INFORMATION SYSTEMS OF FIRM

I/ GENERAL INTRODUCTION OF INFORMATION SYSTEMS :

1/ Definition of Information Systems (IS) :
- An information systems is a group of data sets that ensures that business operates smoothly,
embracing change, and helping companies achieve their goal. The dictionary defines an IS as a
set of interrelated components that work together to collect, process, store and disseminate
information to support decision-making. The information system is incomplete without the
support of information technology (IT) systems.
- An information system is related to how technology is used to fulfil the needs of- individuals,
groups or organizations. In the digital era that we are in, the importance of information systems
is increasing because it standardizes the process of passing, collecting, storing, and accessing
information or data for individuals or businesses.
2/ Components of Information Systems
1. Hardware :
- This is the physical component of the technology. It includes computers, hard disks,
keyboards, iPads, etc. The hardware cost has decreased rapidly while its speed and
storage capacity has increased significantly. However, the impact of the use of hardware
on the environment is a huge concern today. Nowadays, storage services are offered from
the cloud, which can be accessed from telecommunications networks.
2. Software :
- The system software is an operating system that manages the hardware, program files,
and other resources while offering the user to control the PC using GUI.
- Application software is designed to manage particular tasks by the users. In short,
system software makes the hardware usable while application software handles specific
tasks.
- Large companies may use licensed applications which are developed and managed by
software development companies to handle their specific needs. The software can be
proprietary and open source, available on the web for free use
- Examples : Microsoft Excel, Microsoft windows.
3. Data :
- Data is a collection of facts and is useless by themselves, but when collected and
organized together, it can be very powerful for business operations. Businesses collect all
the data and use it to make decisions that can be analyzed for the effectiveness of the
business operations.
4. Telecommunications :
- Networks resources refer to the telecommunication networks like the intranet, extranet
and the internet.
- These resources facilitate the flow of information in the organization.
 - Networks consists of both the physical devices such as networks cards, routers, hubs
and cables and software such as operating systems, web servers, data servers and
application servers.
- Telecommunications networks consist of computers, communications processors, and
other devices interconnected by communications media and controlled by software.
Networks include communication media, and Network Support.
5. Human Resources :
- It is associated with the manpower required to run and manage the system. People are
the end user of the information system, end-user use information produced for their own
purpose, the main purpose of the information system is to benefit the end user. The end
user can be accountants, engineers, salespersons, customers, clerks, or managers etc.
People are also responsible to develop and operate information systems. They include
systems analysts, computer operators, programmers, and other clerical IS personnel, and
managerial techniques.

3/ Types of information systems :

A FOUR LEVEL OF HIERARCHY

The first level represents transaction processing systems for workers. The second level represents
management information systems for middle managers. The third level represents decision
support systems for senior managers. The fourth level represents executive information systems
for executives.
1. Transaction Processing Systems ( TSS ) :
 Definition :
o Transaction processing systems are at the most foundational and basic level of
information systems for a business organization.
o Serve operational managers and staff .
o Transaction processing system meaning refers to an information processing
system that processes all transactions taking place within the business. Such
transactions include modification, collection, and retrieval of transaction data. A
TPS is highly consistent, efficient, and dependable. It is the same system that
online businesses utilize for e-commerce.
 A TPS has the following four components :
o Inputs: Inputs are original requests for payments or products outside parties send
to an organization’s TPS.
Examples : inputs include bills, coupons, custom orders, and invoices.
o Output: Outputs are the documents a TPS generates after it processes all inputs,
for example, the receipts stored by companies in their records. Such documents
help validate transactions and offer crucial reference details for tax and multiple
official purposes.
o Storage: A TPS’s storage component is where organizations keep their output
and input data. Some businesses store the documents in a database. This
component ensures the security, accessibility, and organization of all documents
for late use.
o Processing System: The processing system goes through every input and
establishes a useful output, for example, a receipt. It helps outline the input data
and defines what the outputs must be. One must remember that the processing
time varies depending on the type of TPS an organization uses.
 Some crucial features of a TPS:
o Controlled Access
o Connection with the external environment
o Fast response
o Inflexibility
o Reliability
o Distribution of details to other systems
 Advantages of Transaction processing system :
o Productivity
o Fast
o Low cost
o Large data
o Use anywhere
o Error recovery
o Easy to use
 Disadvantages :
 o Setup cost
o Incompatible
o Overload problem
o High internet
o Standard format
 Bottom Line:
o The transaction processing system (TPS) records the data from everyday
operations throughout every division or department in the organization. Each
division/department is tied together through the TPS to provide useful
information to management levels throughout the company.
2. Management information systems ( MIS )
 Definition :
o MIS being the second level of the information system serves the middle
management. The system provides middle managers reports on firm’s current
performance, based on data from TPS. This information is used to monitor,
control the business and predict future performance. Indeed, the basic
transaction data from TPS is compressed and usually presented in reports that
are produced in a regular schedule. It also provides answers to routine questions
with predefined procedure for answering them. The system also has little
analytical capability. Indeed, most MIS use simple routines such as summarizes
and comparisons, as opposed to sophisticated mathematical models or statistical
techniques.
 Components :
o People: These are the system users who utilize it to keep track of daily business
transactions. The users have typically educated professionals, such as human
resource managers and accountants.
o Business procedures: These are generally accepted best practices that instruct
users and every other component on how to operate effectively. Users,
consultants, and other people create business procedures.
o Data: The daily business transactions that were documented. Data is gathered
for banks via transactions like deposits and withdrawals.
o Hardware: Computers, printers, networking equipment, and other items make up
hardware. The hardware provides the ability to process data. Additionally,
networking and printing capabilities are provided.
o Software: These are applications that use hardware to function. System software
and applications software are the two main divisions of the software. The
operating system is referred to as system software. Applications software
describes specialized software used to carry out business operations.

 Some types of management information system (MIS)

o Management Reporting System
 o Process Control Systems
o Sales and marketing systems
o Inventory control system
o Accounting and Finance systems
o Human resources
 Advantages :
o Facilitates planning
o Minimizes Information Overload
o MIS Encourages Decentralization
o Brings Coordination
o Makes Control Easier
 Disadvantages :
o Quite expensive to set up and configure
o Lack of Flexibility to Update Itself
o Risk of fraud
o Takes into Account only Qualitative Factors
o Heavy reliance on technology
 Bottom line : A management information system is used by managers throughout the
organization to help them in directing, planning, coordinating, communicating, and
decision making. The MIS will help answer structured questions on a periodic basis.
3. Decision Support Systems ( DSS )
 Definition :
o DSS is third level in the Information System. It also serves the middle
management. The system supports routine decision making and focuses on
problems that are unique and rapidly changing using advanced analytical
models. DSS often uses external information as well as from TPS and MIS.
 Components of a Decision Support System
o Model Management System : the model management system S=stores models
that managers can use in their decision-making. The models are used in
decision-making regarding the financial health of the organization and
forecasting demand for a good or service.
o User Interface : the user interface includes tools that help the end-user of a DSS
to navigate through the system.
o Knowledge Base : The knowledge base includes information from internal
sources (information collected in a transaction process system) and external
sources (newspapers and online databases).
 Types of Decision Support Systems
o Communication-driven: Allows companies to support tasks that require more
than one person to work on the task. It includes integrated tools such as
Microsoft SharePoint Workspace and Google Docs.
o Model-driven: Allows access to and the management of financial, organizational,
and statistical models. Data is collected, and parameters are determined using the
 information provided by users. The information is created into a decision-
making model to analyze situations.
o Knowledge-driven: Provides factual and specialized solutions to situations using
stored facts, procedures, rules, or interactive decision-making structures like
flowcharts.
o Document-driven: Manages unstructured information in different electronic
formats.
o Data-driven: Helps companies to store and analyze internal and external data.
 Advantages :
o Fast
o Automation
o Efficient
o Training
o Communication
o Low cost
 Disadvantages :
o Limited skills
o Blame computer
o Machine dependent
o Wrong coding of software
 Bottom lines :
o Decision-support systems are used for complex “what-if” questions that require
internal and external data. Decisions at this management level are mostly
semistructured so the information system must respond to the unique
requirements of the executives.
4. Executive Support Systems :
 Definition :
o The last level is ESS that is for senior management and provides data in form of
graphs, charts and dashboards delivered via portals using many sources of
internal and external information. The system also addresses non-routine
decisions requiring judgment, evaluation and insight.
 Components of ESS :
o Hardware :
- Input data-entry devices. These devices allow the executive to enter, verify, and
update data immediately
- The central processing unit (CPU), which is the kernel because it controls the
other computer system components
- Data storage files. The executive can use this part to useful business
information, and this part also help the executive to search historical business
information easily
 - Output devices, which provide a visual or permanent record for the executive
to save or read. This device refers to the visual output device such as monitor or
printer
o Software :
- Text-handling software
- Database
- Graphic base
- Model base
o Use interface :
- An EIS must be efficient to retrieve relevant data for decision markers, so the
user interface is very important.
- Several types of interfaces can be available to the EIS structure, such as
schedules reports, questions/answers, menu driven, command language. Natural
language, and input/output.
o Telecommunication :
- Transmitting data from one place to another has become crucial for establishing
a reliable network.
- In addition, telecommunications within an EIS can accelerate the need for
access to distributed data.
 Features of Executive Information System :
o Drill down capabilities
o Designed with management critical success factor in mind
o Personalized analysis
o Navigation of information
o Status access, trend analysis, exception on reporting
o Graphical and textual information
o Navigation of information
 Advantages :
o Reliability
o Stability
o Increased use of renewable
o Energy
o Cost savings
 Disadvantages :
o High initial cost
o Limited storage capacity
o Limited lifespan
 Bottom line:
o An executive support system helps managers make strategic decisions affecting
the entire company. The decisions use internal and external data to give
executives the information they need to determine the proper course of action in
unstructured situations.