MANAGEMENT INFORMATION

SYSTEMS

PART II

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STUDY TEXT
 MANAGEMENT INFORMATION SYSTEM

KASNEB SYLLABUS

GENERAL OBJECTIVE
This paper is intended to equip the candidate with knowledge, skills and attitudes that will
enable
him/her to apply information communication technology (ICT) to enhance business and other
operations.

LEARNING OUTCOMES
A candidate who passes this paper should be able to:
 Effectively use ICT facilities in an organisation
 Apply the knowledge of ICT strategy and its role in facilitating competitive -
advantage in business
 Use data communication networks, the Internet and e-commerce in optimizing
business opportunities
 Implement information systems' security, controls and social ethical issues required in
a business environment
 Implement ICT governance and risk management principles in business

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CONTENT

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1. Introduction to information communication technology (ICT)

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- Overview of computer systems

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- Computer hardware

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- Computer software

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- Programming languages

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- ICT personnel and information communication technology hierarchy
- Role of ICT in business environments .s
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- Information centres
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- Factors that impact on ICT

2. ICT governance
- Corporate governance and ICT governance
- Monitoring of controls and risks
- Policies and procedures
- ICT management practices
- Impact on ICT compliance with professional standards and codes

3. Systems development
- General systems theory
- Role of management in systems development
- Systems development approaches
- Systems development life cycle
- Rapid applications development
- Business process re-engineering

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 MANAGEMENT INFORMATION SYSTEM

- Systems development constraints

- Acquisition of ICT assets

4. Information systems in an enterprise

- Components of an information system
- Types of information systems
- Systems in a functional perspective
- Enterprise applications and the business process integration
- Outcome measurement of ICT infrastructure

5. Information systems architecture

- Nature and types of information y r-
- Attributes of information
- Files and file structure
- File organisation methods
- Database management systems
- Characteristics, importance and limitations of database systems
- Data warehousing
- Transaction processing phases in business systems

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- File processing modes

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6. Data communication and computer networks

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- Principles of data communication and computer networks

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- Data communication devices

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- Data transmission characteristics

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- Types of networks

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- Network topologies
- Network/internet protocols .s
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- Benefits and challenges of networks in an organisation

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- Limitations of networks in an organisation

- Cloud computing
- Internet of things

7. e-Commerce
- Impact of the internet on business
- Models of e-commerce
- E-commerce enabling software
- Business opportunities in e-commerce
- Challenges of e-commerce
- Mobile computing

8. Information systems strategy

- Overview of business strategy hierarchy
- The strategic process and information systems planning
- Development of information systems strategy
- Aligning information systems to the organisation's corporate strategy
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- Managing information systems strategy

- Information systems for competitive advantage

9. ICT Risk management

- Risk management overview
- Risk assessment and analysis methodologies
- Controls and countermeasures
- Risk monitoring and communication
- Disaster recovery and business continuity planning
- Information systems security management

10. Legal, ethical and social issues in management information systems

- Management information systems ethical and social concerns
- The moral dimension of management information systems
- The legal issues in management information systems

11. Emerging issues and standards

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TABLE OF CONTENTS PAGE

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Topic 1: Introduction to information communication technology(ICT)…………..………...5

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Topic 2: ICT governance……………………………………………………………….…...59

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Topic 3: Systems development………………………………………………… .………….66

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Topic 4: Information systems in an enterprise……………………………………….…......106

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Topic 5: Information systems architecture………………………………………..……..….131
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Topic 6: Data communication and computer networks…………..........................................153
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Topic 7: E-commerce……………………………………………………..………...….…...188
Topic 8: Information systems strategy………………………………………………..….…204
Topic 9: ICT risk management………………………………………………………….…..279
Topic 10: Legal, ethical and social issues in management information system……...…..…334
Topic 11: Emerging issues and trends…………………………………...…………………..352

Revised on: July 2018

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 MANAGEMENT INFORMATION SYSTEMS

TOPIC 1

INTRODUCTION TO INFORMATION COMMUNICATION

TECHNOLOGY
Introduction

The primary objective of an organization is to satisfy the needs of its clients. It is supposed to be
effective and efficient whether it is profit motivated or not. These objectives are majorly
achieved through computerization of the systems, which are fast and economical to
organizations.

KEY TERMS

Computer - It may be defined as a device that works under the control of stored programs
automatically accept, store and process data to produce information that is the result of that

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processing.

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Input devices - Enters programs and data into a computer system
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Central Processing Unit (CPU) - This is the part of the computer that processes data.
Output devices - They display information processed by the computer system.
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Hardware - Refers to the physical, tangible computer equipment and devices

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Software - This is a detailed step-by-step sequence of instructions known as programs which

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guide computer hardware

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Multiprogramming - Multiprogramming is a rudimentary form of parallel processing in which

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several programs are run at the same time on a uniprocessor. Since there is only one processor,
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there can be no true simultaneous execution of different programs. Instead, the operating system
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executes part of one program, then part of another, and so on. To the user it appears that all
programs are executing at the same time.

Multiprocessing - Multiprocessing is the coordinated (simultaneous execution) processing of

programs by more than one computer processor. Multiprocessing is a general term that can
mean the dynamic assignment of a program to one of two or more computers working in tandem
or can involve multiple computers working on the same program at the same time (in parallel).

Multitasking - In a computer operating system, multitasking is allowing a user to perform more

than one computer task (such as the operation of an application program) at a time. The
operating system is able to keep track of where you are in these tasks and switch from one task
to the other without losing information. Microsoft Windows XP, Vista , IBM’s OS/390, and
Linux. are examples of operating systems that can do multitasking (almost all of today’s
operating systems can). When you open your Web browser and then open word at the same
time, you are causing the operating system to do multitasking.

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Multithreading - It is easy to confuse multithreading with multitasking or multiprogramming,

which are somewhat different ideas. Multithreading is the ability of a program or an operating
system process to manage its use by more than one user at a time and to even manage multiple
requests by the same user without having to have multiple copies of the programming running in
the computer

OVERVIEW OF COMPUTER SYSTEMS

What is a computer?
A computer is an information-processing machine. It may also be defined as a device that works
under the control of stored programs that automatically accept, store and process data to produce
information that is the result of that processing.
The forms of information processed include:

 Data – e.g. invoices, sales ledger, purchase ledger, payroll, stock controls, etc.
 Text – widely available in many offices with microcomputers
 Graphics – e.g. business graphs, symbols

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 Images – e.g. pictures

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 Voice – e.g. telephone
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Processing includes creating, manipulating, storing, accessing and transmitting of data.
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Why use computers?

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Use of computers has become a necessity in many fields. Computers have revolutionized the
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way businesses are conducted. This is due to the advantages that computer systems offer over
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manual systems.
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The advantages include:

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 Speed – Computers have higher processing speeds than other means of processing,
measured as number of instructions executed per second.
 Accuracy – Computers are not prone to errors. So long as the programs are correct, they
will always give correct output. Computers are designed in such a way that many of the
inaccuracies, which could arise due to the malfunctioning of the equipment are detected
and their consequences avoided in a way that is completely transparent to the user.
 Consistency – Given the same data and the same instructions, computers will produce
exactly the same answer every time that particular process is repeated.
 Reliability – Computer systems are built with fault tolerance features, meaning that
failure of one of the components does not necessarily lead to failure of the whole system.
 Memory capability – A computer has the ability to store and access large volumes of
data.
 Processing capability – A computer has the ability to execute millions of instructions per
second.
 Storage – Computers occupy less storage space compared to manual records.

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COMPUTER APPLICATION AREAS

Some of the areas that computers are used include:

• Communication – digital communication using computers is popular and is being

adopted worldwide as opposed to analogue communication using the telephony system.
Computers have also enhanced communication through email communication, electronic
data interchange, electronic funds transfer, Internet etc.
• Banking – the banking sector has incorporated computer systems in such areas as credit
analysis, fund transfers, customer relations, automated teller machines, home banking,
and online banking.
• Organizational management – the proliferation of management information systems
have aided greatly the processes of managerial planning, controlling, directing as well as
decision-making. Computers are used in organizations for transaction processing,
managerial control as well as decision-support. Other specific areas where computer
systems have been incorporated include sales and marketing, accounting, customer
service, etc.
• Science, research and engineering – Computers are used: as research tools and in

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carrying out complex computations for simulation e.g. outer-space simulations, flight

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simulations as diagnostic and monitoring tools. for computerized maps using global
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positioning satellite (GPS) technology for modern mass production methods in the auto
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industry using computer driven technology.
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• Education – computers incorporate databases of information that are useful in organizing

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and disseminating educational resources. Such e-learning and virtual or distributed

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classrooms have enabled the teaching industry to have a global reach to students.
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Computers are also used for marking uniform tests done in schools, school administration
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and computer aided instructions.

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• Management of information material - The Internet has massive reference material on

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virtually every learning area. Computer systems have enabled the efficient administration
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of library materials for information storage and retrieval.

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• Manufacturing and production – computer aided design (CAD), computer integrated

manufacturing (CIM), process control systems among other technologies are among
computer systems that have revolutionized the production industry. CAD and CIM are
generic terms applied to the development and design of systems to support design work
and to control manufacturing operations.
• Entertainment – use of computers in the entertainment industry has increased
tremendously over the years. Computers enable high-quality storage of motion pictures
and music files using high-speed and efficient digital storage devices such as CDs, VCDs
and DVDs. The Internet is also a great source of entertainment resources. Computer
games have also become a major source of entertainment.
• Retailing – computers are used in point of sale systems and credit card payment systems
as well as stock inventories.
• Home appliances – computers (especially embedded computers or microprocessors) are
included in household items for reasons of economy and efficiency of such items. Major
appliances such as microwave ovens, clothes washers, refrigerators and sewing machines
are making regular use of microprocessors.

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• Reservation systems – guest booking, accommodation and bills accounting using

computers in hotels have made the process to be more efficient and faster. Airline
computer reservation systems have also enhanced and streamlined air travel across major
airlines. Major players in the industry have also adopted online reservation systems.
• Health care and medicine – computers have played such an important role in the growth
and improvement of health care that the use of computers in medicine has become a
medical specialty in itself. Computers are used in such areas as maintenance of patient
records, medical insurance systems, medical diagnosis and patient monitoring.

HISTORY OF COMPUTERS

The first electronic computers were produced in the 1940s. Since then, many breakthroughs in
electronics have occurred leading to great improvements in the capacity, processing speed and
quality of computer resources. The evolution of computerization in business may be
summarized .
• 1870s: Development of the typewriter allows speedier communication and less copying.
• 1920s: Invention of the telephone enables both Wide Area Networks (WAN) and Local

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Area Networks (LAN) communication in real time. This marks the beginning of

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telecommunication.
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• 1930s: Use of scientific management is made available to analyze and rationalize data.
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• 1940s: Mathematical techniques developed in World War II (operations research) are
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applied to the decision-making process.

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• 1950s: Introduction of copying facilitates cheap and faster document production, and the
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(limited) introduction of Electronic Data Processing (EDP) speeds up large scale

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transaction processing.
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• 1960s: Emergence of Management Information Systems (MIS) provides background

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within which office automation can develop.

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• 1970s: Setting up of telecommunication networks to allow for distant communication

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between computer systems. There is widespread use of word processors in text editing
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and formatting, advancement in personal computing - emergence of PCs. Use of

spreadsheets.
• 1980s: Development of office automation technologies that combine data, text, graphics
and voice. Development of DSS, EIS and widespread use of personal productivity
software.
• 1990s: Advanced groupware; integrated packages, combining most of the office work
clerical, operational as well as management.
• 2000s: Wide spread use of Internet and related technology in many spheres of
organizations including electronic commerce (e-commerce), e-learning, and e-health

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Landmark Inventions

 ~500 B.C. - counting table with beads

 ~1150 in China - ABACUS - beads on wires
 1642 Adding machine - Pascal
 1822 Difference machine/Analytic Engine - design by Babbage
 1890 Holerith punched card machine - for U.S. census
 1944 Mark I (Harvard) - first stored program computer
 1947 ENIAC (Penn)- first electronic stored progam computer
 1951 UNIVAC - first commercial computer; 1954 first installation
 1964 IBM - first all-purpose computer (business + scientific)
 1973 HP-65, hand-held, programmable ‘calculator’
 ~1975 Altair, Intel - first Micro-computer; CPU on a “chil

COMPUTER GENERATIONS

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The capabilities of a personal computer have changed greatly since the introduction

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of electronic computers.
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The classification of computers into generations is based on the fundamental technology
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employed. Each new generation is characterised by greater speed, larger memory capacity and
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smaller overall size than the previous one.

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i. First Generation Computers (1946 – 1957)

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• Used vacuum tubes to construct computers.

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• These computers were large in size and writing programs on them was difficult.
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• The following are major drawbacks of First Generation computers.

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- The operating speed was quite slow.

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- Power consumption was very high.

- It required large space for installation.
- The programming capability was quite low.
- Cumbersome to operate – switching between programs, input and output

ii. Second Generation Computers (1958 - 1964)

• Replaced vacuum tubes with transistors.
• The transistor was smaller, cheaper and dissipated less heat than a vacuum tube.
• The second generation also saw the introduction of more complex arithmetic and logic
units, the use of high–level programming languages and the provision of system software
with the computer.
• Transistors were smaller than electric tubes and had higher operating speed. They had no
filament and required no heating. Manufacturing cost was also lower. Thus the size of the
computer got reduced considerably.

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TOPIC 2

ICT GOVERNANCE
CORPORATE GOVERNANCE AND ICT GOVERNANCE

Definition

From relative obscurity a few years ago, several factors have come together to make the concept
of formal ICT governance a good idea for virtually every company, both public and private. Key
motivators include the need to comply with a growing list of regulations related to financial and
technological accountability, and pressure from shareholders and customers. Here’s a quick
primer on the basics of ICT governance:

What is ICT governance?

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Simply put, it’s putting structure around how organizations align ICT strategy with business

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strategy, normally known as corporate governance ,ensuring that companies stay on track to
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achieve their strategies and goals, and implementing good ways to measure ICT’s performance.
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It makes sure that all stakeholders’ interests are taken into account and that processes provide
measurable results. An ICT governance framework should answer some key questions, such as
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how the ICT department is functioning overall, what key metrics management needs and what
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return ICT is giving back to the business from the investment it’s making.
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Is it something every organization needs?

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Every organization—large and small, public and private—needs a way to ensure that the IT
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function sustains the organization’s strategies and objectives. The level of sophistication you
apply to ICT governance, however, may vary according to size, industry or applicable
regulations. In general, the larger and more regulated the organization, the more detailed the ICT
governance structure should be.

Drivers that motivate organizations to implement ICT governance infrastructures?

Organizations today are subject to many regulations governing data retention, confidential
information, financial accountability and recovery from disasters. While none of these
regulations requires an ICT governance framework, many have found it to be an excellent way
to ensure regulatory compliance. By implementing ICT governance, you’ll have the internal
controls you need to meet the core guidelines of many of these regulations.

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What are the major focus areas that make up ICT governance?

According to the IT governance setters, there are five areas of focus:

Strategic alignment: Linking business and IT so they work well together. Typically, the
lightning rod is the planning process, and true alignment can occur only when the
corporate side of the business communicates effectively with line-of-business leaders and
IT leaders about costs, reporting and impacts.

Value delivery: Making sure that the IT department does what’s necessary to deliver the
benefits promised at the beginning of a project or investment. The best way to get a
handle on everything is by developing a process to ensure that certain functions are
accelerated when the value proposition is growing, and eliminating functions when the
value decreases.

Resource management: One way to manage resources more effectively is to organize

your staff more efficiently—for example, by skills instead of by line of business. This
allows organizations to deploy employees to various lines of business on a demand basis.

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Risk management: Instituting a formal risk framework that puts some rigor around how
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IT measures, accepts and manages risk, as well as reporting on what IT is managing in
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terms of risk.
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Performance measures: Putting structure around measuring business performance. One

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popular method involves instituting an IT Balanced Scorecard, which examines where IT

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makes a contribution in terms of achieving business goals, being a responsible user of

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resources and developing people. It uses both qualitative and quantitative measures to get
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those answers.
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MONITORING OF CONTROLS AND RISKS

Overview

Growing regulatory environment, higher business complexity and increased focus on

accountability have led enterprises to pursue a broad range of ICT governance, risk and
compliance initiatives across the organization. However, these initiatives are uncoordinated in
an era when risks are interdependent and controls are shared. As a result, these initiatives get
planned and managed in silos, which potentially increases the overall business risk for the
organization. In addition, parallel compliance and risk initiatives lead to duplication of efforts
and cause costs to spiral out of control. ICT governance, risk, and controls process through
control, definition, enforcement, and monitoring has the ability to coordinate and integrate these
initiatives.

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 MANAGEMENT INFORMATION SYSTEMS

TOPIC 3

SYSTEMS DEVELOPMENT
Introduction
System analysis and design is a series of processes for analyzing and designing computer-based
information systems. Systems design allows a development team to roughly see what and how
their system will look like. An important result of systems analysis and design is an application
software, that is, software designed to support a specific organizational function or process.

KEY TERMS

 Critical path is the longest-duration path through the network.

 Activity is a task that must be performed.
 Event is a milestone marking the completion of one or more activities.
 Program Evaluation and Review Technique (PERT) is a network model that allows

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for randomness in activity completion times.

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 Structured walkthrough - It is a planned review of system by people not involved in its
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GENERAL SYSTEMS THEORY

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1. Systems concepts
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A system is a set of interacting components that work together to accomplish specific goals.
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For example, a business is organized to accomplish a set of specific functions. Any situations,
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which involve the handling or manipulation of materials or resources of any kind whether
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human, financial or informative, may be structured and represented in the form of a system.
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Characteristics of a System

i. Purpose – Systems exist to fulfill some objective or satisfy a need. A system may
accomplish more than one task. The purpose of a system is closely tied to its rationale.
ii. Rationale – This is the justification for a system’s existence.
iii. Efficiency – This is how well a system utilizes its resources, that is, doing things right
using the least amount of resources.
iv. Effectiveness – How well a system fulfills its purpose, assuming that its purpose is the
right one. Involves a system doing the right things.
v. Inputs– Entities that enter the system to produce output or furnish information.
vi. Outputs– Entities that exit from the system either as interfaces or for end-user activities.
They may be used to evaluate system’s efficiency and effectiveness.
vii. Transformation rules – They specify how the input is processed to produce output.

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viii. Throughput – Measures the quantity of work a system accomplishes. Does not
consider the quality of the output.
ix. Boundary – Artificially delimits a system for study or discussion purposes. System
designers can only control those system components within the boundary.
x. Environment – That which impacts the system but is outside the system’s boundary.
The system cannot control events in the environment.
xi. Interfaces – Points where two systems meet and share inputs and outputs. Interfaces
belong to the environment although they may be inside the system boundary.
xii. Feedback– Recycles outputs as subsequent inputs, or measures outputs to assess
effectiveness.

Classification of systems

Each system can be characterized along a wide range of characteristics.

Physical systems Vs. Abstract systems

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A physical system consists of a set of elements, which are coordinated and operate as a whole

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entity to achieve a certain objective. This system may also be called a concrete system.
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An abstract system is an orderly arrangement of conceptual items or components.
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Simple systems vs. Complex systems

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A simple system has few components, and the relationship or interaction between elements is
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uncomplicated and straightforward.

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A complex system has many elements that are highly related and interconnected.
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Open systems vs. Closed systems

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An open system interacts with its environment. It is a system with a feedback mechanism
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that promotes the free exchange of information between the system and the external entities.
Organizations are open systems.

A closed system has no interaction with the environment. This is a system that neither transmits
information to the outside world nor receives any information from the outside world. It is
mainly a scientific concept (e.g. physics experiments).

Open loop systems vs. closed loop systems

An open-loop system is one which does not act in a controlled manner, that is, there is no
feedback loop, and so it has no measure of performance against standards.

A closed-loop system is one that functions in a controlled manner. Such a system accepts inputs,
works upon them according to some predefined processing rules and produces outputs. Such a
system is controlled via a feedback loop.

Stable/Static systems vs. Dynamic systems

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A stable system undergoes very little change over time. A dynamic system undergoes rapid and
constant change over time.

Adaptive systems vs. Non-adaptive systems

An adaptive system is able to change in response to changes in the environment. These systems
can also be described as cybernetic or self-organizing systems.

A non-adaptive system is not able to change in response to changes in the environment.

Deterministic systems vs. Probabilistic systems

Deterministic systems operate in a predictable manner. For example, thermostats and computer
programs. In probabilistic systems, however, it is not possible to determine the next state of
the system. These systems depend on probability distribution.

Permanent systems vs. Temporary systems

A permanent system exists for a relatively long period of time.
A temporary system exists for a relatively short period of time.

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Components of systems
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Inputs
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These provide the system with what it needs to operate. It may include machines, manpower,
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raw materials, money or time.

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Processes
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Include policies, procedures, and operations that convert inputs into outputs.
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Outputs
These are the results of processing and may include information in the right format, conveyed at
the right time and place, to the right person.

Systems Boundary
A system boundary defines the system and distinguishes it from its environment.

Subsystems
A subsystem is a unit within a system that shares some or all of the characteristics of that
system.
Subsystems are smaller systems that make up a super-system / supra-system. All systems are
part of larger systems

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Components of systems
Environment System Boundary
Environment

Input Output
Environment Interacting subsystems

Inputs
These provide the system with what it needs to operate. It may include machines,
manpower, raw materials, money or time.

Processes
Include policies, procedures, and operations that convert inputs into outputs.

Outputs
These are the results of processing and may include information in the right format,
conveyed at the right time and place, to the right person.

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Systems Boundary

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A system boundary defines the system and distinguishes it from its environment.
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Subsystems
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A subsystem is a unit within a system that shares some or all of the characteristics of that
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system. Subsystems are smaller systems that make up a super-system / supra-system.

c

All systems are part of larger systems

ya.
en

Environment
k
ea

This is the world surrounding the system, which the system is a subsystem of.
om
.s
w

Objectives and application of systems approach

w
w

Fast Forward: There are multiple levels of explanation for any complex situation. All may
be true but their usefulness is different.

Environment
This is the world surrounding the system, which the system is a subsystem of.

Objectives and application of systems approach

Features of systems theory

1. All systems are composed of inter-related parts or sub-systems and the system can only be
explained as a whole. This is known as holism or synergy. The systems view is that the
whole is more than just some of its parts and those vital interrelationships will be ignored
and misunderstood if the separate parts are studied in isolation.

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 MANAGEMENT INFORMATION SYSTEMS

2. Systems are hierarchical, that is, the parts and sub-systems are made up of other smaller
parts. For example, a payroll system is a subsystem of the Accounting System,which is a
sub of the whole organization. One system is a sub of another.
3. The parts of a system constitute an indissoluble whole so that no part can be altered
without affecting other parts. Many organizational problems arise once this principle is
flouted or ignored. Changes to one department could create untold adverse effects on
others - ripple effects: e.g. changing a procedure in one department could affect others e.g.
admissions - faculty ,type of data captured, process. , etc.
4. The sub-systems should work towards the goals of their higher systems and should not
pursue their own objectives independently. When subsystems pursue their own objectives,
a condition of sub-optimality arises, and with this the falling of the organization is close at
hand! Information systems designers should seek to avoid the sub-optimality problem!
5. Organizational systems contain both hard and soft properties. Hard properties are those that
can be assessed in some objective way e.g. the amount of PAYE tax with tax code, size of
product-quantifiable
Soft properties - constitute individual taste. They cannot be assessed by any objective
standard or measuring process e.g. appearance of a product, suitability of a person for job
and any problem containing a political element.

s
te
no
e
Importance of systems theory: pl
m
Sa

a) It provides a theoretical framework for study of performance of businesses

-
om

b) It stresses the fact that all organizations are made up of subsystems, which must work
c

together harmoniously in order that goals of the overall system can be achieved.
ya.

c) It recognizes the fact that conflicts can arise within a system, and that such conflicts can
en

lead to sub-optimization and that, ultimately, can even mean that an organization does not
k
ea

achieve its goals.

om

d) It allows the individual to recognize that he/she is a subsystem within a larger system, and
.s
w

that the considerations of systems concept apply to him/her, also.

w
w

e) Given the above factors, it is clear that information-producing systems must be designed to
support the goals of the total system, and that this must be borne in mind throughout their
development.

Systems theory concepts

 Entropy – This is the tendency towards disorder (chaos) in a system. The more closed a
system is, the greater the entropy.
 Feedback – This is a control mechanism in open systems. Feedback involves measuring
the output of the system, comparing the output with a standard and using any difference
to modify subsequent input to ensure that the outputs conform to the required standards.
 Feed-forward – It means to take steps that make some adjustments to the system in
advance in order to face any expected deviations in future. Feedback monitors the past
results whereas feed-forward deals with future outcomes.

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en

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 MANAGEMENT INFORMATION SYSTEMS

TOPIC 4

INFORMATION SYSTEMS IN AN ENTERPRISE

Introduction
An information system is a set of interrelated components that collect, manipulate, process and
transform data into information and provide feedback to meet a specified objective. A computer
based information system is one that uses computer technology to perform input, processing and
output activities. Due to the massive computerization of manual information systems, computer
based information systems are simply referred to as information systems. They are the subject
of discussion in this chapter.

Common examples of information systems include: Automated Teller Machines (ATMs), Point
of Sale (POS) terminals used by supermarket checkout clerks, airline reservation systems or
flight schedule systems used by airlines, student registration systems used by colleges, etc.

s
te
KEY TERMS

no
e
• pl
Computer Hardware – Refers to physical computer equipment and devices.
m
• Computer Software – Refers to the instructions that direct the operation of the computer
Sa

hardware.
-
om

• Electronic Funds Transfer (EFT) - is the exchange of money via telecommunications

c

without currency actually changing hands.

y a.

• Databases – Contains all data utilized by application software.

en
k
ea
om

COMPONENTS OF AN INFORMATION SYSTEM

.s
w
w
w

Components of an information system include:

 People – These use the system to fulfill their informational needs. They include end
 users and operations personnel such as computer operators, systems analysts,
 programmers, information systems management and data administrators.
 Computer Hardware – Refers to physical computer equipment and devices, which
 provide for five major functions.
 Input or data entry
 Output
 Secondary storage for data and programmes
 Central processor (computation, control)
 Communication
 Computer Software – Refers to the instructions that direct the operation of the computer
hardware. It is classified into system and application software.
 Telecommunication System/Communication network

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 MANAGEMENT INFORMATION SYSTEMS

 Databases – Contains all data utilised by application software. An individual set of stored
data is referred to as a file. Physical storage media evidences the physical existence of
stored data, that is: tapes, disk packs, cartridges and diskettes.
 Procedures – Formal operating procedures are components because they exist in
physical forms as manuals or instruction booklets. Three major types of procedures are
required.

User instructions – for application users to record data, to use a terminal for data
entry or retrieval, or use the result.

Instructions for preparation of input by data preparation personnel.

Operating instructions for computer operations personnel.

TYPES OF INFORMATION SYSTEMS:

Major types of systems include:

s
te
no
1. Transaction Processing Systems (TPS)
e
2. Management Information Systems (MIS) pl
m
3. Decision Support Systems (DSS)
Sa

4. Executive Support Systems (ESS)

-
om

5. Expert Systems
c
ya.

(i) Transaction Processing System (TPS)

en
k

A transaction is any business related exchange, such as a sale to a client or a payment to a

ea

vendor
om

Transaction processing systems process and record transactions as well as update records.
.s
w

They automate the handling of data about business activities and transactions. They record daily
w
w

routine transactions such as sales orders from customers, or bank deposits and withdrawals.
Although they are the oldest type of business information system around and handle routine
tasks, they are critical to business organisation. For example, what would happen if a bank’s
system that records deposits and withdrawals and maintain accounts balances disappears?

TPS are vital for the organisation, as they gather all the input necessary for other types of
systems. Think of how one could generate a monthly sales report for middle management or
critical marketing information to senior managers without TPS. TPS provide the basic input to
the company’s database. A failure in TPS often means disaster for the organisation. Imagine
what happens when an airline reservation system fails: all operations stop and no transaction can
be carried out until the system is up and running again. Long queues form in front of ATMs and
tellers when a bank’s TPS crashes.

Transaction processing systems were created to maintain records and do simple calculations
faster, more accurately and more cheaply than people could do the tasks.

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Characteristics of TPS:

• TPS are large and complex in terms of the number of system interfaces with the various
users and databases and usually developed by MIS experts.
• TPS’s control collection of specific data in specific formats and in accordance with rules,
policies, and goals of organisation- standard format
• They accumulate information from internal operations o the business.
• They are general in nature—applied across organisations.
• They are continuously evolving.

The goals of TPS is to improve transaction handling by:

• Speeding it up
• Using fewer people
• Improving efficiency and accuracy
• Integrating with other organisational information systems
• Providing information that was not available previously

s
te
no
Examples—Airline reservation systems, ATMs, order processing systems, registration systems,
e
payroll systems and point of sale systems. pl
m
Sa

(ii) Management Reporting System (MRS)

-
om

Management Reporting Systems (MRS) formerly called Management Information Systems

c

(MIS) provide routine information to decision makers to make structured, recurring and routine
y a.

decisions, such as restocking decisions or bonus awards. They focus on operational efficiency
en

and provide summaries of data. An MRS takes the relatively raw data available through a TPS
k
ea

and converts it into meaningful aggregated form that managers need to conduct their
om

responsibilities. They generate information for monitoring performance (e.g. productivity

.s
w

information) and maintaining coordination (e.g. between purchasing and accounts payable)
w
w

The main input to an MRS is data collected and stored by transaction processing systems. An
MRS further processes transaction data to produce information useful for specific purposes.
Generally, all MIS output have been pre-programmed by information systems personnel.
Outputs
include:
a) Scheduled Reports – These were originally the only reports provided by early
management information systems. Scheduled reports are produced periodically, such
as hourly, daily, weekly or monthly. An example might be a weekly sales report that a
store manager gets each Monday showing total weekly sales for each department
compared to sales this week last year or planned sales.

b) Demand Reports – These provide specific information upon request. For instance, if
the store manager wanted to know how weekly sales were going on Friday, and not
wait until the scheduled report on Monday, she could request the same report using
figures for the part of the week already elapsed.

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 MANAGEMENT INFORMATION SYSTEMS

c) Exception Reports – These are produced to describe unusual circumstances. For

example, the store manager might receive a report for the week if any department’s
sales were more than 10% below planned sales.

Characteristics of MRS

• MIS professionals usually design MRS rather than end users - using life cycle oriented
development methodologies.
• They are large and complex in terms of the number of system interfaces with the various
users and databases.
• MRS are built for situations in which information requirements are reasonably well known
and are expected to remain relatively stable. This limits the informational flexibility of MRS
but ensures that a stable informational environment exists.
• They do not directly support the decision-making process in a search for alternative solutions
to problems. Information gained through MRS is used in the decision-making process.
• They are oriented towards reporting on the past and the present, rather than projecting the
future. Can be manipulated to do predictive reporting.

s
• MRS have limited analytical capabilities. They are not built around elaborate models, but

te
no
rather rely on summarisation and extraction from the databases according to the given
e
criteria. pl
m
Sa
-
om

(iii) Decision Support System (DSS)

c
y a.

Decision support systems provide problem-specific support for non-routine, dynamic and often
en

complex decisions or problems. DSS users interact directly with the information systems,
k
ea

helping to model the problem interactively. DSS basically provide support for non-routine
om

decisions or problems and an interactive environment in which decision makers can quickly
.s
w

manipulate data and models of business operations. A DSS might be used, for example, to help a
w
w

management team decide where to locate a new distribution facility. This is a non-routine,
dynamic problem.

Each time a new facility must be built, the competitive, environmental, or internal contexts are
most likely different. New competitors or government regulations may need to be considered, or
the facility may be needed due to a new product line or business venture.

When the structure of a problem or decision changes, or the information required to address it is
different each time the decision is made, then the needed information cannot be supplied by an
MIS, but must be interactively modelled using a DSS. DSS provide support for analytical work
in semi-structured or unstructured situations. They enable mangers to answer ‘What if’
questions by providing powerful modelling tools (with simulation and optimisation capabilities)
and to evaluate alternatives e.g. evaluating alternative marketing plans.

DSS have less structure and predictable use. They are user-friendly and highly interactive.
Although they use data from the TPS and MIS, they also allow the inclusion of new data, often

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 MANAGEMENT INFORMATION SYSTEMS

from external sources such as current share prices or prices of competitors.

DSS components include:

a) Database (usually extracted from MIS or TPS)

b) Model Base
c) User Dialogue/Dialogue Module

(iv) Executive Information System (EIS)/Executive Support Systems (ESS)

EIS provide a generalized computing and communication environment to senior managers to

support strategic decisions. They draw data from the MIS and allow communication with
external sources of information. But unlike DSS, they are not designed to use analytical models
for specific problem solving. EIS are designed to facilitate senior managers’ access to
information quickly and effectively.

ESS has menu-driven user-friendly interfaces, interactive graphics to help visualisation of the
situation and communication capabilities that link the senior executives to the external databases

s
he requires.

te
no
e
Top executives need ESS because they are busy and want information quickly and in an easy
pl
m
to read form. They want to have direct access to information and want their computer set-up to
Sa

directly communicate with others. They want structured forms for viewing and want summaries
-
om

rather than details.

c
y a.

(v) Expert System (ES)

en

• It is an advanced DSS that provides expert advice by asking users a sequence of

k
ea

questions dependent on prior answers that lead to a conclusion or recommendation. It is

om

made of a knowledge base (database of decision rules and outcomes), inference engine
.s
w

(search algorithm), and a user interface.

w
w

• ES use artificial intelligence technology.

• It attempts to codify and manipulate knowledge rather than information
• ES may expand the capabilities of a DSS in support of the initial phase of the decision
making process. It can assist the second (design) phase of the decision making process by
suggesting alternative scenarios for "what if" evaluation.
• It assists a human in the selection of an appropriate model for the decision problem. This
is an avenue for an automatic model management; the user of such a system would need
less knowledge about models.
• ES can simplify model-building in particular simulation models lends itself to this
approach.
• ES can provide an explanation of the result obtained with a DSS. This would be a new
and important DSS capability.
• ES can act as tutors. In addition ES capabilities may be employed during DSS
development; their general potential in software engineering has been recognised.

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en

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ea

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 MANAGEMENT INFORMATION SYSTEMS

TOPIC 5

INFORMATION SYSTEMS ARCHTECTURE

NATURE AND TYPES OF INFORMATION

Information is data that has been processed into a form that is meaningful to the recipient and
is of real or perceived value in current or prospective actions or decisions. It is important to note
that data for one level of an information system may be information for another. For example,
data input to the management level is information output of a lower level of the system such as
operations level. Information resources are reusable. When retrieved and used, it does not lose
value: it may indeed gain value through the credibility added by use.

The value of information is described most meaningfully in the context of making a decision. If
there were no current or future choices or decisions to be made, information would be
unnecessary.

s
te
no
The value of information in decision-making is the value of change in decision behaviour caused
e
pl
by the information less the cost of obtaining the information. Decisions, however, are sometimes
m
made without the “right” information. The reasons are:
Sa
-
om

• The needed information is unavailable

c

• The effort to acquire the information is too great or too costly.

y a.

• There is no knowledge of the availability of the information.

en
k

• The information is not available in the form needed.

ea

Much of the information that organisations or individuals prepare has value other than in
om

decision making.
.s
w

The information may also be prepared for motivation and background building.
w
w

ATTRIBUTES OF INFORMATION

Desirable qualities of information

• Availability – It should be available and accessible to those who need it.

• Comprehensible – It should be understandable to those who use it.
• Relevance – Information should be applicable to the situations and performance of
organizational functions. Relevant information is important to the decision maker.
• Secure – It should be secure from access by unauthorized users.
• Usefulness – It should be available in a form that is usable.
• Timeliness - Information should be available when it is needed.
• Reliability – Reliable information can be depended on. In many cases, reliability of
information depends on the reliability of the data collection method use. In other
instances, reliability depends on the source of information.

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 MANAGEMENT INFORMATION SYSTEMS

• Accuracy – It should be correct, precise and without error. In some cases, inaccurate
information is generated because inaccurate data is fed into the transformation process
(this is commonly called garbage in garbage out, GIGO).
• Consistency – It should not be self-contradictory.
• Completeness – Complete information contains all the important facts. For example an
investment report that does not contain all the costs is not complete.
• Economical – Information should always be relatively economical to produce. Decision
makers must always balance the value of information and the cost of producing it.
• Flexibility – Flexible information can be used for a variety of purposes.

FILES AND FILES STRUCTURE

Computer files A file is a collection of related data or information that is normally maintained
on a secondary storage device. The purpose of a file is to keep data in a convenient location
where they can be located and retrieved as needed. The term computer file suggests organised
retention on the computer that facilitates rapid, convenient storage and retrieval. As defined by

s
their functions, two general types of files are used in computer information systems:

te
no
master files and transaction files.
e
pl
m
Master files
Sa

Master files contain information to be retained over a relatively period of long time. Information
-
om

in master files is updated continuously to represent the current status of the business. An
c

example is an accounts receivable file. This file is maintained by companies that sell to
y a.

customers on credit. Each account record will contain such information as account number,
en

customer name and address, credit limit amount, the current balance owed, and fields indicating
k
ea

the dates and amounts of purchases during the current reporting period. This file is updated each
om

time the customer makes a purchase. When a new purchase is made, a new account balance is
.s
w

computed and compared with the credit limit. If the new balance exceeds the credit limit, an
w
w

exception report may be issued and the order may be held up pending management approval.

Transaction files
Transaction files contain records reflecting current business activities. Records in transaction
files are used to update master files.
To continue with the illustration, records containing data on customer orders are entered into
transaction files. These transaction files are then processed to update the master files. This
is known as posting transaction data to master file. For each customer transaction record, the
corresponding master record is accessed and updated to reflect the last transaction and the new
balance. At this point, the master file is said to be current.

Accessing Files

Files can be accessed:

 Sequentially - start from the first record and read one record after another until the end
of file or when desired record is found

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 known as “sequential access”

 only possible access for serial storage devices
 Directly - read desired record directly
 known as “random access” or “direct access”

FILE ORGANISATION METHODS

Files need to be properly arranged and organised to facilitate easy access and retrieval of the
information. Types of file organisation (physical method of storage) include:
 Serial
 Sequential
 Indexed-Sequential
 Random
All file organisation types apply to direct access storage media (disk, drum etc.)
A file on a serial storage media (e.g. tape) can only be organised serially

Serial Organisation

s
te
no
 Each record is placed in turn in the next available storage space
e
pl
 A serial file must be accessed sequentially implying
m
Sa

good use of space

-

high access time

om

 Usually used for temporary files, e.g. transaction files, work files and spool files
c
ya.
en

Note: The method of accessing the data on the file is different to its organisation
k
ea

 E.g. sequential access of a randomly organised file

om

 E.g. direct access of a sequential file

.s
w
w
w

Sequential organization

 Records are organised in ascending sequence according to a certain key

 Sequential files are accessed sequentially, one record after the other
 Suitable:
- for master files in a batch processing environment
- where a large percentage of records (high hit-rate) are to be accessed
 Not suitable for online access that requires a fast response as file needs to be accessed
sequentially

Indexed-Sequential

Most commonly used methods of file organisation

 File is organised sequentially and contains an index
Used on direct access devices
 Used in applications that require sequential processing of large numbers of records but

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 MANAGEMENT INFORMATION SYSTEMS

occasional direct access of individual records

 Increases processing overheads with maintenance of the indices

Random organization

Records are stored in a specific location determined by a randomising algorithm

 function (key) = record location (address)
 Records can be accessed directly without regard to physical location
 Used to provide fast access to any individual record e.g. airline reservations and online
banking

Problems of traditional file- based approach

Each function in an organisation develops specific applications in isolation from other divisions
with each application using its own data files. This leads to the following problems:

Data redundancy

s
te
 duplicate data in multiple data files

no
Redundancy leads to inconsistencies in data representation e.g. refer to the same person as
e
pl
client or customer values of data items across multiple files
m
Sa

Data isolation — multiple files and formats

Programme-data dependence
-
om

 tight relationship between data files and specific programs used to maintain files
c
a.

Lack of flexibility
y
en

 Need to write a new programme to carry out each new task§ .

k
ea

Lack of data sharing and availability

om

Integrity problems
.s

 Integrity constraints (e.g. account balance > 0) become part of programme code
w
w

 Hard to add new constraints or change existing ones

w

 Concurrent access by multiple users difficult

 Concurrent access needed for performance
 Uncontrolled concurrent access can lead to inconsistencies
 E.g. two people reading a balance and updating it at the same time
Security problems

Data files and databases

A data file is a structured collection of data (information). The data are related in some manner.
It is organised so that relationships within the data are revealed (revealable). A data file stores
several (many) pieces of information about many data objects. The simplest and most efficient
metaphor of how data is organised in a data file is as a table of rows and columns, like a
spreadsheet but without the linkages between individual cells. A data file is made up of a

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 MANAGEMENT INFORMATION SYSTEMS

number of records; each row in a table is a separate record. Each record is made up of all the
data about a particular entity in the file.

A record includes many data items, each of which is a separate cell in the table. Each column
in the table is a field; it is a set of values for a particular variable, and is made up of all the data
items for that variable. Examples include phone book, library catalogue, hospital patient records
and species information.

A database is an organised collection of (one or more) related data file(s). The way the database
organises data depends on the type of database, called its data model, which, may be
hierarchical, network and relational models.

Benefits of the database approach

Provide Data Independence

 separating the physical (how) and logical (what) aspects of the system
Physical data independence

s
 protects the application programmes from changes in the physical placement, of

te
no
the files
e
pl
 the ability to modify the physical schema without changing the logical schema
m
Logical data independence
Sa

 Modify logical schema without changing application programmes

-
om

Reduce redundancy
c

 reduce duplicate data items

ya.
en

 some redundancy may be necessary for business or technical reasons - DBA

k

must ensure updates are propagated (a change to one is automatically applied to

ea
om

the other).
.s

Avoid inconsistency (by reducing redundancy)

w
w

 if it is necessary - propagate updates

w

Maintain integrity - i.e. ensure the data is accurate by:

 reducing redundancy
 implementing integrity rules, e.g. through foreign keys
Share data
 among existing applications
 used in new applications
Allow implementation of security restrictions
 establish rules for different types of users for different types of update to database
Enforce standards for
 data representation - useful for migrating data between systems
 data naming & documentation - aids data sharing and understandability
Balance conflicting requirements
 structure the corporate data in a way that is best for the organisation

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m
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c
a.

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en

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ea

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 MANAGEMENT INFORMATION SYSTEMS

TOPIC 6

DATA COMMUNICATION & COMPUTER NETWORKS

Introduction
Data is useful once it has been transferred from the source to the recipient. The transfer of
such data involves various techniques and technology of essence to facilitate fast, efficient and
effective data transfer so that delays and eavesdropping by unintended recipients is avoided.

KEY TERMS

• Modem is a hardware device that converts computer signals (digital signals) to telephone
signals (analog signals) and vice versa.
• Bandwidth is the bits-per-second (bps) transmission capability of a communication
channel.

s
• Protocols are sets of communication rules for exchange of information.

te
no
• Computer network is a communications system connecting two or more computers that
e
pl
work to exchange information and share resources.
m
Sa
-
om

PRINCIPLES OF DATA COMMUNICATION

c
y a.

Data communication systems are the electronic systems that transmit data over communication
en
k

lines from one location to another. End users need to know the essential parts of communication
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technology, including connections, channels, transmission, network architectures and network

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types. Communication allows microcomputer users to transmit and receive data and gain access
.s
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to electronic resources.
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• Source – creates the data, could be a computer or a telephone

• Transmitter – encodes the information e.g. modem, network card
• Transmission system – transfers the information e.g. wire or complex network
• Receiver – decodes the information for the destination e.g. modem, network card
• Destination – accepts and uses the incoming information, could be a computer or
telephone

DATA COMMUNICATION DEVICES

The transmission media used in communication are called communication channels. Two ways
of connecting microcomputers for communication with each other and with other equipment is
through cable and air. There are five kinds of communication channels used for cable or air
connections:
- Telephone lines

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 MANAGEMENT INFORMATION SYSTEMS

- Coaxial cable
- Fibre-optic cable
- Microwave
- Satellite

Telephone lines (Twisted Pair)

Telephone line cables made up of copper wires called twisted pair. single twisted pair
culminates
geographic location and are on the same LAN. A community of interest has less of a
connotation
of being in a local area, and should be thought of as a set of arbitrarily located users who share
a set of servers, and also communicate via peer-to-peer technologies in a wall jack where you
plug your phone. Telephone lines have been the standard communication channel for both voice
and data. More technically advanced and reliable transmission media are now replacing it.

Coaxial cable

s
This is a high-frequency transmission cable that replaces the multiple wires of telephone lines

te
no
with a single solid copper core. It has over 80 times transmission capacity of twisted pair. It is
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often used to link parts of a computer system in one building.
pl
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Sa

Fabre-optic cable
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Fibre-optic cable transmits data as pulses of light through tubes of glass. It has over 26,000
c

times
y a.

the transmission capacity of twisted pair. A fibre-optic tube can be half the diameter of human
en

hair. Fibre-optic cables are immune to electronic interference and more secure and reliable.
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Fibre-optic cable is rapidly replacing twisted-pair telephone lines.

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.s
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Microwave
w
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Microwaves transmit data as high-frequency radio waves that travel in straight lines through
air. Microwaves cannot bend with the curvature of the earth. They can only be transmitted over
short distances. Microwaves are good medium for sending data between buildings in a city or on
a large college campus. Microwave transmission over longer distances is relayed by means of
‘dishes’ or antennas installed on towers, high buildings or mountaintops.

Satellite
Satellites are used to amplify and relay microwave signals from one transmitter on the ground to
another. They orbit about 22,000 miles above the earth. They rotate at a precise point and speed
and can be used to send large volumes of data. Bad weather can sometimes interrupt the flow
of data from a satellite transmission. INTELSAT (INternational TELecommunication SATellite
consortium), owned by 114 governments forming a worldwide communications system, offers
many satellites that can be used as microwave relay stations.

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DATA TRANSMISSION

: analog versus digital

Information is available in an analogue or in a digital form. Computer-generated data can easily
be stored in a digital format, but analogue signals, such as speech and video, must first be
sampled at regular intervals and then converted into a digital form. This process is known as
digitization and has the following advantages:

• Digital data is less affected by noise

• Extra information can be added to digital signals so that errors can either be detected or
corrected.
• Digital data tends not to degrade over time.
• Processing of digital information is relatively easy, either in real-time or non real-time.
• A single type of media can be used to store many different types of information (such as
video, speech, audio and computer data can be stored on tape, hard-disk or CDDATA
ROM).
• A digital system has a more dependable response, whereas an analogue system’s
accuracy depends on parameters such as component tolerance, temperature, power supply

s
variations, and so on. Analogue systems thus produce a variable response and no two

te
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analogue systems are identical.
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• Digital systems are more adaptable and can be reprogrammed with software. Analogue
pl
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systems normally require a change of hardware for any functional changes (although
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programmable analogue devices are now available).

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The main disadvantage with digital conversion is:

y a.

• Digital samples must be quantised to given levels: this adds an error called quantisation
en

• error. The larger the number of bits used to represent each sample, the smaller the
k
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quantisation error.
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Modem
A modem is a hardware device that converts computer signals (digital signals) to
telephone signals (analog signals) and vice versa.

The process of converting digital signals to analog is called modulation while the process
of converting analog signals to digital is called demodulation.

Digital signal modulate telephone line demodulate digital signal (Analog signal)

Modem transmission speed

The speed with which modems transmit data varies. Communications speed is typically
measured in bits per second (bps). The most popular speeds for conventional modems are 36.6
kbps (36,600 bps) and 56kbps (56,000 bps). The higher the speed, the faster you
can send and receive data.

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Types of modems

a) External modem
An external modem stands apart from the computer. It is connected by a cable to the computer’s
serial port. Another cable is used to connect the modem to the telephone wall jack.

b) Internal modem
An internal modem is a plug-in circuit board inside the system unit. A telephone cable connects
this type of modem to the telephone wall jack.
c) Wireless modem
A wireless modem is similar to an external modem. It connects to the computer’s serial port, but
does not connect to telephone lines. It uses new technology that receives data through the air.

DATA TRANSMISSION CHARACTERISTICS

These includes:

s
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• Bandwidth
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• Type of transmission pl
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• Direction of data flow
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• Mode of transmitting data

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• Protocols
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Bandwidth
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Bandwidth is the bits-per-second (bps) transmission capability of a communication channel.

k
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There are three types of bandwidth:

.s
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• Voice band – bandwidth of standard telephone lines (9.6 to56 kbps)

• Medium band – bandwidth of special leased lines used (56 to 264,000 kbps)
• Broadband – bandwidth of microwave, satellite, coaxial cable and fiber optic (56 to
30,000,000 kbps).

Types of transmission – serial or parallel

Serial data transmission

In serial transmission, bits flow in a continuous stream. It is the way most data is sent over
telephone lines. It is used by external modems typically connected to a microcomputer through
a serial port. The technical names for such serial ports are RS-232C connector or asynchronous
communications port.

Parallel data transmission

In parallel transmission, bits flow through separate lines simultaneously (at the same time).
Parallel transmission is typically limited to communications over short distances (not telephone

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 MANAGEMENT INFORMATION SYSTEMS

lines). It is the standard method of sending data from a computer’s CPU to a printer.

Direction of data transmission

There are three directions or modes of data flow in a data communication system.
• Simplex communication – data travels in one-direction only e.g. point-of-sale terminals.
• Half-duplex communication – data flows in both directions, but not simultaneously. E.g.
electronic bulletin board
• Full-duplex communication – data is transmitted back and forth at the same time e.g.
mainframe communications.

Mode of data transmission

Data may be sent over communication channels in either asynchronous or synchronous mode.
• Asynchronous transmission – data is sent and received one byte at a time. Used with
microcomputers and terminals with slow speeds.

s
• Synchronous transmission – data is sent and received several bytes (blocks) at a time. It

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requires a synchronised clock to enable transmission at timed intervals.
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pl
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COMPUTER NETWORKS
c
ya.

A computer network is a communications system connecting two or more computers working

en

to exchange information and share resources (hardware, software and data). A network may
k
ea

consist of microcomputers or it may integrate microcomputers or other devices with larger

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computers.
.s
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Networks may be controlled by all nodes working together equally or by specialised nodes
w
w

coordinating and supplying all resources. Networks may be simple or complex, self-contained or
dispersed over a large geographical area.

Network architecture is a description of how a computer is set-up (configured) and what

strategies are used in the design. The interconnection of PCs over a network is becoming more
important, especially as more hardware is accessed remotely and PCs intercommunicate with
one another.

Terms used to describe computer networks

• Node – any device connected to a network such as a computer, printer or data storage
device.
• Client – a node that requests and uses resources available from other nodes. Typically a
microcomputer.
• Server – a node that shares resources with other nodes. May be called a file server, printer
server, communication server, web server or database server.

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en

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 MANAGEMENT INFORMATION SYSTEMS

TOPIC 7

E-COMMERCE
Introduction

Electronic commerce is perhaps the most promising application of information technology

witnessed in recent years. It is revolutionalising supply-chain management and has enormous
potential for manufacturing, retail and service operations.

Definition of key terms

Electronic commerce (e-commerce) is the buying and selling of goods and services over the
Internet. Businesses on the Internet that offer goods and services are referred to as web
storefronts. Electronic payment to a web storefront can include check, credit card or electronic
cash.

Electronic Data Interchange (EDI) - is an electronic means for transmitting business

s
transactions between organisations.

te
no
e
pl
Outsourcing is a contractual agreement whereby an organization hands over control of part or
m
all of the functions of the information systems department to an external party.
Sa
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Software house is a company that creates custom software for specific clients
c
y a.

Hacking - Gaining unauthorised access to computer programmes and data.

en
k
ea

Mobile computing – a technology that allows transmission of dat, voice and video via a
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computer or any other wireless enabled device without having to be connected to a fixed
.s
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physical link.
w
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IMPACT OF INTERNET ON BUSINESS

Virtual companies and the internet are changing traditionally accepted economic practices and
making competition even fiercer than it has ever been in the past. As the internet opens up larger
markets to take advantage of, more and more flexible competitors are entering your market, all
offering better priced value propositions in order to steal market share.
Being an industry leader today is in no way a security blanket to confirm tomorrow’s success. In
order to maintain competitive advantage and emerge as an industry leader tomorrow, established
old school companies must be ready to take on the challenge of some difficult and painful
changes.

A new threat to traditional enterprise has arrived and established vertically integrated companies
are caught off guard on how to defend successfully and win the war to retain exiting market
share while expanding to new markets. Why has the world of eCommerce caused such a

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 MANAGEMENT INFORMATION SYSTEMS

problem to established enterprise? The reason being that most brick and mortar companies are
still strategizing to win according to old rules that do not apply in today’s eMarket. Today’s
truly successful companies must embrace Information Technology and leverage it in order to
achieve great results. Traditional Economic truths are no longer applicable in the virtual world
of the Internet and in eBusiness, as accepted principles in Physics are not applicable with the
inversed world of a black hole.

Internet has affected business in the following ways

• Communication – a business ability to communicate with its employees, customers

and associates changed dramatically when the internet yielded new communication
tools. Email and instant messaging greatly improve communication.

• Telecommunication- Many businesses are now offering the option for their
employees to work from home using office equipment provided by the company. This
process referred to as telecommuting , allows a business to decrease its overhead costs
by needing less office space and using less in utilities for daily operation.

s
• Marketing-with the advent of internet marketing, a business must stay abreast of the

te
no
needs of its customers. Competition is no longer localized, a business now has
e
competition all over the world. It is imperative that a business know what its
pl
m
customers want and deliver it.
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-
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• Advertising-including the internet in a business advertising budget extends a business

c

ability to attract customers from their back yard to all four corners of the globe.
y a.

Websites, banner lacement and search engine optimization , also referred to as SEO
en

allow a business to have a presence on the web and reach millions of potential
k
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customers.
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.s
w

• Collaboration-working with other businesses and professionals is simplified with the

w
w

use of internet. Internet seminars, also called webinars make collaboration on projects
with people all over the world as easy as logging onto a website.

• Research-Businesses use the internet to research new product ideas, new methods of
creating products and pricing information. A business can also the competition to see
what products and services are offered. If a company is looking to expand into a
particular location, the internet can be used to research the population , its needs and
what products and services would sell best in that area.

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MODELS OF ECOMMERCE

E-Commerce or Electronics Commerce business models can generally categorized in following

categories.

 Business - to - Business (B2B)

 Business - to - Consumer (B2C)
 Consumer - to - Consumer (C2C)
 Consumer - to - Business (C2B)
 Business - to - Government (B2G)
 Government - to - Business (G2B)
 Government - to - Citizen (G2C)

Business - to - Business (B2B)

Website following B2B business model sells its product to an intermediate buyer who then sells
the product to the final customer. As an example, a wholesaler places an order from a company's
website and after receiving the consignment, sells the end product to final customer who comes

s
to buy the product at wholesaler's retail outlet.

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Business - to - Consumer(B2C)

Website following B2C business model sells its product directly to a customer. A customer can
view products shown on the website of business organization. The customer can choose a
product and order the same. Website will send a notification to the business organization via
email and organization will dispatch the product/goods to the customer.

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c
a.

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 MANAGEMENT INFORMATION SYSTEMS

TOPIC 8

INFORMATION SYSTEMS STRATEGY

INTRODUCTION

Through in-depth analyses of the business environment and the strategy of the business as well
as an examination of the role that information and systems can and could fulfill in the business,
a set of known requirements and potential opportunities can be identified. These needs and
options will result from business pressures, the strategy of the business and the organization of
the various activities, resources and people in the organization. Information needs and
relationships can then be converted into systems requirements and an appropriate organization
of data and information resources.

s
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To enable these 'ideal applications to be developed and managed successfully, resources and

no
technologies will have to be acquired and deployed effectively. In all cases, systems and
e
pl
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information will already exist, and, normally, IS resources and technology will already be
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deployed.
-
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Any strategy, therefore, must not only identify what is eventually required and must also
c
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understand accurately how much has already been achieved.

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The IS/IT strategic plan must therefore define a migration path that overcomes existing
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weaknesses, exploits strengths and enables the new requirements to be achieved in such a way t
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h a t it can be resourced and managed appropriately.

w
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A strategy has been defined as 'an integrated set of actions aimed at increasing the long-term
well-being and strength of the enterprise.'

The IS/IT strategy must be integrated not only in terms of information, systems and technology
via a coherent set of actions but also in terms of a process of adaptation to meet the changing
needs of the business as they evolve. "Long term' suggests uncertainty, both in terms of the
business requirements and the potential benefits that the various applications and technologies
will offer. Change is the only thing that is certain. These changing circumstances will mean that
the organization will have to be capable of effective responses to unexpected opportunities and
problems.

Prior research on IS strategy has been heavily influenced by the treatment of strategy in the field
of strategic management.

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 MANAGEMENT INFORMATION SYSTEMS

Strategy in Management Studies

Strategy researchers have spent significant effort discussing the strategy construct from various
angles. Several streams of strategy research receive considerable attention, including research
dedicated to defining strategy, distinguishing the characteristics of strategic and understanding
the central issues of strategy at different levels. We describe each of these research streams
briefly here.

The first of these streams focuses on the central question of what is strategy, or what constitutes
a strategy. Although, to date, there is no model that has received consensus, there are several
strategy models, including Porter’s five-forces and the value chain model, core competency
theory, the resource based view of the firm, and other tools that aid in the analysis, development,
and execution of strategy. While each of these tools reflects a useful perspective of strategy,
they do not provide direct help in providing a clear definition of strategy.

The second major stream emphasizes characteristics for distinguishing strategic decisions from
non-strategic decisions. Frequently cited characteristics of strategic decisions include their

s
irreversible nature, the expected impact on long-term firm performance, and the directional

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nature, that give guidance to non-strategic decisions. Similar to the first stream of research, this
e
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line of strategy research does not offer a tight definition of strategy per se.
m
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The third stream has focused on the central questions that emerge from the existence of strategy
-
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at different organizational levels. For example, at a corporate level, strategy that involves
c
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answering what businesses the corporation should be in is viewed as a major area of interest .
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In contrast, business unit strategy deals primarily with addressing how to gain competitive
ea
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advantage in a given business and hence is also referred to as competitive strategy. Finally,
.s

functional strategy is primarily concerned with resource allocations to achieve the maximization
w
w
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of resource productivity. While strategy may include various decisions at different

organizational levels, strategy is nevertheless recognized to be more than the sum of the
strategic decisions it includes. In this sense, Lorange and Vancil (1977) consider strategy as a
“conceptual glue” that ensures coherence between individual strategic decisions. However,
whether this form of integration is achieved ex ante (i.e., through planning) or ex post (i.e.,
emergent) has remained a point of debate.

Definition of Information Systems Strategy

Whereas strategy in management studies has drawn a long tradition of scholarly debate, IS
strategy research, by way of comparison, has tended to eschew explicit discussion of what

IS strategy is and, instead, has focused more on how to conduct strategic planning, how to align
IS strategy with a given business strategy, or who should be involved in forming the strategy.
On one hand, it is quite clear that, applying Whittington’s (1993) framework, most IS strategies

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 MANAGEMENT INFORMATION SYSTEMS

described in the extant literature fall into the “classical” quadrant of strategy (i.e., IS strategic
planning is a product of calculated deliberation with profit maximization as the goal). On the
other hand, there remains a large degree of obscurity about IS strategy due to the absence of
established typologies such as those found within business strategy literature. Moreover, a
variety of terms have been employed to represent similar constructs such as IT strategy, IS
strategy, IS/IT strategy or information strategy, among others. This plethora of terms creates
confusion among researchers trying to interpret existing works. As stated earlier, information
systems is a broad concept (covering the technology components and human activities related to
the management and employment process of technology within the organization); therefore, we
find it most meaningful to use the term IS strategy throughout this paper. More specifically,
following Mintzberg’s (1987) fifth definition of strategy as a perspective, we define IS strategy
as the organizational perspective on the investment in, deployment, use, and management of
information systems. We note that the term of IS strategy is chosen to embrace rather than to
exclude the meanings of the other terms. With this definition, we do not regard the notion of IS
strategy as an ex post only or “realized IS strategy” as defined in the IS strategic alignment
literature. Nor do we suggest that an IS strategy must be intentional as implied in the strategic

s
te
information systems planning literature. This is because organizations, without an (formal or

no
intentional) IS strategy, do use IS and hence make decisions regarding IS. For example, recent
e
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research has examined the pattern of IS deployment as an indication of IS strategy. However, we
m
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cannot infer an intentional IS strategy from the mere existence of IS within a company.
-
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Therefore, we contend that examining IS strategy as a perspective may resolve this dilemma.
c

Furthermore, our definition of IS strategy suggests that while IS strategy is part of a corporate
ya.
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strategy, conceptually it should not be examined as part of a business strategy. Rather, it is a

k
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separate perspective from the business strategy that addresses the scope of the entire
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organization (i.e., IS investment, deployment, and management) to improve firm performance.

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This view is consistent with Earl’s (1989) work, which argues that IS strategy should both
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w
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support and question business strategy. Therefore, this definition also implies that IS strategy
should be examined at the organizational level, rather than at a functional level. Hence, while
each individual business and IS executive can have his/her own view of IS, organizational IS
strategy should reflect the collective view shared across the upper echelon of the organization.
Meanwhile, this notion has implications for advancements in the stream of research that seeks to
“align” the two separate strategies—business and IS.

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OVERVIEW OF BUSINESS STRATEGY HIERACHY

Two of the classics in the field of strategic management, the first by Ansoff (1965) and the other
by Andrews (1971), both had corporate strategy in their titles. Strategy making, at the time, was
considered the sole preserve of the firm’s corporate officers; hence the term corporate strategy.
Only with the eventual democratization of strategy making did a hierarchy of strategies begin to
emerge.

The origin of the hierarchical view of strategies dates back to the 1920s when some of the
largest US firms started pursuing a strategy of diversification. At that time, these firms were
typically organized functionally. But diversified growth using these organization structures soon
led to severe coordination and resource allocation problems. Top management, in firms such as
Dupont and General Motors, responded to this problem with the creation of the multidivisional
organization structure, or the M-Form.

Following Chandler’s (1962) pioneering work showing how a strategy of diversification led to
the use of a multidivisional structure, other researchers sought theoretical reasons for the

s
emergence and adoption of the M-form organization structure. Using transaction cost economics

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reasoning, Williamson (1975) argued that the M-form was adopted because it did a better job
e
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than capital markets in allocating scarce capital between competing investment proposals. He
m
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suggested that both the monitoring and policing costs were also lower in the multidivisional
-

structure when compared to capital markets.

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c
a.

However, the multidivisional structure was itself becoming unwieldy. Leading firms like
y
en

General Electric (GE) invited McKinsey & Company, one of the founders of the now
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flourishing management consulting industry, to examine its corporate structure. GE had at that
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time nearly 200 profit centers and 145 departments. The McKinsey consultants advised GE’s top
.s
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management to organize their firm’s businesses along strategic lines, influenced more by
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external industry conditions than internal organizational considerations. GE’s profit centers and
departments were consolidated into a smaller number of Strategic Business Units (SBU).

Each SBU became a stand-alone entity deserving of its own strategy and dedicated functional
support. While corporate strategy was concerned with domain selection (the portfolio of
businesses that the firm should have in order to deliver value to its shareholders); business unit
strategy was concerned with domain navigation (competitive positioning of each of the firm’s
business within its industry environment). Finally, functional strategies specified the
contributions that were expected from each function and their relative salience to the success of
the firm’s business strategy.

Corporations also turned to consultants for answers regarding resource allocation. Starting with
BCG’s growth share matrix, numerous other consulting firms introduced portfolio planning
matrix as an answer to the resource allocation problem. The two axes of the matrix were
typically the industry’s attractiveness and the company’s position within the industry. Each of
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 MANAGEMENT INFORMATION SYSTEMS

the corporation’s strategic business units could be mapped onto this matrix. SBUs with strong
market positions in growing industries, the “star” businesses, were lavished with additional
resources; even as SBUs with weak positions in stagnating or declining industries, the so called
“dog “ businesses, were slated for divestment. By the mid 1970s, portfolio planning became
very popular. Indeed, by the early 1980s over half of the Fortune 500 had introduced portfolio
planning techniques.

Further, in order to bridge the multiple levels of decision making within the firm top
management needed a process. Formal planning and control systems began filling this void. A
study by Stanford Research Institute showed that a majority of US companies used formal
planning systems by 1963. Vancil and Lorange (1977) and Lorange (1980) describe three
distinct phases in a typical strategic planning process: agenda setting, strategic programming and
budgeting. Aspirations of top management when cycled through these three phases and three
layers of management (corporate, divisional and functional) resulted in concrete budgets for
business units and functions within the firm. When the three phases were followed in a rigid
sequential fashion, the intent was frozen when strategic programs began to be developed. In

s
turn, the programs were non-negotiable once budgets were decided.

te
no
By the early 1980s, with the diffusion of M-form structure, the creation of SBUs, the adoption
e
pl
m
of formal planning systems and portfolio planning techniques, the separation of business unit
Sa

and corporate strategies was complete in the US and Europe. Functional strategies had to be
-
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subservient to the business strategies that they supported, and business strategies in turn had to
c
a.

be aligned with strategy.

y
en
k

Furthermore, this hierarchical view of strategy was also mapped on to levels of management
ea
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within the firm. The locus of decision making for each strategy was thus clearly specified. The
.s

corporate office was the primary architect of strategy.

w
w
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Divisional managers helped in a more restricted fashion by detailing their business strategy
within strict corporate guidelines. Functional managers supported their divisional heads with
well aligned functional strategies.

It was assumed then that this unidirectional causality and hierarchically determined locus of
decision making was the sine qua non for superior firm performance. No theoretical basis was
provided for this assertion. Nor were there systematic empirical studies conducted to verify this
claim. The assumption was that since the framework emerged from the practices of high
performing companies like General Motors, Dupont, ITT and GE, it had to have universal
appeal. It appeared to be a useful framework in practice and that seemed to have sufficed.

However, the hierarchical view of strategies has since unraveled because of both empirical and
theoretical developments on corporate, business and functional strategies. It has also lost its
relevance today mostly because strategic management has changed dramatically due to an

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 MANAGEMENT INFORMATION SYSTEMS

TOPIC 9

ICT RISK MANAGEMENT

INTRODUCTION

There could be distinct controls for each separate resource, with separate identifiers for each
user on each application. This will be determined in part by the relative sensitivity of the data
and the resources, but this progressive approach can be difficult to manage and administer, with
users having to remember different passwords, and probably being out of compassion with the
underlying philosophy.

KEY TERMS

• Authorisation - Involves determining the access rights to various system

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objects/resources.

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• Data diddling involves changing data before or as it is being entered into the computer.
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Trojan horses involve hiding malicious, fraudulent code in an authorised computer
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programme.
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• Viruses are malicious programme code inserted into other executable code that can self-
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replicate and spread from computer to computer.

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• Encryption is the process of converting a plaintext message into a secure coded form of
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text called cipher text.

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• Firewall - is a set of hardware and software equipment placed between an organisation’s

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internal network and an external network to prevent outsiders from invading private
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networks.
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Definition of computer security – threats, hazards and controls

Information is a strategic resource and a significant portion of organisational budget is spent on

managing information. A security system is a set of mechanisms and techniques that protect
a computer system, specifically the assets. They are protected against loss or harm including
unauthorised access, unauthorised disclosure and interference of information.

Assets can be categorised into:

• Resources – all instances of hardware, software, communication channels, operating
environment, documentation and people
• Data – files, databases, messages in transit, etc.

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RISK MANAGEMENT OVERVIEW

Companies are yearning for a solution to guard their network from security risks
such as external or untrusted users, and unmanaged endpoints on their internal LAN.
A security attack is the act or attempt to exploit vulnerability in a system. Security controls are
the mechanisms used to control an attack. Attacks can be classified into active and passive
attacks.
 Passive attacks – attacker observes information without interfering with information or
flow of information. He/she does not interfere with operation. Message content and
message traffic is what is observed.
 Active attacks – involves more than message or information observation. There is
interference of traffic or message flow and may involve modification, deletion or
destruction. This may be done through the attacker masquerading or impersonating as
another user. There is denial or repudiation where someone does something and denies
later. This is a threat against authentication and to some extent integrity.

Security goals

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To retain a competitive advantage and to meet basic business requirements, organisations must
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• Confidentiality – protect information value and preserve the confidentiality of sensitive

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data. Information should not be disclosed without authorization. Information the release
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of which is permitted to a certain section of the public should be identified and

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protectedagainst unauthorised disclosure.

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• Integrity – ensure the accuracy and reliability of the information stored on the computer
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systems. Information has integrity if it reflects some real world situation or is

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consistentwith real world situation. Information should not be altered without

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authorisation.
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• Hardware designed to perform some functions has lost integrity if it does not perform
those functions correctly. Software has lost integrity if it does not perform according to
its specifications. Communication channels should relay messages in a secure manner to
ensure that integrity. People should ensure the system functions according to the
specifications.
• Availability – ensure the continued availability of the information system and all its
assets to legitimate users at an acceptable level of service or quality of service. Any event
that degrades performance or quality of a system affects availability
• Ensure conformity to laws, regulations and standards.

Risks (exposures) to information security

An exposure is a form of possible loss or harm. Examples of exposures include:

• Unauthorised access resulting in a loss of computing time
• Unauthorised disclosure – information revealed without authorisation

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 MANAGEMENT INFORMATION SYSTEMS

• Destruction, especially with respect to hardware and software

• Theft
• Interference with system operation.

Threats to information security

These are circumstances that have potential to cause loss or harm i.e. circumstances that have
a potential to bring about exposures.

• Human error
• Disgruntled employees
• Dishonest employees
• Greedy employees who sell information for financial gain
• Outsider access – hackers, crackers, criminals, terrorists, consultants, ex-consultants, ex-
employees, competitors, government agencies, spies (industrial, military etc), disgruntled
customers

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• Acts of God/natural disasters – earthquakes, floods, hurricanes

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• Foreign intelligence
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• Accidents, fires, explosion pl
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• Equipment failure
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• Utility outage
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• Water leaks, toxic spills

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• Viruses – these are programmed threats

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Vulnerability
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A vulnerability is a weakness within the system that can potentially lead to loss or harm. The
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threat of natural disasters has instances that can make the system vulnerable. If a system has
programmes that have threats (erroneous programmes) then the system is vulnerable.

CONTROLS AND COUNTER MEASURES

These include:

1. Administrative controls – they include

o Policies – a policy can be seen as a mechanism for controlling security
o Administrative procedures – may be put in place by an organization to ensure that
users only do that which they have been authorised to do
o Legal provisions – serve as security controls and discourage some form of
physical threats
o Ethics

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 MANAGEMENT INFORMATION SYSTEMS

2. Logical security controls – measures incorporated within the system to provide protection
from adversaries who have already gained physical access

3. Physical controls – any mechanism that has a physical form e.g. lockups

4. Environmental controls

Administering security

• Risk analysis
• Security planning – a security plan identifies and organises the security activities of an
organisation.
• Security policy

Risk monitoring and communication.

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The process involves:

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• Identification of the assets pl
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• Determination of the vulnerabilities
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• Estimate the likelihood of exploitation

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• Computation of expected annual loss

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• Survey of applicable controls and their costs

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• Projection of annual savings

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Security policy
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Security failures can be costly to business. Losses may be suffered as a result of the failure itself
or costs can be incurred when recovering from the incident, followed by more costs to secure
systems and prevent further failure. A well-defined set of security policies and procedures can
prevent losses and save money.

Information systems security policy is the responsibility of top management of an organisation

who delegate its implementation to the appropriate level of management with permanent
control.
The policy contributes to the protection of information assets. Its objective is to protect the
information capital against all types of risks, accidental or intentional. An existing and enforced
security policy should ensure systems conformity with laws and regulations, integrity of data,
confidentiality and availability.

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 MANAGEMENT INFORMATION SYSTEMS

Key components of such a policy include the following:

• Management support and commitment – management should approve and support formal
security awareness and training.
• Access philosophy – access to computerised information should be based on a
documented ‘need-to-know, need-to-do’ basis.
• Compliance with relevant legislation and regulations
• Access authorisation – the data owner or manager responsible for the accurate use and
reporting of the information should provide written authorisation for users to gain access
to computerized information.
• Reviews of access authorisation – like any other control, access controls should be
evaluated regularly to ensure they are still effective.
• Security awareness – all employees, including management, need to be made aware on a
regular basis of the importance of security. A number of different mechanisms are
available for raising security awareness including:

- Distribution of a written security policy.

- Training on a regular basis of new employees, users and support staff.

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- Non-disclosure statements signed by employees.

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- Use of different media in promulgating security e.g. company newsletter, web
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page, videos, etc. pl
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- Visible enforcement of security rules.
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- Simulate security incidents for improving security procedures.

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- Reward employees who report suspicious events. Periodic audits.

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Security in the application level:

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Application controls
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Application controls are controls over input, processing and output functions. Application
controls include methods for ensuring that:
 Only complete, accurate and valid data is entered and updated in a computer system.
 Processing accomplishes the correct task.
 Processing results meet expectations.
 Data is maintained.

These controls may consist of edit tests, totals, reconciliations and identification and reporting
of incorrect, missing or exception data. Automated controls should be coupled with manual
procedures to ensure proper investigation of exceptions.

Input/origination controls

Input control procedures must ensure that every transaction to be processed is received,

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 MANAGEMENT INFORMATION SYSTEMS

TOPIC 10

LEGAL, ETHICAL AND SOCIAL ISSUES IN MANAGEMENT

INFORMATION SYSTEMS

MANAGEMENT INFORMATION SYSTEMS ETHICAL AND SOCIAL CONCERNS

Information technology is a powerful tool that can be used to further organizational goals,
pursue national interest, or support environmentally sustainable development. The same
technology has also made it easier to engage in ethical or unethical business practices
electronically anywhere in the world. The way the technology is deployed in organizations
depends on our decisions as managers, computing professionals, and users of information
systems. All of us therefore, should make these decisions guided not only by the organizational
and technological aspects of information systems, but also in consideration of their effects on
individuals.

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Ethic refers to the principles of right and wrong that individuals use to make choices to guide
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their behaviors. IT can be used to achieve social progress, but it can also be used to commit
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crimes and threaten cherished social values. Ethical Issues - is governed by the general norms of
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behaviour and by specific codes of ethics. Ethical considerations go beyond legal liability.
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Knowledge of ethics as it applies to the issues arising from the development and use of
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information systems helps us make decisions in our professional life. Professional knowledge is
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generally assumed to confer a special responsibility within its domain. This is why the
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professions have evolved codes of ethics, that is, sets of principles intended to guide the conduct
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of the members of the profession.

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End users and IS professionals would live up to their ethical responsibilities by voluntarily
following guidelines set in the code of conduct. For example, you can be a responsible end user
by:

1. Acting with integrity

2. increasing your professional competence
3. Setting high standards of personal performance
4. Accepting responsibility for your work
5. Advancing the health, privacy, and general welfare of the public

Computer ethics

Although ethical decision-making is a thoughtful process, based on one’s own personal

fundamental principles, we need codes of ethics and professional conduct for the following

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 MANAGEMENT INFORMATION SYSTEMS

reasons:

- Document acceptable professional conduct to:

 Establish status of the profession

 Educate professionals of their responsibilities to the public
 Inform the public of expectations of professionals
 Judge inappropriate professional behaviour and punish violators

- Aid the professional in ethical decision-making.

The following issues distinguish computing professionals’ ethics from other professionals’
ethics:

- Computing (automation) affects such a large segment of the society (personal,

professional, business, government, medical, industry, research, education, entertainment,
law, agriculture, science, art, etc); it changes the very fabric of society.
- Information technology is a very public business

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- Computing is a young discipline

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- It changes relationships between: people, businesses, industries, governments, etc
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• Communication is faster
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• Data can be fragile: it may be insecure, invalid, outdated, leaked, lost,

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• unrecoverable, misdirected, copied, stolen, misrepresented, etc.

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• The well-being of people, businesses, governments, and social agencies may

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• be jeopardised through faulty computing systems and/or unethical behaviour

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• by computing professionals
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• Computing systems can change the way people work: it can not only make people
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• more productive but can also isolate them from one another
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• Conceivably could create a lower and upper class society

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• People can lose their identity in cyberspace

• Computing systems can change humankind’s quality of life
• Computing systems can take control of parts of our lives: for good or bad.

General moral imperatives

 Contribute to society and human well-being: minimise negative consequences of

computing systems including threats to health and safety, ensure that products will be
used in socially responsible ways and be alert and make others aware of potential
damage to the environment.

 Avoid harm to others: this principle prohibits use of computing technology in ways that
result in harm to the users, general public, employees and employers. Harmful actions
include intentional destruction or modification of files and programmes leading to

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 MANAGEMENT INFORMATION SYSTEMS

serious loss of resources or unnecessary expenditure of human resources such as the time
and effort required to purge systems of computer viruses.

 Be honest and trustworthy: the honest computing professional will not make
deliberately false or deceptive claims about a system or system design, but will instead
provide full disclosure of all pertinent system limitations and problems. He has a duty to
be honest about his qualifications and about any circumstance that may lead to a conflict
of interest.

 Be fair and take action not to discriminate: the values of equality, tolerance and
respect for others and the principles of equal justice govern this imperative.

 Honour property rights including copyrights and patents: violation of copyrights,

patents, trade secrets and the terms of license agreement is prohibited by the lawin most
circumstances. Even when software is not so protected, such violations are contrary to
professional behaviour. Copies of software should be made only with proper
authorisation. Unauthorised duplication of materials must not be condoned.

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 Give proper credit for intellectual property: computing professionals are obligated to

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protect the integrity of intellectual property. Specifically, one must not take credit for
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other’s ideas or work, even in cases where the work has not been explicitly protected by
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copyright, patent, etc.
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 Respect the privacy of others: computing and communication technology enables the
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collection and exchange of personal information on a scale unprecedented in the history

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of civilisation. Thus there is increased potential for violating the privacy of individuals
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and groups. It is the responsibility of professionals to maintain the privacy and integrity
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of data describing individuals. This includes taking precautions to ensure the accuracy of
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data, as well as protecting it from authorised access or accidental disclosure to

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inappropriate individuals. Furthermore, procedures must be established to allow

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individuals to review their records and correct inaccuracies.

 Honour confidentiality: the principle of honesty extends to issues of confidentiality of
information whenever one has made an explicit promise to honour confidentiality or,
implicitly, when private information not directly related to the performance of one’s
duties becomes available. The ethical concern is to respect all obligations of
confidentiality to employers, clients, and users unless discharged from such obligations
by requirements of the law or other principles of this code.

More specific professional responsibilities

 Strive to achieve the highest quality, effectiveness and dignity in both the process and
product of professional work.
 Acquire and maintain professional competence
 Know and respect existing laws pertaining to professional work
 Accept and provide appropriate professional review
 Give comprehensive and thorough evaluations of computer systems and their impacts,
including analysis of possible risks.
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 MANAGEMENT INFORMATION SYSTEMS

 Honour contracts, agreements and assigned responsibilities

 Improve public understanding of computing and its consequences
 Access computing and communication resources only when authorised to do so

Organisational leadership imperatives

• Articulate social responsibilities of members of an organisational unit and encourage full

acceptance of those responsibilities
• Manage personnel and resources to design and build information systems that enhance
the quality of working life.
• Acknowledge and support proper and authorised uses of an organisation’s computing and
communication resources.
• Ensure that users and those who will be affected by a system have their needs clearly
articulated during the assessment and design of requirements; later the system must be
validated to meet requirements.
• Articulate and support policies that protect the dignity of users and others affected by a
computing system.
• Create opportunities for members of the organisation to learn the principles and

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limitations of computer systems.

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Ethical Theories
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Ethical theories give us the foundation from which we can determine what course of action to
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take when an ethical issue is involved. At the source of ethics lies the idea of reciprocity. There
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are two fundamental approaches to ethical reasoning:

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1. Consequentialist theories
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It tells us to choose the action with the best possible consequences. Thus, the utilitarian theory
w
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that represents this approach holds that our chosen action should produce the greatest overall
good for the greatest number of people affected by our decision. This approach is often difficult
to apply, since it is not easy to decide what good and how to measure and compare the resulting
good

2. Obligational (deontological) theories

It argues that it is our duty to do what is right. Your actions should be such that they could serve
as a model of behaviour for others - and, in particular, you should act as you would want others
to act toward you. Our fundamental duty is to treat others with respect, and thus not to treat them
solely as a means to our own purposes.

Treating others with respect, means not violating their rights. The principal individual rights are:

1. The right to life and safety

2. The right of free consent
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 MANAGEMENT INFORMATION SYSTEMS

TOPIC 11

EMERGING ISSUES IN MANAGEMENT INFORMATION

SYSTEMS

Introduction

Information technology is a field that changes day-in-day out. Invention of complex technology
is facilitated by sophisticated systems required by different firms. This is also enhanced by
competition of organisations for clients’ satisfaction.

ELECTRONIC COMMERCE

Electronic commerce (e-commerce) is the buying and selling of goods and services over the

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Internet. Businesses on the Internet that offer goods and services are referred to as web

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storefronts. Electronic payment to a web storefront can include check, credit card or electronic
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cash. pl
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Web storefronts
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These are also known as virtual stores. This is where shoppers can go to inspect merchandise
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and make purchases on the Internet. Web storefront creation package is a new type of
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programme to help businesses create virtual stores. Web storefront creation packages (also
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known as commerce servers) do the following:

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• Allow visitors to register, browse, place products into virtual shopping carts and purchase
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goods and services.

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• Calculate taxes and shipping costs and handle payment options.

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• Update and replenish inventory.

• Ensure reliable and safe communications.
• Collects data on visitors.
• Generates reports to evaluate the site’s profitability.

Web auctions
Web auctions are a recent trend in e-commerce. They are similar to traditional auctions but
buyers and sellers do not meet face-to-face. Sellers post descriptions of products at a web site
and buyers submit bids electronically. There are two basic types of web auction sites:
• Auction house sites
• Person-to-person sites

Auction house sites

Auction house owners present merchandise typically from companies’ surplus stocks. Auction

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 MANAGEMENT INFORMATION SYSTEMS

house sites operate in a similar way to a traditional auction. Bargain prices are not uncommon
on this type of site and are generally considered safe places to shop.

Person-to-person sites
The owner of site provides a forum for buyers and sellers to gather. The owner of the site
typically facilitates rather than being involved in transactions. Buyers and sellers on this type of
site must be cautious.

Electronic payment
The greatest challenge for e-commerce is how to pay for the purchases. Payment methods must
be fast, secure and reliable. Three basic payment methods now in use are:

(i) Cheques
• After an item is purchased on the Internet, a cheque for payment is sent in the mail.
• It requires the longest time to complete a purchase.
• It is the most traditional and safest method of payment.

(ii) Credit card

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• Credit card number can be sent over the Internet at the time of purchase.

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• It is a faster and a more convenient method of paying for Internet purchases.
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• However, credit card fraud is a major concern for buyers and sellers.
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• Criminals known as carders specialise in stealing, trading and using stolen credit. cards
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stolen from the Internet.

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(iii) Electronic cash

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• Electronic cash is also known as e-cash, cyber cash or digital cash.

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• It is the Internet’s equivalent of traditional cash.

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• Buyers purchase e-cash from a third party such as a bank that specialises in electronic
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currency.
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• Sellers convert e-cash to traditional currency through a third party.

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• It is more secure than using a credit card for purchases.

ELECTRONIC DATA INTERCHANGE (EDI)

EDI is an electronic means for transmitting business transactions between organisations. The
transmissions use standard formats such as specific record types and field definitions. EDI has
been in use for 20 years, but has received significant attention within recent years as
organisations seek ways to reduce costs and be more responsive.

The EDI process is a hybrid process of systems software and application systems. EDI system
software can provide utility services used by all application systems. These services include
transmission, translation and storage of transactions initialised by or destined for application
processing. EDI is an application system in that the functions it performs are based on business
needs and activities. The applications, transactions and trading partners supported will change

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 MANAGEMENT INFORMATION SYSTEMS

over time and the co-mingling of transactions, purchase orders, shipping notices, invoices and
payments in the EDI process makes it necessary to include application processing procedures
and controls in the EDI process.

EDI promotes a more efficient paperless environment. EDI transmissions may replace the use
of standard documents including invoices or purchase orders. Since EDI replaces the traditional
paper document exchange such as purchase orders, invoices or material release schedules, the
proper controls and edits need to be built within each company’s application system to allow
this communication to take place.

OUTSOURCING PRACTICES

Outsourcing is a contractual agreement whereby an organisation hands over control of part or

all of the functions of the information systems department to an external party. The organization
pays a fee and the contractor delivers a level of service that is defined in a contractually binding
service level agreement. The contractor provides the resources and expertise required to perform
the agreed service. Outsourcing is becoming increasingly important in many organisations.

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The specific objective for IT outsourcing vary from organisation to organisation. Typically,

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though, the goal is to achieve lasting, meaningful improvement in information system through
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corporate restructuring to take advantage of a vendor’s competencies.
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Reasons for embarking on outsourcing include:

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• A desire to focus on a business’ core activities.

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• Pressure on profit margins.

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• Increasing competition that demands cost savings.

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• Flexibility with respect to both organisation and structure.

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The services provided by a third party can include:

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w

• Data entry (mainly airlines follow this route).

w
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• Design and development of new systems when the in-house staff do not have the
requisite skills or is otherwise occupied in higher priority tasks.
• Maintenance of existing applications to free in-house staff to develop new applications.
• Conversion of legacy applications to new platforms. For example, a specialist company
• may enable an old application.
• Operating the help desk or the call centre.

Possible disadvantages of outsourcing include:

• Costs exceeding customer expectations.
• Loss of internal information system experience.
• Loss of control over information system.
• Vendor failure.
• Limited product access.
• Difficulty in reversing or changing outsourced arrangements.

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Business risks associated with outsourcing are hidden costs, contract terms not being met,
service costs not being competitive over the period of the entire contract, obsolescence of
vendor IT systems and the balance of power residing with the vendor. Some of the ways that
these risks can be reduced are:

• By establishing measurable partnership enacted shared goals and rewards.

• Utilisation of multiple suppliers or withhold a piece of business as an incentive.
• Formalisation of a cross-functional contract management team.
• Contract performance metrics.
• Periodic competitive reviews and benchmarking/bench-trending.
• Implementation of short-term contracts.

Outsourcing is the term used to encompass three quite different levels of external provision of
information systems services. These levels relate to the extent to which the management of IS,
rather than the technology component of it, have been transferred to an external body. These are
time-share vendors, service bureaus and facilities management.

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TIME-SHARE VENDORS

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These provide online access to an external processing capability that is usually charged for on a
pl
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time-used basis. Such arrangements may merely provide for the host processing capability onto
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which the purchaser must load software. Alternatively the client may be purchasing access to the
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application. The storage space required may be shared or private. This style of provision of
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the‘pure’ technology gives a degree of flexibility allowing ad hoc, but processor intensive jobs
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to be economically feasible.
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SERVICE BUREAUS
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These provide an entirely external service that is charged by time or by the application task.
Rather than merely accessing some processing capability, as with time-share arrangements, a
complete task is contracted out. What is contracted for is usually only a discrete, finite and often
small, element of overall IS.
The specialist and focused nature of this type of service allows the bureaux to be cost-effective
at the tasks it does since the mass coverage allows up-to-date efficiency-oriented facilities ideal
for routine processing work. The specific nature of tasks done by service bureaus tend to make
them slow to respond to change and so this style of contracting out is a poor choice where fast
changing data is involved.

FACILITIES MANAGEMENT (FM)

This may be the semi-external management of IS provision. In the physical sense all the IS
elements may remain (or be created from scratch) within the client’s premises but their
management and operation become the responsibility of the contracted body. FM contracts

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 MANAGEMENT INFORMATION SYSTEMS

provide for management expertise as well as technical skills. FM deals are legally binding
equivalent of an internal service level agreement. Both specify what service will be received but
significantly differ in that, unlike when internal IS fails to deliver, with an FM contract legal
redress is possible. For most organisations it is this certainty of delivery that makes FM
attractive. FM deals are increasingly appropriate for stable IS activities in those areas that have
long been automated so that accurate internal versus external cost comparisons can be made. FM
can also be appealing for those areas of high technology uncertainty since it offers a form of risk
transfer. The service provider must accommodate unforeseen changes or difficulties in
maintaining service levels.

SOFTWARE HOUSES

A software house is a company that creates custom software for specific clients. They
concentrate on the provision of software services. These services include feasibility studies,
systems analysis and design, development of operating systems software, provision of
application programming packages, ‘tailor-made’ application programming, specialist system
advice, etc. A software house may offer a wide range of services or may specialise in a

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particular area.

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INFORMATION RESOURCE CENTRES
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Information Resource Centres co-ordinate all information activities within their areas of interest
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and expertise. Information within that area is analysed, abstracted and indexed for effective
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storage, retrieval and dissemination.

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DATA WAREHOUSING
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A data warehouse is a subject-oriented, integrated, time-variant, non-volatile collection of data

in support of management’s decision-making process.

Data warehouses organise around subjects, as opposed to traditional application systems

which organise around processes. Subjects in a warehouse include items such as customers,
employees, financial management and products. The data within the warehouse is integrated
in that the final product is a fusion of various other systems’ information into a cohesive set of
information. Data in the warehouse is accurate to some date and time (time-variant). An
indication of time is generally included in each row of the database to give the warehouse time
variant characteristics. The warehouse data is non-volatile in that the data, which enters the
database is rarely, if ever, changed. Change is restricted to situations where accuracy problems
are identified.

Information is simply appended to or removed from the database, but never updated. A query
made by a decision support analyst last week renders exact results one week from now.

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