Management information

system
By M.P.Jayarama Shetty
 INTRODUCTION
• Information system consists of all the
components that work together to process
data and produce information.
• All business information systems consists
of many subsystems with sub goals, all
contributing to the organizations main
goal.
TERMS-INFORMATION SYSTEM
& INFORMATION TECHNOLOGY
• Information system:
• An organized combination of people,
hardware, software and communication
networks and data resources that store,
retrieve, transform and disseminate
information in an organization.
• Information technology:
• Various hardware components necessary
for the system to operate.
 Purpose of information system
• Personal: For entertainment,
enlightenment or to get information.
• Business: To arrive at sound decisions
and solve critical problems.
• Efficient gathering of information, storing it
for further use and manipulating it as and
when necessary, helps an organization to
achieve its business goals.
 Role of information system
• Supports business process: receipts,
payments, sales, purchases, inventory
management etc.
• Support decision making: Date of purchase,
how to minimize cost, how to maximize
profitability etc.
• Supports competition, competitive
advantage, customer friendly, offer
innovative products, use of intranet,
IVRs[interactive voice response] etc.
 Components of information
system
• 1.Data: Input that takes the system to
produce information.
• 2.Hardware: Computer and its peripheral
equipments, Input, Output and storage
devices and also data communication
equipments, eg: telephone.
 Components
• 3.Software:
• Set of instructions that instructs the
computer to take data, process it, display
information and store data and information.
• 4.Telecommunication: hardware and
software that facilitates fast transmission
and reception of text, pictures, sound and
animations in the form of electronic data.
 Components …..
5.People: professionals and users who
analyze organizational information needs,
design and construct information system,
write computer programmes, operate the
hardware and maintain the software.
6. Procedures: Rules for achieving optimal
and secure information in data
processing[data security, back up, virus
attacks, passwords, piracy/privacy etc.
 Stages of processing in
information system
• Input: Entering data in to the information
system.
• Processing: Changing and manipulating
the data in information system.
• Output: Getting the information out of
information system.
• Storage: Storage of data and information
for future use.
 Capabilities of information
system
• Data processing- fast and accurate.
• Data storage: capacity to store large
volume.
• Information: Instant access/real time
access.
• Coordination: facilitates greater
coordination through accurate information
sharing and effective communication.
 Capabilities……
• Supports: Decision making.
• Facilitates organizational memory and
learning.
• Enables differentiation of products and
services.
• Facilitates modeling.
• Supports automation.
 Unit-1 Introduction to
information system.
• Data:Data is derived from the Latin word
‘datum’- raw facts or observations.
• Data are objective measurement of
attributes/characteristics of entities like
people/place/things/events.
• It may be in the form of number, a
statement or a picture.
• It is a raw material in the production of
information
 Information
• Facts or conclusions that have meaning
with the situation.
• Data to be manipulated to become
information.
• Data is raw material and information is
output.
• Information thus consists of data that have
been retrieved processed or otherwise
used for information purposes or as a
basis of forecasting or decision making.
 Characteristics of useful
information
• Relevant-Related to a particular objective.
• Complete-All information required,
incomplete information is useless.
• Accurate-Correct and true data.
• Current-Latest/updated information
needed.
• Economical-deriving information at lowest
operational cost.
 Users of information
• 1.Within the organization:
• Finance personnel, public relations,
production, purchase etc.
• 2.Outside the organization:
• Government, Regulators, Auditors, Share
holders etc.
• Government interferes during frauds etc,
regulators- SEBI/RBI/IRDA.
• Auditors-External/Internal/Concurrent/RBI.
 System and subsystem
• A system is a range of components that
work together to achieve a common goal
or multiple goals by accepting inputs,
processing it and producing output in an
organized manner.
• A subsystem is a part of a larger system.
• Organization is the system and the
parts[divisions, departments, functions
units etc] are the subsystems.
 Types of information systems
• 1. Operations Support Systems:
• A)Support business operations- process
data generated by and used in business
operations.

• B)Transaction processing systems:

• Record and process data, update
operational database.
 Types of information systems
• C)Batch processing & Real time
processing:
• Eg: Order/payrolls/sales/inventory
processing.

• D) Process control system:

• Monitor and control physical process, eg:
power generation, steel production,
bottling plant etc.
 Types of information systems
• E) Enterprise collaboration system:
• Enhance team and work group
communications and productivity.
• Examples:
• Email, Video conferencing and other office
automation systems.
2.Management support systems
• Provide information to support effective
decision making by the managers.
• A) Management information system:
• Is an integrated user machine system for
providing information to support
operations, management and decision
making functions in an organization. The
system utilizes computer hardware and
software models for analysis, planning,
control and decision making.
 Management support system
• B. Decision support system:
• Provides direct, interactive support during
decision making process.
• Eg: Product pricing, sales/service[online
services] profitability[future forecast], other
financial forecasting, risk calculations etc.
 Management support system
• C. Executive Information system:
• Provide critical information from variety of
internal and external sources.
• Easy to use displays.
• Eg: Five years sales trend forecasting,
profit planning, personnel planning,
evaluating actions of competitors.
 3. Other types of information
system
• Expert systems: are knowledge based, act
as expert consultants eg: Diagnostics
systems, process monitoring system etc.
• Knowledge management systems: are
knowledge based[e-learning] supports
creation and dissemination of business
knowledge. eg: marketing/sales strategies
and access to best practices.etc.
 Strategic information system
• Support activities that have strategic
advantage.
• Give competitive edge.
• Eg: Ecommerce
• web systems
• shipment tracking etc.
 Functional business systems
• Support operational and managerial
applications related to business functions.
• Eg: Information systems that support
various applications in marketing,
accounting etc.
 Development of infrastructure
• Access information requirements of a
business.
• Identify the software requirement for
getting the relevant information to support
the risks.
• Go for hardware requirements to run the
software.
• Use telecom/network facilities for access.
 Basic hardware components
• Input devices.
• Central processing unit. CPU
• Internal memory-RAM/ROM.
• External storage – hard disk/cd/dvd.
• Output devices.
 Classification of computers
• 1.Super Computers:
• Largest in physical size,
• Costs heavily,
• Use multiple processor,
• High processing speed,
• Used in weather forecasting, simulations…
 2.Mainframe computers
• Less powerful and less expensive
• Ability to run multiple operations systems
• Have multiple processors
• Used in banks, Insurance companies etc.
 Classification of computers
• 3. Mid range computers:
• Smaller than mainframe and less powerful.
• Used as shared resources.
• Acts as server.
• 4. Micro Computers:
• PCs, Notebook computers etc.
• Generally called as workstations, used for
CAD[computer aided design] and
cam[computer aided manufacturing].
 Business software-types of
software
• What is a software!
• A series of instructions, to a computer to
execute any and all process including
displaying texts, manipulating numbers or
copying/deleting documents etc.
• Application software
• System software
• Open source system.
 Application software
• A programme developed to address a
specific need.
• Performs information processing tasks for
end users.
• It can be application specific or general
purpose.
• Eg: software for payroll, CRM-customer
relationship management, spread sheets,
• Word processor, presentation tools,
graphics etc.
 System software
• Manage computer resources and perform
routine tasks.
• Acts as a n interface between computer
and user.[file loading, copying, deleting]etc
• Develop to work in association with as
many applications as possible. Application
work with system software when they are
developed to be compatible with that
software. Eg: operating systems[Linux,
windows, XP etc. Network management
systems.
 Open source software
Proprietary software v/s open source s/w:
Software developed and sold for profit v/s
Software developed and made available free
of cost.
Sharing of source codes, solving
programming problems, recognition of
one’s contribution.
Eg: Mozilla Firefox, thunderbird, SQL.
 Business networks &
telecommunications
Advantages of telecommunications in
business:
Better business communications[intranet-
within organization]. Efficient business
processes.[streamlined/standardized
process]. Quick transmission/distribution of
data [real time]. Facilitates transactions
over the net. Workforce can be mobile and
flexible[use of networks can easily transfer
data fast].
 Bandwidth and media
• Bandwidth: It is speed [transmission rate]
at which data are communicated.
Transmission rate measured as bits per
second[bps]. Dial up connections through
regular phone lines carry only one
transmission at a time.
Cable television, fiber optic cables, wireless
connections carry multiple transmissions
simultaneously.
 Media
It is the means through which bits are
transmitted.
Tangible v/v intangible-cable v/s radio
waves.
Twisted pair cables: electric power lines,
radio and satellite transmissions.
 Ch-3. Applications of
information system.
An information system is strategic if its
objective is to improve competitive
positions of the organization.
May include system that supports
operations, management or knowledge
work.
Helps firms to attract customers and retain
them for an extended period of time.
 Characteristics of strategic
information system
• External focus:
• they change the way the firms compete in
the market place.
• Innovative use of I.T:
• It is all about how to use the technology
rather than which technology you use.
• High degree of projectors.
Strategies in competitive market
• Differentiation of service: offering value
added service/special schemes etc of
product, offering free products/credit facility
for regular customers/bonus, vouchers for
special customers.
• Cost leadership-for product-use of I T is to
reduce process/labour cost.
• For service-use of Web/IVR etc
• For customer service-change from labor
intensive to technology intensive.
 Companies that focus on
narrow customer segment
• Focused differentiation-company identifies
a segment of the market which it can serve
in a superior way. Smaller firms compete
by specializing in product or service for a
limited size slot.
• It could be customer segment or a
geographical region. It helps in identify the
customers to be served and customizing
the product or service for their needs.
 Cost focus
• Company serving a narrow market
segment with which product or service that
it offers at a significantly lower cost than
competitors.
• Relatively difficult to pursue for smaller
companies.
• Use of IT facilitates operational
efficiencies.
 Competitive focus of the
companies.
• Customers
• Suppliers
• Existing competitors
• Potential substitute prodcts[diversification]
 Using I S to our advantage
• 1.threat of new competitors: Use
technology/expertise that is available to
the competitors.
• Use barriers to entry[for the competitors]
• Obtain legal protection/IPR [intellectual
property rights] for and artistic work.
• Eg: Microsoft patenting software, cell
companies offering TV on mobiles etc.
 I.S advantages
• 2.Intensify rivalry among the existing
competitors:
• Change the basis of competition
• Eg: FED express facilitating parcel
tracking. Real estate business going web
etc.
 I S advantages
• 3. pressure from potential substitute
products:
• Track the market changes using
information service and be the first
mover/introducer.
• Eg:e-bay dominating on line auctions etc.
 I S-advantages
• 4.Bargaining power of the customer:
• Introduces switching cost eg: selling of ink
jet printers bellow cost-replace a depleted
ink or toner with the one that the printer
manufacturer’s sell.
• Competitive tactics: the alternative the firm
has-internal innovation[technology, cost-
cutting, quality], Merger/Acquisition[two
companies to agree], strategic alliance[for
a given output/processing/capitalization
etc]
 Types of MIS/applications of
MIS
• 1.Human resource management: I.S:
Types of applications:
a) Employee record management.
Maintenance of personal records for
internal and external regulations.
Payrolls, tax calculations-TDS on salary,
deposits, promotion, employee
photographs etc.
 HRM related I.S
b) Recruitment and promotion.
Use of Intranets for posting vacancies linked
to employees, PC’s enable data base
search, automates selection process,
automated recruitment and selection
software, web searching for qualified
candidates with job openings and use of
tracking system to Email candidates and
updates the corporate HR database with
their resumes.
 HRM related I S
C] Training: Improving employee skills by
using multi media software/simulated
trainings etc reduces training costs.

D]evaluation: evaluation of technical ability,

communication skills, professional conduct
etc by using evaluation software for
standardizing the evaluation process,
access employee and departments.
 HRM related IS
E]compensations and benefits management.
Manage compensation-salary, hourly pay,
commission, bonuses etc and benefits like
health insurance, life insurance, retirement
plans etc. Reduced amount of work of HR
staff decrease the companies overhead
costs if given access to the system.
 Customer relationship
management system.
Phases of CRM:
Acquire[new customer]: by superior job of
contact management, sales, prospecting [for
a certain group], marketing and order
fulfillment.
Enhance[customer satisfaction]: by supporting
superior service through a responsive team
of sales and service specialists.
 CRM-phases of CRM contd..
Retain: help identify and reward most loyal,
profitable customers. Companies must not
only acquire new customers but also retain
existing customers. Customer profitability
analysis statement. Concessions of
various nature extended to HNI/corporate
customers who facilitate volume growth
and profitability, production and
productivity.
 CRM-phases
Goals of CRM system:
Finding Data-reduce time
Knowledge- enable sharing across the
company.
Sales force-streamlining and automation.
Marketing efforts-Market research[looking
for references].
 CRM
CRM systems:
Credit information about customers' likes
and dislikes’. Use statistical models to
predict sales volumes of different products
and different designs of the same products
aiding manufacturing capacities and
production live, enabling budgeting.
 Inventory information systems
What is inventory:
Stock of raw material and finished goods
available for the firm for production and
sale.
It needs to be controlled to have optimum
level of investment in all types of
inventories.
Stock levels should be always balanced. High
level of inventory leads to financial burden.
 Objectives of inventory-I S
To maintain optimum level of raw material
and finished goods.
To prepare purchase order and inventory
status reports accurately and on time.
To prepare various analysis reports-
defective materials, quantity ordered and
received etc…..
To generate reports to assist the
management for making effective and
timely decisions
 Inputs to the system
Data of suppliers, vendors, buyers, raw
materials and finished goods.
Goods received notes indicating the quantity
received. Material requisition slips indicating
the quantity used.
Delivery challans indicating quantity sold of
various items to buyers.
Material rejection note indicating quantity of
items rejected to vendors and reasons.
 Targeted marketing
Use database to define ‘prospective
customer’(consistent) accurately.
Using of telemarketing and web for
personalized marketing.
Use personal information of the customer to
identify their interests, tastes, buying habits
etc when they use the web.
Customer service: web enabled service,
automated customer service, use of IVR etc,
answers to FQRs on the website etc..
 Sales force automation
Note books with internet facilities to sales
people with specialized software for
manipulating the customer information.
Generation of e-bills and electronic payment
of bills.
Enabling immediate order fulfillment, loading
the sales information to enable order
processing, manufacturing shipping and
invoicing.
 What CRM system does ?
Instant and complete view of the customer.
Single and complete view of the company
and its products/services for customers.
Integrating and automation of customer
servicing processes.
Integration of related business operation with
IT framework of web enabled software and
databases.
Better service for customers.
 Inventory information system
What is inventory:
Stock of raw material and finished goods
available in the firm for production and
sale.
It needs to be controlled to have optimum
level of investment in all types of
inventories. Stock levels should be always
balanced. High level of inventory leads to
financial burden.
 Objectives of inventory I.S.
To maintain optimum levels of raw materials
and finished goods. To prepare purchase
order and inventory status reports
accurately and on time. To prepare
various analysis reports-defective
materials, quantity ordered and received
etc. To generate reports to assist the
management for making effective and
timely decisions.
 Inputs to the system
Data of suppliers, vendors, buyers, raw
materials and finished goods.
Goods received notes indicating the quantity
received, material requisition slips indicating
the quantity used. Delivery chalans
indicating quantity sold of various items to
buyers.
Material rejection note indicating quantity of
items rejected to vendors and reasons.
 Output from the system
1.Purchase order with details.
2.Purchase book-for quantity & other details.
3.Inventory status report-quantity sold, received,
issued and closing balance.
4.Materials return receipt-quantity of items
rejected with details.
5.Materials transfer reports- issued to other
branches or departments.
6.Purchase analysis report-indicating quantity and
other details of items purchased from various
suppliers.
 Output from the system contd..
7.Inventory management system does not
make decisions or manage operations. It
provides information to efficiently manage
materials, people and equipment and
communicate with the suppliers and
customers.
8.It also provides information to managers to
make accurate and timely decisions to
manage operations.
Accounting information system-
AIS
AIS is the system of records that a business
keeps to maintain its accounting system.
It records, processes, and reports events
using accounting methods to achieve
accounting objectives.
Purpose of AIS is to accumulate data and
provide decision makers, investors,
creditors and managers with information to
make decisions/generate reports.
 What AIS does?
Help record transactions, collect and process
transaction data, produce periodic
statements, disseminate the information to
the interested parties and helps in creating
the reports to the managers.
AIS facilities:
Cost accounting, accounts payable & accounts
receivable details/data.
Creation of financial reports.
Generation of sales information.
 Expert system
Artificial intelligence-AI.
It is a field of study that explores how
computers can be used for tasks that
require the human characteristics of
intelligence, imagination and intuition.
It includes the following branches of study:
Problem solving
Natural languages
Robotics
 Expert system-how the
computer learns
Computers learn, given a knowledge base(a
set of facts and rules about those facts).
Next, the computer uses an ‘inference
engine’(a software) to access, select and
interpret a set of rules to make up new
facts.
Inference engine-combines data with the
data relationships stores to diagnose
interpret, suggest the solution.
 What expert system does?
Performs at a human expert level in a
specialized domain.
Uses symbolic reasoning to solve the
problems.
Artificial intelligence(AI) applications process
strings of characters that represent real
world/entities or concepts.
The term ‘customer’ and ‘profit’ are
examples of such symbolic strings.
E.g.-sales, purchases etc
 What expert system does
Applies proceedings to a solution based on
experience/informal methods by trial and
error to guide reasoning process.
 Expert system used in….
1.classifications-identifying an object based
on certain characteristics.
2.diagnosis-detect and understand
malfunction disease from data.
3.monitoring-continuous observations of data
to check any deviations to take remedial
action.
4.Process control-controlling a physical
process based on monitoring.
 Expert systems-benefits
Faster completion of a task than a human
expert.
Enables immediate response, decision,
diagnosis.
Error rate of successful expert system is
very low, as it has high performance.
Expert system makes consistent
recommendations.
 Expert system benefits…..
Ease to get everything at one place, as it
operates through networks and engines.
Captures scarce expertise, best
professionals.
Facilitates building up of organizational
knowledge, e-knowledge, e-learning.
Can operate in an environment that are
hazardous for human experts.
 Expert systems-limitations
Limitations of technology-no automatic
learning capacity.
Problems with knowledge acquisition-lack of
data accessibility. Unwillingness/non
availability of domain experts.
Long term weakening of innovation in the
performance of the people.
 Unit-4.Decision making and
support systems
Introduction:
Decision-act or process of deciding.
Deciding a settlement of a question.
Arriving at a formal judgement.
 Decision support
Decision support:
Why support-to make quality decisions.
To arrive at right decision. Large amount of
information requires great amount of
processing.
Use of computers facilitates effective and
efficient processing.
Decision making-making the decision a
necessity.
 Decision making process

1.intelligence-collection of facts and ideas.

2.design-method of considering the data.

3.choice-collecting the optimum course of

action.
 Types of problems(decisions)
1.Structured problem: programmed decision

-can be delegated or outsourced.

-cost of solving the problem is low compared
to the non programmed problems.
-can be made with the help of computer
system.
 Unstructured problems-non
programmed decisions
-cannot be delegated as they are managed
directly.
-higher authority cannot delegate but take
decisions.
-are difficult to structure in logical or
mathematical forms.
-computers may be used to process large
volumes of data.
 Unstructured problems……
-acquisition of capital projects or purchase of
scarce and capital items under
fluctuations/fluctuating price conditions,
new product service/new product
development(NPD) etc…
-cost is high. Hence higher authority must be
in charge.
 Unstructured problems….
Semi structured problems or semi
programmed decisions.
Intelligence-design-choice.
-at least one phase of the three phases of
decision making can be handled by
defined procedure.
-middle level officials taking decision.
-considering factors-demand and supply.
 Decision support system
DSS is a computer based information
system.
Helps managers select one of many
alternative solutions to a problem.
DSS are used at all levels of organization.
It is also used as business intelligence or
management support systems.
Evaluate various alternatives, select the
best-use of intranet to cut cost, just in
time(JIT) for stock etc…
 How decision support system
works(DSS)?
Process of DSS
Users enter a request in a convenient
manner(dialogue management module).
Computer searches vast amount of data to
focus on relevant facts(data management
module).
Computer processes the data through
desired modules.
Computer presents the results/output in
easy to understand formats.
 Component/structure of DSS
Decision support system:

1.Data management sub system.

2.Module management sub system.
3.Dialogue management system.
 Component/structure DSS….
1.Data management system.
It is data base/data warehouse. Data base
may be specially created or already
existing.
Takes care of data mapping, data validation,
data integration and data processing.
Mapping-selecting required customer.
Validation-verification of data& be available
throughout. Eg: data about raw materials,
price, demand, etc for last 5 years.
 2.Module management sub
system
Offers different models for representation.
Models are used to predict output on the
basis of different inputs.
Models may be based on experience or
mathematical research to establish
relationship between the factors.
Models can be fixed or dynamic.
2. Module management contd…
Companies usually do not share the details
of the models-private/confidential due to
other competitors.
Used for research and development.
Images/modules on how to produce
Control of price/demand and supply(market)
Eg:Models developed by airline industry to
maximize revenue or engineering model.
 3.Dialogue management sub
system.
DSS answers the question like, if increase
the price of the product ‘x’ by Rs:2 what
will be the demand?-what, if analysis.
OR
What would it take in terms of input factors
to achieve a particular performance? (goal
seeking analysis).
Facilitates user interaction.
 Dialogue management
subsystem….
Prompts a user to select a model, access
and select database, enter programmes.

Dialogue may be in the form of menus,

commands etc….
Results may be displayed in a table graph.
Better interpretation and contradiction can
be made easily.
 Features of DSS
Supports decision making-even to process
larger volume of data, computer
assistance is required.
Compatibility-faster processing speeds.
Faster rate of reaching a decision-facilitated
by in built models-customized mode to
satisfy one’s needs.
 Features of DSS……..
supports easy modification of models, eg;
CBS Software-modification & Customization.
Finacle introduced & upgraded for better
operations.
High quality decision taking is made
possible by integration of available
information.
 Features of DSS……

User friendly-facilitating problem solving at

all levels in the organization.
Efficient and effective.
Assists the user at any time.
Problems solved.
 Benefits of DSS
Improves personal efficiency.
Expedites problem solving(speed up the
progress of problems solving in the
organization)
Facilitates interpersonal communication.
Promotes learning and training.
Increases organizational control.
Generates new evidence in support of a
decision.
 Benefits of DSS…….
Creates a competitive advantage over
others.
Encourage exploration and discovery on the
part of the decision maker.
Reveals new approaches to thinking about
the problem space.
Helps automate the managerial problem(all
branches are inter connected).
Decision-analytic DSS
 User of information
a) Within the organization-finance
personnel, public relations, production,
purchases, etc…
b) Outside the organization: Government,
Regulators, auditors, shareholders etc..
Government interferes during frauds etc.
Regulators-SEBI(securities and exchange
board of India)
Auditors: external-outside the organization
Internal-within the organization.
 System and subsystem
A system is a range of components that
work together to achieve a common goal
or multiple goals by accepting input,
processing it and producing output in an
organized manner.
A subsystem is a part of a larger system.
Organization is the system and the
parts(divisions, departments, functions,
units etc..) are the subsystems.
CH-3 applications of inf. system
Strategic information system.
An information system is strategic if its
objective is to improve competitive
positions of the organization.
May include system that supports operation,
management or knowledge work.
Helps firms to attract customers and retain
them for an extended period of time.
 Characteristics of strategic I.S.
External focus: they change the way the
firms compete in the market place. E-
market-online purchasing.
Innovative use of I.T: it is all about how to us
the technology rather than which
technology you use.
High degree of projectors:
standardized/streamlined/processed.
 Strategies in competitive market
1.Differentiation:
Of service-offering value added service/special
schemes etc…
Of products: offering free products/credit facility
for regular customers, bonus, vouchers for
special customers.
2.Cost leadership-for product-use if IT is to
reduce process/labor cost.
For service-use of web/IVR etc..for customer
service change from labor intensive to
technology intensive.
 Companies that focus on
narrow customer segment
1.Focussed differentiation:
Company identifies a segment of the market
which it can serve in a superior way.
Smaller firms compete by specializing in
product or service for limited size slot.
It could be a customer segment or a
geographical region.
It helps in identify the customers to be served
and customizing the product or service for
their needs.
 Focus on narrow cust.segment
2.Cost focus:
Company serving a narrow market segment
with which products or service that it offers
at a significantly lower cost than
competitors.
Relatively difficult to pursue for smaller
companies.
Use of I T facilitates operational efficiencies.
 Competitive forces of the
companies
Customers
Suppliers
Existing competitors
Potential substitute products