3.5 Trends in Business Information Systems

Until the 1960s the most information systems played a minor role carrying out simple
transactions processing, record keeping, accounting and other data processing activities.
Transaction Processing Systems (TPS) are necessary for data processing activities that result
from business transactions. For example, to register customer orders, to produce payroll
checks and produce invoices.

Then another role was added as the concept of Management Information Systems (MIS). MIS provide reports and displays for specific time periods. These reports are designed for managers responsible for specific functions or processes in a firm. These reports enable managers to control their area of responsibility. MIS typically provide with standard reports generated daily with data and information from the TPS.

By the 1970s, it was evident that the pre-specified information products produced by such
management information systems were not adequately meeting many of the decision
making needs of management. So the concept of Decision Support Systems (DSS) was born.
A DSS goes beyond the traditional MIS and provide support for non-routine decisions or
problems. It analyses the information already captured by TPSs and MISs in order to support
unstructured and semi structured decision making at various levels. Such a system can help
you budget for your sales team over the next quarter, considering the current sales forecast.
In the 1980s, several new roles for information systems appeared.

Firstly, the rapid development of micro computer processing power, application software packages, and telecommunication networks gave birth to the phenomenon End User Computing. They are CBIS that directly support both the operational and managerial applications of end users.

Secondly, it became evident that most top corporate executives did not directly use either
the reports of management IS or analytical capabilities of DSS. Therefore, the concept of
Executive Information Systems (EIS) was developed. EIS provides support for the long term
strategic view that senior executives need to take of the business. These systems provide
easy access to summarized company data, taking into consideration the external
information such as competitor, industry and economy at large.

Thirdly, another breakthrough occurred in the development and application of artificial intelligence (AI) techniques to business information systems. AI’s are based on artificial intelligence and carries out functions normally associated with human intelligence, for example, reasoning, inference learning and problem solving. Robotics is an area of artificial intelligence in which machines take over complex, dangerous, routine or boring tasks, such as welding car frames or assembling computer systems and components.

Furthermore, Expert systems (ES) and other knowledge based systems form a new role for
information systems. ES provide expert advice and act as expert consultants to users.
Examples include credit application advisor and diagnostic maintenance system.

An important new role of information systems appeared in the 1980s and continued through the 1990s. This is the concept of a strategic role for information systems, sometimes called as Strategic Information Systems (SIS). SIS are Information systems that provide a firm with competitive products and services that give it a strategic advantage over its competitors in the market place. Also, IS promotes business innovation, improve business processes and build strategic information resources for a firm.

Finally, the rapid growth of the Internet in the 1990s and other interconnected global
networks, changed the capabilities of information systems in business at the beginning of
21st century. Internet based e-commerce and mobile commerce systems are becoming
common place in the operations and management of today’s business enterprise. Ecommerce
involves any business transaction executed electronically between parties such
as companies (business to business, B2B), consumers and other consumers (consumer to
consumer), companies and consumer(B2C), business and the public sector and consumers
and the public sector.

Although e-commerce is mostly associated with web shopping, major volume of ecommerce and its fastest growing segment is business to business (B2B) transactions that make purchasing easier for companies.

The trends discussed above are depicted in figure 1.1.

3.4 Activities of an Information System

Basic information processing activities that take place in an information system include input
of data resources, processing of data into information, output of information products,
storage of data resources and control of system performances.

3.4.1 Input of Data Resources
Data about business transactions and other events must be captured and prepared for
processing by the input activity. Input typically takes the form of data entry activities such as
recording and editing. End users typically enter data directly into a computer system, or
record data about transactions on some type of physical medium such as a paper form. This
usually includes a variety of editing activities to ensure that they have recorded data
correctly. Once entered, data may be transferred onto a machine readable medium such
as a magnetic disk until processing takes place.

For example, data about sales transactions can be recorded on source documents such as
paper sales order forms (a source document is the original formal record of a transaction).
Alternately, sales persons can capture sales data using the computer keyboard or optical
scanning devices (ie. input devices).

Methods such as optical scanning and displays of menus, prompts, and fill-in the-blanks
formats make it convenient for the end user to enter data correctly into an information
system. Therefore, these methods also increase the efficiency of the input activity.

3.4.2 Processing of Data into Information
Data are typically subjected to processing activities such as calculating, comparing, sorting,
classifying, and summarizing. These activities organize, analyze, and manipulate data, thus
converting them into information for end users. The quality of any data stored in an
information system must also be maintained by a continual process of correcting and
updating activities.

Example. Data received about a purchase can be(1) added to a running total of sales
results, (2) sorted in numerical order based on product identification numbers, (3) classified
into product categories (such as food and nonfood items), (4) summarized to provide a sales
manager with information about various product categories, and, finally, (5) used to update
sales records.

3.4.3 Output of Information Products
The goal of information systems is the production of appropriate information products for
end users. Information products in various forms is transmitted to end users and made
available to them in the output activity. Common information products include messages,
reports, forms, and graphic images which may be provided by video displays, audio
responses, paper products, and multimedia depending on the requirement of the end user
of the system. We routinely use the information provided by these products as we work in
organizations and live in society.

For example, in order to check the performance of a Sales Executive, a Sales Manager may
print a sales report, accept a computer-produced voice message by telephone, and view a
video display of an executive carrying out a sales presentation.

3.4.4 Storage of Data Resources
Storage is a basic system component of information systems. Storage is the information
system activity in which data and information are retained in an organized manner for later
use.

For example, just as written text material is organized into words, sentences, paragraphs,
and documents, stored data are commonly organized into a variety of data elements and
databases. This facilitates its later use in processing or its retrieval as output when needed by
users of a system.

3.4.5 Control of System Performance
An important information system activity is the control of system performance. An
information system should produce feedback about its input, processing, output, and
storage activities. This feedback must be monitored and evaluated to determine if the
system is meeting established performance standards. Then appropriate system activities
must be adjusted so that proper information products are produced for end users.

For example, a manager may discover that in a sales report which lists monthly and yearly
sales of the organization up to two years, the total monthly sales of year one does not add
up to the total sales of the same year.

This might mean that data entry or processing procedures need to be corrected. Then
changes would have to be made to ensure that all sales transactions would be properly
captured and processed by a sales information system.

3.3 Computer based Information Systems

3.3.1 A computer-based information system (CBIS) is a single set of hardware, software,
databases, telecommunications, people, and procedures that are configured to collect, manipulate,store, and process data into information.

All these components of CBIS define the business’s technology infrastructure since it forms
the foundation of organizations information systems.
Lets identify these components in detail.

3.3.2 Hardware
Computer equipment used to perform input processing and output activities.
Hardware components can also categorize based on the input, processing and output
activities. Other than main computer system unit, all other hardware devices are
known as peripherals.

• Input devices
Input devices are used to input data that will be processed by the Information System. They
are connected to computers directly to pass data. Most common input devices are
keyboard and mouse.

Here is the list of common input devices:
The keyboard
The mouse.
Other pointing devices,
Scanning devices,
Magnetic ink character readers,
Smart cards
Optical cards,
Sensors,
Digital cameras etc.

• Processing devices
Processing devices include the central processing unit (CPU) and main memory. They are
inside the system unit.

Lets identify CPU and main memory:

CPU
This has several components and the processor is most important component. It is generally
considered as the “brain of a computer”. It does exactly what the name implies, process
data based on the given instructions. As a result of this processing, input data will be
changed. Speed is the most important parameter in a processor and it is very important for
the faster processing of complex data like video images.
Simply, if the speed is low, the computer will be slow.

The Main/Primary Memory
Also know ans the Primary memory is directly accessible by the processing unit of the
computer. You can store and retrieve data much faster with primary memory compared to
secondary memory.
We will discuss about the processor and the primary memory in detail in Chapter 3.

• Output devices
Results after processing the data, can be stored in the computer or it can be taken out from
the information system. Results are known as output and devices which facilitates distributing
of the output is known as output devices.

Depending on the requirements of the organization output may be produced on printed
paper, visual screen or any other format (non-permanent ways, e.g. a file of data).

Output Type Output Device
Printed on a paper Printers, plotters
Visual Display Monitor
Audio Speakers
Video Monitor + speakers
Software Object Secondary storage devices,
- Floppy Disk, Flash disks

3.3.3 Software
Software consists of computer programs that govern the operation of the computer. It can
be described as the digital instruction set to a computer. CPU needs software to control its
functions as well as to process the input data. Without software computers are dead
hardware. It is the component which gives the computer the power to act as an intelligent
machine.

Software is normally classified into two components called application software and system
software.

Example: MS Windows is a system software which control devices including the CPU. MS
Word is an application software which facilitates users to use computers as word processors.
Application Software

An Application Software also is known as an application package, is a set of programs
designed to carry out operations for a specified purpose or task.

Example:
Microsoft Office (MS Office). It consists of several applications which usually are very
useful to carry out activities in an office environment.

An Accounting Package
It may help an account division to carry out all its activities including payroll of
employees in the organization.

System Software
It generally performs tasks of controlling devices attached to a computer system. It gives life
to hardware devices. Simply, hardware devices together with system software provide the
infrastructure to run/execute application software. Simply, Application software cannot be
run without having system software.

Some software communicates with hardware devices to coordinate activities. E.g. print
drivers. You have to install these drivers to connect to a computer.
System Software allows application software to be run on the computer with less time and
effort. Most important system software of a computer is its operating system. A computer
cannot work without an operating system. It controls all hardware devices and other system
software, plus facilitation to run a particular application software.
Example: Microsoft windows, Linux, Unix

3.3.4 Databases
A database is an organized collection of data and information in an organization.
Data and information are critical for problem solving and decision-making in an
organization. Hence, most managers and executives consider a database to be the most
valuable and important part of a computer-based information system.

We use special application software to create databases. We call these software as
“Database Management Systems” DBMS.

Examples: Access, DBASE.

3.3.5 Telecommunications, Network and Internet:
Communication is described as transmission (i.e. both sending and receiving)of messages
between two parties. We can use electronic medium to this activity. For example, using a
telephone we can communicate with someone far away.

Telecommunications is described as the electronic transmission of signals (i.e. data, voice,
messages) for communications.

Telecommunications enable organizations to connect with their branches, customers and
other parties to set up advanced business environment. For example, you can use a
telephone to book a cab service.

What is the Internet?
The Internet is defined as a network of networks.
The first letter of Internet, I, is always capital letter. It is huge resource and no one owns it as a
private property.

Do you know what a network is?
A network is a group of computers inter-connected through a physical cable. Some
computers in this network act like leaders and we call them servers. Other computers are
called clients.

When the geographical area of the network is not very large, we call them as LAN (Local
Area Network). On the other hand, WAN (Wide Area Network) is a network which is spread
in a large geographical area, sometimes connecting several offices/branches of an
organization.

By connecting computers to each other, we can communicate with one another and share
resources of computers (e.g. data files, programs, physical devices like printers)
Today, Information Systems heavily depend on all these telecommunication, network and
Internet infrastructures. Due to the developments in telecommunications, organizations have
access to wide variety of services irrespective of location and time.

3.3.6 People
Computer based Information systems (CBIS) are designed and developed by a group of
people to another set of people who will use it to do some tasks. Therefore, the role of
people is very significant. We can identify four types of groups who are considered the key
stakeholders of a CBIS.

They are:
- End Users – people who use an information system or the information produced
by a CBIS. Most end users consist of knowledge workers, a term that is used to
describe a group of people who spend most of their time communicating and
collaborating in teams and workgroups. They create, use and distribute
information.
(e.g. employees in an organization, customers).
- Clients – who are spending money to develop a CBIS for an organization
(e.g. managers of the organization)
- Developers – who will design and develop CBIS according to requirements of an
organization
(e.g. software engineers/developers in IT department or software
house/company)
- Development Managers – those who are undertaking the contract to develop
CBIS and manage the development work using developers
(e.g. managers in IT dept. of an organization or managers of software
house/company)

3.3.7 Procedures
Development of a CBIS is not an easy thing. We need to use an engineering approach to
develop such a thing. (e.g. it is like building a big building or bridge, only difference is we
cannot physically see it like a bridge)

After developing a CBIS, it must be used according to some procedures to utilize it to
achieve your objective. Once you have a car, you must know how to drive it as well as basic
procedures to maintain it. Information systems are like that. These procedures include the
strategies, policies, methods, and rules for using a Computer-based information system.

Methods describe the steps to be followed to perform a certain task. E.g. When you want to
take a print out of your transactions in your savings account from the banking Information
System, you must know the method to do it. At the same time, you must have authority to do
so, as others may not be allowed to see details in your savings account except bank staff.
Procedures may include policies of the organization. For example, a policy may describe
which groups of users have access to a certain database.

3.2 Main Components of an Information System

In this section, we will discuss details of main components of Information system described in
section 3.1.

Input
Input describes activities to produce raw materials which will enter into a system from the
environment. In information systems, it includes activities of gathering and capturing raw
data that should be processed.

Input to a system could take a manual or automated method. For example, a scanner at a
grocery store that reads bar codes and enters the grocery item and price into a
computerized cash register is a type of automated input. Generally, both automated and
manual methods of input are active. When the bar code reader fails to identify the item,
cashier can enter the code using the keyboard. Regardless of the input method, accurate
input is critical to achieving the desired output.

Processing
In information systems, processing part involves converting or transforming input data into
useful outputs by making calculations, comparisons and arranging raw data. Sometimes,
processing involves storing data for future use. This is a critical part in an information system,
and it can be done manually or with the assistance of a computer.

Output
In information systems, output involves producing documents and reports using results of the
processing activity. For example, pay slip of each employee prepared based on the
company format, reports of total pay to the management, reports to third parties such as
Labor Department (EMF contribution), Inland Revenue Department (Income tax employees).

In some cases, the output of a system could become an input to another system. Often,
output from one system can be used as input to control other systems or devices.
The salesperson, customer, and furniture designer can go through several design iterations to
meet the customer’s needs. Special computer programs and equipment create the original
design and allow the designer to rapidly revise it. Once the last design mock-up is approved
the computer creates a bill of materials that goes to manufacture to produce the order.

Output can be produced in different ways using different devices such as display screens,
printers etc. It can also be a manual process involving handwritten reports and documents.

Feedback
In information systems, feedback is a kind of output that is used to make changes to input or
processing activities. For example, errors or problems might make it necessary to correct
input data or changes to the logic of the process.

Feedback is also very important component for managers and decision makers.

3 Information Systems

3.1 What is an Information System

An information system (IS) is a set of interrelated elements or components that collect (input),
manipulate (process) and store, and disseminate (output) data and information and provide
a feedback mechanism to meet an objective. Hence Information system consists of four
main components, namely input, processing, output and feedback. Their relationship is
illustrated in the figure below.








This feedback mechanism is very important since it provides to improve the quality of
processing as well as the input. Every system including Information system, has a goal to be
achieved to fulfill the need of the organization. As a result of this mechanism, organizations
can achieve their goals, such as increasing profits or improving customer service.