Chapter 1

Introduction to IS
 Learning Outcome
At the end of this chapter, student should be able to:
1.Define the concepts of information system
2.The components of Information system
3.Identify various types of business
information systems
4.Discuss different of organization levels
5.Discuss the importance and benefits of
information system
 What is Information System
• Information systems can be defined technically as a set
of interrelated components that collect (or retrieve),
process, store, and distribute information to support
decision making and control in an organization.
• Information systems contain information about
significant people, places, and things within the
organization or in the environment surrounding it.
• Information we mean data that have been shaped into a
form that is meaningful and useful to human beings.
• Data, in contrast, are streams of raw facts representing
events occurring in organizations or the physical
environment before they have been organized and
arranged into a form that people can understand and use.
 What is Information System
• Using information systems effectively
requires an understanding of the
organization, management, and
information technology shaping the
systems. An information system creates
value for the firm as an organizational and
management solution to challenges posed
by the environment.
Example of Data and Information
A brief example contrasting information and data
may prove useful. Supermarket checkout counters
scan millions of pieces of data from bar codes,
which describe each product. Such pieces of data
can be totaled and analyzed to provide meaningful
information, such as the total number of bottles of
dish detergent sold at a particular store, which
brands of dish detergent were selling the most
rapidly at that store or sales territory, or the total
amount spent on that brand of dish detergent at
that store or sales region
 Four Functions of IS
Three activities in an information system produce the
information that organizations need to make decisions,
control operations, analyze problems, and create new
products or services. These activities are input, processing,
and output (see Figure 1.4).
Input captures or collects raw data from within the
organization or from its external environment.
Processing converts this raw input into a meaningful form.
Output transfers the processed information to the people
who will use it or to the activities for which it will be used.
Feedback, which is output that is returned to appropriate
members of the organization to help them evaluate or
correct the input stage.
 Four Functions of IS

❑Input : accepts raw data from outside system

❑Process : processes the raw data into information
❑Output : produces the results of the process
(information)
❑Storage : stores data, information, programs
 Example - Sales Order System
❑Input function – Receive Customer Order e.g.
Item code, quantities).
❑Process function – Calculate the total
payment
❑Output function – Generate the receipt
❑Storage function – Data (customer detail) and
information (total payment) stored for future
use.
 5 Components of an Information
System
1. Software
2. Hardware
3. Data
4. People
5. Procedures
1. Hardware
• Hardware consists of everything in the
physical layer of the information system.
• For examples: computers, networks,
communication equipment, scanners,
printers, digital capture devices, Global
Positioning Satellite (GPS) equipment and
other technology-based infrastructure.
1. Hardware
2. Software
❑The programs that control the
hardware and produce the desired
information or results.
❑Software consists of:
❑System Software - manages
the hardware components,
which can include a single
computer or a global network
with many thousands of clients.
❑Application Software -
programs that support day-to-
day business functions and
provide users with the
information they require.
3. Data
❑Data is the raw material that
an information system
transforms into useful
information.
• An information system can
store data in various
locations, called tables. By
linking the tables, the system
can display the specific
information that the user
needs—no more, and no
less.
 4. People
• People who have an interest in an information
system are called stakeholders.
• Stakeholders include the management group
responsible for the system, the users (sometimes
called end users) inside and outside the company
who will interact with the system, and IT staff
members, such as systems analysts, programmers,
and network administrators who develop and
support the system.
• Example - Inventory Control System
❑Users E.g. salespeople, clerical personnel, and the
store's manager
❑Operation staff - personnel operate the hardware and
software in the system
5. Procedures/Process
• Processes describe the tasks and business
functions that users, managers, and IT staff
members perform to achieve specific results.
Processes are the building blocks of an
information system because they represent
actual day-to-day business operations. To build
a successful information system, analysts must
understand business processes and document
them carefully.
• It describes in written documentation / manuals
or online reference material.
Business Functions
Business Functions
Applications of computer systems
• Applications mean the software that you use on
your computer.
• Software is a bundle of many codes called
application software.
• Computer applications are those which are made
to do a particular work, and we install those
applications in our computer and use that
application to do a specific work.
• There are many applications of computers, which
are used in many fields.
• Whatever you work on the computer, you do it
through an application.
Types of Businesses Information
System
Transaction Management
Processing Information
System (TPS) System (MIS)

Decision Knowledge
Support Worker
System (DSS) System
 Transaction Processing System (TPS)
• Definition: Transaction processing (TP) systems process
data generated by day-to-day business operations. TP
systems perform a series of tasks whenever a specific
transaction occurs.
• Examples: Customer order processing, accounts
receivable, and warranty claim processing, point-of-sale
system, payroll system, stock control system, airline
booking systems, sales order system.
• Used By: Operational staff
• Transaction processing (TP) systems are efficient
because they process a set of transaction-related
commands as a group rather than individually. To protect
data integrity, however, TP systems ensure that if any
single element of a transaction fails, the system does not
process the rest of the transaction.
Transaction Processing System (TPS)
For example, the payroll system illustrated in Figure 2.2, along
with other accounting TPS, supplies data to the company’s
general ledger system, which is responsible for maintaining
records of the firm’s income and expenses and for producing
reports such as income statements and balance sheets.

It also supplies
employee payment
history data for
insurance, pension, and
other benefits
calculations to the firm’s
human resources
function, and employee
payment data
Management Information System (MIS)
• Definition: A computer-based information system used
in business planning, control, decision making, and
problem solving.
• Used by: Middle management E.g. manager
• Examples. Inventory control MIS, Sales MIS
– Sales management systems – they get input from the
point of sale system, produce the monthly sakes
reports
– Budgeting management systems – gives an overview
of how much money is spent within the organization
for the short and long terms.
– Human resource management system – overall
welfare of the employees, staff turnover, etc.
Management Information System (MIS)
Figure 2.3 shows how a typical MIS transforms transaction-
level data from inventory, production, and accounting into
MIS files that are used to provide managers with reports.
Figure 2.4 shows a sample report from this system.
Figure 2.4 shows a sample report from this system.
 Knowledge Work System (KWS)
• Definition: It uses a large database called a
knowledge base that allows users to find information
by entering keywords or questions in normal English
phrases. A knowledge management system using a
mix of multimedia, including mathematical equations
if appropriate.
• Used By: Knowledge workers include programmers,
accountants, researchers, trainers, human resource
specialists, and other professionals.
• Purpose: Create and integrate knowledge
• Examples: Computer-aided design (CAD) and
Computer-aided manufacturing (CAM) systems,
Virtual Reality (VR) System
Knowledge Work System (KWS)
Decision Support System (DSS)
• Definition: Decision support helps users make
decisions by creating a computer model and applying
a set of variables.
• Used By: Middle and top management
• Purpose: Planning, organizing, controlling, making
decision (long-term)
• Example: A truck fleet dispatcher might run a series
of what-if scenarios to determine the impact of
increased shipments or bad weather. Alternatively, a
retailer might use what-if analysis to determine the
price it must charge to increase profits by a specific
amount while volume and costs remain unchanged.
The voyage-estimating DSS we have just described draws
heavily on models. Other business intelligence systems are
more data-driven, focusing instead on extracting useful
information from massive quantities of data.
 Decision Support System (DSS)
Example
Financial planning systems – it enables managers to
evaluate alternative ways of achieving goals. The objective
is to find the optimal way of achieving the goal. For
example, the net profit for a business is calculated using the
formula Total Sales less (Cost of Goods + Expenses). A
financial planning system will enable senior executives to
ask what if questions and adjust the values for total sales,
the cost of goods, etc. to see the effect of the decision and
on the net profit and find the most optimal way.
Bank loan management systems – it is used to verify the
credit of the loan applicant and predict the likelihood of the
loan being recovered.
 Organizational Level
• A typical organizational model identifies
business functions and organizational levels, as
shown in Figure 1-6.
 Organizational Level (Cont.)
Senior Makes long-range strategic decisions about products
Management and services as well as ensures financial performance
of the firm. Focus on the overall business enterprise
and use IT
to set the company’s course and direction.
Middle Carries out the programs and plans of senior
Managers and management.
Knowledge Knowledge workers provide support for the
Workers organization’s basic functions.
Operational Responsible for monitoring the daily activities of the
Employees/ business.
Operational Users who rely on transaction processing systems to
Management enter and receive data they need to perform their jobs.
 Benefits of Information System
Improved Services
• Can help to speed up the performance of the many
business processes in an organization.
• Can serve customers better by making transactions with
the organization easier, convenient and time-saving.
Better Information
• Information system can process data and turn them into
useful information which is necessary for good and
effective decision making. Information can be stored for
future use.
• With information systems which are integrated,
managers are able to retrieve company wide and cross-
functional information for decision making.
 Benefits of IS
Increased Productivity
• With the use of computers, the number of people
required to perform task can be reduced.
• With less staff, a large number of tasks can be done
effectively in a short period of time if computerized
information systems are used.
Saving Costs
• Increase in productivity through use of computer
systems, means that less staff are required to
perform a particular job.
• Reducing the number of staff for a job means
reducing for the business paying staff salaries.
End of Chapter 1