table of contents 2. chapter 1: introduction to ... · by gitau g.k. , 1 table of contents 2....
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By Gitau G.K., 1
TABLE OF CONTENTS
2. CHAPTER 1: INTRODUCTION TO INFORMATION SYSTEM (IS) ............................................... 3
2.1. Definitions of key terminologies ............................................................................................................. 3
2.2. Framework of Information Systems Needed by Managerial End Users .................................. 5
2.3. Levels of management: ............................................................................................................................... 5
3. CHAPTER 2: INFORMATION SYSTEMS FOR OPERATIONS, MANAGEMENT AND
STRATEGIC ADVANTAGE .......................................................................................................................... 8
3.1. Importance of Information Systems ...................................................................................................... 8
3.2. Disadvantages of MIS ................................................................................................................................... 9
3.3. Function of MIS .............................................................................................................................................. 9
3.4. MIS Characteristics in General ............................................................................................................... 10
4. CHAPTER 3: SYSTEMS APPROACH TO PROBLEM SOLVING AND ITS APPLICATION IN
MANAGEMENT .......................................................................................................................................... 10
4.1. What is systems approach? ..................................................................................................................... 10
4.2. Understanding a Problem or Opportunity ........................................................................................ 11
4.3. Developing a Solution ................................................................................................................................ 12
4.4. Implementing a Solution .......................................................................................................................... 13
4.5. Applying the Systems Approach to Information Systems. .......................................................... 13
5. CHAPTER 4: INFORMATION SYSTEMS DEVELOPMENT .......................................................... 13
5.1. Systems investigations or planning ..................................................................................................... 14
5.2. Systems analysis .......................................................................................................................................... 14
5.3. Systems design ............................................................................................................................................. 14
5.4. Systems implementation .......................................................................................................................... 15
5.5. Post Implementation Review and Support ....................................................................................... 16
6. CHAPTER 5: COMPUTER HARDWARE .......................................................................................... 17
6.1. Definition ........................................................................................................................................................ 17
6.2. Input Devices ................................................................................................................................................ 17
6.3. Processor Unit .............................................................................................................................................. 17
6.4. Output devices .............................................................................................................................................. 17
6.5. Storage Devices ............................................................................................................................................ 18
6.6. Networking equipment ............................................................................................................................. 18
6.7. Types of Computers ................................................................................................................................... 18
7. CHAPTER 6: COMPUTER SOFTWARE ............................................................................................ 20
7.1. Types of software ........................................................................................................................................ 20
7.2. System Software .......................................................................................................................................... 20
7.3. Firmware ........................................................................................................................................................ 20
7.4. Operating systems ...................................................................................................................................... 20
7.5. Utility programs........................................................................................................................................... 21
7.6. Application software .................................................................................................................................. 21
7.7. Application Packages Used to Support End-User Computing .................................................... 21
8. CHAPTER 7: DATA RESOURCE MANAGEMENT .......................................................................... 22
8.1. Transaction Processing Systems ........................................................................................................... 22
8.2. Transactions Processing Methods ........................................................................................................ 22
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8.3. Objectives of Transaction Processing Systems ................................................................................ 23
13.1. Transaction Processing Activities ...................................................................................................... 24
13.2. Transaction Processing Cycle .............................................................................................................. 24
13.3. Traditional Transaction Processing Systems ................................................................................ 26
20. CHAPTER 8: DATABASE MANAGEMENT SYSTEMS ................................................................ 26
20.1. Introduction of Database Management Systems.......................................................................... 26
20.2. Types of Databases .................................................................................................................................. 27
20.3. Flat-file Database Model or Relational Database: ........................................................................ 28
20.4. Hierarchical Database Model: .............................................................................................................. 28
20.5. Network Database Model ...................................................................................................................... 29
21. CHAPTER 8: TELECOMMUNICATIONS AND NETWORKS ..................................................... 30
21.1. Types of networks - according to area coverage.......................................................................... 30
21.2. Local Area Networks (LAN) versus Wide Area Networks (WAN) ........................................ 30
21.3. Types of Network Environment in an Organization ................................................................... 31
21.4. Internet ......................................................................................................................................................... 31
21.5. Internet Resources (or Services) ........................................................................................................ 31
21.6. Internet Protocol (IP) Addressing ..................................................................................................... 33
21.7. Data Communication Channels ........................................................................................................... 33
21.8. Intranets versus Extranets.................................................................................................................... 34
21.9. SOCIAL MEDIA IN BUSINESS ............................................................................................................... 35
23. CHAPTER 9: E-COMMERCE ............................................................................................................. 38
23.1. Understanding E-commerce ................................................................................................................ 38
23.2. Types of E-commerce ............................................................................................................................. 39
23.3. Advantages of E-commerce .................................................................................................................. 40
23.4. Disadvantages of E-commerce ............................................................................................................ 41
23.5. Benefits of E-commerce ......................................................................................................................... 43
24. CHAPTER 10: CONTROLLING INFORMATION SYSTEMS ...................................................... 44
25.1. Threats to data........................................................................................................................................... 44
25.2. Administrative controls versus system controls ......................................................................... 44
25.3. Physical versus logical controls .......................................................................................................... 45
26.1. Examples of Data Security Controls .................................................................................................. 45
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1. CHAPTER 1: INTRODUCTION TO INFORMATION SYSTEM (IS)
1.1. Definitions of key terminologies
System is a collection of related components and has the interaction between them to
accomplish a common objective. System will have the following basic interacting components;
System Components/characteristics
1. Purpose / Goal : Mission or objective to accomplish
2. Components : Elements which is known as subsystem
3. Input : Raw materials that enter to the system
4. Output : Results or products/by products of the system
5. Processes : Manipulative functions that convert inputs to outputs
6. Feedback and control: This is an inbuilt mechanism for continuous measurement and
review of the status to ensure the system remains on track according to set standards of
performance
7. Border / Boundary/Interface : Boundary is the line in between internal and external
environment of the system. Interface is the link of interaction between internal and external
environment of the system
8. External environment: What is outside the boundary of the system
Virtually all systems are part of a larger system, called a supra-system and likewise, virtually
all systems can be decomposed into smaller systems, called subsystems. A system may also
be closed or open. A closed system is isolated from its external environment and it neither
influences nor is influenced by that external environment; e.g. a vacuum, a controlled
experiment, etc. However, business systems are usually open systems. They influence and
influenced by their external environments. A system may also be formal or informal. A formal
system is official and documented with clear standards and documents such as receipts, order
notes, etc. Informal systems on the other hand are not documented they are verbal and
include telephone conversations, observations and mental clues. Such information is easily
lost unless it is captured in a permanent record. Other systems include deterministic versus
probabilistic (stochastic), self organizing (adaptive) versus non adaptive, etc.
Properties of Information and Decision Making
Data versus Information
Data: Consists of facts, text, graphics and figure that have not been processed and
inadequate for user’s application.
Information: A processed data that is sorted, useful and valuable for particular user
The Characteristics of Valuable Information
1. Accurate
Information must be free from errors.
2. Complete
Information has to contain all the important facts as needed to perform the required
processing and what you want to know.
3. Relevant (Communicated to the right user)
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Information must be related to the desired performance or useful to what you’re trying to
do.
4. Timely
Information has to be delivered at the right time.
5. Up-to-date or current
Information is useful if it reflects the current state of affairs
6. Cost effective
Cost of producing information in a firm should not exceed the benefit/profit that is
obtained from it.
7. Simple or well presented to user (Understandable to user)
Information that has been presented should be easy to understand –format, language,
detail level, vocabulary, etc.
8. Security
Only authorized person is allowed to access the information.
9. Confidence of the source e.g. forex mean exchange rates from Central Bank, Billing Rates
from previous month data capture logs, etc.
10. Communicated through the right channel
Different users make audience to varied channels e.g. mass media, social media, circulars,
mobile SMS alerts, telephone calls, emails, websites, face to face, written print outs, etc.
Information System
Definition: A collection of related components and has the interaction between them to
capture data, process it and produce the useful output information to accomplish
an objective.
Functions of information system
1. Input : Facts or data from outside the system
2. Processing : Transform the data to information
3. Output : Information that need to be used outside the system
4. Storage : A place to store data for future reference
5. Communication: Transmitting and dissemination of data and information through carrier
media
Computer Based Information System (CBIS)
Information system can be categorized into TWO; manual and Computer Based
Information System (CBIS). Manual or non-computerized system involves a lot of paper
work and user memorization of transactions. Non-computerized is not efficient because it
consumes a lot of time to find, process and modify the information. It also involves
duplication, more data insecurity and expensive. The CBIS eliminates all these weaknesses.
Roles and function of Computer Based Information System (CBIS)
Same as functions of an information systems, but additional CBIS are adopted for their
strategic advantages as covered in the importance of information systems or MIS.
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Components of CBIS :
1. Hardware : Hardware can be a single PC, a single main frame or networks of computers. It
also includes physical device to control the process of input and output like
keyboard, mouse and modem.
2. Software : Application program such as MS Office, Macromedia Dreamweaver and
etc.
3. People : Those who are involved with the system or using the system.
4. Data : Consists of facts, text, graphic, figure that can be recorded and that have
specific meaning.
5. Procedures : Instructions and rules to design and use information system
1.2. Framework of Information Systems Needed by Managerial End Users
End-users are the various users of Information Systems in the User departments. They can be
divided into three managerial end-user levels; operational management (first line managers),
tactical management (middle management) and the strategic management (top management).
Each of these managerial end users have differing informational needs dependent on the
nature of decisions and the level of planning attended to. A top manager is an upper-level
executive who guides and controls the overall activities of the organization. They are
responsible for the organization’s planning and developing its mission. They also determine
the firm’s strategy and its major policies. They are president, vice president, chief executive
officer, and members of the Board. Middle managers develop tactical plans, policies, and they
coordinate and supervise the activities of first-line managers. Titles at this level are division
manager, department head, plant manager, and operating manager. A first-line manager is a
manager who coordinates and supervises the activities of operating employees. They solve
day-to-day problems. Common titles for first-line manager include office manager, supervisor,
foreman, shift leaders, etc. Operating employees are not managers. They represent the work
force of organization.
1.3. Levels of management:
This refers to a pyramid model of the hierarchy of command in an organization. It is a three
tier view that conceptualizes management into strategic management, tactical management
and operational management.
The middle level management or tactical management comprises of horizontally into areas of
management. The most common areas are Administration and Finance, Marketing, Human
Resources, Information Technology, Research and Development, etc.
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In view of this organization structure ISs can be categorized according to that
management pyramid;
1. Operational Management (First Line Managers) requires Information Systems capable
of capturing transactional data from day to day operations. This called a Transaction
Processing System (TPS). The system should be capable of processing volume of data
captured in organizations transactions such as sales system, inventory system, students’
registration system. The data collected by these systems may be deposited into the
organizations Database Management System (DBMS) to be used as raw materials for the
Middle Level (tactical managers) Management Information System (MIS). A TPS may be real
time or batch based. Real time means data collected is processed immediately for immediate
output to aid in a current transaction, e.g. Bank Cashier Terminal Processing System. A batch
processing system means data collected is collated together so that it is processed at one go
later in the day or another specified time. These systems are easy to automate for they
support structured decisions, for example a Bank Cashier Terminal Processing System can be
replaced by an ATM. With the power of Internet TPS systems can also be based on Internet
infrastructure. An organization can operate a private Internet based TPS where employees
can access the organization’s private Internet accessible database to conduct transactions
from different branches of the organization such as bank branches network. This called an
intranet. These systems can also be extended further to allow customers and suppliers to for
example process their orders or track their supplies. Such as a system is called extranet.
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Various organizations are also embracing IS systems to provide unique services such as e-
commerce, e-ticketing, e-banking, etc.
2. Tactical management: The data collected in the organization DBMS becomes the raw
material for producing information for middle level managers. These databases are
interrogated by an interface called Management Information System (MIS). Generally
speaking an MIS is a system for providing information for managers. It is therefore a general
term for an IS. However, specifically MIS refers to an IS for providing information for the
middle level of management. It is therefore based on a DBMS that collects data from
organization TPS to provide special information depending on the functional management
targeted. At this level these MIS may also be called Decision Support Systems (DSS) because
the information provided to these tactical managers is meant to aid them in decision making.
A DSS is a system that provides information to aid tactical managers in the decision making
roles. The decisions supported are semi-structured. They use partial rules automated in the
computer system and partly on the manager’s wisdom and experience. Information used in a
DSS is taken from TPS and MIS, in addition to this external information may also be
incorporated. With all the information gathered, managers can use models contained within a
DSS to look at what might happen if they do certain things. This is a bit like an IF statement
that can be changed, scenarios or goal seeking. If a change is made to the figures then the
output is increased or decreased.
3. Strategic Management: This is the top most level of management. Their use of
information system may not be frequent. However, they need information on exceptional
issues of the organization on demand or on the need to know. At some low frequency they
may also need regular reports. Such reports are highly summarized and very graphical to
allow quick view of the organization at any one point. Executive information systems are used
for this purpose. They have very user friendly features such as a dashboard with graphics
represent various parameters of interest and allow the CEO to drill down for information and
interrogate the report for any finer details they may need. The nature of decisions made by
this management is unstructured. They have no clear rules but largely depend on the wisdom
and experience of the decision maker. For example a decision on whether to forge a business
alliance, how to raise capital, etc. Strategic management may also use Expert Systems to be
able to make decisions in areas where they have no adequate expertise. An Expert System is a
knowledge-based computer program or artificial intelligence containing expert domain
knowledge about objects, events, situations and courses of action, which emulates the process
of human experts in the particular domain. In other words, expert system is a computer
application that performs a task that would otherwise be performed by a human expert.
Expert systems are extensively used in the medical field. For example, there are expert
systems that can diagnose human illness, and MYCIN is one of the popular expert systems in
medical field. However, Expert Systems can also be used at other levels of management.
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2. CHAPTER 2: INFORMATION SYSTEMS FOR OPERATIONS, MANAGEMENT AND
STRATEGIC ADVANTAGE
2.1. Importance of Information Systems
Information systems in an organization are important to all levels of management to
enable managers perform their functions of planning, directing (commanding and
leadership), organizing, controlling and coordinating. They are important at operational in
execution of specific tasks or transaction/application in the day to day operations of a
business, such as accounting, sales, front office automation, etc. However, an organization
may identify unique application area that would make the firm stand out among its peers
or possibly to offer a service far from ordinary as compared to competitors who are doing
business as usual. Such a unique application of IS by a firm is called strategic application.
This is an application that gives the firm an edge above the competitors. It is either using
IS to provide a unique service or using IS to provide better services so as to achieve a
competitive advantage or edge. For example providing online ticketing, an extranet to
allow customers to book a hotel room online, a Just In Time (JIT) system to order a
customized luxury car, etc. Ways to gain strategic advantage using IS includes;
1. Cost reduction: A firm can gain profit margin by using IS to reduce number of staff and
reduce production time for its products
2. Raise barriers to new entrants: Where an organization provides advanced system
more than competitors, new entrants may find it difficult to penetrate, e.g. Safaricom 3G
internet while competitors are on GPRS or EDGE technology
3. Establish high switching cost: Where a client has so expensive equipments from the
current supplier and the technology cannot migrate to another supplier the customers would
remain to avoid migration or switching cost; e.g. switching from one accounting package to
another provider may require flesh data entry and expensive data conversion.
4. Creating new products or services: A company can gain strategic positioning by using
IS to provide a unique service e.g. Mobile Banking, 24-hour loan processing, etc.
5. Differentiate products or services: An organization may attract customers by
convincing them that their product is different from their customers through unique
interaction and product features by use of IS.
6. Enhance products or services: Even with current products the company can enhance
them such as longer business hours for customers by reducing after office batch processing of
daily transactions by use of real time transaction processing system.
7. Establish business alliances: The business can enhance customer experience and
product provision by packaging products with other companies, e.g. a holiday package that
includes air ticket, hotel, tours and travel, etc by use of IS system inter-linked with other
service providers or service advantage smart cards.
8. Locking customers and locking out competitors: Making it impractical for customers or
suppliers to deal with competitors for example MPESA agency requirements that your
partners do not brand with competitors products
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In general, beside these strategic uses of IS, MIS systems are specifically important at
various of levels of management to aid in transaction processing and to support
management decisions at various levels.
2.2. Advantages and Disadvantages of MIS
An MIS provides the following advantages.
1. It Facilitates planning: MIS improves the quality of plants by providing relevant
information for sound decision - making. Due to increase in the size and complexity of
organizations, managers have lost personal contact with the scene of operations.
2. In Minimizes information overload: MIS change the larger amount of data in to
summarized form and there by avoids the confusion which may arise when managers are
flooded with detailed facts.
3. MIS Encourages Decentralization: Decentralization of authority is possibly when there is
a system for monitoring operations at lower levels. MIS is successfully used for measuring
performance and making necessary change in the organizational plans and procedures.
4. It brings Co ordination: MIS facilities integration of specialized activities by keeping
each department aware of the problem and requirements of other departments. It
connects all decision centres in the organization.
5. It makes control easier: MIS serves as a link between managerial planning and control. It
improves the ability of management to evaluate and improve performance. The used
computers has increased the data processing and storage capabilities and reduced the
cost.
6. MIS assembles, process, stores, Retrieves, evaluates and disseminates the information.
7. Creates strategic advantage for an organization such as cost reduction, product
differentiation, etc with end result being higher profitability
The following are some of the disadvantages of MIS:
MIS is highly sensitive: MIS is very helpful in maintaining logging information of an
authorized user. This needs to monitor constantly.
Quality of outputs is governed by quality of inputs.
MIS budgeting: There is difficulty in maintaining indirect cost and overheads.
Capturing the actual cost needs to have an accrual system having true costs of outputs
which is extremely difficult. It has been difficult to establish definite findings.
MIS is not flexible to update itself for the changes.
The changes in the decision of top level management decrease its effectiveness.
Information accountability is based on the qualitative factors and the factors like
morality, confidence or attitude will not have any base.
2.3. Function of MIS
The main functions of MIS are:
Data Processing: Gathering, storage, transmission, processing and getting output of the
data. Making the data into information is a major task.
Prediction: Prediction is based on the historical data by applying the prior knowledge
methodology by using modern mathematics, statistics or simulation. Prior knowledge
varies on the application and with different departments.
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Planning: Planning reports are produced based on the enterprise restriction on the
companies and helps in planning each functional department to work reasonably.
Control: MIS helps in monitoring the operations and inspects the plans. It consists of
differences between operation and plan with respect to data belonging to different
functional department. It controls the timely action of the plans and analyzes the
reasons for the differences between the operations and plan. Thereby helps managers
to accomplish their decision making task successfully.
Assistance: It stores the related problems and frequently used information to apply
them for relative economic benefits. Through this it can derive instant answers of the
related problem.
2.4. MIS Characteristics in General
It supports transaction handling and record keeping (Transaction Processing Systems
and office automation systems).
It can be integrated with organization wide Database Management System (DBMS)
which supports centrally all major functional areas of an organization. This will receive
data collected from various operation’s Transaction Processing Systems (TPS)
From the DBMS various managers can interrogate the MIS to obtain information for
operational, tactical, and strategic level managers with east access to timely
It supports decision –making function especially acting as a data source for the middle
level Decision Support Systems (DSS) for aiding them in their semi-structured
decisions.
It is flexible which is needed to adapt to the changing needs of the organization.
It promotes security system by providing only access to authorized users.
MIS not only provides statistical and data analysis but also works on the basis on MBO
(management by objectives). MIS is successfully used for measuring performance and
making necessary change in the organizational plans and procedures. It helps to build
relevant and measurable objectives, monitor results, and send alerts.
3. CHAPTER 3: SYSTEMS APPROACH TO PROBLEM SOLVING AND ITS APPLICATION IN
MANAGEMENT
3.1. What is systems approach?
The systems approach is a problem solving technique that stresses a systematic process of
problem solving. Problems and opportunities are viewed in a systems context. Studying a
problem and formulating a solution becomes an organized system of interrelated
activities;
1. Define a problem or opportunity in a systems context.
2. Gather data describing the problem or opportunity
3. Identify alternative solutions.
4. Evaluate each alternative solution.
5. Select the best solution.
6. Implement the selected solution.
7. Evaluate the success of the implemented solution.
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These activities and steps of the systems approach can be grouped into a smaller number
of stages of problem solving:
a. Understanding a problem or opportunity (steps 1 and 2).
b. Developing a solution (steps 3 through 5).
c. Implementing a solution (steps 6 and 7).
3.2. Understanding a Problem or Opportunity
To solve a problem or pursue an opportunity requires a thorough understanding of the
situation at hand. This implies viewing the problem/opportunity in a systematic fashion
within a systems context.
1. Defining Problems and Opportunities. Problems and opportunities must be identified
when using the systems approach. Symptoms must be separated from problems.
Symptoms are merely signals of underlying problems.
a. A problem is a basic condition that causes undesirable results.
b. An opportunity is a condition that presents the potential for desirable results.
2. Gathering Data and Information. Data and information need to be captured to gain
sufficient background into the problem or opportunity situation. In the context of a
business systems problem, information gathering may encompass the following:
a. Interviews with employees, customers, and managers.
b. Questionnaires to appropriate end users in the organization.
c. Personal observation or involvement in business operations.
d. Examination of documents, reports, procedures manuals, and other
documentation.
e. Inspecting accounting and management reports to collect operating statistics,
cost data, and performance results.
f. Development, manipulation, and observation of a model of the business
operations or systems affected by the problem or opportunity.
Identifying Current Organizational Systems. In the systems approach, a problem or
opportunity must be viewed in a systems context. To understand a problem or
opportunity, you must understand both the organizational systems and environmental
systems in which a problem or opportunity arises. You must have a systemic view of
the situation.
a. A Business as a System. A business faced with a problem or opportunity needs
to be viewed as an organizational system operating within a business
environment. This concept helps us isolate and better understand how a
problem or opportunity may be related to the basic system components of a
business.
b. Environmental Systems. A business is a subsystem of society and is surrounded
by other systems in the business environment. Proper interrelationships with
the economic, political, and social stakeholders within the environment should
be maintained. These stakeholders that interact with a business need to be
identified, to determine their effect on a problem or solution.
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c. Organizational Subsystems. Typically a business is subdivided into subdivisions
that compose the organizational subsystem.
i. These typically represent functional areas such as marketing,
manufacturing, and finance, but can also represent geographic areas,
product lines, distribution facilities, work groups, etc.
ii. Decomposition is the process of identifying the boundaries of
subsystems within a business and determining the relationships
between the subsystems. Those subsystems most affected by the
problem or opportunity under consideration need to be identified.
d. Relationships Between Systems. A black box approach aids systems
professionals in analyzing the relationships and interconnections between
subsystems within the firm. In other words, the processing component remains
a black box while inputs and outputs of subsystems are studied.
i. Coupling - the process of determining how tight the function of
subsystems are connected. e.g., JIT - requires a close association between
inventory control and manufacturing.
ii. Decoupling - the process of loosening the connections between systems.
e.g., E-Mail may loosen communications connections within the
organization. People can be more efficient by having differing avenues of
communication available to them.
e. Evaluating Selected Systems. To understand a problem and solve it, you should
try to determine if basic system functions are being properly performed. This
should be done within a systems context by looking at inputs, processing,
outputs, feedback, and control structures.
f. Determining Objectives, Standards, and Constraints - a systems approach must
determine firm objectives, identify standards, and recognize constraints.
3.3. Developing a Solution
Once you understand a problem or opportunity, you can develop an appropriate solution.
3. Designing Alternative Solutions. Jumping immediately from problem definition to a
single solution limits your options and robs you of the chance to consider the
advantages and disadvantages of several alternatives. Of course, having too many
alternatives can obscure the best solution. Alternative solutions may come from past
experience, advice of others, simulation of business operations models, and your own
intuition and ingenuity. The "doing nothing" option is also a valid alternative.
4. Evaluating Alternative Solutions. To identify the best solution, the proposed
alternatives need to be evaluated. The goal of evaluation is to determine how well each
alternative solution helps the firm and its selected subsystems meet their objectives.
a. Evaluation criteria - should reflect the firm's objectives and constraints.
b. Cost Benefit Analysis - Every legitimate solution will have some advantages or
benefits, and some disadvantages or costs. This process identifies the benefits
and costs associated with each alternative solution.
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i. Tangible costs - quantified costs such as Hardware, Software and Staff
Salaries.
ii. Intangible Costs - difficult to quantify such as Customer goodwill,
Employee morale caused by system errors and Installation/conversion
problems.
iii. Tangible Benefits - favorable results that the firm has attained such as
Decrease in payroll and Decrease in inventory carry.
iv. Intangible Benefits - hard to estimate and include better customer
service, and better delivery of customer request(s).
5. Selecting the Best Solution. Once all alternative solutions have been evaluated, they
can be compared to each other, and the "best" (most desirable) solution can be
selected. Since the solutions are compared based on multiple criteria (some of which
may be intangible), this selection is not always a simple process.
3.4. Implementing a Solution
6. Implement the selected solution. Once a solution has been selected, it must be
implemented. An implementation plan may have to be developed. A project
management effort may be required to supervise the implementation of large projects.
Typically, an implementation plan specifies the activities, resources, and timing needed
for proper implementation. This may include:
a. Types and sources of hardware and software.
b. Construction of physical facilities.
c. Hiring and training of personnel.
d. Start-up and operating procedures.
e. Conversion procedures and timetables.
7. Post implementation Review (Evaluate the success of the implemented solution). The
focus of the post implementation review is to determine if the implemented solution
has indeed helped the firm and selected subsystems meet their system objectives. If
not, the systems approach assumes you will cycle back to a previous step and make
another attempt to find a workable solution.
3.5. Applying the Systems Approach to Information Systems.
A variety of information systems development methodologies tailor the systems
approach to the process of developing information systems solutions to business
problems. A firm may experience difficulties in applying the systems process to IS due
to: Lack of User Acceptance due to Departmental/unit and/or emotional conflicts, and
the Rapidly changing environmental conditions.
4. CHAPTER 4: INFORMATION SYSTEMS DEVELOPMENT
Systems Development Life Cycle (SDLC) or sometimes just Systems Life Cycle (SLC) an
Information Systems Development process, used by a systems analyst to develop information
systems of high quality that meet or exceeds customer expectations, within time and cost
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estimates, works effectively and efficiently in the current and planned information technology
infrastructure, and is cheap to maintain and cost-effective to enhance. SDLC is a systematic
approach to problem solving and is composed of several phases, each comprised of multiple
steps: systems investigation (systems planning), systems analysis, systems design, systems
implementation and post implementation support and maintenance. Due to this sequencing of
phases it is also referred to as the waterfall model.
4.1. Systems investigations or planning
Systems investigations or planning are triggered by a user request. It may be initiated by
user in the user department or an external environment entity such as government, supplier
or customer or a new technology change that demands overhaul of systems, etc. When this
occurs a feasibility study should be conducted to determine the extent of the problem –
whether the problem really exists, its extent and what happen if the problem is not tackled.
The feasibility study aims to establish whether the problem should actually be solved. One
conclusion might be that the problem is too expensive to solve or it is not worthy, or there is
no adequate technical capacity to solve it. A decision may be made to buy, lease or outsource
or not to buy all together. Areas of feasibility include;
1. Financial feasibility: This aims to establish what are the financial costs for solving the
problem and what are the benefits (cost benefit analysis) of solving it.
2. Technical feasibility: Does the necessary technical capacity exist to solve the problem,
can it be hired or procured?
3. Operational feasibility: Can the system work in the organization given existing
systems?
4. Other feasibility may include social, environmental, political, etc.
4.2. Systems analysis
Systems analysis involves establishing the requirements for solving the problem; such as
what technology will be required, what are the financial costs or budget, when to implement
or deliver the solution, etc. The completion of this exercise is marked by a SYSTEMS
REQUIREMENTS document. This document will act as the invitation for bidders or Request
for Quotations (RFQ) to suppliers. The systems analysis may be done by a systems analyst
from the IT department or by an external consultant.
4.3. Systems design
Once the suppliers bid for supply of the system detailed in the SYSTEMS REQUIREMENTS in
the Invitation to Bid, the suppliers will detail their proposed solutions in line with the systems
requirements. This document is called SYSTEMS SPECIFICATIONS. The systems specification
document details what systems the supplier proposes to deliver to meet the systems
requirements. The specifications should meet or exceed the systems specifications and should
be within the budget of approved by the procurement committee. As an aid to communication
the supplier may provide a prototype either a demo version of the system or schematic
drawing of the workings of the system. Once the procurement team is satisfied with the
By Gitau G.K., 15
bidder’s proposal they will draw the purchase order which will act as the contract document
for the supplier. It will outline the Terms of Reference for the contractor and will be used to
evaluate the final system that will be delivered. The system specifications act as the
BLUEPRINT for the systems design. Further design includes both the logical and the physical
design. The logical design is the development of specifications while physical design is the
building and testing of the system upon approval by the client.
4.4. Systems implementation
Systems implementation refers to the delivery of the ordered system when the system goes
live. This is completed by a project team comprising of members from the contractor and the
client department. In order to enhance success and acceptance of the final system, this stage
beside the other stages must include representatives for the affected user departments as well
as the IT department who will be charged with maintaining the system. For continuity the
system could be implemented on phased implementation, pilot change over direct changeover
or parallel changeover. Phased implementation may involve piecemeal implementation over a
duration of time, pilot change over may involve scaled down number of departments to
ensure it works before it is implemented full scale. Direct changeover is when the system is
implemented over the entire organization at one go. It is very risky in case the system fails but
is quick and cheap. Such changeover should be done during low season of the system usage.
Parallel changeover is when both the old and the new systems are run simultaneously until
the team is confident the users have learnt and the system is satisfactory for live running. A
team of data conversion may be required to convert data from the old system to the new
system. The new system is signed off upon confirmation that it has met the systems
requirements and that the contractor has met the specifications. System implementation also
involves user training. The system delivered should include systems documentations which
become an aid to training and future support. They include systems technical manuals, user
manuals and operational/procedure manuals. During this stage if the contractor encounters
change in specifications they must apply for change request authorization from the
procurement team of the organization.
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4.5. Post Implementation Review and Support
Post Implementation Review and Support
after the system has gone live and the contractor has signed off. Whether the contractor is
legally bound to continue providing support services after delivery depends on the
specifications of the Warranty document and any Service Level Agreements (SLA) established.
For continuity the organization should sign for Scheduled Preventive Maintenance (SPM).
Further to strengthen the internal capacity for support the organization should establish a
help desk or an information centre. A help desk is a team of ICT support who have been
trained on the new system whereas an information centre is a centre that provides
information to a user’s community on frequently asked questions. It may be an office or even
a web based FAQ. The supplier may also complement support by online chats, email support
and telephone support and to some extent site visits.
Post Implementation Review and Support
Post Implementation Review and Support refers to the services that the users may request
after the system has gone live and the contractor has signed off. Whether the contractor is
continue providing support services after delivery depends on the
specifications of the Warranty document and any Service Level Agreements (SLA) established.
For continuity the organization should sign for Scheduled Preventive Maintenance (SPM).
strengthen the internal capacity for support the organization should establish a
help desk or an information centre. A help desk is a team of ICT support who have been
trained on the new system whereas an information centre is a centre that provides
mation to a user’s community on frequently asked questions. It may be an office or even
a web based FAQ. The supplier may also complement support by online chats, email support
and telephone support and to some extent site visits.
16
refers to the services that the users may request
after the system has gone live and the contractor has signed off. Whether the contractor is
continue providing support services after delivery depends on the
specifications of the Warranty document and any Service Level Agreements (SLA) established.
For continuity the organization should sign for Scheduled Preventive Maintenance (SPM).
strengthen the internal capacity for support the organization should establish a
help desk or an information centre. A help desk is a team of ICT support who have been
trained on the new system whereas an information centre is a centre that provides
mation to a user’s community on frequently asked questions. It may be an office or even
a web based FAQ. The supplier may also complement support by online chats, email support
By Gitau G.K., 17
5. CHAPTER 5: COMPUTER HARDWARE
5.1. Definition
Hardware refers to the computer’s physical equipment. They include input devices, the
processor, output devices, and storage devices. Hardware can also include data
communication equipment, also called networking equipment.
5.2. Input Devices
Input Devices are used to enter raw data into the system. They include devices for manual
human input (keyboard, mouse, trackball, touch screens) and dde - source data automation
(interactive touch screens, magnetic card readers, optical recognition, and voice recognition).
Data may be stored for batch processing or processed immediately. Data may be in a form
acceptable for another machine or usable by people
5.3. Processor Unit
Processor Unit includes primary storage and the CPU (control unit and arithmetic/logic unit).
The control unit includes instruction registers and control circuits. The control unit
(along with the main memory) makes possible the stored program concept of
computer operations. The control unit interprets program instructions; control circuits
are activated to complete operations and results are stored. The arithmetic/logic unit
(ALU) performs all mathematical computations and logical comparisons. Data are
transferred as needed from main memory to the arithmetic/logic unit for manipulation
and then returned to main memory for additional processing or output.
The CPU physically is a microprocessor that includes the control unit and
arithmetic/logic unit mounted on a silicon chip. A multiprocessing operation mode is
possible when a computer contains more than one microprocessor.
5.4. Output devices
Output devices produce results of processed data and relay it to the user. The output format
can be a hard copy or softcopy. Softcopy output that can be viewed on a monitor or heard over
speakers while a hardcopy is a physical or tangible output printed or plotted on paper.
Softcopy output devices include; visual display units and audio output devices. There are
several varieties of display units (also called monitors or computer screen). These include
CRT monitors and TFT monitors. CRT monitors are huge and bulky. They consume a lot of
office space and electricity and the technology has been phased out. TFT monitors are smaller
and flat. They consume less office space and are available in different sizes and technologies.
Hardcopy devices include printers and plotters. Plotters produce their output by drawing.
They are mainly used in architectural drawings and with scientific equipments. However,
printers have wide application in business for printing out office documents. Printers can be
impact or non-impact printers. Impact printers use a hammer mechanism and are therefore
noisy but suitable for producing duplicate or multiple documents. Impact printers are
represented by dot matrix printers. They are called dot matrix printers because they produce
their output in form of matrix of dots by the hammering mechanism and print ribbon. Such
By Gitau G.K., 18
printers are commonly used by banks and other businesses to produce customer statements
and other transaction documents such as deposit or withdrawal slips in a bank (as POS
printers, also called E-POS (Electronic Point of Sale) printers). Non-impact printers on the
other hand are noiseless and use a variety of technologies to produce their print output. Non-
impact printers include inkjet printers, laserjet printers, thermal printers and bubblejet
printers. Inkjet printers produce their output by use of liquid ink released in small jets from a
cartridge. They are the cheapest options for small offices and home use especially for color
printing or multi-functions such as copying, printing and scanning. However, ink cartridges
print yield is low - some modifications to use continuous ink supply system (CISS) are
available that provide an external ink reservoirs for refilling is available, to create high yield
and economical output in a commercial setup. Laserjet printers user laser beams, light
sensitive magnetic drum and powdered ink called toner cartridge, with heat roller mechanism
to produce glossy and high quality printout. They are expensive but best choice for quality
office documents both in monochrome printing and color printing. They may also be available
in multi-function including copy, print and scan functions. Thermal printers produce their
print by use of heat sensitive paper and thermal transfer unit. They are commonly used as
POS (or E-POS) printers in retail outlets, and ETR printers. However, their print copy fades
with time as exposed to light. Bubblejet printers on the other hand are supplied in small
portable printers for off-the road print out. They produce their copy by use of inkjet bubbles.
Usually the do not need external power for they can be powered by the USB port of the
computer or laptop. They are not suitable for commercial application.
5.5. Storage Devices
Storage Devices are divided into primary and secondary storages also called auxiliary storage.
Primary storage includes Read Only Memory (ROM) and Random Access Memory (RAM).
ROM contains the manufacturer’s firm ware but the RAM provides the computer’s working
memory. The secondary storage is used for data that are saved for future processing.
Processed data are saved using unique file names to identify the information or program.
Common devices include magnetic disk, optical disc, DVD, USB flash drive, and magnetic tape.
5.6. Networking equipment
Data Communication and Networking equipment: These are devices used for interconnecting
of computers and data communication. They include modems, network switches, network
cards, routers, bridges, LANs and WANs, Wi-Fi, etc.
5.7. Types of Computers
A computer is a programmable electronic device that receives data to process it using some
set of instructions to produce information. There are two basic categories of computers
namely, analog and digital computers, but a third category can also be available by combing
the two types to create a hybrid computer. Analog computers are computing or tabulating
devices that provide continuous measurement of a quantity or physical matter such as an
analog clock, analog microwave, analog weigh scale, etc. These equipment have limited
application in business and are actually not included in the day to day conversation about
computers. The digital computer is represent data and signal in a two state electrical circuit;
By Gitau G.K., 19
OFF or ON which is translated into two digits 0 or 1 which are referred to as Binary Digits
(abbreviated as BITS). This is the modern meaning of a computer device.
Therefore, today’s computer systems fall into one of the following categories:
1. Supercomputers
2. Mainframe Computers
3. Minicomputers or Midrange Computers
4. Microcomputers
Supercomputers:
• Most powerful computer made
• Physically they are the largest
• Process huge amounts of data
• Can house thousands of processors
• Relatively rare because of size and cost.
• Used by large corporations, universities and government agencies.
Mainframe Computers
• Used in large organizations like insurance companies, and banks where many people
need frequent access to the same data, which is usually organized into one or more
databases.
• Airlines, Government Agencies (Federal Aviation Administration and Census Bureau)
track information about large populations, individual tax records, payroll, and more.
• Are being used more and more as specialized servers on the World Wide Web,
enabling companies to offer secure transactions with customers over the Internet.
• Many enterprises are connecting personal computers and personal computer
networks to their mainframe system. This allows access to the mainframe data and
services and also enables them to take advantage of local storage and processing, as
well as other features of the PC or network.
• Houses an enormous volume of data (literally billions of records)
• Mainframe can occupy entire rooms or even an entire floor of a high-rise building.
Special air conditioning systems are used to keep them cool and on raised floors to
accommodate all the wiring needed to connect the system.
Minicomputers
• Abbreviated version of mainframe computers.
• The capabilities are somewhere between mainframes and PC.
• Minicomputers can handle much more input and output than personal computers can.
• Designed for a single user, most are designed to handle multiple terminals.
• Can be used as a server for PC’s
Microcomputers
• The microcomputer is “the computer for the masses” and personal computing
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• Microcomputers include the following types: Desktop models, including workstations,
notebook computers (laptops), Network Computers (netbooks), Mini laptops and
Handheld personal computers, PDAs
6. CHAPTER 6: COMPUTER SOFTWARE
6.1. Types of software
Computer software refers to the set of instructions that are used by the computer for its data
processing. Software can be categorized into systems software and application software.
6.2. System Software
System software: refers to a collection of software required by the computer to perform its
own internal process. This software includes firmware, operating systems and utility
programs.
6.3. Firmware
These are native programs that are loaded to the computer at the point of manufacture and
are embedded as a part of the computer basic configuration in Read Only Memory (ROM) chip
or its variance equivalent. These programs perform Basic Input Output Systems (BIOS)
functions such as performing Power-On Self Test (POST) or Pre-Operational Self Test when
the computer is powered on. In absence of an operating system the firmware will load and
await further instructions of the system administrator on the location of the operating system.
They may also include various system drivers and hardware equipment drivers supplied by
equipment manufacturer.
6.4. Operating systems
Operating systems: refers to programs that support the basic functions or operations of a
computer system. Examples of operating systems include Ms Windows, UNX, Mac Os, Novell
Netware, etc. These functions including;
i. Booting a computer (i.e. preparing a computer for use by initializing its hardware and
software resources)
ii. Providing user interface: or the human computer interface that enables interaction of a
computer user with the computer system e.g. Windows Graphical User Interface (GUI) using
Windows Icon Menu and Pointer (WIMP) interactions
iii. Managing memory of the computer: It allocates how the computer memory is utilized
during processing
iv. Hardware and software interface: The operating system provides a platform to load
hardware drivers and help various hardware added to the computer system to interact with
the software
v. System resources management (Interrupt request handling): these include all the
resources of the computer apart from the memory management. Each resource in the
computer is assigned a unique identity code called IRQ that identifies the priority given to that
resource when it calls for attention from the processor
vi. Error handling: during processing the operating system responds to errors that may
arise such as output device missing, memory overflow, etc.
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vii. Security management: The operating system includes access controls and
authentication mechanism to ensure the system maintains its integrity and data reliability
and is secure from unauthorized access
6.5. Utility programs
These are programs that expand the capacity of the computer by providing other additional
services. They include software developers’ tools such as programming languages –
compilers, debuggers, linkers, translators, and assemblers; systems tools and accessories
such as antivirus, backup and restore, media players, CD burning software, Adobe Reader,
Games, etc.
6.6. Application software
These are user programs that have been developed to deliver a specific functionality for what
a user does in his or her day to day operations. This means the application software required
by the computer depends on who the user is. Accountants need accounting software,
statisticians need statistical packages, school needs a school management system, etc. Further
application software is categorized according to nature of its distribution. If the package is
available as off-the-shelf then it is referred to as application package, examples include Ms
Office packages, QuickBooks, SPSS, etc. If it is tailor-made by in-house development of hired or
internal team of software developers it is called be-spoke software. Application packages are
cheap for they are mass produced but may not be adequate for unique functionalities of an
organization. However, be-spoke software is expensive and many times the developers may
choose to package is to sell to other similar organizations.
Depending on the terms of sale, software may also be commercial or open-source.
Commercial software is available for sale and cannot be duplicated or altered without the
authority of the owner. Such acts of illegal reproduction are referred to as piracy. However,
open-source software is free to use and to modify. However, owners of the software may
change for some special rights on services such as installation and support. Over the Internet
a number of software can also be downloaded as freeware, shareware, demo versions or
commercial software. Freeware are absolutely free to use. Shareware are copyrighted and
shared free of charge but a donation may be expected or some limitations may exist if you use
it regularly, demo versions are commercial softwares given as trial version to use for a period
of time or with limited functionality or with a penalty of carrying developers banner ads.
However, one is expected to purchase the commercial version after working with the demo
version.
6.7. Application Packages Used to Support End-User Computing
These refer to a number of application packages used for office automation and by knowledge
workers. They can be classified into;
i. Word processors
ii. Spreadsheets
iii. Databases
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iv. Presentation graphics
v. Desktop Publishing packages
vi. Photo and Video editors
vii. Statistical packages
viii. Accounting packages, etc.
7. CHAPTER 7: DATA RESOURCE MANAGEMENT
7.1. Transaction Processing Systems
A transaction processing system performs routine, day-to-day operation of a business that
helps a company add value to its products and services.
� It requires a large amount of input data and produces a large amount of output without
requiring sophisticated or complex processing.
� Examples are, order entry, inventory control, payroll, accounts payable, accounts
receivable, and general ledger.
� An automated TPS consists of all the components of a CBIS such as hardware, software,
databases, telecommunication, people, and procedures.
� A transaction processing system serves the foundation of other systems, such as MIS, DSS,
and AI/ES. These systems handle less input and output, but more sophisticated and complex
processing.
7.2. Transactions Processing Methods
Transactions are commonly performed in batch or on-line.
Batch Processing
� With batch processing, business transactions are accumulated over a period of time and
prepared for processing as a single unit or batch.
� There is some delay between the occurrence of an event and the processing of the event.
� Examples are, payroll processing, billing, accounts payable, and accounts receivable.
On-Line/Real-Time Processing (OLTP)
� With this form of data processing, each transaction is processed immediately, without the
delay of accumulating transactions into a batch.
� As soon as the input data is available, a program performs the necessary processing and
updates the records affected by the transaction.
� Data in an OLTP always reflect the current status.
On-Line Entry with Delayed Processing
� This type of transaction is a compromise between the batch and on-line processing.
� With this type of transaction, orders or transactions are entered into the computer system
when they occur, but they are not processed immediately.
� Example: A typical mail order system in which orders are accumulated and then it is
forwarded to a warehouse for shipment.
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Integrated Transaction Processing System
� A firm may integrate all its business activities into a single transaction processing system.
It involves inventory control, order entry, shipping, invoice processing, accounts receivable,
purchase orders, accounts payable, payroll processing, general ledger, and budget.
7.3. Objectives of Transaction Processing Systems
Because of the importance of the transaction processing system, organizations expect their
TPSs to accomplish a number of specific objectives.
Process data generated by and about transactions
� The primary objective of any TPS is to capture, process, and store transactions and to
produce a variety of documents related to routine business activities.
� Processing orders, purchasing materials, controlling inventory, billing customers, and
paying suppliers, result in transactions that are processed by a TPS.
Ensure data and information integrity and accuracy
� One objective of any TPS is error-free data input and processing.
� Rules must be in placed and implemented in the programming to ensure data accuracy
before it is stored.
� Another of a TPS is to ensure that all data and information stored in the file or database
are accurate, current, and appropriate.
Produce timely documents and reports
� Transaction processing systems produce routine documents such as order slip,
shipping order, invoice, purchase order, inventory status report, inventory on-hand report,
customer list, paycheck, and so on.
� These documents need to be produced in timely manner to perform routine business
transactions.
Increase labor efficiency
� Transaction processing system can substantially reduce routine clerical and other
labor requirements.
� An automated scanning device in a retail store can substantially reduce the item
processing time. This not only increases checkout efficiency but also a reduction of the
manual workforce.
Help provide increased and enhanced service
� TPSs can provide services faster than humans, thus increasing the number and
varieties of services it can offer to customers.
� Examples are, automated university registration system, automated billing inquiries,
automated bank account transfers, and so on.
Help build and maintain customer loyalty
� TPS can be used to build customer loyalty.
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� Examples are, ease of use of the system, easy access of customer account, timely
reporting of information, automated telephone answering and faxing, and web-based
information processing, can help satisfy customers.
Achieve competitive advantage
� A competitive advantage provides a significant and long-term benefit for the
organization.
� For example, UPS and FedEx systems keep track of a package at each stage of its
traversal. Customers can use a tracking number to find the latest status of the package.
� Some of the ways that companies can achieve competitive advantage are mentioned
below.
7.4. Transaction Processing Activities
All transaction processing systems performs a common set of basic data processing activities.
TPSs capture and process data that describe fundamental business transactions. This data is
used to update databases and to produce a variety of reports.
7.5. Transaction Processing Cycle
The business data goes through a transaction processing cycle that includes: Data Collection,
Data Editing, Data Correction, Data Manipulation, Data Storage and Document Production
Data Collection
� The process of capturing and gathering all data necessary to complete transactions is
called data collection.
� It can be manual such as completing a purchase order by hand. It can also be automated
via special input device such as scanners and terminals.
� Data collection begins with a transaction (such as customer order) and results in the
origination of data that is input to the transaction processing system.
� Data should be captured at its source and it should be recorded accurately, in a timely
fashion, with minimal manual effort, and in a manner that can be directly entered to the
computer rather than entering using keys.
� Automatic data collection is termed as source data automation. An example is the use of
scanning device at the grocery store to read UPC code and hence the price of an item. Another
example is an employee badge used as a time card when going in and out of an office building.
Data Editing
� An important step in processing data is to check for validity and completeness of data.
Controls must be placed in the data-entry form.
� For example, quantity and cost must be numeric and names must be alphabetic.
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Data Correction
� A data that is not entered properly needs to be entered correctly.
� Data correction involves reentering miskeyed or misscanned data in the data entry point.
� For example, a UPC code not found in the retail store checkout, is given a special code to
complete the transaction for an item.
Data Manipulation
� The process of performing calculations and other data transformations is termed data
manipulation.
� Examples are, sorting data, summarizing data, finding price of five items, calculating
employee weekly pay, and so on.
Data Storage
� Involves updating one or more database tables or files with new transactions.
� For example, inserting new customer information, updating customer demographics,
updating inventory transactions, creating new student registration, and so on.
Document Production
� TPSs produce important business documents such as sales receipts, order entry list,
customer list, invoices, purchase orders, inventory on-hand report, paychecks, and so on.
� Documents can be hard copy paper report or displayed on computer screen.
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7.6. Traditional Transaction Processing Systems
Traditional transaction processing systems include order processing, purchasing, and
accounting. Systems that support these processing are mentioned in the table. We describe
these systems in detail in the following.
Accounts Receivable
• A system that manages the cash flow of the company by keeping track of the money paid
by the customers and other companies for goods and services sold to them.
• The major output of the accounts receivable system is monthly bills or statement sent to
the customers. See below.
• Transactions created by accounts receivable system updates general ledger accounts.
• It is also used to generate reports for “aged” accounts, for which payments are overdue by
30, 60, or 90 days. Reminder notices are created for these accounts.
• An important function of the accounting system is to identify bad credit risks. Thus
companies routinely checks customer credit before accepting a new order.
Accounts Payable
• A system that manages the cash flow of the company by keeping track of the money paid
to the company on purchases and services received and produces reports such as Accounts
Receivable Aging Report.
Payroll
• Generates payroll checks and stubs, as well as W-2 statements at the end of the year
for tax purposes.
• This can be outsourced to an external company. In this case, the employee file (with
weekly hours and pay rate) is sent to the company and the company deliver the checks.
• In addition, payroll processing produces employee journal containing various earning
factors as shown in the figure.
General Ledger
• A system that produces a detailed list of business transactions designed to automate
financial reporting and data entry.
8. CHAPTER 8: DATABASE MANAGEMENT SYSTEMS
8.1. Introduction of Database Management Systems
The guiding principles of TPS systems are: to create data that is current, up-to-date, accurate,
and consistent. To achieve these goals, these systems employ Database Management System
(DBMS) software. A DBMS is a system for managing a collection of related records. It allows
the data to be stored and managed in a single file and thus facilitates the centralized retrieval
of the data. It collects, stores and manipulates data (data input screens; Edit/Deletion of data
screen) and disseminates information (executes queries and creates reports). The DBMS also
allows the user to query the database and retrieve the data specific to his/her needs. One of
the primary advantages of DBMS is its ability to limit and control redundant data in multiple
By Gitau G.K., 27
systems. Instead of the same data field being repeated in different files, the information
appears just once. Another advantage of DBMS is that it improves data integrity. Updates are
made only once, and all changes are made for that data element no matter where it appears.
8.2. Types of Databases
Manual System - Customer Ledger Cards; Check Book Green Ledger
File-Processing System – Majority of Transaction Processing Systems
Microcomputer DBMS - Single-User Database System
Client/Server DBMS - Multiple-Users on the same LAN
Internet DBMS - Multiple-Users from different locations using Web to share data
Distributed DBMS - Multiple-Servers sharing the data processing load (bank)
Object-Oriented DBMS - processing/data management of objects (new engineering)
What are some of the reasons for implementing a database system?
• Improve Data Integrity
• Elimination of duplication of data
• Data sharing
• Centralizing file maintenance
• Ease of creating information
• Improve data consistency
• Improve data accessibility and responsiveness
What are some of the PROBLEMS with moving from a manual to a computerized DBMS?
o Special personnel
o Cost (New Hardware/Software)
o Conversion Costs (training, duplication of systems)
o Problems with change
Manual System -
Why? Unknown business rules or data needs; very small effort
Problem? Data sharing; Accuracy of data dependent on user
File-Processing System -
Why? Linear data; used for a single purpose
Problem? Inability to create relationships with other data
Microcomputer DBMS - Single-User Database System
Why? Accounting data; relational data; improve data integrity
Problem? Time; level of effort; some business rules can't be modeled; changing
environment; New developments in third-party software
Client/Server DBMS -
Why? Multiple-Users need to share/input data
Problem? Concurrency control issues; data locking Yes/No
Internet DBMS -
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Why? Users can share/input data from any terminal with Web access; no special
software needed; multi-site businesses allow customers and vendors to interface
directly
Problem? Harder to control; other people in your data; data corruptions; not all
business functions on Web; combining data for reporting
Distributed DBMS - sharing the data processing load
Why? Business cannot allow system downtime; banks, airlines
Problem? Cost in hardware, software (requires middleware) and staff
Object-Oriented DBMS -
Why? Intensive object processing (heat-loss photos)
Problem? Difficult to use; limited supply of experts; not cost effective to move from
existing system
The other way of classifying types of databases is by their data model. A data model is the
intangible form in which data is stored. It is kind of like the structure of a database, but data
models are only a theoretical idea; they are abstract concepts that you cannot touch. Data
models are used to describe how the data is stored and retrieved in a database. Now, we will
discuss a few of the types of data models.
8.3. Flat-file Database Model or Relational Database:
The flat-file data model is generally used by the old paper-based databases. In this system,
data was stored in numerous files. However, the files were not linked, so often, data might be
repeated in more than one file. This caused everything to be quite redundant. The original
"database," flat-file databases inspired scientists to find a way to link files so that they would
not be repetitive. Example is Ms Access.
8.4. Hierarchical Database Model:
The hierarchical database model took steps to get rid of the repetitiveness of the flat-file
database model, but although it was somewhat successful, it did not completely succeed.
There is still a level of redundant data in hierarchical databases.
A hierarchical database consists of a series of databases that are grouped together to
resemble a family tree:
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Each of the boxes in the diagram represents one database. The top database in the
hierarchical model is called the "parent" database. The databases under it are called "child"
databases. One "parent" can have many "children," but a "child" can only have one "parent."
The child databases are all connected to the parent database via links called "pointers."
To get to a child database in the hierarchical database model, you must first go through the
parent database, and then through the levels above it. If you have Microsoft Windows, you
might realize that this is how Windows Explorer works. First, you open up a file- usually it's
"My Computer." Under "My Computer," you can then choose from a list of drives.
Notice in the diagram above how the child databases on the same level are not connected.
This presents a problem in the hierarchical database model and makes searching for data
extremely difficult. Another problem is that data cannot be entered into the child databases
until that field has been added to the parent database. This method was quite inefficient. Thus,
although the hierarchical database model reduced some repetitiveness of data, it also
presented many new problems. Hierarchical structures were widely used in the first
mainframe database management systems. However, owing to their restrictions, they often
cannot be used to relate structures that exist in the real world.
8.5. Network Database Model
The network database model was designed to help resolve some of the hierarchical database
model's problems. For one thing, it allowed for links between the child databases. This no only
reduces the chance of redundant data, but also makes searching for data much easier!
Another improvement of the network database model over the hierarchical model is that
while in the hierarchical model a child database can only have one parent, in the network
model, a child database can have more than one parent! However, the network database
model still had its share of problems. For one thing, it was difficult to execute and maintain.
Only database experts could successfully use these databases. It was difficult for the general
public to use network databases for real-life applications.
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One type of network DBMS is a distributed database. A distributed database is a database that
is under the control of a central database management system (DBMS) in which storage
devices are not all attached to a common CPU. It may be stored in multiple computers located
in the same physical location, or may be dispersed over a network of interconnected
computers. Collections of data (e.g. in a database) can be distributed across multiple physical
locations. A distributed database is distributed into separate partitions/fragments. Each
partition/fragment of a distributed database may be duplicated.
The other type of network database is one which is held centrally but can be accessed
simultaneously by many users remotely using a WAN or locally as part of a LAN.
9. CHAPTER 9: TELECOMMUNICATIONS AND NETWORKS
9.1. Types of networks - according to area coverage
A network occurs when two or more computers are connected together, allowing them to
share data and peripherals. A computer which is not connected to any other computer (not
part of a network) is known as a stand-alone computer.
There are two types of networks, these are:
• Local Area Networks (LANs)
• Wide Area Networks (WANs)
9.2. Local Area Networks (LAN) versus Wide Area Networks (WAN)
A Local area network is when a number of computers are connected together which are in
close proximity to each other, such as in an office building, a school or a home.
A Wide area network is when a number of computers are connected together which span a
large geographic area, such as a country or continent. WANs often connect multiple smaller
networks together. Typically a WAN consists of two or more Local Area Networks.
Advantages of Local Area Networks
There are several advantages to interconnecting computers in a network. These include:
• Sharing data and programs such as portable storage media and load it up in each
computer that required it.
• Sharing resources. Instead such as printers attached to each computer, you can attach
the peripheral to the network and it is then linked to each station on the network.
• Management. As everything will be saved on the file server, rather than on the hard disks
of each workstation, it means that centralised back-ups of files are available. It is also possible
to manage stations remotely
• Security. A username and password are needed to access the network, and different
levels of access can be provided to different users.
• Flexible access. You can use any station on the network to access your user space, you
are not restricted to the use of one computer.
• Electronic communication. You can use e-mail and chat systems to communicate with
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other network users (either individually or simultaneously). With e-mail you can send
electronic attachments.
• Workgroup computing. This is when many users are working on the same document
simultaneously.
Advantages of Wide Area Networks
Wide area networks have much of the same advantages of local area networks, however some
things like sharing peripherals are not practical (although possible) on a wide area network.
9.3. Types of Network Environment in an Organization
Each computer in the network is known as a workstation (or simply as a station), although
one station on the network will be designated as the file server. This computer will store all
the software that controls the network as well as any software and files that can be shared by
all the computers attached to the network. Generally the file server will be a more powerful
computer (faster processor, more RAM, greater backing storage capacity) than all the other
computers in the network. The stations which contact the server for access to files or shared
resources are known as clients. This network configuration is called a client/server
network.
9.4. Internet
The internet is a global public network of resources that is openly accessible to all. It can be
thought of as many smaller networks connected together.
9.5. Internet Resources (or Services)
The internet provides three main services:
• The World Wide Web, which gives access to remote databases through browsing or
searching
• Electronic mail, which provides one to one (or one to many) communication and
exchange of information
• File transfer, which makes it possible to send and receive large amounts of information.
It also provides several other services including:
• E-commerce
• On-line banking
• On-line shopping
• Chat and instant messaging
• Web logs
• Bulletin boards
• Discussion groups
• Streaming video
• Video conferencing
The World Wide Web (WWW) is a collection of information held in multimedia form on the
internet. This information is stored at locations known as web sites in the form of web
pages.
Browser
A browser is a program that allows a user to read and navigate web pages. The software also
allows pages to be saved or printed. It also stores a history of recently viewed pages, and can
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remember web page addresses using bookmarks. Two of the best known browsers are
Internet Explorer and Mozilla Firefox.
Web pages
A web page is a document that usually contains information in the form of text, images and
other multimedia types
Web pages are created using a special language known as HTML (hypertext mark-up
language).
Each web page is stored on a web server and is identified by its unique location (address),
commonly known as its URL (uniform resource locator). Here is an example of a URL:
HTTP://www.computing.com/int2/car.html
Hyperlinks
Some web pages will contain hyperlinks. Typically hyperlinks are used to connect web pages
(in the same or different sites) together. When a hyperlink is clicked, the connected web page
will be retrieved from its server and loaded into your browser.
Search engines
The internet contains millions of web pages on every subject imaginable. The best way to find
information is to use a search engine such as Google.
When you enter a search, you are really searching the database for words that match your
entry. Advanced searches can include operators such as AND or OR to help narrow the
search. The results of the search are placed on a web page that is composed of links and brief
extracts for the original web page. To visit the actual page all you have to do is click on the
hyperlink.
Electronic mail (e-mail) is the exchange of computer stored messages by telecommunication.
E-mail messages are usually encoded in ASCII text. However you can also send non-text files,
such as graphic images and sound files as attachments.
The protocol used to retrieve the webpage. Hypertext transfer protocol (HTTP) in this instance.
The domain name which specifies which server has the page. In this case: www.computing.com
The pathname which specifies where the actual page (car.html) is stored on the server.
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Many e-mail systems are now web-based. This means that a user can access their e-mail from
any computer that has a connection to the internet. The software used to access the e-mail
may vary, but the same basic principle and functions apply. The user logs onto an e-mail
server with a username and password, before access is granted. To send an e-mail message to
someone you must first have their e-mail address. This is the location of the server on the
internet where the person’s mailbox can be found. An example is given below.
The part before the ’@’ symbol is the local part of the address, which is usually the username
of the person on that server. The part after the ‘@’ symbol (ntlworld.com) is the domain
name, which is often the name of the host e-mail service. Together they make up the e-mail
address of the person to whom the message is being sent.
9.6. Internet Protocol (IP) Addressing
An Internet address or IP address is a digital code that identifies a computer (host) location
on the Internet or LAN. The current standard is IP address version 4 (IPv4), which is a 32 bit
long number represented in the form of four octets (eight-bit or one-byte fields) separated by
dots. Each octet is displayed as a decimal number in the range of 0-255. Examples of valid IP
addresses: 192.168.0.1, 205.245.172.72, 10.1.0.22, etc. An IP address on the Internet or in a
local network must be unique so network packets destined for the host with that address can
find it.
9.7. Data Communication Channels
Data communication channels or the transmission media is how the computers on the
network are connected to one another. In a local area network, the transmission media is
owned by the organisation that owns the LAN. As the stations are relatively close to one
another the stations within a LAN can be connected together using cables or wireless
technologies.
Cables
Cabling is the most common medium through which data is transmitted between stations and
devices in a Local Area Network. Network cables include Ethernet and fibre cables.
Wireless LANs
Instead of connecting network devices with cabling, some networks are wireless. These
networks use high frequency radio waves or infrared beams to communicate between the
network devices. Each station on the network will have a wireless network interface card or
network adapter that allows them to send and receive data wirelessly.
Wireless networks are ideal for places where it is difficult or impossible to install cables. They
are also used with portable or remote workstations. Wireless networks also have some
disadvantages in that they can be susceptible to electrical interference, they are slower than
most cabled technologies and security can also be an issue.
Wireless technologies include Infrared, Bluetooth and WiFi (Wireless Fidelity)
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Transmission
media
Twisted pair Coaxial cable Fibre optics wireless
Bandwidth 10 Mbit s-1 500 Mbit s-1 30 Gbit s-1 54 Mbit s-1
Geographical
spread
Small area – in a single building or a site linking buildings which are
in close proximity
Functions • Allows sharing of data files, applications and peripherals
• Can access work from any workstation on network
• Different levels of access can be granted
• Can communicate using e-mail, chat etc
Wide Area Networks
A Wide area network is when a number of computers are connected together which span a
large geographic area, such as a country or continent. WANs often connect multiple smaller
networks together. Typically a WAN consists of two or more Local Area Networks.
Advantages of Wide Area Networks
Wide area networks have much of the same advantages of local area networks, however some
things like sharing peripherals are not practical (although possible) on a wide area network.
Transmission media
Computers connected to a wide area network are often connected through existing public
networks, but they may also be connected through leased lines (permanent telephone
connection between two points). The transmission media used in wide area networks they
include microwave transmission, satellite links, radio and optical fibres.
Summary of WANs
Transmission
media
Fibre optics Microwave Satellite Radio
bandwidth 30 Gbit s-1 100 Mbit s-1 100 Mbit s-1 2 Mbit s-1
Geographical
spread
large area – spread throughout a country or the world
functions • Allows sharing of data files, applications and peripherals
• Can communicate using e-mail, chat and allows video conferencing
• E-commerce
• Entertainment
9.8. Intranets versus Extranets
INTRANETS
1. An intranet is a network inside an organization that uses Internet technologies (such as
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web browsers and servers, TCP/IP network protocols, HTML hypermedia document
publishing and databases, and so on) to provide an Internet-like environment within the
enterprise for information sharing, communications, collaboration, and the support of
business processes.
2. An intranet is protected by security measures such as passwords, encryption, and fire
walls, and thus can be accessed by authorized users throughout the Internet.
Intranet applications support communications and collaboration, web publishing, business
operations and management, and intranet management. These applications can be integrated
with existing IS resources and applications, and extended to customers, suppliers, and
business partners to create extranets.
EXTRANETS
Extranets are network links that use Internet technologies to interconnect the intranet of a
business with the intranets of its customers, suppliers, or other business partners. Companies
can:
1. Establish direct private network links between themselves, or create private secure
Internet links between them called virtual private networks.
2. Use the unsecured Internet as the extranet link between its intranet and consumers and
others, but rely on encryption of sensitive data and its own fire wall systems to provide
adequate security.
The business value of extranets is derived from several factors:
∃ The web browser technology of extranets makes customer and supplier access of
intranet resources a lot easier and faster than previous business methods
∃ Extranets enable a company to offer new kinds of interactive Web-enabled services to
their business partners. Thus, extranets are another way that a business can build
and strengthen strategic relationships with its customers and suppliers.
∃ Extranets enable and improve collaboration by a business with its customers and other
business partners.
∃ Extranets facilitate an online, interactive product development, marketing, and
customer- focused process that can bring better designed products to market faster.
9.9. SOCIAL MEDIA IN BUSINESS
Social media refers to online tools and services that allow a user to create public content. It
also allows for the easy sharing of information, including existing content.
Examples of social media include skype, facebook, twitters, blogs, wikis, podcasts, social
networks and Really Simple Syndication (RSS) Feeds, etc.
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Classification of Social Media Types
There are many different types of social media (Tredinnick 2006; Kaplan and Haenlein 2010).
These have been identified as blogs, collaborative projects, social networking sites, content
communities, virtual social networks, and virtual game worlds (Tredinnick 2006; Kaplan and
Haenlein 2010).
Blogs
Blogs are the oldest form of social media (Tredinnick 2006; Kaplan and Haenlein 2010). They
can be considered as a special type of website and when initially introduced they were seen as
a way for users to easily publish information to the web (Tredinnick 2006; Kaplan and
Haenlein 2010). They were used as public diaries by individuals, but have grown to other uses
such as providing general information about topics the author wishes to discuss (Tredinnick
2006; Kaplan and Haenlein 2010). Blogs have introduced tools that have allowed publishing
to the web to become easier and cheaper, as websites don't need to be created to start a blog
with tools such as Blogger and WordPress (Tredinnick 2006). A blog consists of the post
provided by the blogger, date-stamped in a chronological order, and a comments section
underneath for feedback and discussion on the post (Godwin-Jones 2003; Kaplan and
Haenlein 2010). Organisations can set up a blog to inform the public about its products and
services, or individuals within the organisation can blog. Microsoft's Larry Hryb, who is
Director of Programming for Xbox Live, uses the pseudo name Major Nelson for his blog and
he releases news about the Xbox and engages with the users that respond to his blog.
Micro-blogging
Micro-blogging is a new technology that has been derived from blogging (Java, Song et al.
2007; Holotescu and Grosseck 2008). Users are allowed to publish information online about
their activities, opinions and status, with a character limit on the message being between 140-
200 characters (Java, Song et al. 2007; Holotescu and Grosseck 2008). Users can post or view
comments through micro-blogging tools such as Twitter, Jaiku and Pownce (Java, Song et al.
2007). These tools can be accessed online, and through SMS messaging (Holotescu and
Grosseck 2008). This allows a user to create or read messages quickly and almost anywhere
they wish. This faster mode of communication is one of the main differences between micro-
blogging and blogging. A second difference is how frequently users can update such a short
message as less thought and time is required (Java, Song et al. 2007). Users are therefore
more likely to update their micro-blog more frequently than their general blog. Users also use
their micro-blog to draw people’s attention to posts they have made at their main blog,
providing a link to the post.
Collaborative Projects
Collaborative projects allow users to create content simultaneously (Kaplan and Haenlein
2010). There are different types of collaborative projects; wikis, like blogs, have been in
existence for a long time, and are intensely collaborative (Godwin-Jones 2003; Tredinnick
2006). The goal of wiki websites is to become a shared repository of knowledge, with the
knowledge base growing over time (Godwin-Jones 2003). Users can add, remove, and change
text-based content (Tredinnick 2006; Kaplan and Haenlein 2010). This puts the power of the
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information created with the users, rather than the information coming from a centralised
source (Tredinnick 2006). Wikipedia is an example of a wiki, where users can edit
information on any page, with all the content generated by users. Social bookmarking tools
are another type of collaborative project, where there is a collection of website links and
media content that is generated by groups of users (Kaplan and Haenlein 2010). These links
can be shared and accessed by any users. Delicious bookmarking is an example of social
bookmarking. An extension to these collaborative projects is social news tools. These are a
collection of news stories, or sometimes other links, and users vote the most popular ones up
and the unpopular ones down. This gives the users the power of choosing what links should
be immediately visible. Reddit and Digg are examples of such tools. The main idea of
collaborative projects is the input of many users can lead to a better outcome than an
individual on their own, with more credible and stable content being created (Godwin-Jones
2003; Tredinnick 2006; Kaplan and Haenlein 2010).
Social Networking Sites
Social networking sites are tools that allow users to create a personal profile of themselves
containing information such as their age, location and interests (Boyd and Ellison 2007;
Kaplan and Haenlein 2010). These personal profiles can than be connected with friends and
colleagues, where information can be shared between each other (Boyd and Ellison 2007;
Kaplan and Haenlein 2010). These connections create a network of users, where anyone
connected to the network can view everyone else’s profile, and therefore interact with them
(Boyd and Ellison 2007). Social networks have started attracting organisations, where they
can set up a profile, and communicate with users who add them to their network. Popular
social networking sites are Facebook, MySpace, and Bebo, which have attracted hundreds of
millions of users, who use the sites on a daily basis (Boyd and Ellison 2007; Kaplan and
Haenlein 2010).
Livecasting
“Livecasting is sharing live content with the intent of interacting with a live audience”
(Grantham 2009). While this concept has been in use for many years in organisations with
technologies like Group Decision Support Systems, it is with the introduction of online tools
that enable this concept to reach a much wider audience. Skype is one such tool that allows
users to have live conversations over the internet (Baset and Schulzrinne 2006). These
conversations can have many users interacting, and can include video conferencing. Other
forms include live podcasting, live blogging and videocasting (Gay, Cain et al. 2009).
Journalists are currently using these tools to provide live content to users (Gay, Cain et al.
2009). General users are also using the tools, with live videocasting websites such as
Ustream.tv and Justin.tv.
Content Communities
Content communities consist of users sharing media content between one another (Kaplan
and Haenlein 2010). There is a wide range of different media types, including text, photos,
videos, and presentations (Kaplan and Haenlein 2010). The content is uploaded by users to a
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specific website such as YouTube for videos, Flickr for photos and Slideshare for
presentations, and can be viewed and shared with other users. Some content websites have
had a negative impact on organisations as the content uploaded can be illegal, such as the
sharing of music (Kaplan and Haenlein 2010). But because of the size of the communities that
exist with these websites there is great opportunities for organisations to interact with users.
Virtual Worlds
Virtual worlds are 3D environments, where users appear as avatars that they design
themselves, and interact with other users like they would in real life (Kaplan and Haenlein
2010). Virtual worlds often have their own economies, where transactions occur between
users in the worlds own currency, and can be exchanged for real monetary value. Users
interact with each other as they would in real life, and communities are built from
relationships that are made e.g. Second Life.
10. CHAPTER 10: E-COMMERCE
10.1. Understanding E-commerce
E-Commerce is the ability of a company to have a dynamic presence on the Internet which
allowed the company to conduct its business electronically, in essence having an electronic
shop. Products can be advertised, sold and paid for all electronically without the need for it to
be processed by a human being.
Due to the vastness of the internet advertising and the website can be exposed to hundreds of
people around the world for almost nil cost and with information being able to be changed
almost instantly the site can always be kept up to date with all the latest products to match
with consumers demands.
The biggest advantage of E-Commerce is the ability to provide secure shopping transactions
via the internet and coupled with almost instant verification and validation of credit card
transactions. This has caused E-Commerce sites to explode as they cost much much less than a
store front in a town and has the ability to serve many more customers.
In the broad meaning electronic commerce (E-Commerce) is a means of conducting business
using one of many electronic methods, usually involving telephones, computers (or both).
E-Commerce is not about the technology itself, it is about doing business using the technology.
Electronic commerce, commonly known as e-commerce or eCommerce, consists of the buying
and selling of products or services over electronic systems such as the Internet and other
computer networks. The amount of trade conducted electronically has grown extraordinarily
with wide-spread Internet usage. A wide variety of commerce is conducted in this way,
spurring and drawing on innovations in electronic funds transfer, supply chain management,
Internet marketing, online transaction processing, electronic data interchange (EDI),
inventory management systems, and automated data collection systems. Modern electronic
commerce typically uses the World Wide Web at least at some point in the transaction's
lifecycle, although it can encompass a wider range of technologies such as e-mail as well.
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A large percentage of electronic commerce is conducted entirely electronically for virtual
items such as access to premium content on a website, but most electronic commerce involves
the transportation of physical items in some way. Online retailers are sometimes known as e-
tailers and online retail is sometimes known as e-tail. Almost all big retailers have electronic
commerce presence on the World Wide Web.
10.2. Types of E-commerce
E-commerce is the use of Internet and the web to transact business but when we focus on
digitally enabled commercial transactions between and among organizations and individuals
involving information systems under the control of the firm it takes the form of e-business.
Nowadays, 'e' is gaining momentum and most of the things if not everything is getting digitally
enabled. Thus, it becomes very important to clearly draw the line between different types of
commerce or business integrated with the 'e' factor.
There are mainly five types of e-commerce models:
1. Business to Consumer (B2C) - As the name suggests, it is the model involving businesses
and consumers. This is the most common e-commerce segment. In this model, online
businesses sell to individual consumers. When B2C started, it had a small share in the market
but after 1995 its growth was exponential. The basic concept behind this type is that the
online retailers and marketers can sell their products to the online consumer by using crystal
clear data which is made available via various online marketing tools. E.g. An online pharmacy
giving free medical consultation and selling medicines to patients is following B2C model.
2. Business to Business (B2B) - It is the largest form of e-commerce involving business of
trillions of dollars. In this form, the buyers and sellers are both business entities and do not
involve an individual consumer. It is like the manufacturer supplying goods to the retailer or
wholesaler. E.g. Dell sells computers and other related accessories online but it is does not
manufacture all those products. So, in order to sell those products, it first purchases them
from different businesses i.e. the manufacturers of those products.
3. Consumer to Consumer (C2C) - It facilitates the online transaction of goods or services
between two people. Though there is no visible intermediary involved but the parties cannot
carry out the transactions without the platform which is provided by the online market maker
such as eBay.
4. Peer to Peer (P2P) - Though it is an e-commerce model but it is more than that. It is a
technology in itself which helps people to directly share computer files and computer
resources without having to go through a central web server. To use this, both sides need to
install the required software so that they can communicate on the common platform. This
type of e-commerce has quite low revenue generation as from the beginning it has been
inclined to the free usage due to which it sometimes got entangled in cyber laws.
5. M-Commerce - It refers to the use of mobile devices for conducting the transactions. The
mobile device holders can contact each other and can conduct the business. Even the web
design and development companies optimize the websites to be viewed correctly on mobile
devices.
There are other types of e-commerce business models too like Business to Employee (B2E),
Government to Business (G2B) and Government to Citizen (G2C) but in essence they are
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similar to the above mentioned types. Moreover, it is not necessary that these models are
dedicatedly followed in all the online business types. It may be the case that a business is
using all the models or only one of them or some of them as per its needs.
10.3. Advantages of E-commerce
E commerce provides many new ways for businesses and consumers to communicate and
conduct business. There are a number of advantages and disadvantages of conducting
business in this manner.
Access to A Global Market: The internet allows companies to have access to a global market
rather than just the potential customers in the surrounding area of there physical location.
Cutting Out the Middleman: Businesses can sell direct to the consumer rather than having to
sell to a supplier and then them sell it on and make more profit.
A Level Playing Field: A small business can compete and show itself as a professional
company as much as large ones as budgets for setting up a professional site are relatively
cheap to the amount of return you can get on them.
Open 24 Hours: With fully automated payment and order processing systems your site need
never be closed even if your office/warehouse is. Orders can be dispatched during opening
hours while orders can be taken 24 hours a day.
Greater Customer Satisfaction: An E-Commerce website can be a powerful tool for building
customer loyalty if it is effective enough, a well designed website puts the customer in charge
of the relationship, they can buy, browse, ask for help or track the progress of order they have
placed where they want and when they want.
Reduced Marketing Costs: Internet advertisement being relatively cheap you can reach
many more people at a cheaper cost than using conventional advertising methods.
Better Customer Information: You can quickly and easy analyze your customers by location
and area as well as the products they buy as you will have to request a customers name and
address from them when processing a transaction.
Improved Security: Most E-Commerce suits offered by companies come with built in security
in the software and with the purchase of a dent SSL certificate and some good server
configurations you can safely know that all the details of your customers will be safe and
secure.
As a further thought, many businesses find it easier to buy and sell in U.S. dollars: it is
effectively the major currency of the Internet. In this context, global online customers can find
the concept of peculiar and unfamiliar currencies disconcerting. Some businesses find they
can achieve higher prices online and in US dollars than they would achieve selling locally or
nationally. Given that banks often charge fees for converting currencies, this is another reason
to investigate all of your (national and international) options for accepting and making online
payments.
In brief, it is useful to take a global view with regard the potential and organization of your e-
commerce activities, especially if you are targeting global customers.
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• A new marketing channel. The Internet provides an important new channel to sell to
consumers. Peterson et al. (1999) suggest that, as a marketing channel, the Internet has the
following characteristics:
• the ability to inexpensively store vast amounts of information at different virtual
locations
• the availability of powerful and inexpensive means of searching, organizing, and
disseminating such information
• interactivity and the ability to provide information on demand
• the ability to provide perceptual experiences that are far superior to a printed
catalogue, although not as rich as personal inspection
• the capability to serve as a transaction medium
• the ability to serve as a physical distribution medium for certain goods (e.g., software)
• relatively low entry and establishment costs for sellers
• no other existing marketing channel possesses all of these characteristics.
10.4. Disadvantages of E-commerce
Some disadvantages and constraints of e-commerce include the following.
• Time for delivery of physical products. It is possible to visit a local music store and
walk out with a compact disc or a bookstore and leave with a book. E-commerce is often used
to buy goods that are not available locally from businesses all over the world, meaning that
physical goods need to be delivered, which takes time and costs money. In some cases there
are ways around this, for example, with electronic files of the music or books being accessed
across the Internet, but then these are not physical goods.
• Physical product, supplier & delivery uncertainty. When you walk out of a shop with an
item, it's yours. You have it; you know what it is, where it is and how it looks. In some respects
e-commerce purchases are made on trust. This is because, firstly, not having had physical
access to the product, a purchase is made on an expectation of what that product is and its
condition. Secondly, because supplying businesses can be conducted across the world, it can
be uncertain whether or not they are legitimate businesses and are not just going to take your
money. It's pretty hard to knock on their door to complain or seek legal recourse! Thirdly,
even if the item is sent, it is easy to start wondering whether or not it will ever arrive.
• Perishable goods. Forget about ordering a single gelato ice cream from a shop in Rome!
Though specialized or refrigerated transport can be used, goods bought and sold via the
Internet tend to be durable and non-perishable: they need to survive the trip from the
supplier to the purchasing business or consumer. This shifts the bias for perishable and/or
non-durable goods back towards traditional supply chain arrangements, or towards relatively
more local e-commerce-based purchases, sales and distribution. In contrast, durable goods
can be traded from almost anyone to almost anyone else, sparking competition for lower
prices. In some cases this leads to disintermediation in which intermediary people and
businesses are bypassed by consumers and by other businesses that are seeking to purchase
more directly from manufacturers.
• Limited and selected sensory information. The Internet is an effective conduit for
visual and auditory information: seeing pictures, hearing sounds and reading text. However it
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does not allow full scope for our senses: we can see pictures of the flowers, but not smell their
fragrance; we can see pictures of a hammer, but not feel its weight or balance. Further, when
we pick up and inspect something, we choose what we look at and how we look at it. This is
not the case on the Internet. If we were looking at buying a car on the Internet, we would see
the pictures the seller had chosen for us to see but not the things we might look for if we were
able to see it in person. And, taking into account our other senses, we can't test the car to hear
the sound of the engine as it changes gears or sense the smell and feel of the leather seats.
There are many ways in which the Internet does not convey the richness of experiences of the
world. This lack of sensory information means that people are often much more comfortable
buying via the Internet generic goods - things that they have seen or experienced before and
about which there is little ambiguity, rather than unique or complex things.
• Returning goods. Returning goods online can be an area of difficulty. The uncertainties
surrounding the initial payment and delivery of goods can be exacerbated in this process. Will
the goods get back to their source? Who pays for the return postage? Will the refund be paid?
Will I be left with nothing? How long will it take? Contrast this with the offline experience of
returning goods to a shop.
• Privacy, security, payment, identity, contract. Many issues arise - privacy of
information, security of that information and payment details, whether or not payment details
(eg. credit card details) will be misused, identity theft, contract, and, whether we have one or
not, what laws and legal jurisdiction apply.
• Defined services & the unexpected. E-commerce is an effective means for managing the
transaction of known and established services, that is, things that are everyday. It is not
suitable for dealing with the new or unexpected. For example, a transport company used to
dealing with simple packages being asked if it can transport a hippopotamus, or a customer
asking for a book order to be wrapped in blue and white polka dot paper with a bow. Such
requests need human intervention to investigate and resolve.
• Personal service. Although some human interaction can be facilitated via the web, e-
commerce can not provide the richness of interaction provided by personal service. For most
businesses, e-commerce methods provide the equivalent of an information-rich counter
attendant rather than a salesperson. This also means that feedback about how people react to
product and service offerings also tends to be more granular or perhaps lost using e-
commerce approaches. If your only feedback is that people are (or are not) buying your
products or services online, this is inadequate for evaluating how to change or improve your
e-commerce strategies and/or product and service offerings. Successful business use of e-
commerce typically involves strategies for gaining and applying customer feedback. This
helps businesses to understand, anticipate and meet changing online customer needs and
preferences, which is critical because of the comparatively rapid rate of ongoing Internet-
based change.
• Size and number of transactions. E-commerce is most often conducted using credit
card facilities for payments, and as a result very small and very large transactions tend not to
be conducted online. The size of transactions is also impacted by the economics of
transporting physical goods. For example, any benefits or conveniences of buying a box of
pens online from a US-based business tend to be eclipsed by the cost of having to pay for them
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to be delivered to you in Australia. The delivery costs also mean that buying individual items
from a range of different overseas businesses is significantly more expensive than buying all
of the goods from one overseas business because the goods can be packaged and shipped
together.
• Some business processes are difficult to be implemented through electronic commerce.
• Return-on-investment is difficult to apply to electronic commerce.
• Businesses face cultural and legal obstacles to conducting electronic commerce.
10.5. Benefits of E-commerce
E-Commerce is one of the most important facets of the Internet to have emerged in the recent
times. Ecommerce or electronic commerce involves carrying out business over the Internet
with the assistance of computers, which are linked to each other forming a network. To be
specific ecommerce would be buying and selling of goods and services and transfer of funds
through digital communications.
The benefits of Ecommerce:
• Ecommerce allows people to carry out businesses without the barriers of time or
distance. One can log on to the Internet at any point of time, be it day or night and purchase or
sell anything one desires at a single click of the mouse.
• The direct cost-of-sale for an order taken from a web site is lower than through
traditional means (retail, paper based), as there is no human interaction during the on-line
electronic purchase order process. Also, electronic selling virtually eliminates processing
errors, as well as being faster and more convenient for the visitor.
• Ecommerce is ideal for niche products. Customers for such products are usually few.
But in the vast market place i.e. the Internet, even niche products could generate viable
volumes.
• Another important benefit of Ecommerce is that it is the cheapest means of doing
business.
• The day-to-day pressures of the marketplace have played their part in reducing the
opportunities for companies to invest in improving their competitive position. A mature
market, increased competitions have all reduced the amount of money available to invest. If
the selling price cannot be increased and the manufactured cost cannot be decreased then the
difference can be in the way the business is carried out. Ecommerce has provided the solution
by decimating the costs, which are incurred.
• From the buyer’s perspective also ecommerce offers a lot of tangible advantages.
1. Reduction in buyer’s sorting out time.
2. Better buyer decisions
3. Less time is spent in resolving invoice and order discrepancies.
4. Increased opportunities for buying alternative products.
• The strategic benefit of making a business ‘ecommerce enabled’, is that it helps reduce
the delivery time, labor cost and the cost incurred in the following areas:
1. Document preparation
2. Error detection and correction
3. Reconciliation
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4. Mail preparation
5. Telephone calling
6. Data entry
7. Overtime
8. Supervision expenses
• Operational benefits of e commerce include reducing both the time and personnel
required to complete business processes, and reducing strain on other resources. It’s because
of all these advantages that one can harness the power of ecommerce and convert a business
to e-business by using powerful turnkey ecommerce solutions made available by e-business
solution providers.
11. CHAPTER 11: CONTROLLING INFORMATION SYSTEMS
Data security and controls refers to various threats to data and the counter measures
taken to ensure that data is not lost, altered illegally or accessed by unauthorized persons.
Although data does not show on the balance sheet as an asset, many companies are totally
reliant on the information stored on their PC’s, Laptops and Networks. Electronic data
processing involves processing large volumes of data with little or no human intervention.
It also concentrated in small storage media that can be easily stolen or misplaced.
Computer Based Information Systems are also often connect on the Internet such that
unknown persons can remotely connect to an organization's computers without been
noted physically.
Here we look at some of the issues to consider when reviewing the security of your computer
systems, and some of the compliance issues surrounding data security and data protection.
11.1. Threats to data
As earlier identified due to the nature of electronic data it can face 3 types of threats;
- Loss of data (system unavailability): Possibly due to theft, corruption by virus or system
malfunction, power failure, Internet disconnection, etc.
- Unauthorized alteration or accidental alteration (loss of integrity): Such data although may
not be said to be lost, the contents are no longer reliable. So the data has lost its integrity.
-Unauthorized access (loss of confidentiality): When data is accessed by unauthorized users
such as eavesdroppers, hackers and industrial espionage, the company may lose the benefit of
its trade secrets. Many times employees are source of this threat and so persons should be
limited to the data that concern the alone and audit trails can be used to track what employees
do in their computer systems.
11.2. Administrative controls versus system controls
Administrative controls refers to data security controls that are implemented through the
organization administrative framework. It involves policies and procedures about processing
data; such as segregation of duties, insurance, fire and anti-burglary, authorization of
processing, work ethics, and any other practices that enhance safety and security of an
information system.
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System controls on the other refers to data security control measures that are in-built into the
computer system to ensure correct input, correct processing, correct output and security of
data stored. Such controls become a part of the computer system design.
11.3. Physical versus logical controls
The controls needed for information systems performance and security, the legal and
ethical implications of the control of computer crime and other societal impacts of
information systems.
Although data does not show on the balance sheet as an asset, many companies are totally
reliant on the information stored on their PC’s, Laptops and Networks.
Here we look at some of the issues to consider when reviewing the security of your computer
systems, and some of the compliance issues surrounding data security and data protection.
11.4. Examples of Data Security Controls
Passwords
Passwords are one of the measures which can be used to implement access controls.
However, to be at all effective they should:
be relatively long (i.e. 8 characters or more)
contain a mixture of alpha, numeric and other characters (such as &^”)
not be the same for all applications
be changed regularly
be removed or changed when an employee leaves.
Data backup and restore
Data backup is an essential process for security and needs to be undertaken on a regular
basis. There are a number of points to consider.
Data file locations
In a network environment some data files might be stored on the server and other data files
stored on local drives. In which case separate backups may be required for both the server
and one or more PC’s.
Backup strategy
There is likely to be a need for two parallel backup procedures; one to cover a complete
systems backup and another to cover the backing up of individual applications’ data files.
Complete systems backup
On a network some form of server backup software should be used to take a complete copy of
the network drive(s). This can normally be set to run overnight. However, someone will need
to be given responsibility for these procedures -
Key areas to consider include: training in how to use the backup software, alter backup
schedules and change backup file criteria
The person responsible needs to be able to: adapt the backup criteria as new applications are
added interpret backup logs and react to any errors notified restore data from backup media
maintain a regular log of backups and where these are stored.
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Finally, be aware that some backup utilities only take a mirror image of the hard disc. In this
case, the whole of the hard disc has to be restored even if there is a problem with just one file
or just one folder.
Applications backup
Many accounting and payroll packages have their own backup routines. It is a good idea to use
these (as well as full server backup) on a regular basis, and always just before period end, or
pay period end, update routines.
Local PCs
Remember that some users will have applications data files exclusively on their local drives
(such as payroll data for example) and these will all require their own regular backup regime.
Backup media
There are about half a dozen different types of backup media available – from the writable CD
capable of storing up to 1gb, through the DVD reader/writer (5gb) up to the mighty external
hard drives (1000gb). Most server backups will use either use tape cartridges or CD/DVD
reader/writers. For more temporary forms of backup, a USB memory stick/pen (1gb) might
be considered.
Backup frequency
A cycle of backups should be retained for a period of time (probably going back at least 12
months – but see Backup retention below). Overwriting the same backup disc/tape/cd/dvd
day after day is not advised.
Backup retention
Backups should be stored in a variety of locations. Obviously, the safest place is off-site.
Physical backup media can be stored in a separate location, whilst some firms may rent disc
space on a service provider’s server, to backup files to.
Issues such as how long certain type of records, accounting records for example, need to be
kept for, should be borne in mind.
Backup media degradation/decomposition
Backup media degrades and the data decomposes over a period of time.
DVD’s are particularly sensitive to light (i.e. they are photosensitive) for example, so ensure
that they are stored in a dark environment.
RW media is noted as being particularly prone to degradation, and should not be relied upon
for long-term storage.
Backups should be checked on a regular basis for signs of digital decomposition.
Restoring data
As with backup, there are a number of issues to consider.
Total systems restore. This can be a complex procedure in a network environment and may
require specialist network engineers to provide assistance.
Application restore. We recommended above (see Applications backup) a separate cycle of
backups to cover individual applications. If it is necessary to restore the whole application
from these backups, then the restore utility within the package concerned needs to be
used and the correct backup media loaded.
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Individual data file(s) restore. These are generally less complex, but nevertheless care is
needed. If the required data files are on the server backup then the restore utility will need
to be used, the correct backup media loaded and the file or files to be restored identified.
Virus/Spam protection
The prevalence of e-mail viruses and unsolicited spam means that software is required to
filter these items out of the system. This software will require regular updating, along with all
relevant on-going software security patches that need to be applied to the operating and
applications software. Additional network security in the form of firewall software is also
required to protect the network from unauthorised access and potential network attacks.
Employees
All employees should know and understand the firms’ security procedures and the
consequences of abusing these. You might wish to refer to our factsheet which sets out a
model internet and e-mail access policy. Staff dealing with personal data also require training
in the principles of data protection and good information handling practices
Compliance issues
Most businesses process personal data to a greater or lesser degree. If this is the case, then
notification under the Data Protection Act is required. That will then mean on-going
compliance with the principles of information handling and information security. We can help
you with this process to ensure compliance.
Control and Management Issues
Transaction processing systems are the backbone of any organization’s information systems.
Business Resumption Planning
• It is the process of anticipating and providing for disasters. A disaster can be a flood,
fire, earthquake, intentional damage, labor unrest or erasure of an important file.
• Focus on maintaining the integrity of the corporation information and keeping the
information system running until normal operations can be resumed.
• Identify potential problems and prepare for the disaster.
Disaster Recovery
• The implementation of the business resumption plan.
• The primary tools are backups for hardware, software, databases, telecommunication,
and personnel.
• Keep a backup copy of software and database to a remote location in a safe, secure,
fireproof, and temperature and humidity controlled environment.
• Always train backup personnel in case employees leave the company.
Transaction Processing System Audit
• Auditing a TPS system, is an attempt to answer three basic questions:
• Does the system meet the business need for which it is developed?
• What procedures and controls have been established?
• Are the procedures and controls being properly used?
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• An internal audit is conducted by employees of the organization and an external audit is
conducted by an outside firm.
• The auditors inspects all programs, documents, control techniques, the disaster plan,
insurance protection, fire protection, and other system management concerns such as
efficiency and effectiveness of the disk and tape library.
The audit trail allows the auditors to trace any out from the computer system back to its
source documents.