Information system

Introduction Data Bare facts and figures Information Data that is organized into meaningful context It is processed data Supports the decision making process reduces uncertainty about a situation or event Knowledge Human capacity (potential & actual ability) to take effective action in varied and uncertain situations. It is the awareness and understanding of facts, truths or information gained in the form of experience or learning.

Process of Generation of Information It involves three activities: Data Acquisition - Data is initially recorded and later verified for accuracy and authenticity. This is called dta capture. Data is captured by punching with keyboard or scanning with scanning devices, facts from documents on which they were recorded. Data captured is organized in data files. Each file contains records relating to various data elements (fields) expressed with the help of different symbols (characters). (b) Data Transformation It is done by performing any of the following operations: Rearranging: also called sorting of data Classifying Calculating Summarizing (c) Management of Information The processed data maybe either communicated to end user or maybe stored for future reference. One decides the report format, appropriate channel of communication to provide information. If stored, one decides to store it on some mass storage.

System An assembly of inter-related elements comprising a unified whole. The components (elements) are connected together in order to facilitate the flow of information, matter or energy. It works towards a common goal by accepting inputs and producing outputs. System - Input Process Output Control Feedback

What is Information System? It is an organized combination of people, hardware, software, communications networks, and data resources that stores and retrieves, transforms, and disseminates information in an organization. Evolution of Information System Enterprise & Internetworking (1990s/2000s) e.g. internet worked IS, Intranet, Extranet, Internet, etc. Strategic & End User Support (1980s/1990s) e.g. Expert System, etc. Decision Support System (1970s/1980s) Management Reporting (1960s/1970s) e.g. MIS Data Processing (1950s/1960s) E.g. EDPS, TPS, etc.

Elements/Resources of IS Computer Hardware Refers to computer systems and other associated equipment including the communication links that a modern IT installation may need. One needs to assess the nature of IT needs, the volume of data to be processed, sources of data, complexity of data analysis and impact of other related factors to determine the hardware resources. Computer Software It is the lifeline of the IT infrastructure and it makes the computer hardware function. It is set of interrelated computer programs. Data Collection of facts or events from both internal and external sources represented in the form of symbols, such as digits, alphabets, pictures, graphs, etc. Capturing, processing and storage of data are the essential functions. Human Resource They are the catalyst in process of generation of information and thus are very vital. Procedures It includes the operational and control procedures for the use of IT infrastructure. It contains instructions for users regarding the use of IT infrastructure for day to day activities and for also handling specific situations.

Roles of IS Focuses on competitive priorities. Supports Business Process and operations Provide access to information Enhance communications Provide decision assistance Supports strategies for competitive advantage - Summarizing the three major roles of the business applications of IS Support Strategies for CA Support Business Decision Making Support business Processes & Operations

Types of Information Systems Operations Support Systems Management Support Systems Transaction Processing Systems Process Control Systems Enterprise Collaboration Systems Management Information Systems Decision Support Systems Executive Information Systems Information Systems

Types of Information Systems Two categories depending upon their focus on the kind of activities in a business enterprise Operations Support Systems Management Support Systems Operations Support Systems Focus on the operations of the enterprise Objective is to improve the operational efficiency Use internal data primarily For lower level of managers Classified into the following categories Transaction Processing System Process Control System Enterprise Collaboration System

a) Transaction Processing Systems Focus on the recording and processing of economic events (transactions) It processes transactions in two ways – batch and real-time (or online) It encompasses the entire gamut of daily routines of the enterprise including financial accounting, inventory control, payroll, sales order processing system. TPS s were one of the earliest computerized systems that organizations used to capture valuable decision-making data and to conduct every day business. - Almost all organizations have manual or automated TPS. Examples of TPS Coffee shop Bank Doctor Nasdaq- the e-stock exchange handles up to 1000 stock transaction /second TPS are considered the backbone of many organizations without it managers couldn’t make basic decisions such as how many items to produce? - Transaction can be internal or external Internal: occurring inside the organization External : occurring outside the company, customer places an order from a company catalog

Few years ago a separate transaction systems existed for each department in a company - Now many organizations are integrating the TPS systems of each department so that users can see how their decision affect other parts of the organization and the customers. TPS are the “data lifeline” of a company for several reasons: If a company fails to capture a transaction it may lead not only to customer dissatisfaction and lost profit but also to serious penalties and lawsuits. TPS s become the source of data for other systems in the organization. If analyzed and integrated it will give business key information about new company plans. A better plan how to meet customer needs and preferences. TPS is a link between the organization and external entities, such as suppliers, customers & distributors.

Steps in Processing a Transaction Enter data Step 1 Validate data Step 2 Process the data into information Step 3 Store the processed data Step 4 Generate output Step 5 Support user queries Step 6

Steps in Processing a Transaction Data entry : enter data by using input devices such as ATM it called data source document Validation : ensure the accuracy and reliability of data. Processing : once the company validate the accuracy & reliability of data the system processes and converts data into information. There are two types of processing. (a) On-line Transaction Processing (OLTP) the data input device is directly linked to the system to be processed. “ some times linked to the system via the network or telecommunication.” example Bank ATM, student registration for classes, travel agent flight reservation. On-line processing is possible because of networks and databases.

(b) Batch Processing Processing that done on a daily, weekly, or monthly basis or any period of time. Disadvantages of batch processing The information in the files may not up-to-date. Some errors may be detected only after the entire batch is processed in on-line processing errors can be detected right away. Which type of processing is better? It depends on the users decision making needs. 4. Data storage : to store the processed data in proper way. Otherwise data will be usefulness to decision makers. The kind of processing and type of storage medium are to some extent related. For example: magnetic tape is often used in batch processing. And magnetic disk used in on-line processing.

Output generation Convert data into useful format Different users need different formats at different times Query support the last step is to query or ask system questions. Steps in Processing a Transaction

Characteristics/Features of a Transaction Processing System Records internal and external transactions that take place in a company Is used mostly by lower-level managers to make operational decisions Handles and stores large Volume of Data Automation of basic operations Benefits are easily measurable Stores data that are frequently accessed by other systems, i.e. it acts as a source of input for other systems Is ideal for routine, repetitive tasks Records transactions in batch mode or on-line Requires six steps to process a transaction—data entry, validation, data processing, storage, output generation, and query support

b) Process Control System Monitors & control physical process c) Enterprise Collaboration Systems Enhance team and workgroup communication and productivity, and include applications that are sometimes called office automation system. It facilitates the following activities: Producing outgoing documents (using text processors) storage & retrieval of documents (using document management system) transmission of messages (using message communication systems) scheduling and meeting management (using video conferencing)

Management Support System Information System application focus on providing information and support for effective decision making by managers. Classified into following categories Management Information System Decision Support System Executive Support System a) Management Information Systems Aims at meeting the information needs of managers, particularly with regard to the current and past operations of the enterprise. Offers summary and exception reports on the operations of the enterprise and are also called as operations support systems. Summary Report : A report that accumulates data from several transactions and presents the results in a condensed form . Exception Report: A report that outlines any deviations between actual output and expected output. The main input to an MIS is usually the transaction processing system and other internal company sources

Benefits of MIS: Provide middle managers with information to make semistructured decisions. Information generated by an MIS helps managers understand the day-to-day operations of the company Helps managers implement the tactical goals of the company. MIS is a group of general-purpose, well-integrated systems that monitor and control the internal operations of an organization. Features Summary and exception Information Operational Control Focus on Internal Information Structured and semi-structured Decision

Relationship between a TPS and MIS The main goal of TPS is to record & process company transaction. While the main goal of MIS is to produce summary & exception reports for making tactical decisions. The output of a TPS & other company sources are the input of MIS TPS usually helps managers with operational decisions, while MIS helps managers make tactical decisions over a longer period of time. However both systems must work together in harmony to meet the company’s information needs.

b) Decision Support System Gives direct computer support to managers during the decision making process. - offers flexibility to manager to decide the input data, tool of analysis, depth of analysis and reliance on the outcome of analysis for decision making. The users have full control of the system. - offers an interactive environment for users and thus permits managers to experiment with data and model to develop the optimal decision making strategy. It has a User friendly interface report generators and graphical facilities Flexibility of use in various unexpected decision situation. DSS:- A set of interactive software programs that provide managers with data, tools, and models to make semistructured decisions. Some activities that a DSS can perform: Selecting the best loan package to meet your needs. Identifying an ideal location for a store

Managers should answer two types of questions What? …Why? What Computers are excellent at computations (answering what questions) Why People are excellent at applying intuition & judgment to solve problems (answering why questions) DSS uses computer computations and put them into models that systemize decision processes

Components of a Decision Support System Database management system (DBMS): a piece of software that controls, manages, and maintains internal & external data. Model management system : a system that stores and processes the models that managers use to make decisions. Support tools : tools that help users to interact and interface with a decision support system.

A DSS has five main characteristics: DSS integrates data & models so that it is easier for managers to make good decisions. DSS helps managers see how decision interrelate and the effects of one decision on others. It supports a wide variety of decision-making styles. It helps managers make decisions under dynamic or changing business conditions DSS allows users to query the system for a specific answers. Characteristics of a decision support system

Features of a decision support system A DSS has three features that are extremely useful to managers : What-if analysis 2. Goal seeking 3.risk analysis What-if analysis: The study of the impact of a change in the input data on the proposed solution. ex. Product pricing Complex decision because decision maker must consider many internal & external information A DSS can help manager to answer “what if questions” What if the price of raw materials increased by 10% What if the product demand increased If the competitors reduce the price by 5%

Goal seeking: help managers determine what they should do to achieve a certain goal. Ex.1 The goal to increase sales of its top-selling product by 10%. A DSS can show different ways to achieve. Ex.2 What grade should student get to achieve A in the course. 3. Risk analysis: A DSS calculates the risk associated with each alternatives. Features of a decision support system con..

A Simple Decision-Making Model Internal Data External Data Decision-making Models What-if Analysis Goal Seeking Problem Solving Generate Alternatives Assess Risk

Decision Models Statistical Models allow user to perform a wide range of statistical functions (average, standard deviation, graphic analysis….) Financial and Accounting Models to measure and assess the financial implications of different alternatives. (profit-or-lose analysis, cost-benefit analysis….) Production Models help to estimate number of machines to operate, amount of material required to meet the predetermined demand Marketing Models help marketing managers make a wide variety of decisions (product pricing, store location, advertising strategies..) Human Resource Models help managers to make decisions that involve in company personnel (assessing training needs estimating future personnel needs evaluating hiring & firing policies.

Benefits evaluation of a larger number of alternatives modeling and forecasting becomes easy useful in intra group and inter group communication in depth analysis of data and thus more effective use of data resource

c) Executive Information Systems (EIS) Top managers do not have the time to study and analyze large volume of data. They need an IS that will analyze the data & present it in elegant manner so they can have quick & effective decisions. The system that deliver high level information in a friendly way is called EIS. An EIS consists of tools & techniques, such as color graphics, touch screens, voice activated commands, and distribute large volumes of data quickly and effectively. Provides critical information from both internal and external sources to easy-to-use displays to managers The managers get tailored made formats they prefer. Focus more on delivery of information by top managers than generation of information.

The main difference between DSS & EIS is that EIS is used to deliver & display information (information delivery), while DSS is used to analyze a problem(problem solving) Today many systems are a combination of DSS & EIS, these systems are known as Executive Support System An EIS has many features that a DSS has, such as drill-down , which allows employees to obtain summary or detailed data with a few simple keystrokes. Drill-down: the ability to provide information at the level of detail that the decision maker demands.

Applications of EIS Executive Briefing Personalized Analysis Exceptions Reporting Model based analysis EIS: information system that analyzes and presents information to executive decision makers in a useful, friendly, and customized format.

DSS and EIS Characteristics DSS and EIS provide middle and top managers with decision support. Both DSS and EIS are intuitive, interactive, user-friendly systems. DSS and EIS are menu-driven and often have excellent color and graphic capabilities. Both systems use internal and external data to solve problems. A DSS uses internal and external data and different decision-making models to provide managers with alternatives to a given problem. An EIS provides managers with expert information in the form of analysis and reports. Both systems are equipped with decision-making tools such as “what-if” analysis and ‘goal seeking”. EIS is also equipped with drill-down capabilities. A DSS can support both individual and group decision making. DSS that support group decision making are known as group decision support systems (GDSS).

Artificial Intelligence (AI) and Expert Systems (ES) Artificial intelligence is a field of computer science that studies the design and development of computer systems that mimic human intelligence. Intelligence defined as a set of characteristics or attributes. AI includes several areas of specialization such as Computer vision: the computers ability to recognize & identify objects. Speech recognition: the computers ability to understand a human voice. Natural language:the ability to communicate with a computer the way the humans communicate with each other. Robots: machines capable of human like movement.

Expert System One of the AI fields is Expert System (ES) Expert systems are computer programs that capture the knowledge of a human expert and use it to solve complex problems. Knowledge appears in different forms in an organization such as an innovative ideas for a products, a new way to motivate employees, a new production method….. The main goal of ES is to capture knowledge of experts in all forms and use it to solve complex problems of an organization in a relatively narrow domain. ES then are versatile and can help with many kinds of problems. It attempts to represent knowledge of human experts in the form of heursitics.

Components of an Expert System ES can capture and apply the knowledge of human expert by joining three main components: Knowledge base Inference engine User interface User Poses Problem User Interface Inference Engine Knowledge Base

1. Components of an ES Knowledge base Knowledge Acquisition Knowledge base consists of facts, theorem, cases, forms, texts, graphics, spreadsheets, principles & rules, that experts use to solve a given problem. The information in the knowledge base comes from many sources such as the human experts, books, journals, databases & others. Managers also can gain knowledge from observation, formal & informal interviews & questionnaires. This is known as knowledge acquisition . Knowledge acquisition : the process of acquiring knowledge from different sources. These processes usually hard to do and time consuming. Knowledge acquisition is viewed a bottle neck in building expert systems.

Knowledge representation The process of representing the knowledge of experts in a language that the computer can understand. There are different approaches to knowledge representation on of the most popular ways to represent knowledge is using IF – THEN rules. Expert system that use IF-THEN rules are called rule based systems. Example IF car lights were left on AND car doesn't start THEN the battery is dead (99%) Components of an ES knowledge base

Knowledge Base Knowledge Human experts Journals Books Databases others Experts captures & acquires this knowledge Knowledge acquisition Experts represents knowledge in the system Knowledge representation Facts, rules, theorem, & principles Knowledge Base

2.Inference engine The inference engine is similar to the reasoning of the human brain.two popular reasoning possesses that an expert system uses: Forward chaining 2.backward chaining In forward chaining , the inference engine begins with a set of known facts, analyze the data and looks for solutions that match the data set. In backward chaining , the inference engine begins with a goal and search for data, facts, and other evidence that support this goal. Inference engine :a component of expert system that perform a reasoning function that results in advice to the user.

3.User interface User interface combines the knowledge base & inference engine in a way that makes it easy for the user to interact with the system. forward chaining backward chaining Data start Rule 1 Rule 2 Rule 3 Rule 4 Goal End End Data Rule 1 Rule 2 Rule 3 Rule 4 Goal start

Characteristics of an Expert System An expert system is a software program that captures the knowledge and problem-solving skills of a human expert. Expert systems are ideally suited for problems that require knowledge, intuition, and judgment. Expert systems, unlike DSS and EIS, can replace the decision maker. The three main components in an expert system are the knowledge base, the inference engine, and the user interface.

Benefits of an Expert System Coding of expertise Enhanced understanding of business process Timely availability of expertise Easy replication Strategic Application Limitations Limited Focus Inability to learn Maintenance problems and developmental costs Limited domain of knowledge

Top Middle Lower Office Automation Systems Expert Systems Types of Information Systems and Levels of Management EIS DSS MIS TPS

Knowledge Management Systems Used for managing knowledge in organization, supporting creation, capture, storage and dissemination of information Idea is to enable employees to have ready access to the organization documented base of facts, sources of information and solutions. A KM System could be any of the following: * Document based * Provide network maps * AI technologies which use a customized representation scheme to represent the problem domain. KMS Cycle Create Disseminate Store Manage Capture Refine Knowledge

Knowledge – information that is contextual, relevant and actionable. Knowledge is information in action and is exercised to solve a problem Knowledge is of two types – Explicit knowledge- deals with more objective, rational and technical knowledge Implicit Knowledge- cumulative store of subjective or experiential learning MIS focus on explicit knowledge KMS refers to the use of modern technologies – the internet, intranets, extranets. Benefits Sharing of valuable organizational information reducing redundant work reducing training time for new employees

IS for Strategic Advantage IS and Business Strategy Strategic Information Systems Definition: Computer systems at any level of an organization that change the goals, processes, products, services, or environmental relationships to help the organization gain a competitive advantage. Strategic information systems profoundly alter the way a firm conducts its business or the very business of the firm itself. It can be of any kind of information system (DSS, TPS, MIS, etc.)

Business Level Strategy and IT “ How can we compete effectively in this particular market?” The most common generic strategies at this level are: To become the low-cost producer To differentiate your product or service * Product differentiation: Competitive strategy for creating brand loyalty by developing new and unique products and services that are not easily duplicated by competitors. Eg: banks provide on-line banking service, Dell sells custom-tailored PC. * Focused differentiation: Competitive strategy for developing new market niches for specialized products or services where a business can compete in the target area better than its competitors. Information systems enable companies to finely analyze customer buying patterns, tastes, and preferences so that they efficiently pitch advertising and marketing campaigns to smaller and smaller target markets. - To change the scope of competition by either enlarging the market or narrowing the market

At the business level the most common analytic tool is value chain analysis. Value chain model: Model that highlights the primary or support activities that add a margin of value to a firm’s products or services where information systems can best be applied to achieve a competitive advantage. Primary activities are most directly related to the production and distribution of the firm’s products and services that create value for the customer Primary activities include inbound logistics, operations, outbound logistics, sales and marketing, and service. Support activities make the delivery of the primary activities of a firm possible and consist of organization infrastructure (administration and management), human resources (employee recruiting, hiring, and training), technology (improving products and the production process), and procurement (purchasing input). Organizations have competitive advantage when they provide more value to their customers or when they provide the same value to customers at a lower price. Firms can use information systems to create unique new products and services that can be easily distinguished from those of competitors.

Data mining: Analysis of large pools of data to find patterns and rules that can be used to guide decision making and predict future behavior. The cost of acquiring a new customer has been estimated to be five times that of retaining an existing customer. By carefully examining transactions of customer purchases and activities, firms can identify profitable customers and win more of their business. Supply chain management: Integration of supplier, distributor, and customer logistics requirements into one cohesive process. Supply chain: A collection of physical entities, such as manufacturing plants, distribution centers, conveyances, retail outlets, people, and information, which are linked together into processes supplying goods or services from source through consumption. To manage the supply chain, a company tries to eliminate delays and cut the amount of resources tied up along the way. Information systems make efficient supply chain management possible by integrating demand planning, forecasting, materials requisition, order processing, inventory allocation, order fulfillment, transportation services, receiving, invoicing, and payment.

SUPPLY-CHAIN MANAGEMENT SHIPPING INVENTORY PLANNING & FORECASTING ORDER PROCESSING PRODUCTION PROCUREMENT ACCOUNTING SUPPLIERS CUSTOMERS LOGISTICS SERVICES DISTRIBUTORS INTRANET INTRANET

FIRM LEVEL STRATEGY & IT “ How can the overall performance of these business units be achieved?” “ How can information technology contribute?” Synergies: When outputs of some units can be used as inputs to other units, or two organizations can pool markets and expertise, these relationships can lower costs and generate profits. One use of IT is to tie together the operations of disparate business units so that they can act as a whole. Core competency: An activity at which a firm is a world-class leader. A core competency relies on knowledge that is gained over many years of experience (embedded knowledge) and a first-class research organization or just key people who follow the literature and stay abreast of new external knowledge (tacit knowledge). Any system that encourages the sharing of knowledge across business units enhances competency.

INDUSTRY LEVEL STRATEGY & IT “ How and when should we compete as opposed to cooperate with others in the industry?” Firms can cooperate to develop industry standards in a number of areas; they can cooperate by working together to build customer awareness, and to work collectively with suppliers to lower costs. Information partnership: Cooperative alliance formed between two corporations for the purpose of sharing information to gain strategic advantage. Such partnerships help firms gain access to new customers, creating new opportunities for cross-selling and targeting products. They can share investments in computer hardware and software. At industry level, two analytic models are used: the competitive forces model and network economics. Competitive forces model: Model used to describe the interaction of external influences, specifically threats and opportunities, that affect an organization’s strategy and ability to compete. Network economics: Model based on the concept of a network where adding another participant entails zero marginal costs but can create much larger marginal gain. Used as a model for strategic systems at the industry level.

Business can counter the threats of competitive forces by implementing five basic strategies- Cost Leadership Strategy Differentiation Strategy Innovation Strategy Growth Strategy Alliance Strategy Other Competitive Strategies Improving Business Processes Promoting Business Innovation Lock-in Customers and Suppliers Creating Switching Costs Raising Barriers to Entry Leverage Investment in IT Developing a strategic information base

Strategic use of IT Building a customer focus business Reengineering Business Processes Improving Business Quality Becoming an agile company Creating a virtual company Building a knowledge creating company The challenge of strategic IS

SALES & MARKETING INFORMATION SYSTEM SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

MANUFACTURING INFORMATION SYSTEM

FINANCE & ACCOUNTING INFORMATION SYSTEM

HUMAN RESOURCES INFORMATION SYSTEM

Information system

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