Chapter 5

INFORMATION SYSTEMS

Instructor
Name
Khaliq ul
 Role of Information Systems
 General System Concepts of
Information Technology
 Key Elements of Information
Systems
 Types of Information Systems
 Levels of Information Systems
 We are living in an increasingly
technological world, which brings not
only opportunities but challenges as
well.
 Competitive advantage by the effective
use of Information Technology (IT).
 Obtaining information for optimal
decision-making, which result in
substantial operational and cost
benefits.
 An information system (IS) collects and
processes data into information that is
provided to users for use in strategic
planning, decision making, performance
monitoring, and production.
 Virtually all companies use some type of
IS to store, access and analyze
information; improve communication
with customers; and improve
communication among employees.
 Investing in information systems can
be expensive for companies,
therefore, it is important to carry out
a cost-benefit analysis of investing in
technologies that will (not) provide a
net positive return on investment
within their relatively short useful
lives as technology experiences fast
paced change.
 Computer systems
computer system comprises four key
components:
 Input devices facilitate the introduction of data and
information into the system. Examples might include
a keyboard, scanner, mouse or barcode reader.
 Output devices facilitate the extraction of
processed information from the system. Examples
would include a printer, speaker or screen (visual
display unit).
 The central processing unit is the ‘brain’ of the
computer that takes the inputs, processes them and
then outputs the results.
 Finally, some type of storage facility is
useful to enable data to be saved for future
use.
Computer hardware
Computer hardware consists of the
computers themselves plus all the
peripheral equipment connected to a
computer for input, output and
storage of data (such as printers and
stand-alone disc drives).
Input devices
facilitate the introduction of data and
information into the system. Examples might
include a keyboard, scanner, mouse or
barcode reader.
Keyboards
Keyboards are the most common input device and
are part of virtually all computer systems. Keyboards
can be stand-alone and connected to the computer
with a cable or through a wireless connection, or they
might be integrated into the computer itself, such as
with a laptop or notebook.
 Touch-sensitive screens and
touch pads
recent trend has been towards
integrating the keyboard into touch-
sensitive screens and touch pads.
Examples of touch-sensitive screens
include automated payment booths
used to buy train or bus tickets and
bank ATM machines.
 Magnetic ink character recognition
(MICR)
Magnetic ink character recognition (MICR)
requires the input media to be formed of
specially formatted characters printed in
magnetic ink.
characters are then read automatically using
a specialized reading device called MICR
reader.
The most common example of MICR is in the
banking industry with the use of cheques
and deposit slips.
 Optical mark reading (OMR)
Optical mark recognition is the process of
reading information that people mark on
surveys, tests and other paper
documents. OMR is used to read
questionnaires, multiple choice
examination papers in the form of
shaded areas.
The card is then read by an OMR device
which senses the mark in each box.
 Scanners and optical character
recognition (OCR)
Scanners read text or illustrations printed
on paper and translate the information
into a format the computer can use.
 Mice, trackballs and similar devices
Mice and trackball devices are hand-operated
devices with internal sensors pick up the
motion and convert it into electronic signals
which instruct the cursor (pointer) on screen
to move.
 Touch sensitive pads and joysticks that
similarly control the cursor are also now
commonly found in the center of the keyboard.
Most current laptops and notebooks
incorporate a pad or joystick.
 Voice date entry (VDE)
Many computers can now accept voice input via
a microphone and voice data entry (VDE)
software.
useful application is found in language
translation programs that support
simultaneous translation.
 Barcodesand QR (quick response)
codes, EPOS
Barcodes are the groups of black and white marks
with variable spacing and thickness found on
product labels such as those at the supermarket.
QR codes are matrix, or two-dimensional, barcodes
EPOS stands for electronic point of sale which is
normally integrated with barcode readers.
EPOS allows credit and debit cards to be read for
instant payment for goods.
 Digital cameras
Digital cameras can be found in the form
of stand-alone units or they may be
integrated into other technology such
as smartphones and tablet computers.
Digital cameras capture images and
videos in digital form and allow easy
transfer to a computer where they can
be manipulated by software.
Output devices
An output device is the part of a computer
system that receives the processed data
from the computer and presents it in some
way.
 Storage devices
seen how the CPU is the brain of the
computer taking inputs from various
devices such as keyboards, mice and
scanners then outputting to devices
such as speakers, printers and
monitors.
Online storage, also known as cloud storage or internet-based
storage, is a technology that allows individuals and organizations to
store and access digital data, such as files, documents, photos, and
videos, on remote servers via the internet
Near-line storage, also known as nearline storage, is a data
storage approach that combines elements of both online and offline
storage solutions. Optical Disc Archives,
Information technology and
information systems:
Information technology
Information technology describes the application
of computers and telecommunications equipment
to store, retrieve, transmit and manipulate data.
The term is typically associated with computers
and computer networks. However, the full
definition includes other information distribution
technology such as television, telephone and
radio.
Information system
Information system describes complementary
networks of software and hardware that people and
organizations use to collect, filter, process, create and
distribute data and information.
Within organisations, information systems support
operations, management and decision making.
The term ‘information system’ is broader than
‘information technology’ as it incorporates the way in
which people interact with the technology in support of
business processes, as well as the information and
communication technology (hardware and software)
itself.
 In summary:
 System – a set of interacting components that
operate together to accomplish a purpose
 Business system – a collection of people,
machines and methods organized to accomplish a
set of specific functions
 Information system – all systems and
procedures involved in the collection, storage,
production and distribution of information
 Information technology – the equipment used
to capture, store, transmit and present information
 Information management – planning, the
environment, control and technology
Elements of a system
The elements of a system include:
 Goals
 Inputs
 Processes
Outputs
The environment
 Boundary (this limits the system
from its environment)
Open and closed systems
Closed systems - the environment has no
effect on the system and the system has no
effect on the environment. Examples in the real
world are rare and business examples even
rarer; one useful example is that of a scientific
experiment.
Open systems - do interact therefore the
environment will affect the system and the
system will affect the environment. All
businesses, social and information systems are
examples of open systems.
System adaptation
Open systems will adapt to their environment
with varying degrees of limit:
Deterministic systems
Use predetermined rules
Therefore have predicted operations
Giving predictable outputs
Examples include machines and computer programs
These systems will follow a standard and often have
a rule book.
 Probabilistic systems
Assign a probability to future events
Their behavior is less easy to predict
Most businesses are examples of
probabilistic systems
When a business sales forecasts it will
try to predict sales based on past
evidence.
In effect the business tries to change
before the event has occurred.
 Self-organising or cybernetic
systems
Most complex type of system
Continually changing
Adapts to the environment
Example trade union negotiations
These types of systems are the least
likely to be computerised .Rely
heavily on interaction from people
 Control systems
The two main types of control are open
and closed loop control:
Closed loop control has inbuilt control
very much like a thermostat in a heating
system, they are not responsive to
changes in the environment. A business
example which has inbuilt control is a
stock or a credit control system where
the system automatically checks
responses
Closed loop control is most suitable for
the type of system which is stable.
Systems which exist in a relatively
dynamic environment are not suitable
for this type of control.
 Open loop control systems do not
have inbuilt control as it comes from
the outside the system - no
thermostat.
 A business example would be the
whole organisation. Open control
systems are responsive to the
environment and they often involve
interaction from users.
 The elements of a control system
include:
input, process, output
sensor - measures the output from the
system and determines a new value
comparator - compares the new value with
that of the standard
standard - the predetermined limit set
within the system
effector - effects the feedback into the
system can be positive or negative.
The key elements of IS are as follows:
Data (raw, unorganized data processed into
meaningful and useful information for specific use)
Database (an electronic filing system to collect
and organize data and information)
Database Management System – DBMS (a
software to enter, store, organize, select, and
retrieve/Recover data in a database)
Networks
Integration (provides an holistic view(As whole)
of data and information available within an
organization under different areas and functions)
Security and Privacy
Data:
Data are a set of values of qualitative or
quantitative variables about one or more
persons or objects.
As numbers or text recorded on paper
As bits or bytes stored in electronic
memory
Business data is all the information that is
related to a company, such as sales data,
customer contact information, and even website
traffic statistics.
 Such data is processed into
meaningful and useful information,
used for specific purposes, such as
business analysis, control, and
decision-making.
 Database:
Database is an electronic filing system
that collects and organizes data and
information.
 Key users tap into databases to
access the information they need,
whether for placing inventory
orders, scheduling production, or
preparing long-range forecasts
 DBMS(database management system ):
DBMS is a software called a database
management system, which is used to
quickly and easily enter, store, organize,
select, and retrieve data in a database.
 DBMS software primarily functions as an
interface between the end user and the
database, simultaneously managing the data,
the database engine, and the database
schema/Plan in order to facilitate the
organization and manipulation of data.
 Different types of databases and
DBMS available depending upon the
needs of a business organization.

 Hierarchical database
 Network database
 Relational database
 Object-Oriented database
 Popular DBMS examples include cloud-based
database management systems(access
anywhere),
 in-memory database management systems
(IMDBMS), (computer storage is the main
location of data)
 columnar database management systems (CDBMS),
(stores data tables by column rather than by row)
 NoSQL in DBMS (retrieval of data that is modelled in
means other than the tabular relations used in
relational databases. NoSQL database is for
distributed data stores with humongous data
storage needs. NoSQL is used for Big data and
real-time web apps.
 Networks:
Most businesses use networks to
deliver information to employees,
suppliers, and customers. A
computer network is a group of two
or more computer systems linked
together by communications
channels to share data and
information.
The best-known computer
network is the internet:
The world wide web (internet)
 Sharing software applications such as databases
and Worksheets
 Email
 Sharing devices such as printers, fax machines
and scanners
 Online booking systems
Instant messaging (PVT)
Internet-based communication such as Skype
System architecture refers to the way in
which the components of a computer
system such as printers, PCs and
storage devices are linked together
and how they interact.
A centralised architecture involves
all processing being performed on a
single central computer
Decentralised architectures spread
the processing power throughout the
organization at several different
locations. This is typical of the modern
workplace given the significant
processing power of modern PCs.
Typical network configurations
include star networks(every host
is connected to a central hub),
 ring networks(Data travels from node to
node)
 bus networks (A host on a bus network
is called a station. In a bus network,
every station will receive all network
traffic, and the traffic generated by each
station has equal transmission priority)
 Tree networks (a combination of
two or more star networks
connected together)
Client-server
computing(architectures ):
Client-server computing describes one
level of interaction found between
computers in systems architecture.(with
a system of request and response).
A server is a machine that is dedicated
to providing a particular function or
service requested by a client within a
network system.
 File servers manage the data files
that are accessible to users of the
network.
local area networks and wide area
networks:
 Local Area Network (LAN):
A LAN is a computer network covering a
small geographic area such as a home,
office, group of buildings or school.
A LAN’s distinguishing features
include:

Due to its localized nature, the data transfer

speeds are high
Typically owned, controlled and managed by
one person or a single organization
Low cost maintenance
 Relatively low data transmission errors
One LAN can be connected to another LAN over
any distance via telephone lines and radio waves
Wide Area Network (WAN):
A WAN is a computer network that
covers a broad area i.e. a network that
communicates across regional,
metropolitan or national boundaries over
a long distance.
A WAN connects computers at different
sites via telecommunications media such
as phone lines, satellites, and
microwaves.
A WAN’s distinguishing features
include:
Data transfer speeds are much lower than with LANs
due to the greater distance that information must
travel.
WANs exist under collective or distributed ownership
and management covering long distances.
 Setup costs are typically higher due to the need to
connect to remote areas. Furthermore, maintaining a
WAN is more difficult (and expensive) than maintaining
a LAN due to its wider coverage.
In contrast to LANs, the data transmission error rate
tends to be significantly higher.
 Intranet:
An intranet is a private network contained
within an enterprise that is used to
securely share company information and
computing resources among employees.
Virtual Private Network (VPN) is
Secured Internet (Many companies use
VPN to connect two or more private
networks (such as LANs) over a public
network, such as the internet)
 Integration:
Company-wide enterprise resource
planning (ERP) systems that bring
together human resources,
operations, and technology are
becoming an integral part of business
strategy.
 So is managing the collective knowledge
contained in an organization, using data
warehouses and other technology tools.
 For example, an integrated finance
system would link a number of underlying
modules such as:
Accounts payable control.
Accounts receivable control.
Accumulations and prepayments.
Bank and cash .
Inventory.
Purchases.
Sales .
 Advantages of integrated
systems
Offers a more complete view.
Enables better informed decisions.
Should ultimately lead to a more
efficient operation.
Which would lead to greater
customer. satisfaction and hence
profitability.
 Disadvantages of integrated systems
Greater risk that if one module fails the
whole system could fail.
More complex and therefore disposed to
error.
More expensive than standalone systems.
May require a greater level of support as
the. system is likely to need to be
modified (tailored) specifically to the
organization.
 Security and Privacy:
Unauthorized access into a company’s
computer systems can be expensive,
and not just in monetary terms but
as a reputational risk also. The
costliest categories of threats include
worms, viruses, and Trojan horses;
computer theft; financial fraud; and
unauthorized network access.
Firms are taking steps to prevent these
costly computer crimes and problems, which
fall into several major categories:
 Unauthorized access and security
openings.
 Computer viruses, worms, and Trojan
horses.
Deliberate damage to equipment or
information.
 Spam
Software and media piracy
There are several types of IS such as:
Transaction Processing System (TPS)
 Management Support System (MSS)
 Decision Support System (DSS)
 Executive Information System (EIS)
 Expert System (ES)
 Office automation systems to
improve the flow of communication.
 TPS is the starting point of an
integrated information system. The TPS
receives raw data from internal and
external sources and prepares these
data for storage in a database similar
to a microcomputer database but
vastly larger.
 The DBMS tracks the data and allows
users to query the database for the
information they need.
 TPS automate routine and tedious back-office
processes such as accounting, order processing,
and financial reporting. They reduce clerical
expenses and provide basic operational
information quickly.
 Data entry describes any of the techniques used
to initially record data into a system. A few
examples of data include:
Sales information.
Purchase information.
New employee details.
Updates to existing employee details .
 There are following two ways database
can be updated (i) Batch processing, and
(ii) Online, or real-time processing.
Batch processing:
Batch processing is the collection of a group
of similar transactions over a period of
time, and their processing at a single time
as a batch.
This type of processing has been associated
with mainframe centralized type systems.
Advantages
 Relatively easy to develop
 Less processing power is required as deals with
similar updates
 Checks in place as part of the systems run
 Less hardware required, therefore cheaper.
Disadvantages
Often delays between when a transaction is made and
when the master file is updated and the output
generated.
 Management information is often incomplete due to
out of date data.
 Often master files kept off line therefore access may
not always be available.
 Online processing:
Online processing refers to equipment that
operates under control of the central
computer but typically from a different
location through some kind of terminal.
 Examples include:
An ATM machine for a bank – the ATM is
linked to the bank’s central computer
system and updates the user’s account
immediately.
Flight booking system at a travel agency.
 Real-time processing:
Real time processing is the processing
of individual transactions as they
occur without the need for batching
them together.
This type of processing allows the user
to update the master files
immediately.
Advantages
 Information more up to date therefore
providing better management information.
Increased ability for data to be online.
Disadvantages
 Increase in expense as the system
becomes more complex to run and to
develop.
Increased hardware capacity which
increases costs.
Examples of TPS:
Finance and accounting TPS
The major functions would typically
include:
 Budgeting
 The nominal ledger
Invoicing
 Management accounting
The system might be split into a
number of modules including:
 Nominal ledger
 Accounts payable
 Accounts receivable
 Budgeting
 Treasury management
Human resources TPS
The major functions would typically
include:
Personnel records
 Benefits
 Salaries
 Labour relations
 Training
The system might be split into a
number of modules including:
 Payroll
 Employee records
 Employee benefits
 Career path systems (appraisal)
 MSS use the internal master
database to perform high-level
analyses that help managers make
better decisions.
 which uses summary data collected
by the TPS to produce both regularly
scheduled and special reports.
 Analyze data for many purposes,
including customer relationship
management systems, fraud
detection, product-line analysis,
and corporate asset
management. Retailers might wish
to identify customer demographic
characteristics and shopping patterns
to improve direct-mailing responses
A management information system
is characterized as follows:
Supports structured decisions
Reports on existing operations
Little analytical capability and is relatively
inflexible
 Internal focus
 Generate regular reports and typically would
allow online access to a wide range of users
 Incorporate both current and historical
information
A DSS is a set of related computer
programs and data required to assist
with the analysis and decision-making
within an organization. DSS were initially
developed to overcome the rigid nature
of management information systems.
 DSS help businesses by providing
quantitative data and predictive models
that aid problem-solving and decision-
making.
The characteristics of decision support systems
include:
 DSS assists managers at the tactical level when they are
required to make intelligent guesses
A DSS uses formula and equations to enable mathematical
modelling
DSS are real-time systems enabling managers to solve
problems through queries and modelling
User inputs queries and variables for the model through a
user interface
Contains a natural language interpreter for querying the
system
 The user interface is integrated with data management and
modelling software from the key components
Spreadsheet packages can become the tool for the
 An EIS, similar to a DSS, is customized
for an individual executive. These
systems provide specific information
for strategic decisions. For example, a
CEO’s EIS may include special
spreadsheets that present financial
data comparing the company to its
principal competitors and graphs
showing current economic and industry
trends.
Other characteristics of EIS include:
 Helps senior managers to make
unstructured decisions with many
contributing factors such as price fixing
Tends to be very expensive and real-
time
Often limited in use to a small number of
senior managers within the business.
 An ES is a computer program that
simulates the judgment and behavior
of a human or an organization that
has expert knowledge and
experience in a particular field.
 Examples include legal diagnostics,
medical diagnostics, processing a
loan application and on a social level,
programs that play chess.
Expert systems are most effective
when the following preconditions exist:
 problem is reasonably well-defined
 expert can define some rules
problem cannot be solved through
conventional transaction processing
systems
 expert can be released to focus on more
difficult problems
 investment is cost-justified
The advantages gained from using an
expert system include:
Allows non-experts to make expert decisions
 Fast, accurate and consistent advice
Ability to change input details to explore
alternative solutions
Reduction in staff costs - less experts required
Improved allocation of human resources, experts
concentrate on more complex issues
 Can become a competitive advantage
 Availability potentially 24 hours 365 days per
year
 Multi-access can deal with many problems at one
However, some disadvantages may
exist, such as:
 High initial capital expenditure
 Technical support required
 System does not automatically learn; it
has to be constantly updated by experts
User as a non-expert may give inaccurate
advice without recognising
Down time - systems failures effect all
users
 Reliance - probable reduction in basic
Financial accounting and reporting
involves:
Maintaining a system of accounting
records for business transactions and
other items of a financial nature; and
 Reporting the financial position and
the financial performance of an entity
in a set of ‘financial statements’.
 Order processing
The order processing system should
be capable of recording all orders
accurately and in a timely fashion.
Such as airlines and hotels the
information needs to be updated
immediately.
 Inventory control system
The objective of the inventory control
system is to ensure that the business
maintains an appropriate amount of
inventory at all times. The control system
should be able to indicate accurate levels
of inventory for all the lines maintained
by a business and trigger the ordering of
replacement inventory when inventory
levels fall to a certain level.
Order processing and inventory control systems
typically share the following characteristics:
The system can accurately report the current inventory level at any time
A rule should be associated with each item that will trigger a reorder
such as minimum inventory level
 The age of the inventory can be tracked. This will assist sales managers
in identifying ageing stock and employing tactics to reduce it. This is
particularly important with perishable inventory (e.g., food and drink) that
could have hygiene as well as commercial considerations to monitor.
 The system should be able to highlight shortages
 The system should be able to show individual and total cost of items
 The system should maintain supplier details
 Delivery dates both inwards and outwards must be maintained to enable
the warehouse manager to manage goods movement - inward and
dispatch
The location of the inventory should be recorded to ensure it can be
found easily and efficiently
 Personnel System
The personnel system exists to
support the human resources
management function in performing
its duties of maintaining an
appropriate workforce. This involves:
 Recruitment
 Selection; and
 Staff development and appraisal.
The system will typically incorporate several components
including:
Recruitment
 Highlighting internal job vacancies that are available to existing
staff
 Running external recruitment campaigns and tracking their cost
effectiveness
Redundancy
Planning and executing voluntary redundancy programs
 Planning and executing compulsory redundancies making sure the
company follows all the legal requirements
Personnel management and control
Maintaining contract of employment details such as salary, holiday
entitlement and duties
 Family and medical contact details
 Employment history
Training records
 Training records
 Qualifications and skills
 Amount of holiday accrued and taken
 Sick leave accrued and taken plus authorised absences
such as bereavements
 Unauthorized absence
 Time off in lieu
 Disciplinary record
 Bonus and pay history
 Other rewards and commendations
 Annual appraisal
 Goals and objectives
 Formal checks such as references
Help with making decisions on
headcount. These might include:
Benefits report
Headcount (employee numbers) report
Pay details and total wage expense
Gender and diversity mix information
 Age profiling
 Tenure profiling
 Absence analysis
 ERP is a cross-functional system
driven by an integrated suite of
software modules supporting the
basic internal processes of a
business.
Real-time view of core business
processes such as:
 Order processing
 Inventory management
Productions Business resources
ERP systems track business resources such as:
Cash
Raw materials
Production capacity
 Personnel
Commitments
ERP systems also track the status of commitments such as:
 Purchase orders
 Employee costs
Customer orders
Tracking is permanently updated irrespective of the
department that entered the information – hence the term
‘enterprise’.
 Operational Level:
The operational level is concerned with
performing day to day business transactions
such as cashiers at a point of sale, bank
tellers, nurses in a hospital, customer care
staff, etc.
 Middle Level:
The middle level users generally oversee the
activities of the operational management.
This includes middle-level managers, heads
of departments, supervisors, etc.
 Senior Level:
The senior level users make unstructured, strategic
decisions
Strategic information relates to long-term decision
making e.g. over a 3-5 year time horizon
Tactical information assists managers in making
short-term tactical decisions such as:
 establishing a fee to quote on a particular order
 whether to offer discounts on a particular product
to help lower excess inventory
 whether to switch suppliers
Operational information relates to
the day to day activities of an
organization.
Daily sales reports
 Daily production reports
 Latest inventory levels
 Details of customer complaints