MANAGEMENT INFORMATION SYSTEMS – Dept of MBA SREC

UNIT – I
MIS An overview - Introduction, Need for MIS and IT nature and scope of MIS, MIS
characteristics, Structure of MIS, role of MIS in global business. Challenges of
Managing MIS.

INFORMATION SYSTEMS : 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.

MANAGEMENT INFORMATION SYSTEM: Management information system (MIS) refers to

the processing of information through computers and other intelligent devices to manage and support
managerial decisions within an organization.

1.1 INTRODUCTION :
The purpose of an information system is to help an organization manage its business better. With ever
increasing complexities of business as well as management, now-a-days, information systems are not
merely required for improving efficiency of business operations; rather these systems are used for
effective business decisions and achieving strategic advantage. Given the increasing role of
information technology (IT) in an enterprise, the functions of information systems are changing. It is
transforming from a technology provider to a strategic partner and from a resource to a strategic tool.
Because of the increasing use and participation of IT in all processes and projects, all the managers,
irrespective of their functional areas, need to understand, deploy and effectively manage information
systems/information technology.

1.2 NEED OF MIS:

Now-a-days, information systems and information technology have become a vital component of any
successful business and every manager is supposed to be equipped with the knowledge of information
systems (ISs) and information technology (IT). Further, information system, nowadays, is regarded as a
major functional area just like any other functional areas of a business organization like marketing,
finance, operations, and human resources, etc. Also, information technologies including Internet based
information systems play an increasingly important role in organizations.

The private, public or government, all managerial functions are performed through decision-making;
for taking rational decision, timely and reliable information is essential and is procured through a
logical and well-structured method of data collecting, processing and disseminating of information to
decision-makers. Such a logical and well structured method in the field of management is widely
known as management information system (MIS).

MIS has assumed all the more importance in today’s global business environment because of the
following three main challenges:

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 Because of liberalization and globalization, in which organizations are required to compete not
locally but globally, a manager has to take quick decisions, otherwise his business will be taken
away by his competitors.

 In this information age, where information is doubling up every 18 months, a manager has to
process voluminous data; failing which he may end up taking a wrong decision that may prove
costly for the company.

 Third, because of rapid increase and advances in Information Technology, nowadays, IT is no

longer a luxury; rather it has become a necessity. IT can now be used as an enabler in achieving
business strategic advantages. In the absence of which the organization may loose on such
benefits and may even fail to survive in the long run.

Capabilities of Management Information Systems

Management information systems are based on the systems approach and use of Information and
Communications Technology (ICT). The various capabilities of MIS include the following:

• Automating business processes of an organization

• Capturing data from different sources accurately and quickly
• Performing high-speed, high-volume numerical computations and process voluminous data quickly
• Providing fast, accurate information, communication and collaboration within and among
organizations
• Storing huge amounts of information in a small, easy to access space
• Enabling fast and inexpensive access to large amount of information worldwide
• Analysis and interpretation of vast amounts of data quickly and efficiently
• Increasing the efficiency and effectiveness of managers working in groups in an organization or in
several locations anywhere in the world
• Allowing an organization to become more flexible and responsive

Benefits of Management Information Systems

MIS provides a large number of benefits to an organization, which include:

• Reduced inventory
• Reduced carrying cost of inventory
• Reduced manpower
• Reduced cycle time
• Reduced data transfer time
• Reduced errors
• Reduced quality costs
• Improved information accuracy
• Improved decision making capability
• Improved customer satisfaction

These information systems are just not the small applications of technology; rather nowadays,
organizations are implementing large enterprise wide systems that are highly integrated and complex
systems that are taken as complete business transformation systems.

The manager needs to understand the following factors :

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• The basic concepts of information systems and information technology

• The planning of information systems
• The development of information systems
• Business applications of information systems
• The challenges and issues in managing ISs/IT

Figure 1.1 illustrates the major areas that any manager needs to know about information systems. The
understanding of these areas will certainly help any business professional, manager, entrepreneur or a
business analyst to become a better user, developer, and manager of information systems.

1.3 NATURE AND SCOPE OF MIS :

The concept of MIS is interdisciplinary in nature, i.e., it has borrowed its concepts from a large number
of disciplines like computer science, operations research, management science and behavioural
sciences, etc. (Figure 1.14).

Because of its interdisciplinary nature, MIS is neither termed as a pure science nor an art; rather it is
considered as a combination of both. An information system is a logical system, which is concerned

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with ‘how’ something is being accomplished and thus may be differentiated from a physical system,
which is the process itself and is concerned with the content or ‘what’ is going on. MIS, in fact,
encompasses both physical system and information systems.

There has been a lot of debate on the issue whether MIS is more management-oriented or computer-
oriented. Though there are advocates of both the sides, MIS should be considered more of a
Management subject than of computers because of simple logic that computers are just a tool in the
hands of managers. Computers are used for their characteristics like accuracy, speed and capacity to
handle large amount of data.

There exists a variety of information systems that exist which may be manual information systems,
where managers use tools such as pencils, paper or calculators to convert raw data into information.
However, because of high potential of computers and communications technology (CCT) organizations
in the future would like to make use of advances of CCT. Today, MIS is not a standalone computer-
based information system; rather it is networked where computers can exchange information quickly at
a distance.

Nowadays, organizations are moving towards digital organizations where all or many of the business
activities are performed electronically and a much broader term is being used, which is known as e-
business.

The term e-commerce refers to the entire online process of developing, marketing, selling, delivering,
servicing and paying for products on the Internet; the term of e-business is a more general one and it
refers to the style of operating an organization by making extensive use of information technology
within critical business processes, such as designing products, obtaining suppliers, manufacturing,
selling, fulfilling orders and providing services through the extensive use of computer and
communication technologies and computerized data.

1.4 MIS CHARACTERISTICS

A management information system has certain characteristics, which are discussed below.

Systems approach

The information system follows a systems approach. The systems approach implies dealing of hole or
something by approach to the study of system and its performance in the light of the objective for
which it has been constituted. In other words, systems approach means taking a comprehensive view or
a complete look at the interlocking sub-systems that operate within an organization.

Management-oriented

MIS is management-oriented that implies top-down approach should be followed. Top-down approach
suggests that the system development starts from the determination of management needs and overall
business objectives. The MIS development plan should be derived from the overall business plan.
Management-oriented characteristic of MIS also implies that the management actively directs the
system development efforts. In MIS development, a manager should spend a good amount of his/her
time in system design. To ensure that the implemented system meets the specifications of the system,
continued review and participation of the manager is necessary.

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Need-based

MIS caters to the specific needs of managers at different levels of the management hierarchy. MIS
design and development should be as per the information needs of managers at different levels, viz.,
strategic planning level, management control level and operational control level.

Exception-based

MIS provides information on the exception-based reporting principle so as to initiate a control action.
Exception-based reporting means an abnormal situation, i.e. the maximum, minimum or expected
values vary beyond acceptable limits. In such situations, there should be exception reporting to the
decision-maker at the required level.

Future-oriented

MIS should looks at the future. In other words, MIS does not merely provide past or historical
information. Rather, it provides information on the basis of projections based on which actions may be
initiated.

Integrated

Integration is a necessary characteristic of a management information system. It is significant because

of its ability to produce more meaningful information. For example, in order to develop an effective
production scheduling system, it is necessary to balance such factors as:
• set-up costs
• workforce
• overtime rates
• production capacity
• inventory level
• capital requirements
• customer services
A system that ignores any one of these elements, for example, inventory levels, is not providing the
management with an optimal picture. The cost of carrying excess inventory may more than offset the
other benefits of the system.

Common data flows

Because of the integration concept of MIS, there is an opportunity to avoid duplication and redundancy
in data gathering, storage and dissemination. System designers are aware that a few key source
documents account for much of the information flow. The development of common data, flow is an
economically sound and logical concept, but it must be viewed in a practical light.

Long-term planning

MIS is developed over relatively long periods. Such systems do not develop overnight. A heavy
element of planning is involved. The MIS designer must have the future objectives and needs of the
company in mind. The designer must avoid the possibility of the system going obsolete before its time.
Sub-system concept

The process of MIS development is quite complex and one is likely to lose insight frequently. Thus, the
system, though viewed as a single entity, must be broken down into digestible subsystems which are
more meaningful at the planning stage.

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Central database

A central database holds the functional systems together. Each system requires access to the master file
of data covering inventory, personnel, vendors, customers, etc. If the data is stored efficiently and with
common usage in mind, one master file can provide the data needed by any of the functional systems. It
seems logical to gather data once, to properly validate it and to place it on a central storage medium that
can be accessed by any other subsystem.

1.5 STRUCTURE OF MIS

Structure of MIS is a difficult concept to understand because there is no standard or universally

accepted framework for describing management information system. The question, as to what does an
entity look like, should ideally speaking, be answered by giving its outline or structural specifications.

However, some entities may have well-defined outlines or other structural specifications, whereas some
may not. It is because of this reason that structure of MIS is difficult to describe.

Different approaches may be used while describing an entity. For example, a car may be perceived in a
number of different ways; by describing its physical characteristics, i.e. its shape, colour, seating
capacity, doors, etc., Car type, as passenger or personal . Each of these approaches would provide an
understanding to the person about the car.

MIS structure may be described by following a variety of different approaches:

• Physical components
• Information system processing functions
• Decision support
• Levels of management activities
• Organizational functions

Based on Physical Components

Structure of MIS may be understood by looking at the physical components of the information system
in an organization. The physical components of an organizational information system may be hardware,
software, database, manual procedures and operating persons. A brief description of these components
has already been outlined under components of MIS.

Information System Processing Functions

Information system structure can also be understood in terms of its processing functions. The functions
of an MIS explain what the system does. The main processing functions of information systems are
described below.

• To process transactions: Information systems process transactions, where transaction may be

defined as an activity taking place in an organization. For example, making a purchase or a sale or
manufacturing a product. It may be within the organization or may be external in nature.

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• To maintain master files: Information systems create and maintain master files in an organization. A
master file stores relatively permanent or historical data about organizational entities. For example, data
processing to prepare an employee’s salary requires data items for the employee’s basic pay,
allowances, deductions, etc.

• To produce reports: Reports are significant products of an information system. Many reports are
produced on a regular basis, which are called scheduled reports. An information system also produces
reports on ad hoc requests. These are known as special or ad hoc reports.

• To process enquiries: An information system is used to process enquiries. For processing such
queries, the information system uses its database. These may be regular enquiries with a pre-defined
format or ad hoc enquiries.

• To process interactive support applications: The information system contains applications designed
to support systems for planning, analysis, and decision-making. Various types of models are used for
processing such applications. The mode of operation, as the name suggests, is interactive, in which the
user responds to questions and requests for data and receives results so as to make changes in the inputs
until an optimum solution is found.

Decision Support

The structure of MIS can also be described on the basis of its support in decision-making in an
organization. Decisions vary with respect to the structure that can be provided for making them. A
highly structured decision can be pre-planned, whereas a highly unstructured decision cannot.
However, it should not be taken to necessarily mean that the decision is automated, although many
decisions are automated. Some decisions are more or less structured and have some elements that are
decisions are called semi-structured decisions, which can not be automated.

Levels of Management Activities

Management information systems support various management activities in an organization. This

implies that the structure of an information system can be categorized in terms of levels of management

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activities. Anthony, on the basis of activities, has classified the management hierarchy into three levels.
These are:

1. Strategic planning level

2. Management control level
3. Operational control level

Strategic planning deals with long-range considerations. The decisions include the choice of business
directions, market strategy, product mix, etc.

Management control level includes acquisition and organization of resources, structuring of work, and
acquisition and training of personnel.

Operational control is related to short-term decisions for current operations. Pricing, production levels,
inventory levels, etc., are a result of operational control activities. Management activities and
information processing for the three levels are interrelated.

Organizational Functions

The structure of management information system can also be described in terms of the organizational
functions. Though there is no standard classification of functions, a typical set of functions in a
manufacturing organization includes production, sales and marketing, finance and accounting,
materials, personnel and information systems.

Moreover, a management information system is essentially an integration of information systems that

are designed to support the functional sub-systems of the organization.

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1.6 ROLE OF MIS IN GLOBAL BUSINESS

MIS plays a crucial role in almost all kinds of organizations irrespective of their size and nature of
business. MIS has evolved from traditional electronic data processing (EDP) systems to highly
integrated information systems (enterprise information systems like ERP, CRM, SCM). Many advances
in IS/IT have led to a fundamental shift in the role of information systems. They support the business
processes of an organization, decision-making by managers and the strategies of an organization for
gaining competitive advantage.

The Information systems have played a major role in automating business transactions, streamlining
routine operations and have also helped organizations to take quick and well informed decisions and
thus enable the organizations to have better relation of customers and suppliers. In view of the role,
integrated MIS can play; organizations are implementing these systems replacing their old or legacy
systems.

The role of MIS in impacting the business globally can be understood by the following discussion.

(i) Integration of functional areas

Integrated information systems play a very important role in integrating the various functional areas of
a business organization. Because a highly integrated information systems like ERP are designed on the
premise of a common database and a common interface for all the functional areas and thus have the
ability to automatically update data among related functions or activities.

For example, when a customer places an order and the order is entered into the system (either online
or offline), it triggers ( initiates ) many actions across various departments or functional areas like
inventory management; production planning; finance; marketing and so on.

The invoices are generated, production schedule is planned, the inventory status is verified; the items,
if not available in the stock, are ordered; and the customer is informed about the likely date of the
delivery of the ordered item. All these actions are taken automatically and data updation happens
instantaneously. This role of ERP in integrating various functional areas leads to improved
responsiveness across the organization, and thus enables better decision-making and problem solving
in organizations. This, in turn, leads to reduced lead time (the elapsed time between placing an order
and receiving it); reduced cycle time (the time between placing an order and delivery of the product);
efficient use of resources; on time delivery of products; transparency; and overall customer
satisfaction.

(ii) Reengineering of business processes

Highly integrated information systems like ERP Systems are process-oriented and one of the
prerequisites for the implementation of ERP systems is business process re-engineering (BPR). Thus
ERP Systems force the organizations to re-engineer or redesign their obsolete function-oriented
business processes. To implement ERP System, organizations have to either adopt ERP-based
processes or modify ERP System so as to match its existing business processes. Since ERP Systems are
designed and developed on the basis of the best practices of industry, it is generally recommended to
adopt ERP processes.

(iii) Standardization of systems and procedures

Highly integrated information systems, which are based on an integration approach, enables an
organization to follow standardized systems and procedures across the organizational units. This brings

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about consistency in the entire organization. This becomes all the more important for the organizations,
which have either acquired other company or got merged with some other company. ERP ensures that
the new company after the acquisition or merger uses the same information systems throughout and
follows the similar procedures.

(iv) Networked Business

The integration of highly integrated information systems nowadays are extended beyond the boundaries
of an organization leading to network with the business partners of the organization like Supply Chain
Management (SCM) System; Customer Relationship Management (CRM) System, etc. This network
with the partners of the organization enables it to exchange electronically various business documents
like purchase orders, sales order, invoices, billing, etc.

1.7 CHALLENGES OF MANAGING INFORMATION SYSTEMS

There are many challenges in managing information systems in organizations, which are important for
a manager to understand.

Understanding the need and aligning MIS with business

The success of MIS depends significantly on understanding the need for an Information System and
aligning business with IS/IT. Generally, information systems are developed or acquired without
understanding the specific needs of the organization for such systems. The goals of the information
system and the reasons for implementing it, along with the sub-systems or major tasks involved, are not
always clearly defined. Many a time IS/IT systems are conceived which may not be aligned with the
mission and goals of the organization. As a result, the ISs may not be contributing any value to the
organization.

Requirement analysis
Many a time, the manager (user) is not very clear about his/her requirements and thus it is left to the IT
specialist, who does not know much about the business. Thus there remains a communication gap
between the user and the IT specialist. As a result, the newly developed and implemented information
system does not cater to the needs of the user.

Re-engineering of business processes

The automation of the business process may not make the operation efficient and effective; rather it is
redesigning of the business processes that is more important to improve the performance of the
business. Re-engineering of the business processes would change the structure as well as the way an
organization does its business and thus leading to change in the organizational culture.

Change management
Many IS/IT systems are considered as IT solutions and are not considered as a part of the business
solution and hence there is no change management strategy in place. Integrated information systems
like ERP Systems, being a transformation and an expensive solution, is not an easy decision, and thus
needs to be dealt with great care. If you do not do ERP properly, you can kill your company,
guaranteed.

Security and ethical issues

Security and ethical issues are other challenges in managing information systems. There is always a
threat to the security of an information system, which needs to be managed to protect data resources in
an organization. Similarly managers are often challenged by the ethical responsibilities generated by
the use of information systems/technology.

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