Information System

Overview
Principles and Learning
Objectives
–Discuss why it is important to study and understand
information systems
–Distinguish data from information and describe the
characteristics used to evaluate the value of data
–Name the components of an information system and
describe several system characteristics
–List the components of a computer-based information
system
–Identify the basic types of business information systems
and discuss who uses them, how they are used, and what
kinds of benefits they deliver
Why Learn about Information
Systems?
Information system (IS):
◦ A set of interrelated components that collect, manipulate,
and disseminate data and information and provide
feedback to meet an objective
Businesses:
◦ Can use information systems to increase revenues and
reduce costs
Information systems used by:
◦ Sales representatives
◦ Managers
◦ Financial advisors
What is an
Information
System?
An organized combination of
people, hardware, software,
communications networks, and
data resources that collects
data, transforms it, and
disseminates information.
 Information System(IS):
An
Introductio
◦ The other definition can be “IS is a
n to an combination of IT and people's activities using
Informatio technology to support business processes,
operations, management, and decision-
n Systems making at different levels of the organization.”
(IS)
Componen
ts of an IS
Components of an IS
1. Hardware : Physical devices and equipment like computers, servers,
storage, and networking devices.
2. Software: Programs and applications used for data processing, such as
enterprise resource planning (ERP) systems, operating systems, or
productivity tools.
3. People: Any person involved in developing, operating, and using an IS.
Eg. Analysts, Programmers, Help desk operators, and End-users.
4. Procedures: Documentation containing directions on how to use other
components of an IS. Eg. Operation manual, and User manual.
5. Network: Communication systems that connect hardware and
software, enabling the exchange of data and resources within and
between organizations.
6. Data: Raw or unorganized facts and figures that describes conditions,
ideas, or objects. Eg. Invoices, orders, payments, customer details, etc.
 Questions
1. What is IS ? What is its Role in Decision Making?
2. What are the best practices for summarizing sales data to present a
sales strategy?
3. How can businesses leverage summarized inventory data for
efficient supply chain management?
4. How can companies leverage summarized financial data to optimize
investment and cost management?
 DIKW
Primary goal of IS is to economically process data into info or
knowledge.
Data: Raw unorganized facts. Data describe products, customers,
events, activities, and transactions that are recorded, classified, and
stored.
Information: Information is data that have been processed, organized,
or put into the context so that they have meaning and value to the
person receiving them.
It provides "who", "what", "where", and "when" in context of given
data.
•Defining and organizing relationships among data creates information.
DIKW
Knowledge: It adds understanding, experience, accumulated learning,
and expertise to information, as they apply to a current problem or
activity.
It is used to answer the question "how" and is fact of knowing
something with familiarity gained through experience or education.
2 types:
Explicit Knowledge: Basic form of knowledge, easy to communicate,
store, and distribute. Eg. Books, manuals, policies and procedures, etc.
Tacit Knowledge: It is not taught; it is learned by doing, watching and
experiencing. Eg. Hands-on skills, specialized know-how, employee
experiences, etc.
DIKW
Wisdom: Wisdom is the ability to apply knowledge and experience to
make sound judgments and navigate life effectively.
It's about more than just possessing information; it's about
understanding how to use that information to make wise decisions.
DIKW
DIKW
Case Study
A national retail chain, XYZ Retail, was facing
challenges in predicting sales trends and managing
inventory efficiently. The company decided to use a
data-driven decision-making approach to improve
sales performance and inventory control.
 DIKW
Data (Raw Facts & Figures)
XYZ Retail collects vast amounts of raw sales and inventory
data, including:
◦ Daily sales transactions from all stores
◦ Stock levels across warehouses
◦ Customer purchase histories
◦ Seasonal demand fluctuations
◦ Supplier restock frequencies
At this stage, the data is raw and unprocessed, stored in
databases without any meaningful insights.
 DIKW
Information (Processed Data for Meaning)
To convert data into information, XYZ Retail applies data
analytics:
Sales Reports: Organizes sales data by product, location, and
time period
Inventory Levels: Shows how stock levels fluctuate over time
Customer Insights: Identifies popular products and peak sales
hours
For example, a report may indicate that "Product A sells 30%
more on weekends than weekdays." While this information is
useful, it does not yet suggest direct business actions.
 DIKW
Knowledge (Insights & Patterns)
At this stage, XYZ Retail derives actionable insights from the
information:
Trend Analysis: Sales of winter clothing peak in November
and December, prompting early stock preparation.
Customer Preferences: Customers in urban stores prefer
premium brands, while rural stores sell more budget-friendly
alternatives.
Seasonal Demand Planning: During holiday sales, some items
sell 50% faster, requiring increased stock levels.
Now, patterns emerge, helping managers make informed
decisions on inventory, promotions, and pricing.
 DIKW
Wisdom (Strategic Decision-Making)
Finally, XYZ Retail applies wisdom by making strategic and proactive
business decisions based on knowledge:
Automated Replenishment: The system predicts future stock requirements
based on past sales trends and automatically adjusts inventory orders.
Targeted Promotions: The company creates personalized offers, such as
sending discount coupons for winter clothing in early November based on
prior buying behavior.
Optimized Pricing Strategy: Prices are adjusted dynamically—increasing
during high demand and lowering when inventory needs clearing.
These decisions maximize revenue, minimize stockouts, and reduce
overstocking, leading to higher profitability and improved customer
satisfaction.
 The Characteristics of Valuable
Information
If an organization’s information is not accurate or
complete:
◦ People can make poor decisions, costing thousands,
or even millions, of dollars
Directly linked to how it helps decision makers
achieve their organization’s goals
Valuable information:
◦ Can help people and their organizations perform
tasks more efficiently and effectively
 CASE STUDY
A large hospital, ABC Medical Center, faced a major issue
with patient readmissions due to chronic diseases such as
heart failure and diabetes. High readmission rates not only
increased healthcare costs but also reduced the quality of
patient care. The hospital decided to implement a data-
driven approach using the DIKW (Data, Information,
Knowledge, Wisdom) model to predict and reduce
readmissions.
System Concepts
System:
◦ Set of elements or components that interact to
accomplish goals
Components of a system:
◦ Inputs
◦ Processing mechanisms
◦ Outputs
◦ Feedback
System ConceptsCONTINUED
System Performance and Standards
Efficiency:
◦ Measure of what is produced divided by what is
consumed
Effectiveness:
◦ Measure of the extent to which a system attains its
goals
System performance standard:
◦ Specific objective of the system
System Performance and
StandardsCONTINUED
System Performance and
StandardsCONTINUED
Information System Revisited
Information system (IS) is a set of interrelated
elements that:
◦ Collect (input)
◦ Manipulate (process)
◦ Store
◦ Disseminate (output) data and information
◦ Provide a corrective reaction (feedback mechanism)
to meet an objective
Information System RevisitedCONTINUED
Input, Processing, Output, Feedback
Input:
◦ Activity of gathering and capturing raw data
Processing:
◦ Converting data into useful outputs
Output:
◦ Production of useful information, usually in the form
of documents and reports
Feedback:
◦ Information from the system that is used to make
changes to input or processing activities
 Manual and Computerized
Information Systems
Manual Information System
Example: Paper-Based Inventory Management
Description: In a small retail store, inventory management
might be done manually using paper records. The store owner
keeps track of stock levels, sales, and orders by writing them
down in a ledger or on inventory sheets.
Process: When a product is sold, the owner manually updates
the inventory sheet to reflect the new stock level. Orders for
new stock are also recorded manually.
Advantages: Simple to set up, no need for technical skills or
equipment.
Disadvantages: Time-consuming, prone to human error,
difficult to scale.
 Manual and Computerized
Information SystemsCONTINUED
Computerized Information System
Example: Point of Sale (POS) System
Description: In a larger retail store, inventory management is
handled using a computerized POS system. This system records
sales transactions, updates inventory levels in real-time, and
generates reports.
Tools: Software like Square, Shopify POS, or custom-built POS
systems.
Process: When a product is sold, the POS system automatically
updates the inventory database, processes the payment, and
prints a receipt. The system can also generate sales reports and
reorder alerts.
Advantages: Efficient, accurate, scalable, provides real-time
data.
Disadvantages: Requires initial setup cost, technical skills, and
Computer-Based Information
Systems
Single set of hardware, software, databases,
telecommunications, people, and procedures:
◦ That are configured to collect, manipulate, store, and
process data into information
Technology infrastructure:
◦ Includes all hardware, software, databases,
telecommunications, people, and procedures
◦ Configured to collect, manipulate, store, and process
data into information
Computer-Based Information
SystemsCONTINUED
Computer-Based Information
SystemsCONTINUED
Hardware:
◦ Consists of computer equipment used to perform
input, processing, and output activities
Software:
◦ Consists of the computer programs that govern the
operation of the computer
Database:
◦ Organized collection of facts and information,
typically consisting of two or more related data files
Computer-Based Information
SystemsCONTINUED
Telecommunications, networks, and the Internet
◦ The electronic transmission of signals for
communications
Networks
◦ Connect computers and equipment to enable
electronic communication
Internet
◦ World’s largest computer network, consisting of
thousands of interconnected networks, all freely
exchanging information
Computer-Based Information
SystemsCONTINUED
Intranet:
◦ Internal network that allows people within an organization to
exchange information and work on projects
Extranet:
◦ Network that allows selected outsiders, such as business
partners and customers, to access authorized resources of
a company’s intranet
People:
◦ The most important element in most computer-based
information systems
Procedures:
◦ Include strategies, policies, methods, and rules for using the
CBIS
Types of ISs
Operation Support
Systems
 The role of operation support system is to efficiently
process business transactions, control industrial process
support, enterprise communication, and update corporate
database.
 The Information system generally deals with the support of
business operations known as operation support system
which produces a variety of information products for
external and internal use.
 However, such products produced by OSS needs further
processing for efficient use by manager.
Transaction Processing
System
 It is a category of OSS that generally record and process data
resulting from business transaction.
 It generally process sales, purchase, inventory and other
organizational databases.
 These database then provide the data resources that can be
processed and used by DSS and EIS.
 TPS processes transaction into two ways:
- Batch Processing
- Real Time Processing
Transaction Processing
System CONTINUED

 Batch Processing:
Data is accumulated over a period time and processed
periodically.
It can be for a day, shift, week, or other time period.
Eg. Payroll processing done weekly or biweekly is an
example of batched data.
Disadvantage here can be that data are inaccurate some
of the time because they are not updated in real time.
Transaction Processing
System CONTINUED

§Real Time Processing: Data is immediately processed after

a transaction occurs.
OLTP uses client servers so that transactions can run on
multiple computers on a network to process the
transactions in real time.
Data are accessed directly from the database and reports
can be generated automatically.
Ex: Sales and Inventory Processing
Process Control Systems
 It is a category of OSS in which decision about a physical
production process are automatically made by computer
through routine decisions that control operational process.
 A Process Control System (PCS) is used to
monitor and control industrial processes
automatically, ensuring they run smoothly and
produce consistent, high-quality results.
 These systems use sensors to collect data, which
is then analyzed by computers to make real-time
adjustments.
Process Control
Systems CONTINUED

Example: Server Temperature Control System

Sensors: Measure the temperature of servers in a
data center.
Controller: Compares the measured temperature to
the desired setpoint.
Actuator: Adjusts the cooling system (e.g., fans or
air conditioning) to maintain the desired
temperature.
This system ensures that servers operate within safe
temperature ranges, preventing overheating and
potential hardware failures.
Enterprise Collaboration
System
It is the information system that uses a variety of information
technology to help the people to work together.
ECS helps to collaborate and communicate ideas, share resources and
co-ordinate work effort of an organization.
The aim of an ECS is to use the information technology to enhance
productivity and creativity of organization and work group in an
organization.
An Enterprise Collaboration System (ECS) is an
information system designed to facilitate communication,
collaboration, and information sharing within an
organization. These systems help teams work together
more efficiently, regardless of their physical location.
Enterprise Collaboration
System CONTINUED

Example:
Slack:
◦ Features: Channels for team communication,
direct messaging, file sharing, and integration
with various third-party applications.
◦ Use Case: A marketing team uses Slack to
coordinate their campaigns. They create
channels for different projects, share creative
assets, and integrate tools like Trello for task
management.
Management Support
System
 Management Support Systems (MSS) are computer-based
systems designed to assist managers in decision-making by
providing relevant information and tools. These systems help
managers analyze data, generate reports, and make informed
decisions.
 This generally deals with providing information and support for
effective decision making.
 It helps in designing system frameworks for organizing information
system application.
 It helps in management decision making and processing of data
generated by business operation.
Management
Information System
 MIS is a general-purpose reporting system whose objective is to
provide managers with scheduled reports to track operations,
monitoring, and control.
 A MIS is built on data provided by TPSs.
 MIS are used by middle managers to help insure the smooth running of
an organization in the short to medium term.
 Info provided by these systems allow managers to evaluate an
organization's performance by comparing current output with previous
one.
 Almost all departments like accounting, finance, operations, sales, etc
are supported by information systems designed for their specific
reporting needs.
Types of MIS Reports
1. Periodic Reports: are created or run according to a preset schedule
like daily, weekly, or quarterly. They can be distributed via e-mail,
blogs, intranet, or other reporting media.
2. Exception Reports: are generated only when something is outside
the norm, either higher or lower than expected.
3. Ad hoc or on demand reports: are unplanned reports. They are
generated to a mobile device or computer as needed. They are
generated on demand to learn more about a situation, problem, or
opportunity.
Decision Support
System
 A Decision Support System (DSS) is a computer-
based information system that supports business or
organizational decision-making activities.
 A DSS is a knowledge-based system used by senior
managers to facilitate the creation of knowledge and
allow its integration into the organization.
 A DSS is an interactive application that supports decision making by
manipulating and building upon the info from an MIS and/or a TPS to
generate insights and new information in ad hoc reports.
Decision Support
System CONTINUED

Example: Clinical Decision Support System (CDSS)

Scenario: Healthcare Diagnosis and Treatment
Data Collection: The CDSS collects patient data, including
medical history, lab results, and current symptoms.
Analysis: It analyzes this data using medical knowledge bases
and algorithms to identify potential diagnoses and treatment
options.
Recommendations: The system provides recommendations for
diagnoses and suggests treatment plans based on the analysis.
Decision Making: Healthcare professionals use these insights
to make informed decisions about patient care, improving
diagnosis accuracy and treatment effectiveness.
Degree of Structure of
Decisions
 Structured Decisions: are those that have a well-defined
method for solving and the data necessary to reach a sound
decision. Eg. whether an applicant qualifies for a home loan.
 Unstructured Decisions: are decisions that depend on
human intelligence, knowledge, and/or experience—as well
as on data and models to solve. Eg. Deciding which new
product to develop, or which new market to enter.
Degree of Structure of
Decisions CONTINUED

Semi-structured decisions are those that have some clear, structured

elements but also require human judgment and experience to address
the unstructured aspects. These decisions often involve a mix of
quantitative data and qualitative insights.

Example: Hiring Process in a Company

Structured Elements:
◦ Resume Screening: Candidates are evaluated based on predefined
criteria such as education, years of experience, and specific skills.
◦ Initial Tests: Standardized tests or assessments are used to measure
candidates' technical abilities or knowledge.

Unstructured Elements:
◦ Interviews: Human judgment is crucial in assessing a candidate's
cultural fit, communication skills, and problem-solving abilities.
◦ Reference Checks: Insights from previous employers or colleagues
provide qualitative data that influence the final decision.
Degree of Structure of
Decisions CONTINUED

 What-if Analysis refers to changing assumptions or data in the model

to observe the impacts of those changes on the outcome.
A small retail business owner in Mumbai wants to understand how
changes in sales volume and expenses will affect their monthly profit.
Current Situation:
◦ Sales Volume: 500 units
◦ Price per Unit: ₹200
◦ Fixed Costs: ₹50,000
◦ Variable Costs per Unit: ₹100

Calculate Current Profit:

◦ Revenue: (500 \times 200 = ₹100,000)
◦ Total Variable Costs: (500 \times 100 = ₹50,000)
◦ Total Costs: (50,000 + 50,000 = ₹100,000)
◦ Profit: (100,000 - 100,000 = ₹0)
Degree of Structure of
Decisions CONTINUED

What-If Analysis:
◦ Scenario 1: Increase sales volume to 600 units.
◦ New Revenue: (600 times 200 = ₹120,000)
◦ New Total Variable Costs: (600 times 100 = ₹60,000)
◦ New Total Costs: (50,000 + 60,000 = ₹110,000)
◦ New Profit: (120,000 - 110,000 = ₹10,000)
◦ Scenario 2: Decrease variable costs to ₹90 per unit.
◦ New Total Variable Costs: (500 \times 90 = ₹45,000)
◦ New Total Costs: (50,000 + 45,000 = ₹95,000)
◦ New Profit: (100,000 - 95,000 = ₹5,000)

By performing this what-if analysis, the business owner can see how
changes in sales volume and variable costs impact the overall profit,
helping them make informed decisions
Degree of Structure of
Decisions CONTINUED

Goal seeking in a Decision Support System (DSS) involves determining

the necessary inputs to achieve a desired output. This technique is
particularly useful for planning and forecasting.
Example: Profit Planning for a Manufacturing Company in India
Scenario:
A manufacturing company in Pune wants to determine the sales volume
needed to achieve a target profit.
Current Situation:
◦ Fixed Costs: ₹500,000
◦ Variable Cost per Unit: ₹200
◦ Selling Price per Unit: ₹500
◦ Target Profit: ₹1,000,000
Degree of Structure of
Decisions CONTINUED

Goal Seek Analysis:

◦ Formula: Profit = (Selling Price per Unit × Sales Volume) -
(Variable Cost per Unit × Sales Volume) - Fixed Costs
◦ Set Target: ₹1,000,000

Calculation:
◦ Using goal seek, the DSS adjusts the sales volume until the
profit formula equals ₹1,000,000.
Required Sales Volume: The system determines that the
company needs to sell approximately 5,000 units to achieve
the target profit.
◦ This analysis helps the company set realistic sales targets
and plan their production and marketing strategies
accordingly
Executive Information
System
 An Executive Information System (EIS), also known
as an executive support system (ESS), is a type of
management support system that helps senior executives
in decision-making by providing easy access to important
internal and external information relevant to
organizational goals.
Executive Information
System CONTINUED

Key Features:
Graphical Displays: EIS often includes graphical
displays and user-friendly interfaces to present data
clearly and effectively.
Data Integration: It integrates both internal and
external data, providing a comprehensive view of the
organization's performance.
Trend Analysis: EIS helps in analyzing trends and
identifying patterns, which is crucial for strategic
planning.
Drill-Down Capabilities: Users can drill down into
detailed data to understand the underlying factors
affecting performance.
Executive Information
System CONTINUED

Benefits:
Improved Decision-Making: By providing relevant and
timely information, EIS supports better decision-making.
Enhanced Efficiency: It streamlines the process of
gathering and analyzing data, saving time for executives.
Strategic Planning: EIS aids in long-term strategic
planning by highlighting key trends and performance
metrics
Summary of ISs
Expert Systems

An expert system is a type of artificial intelligence (AI) application that

mimics the decision-making abilities of a human expert.

In the context of information systems, expert systems are designed to

solve complex problems by reasoning through bodies of knowledge,
represented mainly as if-then rules rather than through conventional
procedural code.
Expert Systems CONTINUED

Key Components of Expert Systems:

Knowledge Base: Contains domain-specific and high-
quality knowledge. This is often represented in the form
of rules (if-then statements) and facts.
Inference Engine: The core component that applies
logical rules to the knowledge base to deduce new
information or make decisions.
User Interface: Allows users to interact with the system,
input data, and receive advice or solutions.
Explanation Facility: Provides users with explanations
about how the system arrived at a particular conclusion
or recommendation
Expert Systems CONTINUED

Applications:
Medical Diagnosis: Assisting doctors by providing
diagnostic suggestions based on symptoms and medical
history.
Financial Services: Offering investment advice and
detecting fraudulent activities.
Customer Support: Providing automated responses to
customer queries and troubleshooting issues.
Manufacturing: Monitoring and controlling industrial
processes
Expert Systems CONTINUED

Benefits:
Consistency: Unlike human experts, expert systems
provide consistent responses without fatigue.
Availability: They can operate 24/7, providing expertise
whenever needed.
Documentation: They can document the reasoning
process, which is useful for auditing and learning
purposes.
Knowledge
Management Systems
 A Knowledge Management System
(KMS) is a technology-based system designed
to facilitate the collection, organization, sharing,
and analysis of an organization's knowledge
assets.
 In the context of information systems, KMS
plays a crucial role in enhancing organizational
performance by ensuring that valuable
knowledge is readily accessible to those who
need it.
Knowledge
Management
Systems CONTINUED

Key Components of a KMS:

Knowledge Repository: A centralized storage for documents,
data, best practices, and other knowledge assets.
Search and Retrieval Tools: Advanced search functionalities
that help users quickly locate specific information.
Collaboration Features: Tools like discussion forums, wikis,
and shared workspaces that promote knowledge sharing and
collective problem-solving.
Access Control and Security: Mechanisms to protect
sensitive information, including role-based access controls and
encryption.
Analytics and Reporting: Capabilities to track usage, identify
knowledge gaps, and make data-driven decisions.
Knowledge
Management
Systems CONTINUED

Integration Capabilities: Seamless integration with other

organizational systems like CRM, ERP, and project management
tools

Benefits of a KMS:
Efficient Knowledge Sharing: Promotes collaboration and
breaks down silos within the organization.
Enhanced Decision-Making: Provides easy access to well-
organized knowledge, supporting informed decisions.
Improved Productivity: Saves time by streamlining the
process of finding and using information.
Innovation and Continuous Improvement: Facilitates the
sharing of best practices and innovative ideas