Introduction to Information Systems*

Learning ObjectivesBy the end of the lecture you should be able to:Explain Data and InformationDescribe Systems, Information Systems and Information TechnologyList different types of IS and their conceptsDescribe what the major elements of a TPS, MIS and DSS are*

*Data and Information DataStreams of raw facts representing events such as business transactions meaningless without contextInformationClusters of facts meaningful and useful to human beings in processes such as making decisions Individuals - Entertainment and enlightenmentBusinesses - Decision making, problem solving and control

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*Information Quality contd

*Using InformationInformation and control: Control allows managers to regulate the efficiency and effectiveness of the organization.Effective control requires good information.Information technology in the form of computers allows managers quick access to information.Information and Coordination: Managers must coordinate departmental actions to achieve goals.Information Systems provide information on suppliers, production schedules, and orders to allow coordination

*What Is a System?System: A set of components that work together to achieve a common goalSubsystem: One part of a system where the products of more than one system are combined to reach an ultimate goalClosed system: Stand-alone system that has no contact with other systemsOpen system: System that interfaces with other systems

*What is an Information System (IS)Information System is becoming the foundation of business models and processesIt allows for the distribution of knowledge likeIntegrated components processing, storing and disseminating information in an organisation.Interdisciplinary study of systems that provide information to users in organisations

*Data to Information via IS

*Information Systems & TechnologyInformation System (IS): Acquires, organizes, stores, manipulates and transmits information.A Management Information System is the plan and design of an Information System to provide managers with information.Can be paper or computer-based.Information Technology (IT): Any form of technology used by people to handle information e.g. acquiring, organizing, storing, manipulating, and transmitting informationInformation technology power has increased rapidly.Information and Decisions: managing has to do with making decisions.Good Information allows effective decision making.

*Examples of IT and IS

*Examples of IT and ISExamples of ITHardware (PC, UNIX server)Software (e-mail, Internet, Windows, Word)Consumer devices (mobiles)Examples of ISFile systems, databases, e-mail servers / clientse-commerceSAP, student records

*Why is IS Important?Worldwide changes:Global economyKnowledge- or information-based societyBusiness enterpriseDigital firm

*Global EconomyGrowing percentage of economy relies upon import and exportNeed to operate globallyIS can provide global trading infrastructure

*Information Economy0%10%20%30%40%50%60%70%1900191019201930194019501960197019801997YEAR% SERVICE% WHITE COLLAR% BLUE COLLAR% FARMING

*Changes to SocietyChange of employment profiles:Less farmingLess blue collar manufacturingIncreased serviceIncreased white collar office-basedUSA: 55% of work force are in knowledge- or information-based activitiesShift of manufacture to low-wage countries

*Business EnterpriseChange from hierarchical organisationsNow flat, decentralisedRelies on instant informationFlexibility with customer focus, with increasing importance

*IS - Impact on Organizational Hierarchy

*Digital FirmAn organisation where:Nearly all relationships with customers, suppliers and employees is digitalBusiness processes accomplished through digital networksPaperless OfficeFlexibleDependent upon on IT

*Impacts of ISHorizontal Information Flows: Information networks can bridge functional departments.Allow information to flow horizontally between departments.Can lead to much higher productivity, quality, and innovation.Virtual products: firms can use their information system to custom tailor goods and services to each customer.Virtual showroom, Online business Vs Brick and MortarSystems can allow this at no increase in cost

*Impacts of ISFor an organisation to survive and prosperMore locations (networking, Internet)New products and servicesImprove jobs and work flows:EfficiencyCostAccountabilityEthical and social issues

*Components of an information system

*Benefits of Information SystemsInformation Systems have provided managers with better information, enabling better decision making. Effective Information Systems can be a source of competitive advantage.Computer-based information systems are associated with decentralization of managerial decision making. Flattening the Organization: information systems reduce the need for the hierarchy to control the firm.Managers control and coordinate using the system, not workers

*Who should study IS?Information Systems CareersSystems analyst, Specialist in Enterprise Resource Planning (ERP), Business Consultant, Database Administrator, etc.Knowledge WorkersManagers and non-managersEmployers seek computer-literate professionals who know how to use information technology.Computer Literacy Replacing Traditional LiteracyKey to full participation in western society

*Barriers of ISTechnological factors: consistent standards for systems do not exist.Makers of hardware use different standards.Makes it hard to share information between systems.Resistance by Individuals: many managers do not use the system fully.Some managers are afraid of technology or do not understand it.Political Resistance: the information system changes the way information flows in the firmSome managers feel threatened by it.Managers may think they will be laid-off

*Limitations of ISLoss of the human element: information systems cannot present all kinds of information accurately. Thick information, which is rich in meaning and not quantifiable, is best suited to human analysis. Example: employee evaluations need face-to-face communication to convey all information.Difficult installations: Information systems can be hard to develop. To avoid problems:list major organization goals.build support for the system with workers.create formal training programs.emphasize that face-to-face contact is important

*Porters Value Chain and IS

Value Chain.

It evaluates which value each particular activity adds to the organizations products or services.

This idea was built upon the insight that an organization is more than a random compilation of machinery, equipment, people and money.

Only if these things are arranged into systems and systematic activates it will become possible to produce something for which customers are willing to pay a price.

Porter argues that the ability to perform particular activities and to manage the linkages between these activities is a source of competitive advantage.

(Ref: M. Porter, "Competitive Advantage: Creating and Sustaining Superior Performance" (1985)*

Porters Generic Value ChainSupport Activities

Primary Activities

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Primary ActivitiesPrimary activities are directly concerned with the creation or delivery of a product or service.

inbound logistics, operations, outbound logistics, marketing and sales, and service.

Each of these primary activities is linked to support activities which help to improve their effectiveness or efficiency. *

Inbound LogisticsHere goods are received from a company's suppliers. They are stored until they are needed on the production/assembly line. Goods are moved around the organization.

OperationsThis is where goods are manufactured or assembled. Individual operations could include room service in an hotel, packing of books/videos/games by an online retailer, or the final tune for a new car's engine.

Outbound LogisticsThe goods are now finished, and they need to be sent along the supply chain to wholesalers, retailers or the final consumer.

Marketing and SalesIn true customer orientated fashion, at this stage the organization prepares the offering to meet the needs of targeted customers. This area focuses strongly upon marketing communications and the promotions mix. ServiceThis includes all areas of service such as installation, after-sales service, complaints handling, training and so on. *

Secondary ActivitiesThere are four main areas of support activities: procurement technology development (including R&D), human resource management, and infrastructure (systems for planning, finance, quality, information management etc.).

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ProcurementThis function is responsible for all purchasing of goods, services and materials. The aim is to secure the lowest possible price for purchases of the highest possible quality.

Technology DevelopmentTechnology is an important source of competitive advantage. Companies need to innovate to reduce costs and to protect and sustain competitive advantage. This could include production technology, Internet marketing activities, lean manufacturing, Customer Relationship Management (CRM), and many other technological developments.

Human Resource Management (HRM)Employees are an expensive and vital resource. An organization would manage recruitment and selection, training and development, and rewards and remuneration.

Firm InfrastructureThis activity includes and is driven by corporate or strategic planning. It includes the Management Information System (MIS), and other mechanisms for planning and control such as the accounting department. *

MarginMargin implies that organizations realize a profit margin that depends on their ability to manage the linkages between all activities in the value chain. organization is able to deliver a product / service for which the customer is willing to pay more than the sum of the costs of all activities in the value chain. *

Typical Value Chain AnalysisAnalysis of own value chain which costs are related to what activitiesAnalysis of Customer value chainIdentification of cost advantageIdentification of potential value added for the customerlower cost/high performance-where does customer see value.We have learned that it is NOT technology that creates a competitive edge, but the management process that exploits technology - Pater Keen an MIS Consultant*

Potential IS ContributionsSupport Activities

Primary Activities

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Business processBusiness processes are simply a set of activities that transform a set of inputs into a set of outputs (goods or services) for another person or process using people and tools. *

BPRBPR is the redesign of business processes, the associated systems and organizational structures to achieve a dramatic improvement in business performance *

Why BPR?The business reasons:

poor financial performanceexternal competitionerosion of market share or emerging market opportunities. *

BPRIt is the examination and change of five components of the business: Strategy Processes Technology Organization Culture

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Check out processPurpose of the process is to pay for and bag your groceries.

The process begins with you stepping into line, and ends with you receiving your receipt and leaving the store. You are the customer (you have the money and you have come to buy food), and the store is the supplier. *

Reengineering Business ProcessesLevel of ChangeProcessChangePrimary EnablerTime RequiredPath toExecutionRiskTypical ScopeParticipationHorizonFrequency ofChangeStarting Point*

Enabling technologyInformation technology allows operations, strategies and competitive advantages not possible before.Operational dependency occurs when time, volume or other physical conditions makes IT unique to perform a task. It is related to the organization's EFFICIENCY.Strategic impact occurs when a policy, strategy or product uniquely requires IT for its implementation. It is related to the organization's EFFECTIVENESS.*

Corporate IS Strategy Objectives*

IS Planning Process*

Typical Corporate IS Plan*

Section of Plan

Section Contents

Organizational Mission Statement

Describes the objectives and goals of the organization including both current and future perspectives.

Inventory of Information Requirements

Describes the objectives and goals of the IS organization with regard to its role in the achievement of the stated organizational goals and objectives.

IS Development Constraints

Itemizes and describes the constraints imposed on current and future development including technological, financial, human resource, and operational assets and resources.

Typical Corporate IS Plan (contd)*

Section of Plan

Section Contents

Long-Term IS Needs and Strategies

Presents the set of long-range (2 5 year) needs and strategies of the IS department prioritized in keeping with the information requirements previously described.

Short-Term IS Needs and Strategies

Provides a prioritized list of current projects and a schedule of all additional projects intended to commence within the current year.

Implications of IS Corporate Plan

Discusses the various expected impacts on the organization of both the short-term and long-term IS strategies. Additionally, this section can be used to discuss any expected changes in the current business environment.

Project Selection Factors*

Project Process Flow Model*

Project Feasibility Assessment*

Feasibility Assessment Category

Description

Technical

Determines the relationship between the present technology resources of the organization and the expected technology needs of the proposed project.

Operational

Determines the degree to which the proposed development project fits with the existing business environment and objectives with regard to development schedule, delivery date, corporate culture, and existing business processes.

Human Factors

Determines the relationship between the present human resource base of the organization and the expected human resource needs of the proposed project.

Project Feasibility Assessment (contd)*

Feasibility Assessment Category

Description

Legal and Political

Identifies any potential legal ramifications resulting from the construction and implementation of the new system including copyright or patent infringements, violation of existing antitrust laws, foreign trade restrictions, or any existing contractual obligations of the organization.

Economic

Assesses the cost/benefit relationship of the proposed project and its net value contribution to the organization.

Project Evaluation Criteria*

Quantitative vs. Qualitative*Note: Not all parameters are easily measurable e.g. Goodwill

*Different types of IS

*Types of ISTypes of Information System in Organisations:By organisational levelBy function within organisational levelExamples in functional areas

*IS at the Organisational LevelDATA WORKERSKIND OF SYSTEM GROUPS SERVED STRATEGIC LEVEL SENIOR MANAGERSMANAGEMENT LEVEL MIDDLE MANAGERS OPERATIONAL OPERATIONAL LEVEL MANAGERS KNOWLEDGE LEVEL KNOWLEDGE & SALES & MANUFACTURING FINANCE ACCOUNTING HUMAN RESOURCESMARKETING

*IS at the Organisational LevelOperational-levelElementary activities and routine transactionsData current and accurateKnowledge-levelSupport knowledge and data workersIntegrate new knowledge into the businessOffice automation

*IS at the Organisational LevelManagement-levelPeriodic monitoring, control, decision-making and administrationIs the business working well?Strategic-levelLong-term (e.g. 5 year) planning and strategyInternal and external information

*ExamplesWhat examples can you think of at the different organisational levels?

*Types of ISTransaction Processing Systems (TPS)Knowledge Work Systems (KWS)Office Automation Systems (OAS)Management Information Systems (MIS)Decision-support Systems (DSS)Executive Support Systems (ESS)

*Transaction Processing SystemsSystems that perform and record daily routine transactions necessary for business

Operational-level SystemsOrder trackingMachine controlSecurities tradingPayrollCompensationOrder processingPlant schedulingCash managementAccounts payableTraining and developmentMaterial movement and controlAccounts receivableEmployee recordsSales and MarketingManufacturingFinanceAccountingHuman Resources

*Knowledge Work SystemsSystems that aid the creation and integration of new knowledge into an organisation

Knowledge-level SystemsEngineering workstationsGraphics workstationsManagerial workstations

*Office Automation SystemsSystems that are designed to increase the productivity of data workers

Knowledge-level SystemsWord processingDocument imagingE-mail / electronic calendars

*Management Information SystemsSystems that serve planning, control and decision-making through routine summary and reports

Management-level SystemsSales managementInventory controlAnnual budgetingCapital investmentRelocation analysisSales and MarketingManufacturingFinanceAccountingHuman Resources

*Decision-support SystemsSystems that combine data, models and analysis tools for non-routine decision-making

Management-level SystemsSales region analysisProduction schedulingCost analysisPricing / profitability analysisContract cost analysisSales and MarketingManufacturingFinanceAccountingHuman Resources

*Executive Support Systems (1)Systems that support non-routine decision-making through advanced graphics and communications using expert systems, artificial intelligence

Strategic-level Systems5-year sales trend forecasting5-year operating plan5-year budget forecastingProfit planningPersonnel planningSales and MarketingManufacturingFinanceAccountingHuman Resources

*Executive Support Systems (2)High level with drill downKey business and industry dataStructured and unstructured informationStructured: MTD ordersUnstructured: Industry newsfeedGraphical

*InterrelationshipsTPS major producer of dataExternal data also required for MIS, DSS and ESSTypical loose coupling of systemsDigital firms have tighter integration

*Functional ExamplesExamples of IS by function:Sales and marketingManufacturing and productionFinance and accountingHuman resources

*Sales and Marketing

SystemDescriptionOrganisational LevelOrder processingEnter, process and track ordersOperationalMarket analysisIdentify customers and marketsKnowledgePricing analysisDetermine pricesManagementSales trendsPrepare 5 year forecastsStrategic

*Manufacturing and Production

SystemDescriptionOrganisational LevelMachine controlControl actions of equipmentOperationalComputer-aided design (CAD)Design new productsKnowledgeProduction planningDecide number and schedule of productsManagementFacilities locationDecide where to locate facilitiesStrategic

*Finance and Accounting

SystemDescriptionOrganisational LevelAccounts receivableTrack money owed to firmOperationalPortfolio analysisDesign firms investmentsKnowledgeBudgetingPrepare short-term budgetsManagementProfit planningPlan long-term profitsStrategic

*Human Resources

SystemDescriptionOrganisational LevelTraining and developmentTrack training, skills and appraisalsOperationalCareer pathsDesign employee career pathsKnowledgeCompensation analysisMonitor wages, salaries and benefitsManagementHuman resources planningPlan long-term workforce needsStrategic

*SummaryLooked at the role of IS within organisationsAt organisational levelsLooked at the diversity of types of IS within a business / organisationSix different types of ISLooked at relationships between IS and business functionsExamples by functional area

*Transaction Processing System

*Transaction Processing SystemsManual or automatic all businesses systematically process transactionsFunction: process routine, day-to-day business activitiesComputerized TPS:BatchOnline (real-time, OLTP)The foundation of business systems

*Batch TPSOriginally, the only available optionTransactions accumulated over period of timeTime period day, week, monthTransaction records accumulated in filesWhen batches are processed, what happens?Update databasesGenerate reportsGenerate transactions for other systems

*Batch Processing Pros and ConsProsRelatively easy to program, install and maintainBatches can be processed during low-activity periodsConsInformation is delayed

*Online TPS (OLTP)Transactions are processed in real timeRequired for any modern application where time is criticalWell supported by client/server computing model

*Hybrid TPSOLTP applications can feed transactions to batch systemsExamine: GL only updated once per dayReal time order capture with delayed processing

*TPS RequirementsCapture, process and store transactionsProduce reports and information about transactionsProduce transactions for other TPSBe accurate and timelyBe efficient require less laborIncrease customer serviceIncrease competitive advantage

*TPS Activity ModelData captureFrom online entry or external systemData validationShould be done as close to source as possibleProcessingData manipulationDatabase updatingGeneration of transactions for other systemsArchive TransactionCreate documents and reports

*Management IssuesUptimeHow long can the system be down before significant costs are incurred?Processing Delays / Response TimesHow quickly must a transaction be processed? What is the worst online response time that is acceptable

*Management Issues (2)Disaster RecoveryWhat plans are in place to recover lost business data?What plans are in place to resume business processing in case of disaster?AuditCan you verify the integrity of the system?How will you know if transactions are not processed or are processed incorrectly?

*TPS By FunctionOrder ProcessingProcurement & Inventory ControlAccounting

*Order Processing TPSOrder captureVariety of meansConfigurationShipment planning and inventory allocationPrioritize orders, select shipment locations, allocate inventory to ordersShipping and warehousingPicking, packing, invoicing, reporting

*ProcurementInventory ControlRaw materials, WIP, FGI, etcPurchase Order ProcessingGenerating, transmitting, maintaining purchase ordersReceivingAccounts PayableBoundary between procurement and accounting

*AccountingAccounts PayableAccounts ReceivableBudgetPayrollGeneral LedgerAsset Management

*Disadvantages of Functionally Organized TPSData redundancyCauses integrity problemsInefficientTemporal integrity problemsCaused by different times at which processing occursLack of information coherence

*Management Information System

*Stages of Data ProcessingThe Four Stages of Data ProcessingInput: Data is collected and entered into computer.Data processing: Data is manipulated into information using mathematical, statistical, and other tools.Output: Information is displayed or presented.Storage: Data and information are maintained for later use.

*Management Information SystemsMISThe study of information systems focusing on their use in business and management.Goals of an MISProvide managers with informationRegular, routine operationsControl, organize and plan better

*Typical Inputs and OutputsInputs: Information from the TPSOutputs: hard and softcopy reportsScheduled reportsOn-demand reportsKey-indicator (business fundamentals)Exception reports

*Functional Perspectives of MISFinancial MISWill integrate information from multiple sourcesFunctionsCostingP&L reportingAuditingFunds management

*Functional Perspectives of MISManufacturingDesign and EngineeringMaster Production SchedulingInventory ControlMaterials PlanningManufacturing and Process ControlQuality Control

*Functional Perspectives of MISMarketingMarket researchWeb-based market researchPricing

*Functional Perspectives of MISTransportation and LogisticsRoute and schedule optimizationHuman ResourcesAccounting

*TPS Vs MISTransaction Processing Systems (TPS)Support operationManagement and controlRoutine, normal operationsManagement Information Systems (MIS)Provide decision-making support for routine, structured decisionsClosely linked to and fed by TPS

*Decision Support System

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*Decision Making ProcessIntelligence gatheringDefinition of problemData gathered on scopeConstraints identifiedDesign phaseAlternatives identified and assessedChoiceSelection of an alternativeImplementationIs the solution working?

*Structured vs. Unstructured ProblemsStructured problems lend themselves to programmed decisionsThe implication is that a repeatable process can be employed and these can be automatedUnstructured problems require unprogrammed decisions - Can be addressed (or partially addressed) with Decision Support Systems

*Structured ProblemsCan be addressed by an MISThree decision models or techniquesOptimizationFind the best solutionSatisficingFind a solution which meets certain criteriaHeuristicsRule-based solution generation

*Mintzbergs Research

*Mintzbergs Research

*Mintzbergs Management roles

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*Decision Support SystemsUsed for unstructured problemsCharacteristicsData from multiple sources internal and external to organizationPresentation flexibilitySimulation and what-if capabilitySupport for multiple decision approachesStatistical analysis

*Dialogue ManagerAllows user interaction with DSS

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*Group Decision Making SystemsVery interesting fieldHow can information technology improve how decisions are made by groups?ApplicationsWhere time is criticalWhere participants are geographically dispersedWhere authority obstructs communicationMilitaryBusinessGovernment

*Group Decision Making SystemsCommon characteristicsMeeting moderation/facilitationSigned and anonymous commentsStructured deliberationsPresentation periodComment periodAutomated collation of commentsVotingFace-to-face and remote

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***For example, think of data as a set of marks given for an exam, whereas information is how these marks are turned in a degree. This could be further explored with how a set of degree marks (data) can be used to determine the total number of people gaining a 1st class.

Example: customer surveyReading through data collected from a customer survey with questions in various categories would be time-consuming and not very helpful. When analysed, the surveys may provide useful information.*Business process examples:Developing a new product,Generating and fulfilling an order,Hiring staff.2*IT infrastructure is the foundation upon which IS are built.**Hierarchical business organisations had people in specific roles working to specific Standard Operating Procedures. In order to be flexible and competitive, businesses now have more flattened structures where people have more general roles, relying on the access to (near) instant information to fulfil the role they are performing at any given time. For example, a task force set up to produce a proposal for work, learning about the opportunity and targeting the customers needs.

Such flatter organisations have been implemented by AT&T, IBM and General Motors, removing greatly the role of middle managers. This, of course, brings in ethical considerations.*Provision of information / assets on a digital network and allowing workflow to be re-organised and management information available (almost) instantly. Such communication can also include inter-organisation networks (Extranets).

CISCO provides an example of this approach and are close to being a digital firm to improve efficiency.*The emergence of the Internet is providing new business models, such as e-business and e-commerce.

Some organisations are solely based on IS. For example e-commerce web sites. More traditional examples include companies that have adopted IS to run their business, such as IBM. Digital links include e-commerce, e-business and business-to-business (b2b).

****Reengineering is more than automating business processes to make modest improvements in the efficiency of business operations. Reengineering is a fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in cost, quality, speed, and service. ******Current and accurate data available when required.TPS are often business critical if TPS fail, then the business will fail. They have become an essential part of organisations.Examples:What if there was no train information available at stations? How would you know what train to get on?Can Amazon sell books without its website?Can the University process exam marks without IS?.*Examples:Modelling and design with Computer-aided design (CAD) systems.Financial trend analysis.*The move towards the paperless office. OAS try to improve workflow, using integrated office systems, such as e-mail, word processing and presentation graphics.*MIS provide summary reports on data generated by TPS. They typically use simple models to help managers understand what is happening in the business. Summary reports are used to plan budgets using past and present data and are tailored for specific business needs.

Examples:How many mobile phone accounts have we sold?How many mobile phone users have left?What products are selling best?How much does it cost to produce certain products?*Flexible systems that ask what if. Data taken from TPS, MIS and external. Allows for sophisticated modelling.Example:Election campaigns: politicians target communities (those that are marginal). IS may be used to collate voter information and demographics to decide where targeting is required.*Aggregates data from internal and external sources. Attempts to project data into the future for long-term planning. Bespoke systems specifically for senior management.*Highlights the interdependence of systems. External data also important.**Sales is responsible for the selling of a companies products and services.Marketing is responsible for the identification of customers, determining their need, planning the development of products and services to meet these needs and advertising the products and services.*Manufacturing and production is responsible for producing the firms products and services, including planning, development, maintenance of production equipment, maintenance for products and services, acquisition of production materials and resources and scheduling of production.

Simple example from F1, including design of cars and parts, production, production schedule in-line with races and testing, location of facilities (near test tracks and expertise).*The finance function is responsible for managing a firms assets, including cash, stocks and bonds, to maximise return.The accounting function is responsible for maintaining and managing a firms financial records, including invoices, receipts and payroll.*The human resources (HR) function is responsible for attracting, developing and maintaining the firms workforce, including employee records, recruitment and personal/professional development.****Traditionally MIS was concerned with managers. Now covers business / organisations in a broader sense.*