Lecture 2 (major types of information systems in organizations)

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Major Types of Information
Systems in Organizations
Lecture 2
Abdisalam Issa-Salwe
Department of Computer Science
Faculty of Information Science and Technology
East Africa University
2 East Africa University, Faculty of Information Science and Technology, Department of Computer Science
Topic list
 Types of information systems?
 Function of different types of system
 Transaction Processing Systems
Structure of a typical TPS
 Office automation system (OAS)
 Executive information system (EIS)
 Benefits of executive information systems
 The characteristics of a DSSComponents of a
DSS

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Types of information systems
 Transaction processing system (TPS):
 Office automation system (OAS)
 Executive information system (EIS):
 Decision support system (DSS):
 Knowledge Work Systems (KWS):
Transaction processing system (TPS):
 A TPS collects and stores information about transactions, and
controls some aspects of transactions. A transaction is an event of
interest to the organisation. e.g. a sale at a store.
 It is a basic business system.
 serves the most elementary day-to-day activities of an
organisation;
 supports the operational level of the business;
 supplies data for higher-level management decisions.
 is often critical to survival of the organisation
 mostly for predefined, structured tasks
 can have strategic consequences (i.e. airline reservation
system)
 usually has high volumes of input and output
 provides data which is summarised into information by
systems used by higher levels of management
 need to be fault-tolerant.

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Transaction Processing Systems
 The lowest level of information system and
Business system
 Used by businesses to record
“transaction” information
 Transactions include things like booking
airline tickets, purchasing goods or
services
 Provides raw data used in processing in
EIS and DSS
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East Africa University, Faculty of Information Science and Technology, Department of Computer Science
Transaction Processing Systems (cont…)
Operational-level Systems
Order
tracking
Machine control Securities
trading
Payroll Compensa
tion
Order
processing
Plant scheduling Cash
management
Accounts
payable
Training
and
developme
nt
Material
movement and
control
Accounts
receivable
Employee
records
Sales and
Marketing
Manufacturing Finance Accounting Human
Resource
s
Systems that perform and record daily routine
transactions necessary for business

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Structure of a typical TPS
On-linedata
entry
Transaction
files
Keypunched
cards
Scanning
devices
TransactionProcessingSystem
-Record - Merge
-Perform -Sort
-List -Update
Products Documents
Datafor
other systems
INPUTS
TPS
OUTPUTS

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Office automation system (OAS)
 OAS provides individuals effective ways to process
personal and organisational data, perform
calculations, and create documents.
e.g. word processing, spreadsheets, file managers,
personal calendars, presentation packages
 used for increasing personal productivity. They reduce
"paper warfare".
 OAS software tools are often integrated (e.g. Word
processor can import a graph from a spreadsheet) and
designed for easy operation.
Office automation system (cont…)
 An automation system is a precisely planned
change in a physical or administrative task
utilizing a new process, method, or machine
that increases productivity, quality, and profit
while providing methodological control and
analysis.
 The value of system automation is in its
ability to improve efficiency; reduce wasted
resources associated with rejects or errors;
increase consistency, quality, and customer
satisfaction; and maximize profit.

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Office Automation Systems
Knowledge-level Systems
Word
processing
Document
imaging
E-mail /
electronic
calendars
Systems that are designed to increase the
productivity of data workers
 Refers to all tools and methods that are applied
to office activities
Making possible to process written, visual,
and sound data in a computer-aided manner.
 Provides elements which make it possible to
simplify, improve, and automate the organization
of the activities of a company or a group of
people (management of administrative data,
synchronization of meetings, etc.).

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 Office automation seems to proceeding more
rapidly and penetrate economic activities more
thoroughly than have other waves of automation
 World economy is driven by the incessant
demand for information as it is by the continuing
necessity of converting raw materials into
finished products
 Office work is rapidly being “automated, ” or
computerized
Executive information system (EIS)
 Also known as an Executive Support System
(ESS), it provides executives information in a
readily accessible, interactive format.
 An EIS/ESS usually allows summary over the
entire organisation and also allows drilling down
to specific levels of detail.
 Used by top level (strategic) management. They
are designed to the individual. They let the CEO
of an organisation tie in to all levels of the
organisation. They are very expensive to run
and require extensive staff support to operate.

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Executive Information Systems
 Topmost systems
 High-level systems designed to provide Senior
Management with information on general trends
in business activities rather than the intimate
details
Executive Support Systems
Strategic-level Systems
5-year sales
trend
forecasting
5-year operating
plan
5-year budget
forecasting
Profit
planning
Personnel
planning
Sales and
Marketing
Manufacturing Finance Account.. Human
Resources
Systems that support non-routine decision-making
through advanced graphics and communications

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General Properties of an EIS
 Used for strategic business planning
 Relatively long time-frame considered
 Unstructured and open-ended (many variables
can be considered)
 For accurate results EIS require information from
inside and outside the business
General Properties of an EIS
 Graphically oriented to provide readily
understandable views of complex data
 Tailored to suit an executive’s decision making
style
 provides rapid access to current information
and filters and tracks critical data
 Its major activity is information scanning and
evaluation, it deals mainly with the intelligence
phase of decision-making.

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Benefits of executive information systems
 Improved financial and operational control
 Enhances business problem solving
 Helps in the identification of new opportunities
(e.g. tour operators use it to identify new holiday
destinations)
 Increases IT awareness among senior
management.
Decisions and information needs
 Characteristics of decisions and
information needs when ascending the
different business levels.
Less structured problems and decisions
Greater need for summarised information
Greater need for external information
Longer time horizon

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Decision support system (DSS)
 Helps strategic management staff (often senior
managers) make decisions by providing information,
models, or analysis tools. For support of semi-
structured and unstructured decisions (structured
decisions can be automated). Used for analytical work,
rather than general office support.
 They are flexible, adaptable and quick. The user
controls inputs and outputs. They support the decision
process and often are sophisticated modelling tools so
managers can make simulations and predictions.
 Their inputs are aggregate data, and they produce
projections. An example job for a DSS would be a 5
year operating plan.
Decision-support Systems
Management-level Systems
Sales
region
analysis
Production
scheduling
Cost
analysis
Pricing /
profitabilit
y analysis
Contract
cost
analysis
Sales and
Marketing
Manufacturing Finance Accounting Human
Resources
Systems that combine data, models and analysis
tools for non-routine decision-making

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Decision Support Systems
 Definition: A DSS is a coherent system of
computer based technology used by
managers as an aid to their decision making in
semi-structured tasks.
 DSS use sophisticated analysis and data
modelling tools to solve semi-structured
problems
The characteristics of a DSS
 Structured and semi-structured decisions
 Used by managers at different levels
 Used both by groups and individuals
 Supports a variety of decision styles and
processes
 It has adaptability and flexibility
 Ease of use
 Its based on effectiveness and not efficiency

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Components of a DSS
 DSS Database - data from internal TPS such as
data from inventory, production, and accounting
sources
 Model Base - Analytical tools used by the DSS.
These include built-in spread sheeting, statistical
analysis, and simulation
Structure of a generic DSS
DSS
System
Software
Model Base
-Spreadsheets
-Statistical Analysis
-Simulation
DSSDatabase
-Sales Data
-Financial Data
-ProductionData
Order Processing
System
Materials Resource
PlanningSystem
General Ledger
System

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Tools used in a DSS
 What-If analysis tools (found in most
spreadsheets)
What-if analysis allows users of a system to
quickly calculate and display the results of
many combinations of input values in a
model.
Knowledge Work Systems
 KWS are used by technical staff.
 KWS use modelling functions to convert design
specifications into graphical designs.
 They may include computer-aided
design/manufacture (CAD/CAM). Knowledge workers
and knowledge work
 Requirements of knowledge work systems
 Examples of knowledge work systems
• CAD
• Virtual reality
• VRML
• Investment workstations

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Knowledge Work Systems (cont…)
Engineering
workstations
Graphics workstations Managerial
workstations
Systems that aid the creation and integration of new
knowledge into an organisation
 Important dimensions of knowledge
 Organizational learning and knowledge management
 The knowledge management value chain
 Knowledge acquisition
 Knowledge storage
 Knowledge dissemination
 Knowledge application
 Building organizational and management capital:
Collaboration, communities of practice, and office
environments
 Types of knowledge management systems

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 Structured knowledge systems
 Semi structured knowledge systems
 Organizing knowledge: Taxonomies and
tagging
 Knowledge network systems
 Supporting technologies: Portals, collaboration
tools, and learning management systems
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Requirements of Knowledge Work Systems
Knowledge work systems
require strong links to
external knowledge bases in
addition to specialized
hardware and software.

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Functional Examples
 Examples of IS by function:
Sales and marketing
Manufacturing and production
Finance and accounting
Human resources
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Sales and Marketing
System Description Organisational
Level
Order processing Enter, process and
track orders
Operational
Market analysis Identify customers
and markets
Knowledge
Pricing analysis Determine prices Management
Sales trends Prepare 5 year
forecasts
Strategic

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Manufacturing and Production
Level
Machine control Control actions of
equipment
Operational
Computer-aided
design (CAD)
Design new products Knowledge
Production planning Decide number and
schedule of products
Management
Facilities location Decide where to
locate facilities
Strategic
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Finance and Accounting
Level
Accounts receivable Track money owed
to firm
Operational
Portfolio analysis Design firm’s
investments
Knowledge
Budgeting Prepare short-term
budgets
Management
Profit planning Plan long-term
profits
Strategic

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Human Resources
Level
Training and
development
Track training,
skills and
appraisals
Operational
Career paths Design employee
career paths
Knowledge
Compensation
analysis
Monitor wages,
salaries and
benefits
Management
Human resources
planning
Plan long-term
workforce needs
Strategic
Management Challenges
 Strategy of an organization is the roadmap towards
attainment of its long term goals and objectives.
 Effective operationalization of strategy enables
effective and efficient realization of organizational
goals.
 In the dynamic business environment of today,
information has emerged as one of the key drivers in
successfully steering the organizational strategy.

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Management Challenges
 Strategy of an organization is the roadmap
towards attainment of its long term goals and
objectives.
 Effective operationalization of strategy enables
effective and efficient realization of
organizational goals.
 In the dynamic business environment of today,
information has emerged as one of the key
drivers in successfully steering the
organizational strategy.
Management Challenges (cont…)
 What do managers need to know about organizations
in order to build and use information systems
successfully?
 What impact do information systems have on
organizations?
 How do information systems support the activities of
managers in organizations?
 How can businesses use information systems for
competitive advantage?
 Why is it so difficult to build successful information
systems, including systems that promote competitive
advantage?

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Management Challenges (cont…)
 IS facilitate in leveraging information towards
organizational success.
 Sustainability of competitive advantage
 Fitting technology to the organization (or vice-
versa)
 Information technology (IT):
Could change hierarchy of decision making
Lower cost of information acquisition
Broadens the distribution of information
Operational-level Systems
 Support operational managers by keeping track
of the elementary activities and transactions of
the organization.
 The principle purpose of systems at this level is
to answer routine questions and track the flow of
transactions through the organization.
 Covers things such as sales, receipts, cash
deposits, payroll, credit decisions, flow of
materials.

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 Support knowledge and data workers in an
organisation.
 The purpose of these systems is to help the
organisation discover, organise and integrate
new and existing knowledge into the business,
and to help control the flow of paperwork.
 These systems, specially in the form of
collaboration tools, workstations, and office
systems, are the fastest growing applications in
business today.
Management-level Systems
 Designed to serve the monitoring, controlling,
decision-making, and administrative activities of
middle managers.
 Typically provide periodic reports rather than instant
information on operations. Some of these systems
support non-routine decision-making, focusing on less-
structured decisions for which information
requirements are not always clear.
 Often require information from out with the
organisation, as well as from normal operational-level
data.

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Strategic-level Systems
 Help senior management tackle and address
strategic issues and long-term trends, both
within the organisation and in the external
environment.
 Principal concern is matching organisational
capability to changes, and opportunities,
occurring in the medium to long term (i.e. 5 - 10
years) in the external environment.

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Reference
 Dave Chaffey, Paul Bocij, Andrew Greasley and Simon
Hickies (eds) (2003): Business Information Systems:
Technology, Development and Management, Pearson
Education Limited, London.
 BPP, Information Systems, Study Text, Paper 2.1, BPP
Professional Education, United Kingdom.
 Lachlan M. MacKinnon, Information: Types of
Information Systems,
http://www.macs.hw.ac.uk/~lachlan/dbislectures/lectures/
types.ppt,
 Abdisalam Issa-Salwe, Lecture Notes, Thames Valley
University, 2008.

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Group Discussions
 Group 1:
 Explain Transaction Processing Systems (TPS)?
 Give example where TPS is applied?
 Group 2:
 Which system collects and stores information about
transactions and why?
 Group 3:
 What is Executive Information System (EIS)?
 Group 4:
 What is Decision support system (DSS)?
 Group 5:
 Explain Knowledge Work Systems (KWS)?
 Group 6:
 What are the three levels of information requirement

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