Information Technology

in Business
UNIT-1
Foundations of IS : Why Information Systems, Informational needs of managers,
Components of Systems viz., Hardware, Software, Database, Networks, Human
Resources, Elements of IS, Characteristics of IS, Types of IS for managers - TPS,
DSS, EIS
Todays Agenda
• Define information and explain information systems are so powerful
and useful.
• Explain why information systems are essential to business.
• Describe how computers process data into useful information for
problem solving and decision making.
• Identify the functions of different types of information systems in
business
INFORMATION
• Information: Information, in MIS, means the
processed data that helps the management
in planning, controlling and operations.

Data means unstructured raw facts,

observations or unevaluated messages. Data
involves facts and figures. Information on
the other hand is like a finished product.
DATA Vs INFORMATION

Salesman Code Zone Item Code

SM001 North P001 475 Sales
SM002 East P002 500
……… SM001 North P001 475
SM002 East P002 500
……………………….
 • It is a set of interrelated components that
Definition of collect, process, store and disseminate
data and information. It provides a
Information feedback mechanism to monitor and
system control its operation to make sure it
continues to meet its goal and objectives.
Definition of
Information system
Information system
• A business is an example of an organizational system to an economic resource (input)
is transformed by various business processes into goods and services (output).
Some examples of information systems include the following.
• Airline reservations (seat, booking, payment, schedules, boarding list, special needs,
etc.).
• Bank operations (deposit, transfer, withdrawal) electronically with a distinguish
payment gateways.
• Feedback and control
A system with feedback and control components is sometimes known as cybernetic
system that is a self monitoring or self-regulating system.
• Feedback.
Feedback is a data about the performance of a system.
• Control.
Control involves monitoring and evolving feedback determines whether a system is
moving towards the achievement of its goals.
 Importance of
Information
Systems
• With an information system,
delivering all the important
information is easier to make better
decisions. In addition, an information
system allows employees to
communicate effectively. As the
documents are stored in folders, it is
easier to share and access them with
the employees in today’s
internetworked enterprises powered
by Information and Communication
Technologies (ICT).
• Information systems play a vital role in the e-business and e-commerce operations,
enterprise collaboration and management, and strategic success of businesses that
must operate in an internetworked global environment.
• The IS knowledge that a business manager or professional needs to know:
• (1) Foundation concepts fundamental behavior, technical, business, and
managerial concepts like system components and functions, or competitive
strategies;
• (2) Information technologies An IS Framework for Business Professionals concepts,
developments, or management issues regarding hardware, software, data
management, networks, and other technologies;
• (3) Business applications major uses of IT for business processes, operations,
decision making, and strategic/competitive advantage;
• (4) Development processes how end users and IS specialists develop and implement
business/IT solutions to problems and opportunities arising in business; and
• (5) Management challenges how to effectively and ethically manage the IS function
and IT resources to achieve top performance and business value in support of the
enterprise.
Concept of a System
• A System is a group of interrelated components working together toward a common goal by accepting inputs and
producing outputs in an organized transformation process.
• System Concepts
• The concepts of a system are Technology, Application, Development and Management.
• a. Technology.
• Computer networks are systems of information processing components that are a variety of hardware, software and
telecommunication technology.
• b. Application.
• That electronic business application involves interconnected business information system
• c. Development.
• That developing way to use IT in business includes designing the basic component of information system.
• d. Management.
• Managing IT emphasize the quality, strategic business value and security of an organization in information system.
Components of a System
• There are three basic components of a system, they are
• a) Input,
• b) Processing and
• c) Output.
• a. Input.
• Input involves capturing and assembling elements that enter to the system to be processed.
Some of the inputs are raw materials, energy, data etc.
• b. Processing.
• It involves transformation process that converts input to output.
• c. Output.
• It involves transforming element that has been produced by a transformation process to their
ultimate destination.
Types of System
a. Dynamic System:
• When the interrelated component of the system interacts with each other, and this
controlled by management then it is known as Dynamic System.
b. Cybernative System
• Dynamic System implementing the concept of feedback and control is known as Cyber
native System.
c. Open System
• A system got interacts with other system in its environment by exchanging input and
output with its environment
d. Adoptive System
• A System having the ability to change itself and its environment in order to survive is
called an Adoptive System.
Components Of Information
System (IS)
Introduction:
• An information system is integrated and co-ordinate network of
components, which combine together to convert data into
information.
Components of information systems
• An information system is essentially made up of five components
hardware, software, database, network and Human Resources
people. These five components integrate to perform input, process,
output, feedback and control.
1. Computer Hardware:
Physical equipment used for input, output and processing. The hardware
structure depends upon the type and size of the organization. It consists
of an input and an output device, operating system, processor, and media
devices. This also includes computer peripheral devices.
2. Computer Software:
The programs/ application program used to control and coordinate the
hardware components. It is used for analyst and processing of the data.
These programs include a set of instruction used for processing
information.
Software is further classified into 3 types:
3. System Software
4. Application Software
5. Procedures
3. Databases:
Data are the raw facts and figures that are unorganized that are later
processed to generate information. Software's are used for organizing
and serving data to the user, managing physical storage of media and
virtual resources. As the hardware can’t work without software the
same as software needs data for processing. Data are managed using
Database management system. Database software is used for efficient
access for required data, and to manage knowledge bases.
4. Network:
• Networks resources refer to the telecommunication networks like the
intranet, extranet and the internet.
• These resources facilitate the flow of information in the organization.
• Networks consists of both the physical devices such as networks
cards, routers, hubs and cables and software such as operating
systems, web servers, data servers and application servers.
• Telecommunications networks consist of computers, communications
processors, and other devices interconnected by communications
media and controlled by software.
• Networks include communication media, and Network Support.
5. Human Resources:
It is associated with the manpower required to run and manage the
system. People are the end user of the information system, end-user
use information produced for their own purpose, the main purpose of
the information system is to benefit the end user. The end user can be
accountants, engineers, salespersons, customers, clerks, or managers
etc. People are also responsible to develop and operate information
systems. They include systems analysts, computer operators,
programmers, and other clerical IS personnel, and managerial
techniques.
 Classification of IS
iven organization information system can be classified based on the usage of the information. Therefore, an
tion system in an organization can be divided into operations support system and management support sys

Information System

Operation Support System Management Support System

Executive
Transaction Process Control Office Automation Management Decision Support Information
Processing System System System Information system System System
Operations support system
• In an organization, data input is done by the end user which is
processed to generate information products i.e. reports, which are
utilized by internal and or external users. Such a system is called
operation support system.
• The purpose of the operation support system is to facilitate business
transaction, control production, support internal as well as external
communication and update organization central database.
• The operation support system is further divided into a transaction-
processing system, processing control system and enterprise
collaboration system.
1. Transaction Processing System (TPS)
• In manufacturing organization, there are several types of transaction
across department.
• Typical organizational departments are Sales, Account, Finance, Plant,
Engineering, Human Resource and Marketing. Across which following
transaction may occur sales order, sales return, cash receipts, credit
sales; credit slips, material accounting, inventory management,
depreciation accounting, etc.
• These transactions can be categorized into batch transaction processing,
single transaction processing and real time transaction processing.
2. Process Control System
• In a manufacturing organization, certain decisions are made by a
computer system without any manual intervention. In this type of
system, critical information is fed to the system on a real-time basis
thereby enabling process control. This kind of systems is referred as
process control systems.
3. Enterprise Collaboration System
• In recent times, there is more stress on team effort or collaboration
across different functional teams. A system which enables collaborative
effort by improving communication and sharing of data is referred to as
an enterprise collaboration system.
Management Support System
• Managers require precise information in a specific format to
undertake an organizational decision. A system which facilitates an
efficient decision making process for managers is called management
support system.
• Management support systems are essentially categorized as
management information system, decision support system, expert
system and accounting information system.
• Management Information System (MIS)
• To facilitate effective decision making in an organisation, managers
require accurate information. However, in an organisation, there is
always a pool of information that needs to be managed. Therefore,
most organisations use Management Information System (MIS), which
collects data from various internal and external sources, processes it
and provides meaningful information.
• According to Davis and Olson, MIS is an integrated user-machine system
designed for providing information to support operational control,
management control and decision making functions in an organisation.
• Decision Support Systems (DSS)
• In the present business environment, decision making has become far more
complicated than it was in the past. Moreover, if decisions are not made on time,
organisations may not be able to exploit opportunities. The major problem that
managers face while making decisions is the availability of abundant information.
• Sometimes, abundance of information causes deformation of its accuracy,
which makes it difficult for managers to make a complete analysis of the problem.
This gives rise to a need for computerized decision support that can enable
managers to make effective decisions on time.
• Decision Support System (DSS) is an interactive information system that is
developed to help managers in making critical business decisions by performing
logical data analysis and testing hypothesis.
• According to Hicks, DSS is an integrated set of computer tools that allow a
decision-maker to interact directly with computers to create information useful in
making decisions.
• Executive Information Systems (EIS)/ Executive Support System
(ESS)
• Executive Information System (EIS) is a tool that supports decision
making at the top level of an organisation. It presents information in
the form of customised reports to help executive levels in making a
comparison of trends. For instance, by providing a report on sales
figures of an organisation in the past five years, EIS can help the top
executives of the organisation in setting sales targets for the next
three years. It presents a report in a graphical format that can be
easily analysed by top-level executives in a short period of time.
Types of IS for managers
• In an organization, information systems are used at all levels. Let us
discuss these different types of information systems in the
subsequent sections.
• Transaction Processing System
• Management Information System
• Decision Support System
• Executive Information System
Information Systems at Different Levels of Management
• The order Fulfillment Process

• Fulfilling a customer order involves a complex set of steps that requires the
close coordination of the sales, accounting, and manufacturing functions.

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Example of a Sales Information System

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OVERVIEW OF AN INVENTORY SYSTEM (STOCK CONTROL SYSTEM)

• Most Manufacturing and Production Systems use some sort of Inventory System.

• An Inventory System produces a Report that gives information about number of each item available in inventory to
support Production activities.

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SYSTEMS FROM A FUNCTIONAL PRESPECTIVE
MANUFACTURING AND PRODUCTION SYSTEMS

• Manufacturing and Production Function is responsible for actually producing the firm’s goods and
services.
• Manufacturing and Production Systems deal with the :

• Planning, Development, and Maintenance of Production facilities;

• Establishment of Production goals;
• Acquisition, Storage, and availability of materials;
• Scheduling of resources such as equipment, facilities , material , and labour required to produce
products.

Examples of Manufacturing and Production Information Systems

SYSTEM DESCRIPTION GROUPS SERVED

Machine Control Controls the actions of machines Operational Management
Production Planning Decides when and how many Middle Management
Products should be produced .
Facilities Location Decides where to locate new Senior Management
Production facilities
Quality Control Identify source of defects Operational Management
Inventory System To track item available Operational Management 35
SYSTEMS FROM A FUNCTIONAL PRESPECTIVE

ACCOUNT RECEIVABLES SYSTEM

This System tracks and stores important Customer data , such as Payment History,
Credit Rating and Billing History.

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SYSTEMS FROM A FUNCTIONAL PRESPECTIVE
HUMAN RESOURCES SYSTEMS

The Human Resources Function is responsible for attracting,

developing, and maintaining the firm’s workforce .

Human Resources Information Systems support activities such as:

- Identifying potential employees,

- Maintaining complete record of existing Employees,
- Creating programs (TRAINING PROGRAMS ) to develop employees’
talents and skills.

Examples of Human Resources Information Systems

SYSTEM DESCRIPTION GROUPS SERVED

Training and Development Tracks employees’ Training skills Operational Mgmt
and Performance appraisals
Compensation Analysis Monitors the range of distribution Middle Management
Wages, Salaries and Benefits
Human Resource Planning Plans the long term labour force Senior Management
needs of the Organization 37
SYSTEMS FROM A FUNCTIONAL PRESPECTIVE

AN EMPLOYEE RECORD KEEPING SYSTEM

The System maintains basic employee data that can be used to produce a variety of
Reports, such as ‘’List of Newly hired employees’’, Employees Classified by Job Type
and Educational Level’’, ‘’Employee Job Performance Evaluation Report’’ etc…
- Employee Record keeping Systems are typically designed to provide data that can satisfy Government (State)
record keeping requirements.

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 Transaction processing systems

• Transaction processing systems

• Perform and record daily routine transactions necessary to
conduct business
• Examples: sales order entry, payroll, employee record
keeping ,shipping
• Allow managers to monitor status of operations and relations
with external environment
• Serve operational levels
• task, resources and goals are predefined and highly structured.
• For eg.: Decision to grant credit to a customer is made by a
Lower-level supervisor according to predefined criteria.

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• System for management Group

• A Payroll TPS

• A TPS for payroll

processing
captures
employee
payment
transaction data
(such as a time
card). System
outputs include
online and hard-
copy reports for
management and
employee
paychecks.

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Office Automation system
An office information system, or OIS is an information system that uses hardware, software and
networks to enhance work flow and facilitate communications among employees

1. Document management systems

2. Message handling systems
3. Teleconferencing systems
The Basics of Office Automation

Information
Storage

Data Data
Management Exchange
Management information system
• MIS provide middle managers with reports on the organization’s
current performance.

• MIS summarize and report the company’s basic operations using

data supplied by TPSs.

• The basic transaction data from TPS are compressed and usually
presented in reports that are produced on a regular schedule.

• Most MIS use simple routines, such as summaries and

comparisons, as opposed to sophisticated mathematical models
or statistical techniques.

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How MIS Obtain Data from TPS

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Sample MIS Report

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Output Of MIS

• Scheduled reports
• Produced periodically, or on schedule (daily, weekly,
monthly)
• Key Indicator Report
• Summarizes the previous day’s critical activities
• Demand Report
• Gives certain report at manager's request
• Exception Report
• Automatically produced when a situation is unusual or
requires management action

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Characteristics of Information System
• An information system is based on long-term planning.
• It provides a holistic view of the dynamics and the structure of the
organization.
• It works as a complete and comprehensive system covering all
interconnecting sub-systems within the organization.
• It is planned in a top-down way, as the decision makers or the
management take part and provides a clear direction at the
development stage of the information system.
• It is based on a need for strategic, operation and tactical information of
managers of an organization.
• It is capable of making forecasts and estimates and generating advanced
information.
• It provides organized and relevant information for all levels of
management: strategic, operational, and tactical.
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Characteristics of Information System
• It creates a linkage between all sub-systems within the organization,
so that the decision makers can take the right decision based on an
integrated view.
• It allows an easy flow of information through various sub-systems,
thereby avoiding redundancy and duplicity of data.
• A central database is the backbone of a well-built information
system.
• It provides flexibility in data storage and retrieval.
• It collects, organizes, manipulates, and updates a large amount of
raw data of both related and unrelated nature, coming from various
internal and external sources at different periods of time.