Lecture 3

TO BE COVERED

The Role of IS in BusinessThe important attributes of

information quality.What are the types of Information

System (IS) within an organization.Levels of organization.The role of each types of IS in

organization.

Do you think using IS in Business important? Why?

THE ROLE OF IS IN BUSINESS Businesses make use of information systems

so that accurate and up-to-date information will be available when it is required.

Since it is not always possible to predict what information will be needed at some future date, most organizations use computers to record and store the details of all their business transactions. When a query arises, or a standard business report must be produced, this raw data can be retrieved and manipulated to produce the required information.

For example : a customer may enquire whether an item is in stock, or financial statements must be produced for shareholders.

What characteristics of information products make them valuable and useful to Business?

INFORMATION QUALITY

Information that is outdated, inaccurate, or hard to understand is not very meaningful, useful, or valuable to you or other business professionals.

People need information of high quality. It is useful to think of information as having

the three dimensions of time, content, and form.

INFORMATION QUALITY

So what kind of IS do we need?

There are a number of different application programs are used within a single business or organizations .

For example, the methods and calculations used in processing the employee payroll are very different from those used for managing stock control or for preparing a balance sheet.

Therefore , there are different types (Classification ) of IS applications that

are used within a business and an organization.

Information systems generally are classified into five categories: 

1. Office information systems (OIS),2. Transaction processing systems (TPS),3. Management information systems (MIS),4. Decision support systems (DSS),5. Expert systems( ES). 

 The following sections present each of these information systems

CLASSIFICATION OF INFORMATION SYSTEMS

1- OFFICE INFORMATION SYSTEMS (OIS)

An office information system, or OIS , is an information system that uses hardware, software and networks to enhance work flow and facilitate communications among employees.  

Also described as office automation; employees perform tasks electronically using computers and other electronic devices, instead of manually.  

With an office information system, for example, a registration department might post the class schedule on the Internet and e-mail students when the schedule is updated.  In a manual system, the registration department would photocopy the schedule and mail it to each student’s house.

An office information system supports a range of business office activities such as creating and distributing graphics and/or

documents, sending messages, scheduling, and accounting.  

All levels of users from executive management to non-management employees utilize and benefit from the features of an OIS.

The software in OIS are used to support these activities include Word processing, Spreadsheets, Databases,

presentation graphics, E-mail, Web browsers, Web page authoring, personal information management,.

1- OFFICE INFORMATION SYSTEMS (OIS)

A transaction processing system (TPS) is an information system that captures and processes data generated during an organization’s day-to-day transactions.

 A transaction is a business activity such as a deposit, payment, order ,reservation , invoicing ,issuing of stock , booking airline tickets, purchasing goods or services.

Support simple processing of large amount of structured data

2-TRANSACTION PROCESSING SYSTEMS (TPS)

Principles of Information Systems, Eighth Edition 14

2-TRANSACTION PROCESSING SYSTEMS

A Payroll Transaction Processing System (Example)

Payroll system example

Clerical staff typically perform the activities associated with transaction processing, which include the following:

1. Recording a business activity such as a student’s registration, a customer’s order, an employee’s timecard or a client’s payment.

2. Confirming an action or triggering a response, such as printing a student’s schedule, sending a thank-you note to a customer, generating an employee’s paycheck or issuing a receipt to a client.

3. Maintaining data, which involves adding new data, changing existing data, or removing unwanted data.

2-TRANSACTION PROCESSING SYSTEMS (TPS)

2-TRANSACTION PROCESSING SYSTEMS (TPS)

More examples of TPS

Architecture of a transaction processing system using the basic systems model

As computers became more powerful, system developers built online transaction processing systems.  With online transaction processing (OLTP) the computer processes transactions as they are entered.  

For example ,when you register for classes, your school probably uses OLTP.  The registration administrative assistant  enters your desired schedule and the computer immediately prints your statement of classes.

2-TRANSACTION PROCESSING SYSTEMS (TPS)

A management information system, is an information system that generates accurate, timely and organized information so managers can make decisions, solve problems, supervise activities, and track progress.  

Or, it is a System that use the data generated by the TPS to help lower and middle managers in their decision making.

3- MANAGEMENT INFORMATION SYSTEMS (MIS)

For example :To process a sales order, the transaction processing system records the sale, updates the customer’s account balance, and makes a deduction from inventory.  Using this information, the related management information system can produce reports that recap daily sales activities; list customers with past due account balances; graph slow or fast selling products; and highlight inventory items that need reordering.

3-MANAGEMENT INFORMATION SYSTEMS (MIS)

More example: where TPS data are used for MIS applications

Because it generates reports on a regular basis, a management information system sometimes is called a management reporting system (MRS).

Management information systems provide a variety of information products to managers. Four major reporting alternatives

1. Periodic Scheduled Reports. This traditional form of providing information to managers uses a prespecified format designed to provide managers with information on a regular basis. Typical examples of such periodic scheduled reports are daily or weekly sales analysis reports and monthly financial statements.

3-MANAGEMENT INFORMATION SYSTEMS (MIS)

2. Exception Reports. In some cases, reports are produced only when exceptional conditions occur. In other cases, reports are produced periodically but contain information only about these exceptional conditions.

For example, a credit manager Can be provided with a report that contains only information on customers who have exceeded their credit limits.

Exception reporting reduces information Overload Instead of overwhelming decision makers with periodic detailed reports of business activity.

3- MANAGEMENT INFORMATION SYSTEMS (MIS)

3. Demand Reports and Responses. Information is available whenever a manager demands it.

4. For example, Web browsers, DBMS query languages, and report generators enable managers at PC workstations to get immediate responses or to find and obtain customized reports as a result of their requests for the information they need. Thus, managers do not have to wait for periodic reports to arrive as scheduled

3- MANAGEMENT INFORMATION SYSTEMS (MIS)

4. Push Reporting. Information is pushed to a manager’s networked workstation. Thus, many companies are using webcasting software to broadcast selectively reports and other information to the networked PCs of managers and specialists over their corporate intranets

3- MANAGEMENT INFORMATION SYSTEMS (MIS)

4- DECISION SUPPORT SYSTEM(DSS)

A decision support system (DSS) is an information system ( interactive computer-based systems and subsystems ) designed to help higher managers to reach a decision when a decision-making situation arises

For example: A sales manager might need to determine how high to set yearly sales quotas based on increased sales and lowered product costs. Decision support systems help provide information to support such decisions.

4- DECISION SUPPORT SYSTEM(DSS)

A decision support system uses data from internal and/or external sources.

Internal sources of data might include for example sales, manufacturing, inventory, or financial data from an organization’s database. 

 External sources could include for example interest rates, population trends, and costs of new housing construction or raw material pricing. 

 Users of a DSS, often managers, can manipulate the data used in the DSS to help with decisions.

TYPES OF DSS

Communication-driven DSS 

Data-driven DSS 

Document-driven DSS 

Knowledge-driven DSS

Model-driven DSS 

TYPES OF DSS : COMMUNICATION-DRIVEN DSS 

Communication-driven DSS .Most communications-driven DSSs are targeted at internal teams, including partners. Its purpose are to help conduct a meeting, or for users to collaborate. The most common technology used to deploy the DSS is a web or client server. Examples: chats and instant messaging software, online collaboration and net-meeting systems.

TYPES OF DSS : DATA-DRIVEN DSS

Data-driven DSS Most data-driven DSSs are targeted at

managers, staff and also product/service suppliers. It is used to query a database or data warehouse to seek specific answers for specific purposes. It is deployed via a main frame system, client/server link, or via the web.

Examples: computer-based databases that have a query system to check (including the incorporation of data to add value to existing databases.

TYPES OF DSS : DOCUMENT-DRIVEN DSS

Document-driven DSS Document-driven DSSs are more common,

targeted at a broad base of user groups. The purpose of such a DSS is to search web pages and find documents on a specific set of keywords or search terms. The usual technology used to set up such DSSs are via the web or a client/server system.

TYPES OF DSS : KNOWLEDGE-DRIVEN DSS

Knowledge-driven DSS: Knowledge-driven DSSs or 'knowledgebase' as they

are known, are a catch-all category covering a broad range of systems covering users within the organization setting it up, but may also include others interacting with the organization - for example, consumers of a business.

It is essentially used to provide management advice or to choose products/services.

The typical deployment technology used to set up such systems could be silent/server systems, the web, or software running on stand-alone PCs.

TYPES OF DSS : MODEL-DRIVEN DSS 

Model-driven DSS Model-driven DSSs are complex systems that

help analyze decisions or choose between different options. These are used by managers and staff members of a business, or people who interact with the organization, for a number of purposes depending on how the model is set up - scheduling, decision analyses etc.

These DSSs can be deployed via software/hardware in stand-alone PCs, client/server systems, or the web.

4- DECISION SUPPORT SYSTEM(DSS)’S COMPONENTS

1. Data Management Subsystem2. Model Management Subsystem3. Knowledge Management Subsystem4. User Interface Subsystem5. The User

DataManagement

ModelManagement

KnowledgeManagement

User Interface

User

OtherSystem

s

DSS Architecture

4- DECISION SUPPORT SYSTEM(DSS)’S COMPONENTS

4.1 THE DATA MANAGEMENT SUBSYSTEM

The Data Management Subsystem Data Management subsystem includes a database that contains relevant data for the situation and managed by software called the Database Management System (DBMS) and can be interconnected with the corporate data warehouse. Usually, the data are stored or accessed via a database Web server.

The Capabilities of DBMS in a DSS1. Captures/extracts data for inclusion in a DSS database2. Updates (adds, deletes, edits, changes) data records and

files3. Interrelates data from different sources4. Retrieves data from the database for queries and reports5. Provides comprehensive data security (protection from

unauthorized access, recovery capabilities, etc.)6. Performs complex data manipulation tasks based on

queries7. Tracks data use within the DSS8. Manages data through a data dictionary

4.2 THE MODEL MANAGEMENT SUBSYSTEM

Model Management Subsystem is a software package that includes financial, statistical, management science or other quantitative models that provide the system’s analytical capabilities and appropriate software management.

There can be 3 different types of modeling software for DSSs: 1. Statistical models, 2. Optimization models, 3. Forecasting models.

4.2 THE MODEL MANAGEMENT SUBSYSTEM : STATISTICAL MODELS

Statistical modeling software can be used to help establish relationships such as relating product sales to differences in age, income or other factors between communities.

Ex: SPSS.

Optimization models often using Linear Programming (LP) determine the proper mix of products within a given market to maximize profit.

4.2 THE MODEL MANAGEMENT SUBSYSTEM : OPTIMIZATION MODELS

4.2 THE MODEL MANAGEMENT SUBSYSTEM : FORECASTING MODELS.

The user of this type of model might supply a range of historical data to project future conditions and sales that might result from those conditions.

Companies often use this software to predict the action of competitors.

1. Creates models easily and quickly, either from scratch or from existing models or from the building blocks.

2. Allows users to manipulate the models so they can conduct experiments and sensitivity analyses ranging from “what-if” to goal seeking.

3. Stores, retrieves, and manages a wide variety of different types of models in a logical and integrated manner.

4. Accesses and integrates the model building blocks.5. Catalogs and displays the directory of models for use by several

individuals in the organization.6. Interrelates models with appropriate linkages with the database

and integrates them within the DSS.7. Manages and maintains the model base with management

functions analogous to database management: store, access, run, update, link, catalog, and query.

8. Uses multiple models to support problem solving.

4.2.1 Major Functions (Capabilities) of the MBMS

4.3THE KNOWLEDGE MANAGEMENT SUBSYSTEM

Provides expertise in solving complex unstructured and semi-structured problems What models to use, how, interpreting results Reasoning, handling uncertainty, learning from data Expertise provided by an expert system or other intelligent system (AI techniques)

Leads to intelligent DSS Example: Data mining

4.4THE USER INTERFACE (DIALOG) SUBSYSTEM

Includes all communication between a user and the DSS

To most users, the user interface is the system

Major Capabilities will include :1. Provides graphical user interface.2. Accommodates the user with a variety of input devices.3. Presents data with a variety of formats and output devices.4. Gives users “help” capabilities, prompting, diagnostic and

suggestion routines, or any other flexible support.5. Provides interactions with the database and the model base.6. Stores input and output data.7. Provides color graphics, three-dimensional graphics, and data

plotting.8. Has windows to allow multiple functions to be displayed

concurrently.9. Provides training by examples (guiding users through the input

and modeling process).

TOOLS USED IN A DSS

Using a DSS involves different types of analytical modeling activities:

THE DSS HIERARCHY

Suggestion systems Optimization systems Representational models Accounting models Analysis information systems Data analysis systems File drawer systems

high

PossibleComplexity

low

FILE DRAWER SYSTEMS

They are the simplest type of DSS Can provide access to simple items of

information The values obtained are used straight

forwardly to make a decision Example: ATM Machine Discover the account balance before

deciding how much to withdraw

DATA ANALYSIS SYSTEMS

Provide access to data Allow data manipulation capabilities Example:Airline Reservation system:No more seats available so provide

alternative flights you can use the information to make flight plans

ANALYSIS INFORMATION SYSTEMS

Provide access to multiple data sources Combines data from different sources Allows data analysis capabilities Example:Compare growth in revenues to industry

average (requires access to many sources)

ACCOUNTING MODELS

Use internal accounting data Provide accounting modeling capabilities Can not handle uncertainty Example:Bill of material used in a dressmaking

shop Calculate production costs Make pricing decisions

REPRESENTATIONAL MODEL

Uses models to solve decision problems using forecasts

Can be used to augment the capabilities of Accounting models

Can incorporate uncertaintyExample:Use demand data to forecast next year’s

demand Use the results to make inventory decisions.

OPTIMIZATION SYSTEMS

Used to estimate the effects of different decision alternatives

Based on optimization models Can incorporate uncertainty Example: Assign sales force to territory Provide

the best assignment schedule

SUGGESTION SYSTEMS

A prescriptive model (this is the way it is) may be used to suggest to the decision maker the best action may incorporate an Expert System

Example: Bank customer applies for personal loan

Use the system to recommend a decision

EXAMPLES OF DSS American airlines: for pricing decisions and

choosing air routes IBM: for determining routing for repair people Texas oil and gas: for evaluating potential

drill sites National Gypsum: corporate planning and

forecasting.

DSS IN BUSINESSES As businesses become more aware of the

power of decision support systems, they are using them in ever-increasing areas of the business.

MANAGERS AND DECISION MAKING For each decision you make, the decision will

fall into one of the following categories:1. Structured Decisions2. Unstructured 3. Semi-Structured

1-STRUCTURED DECISIONS

Often called “programmed decisions” because they are routine and there are usually specific policies, procedures, or actions that can be identified to help make the decision “This is how we usually solve this type of

problem”

2-UNSTRUCTURED DECISIONS

Decision scenarios that often involve new or unique problems and the individual has little or no programmatic or routine procedure for addressing the problem or making a decision

3-SEMI-STRUCTURED DECISIONS

Decision scenarios that have some structured components and some unstructured components.

An expert system  is an information system that captures and stores the knowledge of human experts and then imitates human reasoning and decision-making processes for those who have less expertise.

Examples of expert systems is seen in systems that have resolved diverse problems as diagnosing illnesses, searching for oil. 

Expert systems are one part of an exciting branch of computer science called artificial intelligence.   Artificial intelligence (AI) is the application of human

intelligence to computers.   AI technology can sense your actions and, based on logical

assumptions and prior experience, will take the appropriate action to complete the task.  AI has a variety of capabilities, including speech recognition, logical reasoning, and creative responses.

5-EXECUTIVE INFORMATION SYSTEM(EIS)

Expert systems are composed of two main components:  a knowledge base and inference rules. 

 A knowledge base is the combined subject knowledge and experiences of the human experts.  

The inference rules are a set of logical judgments applied to the knowledge base each time a user describes a situation to the expert system.

5-EXECUTIVE INFORMATION SYSTEM(EIS)

Now, how can we used these IS types in an organization?

DIFFERENT LEVELS OF ORGANISATION

Within any single organization, executives at different levels in the management hierarchy have very different information requirements, and different types of information systems have evolved to meet their needs. A common approach to examining the types of information systems used within organizations, is to categories IS applications by the roles they play at various levels in the organizational structure. There are four levels:

1. At the lowest level, non-management staff.2. Operational management.3. Tactical management .4. At the top of the pyramid, strategic

management.

LEVELS OF ORGANISATION :LOWEST LEVEL

The lowest level, non-management staff attend to routine daily business transactions.

Type of IS used : Transaction processing system (TPS)

Example: selling goods and issuing receipts for payment.

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2. OPERATIONAL LEVEL Operational management are responsible for

monitoring the transactions that are occurring, and dealing with any problems that may arise.

Type of information system used :management information system.

Day-to-day business processes Interactions with customers Information systems used to:

Automate repetitive tasks Improve efficiency

Decisions: Structured (What are structured decisions?) Recurring

Examples of Operational Level Decisions?Scheduling employees , placing orders.

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3. MANAGERIAL (TACTICAL) LEVEL

Tactical management decide on budgets, set targets, identify trends and develop short term plans for the business.

Type of information system used :Decision support systems. Monitoring and controlling operational-level activities Providing information to executive level Midlevel managers

Focus on effectively utilizing and deploying resources Goal of achieving strategic objectives

Managers’ decisions Semistructured Moderately complex

Examples of Managerial Level Decisions? New tools to cut costs or improve efficiency

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4. EXECUTIVE (STRATEGIC) LEVEL

At the top of the pyramid, strategic management is responsible for defining the long term goals of the company, and how it intends to position itself within its particular industry.

Type of information system used : Executive information systems.

The president, CEO, vice presidents, possibly board of directors.

Decisions Long-term strategic issues Unstructured decisions Complex and non-routine problems Long-term ramifications

Examples of executive level decisions? New products that change the industry

DIFFERENT LEVELS OF ORGANISATION AND TYPES OF SUPPORT SYSTEMS

Tactical

Manage

ment

Operation Manage

ment

Non-

manage

ment staff

TPS

MIS

DSS

EIS

SUMMARY CHARACTERISTICS OF EACH LEVEL OF MANAGEMENT SUPPORT

HOW DOES IS SUPPORT BUSINESS OBJECTIVES?

Increasing the efficiency of business processes

Cutting supply costs Improving levels of customer service

Improving managerial decision-making

THE SUPPORT THAT DIFFERENT TYPES OF IS PROVIDE TO BUSINESS OBJECTIVES

Record routine

transactions within the different

departments of an

organization;

Draw from the TPS to

monitor and control

business performanc

e;

Assist managers

with complex decision-making tasks;

Make use of information technology

to gain competitive advantage;

TPS MIS DSS EIS

Thank you . Any questions?