CHAPTER 1

INTRODUCTION TO MANAGEMENT INFORMATION SYSTEM (MIS)

Definition and Importance of MIS
The subject of management information system (MIS) has different meaning for different
people. The concept of MIS has evolved over a period of last two decades or so. The initial
management information systems were built to process transactional data of an organization
and to produce regular reports. The reports were not targeted and individuals picked the
required data from the report.
The information systems evolved further and produced different reports according to
requirements. Instead of user looking through the report for required data, the system
generated a report in a suitable format that created an impact on its user and provoked an
action, a decision or an investigation. Today, an information system has evolved to the stage
where they handle databases and facilitate decision-making.
Accordingly, definition of MIS has also evolved. There are many closely related definitions
in use. The terms MIS is synonymously used with terms the Information System (IS), the
Information and Decision System and the Computer based Information System.
 MIS is defined as an integrated system of man and machine for providing the
information to support the operations, the management, and the decision-making
functions in organizations.
 Management information system: It is a collection of people, procedures, software,
hardware and databases designed to generate information for managers.
An MIS deals with information that is systematically and routinely collected in accordance
with a well-defined set of rules. In other words, data collection is a planned activity for which
resources are allocated and rules are defined. The information provided by an MIS assists
managers in planning, organizing, staffing, coordinating, directing and controlling the
operations of an organization. The management experts have viewed these steps as
Management Control system.
In any organization that has planned activities leading to the achievement of the stated goals,
there is always a control process in place that measures progress towards these goals and
enables the manager to deduct the deviations from the original plan in time. It is the
responsibility of the management to take corrective actions before it is too late. The
deviations may be due to environmental changes or due to the mistakes made by people. An
MIS is concerned with planning and control. An MIS has large amount of data as its integral
part that is stored and managed by a data base management system.

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Characteristics of MIS
An MIS must have the following features:
1. It has its own environment
2. It has sub-systems.
3. It has boundaries and also adaptive in nature.
4. It must be capable of handling voluminous data. The data as well as transactions must
be validated.
5. It must be able to perform operations on the data irrespective of the complexity of the
operations. Often time multi-dimensional analysis is required. As MIS can‟t be
developed without making use of the various theories, principles, formulae, So MIS is
viewed as
6. It is a multi-Disciplinary Subject.
7. An MIS should facilitate quick search and retrieval of information. An MIS must
support mass storage of data and information.
8. The information must be communicated to the recipient in time. Moreover, the
communicated information must be relevant.
9. Because of the integration concepts of MIS, there is an opportunity to avoid
duplication and redundancy in data gathering, storage and dissemination.
Subsystems of MIS
MIS is viewed as a federation of sub-system, developed, & implemented as needed but
conforming to an overall plan. For example, each organization will consist of sub-systems
like production, inventory, finance, marketing etc. There could be functional sub systems as
well as activity subsystems.
The two approaches to defining the subsystems of MIS are according to the organizational
functions which they support and according to the managerial activities for which they are
used.
A). Organizational functions subsystems
Because organizational functions are somewhat separable in terms of activities and are
defined managerially as separate responsibilities, MIS may be viewed as a federation of
information system-one for each major organizational function. There may be common
support systems used by more than one subsystem, but each functional system is unique in its
procedures, programs, models, etc.
Types of Information System
There are various types of information systems in a business as listed below.

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1. Transaction Processing Systems (TPS)
A TPS is used primarily for record keeping which is required in any organization to conduct
the business. Examples of TPS are sales order entry, payroll, and shipping records etc. TPS is
used for periodic report generation in a scheduled manner. TPS is also used for producing
reports on demand as well as exception reports.
2. Decision Support System (DSS)
DSS serves the management of an organization. A decision support system has sophisticated
data analysis tools, which support and assist all aspects of problem specific decision-making.
DSS may use data from external sources such as current stock prices to enhance decision-
making. DSS is used when the problem is complex and the information needed to make the
best decision is difficult to obtain and use. DSS is developed with the help of decision
makers. DSS helps in decision-making process and does not make any decision.
3. Executive Information System (EIS)
An Executive Information System is also called Executive Support System. Senior managers
of an organization use the EIS. Therefore, it must be easy to use so that executives can use it
without any assistance. EIS can do trend analysis, exception reporting and have drill down
capabilities. The results are usually presented in a graphical form tailored to executive‟s
information needs. EIS has on-line analysis tools and they access a broad range of internal
and external data.
4. Management Information Systems (MIS)
MIS provides the management routine summary of basic operations of the organization. The
basic operations are recorded by the TPS of the organization and MIS consolidates the data
on sales, production etc. MIS provides routine information to managers and decision makers.
The main objective behind installing an MIS in the organization is to increase operational
efficiency. MIS may support marketing, production, finance etc.
5. Work Flow System
A workflow system is a rule based management system that directs, coordinates, and
monitors execution of an interrelated set of tasks arranged to form a business process. A
workflow system is also known as a document image management system. For example, a
workflow system is used by banks for loan sanction process. An applicant fills out an
electronic application form for a bank loan at a bank‟s web site. The application is then
upload to the bank loan officer‟s site. The loan officer conducts an interview and fills in his
feedback and passes the application form to the credit check unit. The credit unit checks the
credit limit and fills in the details. The application is now complete and a final decision is
made.

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There are three types of workflow software. Administrative workflow systems focus on the
tracking of expense reports, travel requests, massages. An Ad-hoc workflow system deals
with the shaping of product, sales proposals, and strategic plans. Production workflow
systems are concerned with mortgage loans and insurance claims. A workflow system may be
Internet based and may be combined with e-mail. A workflow system may be based on
client/server architecture that may use a database/file server.
6. Enterprise Resource Planning (ERP)
ERP system is a set of integrated programs capable of managing a company‟s vital business
operations for an entire multi-site, global organization.
7. Expert Systems
The system has the ability to make suggestions and act like an expert in a particular field. An
expert system has an extensive knowledge base.
The Evolution and Characteristics of the Information Age
As far as history of computing is concerned, people tried to invent a computing machine as
early as 800 BC. Abacus is one of the oldest computing devices that are still in use. Every
child in
China learns to use abacus in school. Our ancestors had built various other mechanical
machines using gears. All these efforts laid foundation for better computing machines. The
diode tubes, transistors, integrated circuits (ICs) and now very large integrated circuits
(VLSI) are the electromechanical devices that have been invented over a period of time.
The technology has improved since World War II many folds. The improved technology has
been the key factor in making better computing devices. Along with improvement in
computing technology, the communication technology has also improved in parallel. The
software also improved and became user friendly. The spreadsheets, the word processing
packages, database packages, simulation software packages, and decision support systems
made IT popular among managers as well. The terms Information Systems (IS) and
Information Technology (IT) are used synonymously. IS has evolved considerably since
1960.
Short summary of the Evolution of Computer Based Information Systems
1. Data Processing (DP) during the first half the twentieth century
2. Management Information Systems (MIS) 1964
 The MIS concept recognized that computer applications should be implemented for
the primary purpose of producing management information.
 MIS come to play a much larger role in the organizational life, as compared to the
1950‟s. It has moved into managerial control and further into influencing the “core”
institutional activities.

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3. Decision Support Systems (DSS) 1971
 A DSS is an information-producing system aimed at a particular problem that a
manager must solve and at decisions that the manager must make.
 Notes distinction: MIS: Organizational/group – general
 DSS: Individual - specific
4. Office Automation (OA) 1974
 Facilitates communication
 Increases productivity among managers and office workers through the use of
electronic devices.
 Includes a variety of applications such as video conferencing, voice mail, electronic
mail, desktop publishing...etc.
5. Artificial Intelligence (AI)/ Expert Systems (ES) - 1990s
 AI is an application that enables the computer system to perform some of the same
logical reasoning tasks as humans.
 An expert system is a special subclass of AI that functions as a specialist in a certain
field. For example, it can provide management consultancy.
 Limitation of ES: It doesn‟t improve its intelligence over time. One way to overcome
this limitation is to use neural networks, electronic and mathematical analogs of the
human brain.
What Is Information Technology?
An Information System/ Information Technology is an arrangement of people, data,
processes, interfaces, networks and technology that interact for the purpose of supporting &
improving both day-to-day operations in a business (sometimes called data processing) as
well as supporting the problem solving and decision making needs of management
(sometimes called information services).
Information Technology (IT) has become a strategic necessity. Unless we believe in IT and
act on it, there is every chance of becoming a footnote in the records of history. IT has
become a vital component of successful businesses and organizations. Managers are expected
to identify opportunities to implement information systems to improve the business
processes. Managers are also required to lead IS projects in IT. Information Technology has
become a major facilitator of business activities. It is also a catalyst of fundamental changes
in the structure, operations and management of organizations.
IT can be used to:
 Perform high-speed, high-volume, numeric computations.
 Provide fast, accurate and inexpensive communication within and between
organizations.

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  Store huge amounts of data in an easy-to-access yet small space and allow quick and
easy access.
 Automate semiautomatic business processes and manually done tasks.
IT has been used for improving productivity, reducing cost, enhancing decision making
process, enhancing customer relationships, and developing new strategic applications. The
business paradigm has completely shifted from being sellers‟ market to buyers‟ market.
Customers have become the focal point of any business. The business environment is no
more as stable as it used to be and has become much more competitive. It became mandatory
on the part of the organizations to make full use of IT to survive. IT has become one of the
standard components of an organization.
The individuals are supported by IT to fulfill their roles. The management and the business
processes have become IT oriented. Organization structure and strategy are also supported by
IT.
Whenever an external or internal pressure is felt by an organization, IT helps the organization
to plan critical response activities. The changed government policy may create a pressure on
an organization. But such a pressure is distributed over a long period as government gives
enough time to organizations to respond to changed policies. But if there is a change in the
behavior of consumers, the organization should be able to identify the change. Moreover,
they should be able to come up with a solution fast. IT helps an organization to anticipate and
stay ahead of problems. The organization can take proactive measures rather than firefighting
measures.
An organization can use an IT supported strategic system to increase their market share. IT
can help an organization negotiate better with their suppliers. Maintaining and improving
quality of products and processes in an organization needs regular support, vigilance, and
innovation. IT has been used extensively for productivity improvement, reducing inventory
and maintaining quality. Management Information System (MIS) and decision support
system (DSS) have been used to help management in decision-making process.
Business process reengineering (BPR) has become the need to the day for every business;
BPR involves changing business processes in an innovative way. IT plays a major role in
BPR.
Internet and Intranet help an organization in changing its business processes to reduce cycle
time and time to market a product. IT makes information available to employees with
different level of access. As a result, employees can be given more independence to make
decisions. The ERP, a strategic tool, heavily uses IT to integrate business processes of an
organization.

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The Emergence of Information Technology as a Strategic Issue
Although information systems of some form or another have been around since the beginning
of time, information technology (IT) is a relative newcomer to the scene. The facilities
provided by such technology have had a major impact on individuals, organizations and
society. There are few companies that can afford the luxury of ignoring IT and few
individuals who would prefer to be without it . . . despite its occasional frustrations and the
fears it sometimes raises.
An organization may regard IT as a „necessary evil‟, something that is needed in order to stay
in business, while others may see it as a major source of strategic opportunity, seeking
proactively to identify how IT-based information systems can help them gain a competitive
edge. Regardless of the attitude taken, once an organization embarks on an investment of this
kind there is little opportunity for turning back.
As IT has become more powerful and relatively cheaper, its use has spread throughout
organizations at a rapid rate. Different levels in the management hierarchy are now using IT
where once its sole domain was at the operational level.
The aim now is not only to improve efficiency but also to improve business effectiveness and
to manage organizations more strategically.
As the managerial tasks become more complex, so the nature of the required information
systems (IS) changes – from structured, reutilized support to ad hoc, unstructured, complex
enquiries at the highest levels of management.
IT, however, not only has the potential to change the way an organization works but also the
very nature of its business. Through the use of IT to support the introduction of electronic
markets, buying and selling can be carried out in a fraction of the time, disrupting the
conventional marketing and distribution channels (Malone et al., 1989; Holland, 1998).
Electronic data interchange (EDI) not only speeds up transactions but allows subscribers to
be confident in the accuracy of information being received from suppliers/buyers and to reap
the benefits of cost reductions through automated reordering processes.
On a more strategic level, information may be passed from an organization to its suppliers or
customers in order to gain or provide a better service (Cash, 1985). Providing a better service
to its customers than its competitors may provide the differentiation required to stay ahead of
the competition in the short term. Continual improvements to the service may enable the
organization to gain a longer-term advantage and remain ahead.
The rapid change in IT causes an already uncertain business environment to be even more
unpredictable. Organizations‟ ability to identify the relevant information needed to make

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important decisions is crucial, since the access to data used to generate information for
decision making is no longer restricted by the manual systems of the organization.
IT can record, synthesize, analyze and disseminate information quicker than at any other time
in history. Data can be collected from different parts of the company and its external
environment and brought together to provide relevant, timely, concise and precise
information at all levels of the organization to help it become more efficient, effective and
competitive.
Information can now be delivered to the right people at the right time, thus enabling well
informed decisions to be made. Previously, due to the limited information-gathering
capability of organizations, decision makers could rarely rely on up-to-date information but
instead made important decisions based on past results and their own experience.
This no longer needs to be the case. With the right technology in place to collect the
necessary data automatically, up-to-date information can be accessed whenever the need
arises. This is the information quality of IT about which Zuboff (1988) writes so eloquently.
It is not surprising then that there is resistance to the introduction of IT when it has the
potential of changing the balance of power within organizations. Unless the loss in power,
through the freeing up of information, is substituted by something of equal or more value to
the individuals concerned then IT implementations may well be subject to considerable
obstruction.
Developments in IT have caused revolutionary changes not only for individual organizations
but for society in general. In order to understand the situation we now find ourselves in with
respect to IT, it is as well to reflect on their developments.

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