locally and later justified with the central database. With
replication, the database is duplicated at various remote locations.

17. What are the four key organizational elements of a database environment? Describe
each briefly.

The four key organizational elements of a database environment are data administration, data
planning and modeling methodology, database technology and management, and users.
Data administration is the organizational function for managing the organization's data resources
and is concerned with information policy, data planning, maintenance of data dictionaries, and data
quality standards.

A data planning and modeling methodology focuses on enterprise-wide planning and analysis of
data. The database technology and management element is responsible for defining and
organizing the structure and content of the database, as well as maintaining the database. The
user element references the fact that end users have a wider role with DBMS than in traditional
systems and must be trained.

18. Describe the capabilities of online analytical processing (OLAP) and data mining.

Online analytical processing and datamining enable the manipulation and analysis of large volumes
of data from many perspectives, for example, sales by item, by department, by store, by region, in
order to find patterns in the data. Such patterns are difficult to find with normal database

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methods, which is why a data warehouse and datamining are usually parts of OLAP.

Datamining uses a variety of techniques to find hidden patterns and relationships in large pools of
data and infer rules from them that can be used to predict future behavior and guide decision
making. For example, Nordstrom uses datamining to analyze data generated by visitors to its Web
site. It uses the results to customize advertising and content to individual customers and to
improve online customer service.

19. What is a data warehouse? How can it benefit organizations?

A data warehouse is a database with archival, querying, and data exploration tools (i.e., statistical
tools) and is used for storing historical and current data of potential interest to managers
throughout the organization and from external sources (e.g. competitor sales or market share).
The data originate in many of the operational areas and are copied into the data warehouse as
often as needed. The data in the warehouse are organized according to company-wide standards
so that they can be used for management reporting and analysis. Data warehouses support
looking at the data of the organization through many views or directions. A data warehouse allows
managers to look at products by customer, by year, by salesperson, essentially different slices of
the data. Normal operational databases do not permit such different views.

FUNCTIONAL ASPECTS OF MIS

20. Identify and describe the four levels of the organizational hierarchy. What types of
information systems serve each level?

From lowest to highest, the four levels of the organizational hierarchy are operational, knowledge,
management, and strategic. Types of information systems include transaction processing systems,
office systems, knowledge work systems, decision-support systems, management information
systems, and executive support systems.

Transaction processing systems, such as order tracking, payroll, machine control, and
compensation, serve the operational level.

Engineering workstations, word processing, graphics workstations, managerial workstations,
document imaging, and electronic calendars are examples of knowledge work systems and office
systems that serve the knowledge level.

Sales region analysis, cost analysis, annual budgeting, and relocation analysis are examples of
decision-support systems and management information systems.

Examples of executive support systems that serve the strategic level are sales trend
forecasting, operating plan development, budget forecasting, profit planning, and manpower
planning.

21. List and briefly describe the major types of systems in organizations.

Transaction processing systems, office systems, knowledge work systems, decision-support
systems, management information systems, and executive support systems are the major types
of systems in organizations. Transaction processing systems function at the operational level
of the organization. Examples of transaction processing systems include order tracking, order
processing, machine control, plant scheduling, compensation, and securities trading.

Knowledge work systems help create and integrate new knowledge within the organization.
Examples of knowledge work systems include engineering workstations, managerial
workstations, and graphics workstations. Office systems help increase data worker productivity
and include word processing document imaging, and electronic calendars.

Management information systems provide managers with reports based primarily on data
pulled from transaction processing systems, have an internal orientation, and have limited
flexibility. Examples of management information systems include sales management, inventory
control, and capital investment analysis. Decision-support systems function at the management
level and provide analytical models and data analysis tools to provide support for semi-structured
and unstructured decision-making activities. Examples of decision-support systems include sales
region analysis, cost analysis, and contract cost analysis.

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Executive support systems function at the strategic level, support unstructured decision
making, and use advanced graphics and communications. Examples of executive support
systems include sales trend forecasting, budget forecasting, and personnel planning.

The systems form a level of systems, with all types either formatting or processing the
information from a lower level. For instance, the office systems provide reports or presentations
on the information or data in transaction processing systems. Decision-support and executive
support systems often use office systems in presenting information extracted from transaction
processing systems and management information system. Management information systems
depend on data from transaction processing systems. Some systems, including knowledge work
systems, decision-support systems, and executive support systems may use external
information, such as stock market information and design information from suppliers.

22. What are the five types of TPS in business organizations? What functions do they
perform? Give examples of each.

The five types of transaction processing systems include sales/marketing systems, manufacturing/
production systems, finance/accounting systems, human resources systems, and other types.

Sales/marketing systems provide sales management, market research, promotion, pricing, and
new product functions. Examples include sales order information systems, market research
systems, and sales commission systems.

Manufacturing/production systems provide scheduling, purchasing, shipping/receiving,
engineering, and operations functions. Examples of manufacturing systems include machine
control systems, purchase order systems, and quality control systems.

Finance/accounting systems provide budgeting, general ledger, billing, and cost accounting
functions. Examples of finance/accounting systems include general ledger, accounts
receivable/payable, and funds management systems.

Human resource systems provide personnel records, benefits, compensation, labor relations,
training, and payroll functions. Examples include employee records, benefit systems, and career
path systems.

Other types include admissions, grade records, course records, and alumni for a university.
Examples of transaction processing systems for a university include a registration system, student
transcript system, and an alumni benefactor system.

23. Describe the functions performed by knowledge work systems and office systems and
some typical applications of each.

Knowledge work systems (KWS) aid knowledge work professionals to create new information and
knowledge, and ensure that new knowledge and technical expertise are properly used in their
corporations. Examples of knowledge workers (and some of their software) include engineers
(graphics workstations), Wall Street traders, analysts, and arbitrageurs (financial and stock market
workstations), research scientists, doctors, and designers (CAD systems).

Office systems provide support for data workers, including secretaries, accountants, filing clerks,
and some managers. Software examples include word processing, desktop publishing,
presentation programs, electronic calendars, and document imaging.

24. What are the characteristics of MIS? How do MIS differ from TPS? From DSS?

MIS supports the management level by providing routine summary reports and exception reports
for various purposes, including planning, controlling, and decision making. Examples include sales
and profit per customer and per region, relocation summary and analysis, inventory control, capital
investment analysis, and even a report on students who were here in the autumn but did not to
return in the spring. MIS differs from TPS in that MIS deals with summarized and compressed data
from the TPS and sometimes analysis of that summarized data.

Decision-support systems provide material for analysis for the solution of semi-structured
problems, which often are unique or rapidly changing. Typically, they provide the ability to do
“what if” analysis. While MIS have an internal orientation, DSS will often use data from external
sources, as well as data from TPS and MIS. DSS supports “right now” analysis rather than the

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long-term structured analysis of MIS. MIS are generally not flexible and provide little analytical
capabilities. In contrast, DSS are designed for analytical purposes and are flexible.

25. What are the characteristics of DSS? How do they differ from those of ESS?

DSS provide sophisticated analytical models and data analysis tools to support semi structured and
unstructured decision-making activities. DSS use data from TPS, MIS, and external sources,
provide more analytical power than other systems, combine data, and are interactive. ESS support
senior managers with unstructured strategic-level decision making. They may be less analytical
than DSS with less use of models such as linear programming or forecasting. However, they often
rely on external data and rely heavily on graphics.

26. Describe the relationship between TPS, office systems, KWS, MIS, DSS, and ESS.

The various types of systems in the organization exchange data with one another. TPS are a major
source of data for other systems, especially MIS and DSS. TPS are operational-level systems that
collect transaction data. Examples of these are payroll or order processing that track the flow of
the daily routine transactions that are necessary to conduct business. TPS provide data that are
required by office systems, KWS, MIS and DSS, although these systems may also use other data.
KWS and office systems not only use data from TPS but also from MIS. DSS not only use data
from TPS but also from KWS, office systems, and MIS. MIS rely heavily on data from TPS but also
use data from KWS and office systems. ESS obtains most of their internal data from MIS and DSS.

27. List and describe the information systems serving each of the major functional areas of
a business.

Sales and marketing information systems help the firm identify customers for the
organization's products and services. These systems help develop, promote, sell, and provide
ongoing customer support for the firm's products and services. Specific sales and marketing
information systems include order processing, market analysis, pricing analysis, and sales trend
forecasting.

Manufacturing and production information systems provide information for planning, product
development, production or service scheduling, and controlling the flow of products and services.
Specific manufacturing and production information systems include machine control, CAD,
production planning, and facilities location.

Finance and accounting information systems track the organization's financial assets and fund
flows. Financial and accounting systems include accounts receivable, portfolio analysis, budgeting,
and profit planning.

Human resources information systems maintain employee records; track employee skills, job
performance, and training; and support planning for employee compensation, including pensions
and benefits, legal and regulatory requirements, and career development. Systems include
training and development, career pathing, compensation analysis, and human resources planning.

28. What is a business process? Give two examples of processes for functional areas of
the business and one example of a cross-functional process.

Business processes are the ways in which organizations coordinate and organize work activities,
information, and knowledge to produce their valuable products or services. Business processes for
the manufacturing and production area include product assembling, quality checking, and
producing bills of materials. For the sales and marketing area, business processes include
identifying customers, making customers aware of the product, and selling the product. For
finance and accounting, business processes includes paying creditors, creating financial
statements, and managing cash accounts. For human resources, business processes include hiring
employees, evaluating job performance of employees, and enrolling employees in benefits plans.

An example for cross-functional process is sales order processing. (Explain this with a diagram).

29. Why are organizations trying to integrate their business processes?

Operating in a global environment requires an organization to focus on the efficient execution of its
processes, customer service, and speed to market. To accomplish these goals, the organization

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must exchange valuable information across different functions, levels, and business units. By
integrating its processes, the organization can more efficiently exchange information among its
functional areas, business units, suppliers, and customers.

30. What are the four key enterprise applications for organization-wide process
integration?

The four key enterprise applications are enterprise systems, supply chain management systems,
customer relationship management systems, and knowledge management systems.

31. What are enterprise systems? How do they change the way an organization works?

Enterprise systems integrate the key business processes of an organization into a single software
system. Data from various functional areas are maintained centrally where they can be accessed
and used by other functions and cross-functional processes. This changes the work flow of an
organization. Now information can seamlessly flow throughout the organization, improving
coordination, efficiency, and decision making.

32. What are the benefits and challenges of implementing enterprise systems?

Enterprise systems are firm-wide information systems that integrate key business processes so
that information can flow freely between different parts of the firm. Enterprise systems help create
a more uniform organization in which everyone uses similar processes and innovation and
measures their work in terms of organization-wide performance standards. Enterprise systems are
very difficult to successfully implement and once implemented, are very difficult to change.
Enterprise systems require extensive organizational change, use complicated technologies, and
require large up-front costs for long-term benefits that are difficult to quantify.

33. What is supply chain management? What activities does it comprise? Why is it so
important to businesses?

Supply chain management is the close linkage of activities involved in the processes of buying,
making and moving a product. Supply chain management is important to a business because
through its efficiency it can coordinate, schedule, and control the delivery of products and services
to customers.

Supply chain management closely links and coordinates activities in buying, making, and moving a
product. The system should lower costs and streamline the user’s business. Information systems
make supply chain management more efficient by helping companies coordinate, schedule, and
control procurement, production, inventory management, and delivery of products and services to
customers. Information systems help organizations achieve great efficiencies by automating parts
of these processes or by helping organizations rethink and streamline these processes.

34. How do information systems facilitate supply chain management?

Information systems make supply chain management more efficient by helping companies
coordinate, schedule, and control procurement, production, inventory management, and delivery of
products and services to customers. Information systems help organizations achieve great
efficiencies by automating parts of these processes or by helping organizations rethink and
streamline these processes.

35. What is customer relationship management? Why is it so important to businesses?
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36. How do information systems facilitate customer relationship management?

Customer relationship management is a business and technology discipline to coordinate all of the
business processes for dealing with existing and potential customers. With the growth of the Web,
potential customers can easily comparison shop for retail and wholesale goods and even raw
materials, so better treatment of customers has become very important. Good CRM systems
consolidate customer data from multiple sources and provide analytical tools for answering
questions such as: What is the value of a particular customer to the firm over his/her lifetime?
CRM tools integrate the firm’s customer-related processes and consolidate customer information
from multiple communication channels, so that the firm can put one coherent face to the

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customer.

SYSTEMS DEVELOPMENT LIFE CYCLE

37. Why is selecting a systems development approach an important business decision?
Who should participate in the selection process?

The development of new systems or major enhancements to existing systems is often the result of
significant changes made to the business processes supported by the systems. Organizations are
being faced with the requirement to meet higher quality standards, but often with fewer resources.
Basically, organizations need to do more with less and do it better. This trend forces organizations
to find simpler and more efficient methods for performing their work. Usually the effort to simplify
the business processes themselves precedes any major systems development effort. It is
appropriate that the business processes be reviewed before systems work begins, to avoid the
unfortunate mistake of simply automating existing cumbersome processes. Ideally, the efforts to
simplify business processes will be done by the functional office in conjunction with technical
personnel, so that current technology can be considered as the business processes are reviewed.
In some cases, particularly when a vendor package is selected for implementation, the
simplification of business processes may occur during the systems development or installation
process. One other issue is critical. A decision on the selection of a development approach often
is dependent upon the system itself. A large, complex system simply cannot be done using a
quick prototype method, for example. Part of the decision has to be how important the system is,
and if it is important, what will be the quality of the system if a particular method is selected.

38. Some have said that the best way to reduce system development costs is to use
application software packages or fourth-generation tools. Do you agree? Why or why
not?

The answer to this question is dependent upon the type of problem to be solved. For example,
large transaction-heavy applications are not suited to end-user software tools. Also, remember
that purchasing and installing an application software package or fourth-generation tool rather
than developing a system from scratch might save significant time, and often significant resources,
in terms of cost. However, there are many issues to consider when deciding whether to purchase
a product or develop a custom system. The following guidelines help determine if the purchase of
a vendor package should be considered:

• Whether packages are available on the market that can satisfy at least 80 percent of the
functional requirements of the system. While it may not be possible to find a package that
exactly matches the specific functional requirements, if less than 80 percent of the
requirements are satisfied, then the purchase of a package is likely to be more costly than
custom development.
• If available packages are compatible with the organization's current technical environment
(or planned for installation in the immediate future).
• Whether the overall cost of purchasing, installing, and maintaining a package will be no
more than (and preferably less than) the cost of custom development and maintenance.
• Whether or not the vendors for the packages have a proven track record of installation and
support and can show evidence of financial stability (this is particularly critical for large
systems).
39. Why can an information system be considered planned organizational change?

An information system is a socio-technical entity, an arrangement of both technical and social
elements. Information systems change involves hardware and software, but in addition, it involves
changes in jobs, skills, management, and organization. When we design a new information system,
we are redesigning the organization, reordering its technical and social elements.

40. What are the major categories of an information systems plan?

The major categories include Purpose of the Plan, Strategic Business Plan, Current Systems, New
Developments, Management Strategy, Implementation Plan, and Budget Requirements.

41. How can enterprise analysis and critical success factors be used to establish
organization-wide information system requirements?

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Both approaches attempt to gain a clear understanding of the organization's long- and short-term
information requirements. Both use interviews of managers to gain the information needed. And
both rest ultimately on the strategy of the company.
Enterprise analysis approaches the problem by looking at the entire organization in terms of
organizational units, functions, processes, and data elements. This approach takes a large sample
of managers and asks them how they use information, where they get the information, what their
environment is like, what their objectives are, how they make decisions, and what their data needs
are. The data are aggregated into subunits, functions, processes, and data matrices. From this
information, conclusions are drawn about the organization-wide information systems requirements.
The CSF approach interviews a smaller number of top managers who are asked to identify their
goals and the objectives essential to those goals. These critical success factors (CSFs) are
aggregated to develop a picture of the overall organization's CSFs. Systems that are needed to
deliver these critical success factors are then built.

42. Describe each of the four kinds of organizational change that can be promoted with
information technology.

Information technology enables automation, rationalization, reengineering, and paradigm
shifts.

Automation uses the computer to speed up the performance of existing tasks. This approach to
organizational change changes the organization less than the other three. It may release staff to
other jobs, reduce the number of employees needed, or enable the organization to process more
transactions.
Rationalization of procedures refers to the streamlining of standard operating procedures,
eliminating obvious bottlenecks, so that automation makes operating procedures more efficient.
By making such changes, it can eliminate some tasks and enable the organization to make more
changes than automation, but the organization still has not made changes in the goals or strategy
of the company.
Business process reengineering refers to the radical redesign of business processes, combining
steps to cut waste and eliminating repetitive, paper-intensive tasks in order to improve cost,
quality, and services, and to maximize the benefits of information technology. This is a more
powerful type of organizational change because an organization can use it to rethink and
streamline its business processes, improve speed, service, and quality.
A paradigm shift is a radical re-conceptualization of the nature of the business and the nature of
the organization. The strategy of the business can be changed, and sometimes even the business
the company is in.

43. What is the difference between systems analysis and systems design? What activities
do they comprise?

Systems analysis is the analysis of the problem that the organization is trying to solve with an
information system. It consists of defining the problem, identifying its causes, specifying solutions,
and identifying the information requirements that must be met by a system solution. Systems
design shows how the system will fulfill the information requirements specified in system analysis.

44. What are information requirements? Why are they difficult to determine correctly?

Information requirements involve identifying who needs what information, where, when, and how.
They define the objectives of the new or modified system and contain a detailed description of the
functions the new system must perform. Gathering information requirements is perhaps the most
difficult task of the systems analyst, and faulty requirements analysis is a leading cause of systems
failure and high systems development costs.

Information requirements are difficult to determine because business functions can be very
complex and poorly defined. A manual system or a routine set of inputs and outputs may not
exist. Procedures may vary from individual to individual, and users may disagree on how things
are or should be done. Defining information requirements is a laborious process, requiring a great
deal of research and often several reworks by the analyst.

45. Why is the testing stage of systems development so important? Name and describe
the three stages of testing for an information system.

Testing is critical to the success of a system because it is the only way to ascertain whether the
system will produce the right results. Three stages of information system testing are unit testing,
system testing, and acceptance testing. Unit testing refers to separately testing or checking the

10

individual programs. With system testing, the entire system as a whole is tested to determine
whether program modules are interacting as planned. With acceptance testing, the system
undergoes final certification by end users to ensure that it is ready for installation.

46. What role do programming, conversion, production, and maintenance play in systems
development?

Programming translates the design specification into software, thus providing the actual
instructions for the computer. Programming constitutes a smaller portion of the systems
development cycle than design and perhaps testing activities. Conversion is the process of
changing from the old system to the new system. Production is the operation of the system once
it has been installed and conversion is complete. The system will be reviewed during production by
both users and technical specialists to determine how well it has met its original objectives and to
decide whether any revisions or modifications are needed. Maintenance is modifications to
hardware, software, documentation, or procedures to a production system to correct errors, meet
new requirements, and improve processing efficiency.

47. What is the traditional systems lifecycle? Describe each of its steps and its advantages
and disadvantages for system building.

The traditional systems lifecycle is a formal methodology for managing the development of systems
and is still the principal methodology for medium and large projects. The overall development
process is partitioned into distinct stages, each of which consists of activities that must be
performed to fashion and implement an information system. The stages are usually gone through
sequentially with formal “sign-off” agreements among end users and data processing specialists to
validate that each stage has been completed. Users, managers, and data processing staff have
specified responsibilities in each stage. The approach is slow, expensive, inflexible, and is not
appropriate for many small desktop systems.

The systems lifecycle consists of systems analysis, systems design, systems implementation
(which involves programming, testing and conversion) and production and maintenance.

Systems analysis is the phase where the problem that the organization is trying to solve is
analyzed. Technical specialists identify the problem, gather information requirements, develop
alternative solutions, and establish a project management plan. Business users provide
information requirements, establish financial or operational constraints, and select the solution.

During systems design, technical specialists’ model and document design specifications and
select the hardware and software technologies for the solution. Business users approve the
specifications.

During the programming phase, technical specialists translate the design specifications into
software for the computer. During the testing phase, technical specialists develop test plans and
conduct unit, system, and acceptance tests. Business users provide test data and scenarios and
validate test results.

During the conversion phase, technical specialists prepare a conversion plan and supervise
conversion. Business users evaluate the new system and decide when the new system can be put
into production. During the production and maintenance phase, technical specialists evaluate
the technical performance and perform maintenance. Business users use the system and evaluate
its functional performance.

The advantages of using this method for building information systems include it is highly
structured; it has a rigorous and formal approach to requirements and specifications and tight
controls over the system building process; it is appropriate for building large transaction processing
and management information systems and for building complex technical systems. The
disadvantages include it is very costly and time-consuming; it is inflexible and discourages change
even though requirements will change during the project due to the long time this method
requires; it is ill-suited to decision-oriented applications which can be rather unstructured and for
which requirements are difficult to define.

48. What do we mean by information system prototyping? What are its benefits and
limitations? List and describe the steps in the prototyping process.

Information system prototyping is an explicitly interactive system design methodology that builds
an experimental model of a system as a means of determining information requirements.

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Prototyping builds an experimental system quickly and inexpensively for demonstration and
evaluation so that users can better determine information requirements. A preliminary model of a
system or important parts of the system are built rapidly for users to experiment with. The
prototype is modified and refined until it conforms precisely to what users want. Information
requirements and design are determined dynamically as users interact with and evaluate the
prototype.

Prototyping is most valuable when requirements are uncertain and cannot be entirely pre-specified
or when the appropriate design solution is unclear. Prototyping is especially helpful for designing
end-user interfaces (screens and reports) and for determining elusive requirements of decision-
support type applications. Prototyping can help reduce implementation costs by capturing
requirements more accurately at an earlier point in the implementation process. It is not so useful
for a very structured, well-understood, or routine problem.

It is best suited for smaller applications oriented toward simple data manipulation. Large systems
with complex processing may only be able to have limited features prototyped. The prototype may
be built so rapidly that design is not well thought out or must be reworked for a production
environment. The problem arises when the prototype is adopted as the production version of the
system without careful analysis and validation. Prototypes are built so rapidly that documentation
and testing are glossed over. The system is so easily changed that documentation may not be
kept up-to-date.

The steps in prototyping include identifying the user's basic requirements; developing a working
prototype of the system outlined in the basic requirements, using the prototype, and revising and
enhancing the prototype based on the users' reaction. The third and fourth steps are repeated
until users are satisfied with the prototype.

49. What is an application software package? What are the advantages and disadvantages
of developing information systems based on software packages?

An application software package is a set of prewritten, pre-coded application software programs
that are commercially available for sale or lease. Packages range from very simple programs to
very large and complex systems, encompassing hundreds of programs. Packages are normally
used when functions are common to many companies, data processing resources, for in-house
development, are in short supply, and when desktop microcomputer applications are being
developed for end users.

Software packages provide several advantages: (1) the vendor has already established most of
the design that may easily consume up to 50 percent of development time; (2) programs are pre-
tested, cutting down testing time and technical problems; (3) the vendor often installs or assists in
the installation of the package; (4) periodic enhancement or updates are supplied by the vendor;
(5) vendors also maintain a permanent support staff well-versed in the package, reducing the need
for individual organizations to maintain such expertise in-house, and (6) the vendor supplies
documentation.

The usage of software packages has several disadvantages: (1) there are high conversion costs
for systems that are sophisticated and already automated; (2) packages may require extensive
customization or reprogramming if they cannot easily meet unique requirements, and (3) a system
may not be able to perform many functions well in one package alone.

50. What do we mean by end-user development? What are its advantages and
disadvantages? Name some policies and procedures for managing end-user
development.

End-user development refers to the development of information systems by end users with
minimal or no assistance from professional systems analysts or programmers. This is
accomplished through sophisticated "user-friendly" software tools and gives end users direct
control over their own computing.

Advantages include improved requirements determination, realizing large productivity gains when
developing certain types of applications, enabling end users to take a more active role in the
systems development process, many can be used for prototyping, and some have new functions
such as graphics, modeling, and ad hoc information retrieval.

Disadvantages include not being suited for large transaction-oriented applications or applications

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with complex updating requirements, standards for testing and quality assurance may not be
applied, and proliferation of uncontrolled data and private information systems.

End-user development is suited to solving some of the backlog problem because the end users can
develop their needed applications themselves. It is suited to developing low-transaction systems.
End-user development is valuable for creating systems that access data for such purposes as
analysis (including the use of graphics in that analysis) and reporting. It can also be used for
developing simple data-entry applications.

Policies and procedures to manage end-user development include the following:

• The organization must establish sufficient support facilities for end-user computing:
information centers or distributed end-user computing centers.
• Training and support should be targeted to the specific needs of those being trained.
• End-user application development should not be allowed to be undertaken randomly but
should be incorporated into the organization's strategic plan.

Management should develop controls over end-user computing in the following areas:

• Cost justification of end-user information system project.
• Hardware and software standards for user-developed applications.
• Company-wide standards for microcomputers, word processing software, database
management systems, graphics software, and query and reporting tools.
• Quality assurance reviews that specify whether the end-user systems must be reviewed by
information systems and internal audit specialists.
• Control for end-user developed applications covering testing, documentation, accuracy,
and completeness of input and update, backup, recovery and supervision.
• Critical applications that supply data to other important systems should be flagged and
subjected to more rigorous standards.

DECISION SUPPORT SYSTEMS

51. What is a decision-support system (DSS)? How does it differ from a management
information system (MIS)?

A DSS assists management decision making by combining data, sophisticated analytical models, and
user-friendly software into a single, powerful system that can support semi-structured or
unstructured decision making. These systems help end users utilize data and models to discuss and
decide semi-structured and unstructured problems, but they do not solve the problems for the user.
Generally speaking, MIS provide routine, pre-specified, and formatted reports based on data
extracted and summarized from the firm's TPS. These reports provide information on the firm's
performance and are used to help monitor and control the business. In contrast, DSS provide
capabilities for addressing non-routine decisions and user control. DSS emphasize change, flexibility,
and rapid response and place a greater emphasis on models, assumptions, ad hoc queries, and
display graphics. Additionally, MIS primarily address structured problems, while DSS focus more on
supporting semi-structured and unstructured problems.

52. How can a DSS support unstructured or semi-structured decision making?

Unstructured problems are novel, non-routine and have no predefined algorithms or solutions. DSS
help design and evaluate alternatives and monitor the adoption or implementation process. DSS
combine data with models to produce various alternative scenarios that can be used for making
choices. In large organizations, decision making is inherently a group process, and DSS can be
designed to facilitate group decision making by providing tools, procedures, and technologies to help
people working on decisions as a group.

53. What are the three basic components of a DSS? Briefly describe each.

The three basic components of a DSS include a DSS database, DSS software system, and DSS user
interface. The DSS database is a collection of current or historical data from a number of
applications or groups, organized for easy access by a range of applications. The DSS database may
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be a small database residing on a PC or it may be a massive data warehouse that is continuously
updated by major organizational TPS. The DSS software system is a collection of software tools used
for data analysis, including a collection of mathematical and analytical models, OLAP tools, and
datamining tools. Various kinds of models may be in the model base, including libraries of statistical,
optimization, sensitivity analysis, and forecasting models. The DSS user interface permits easy
interaction between users and the DSS software tools.

54. How can DSS help firms with supply chain management and customer relationship
management?

Supply chain decisions involve determining “who, what, when, and where” from purchasing and
transporting materials and parts through manufacturing products and distributing and delivering
those products to customers. DSS can help managers examine this complex chain comprehensively
and search among a huge number of alternatives for the combinations that are most efficient and
cost-effective. The prime management goal might be to reduce overall costs while increasing the
speed and accuracy of filling customer orders.

DSS for customer relationship management use datamining to guide decisions about pricing,
customer retention, market share, and new revenue streams. These systems typically consolidate
customer information from a variety of systems into massive data warehouses and use various
analytical tools to slice it into tiny segments for one-to-one marketing.

55. What is a geographic information system (GIS)? How does it use data visualization
technology? How can it support decision making?

Geographic information systems (GIS) are a special category of DSS that use data visualization
technology to analyze and display data for planning and decision making in the form of digitized
maps. The software can assemble, store, manipulate, and display geographically referenced
information, tying data to points, lines, and areas on a map. GIS can thus be used to support
decisions that require knowledge about the geographic distribution of people or other resources in
scientific research, resource management, and development planning. For example, GIS might be
used to help state and local governments calculate emergency response times to natural disasters or
to help banks identify the best locations for installing new branches or ATM terminals. GIS tools
have become affordable even for small businesses and some can be used on the Web.

56. What is a group decision-support system (GDSS)? How does it differ from a DSS?

A GDSS is an interactive computer-based system that facilitates the solution of unstructured
problems by a set of decision makers working together as a group. GDSS have been developed in
response to the growing concern over the quality and effectiveness of meetings. In general, DSS
focus on individual decision making, while GDSS support decision making by a group.

57. Describe the three elements of GDSS.

Hardware, software tools, and people are the three GDSS elements. Hardware includes the
conference facility itself (room, tables, chairs) that is laid out to support group collaboration. It also
includes electronic hardware such as electronic display boards as well as audiovisual, computer, and
networking equipment. Software tools include electronic questionnaires, electronic brainstorming
tools, idea organizers, questionnaire tools, tools for voting or setting priorities, stakeholder
identification and analysis tools, policy formation tools, and group dictionaries. People include the
participants, a trained facilitator, and the staff to support the hardware and software.

58. Define and describe the capabilities of an executive support system (ESS).

Executive support systems (ESS) help managers make unstructured and semistructured decisions.
ESS focus on the information needs of senior management and combine data from both internal and
external sources. The ESS creates a generalized computing and communications environment that
can be focused on and applied to a changing array of problems. The ESS can help senior executives
monitor organizational performance, track activities of competitors, spot problems, identify
opportunities, and forecast trends.

59. What are the benefits of ESS? How do these systems enhance managerial decision
making?

Although ESS benefits are not easily measured, several benefits are mentioned in the chapter. ESS

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increase flexibility, provide the ability to analyze, compare and highlight trends, monitor
performance, can dramatically improve management performance, and can increase management's
span of control. ESS flexibility allows executives to shape the problems, using the system as an
extension of their own thinking. ESS offer executives the ability to analyze quickly and to compare
and highlight trends, freeing up executives and their staff for more creative analysis and decision
making. ESS can, and do, change the workings of organizations. Executives are better able to
monitor activities below them, allowing them to push decision making further down in the
organization while expanding the executive’s span of control.

70. As a manager or user of information systems, what would you need to know to participate
in the design and use of a DSS or an ESS? Why?

Managers and users of information systems would want to specify what kinds of decisions the
systems should support, and where the data for those decisions should come from. In a typical
enterprise, workers are capturing data, sharing data with other workers, retrieving insights from
captured data, and managing the information as per agreed upon guidelines. However, data are
turned into valuable business information and insight only when they can be easily captured,
systematically stored, properly retrieved, readily shared, and well-managed. Data management,
DSS, and ESS represent the cornerstone of any data warehousing program.

Data warehouses have become a critical component in enabling management to make decisions
quickly and accurately. For example, telecommunications companies use it to manage churn and
ensure the retention of their customers, while retail firms rely on datamining to maximize product
mix and shelf space, and governments use it to manage federal welfare and healthcare programs.
Across industries, data warehousing programs have achieved a 400 percent ROI, on average, while
increasing productivity, reducing speed of analysis, and revealing business opportunities that were
otherwise hidden from management among layers of unreachable data. However, if management
is not part of the design and use of a DSS or ESS, then this information may not be available or
utilized, and if not, the firm may not be able to gain or maintain competitive advantage. One thing
is for sure: the competition is using these systems to enhance decision making.

71. If businesses used DSS, GDSS, and ESS more widely, would they make better decisions?
Explain.

Competitiveness increasingly depends on the quality of decision making. So naturally, companies
often rely on their own history and their past transactions and activities to make future decisions.
When businesses make decisions, it is usually helpful to use a decision-support system and firm-
wide data. These systems can automate certain decision procedures, and they can offer
information about different aspects of the decision situation. They can also help managers
question existing decision procedures. It can be useful to explore the outcomes of alternative
organizational scenarios. And, of course, using GDSS can improve how groups make decisions,
and also improve the decision that might have been made by an independent person.

The size of the corporate information base is increasing at the rate of 400 percent every three
years. Until recently, the idea of analyzing years of accumulated transaction data in a single pass
seemed expensive and unachievable. In addition to the difficulties caused by data format
incompatibilities, the computational requirements would have consumed much of the company's
data processing capacity for days or even weeks. Analysis has been limited to fairly simple queries
run after hours against relatively small subsets of data. In recent years, scalable hardware and
software technologies have fueled data warehousing, enabling decision makers to unleash the
power of analysis provided as a result.

On the other hand, remember that these systems do not automatically lead to better decisions
unless the decision problem or situation is clearly understood and the systems are appropriately
designed.

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MBA Trim2-Mis Notes

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