CHAPTER

Introduction
1 to
Information
Systems
What is Data?

◼ Raw Material
◼ Numbers and strings of letters with
no precise context or meaning
What is Information?

◼ Data processed with knowledge

◼ “Data endowed with relevance and
purpose”
◼ “Data becomes information when its
creator adds meaning”
◼ “An organized, meaningful, and
useful interpretation of data”
What is Knowledge?

◼ “A body of guidelines and rules used to

select, organize, and manipulate data to
make it suitable for a given task”
◼ “An awareness and understanding of a
set of information and how that
information can be put to its best use”
◼ “Internalized information + the ability to
utilize this information”
Data transformed into
Information

A collection of facts organized in

such a way that they have
additional value beyond the
Information value of facts themselves.

Guidelines and procedures used to

select, organize, and manipulate data
Knowledge
Process to make it suitable for a specific task.

Data Raw facts

 Data becomes Information

Establishing
relationships
between data
creates
information.

Information = Data + Relationships

Characteristics of Valuable
Information
◼ Relevant
◼ Complete
◼ Accurate
◼ Current/Timely
◼ Economical
◼ Accessible
Determining the Value of
Information
◼ Measurements
◼ Time saved, lower costs
◼ More accurate forecasts

◼ Improved service

◼ Often difficult to quantify

◼ Payback period?
What is a System?
◼ Components that work together to
achieve a goal by accepting input,
processing it, and producing output
in an organized manner.
 Components of a System

INPUTS PROCESSING OUTPUTS

Gathering and Converting or Producing useful
capturing raw data transforming data information, usually in
into useful outputs the form of documents.

Output that is used to

make changes to input
or processing activities
GOALS MET?
Feedback
What is a System?
System will have the following basic interacting
components (functions):
◼ Inputs and Outputs: A major objective of a
system is to produce an output that has value to
its user. In order to get a good output, inputs to
system must be appropriate.
◼ Processing: It is the element of a system that
involves the actual transformation of input into
output. It is the operational component of a
system. Processors may modify the input totally
or partially, depending on the specifications of
the output.
What is a System?
System will have the following basic interacting components
(functions):
◼ Control: The control elements guide the system. It is the
decision-making subsystem that controls the pattern of
activities governing input, processing, and output.
◼ Feedback: Feedback measures output against a standard
in some form of procedure that includes communication
and control. Feedback may be positive or negative, routine
or informational. Positive feedback reinforces the
performance of the system. It is routine in nature.
Negative feedback generally provides the controller with
information for action.
What is a System?
System will have the following basic interacting
components (functions):
◼ Environment: The environment is the “supra-
system” within which an organization operates.
It is the source of external elements that
impinge on the system. In fact, it often
determines how a system must function.
◼ Boundaries and Interfaces: A system should
be defined by its boundaries- the limits that
identify its components, processes, and
interrelationships when it interfaces with another
system.
What is a System?
Types of System
Physical or Abstract Systems: Physical
systems are tangible entities that may be static or
dynamic in operation. Abstract systems are
conceptual or nonphysical entities. They may be
formulas of relationships among sets of variables
or models – the abstract conceptualization of
physical situations.
Types of System
◼ Open or Closed Systems: An open system has
many interfaces with its environment. It permits
interaction across its boundaries; it receives
inputs from and
delivers outputs to the outside. A closed system
is isolated from environment influences.
Types of System
◼ Deterministic and Probabilistic: A
Deterministic system is one in which the
occurrence of all events is perfectly predictable.
If we get the description of the system state at a
particular time, the next state can be easily
predicted. Probabilistic system is one in which
the occurrence of events cannot be perfectly
predicted.
System Performance

◼ Efficiency
◼ A measure of what is produced divided
by what is consumed.
◼ Effectiveness
◼ A measure of what is achieved divided
by the stated goal.
System Performance
Standards

Sales

Defects
System Variables and
Parameters
◼ System Variable
◼ A quantity or item that can be controlled by
the decision maker (controllable).
• e.g. selling price

◼ System Parameter
◼ A value or quantity that cannot be controlled
by the decision maker.
• e.g. raw material costs
So, What is an Information
System?
Information: An System: Components that work
organized, meaningful, together to achieve a goal by
accepting input, processing it,
and useful interpretation and producing output in an
of data organized manner

◼ Information System: Components that

work together to process data and
produce information (to help
companies solve problems and make
decisions).
The Components of a CBIS

1) Hardware
2) Software
◼ Operating systems
◼ Applications
3) Databases
4) Telecommunications/Networks
5) People
6) Procedures
Components of an IS
◼ In an organization, information systems consist of the
following components. These components will formulate a
system, which will help us to gather the required
information for making decision in various levels of
management.
◼ Data - Input that the system takes to produce information
◼ Hardware - Computer itself and its peripheral equipment:
input, output, storage devices; includes data
communication equipment
◼ Software - Sets of instructions that tell the computer how
to input, process, output and store data
Components of an IS
◼ Communication networks - Hardware and software
specializing in transmission and reception of electronic
data.
◼ People - IS professionals who design, construct, operate
and maintain IS. And end users who use the information
system. People are the most important component in most
computer based information systems.
◼ Procedures are the strategies, policies, methods and
rules for using computer based information systems.
Types of Business
Information Systems
◼ Transaction Processing
◼ E-Commerce
◼ Workflow
◼ Enterprise Resource Planning
◼ Management Information
◼ Decision Support
◼ Artificial Intelligence/Expert
Information system types
◼ A typical organization is divided into operational,
middle, and upper level. The information
requirements for users at each level differ.
Towards that end, there are number of
information systems that support each level in
an organization.
Strategy Levels and IS
Examples
Strategy Levels
Operational management level
◼ The operational level is concerned with performing day-to-
day business transactions of the organization.
◼ Examples of users at this level of management include
cashiers at a point of sale, bank tellers, nurses in a
hospital, customer care staff, payroll system etc.
◼ Users at this level make structured decisions. This means
that they have defined rules that guide them while making
decisions.
Strategy Levels
Tactical Management Level
◼ Middle-level managers, heads of departments,
supervisors, dominate this organization level.
The users at this level usually oversee the
activities of the users at the operational
management level.
◼ Tactical users make semi-structured decisions.
The decisions are partly based on set guidelines
and judgmental calls.
Strategy Levels
Strategic Management Level
◼ This is the most senior level in an organization.
The users at this level make unstructured
decisions. Senior level managers are concerned
with the long-term planning of the organization.
They use information from tactical managers
and external data to guide them when making
unstructured decisions
Transaction Processing

◼ Transaction
◼ Any business related exchange
◼ Tend to be routine, labor-intensive

◼ “Interactions”
Transaction Processing
◼ Transaction processing system (TPS)
◼ The application of information
technology to routine, repetitive, and
usually ordinary business transactions
Transaction Processing
System
Information system types
Transaction Processing Systems (TPS)
◼ Transaction processing systems are used to
record day-to-day business transactions of the
organization. Users at the operational
management level use them. The main objective
of a transaction processing system is to answer
routine questions such as;
◼ How printers were sold today?
◼ How much inventory do we have at hand?
Information system types
Transaction Processing Systems (TPS)
◼ The decisions made by operational managers are
routine and highly structured.
◼ The information produced from the transaction
processing system is very detailed.
Information system types
Transaction Processing Systems (TPS)
Examples of transaction processing systems
include;
◼ Point of Sale Systems – records daily sales
◼ Payroll systems – processing employees'
salary, loans management, etc.
◼ Stock Control systems – keeping track of
inventory levels
◼ Airline booking systems – flights booking
management
Information system types
Management Information Systems (MIS)

◼ The output from a transaction processing system

is used as input to a management information
system.
◼ The MIS system analyzes the input with routine
algorithms i.e. aggregate, compare and
summarizes the results to produced reports that
tactical managers use to monitor, control, and
predict future performance.
Enterprise Resource
Planning (ERP)
◼ Integrated programs that can
manage a company’s entire set of
business operations
◼ Often coordinate planning, inventory
control, production and ordering
Management Information
System (MIS)

◼ Management Information System

◼ Used to provide routine information to
help managers plan, control, and make
decisions
◼ Characteristics
◼ Focus on operational efficiency
◼ Supports functional areas
◼ Common database
◼ Standard reports…
Management Information
System
◼ Types of Reports
◼ Scheduled
◼ Demand

◼ Exception
Information system types
Management Information Systems (MIS)
◼ For example, input from a point of sale system
can be used to analyze trends of products that
are performing well and those that are not
performing well. This information can be used to
make future inventory orders i.e. increasing
orders for well-performing products and reduce
the orders of products that are not performing
well.
Information system types
Management Information Systems (MIS)
Examples of management information systems
include;
◼ Sales management systems – they get input
from the point of sale system
◼ Budgeting systems – gives an overview of how
much money is spent within the organization for
the short and long terms.
◼ Human resource management system –
overall welfare of the employees, staff turnover,
etc.
Information system types
Decision Support Systems (DSS)
◼ Decision support systems are used by senior
management to make non-routine decisions.
Decision support systems use input from internal
systems (transaction processing systems and
management information systems) and external
systems.
◼ The main objective of decision support systems
is to provide solutions to problems that are
unique and change frequently.
Information system types
Decision Support Systems (DSS)
Decision support systems answer questions such
as;
◼ What would be the impact of employees'
performance if we double the production lot at
the factory?
◼ What would happen to our sales if a new
competitor entered the market
Decision Support Systems

◼ Decision Support Systems (DSS)

◼ Used to support decision making (e.g.
where to build, how much to order)
◼ Characteristics
◼ Suggests and compares alternatives
◼ Problem is complex

◼ Information is voluminous
Information system types
Decision Support Systems (DSS)
Examples of decision support systems include;
◼ Financial planning systems – it enables managers
to evaluate alternative ways of achieving goals. The
objective is to find the optimal way of achieving the
goal. A financial planning system will enable senior
executives to ask what if questions and adjust the
values for total sales, the cost of goods, etc. to see
the effect of the decision and on the net profit and
find the most optimal way.
◼ Bank loan management systems – it is used to
verify the credit of the loan applicant and predict the
likelihood of the loan being recovered.
Information system types
Artificial intelligence techniques in business
◼ Artificial intelligence systems mimic human
expertise to identify patterns in large data sets.
◼ Companies such as Amazon, Facebook, and
Google, etc. use artificial intelligence techniques
to identify data that is most relevant to you.
Information system types
Artificial intelligence techniques in business
◼ Facebook usually makes very accurate predictions of
people that you might know or went with to school. They
use the data that you provide to them, the data that your
friends provide and based on this information make
predictions of people that you might know.
◼ Amazon uses artificial intelligence techniques too to
suggest products that you should buy also based on what
you are currently getting.
◼ Google also uses artificial intelligence to give you the most
relevant search results based on your interactions with
Google and your location.
E-Commerce

◼ E-Commerce
◼ Any business transaction executed
electronically between parties involving
the exchange of goods and/or services
• B2B, B2C

◼ Workflow
◼ Rule-based
E-Commerce
◼ Lowering Barriers to Entry
◼ Traditionally
• Sales force
• Advertising & promotion
• Factories, warehouses, retail stores
◼ Competing electronically
• Increases the threat of new companies
Artificial Intelligence

◼ Artificial Intelligence (AI)

◼ A field that involves computer systems taking
on the characteristics of human intelligence
• Robotics
• Natural language processing
• Learning systems
• Neural networks (patterns & trends)
Expert Systems
◼ Expert Systems (ES)
◼ Give the computer the ability to
make suggestions and act like an
expert in a particular field
• Medical diagnoses
• Repair problems
• Credit evaluations
• Investment strategies
Systems Development

◼ Systems Development
◼ The activity of creating or modifying
existing business systems.
◼ Objectives
◼ Make the process manageable
◼ Achieve predictable costs and timing
Systems Development
Steps
1) Systems Investigation
◼ Gain a clear understanding of the problem
to be solved or opportunity to be
addressed.
2) Systems Analysis
◼ Define the problems and opportunities of
the existing system.
3) Systems Design
◼ Determine how the new system will work
to meet the business needs defined during
systems analysis.
 Systems Development
Steps
4) Systems Implementation
◼ Create or acquire the various system
components defined in the design step,
assemble them, and put the new system into
operation.
5) System Maintenance and Review
◼ Check and modify the system so that it
continues to meet changing business needs.