Introduction to Information System Information Systems The Role of Information Systems in a Business Data versus Information Information Systems Definition Computer-Based Information System Business Information Systems System Development Life Cycle Information System in Business and Industry

What is an Information System? An information system (IS) is a set of interrelated components that collect, manipulate, and disseminate data and information and provide a feedback mechanism to meet an objective of an organization. The Role of Information Systems in a Business Information systems perform three vital roles in any organization: • Support of Business Operations: For example, most retail-stores

use information system to perform customer sales, keep track of inventory, pay employees, buy new merchandise, and evaluate sales records.

• Support of Managerial Decisions: Information systems help

managers make better decisions. For example, by looking at the weekly sales report, a retail-store manger can make decision which item should be ordered more and which item should be discarded.

• Support of Strategic Competitive Advantage: For example, a

business might install computer-based ordering system or internet-based shopping network to achieve competitive advantage over competitors.

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Data versus Information Data Data are raw facts representing events occurring in organizations or the physical environment. Data can be of various types (as shown in the next page). Examples are, employee name, number of hours worked in a week, inventory part number, unit price, order number, and so on. Information Information is a collection of data organized in such a way that they have additional value beyond the data themselves. For example, total monthly sales by all sales persons of an organization, is a valuable information to a manager. Process Transferring data into information requires a process. A process is a set of logically related tasks performed to achieve a defined outcome. A computer program is typically used to convert data into information. In a grocery store, scanning the bar code of an item and finding the price of it from the inventory database and printing it on the screen or paper is a process. Knowledge The process of defining relationships among data requires knowledge. Knowledge is an understanding of a set of rules that are followed to convert data into information and how that information can be made useful to support a specific task. In a retail store, certain rules are used to sell an item to a customer, including manual and computer systems, such as scanning, verifying price, asking for driving license in case of check, scanning credit card, printing receipt, getting customer signature, and so on.

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Types of Data

The Process of Transforming Data into Information

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Information Systems Definition An information system can be defined technically as a set of interrelated components that collect (or retrieve), process, and distribute information to support decision making and control in an organization. The university registration system, a grocery checkout system, a payroll system, and an order processing system are examples of information system. A system has inputs, processing mechanisms, outputs, and feedback.

Input Input captures or collects raw data from within the organization or from its external environment. In a payroll system, the employee name, hourly rate, and number of hours worked are input to the system. Input can be manual or automated. Data-entry to a payroll system by a clerk is a manual process, but processing check is an automated system. Also, scanning barcode for a price in a retail store is an automated system.

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Processing Processing involves converting raw data into meaningful information. Processing can involve making calculations, making comparisons and taking alternative actions, and storing data for future use. In a payroll system, calculation of an employee salary requires multiplying the number of hours with the hourly rate. Output Output involves producing useful information, usually in the form of documents and/or reports. Purchase orders, grocery receipts, paychecks, invoices, sales reports, bank statements, ATM receipts, and utility bills are examples of output. Outputs can be produced on a screen or as a hard copy printout. Feedback Feedback is the process of evaluating outputs of an information system by appropriate members of an organization to correct the input. A payroll system should respond as an error to the data entry clerk if he or she enters 400 instead of 40 for the number of hours worked by an employee in a week. An inventory system can alert a manager when the stock level for a particular item falls below a certain minimum.

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Computer-Based Information System A computer-based information system (CBIS) is composed of: • hardware • software • databases • telecommunications • people and • procedures These resources are configured to collect, manipulate, store, and process data into information.

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Hardware Hardware consists of computer equipment used to perform input, processing, storage, and output activities. Input devices include keyboards, automatic scanning devices, optical data readers, light pens, touch screens, and so on. Processing devices include central processing unit and main memory of a computer. Storage devices include floppy disks, hard disks, magnetic tapes, zip disks, compact disks (CD-ROM), and digital video disks (DVD). Output devices include display monitors, printers, plotters, and liquid crystal displays. Software Software is the computer programs that govern the operation of the computer. There are two types of software: systems software and applications software. The system software (or operating system) controls the basic operation of a computer such as start-up, document saving, document printing, document copying from one disk to another, and so on. An application software performs a specific task such as word processing, spreadsheet, drawing, faxing, e-mail, and web browsing. It also includes programs such as payroll system, order processing system, human resources system, accounting system, and any other custom developed software.

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Database A database is a centralized collection of data and information, which are organized in a certain way that facilitates manipulation of data and information according to the user’s need. A database is typically organized into tables and contains information on all aspects of a business. Thus an order processing database contains information on customers, inventory, employees, orders, invoices, accounts receivables, accounts payables, and so on. Telecommunication Telecommunications is the electronic transmission of signals for communication and enables organizations to link computer systems to a network. It helps people to communicate using e-mails and voice mails, or work together on an enterprise-wide client-server system. Network Networks are used to connect computers and computer equipment in an office, in a building, around a city, within a country, or across the world. Local area network (LAN) is used within an office and a wide area network (WAN) is used in a wide geographical region. Internet Internet is the world’s largest computer network, consisting of thousands of interconnected networks, all freely exchanging information across the whole world. Large companies such as AT&T, MCI, and Sprint normally provide backbone connections to a local area network. Intranet Internet technology that is used within an organization in a secured environment, between the employees, to exchange information and share on projects.

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People People are the most important element in most computer-based information systems. There are two groups of people: information system personnel and users. Information system (IS) personnel include all the people who mange, run, program, and maintain the system. Typical IS positions are computer information officer (CIO), project manager, systems analyst, programmer, network administrator, and operator. Users are people who use information systems to get results. They include financial executive, marketing representative, salesman, inventory operator, sales clerk, order-entry clerk, accountants representative, and others. Procedures Procedures include strategies, policies, methods, and rules for using CBIS. A procedure might be that a program must be automatically run at 10 AM everyday that reads all input insurance claim files in a directory and update the database. After completion of this program, another program will be initiated that might send a file with all processed claims. Other procedures may describe who can have access to a particular computer, access to a particular folder, access and authority to change in the database. A user’s manual of a CBIS describes the procedures to use the system. Procedure might be in place that describes how to recover the CBIS in case of emergency such as hurricane, flood, and earthquake.

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Business Information Systems Information systems are developed for different purposes, depending on the need of the business. They fall into one of the following categories: • Transaction Processing Systems • Electronic Commerce (E-commerce) • Management Information Systems • Decision Support Systems, and • Expert Systems

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Transaction Processing Systems Transactions are business events such as ordering an item, creating an invoice, sales to customer, payment to an employee, and so on. Transaction processing systems are developed to process large amounts of data for routine business transactions on a daily basis Examples are: payroll processing, inventory control, order processing, credit card processing, university registration, airline reservation, and so on. Transaction processing systems are computer based information systems (CBIS) that involve people, procedures, software, databases, and devices to record completed business transactions. There are two types of transaction processing: input transaction processing and output transaction processing. Examples input transaction processing are: customer order, accounting vouchers, course registration, time cards, airline reservation, payments, charge card slips, and bank deposit slips. Output transactions trigger from input transactions. Examples are: customer invoices (bill), course schedules, paychecks, airline reservation confirmations, airline tickets, payment receipts, and sales receipts.

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Electronic Commerce (E-Commerce) Electronic commerce also falls in the category of transactions processing system, as these transactions are performed on a daily basis. E-commerce involves any business transaction executed electronically between to parties, which can be business-to-business transactions or consumer-to-business transactions. In purchasing a computer desk or software for an office, the purchasing officer can mail an approved purchase order to a catalog company or the purchase order can be sent electronically such as via electronic fax, file transfer, or e-mail attachment. The electronic transmission is a business-to-business transaction. Consumers are using Internet technology to browse into an on-line business web-site, and purchases books, CDs, clothes, and flowers on a daily basis. These are consumer-to-business transactions. According to a survey, business-to-business e-commerce totals more dollar transactions than consumer-to-business transactions.

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Management Information System Data stored in a transaction processing system can be summarized to give valuable information to managers to make business decisions. For example, after making many sales transactions in a grocery store, the inventory level of many items will go low. This information is very important to a store manger. The low-inventory items must be ordered on a timely basis, such that the store does not run out of items. A management information system supports the operations, management, and decision-making information needs of a business. The focus of an MIS is primarily on operational efficiency. Thus MIS systems are developed for marketing, production, finance, and other functional areas of a business. Transaction processing systems provide input information to the MIS systems by storing continually updated data in a database, which are accessed by various MIS systems. See next page. Management information systems are typically designed to generate reports that help managers to make decisions. Generally, there are three types of reports: scheduled, demand, and exception reports. Scheduled reports are printed on a regular basis, such as daily, weekly or monthly. Examples are, weekly orders report, weekly new customer report, monthly income report, monthly payroll report, and monthly sales-by-store report. Demand reports are developed to give decision-makers certain information upon request. For example, prior to closing a store, a manager wants to know the inventory level of a fast-selling item. Exception reports are produced when certain condition occurs. For example, an inventory report describing all items whose stock-level falls below a minimum level. Other examples are, outstanding purchase orders, delinquent accounts report, expired subscription report, and backorders report.

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Management information systems obtain data from various transactions processing systems of an organization

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Decision Support Systems A decision support system provides mid-managers with information when a decision-making situation occurs. For example, we can provide an on-line credit check to help a manager or clerk decide whether or not to let someone charge a sale at a department store.

Expert Systems and Artificial Intelligence Artificial Intelligence and expert systems are systems that can learn and reason in a manner similar to humans. These systems uses the knowledge of an expert for solving a particular problem experienced in an organization.

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Office Automation System Office automation systems manipulate information and share it through the organization. Software such as spreadsheet, word processing, e-mail, fax and so on, are routinely used in an office automation system. Office automation systems support workers in a business environment. Knowledge Work Systems Knowledge work systems support professional workers such as scientists, engineers, and doctors by aiding them in their efforts to create new knowledge and by allowing them to contribute it to their organization and to society at large.

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Systems Development Life Cycle Systems development is the activity of creating or modifying existing business systems. The systems development life cycle (SDLC) is a process by which systems analysts, software engineers, and programmers build an information system. It is a phased approach to analysis and design of a system, which holds that systems are best developed through the use of a specific cycle of analyst and user activities. In its simplest form, SDLC consists of five phases: • systems investigation • systems analysis • systems design • systems implementation, and • systems maintenance and review.

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Systems Investigation In this phase, the systems analyst gains a clear understanding of the problem to be solved or opportunity to be addressed. • Problems: In defining problems, the analyst looks honestly what is

occurring in a business. Then together with other organizational members, the analyst pinpoints problems, including business and technical constraints.

• Opportunities: These are situations that the analyst believes can

be improved or modified through the computerized information systems.

Systems Analysis In this phase, the systems analyst determines information requirements for the users who are involved in the business and then tries to find an appropriate solution. The system analyst collects data and information from the users of the system and then analyzes them to define requirements or needs of the new system. Various possible solutions are analyzed and compared in terms of technical, operational, and economical feasibility, and an acceptable solution (by users and managers) is selected for the design.

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Systems Design In this phase, the system analyst uses the information collected earlier to develop a logical design of the information system. It includes a data dictionary definition for the database, file structures, data-entry forms, menu system, reports, and program structure. A “Functional Specification” is developed that is used by programmers to develop the system. Systems Development & Implementation In this phase, the system analyst works with the programmers to develop the new software according to the definition of the functional specification. Hardware and packaged software proposed for the project, are evaluated, screened, and ordered. The development phase also involves program testing and control, document production such as procedure manual and online help. Once the system is developed, the analyst helps implement the new system, and works with the users to describe the functionality of the new system. He or she also trains the users for the new system. Systems Maintenance & Review Maintenance is the correction of errors and omissions that were not caught during the testing and delivery phases. Improvements are the additions of new capabilities to the system. The system analyst checks and modifies the system so that it continues to meet changing needs of the business.

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Information System in Business and Industry Information systems are used in all functional areas of business such as • Finance and Accounting • Sales and Marketing • Manufacturing • Airline Industry • Investment Farms • Banks and Savings & Loan Companies • Transportation Industry • Healthcare Organizations • Publishing • Retail Companies • Utility Companies • Professional Services