CMSC G

Management Information
Systems
Eliezer A. Albacea
Xavier Aurelio Q. Tabbada
University of the Philippines

OPEN UNIVERSITY
Management Information Systems
By Eliezer A. Albacea and Xavier Aurelio Q. Tabbada
Copyright © 1998 by Eliezer A. Albacea and Xavier Aurelio Q. Tabbada

and the UP Open University
Apart from any fair use for the purpose of research or private study,
criticism or review, this publication may be reproduced, stored
or transmitted, in any form or by any means
ONLY WITH THE PERMISSION
of the authors and the UP Open University.
Published in the Philippines by the UP Open University

Office of Academic Support and Instructional Services
2/F, National Computer Center
CP Garcia Avenue, Diliman, Quezon City 1101
Telephone 63-2-4261515
Email oasis@upou.edu.ph
First edition, 1998

Relayout July 2007
Layout by Helen M. Creer
Printed in the Philippines

Preface
Welcome to the distance mode offering of Computer Science G,
Introduction to Management Information Systems. This text was written
with the aim of introducing the concepts of Management Information
Systems.
Management Information Systems (MIS) is the application of information

technology to organizational and managerial needs. After reading and
doing the SAQs and activities in this text, you should already be aware of
what information technology can contribute to an organization and how
to bring that solution to fruition. Your strength after taking this course lies
in your ability to apply the knowledge of information systems and
technology to help organizations compete more successfully in the
marketplace or to streamline current operations.
Here you will be trained to utilize your business-based backgrounds in

working with managers and users to specify technology needs that benefit
the organization. Another skill expected of you after this course is to be
able to analyze and implement enterprise-wide solutions to information
problems and manage telecommunications efforts. You might also be
expected to know how to implement and manage corporate-wide
information systems projects.
Gee! It seems that there are a lot of things expected of you. Well, the idea
of this course is to introduce you to the concepts of MIS. Learning MIS
does not usually occur after doing a semester course. You have to practice
it in your organization and apply what you learned. As you go along, you
become more experienced and learning should become faster due to the
correct foundation provided by this course.
Good luck and I encourage you to allocate enough time for this course.
For any comments and corrections, please contact one of the authors using
the address below.
Institute of Computer Science

University of the Philippines Los Baños
(049) 536-2313 Phone
(049) 536-2302 Fax
eaa@ics.uplb.edu.ph Email
http://www.uplb.edu.ph/~eaa Web page
Table of Contents
Module 1 Information Processing in Perspective, 1

Objectives, 1
Computers and Information Processing, 1
Data, Information, and Information Systems, 2
Data versus information, 2
Information, 8
Information Systems, 10
Information Systems and the Human Heart, 14
Information Resource Management, 16
Information and Decision-Making, 17
Levels of Management, 18
Decision-Making, 19
Types of decisions, 20
The decision-making process, 21
Why We Study Management Information Systems, 24
Information Systems Trends, 24
Answers to Self-Assessment Questions, 26
Module 2 Systems Planning and Development, 29

Objectives, 29
MIS (EM-EYE-ES) Planning, 30
MIS Strategic Planning, 31
MIS Operational Planning, 37
Systems Development and Management, 40
The system life cycle, 41
Conception stage, 41
Development stage, 42
Birth stage, 42
Production stage, 42
Death stage, 42
Assessing System Feasibility, 43
Technological feasibility, 43
Economic feasibility, 44
In-House versus Proprietary Software, 45
Approaches to Systems Development, 47
The prespecification approach, 47
The prototyping approach, 49
Management of Systems Development Projects, 50
The project team, 50
The project leader, 51
The project management variables, 52
Application Development Tools, 53
Personal Computer Tools, 54
Query Languages, 55
Graphics Generators, 56
Application Generators, 56
Computer-Aided Software Engineering (CASE) Tools, 58
Design tools, 59
Prototyping tools, 59
Information repository tools, 60
Program development tools, 60
Methodology tool, 61
When Application Development is no Development, 63
Systems Implementation, 66
User Support for System Implementation, 67
User manuals and help screens, 67
Training programs, 68
System Testing, 69
Testing with test data, 69
Testing with live sata, 70
System Acceptance, 70
Conversion, 71
Parallel conversion, 71
Direct conversion, 72
Phased conversion, 72
Pilot conversion, 73
Post-Implementation Audit and Maintenance, 74
Module 3 Organizational Information Systems, 81

Objectives, 81
Introduction to Functional Information Systems, 81
Executive Information Systems, 83
Qualities of an Executive Information System, 85
Implementing an Executive Information System, 86
Buying application-development software, 86
The Marketing Information System, 86
The Input Subsystem, 88
Data processing subsystem, 88
Marketing research subsystem, 88
Marketing intelligence subsystem, 89
The Output Subsystem, 91
Product subsystem, 91
Place subsystem, 92
Promotion subsystem, 95
Pricing subsystem, 95
The Manufacturing Information System, 97
The input subsystem, 98
The output subsystem, 100
The Financial Information System, 105
Input subsystems, 106
Output subsystem, 110
Module 4 Office Automation, 119

Objectives, 119
What’s Automation?, 119
The Office, 120
What’s in an office?, 120
Let’s trace the history of office systems, 121
Office Tasks and Automation Tools, 122
Document Management Systems, 123
Publishing and distribution, 132
Archive, 132
Communication systems, 132
Data manipulation tools, 136
Other tools, 140
Management Issues, 140
Cost of Using These Tools, 141
Is There a Formula for Putting Them All Together, 142
Internet Resources, 143
Module 5 Decision Support Systems, 147

Objectives, 147
Let’s Look at a Piece of History, 149
Concepts in Decision-Making, 150
EDP, MIS and DSS (The Alphabet Soup), 155
DSS Objectives, 158
DSS Design Issues, 159
Predicting the Future with Historical Data, 159
Text-based data and soft information, 159
Formalizing the informal, 159
Uncertainty, 160
DSS Implementations, 160
Traditional DSS, 161
Organizational DSS, 163
Differences between Traditional DSS and Organizational DSS, 164
Simulation and Modeling, 166
Module 6 Artificial Intelligence and Expert Systems, 171
Objectives, 171
The Thing called “Artificial Intelligence”, 173
What are Expert Systems?, 175
Benefits of an expert system, 176
Parts of an expert system, 176
How do you create an expert system?, 179
Applications of expert systems, 179
Other AI Technologies, 180
Natural language processing, 180
Speech recognition and synthesis, 181
Robotics, 182
Computer vision, 182
Fuzzy logic, 182
Neural networks, 183
Module 7 Systems Analysis and Design Overview, 189

Objectives, 189
What’s Systems Analysis and Design, 190
The Systems Analyst, 191
Systems Development Life Cycle, 191
Preliminary Investigation, 192
Systems analysis, 196
Systems design, 202
Systems development, 207
Implementation, 209
References, 213
Module 1
Information Processing
in Perspective
W elcome to the first module on Management

Information Systems. I suggest that you
prepare for yourself a glass of ice-cold pineapple
Objectives
juice before we begin the session. At the end of this module,
you should be able to:
This module shall introduce you to some
fundamental concepts surrounding information 1. Differentiate data from
systems with emphasis on the impact of information;
information systems on the decision-making 2. Enumerate the qualities of
process. meaningful information;
3. Define the terms information
Well, get those brain cells ready ‘cause I’m ready system, Management
when you are! Information System, and
Information Resource
Management;
Computers and Information 4. Identify the parts of an
Processing information system;
5. State the importance of
Information Resource
Some four decades back, computers were used
Management, and;
mainly in the storage and retrieval of data. The
6. Apply the steps in decision-
decades that followed saw computers processing
making.
data in what is known as electronic data
processing or EDP. Today, computers not only
generate meaningful information by processing data but also aid in the
flow of information within and among organizations.
4 CMSC G Management Information Systems
Let us take a look at a very simple situation. Suppose a sari-sari store

owner keeps a list of the store’s customers with accountabilities (Figure
1-4).
Customer Name Amount Due

Floresto Franco PhP 122.00
Rudolfo Gaminde, Jr 106.00
Aileen Guira 164.00
Michael Flores 212.00
Vincent Negre 95.00
Noel Manlangit 43.00
Stephen Capuno 207.00
Roselyn Cunanan 3.00
Elmar Udarbe 57.00
Erwin Jalao 38.00
Figure 1-4. A list indicating names of customers of a sari-sari store with

accountabilities and their corresponding accountabilities
Observe that the entries under customer name and amount due are simply
data.
By subjecting the entries under amount due to the process of addition, the
sum of PhP1,047.00 can be obtained. This sum is an information indicating
the store’s collectible amount. This information may then be used by the
store manager in deciding as to whether or not to suspend credit for the
next five days.
Well, would you care, anyway? I wouldn’t if I were you. If the store
manager gave you the same piece of information, you’d probably say,
“What’s in it for me, anyway?” That’s because the piece of information
would then be out of context. In other words, what is information to
someone may not be information at all to somebody else.
By selection, the store manager can also extract the names of customers
whose accountabilities have exceeded PhP100.00. Figure 1-6 exhibits the
result of this process. In the figure, the names of customers whose
accountabilities have exceeded PhP100.00 are highlighted. The store
manager can then use this information and perhaps some data as he/she
begins to send these customers notices of accountability.
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The operations addition, selection, and sorting applied on the very short
list of customer names and amounts due are quite easy to do, wouldn’t
you agree? I bet you would. Just imagine how much time would be spent
in manually carrying out the same operations if the store grew and the
number of customers with accountabilities grew to a few hundreds!
Information would become less and less accessible to the manager. As a
result, decisions would become less and less certain.
The way data is defined seems to attach to it a certain characteristic of

being less than information. We must, however, realize that without data,
information could not be generated. Data utilized by an information system
are therefore more appropriately termed data resources to emphasize
the fact that these too are resources and are as valuable as information.
After all, information is only as good as the data it is derived from.
By now, you should have a clear picture as to what data and information
are and how these are used by people in organizations in carrying out
such tasks as decision-making.
Before we move on to a more detailed discussion on information and

information systems, here is a question that you may want to try answering.
SAQ 1-1
In your own words, what is the difference between data and
information? Use the space provided below for your answer.
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Information
Throughout this course, we will be dealing with information for management.
It is therefore necessary that we are able to qualify information.
Do you suppose that you can come up with a good decision when
such is based on erroneous or incomplete information?
Do you think you could put to use information that comes to you
too late?
Do you believe that to be able get to the best decision, one should
have even the least significant information?
For information to be qualified as information for management, it has to

be
 accurate,
 verifiable,
 complete,
 timely, and
 relevant.
Decision makers rely heavily on information for decision-making. As much

as possible, information that reaches managers should be accurate (error-
free) and verifiable (can be cross-checked). For instance, before a farmer
plants his crop, he evaluates the soil on which to plant. Inaccurate data
on the soil may lead the farmer to planting on the wrong soil!
Aside from these, management information should be complete. This does

not imply, however, that decision makers should be swamped with
information. Filtering of information should be carried out to avoid
information-overload. Filtering is the process of weeding out data and
information that may not be meaningful to the decision maker. For
example, a mall’s manager need not know how much a can of tuna costs
in order for him to make decisions for the enterprise, would he?
As you might have expected, through filtering, only information relevant

to the problem at hand reaches decision makers.
Of course, the information becomes useless if it is not delivered when and

where it is needed. It has to be timely.
By now, you should be able to qualify information for management.
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Module 1 9
SAQ 1-2
What are the qualities of meaningful and useful information?
SAQ 1-3
What is the importance of information filtering?
By the way, you can check out my answers at the end of this module.
How did your answers compare to mine? I’m sure the questions were no
sweat at all! (Not a drip!)
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Information Systems
Organizations today operate in a complex world. As such, decision makers
put a lot of things into consideration when they perform their craft of
decision-making fast.
Information can come from various sources inside and outside an

organization. Hence, an organization must be capable of obtaining the
information its decision makers need. To ensure that information is
available to whoever needs it, an information system is maintained.
What is an information system? An information system is a complex

that provides decision makers with the information needed for decision-
making. It involves the collection, storage, processing, and packaging
of data and information.
Information systems can be found in every organization, big or small. As

an example, consider the following business organization called Dusk Video
Shop.
Dusk Video Shop started operations two weeks ago with 80 video tape
titles at two copies per title in VHS format available for rent to members.
Below are some of the shop’s policies:
1. A membership fee of PhP100.00 is required of each non-member

borrower.
2. Only members with proper identification are allowed to borrow video
tapes. However, a non-member bearing an authorization from a
member to borrow and the same member’s identification card issued
by the shop may check out at most two tapes.
3. A member is allowed to borrow a maximum total of five (5) video
tapes in his/her name at any one time.
4. Borrowed tapes are due after a number of days equal to the number of
tapes borrowed at any one transaction.
5. Every video tape returned after the due date is subject to a fine
amounting to 30% of the rental for every day of delay.
Let us take a closer look at the way Dusk, the shop’s manager, organizes
records about members and their transactions with the shop.
Dusk uses a tray of indexed cards that look like the one shown in Figure
1-9.
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As expected, the task of maintaining an index card for every member is

not easy. Suppose the shop had a thousand members. An attempt at
getting the shop’s total collectible in fines would mean an inspection of
each and every index card!
Tabbada, Pamela Bago Oshiro, Mintal, Davao City

Gem
Date Date
Title Date Due
Borrowed Returned
The Bridges of Madison County 4/10/98 4/13/98 5/2/98
Intersection 5/5/98 5/8/98 5/6/98
Figure 1-9. Sample index cards utilized by Dusk in keeping records of

transactions between the video shop and its members
While data processing may be done manually, the use of computers presents
a better alternative. What takes several people hours to process takes a
computer just seconds to do! This makes information more readily
available.
As a result, many information systems today are computer-based. A

computer-based information system has the following components:
• inputs
• processes
• outputs
• data stores
• hardware
• people
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Figure 1-10 shows how these components take their places in an

information system.
PEOPLE
INPUT PROCESSES OUTPUT
DATA
STORE
HARDWARE
Figure 1-10. The six basic components of a computer-based information

system: inputs, processes, outputs, data stores, hardware, and people
Central to the information system is the process component. A process

may be a procedure performed by people or a routine performed by
hardware through software. The process component processes the input
electronically through the computer hardware or manually through
human resource (or the people component). Input into the process
component can come from outside the system (such as those input through
the keyboard) or from the system’s data store (such as those already input
and saved into disks or tapes). The result of the processing is then packaged
into a report for the decision maker’s consumption. A copy of the result is
usually stored electronically (in disks) or manually (in print out form) for
future references. On top of it all, and undoubtedly the soul of the
information system, are the people who keep the system going. People
also perform some input and processing tasks (e.g. keying in data through
the keyboard and manually verifying the validity of some data).
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Module 1 13
Not all information systems are computer-based though. Take Dusk Video
Shop for example. Data about members and their transactions with the
shop are manually collected and stored (recorded on index cards). These
data may then be processed (perhaps by inspection) to come up with the
names of members who have not borrowed a tape for the past ten days.
Even the sari-sari store considered earlier has an information system of its
own.
An information system instituted to support management functions such

as communication and decision-making is called a Management
Information System or MIS.
So, are you ready to face some more questions?
SAQ 1-4
What is the primary role of an information system in an
organization?
SAQ 1-5
In your own understanding, why are some information systems
computer-based?
Another piece of cake, right? So, how many pieces of cake have you
eaten (swallowed?) so far? You must be thirsty by now.
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SAQ 1-6
What are the typical parts of a computer-based information system?
SAQ 1-7
What is a Management Information System or MIS?
You know where to find my answers.
Information Systems and the Human Heart

The role of an information system in an organization is not very difficult
to understand. We can liken it to the role of the heart in the human body.
In the same way that the heart pumps blood to the different organs of the
body, information systems pump information to different parts of the
organization.
In the same way that bad blood pumped to different organs of the body
can cause illness or even death, bad information pumped to different parts
of an organization can be disastrous to the organization.
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In the same way that too much or too little blood supply can weaken the
body, too much or too little information could spell disaster for the
organization.
In the same way that coordination among the organs of the body is
prerequisite to a healthy body, coordination among parts of an
organization is prerequisite to a healthy organization.
Now, try the activity that follows.
Activity 1-1
From the preceding discussion on data and information, it is worth
noting that what is data to someone may be information to another.
Also, what is information to someone may only be data to somebody
else.
For this activity, you will need to identify a fairly small business
organization, a local bakery for instance. You may even choose
your own organization.
When you have identified an organization of your choice, establish

a contact with somebody from the organization familiar with the
goings-on in the organization. Find out what data and information
flow through and within the organization. Through your contact,
identify the person or persons involved in the operations of the
organization. By the way, do not be surprised if your contact
refuses to disclose some details.
Do you see how some personnel support the information needs of

other personnel? Now, point out what particular data undergo
processing to produce information. For example, you may point
out that the daily total sales in a month are added up to produce
the total sales for the month which is information to the manager.
Present your findings to class.
In a short while, we shall be discussing Information Resource

Management and Decision-Making. You may want to stretch those
joints (check if you still have them!) before we proceed.
Are you set? Well, what are you waiting for? Step right in!
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Information Resource Management

Traditional organizations look at
money, materials, and people as
their three major resources. They
focus on raising human efficiency
through motivation and work
simplification. They implement a
systematic flow or movement of
materials. They rely almost
completely on financial experts for
advice on where to invest their
monetary resource. While these can
propel an organization to
prosperity, these may not be able to
give the organization a comfortable
advantage over other organizations.
Today, modern organizations look at information as their fourth major

resource. Thus emerged the need for organizations to manage information
just as they manage money, materials, and people.
Information Resource Management or IRM is a concept that values information

as an organizational resource and, as such, advocates it management and
control.
Recall from the previous module that Management Information Systems

are instituted to support such management functions as communication
and decision-making. Through IRM, an organization is able to get the
right information to the right decision maker at the right time in the right
form. An IRM therefore serves to justify the institution of a Management
Information System because such is a service that an MIS delivers. Also,
through IRM, an organization is able to justify the formation of an
information management team to ensure the maximized use of its
instituted MIS.
The competitive advantage that comes from providing management with

the information it needs through MIS stems from an efficient management
of information itself.
I guess you’re ready for a couple more of questions.
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Module 1 17
SAQ 1-8
In your own words, what is information resource management or
IRM?
SAQ 1-9
What is the significance of IRM to MIS?
Information and Decision-Making

One of the key functions of management is decision-making. Of course,
we now realize that information is a vital ingredient to good decision-
making. We also realize that Information Resource Management or IRM,
through Management Information Systems or MIS, provides information
for management decision-making.
The degree to which information needed for decision-making is available

depends on the level of management. Would you like to find out why?
Read on…
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Levels of Management
In comparatively big organizations, there are three levels of management
performing decision-making:
 the strategic level,

 the tactical level, and
 the operational level.
Thus, the need for information in these levels is continuous. Figure 1-11
shows where these management levels are situated in an organization.
Strategic
Management
Level
Tactical
Management
Level
Operational
Management
Level
Non-Management Level
Figure 1-11. An organizational model showing the layers of management

in a comparatively big organization.
Managers in the strategic level are tasked to identify long-term strategies

and to formulate policies for the organization. Managers in the tactical
level implement these strategies and policies through the identification of
tasks that need to be accomplished. Managers in the operational level are
expected to complete these specific tasks through the utilization of the
organization’s resources like the human resource in the non-management
level.
As an example, suppose managers in the strategic level of a software

development company want to see the organization as the leader in
software development within the next three years. Seeing that this can
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only be accomplished if the organization had the best programmers,

managers in the tactical level may identify skills upgrading for the
company’s programmers as among the many courses of action. The
managers in the operational level then facilitate the conduct of training
for the organization’s programmers.
Now, try answering these questions.
SAQ 1-10
What are the different levels of management performing decision-
making?
SAQ 1-11
What task do managers in each decision-making level of
management perform?
How did you find the questions? Easy, right?
Decision-Making
Decision makers make poor decisions every now and then. This is because
information available to support decision-making may not always be
enough to zero in on a specific course of action. Even so, a manager has
to make decisions - timely decisions.
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As we ascend to the top of the pyramidal organizational model presented

in Figure 1-13, the decision-making process becomes tougher. When
information available is limited, the decision maker relies considerably on
his experiences, intuition, and common sense in decision-making.
Types of decisions
Decisions are classified into three types:
 programmed decisions
 non-programmed decisions
 partially programmed decisions
These three types of decisions stem from the three types of problems that
decision-makers face:
 structured problems
 unstructured problems
 partially structured problems
Programmed Decisions. Programmed decisions are made on well-defined

or structured problems. For example, in Dusk Video Shop, suppose a
non-member attempts to borrow a video tape using a member’s account.
As per the shop’s policy, only members with proper identification are
allowed to borrow video tapes unless otherwise an authorization and
proper identification are presented. Therefore, the non-member should
not be allowed to borrow a video tape if he/she does not present an
authorization coming from a member.
Programmed decisions are actually easy to make. In fact, computers can

be programmed to perform decision-making for such structured problems.
For instance, a computerized inventory system can recommend a reorder
when the number of stocks left is at the reorder point. In this case, the
supply officer need not bother to check the stocks every so often just to
keep the stocks from falling below minimum.
Non-Programmed Decisions. At the other end of the spectrum are the

non-programmed decisions. Non-programmed decisions are made on ill-
defined problems. During crisis, for example, when a manager is
contemplating on laying-off workers, he is in fact facing an ill-defined or
unstructured problem. In this case, the decision maker needs much
information to make a rational decision.
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Partially Programmed Decisions. Within the gray area are the partially
structured decisions. Partially structured decisions are applied to problems
that have structured components and unstructured components at the
same time. When an inventory system reports a need to reorder laser
printers during a currency crisis, the reorder has to be done as a matter of
policy but ordering a hundred laser printers may not be a good idea.
Obviously, programmed decisions are easiest to make over non-

programmed decisions and partially programmed decisions. Hence, the
more programmable a decision is, the more confident a decision maker is
of his decision.
Why not try deciding on what answer to give to the following question
this time?
SAQ 1-12
In your own words, how do the different types of decisions differ?
The decision-making process

The decision-making process is basically a six-step process. In discussing
the different steps in the process, let us consider the case of Dusk Video
Shop. Let us suppose that Dusk wants to include video CDs as items
available for rent to members of the video shop. His problem is where to
get these CDs.
Step 1. Set the objective or objectives.
Dusk’s objective is to be able to decide where to buy video CDs

for the video shop.
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Step 2. Identify constraints.
Dusk might be seeing a budget as tight as PhP10,000.00. Perhaps

he is also looking at a within a week delivery so as to maintain a
competitive edge over other video shops in the area.
Step 3. Identify alternatives.
Dusk procures a list of video CD suppliers and comes up with

three names: Visual Shop, Clear Screen, and Video Quest. He
may eventually pick one of these as supplier or he may eventually
not pursue his plan for some reason.
Step 4. Gather appropriate data and information.
Dusk canvasses and gets the following data:
Supplier Number of video CDs Number of days to

for PhP10,000.00 budget delivery
Visual Shop 15 4
Clear Screen 25 6
Video Quest 30 10
Dusk also notes from talks with some of the suppliers’ customers
that Video Quest is not prompt in delivery.
Step 5. Evaluate alternatives.
Visual Shop promises the soonest delivery but offers only 15 video
CDs.
Clear Screen, on the other hand, offers 25 video CDs for delivery
within six days.
Video Quest provides the best value for Dusk’s money at 30 video
CDs but the 10-day delivery schedule is way beyond the 7-day
delivery Dusk requires. This, aside from the bad comment about
Video Quest, is certainly not a good deal.
Step 6. Choose the most acceptable alternative.
Dusk chooses to close the deal with Clear Screen.

While most decision-making problems may not be as simple as
the one presented above, the decision-making process basically
follows the fundamental steps we outlined.
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Choose the most acceptable alternative
Evaluate the alternatives
Gather appropriate data and information
Identify the alternative courses of action
Identify the constraint or constraints
Set the objective or objectives
Figure 1-12. The six fundamental steps in the decision-making process
I’ve got another question to throw. Try catching it!
SAQ 1-13
What are the six fundamental steps in decision-making?
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Why We Study Management Information

Systems
Why then do we study MIS? Here are a few of the many reasons why.
 MIS facilitates better communication by strengthening communication

lines and by providing communication links where these are needed.
 MIS provides better information through improved information
systems.
 MIS supports decision-making.
 MIS increases productivity through efficiency.
Information Systems Trends

Among the trends emerging as a result of the revolution in information
(as I fondly call it) are the following:
 Computer literacy has become a must at work.

 Computer hardware and software are becoming more powerful and
less costly.
 Data communications and networking have pushed computer systems
into connectivity. Through connectivity, old and new computer
hardware are able to link into networks. This facilitates resource
sharing.
 MIS has gained much reputation as a means of improving productivity,
supporting communication and decision-making, and getting the
competitive advantage.
This time, try answering the SAQ 1-14 and 1-15.
SAQ 1-14
In your point of view, why do we study MIS?
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SAQ 1-15
With the revolution in information, what trends have emerged?
Now here’s a tough one.
Case 1.1
Steelfox Duck Farm has been in operation for more than a year
now. The farm supplies duck eggs to several balot vendors.
With the growing demand for balot in the market, Jose, the farm
manager, decided to expand his farm by increasing the number of
laying ducks from 100 to 200 heads. However, his backyard is
already too small to accommodate more ducks.
Jose then considers buying a small piece of land for the purpose.
He has two options for this: either he buys the lot adjacent to his
farm or he buys the lot in a secluded area about three hundred
meters away from his house.
Several things ran through Jose’s mind. If he relocated his farm, he

would need to hire somebody to watch over the ducks for him
especially at night. Besides, he would also need to dig another well
for water supply.
Should Jose expand his duck farm to the adjacent lot or should he
relocate his farm instead?
Help Jose make the decision. You may point out other
considerations that Jose may have missed. Do not forget that you
may recommend Jose not to pursue the planned expansion for
some reason.
Report your decision to class.
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Well, that’s it for this session. I hope you learned a lot.
The next module, Module 2, shall introduce you to the management,

development and implementation of information systems. It kicks off with
the MIS Planning Process. Oops! That’s em-eye-es planning. Well, see
you when you get there!
Answers to Self-Assessment Questions

ASAQ 1-1
Data are raw while information is processed data.
ASAQ 1-2
For information to be meaningful and useful, it has to be accurate,
verifiable, complete, relevant, and timely.
ASAQ 1-3
Information filtering avoids information-overload.
ASAQ 1-4
An information system serves as provider of meaningful information.
ASAQ 1-5
Some information systems are computer-based because there are tasks
that computers can perform more efficiently than humans can.
ASAQ 1-6
A computer-based information has inputs, processes, outputs, data stores,
hardware, and people.
ASAQ 1-7
A Management Information System is an information system intended to
support managers perform management functions.
ASAQ 1-8
Information Resource Management or IRM is a concept that values
information as a management resource and, as such, advocates its
management.
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Module 1 27
ASAQ 1-9
IRM serves to justify MIS.
ASAQ 1-10
The levels of management performing decision-making are the strategic,

the tactical, and the operational levels.
ASAQ 1-11
Managers at the tactical level formulate long-term plans and policies for
the organization. Managers at the tactical level identify projects that have
to be accomplished in order to realize these long-term plans and policies.
The managers at the operational level complete and implement these
projects.
ASAQ 1-12
Programmed decisions handle structured problems. Non-programmed

decisions are made on ill-defined problems. Partially programmed decisions
are made on problems that have structured and unstructured components
at the same time.
ASAQ 1-13
The six fundamental steps in decision-making:
1. Set the objectives.

2. Identify constraints.
3. Identify the alternative courses of action.
4. Gather appropriate data and information.
5. Evaluate the alternatives.
6. Choose the best alternative.
ASAQ 1-14
We study MIS basically because it supports the different functions of

management such as communication and decision-making.
ASAQ 1-15
With the revolution in information, computer technology has improved

rapidly, resource sharing has become the new culture, and computer
literacy has become norm.
UP Open University
Module 2
Systems Planning
and Development
W elcome to the second module

on Management Information
Systems. If you enjoyed that
Objectives
pineapple juice you had in Module
At the end of this module, you
1, why not try orange juice this time?
should be able to:
After all, it’s good for your health,
wouldn’t it?
1. Outline the steps in the MIS
planning process;
Whew! That was a long list of
2. Enumerate the stages in a
objectives to achieve. If you’re ready
system’s life cycle;
to achieve ‘em all, then let’s dig in!
3. Identify considerations in the
assessment of system
This module introduces you to
feasibility;
systems planning, development, and
4. Differentiate the
implementation. Let us start off with
prespecification approach to
the planning stage.
systems development from the
prototyping approach;
5. Name some application
development tools;
6. Discuss issues surrounding
system implementation; and
7. Describe the different options
for system conversion.
MIS (EM-EYE-ES) Planning
A long queue at a grocery store. A grocery store implements a

point-of-sale system but fails to train its salespersons in
handling transactions through the new system.
A crowded office. It
seems like we are
New printers arrive. Who a growing family
ordered those printers? with a shrinking
Those are not compatible home.
with our current
hardware!
Had there been efforts at planning, these disasters could have been easily
avoided.
Realizing the competitive advantage that they can derive from the use of
Management Information Systems, organizations today put serious efforts
at MIS planning. MIS planning is a planning activity that practically
encompasses all operations of the organization immediately or remotely
affecting information flow.
Sounds tough, huh! Well, it is.
MIS planning is divided into two phases:
 MIS strategic planning

 MIS operational planning
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Module 2 31
MIS MIS
Strategic Strategic Operational
Plan Planning Planning
MIS
Plan
Figure 2-1. The two phases in MIS planning are the MIS strategic planning
and the MIS operational planning phases
MIS strategic planning proceeds from the output of the strategic planning
activity, i.e., it is based on a strategic plan already in place. MIS operational
planning, on the other hand, is based on the MIS strategic plan.
Recall from the previous module that managers at the strategic level
formulate policies and long-term strategies for the organization. For
instance, seeing a very strong market for beer, they may want to see
increased production and more sales within the next three years. Or,
perhaps Dusk would want to see a bigger video shop with more members
and with more video tapes and video CDs available for rent to members.
Let us now investigate each of the two phases in MIS planning.
MIS Strategic Planning

With the strategic plan in place, managers at the strategic level, together
with MIS professionals, formulate an MIS strategic plan for the company
or organization.
Let us consider the case of our favorite video shop, Dusk Video Shop,
once more.
Realizing that the current transaction processing system is not doing the
shop any good anymore, Dusk finally decided to call his friend Steel, an
MIS professional, for help.
UP Open University
Let’s eavesdrop on their conversation.
Dusk: We are having some difficulty processing transactions now. We

work with over a hundred index cards everyday!
When a member borrows a video tape for instance, we pull his or

her card out of a tall stack and we check if he or she has exceeded
the allowable number of tapes that a member could borrow. If he
or she has not then we record the title of the material he or she
wishes to borrow and the corresponding date the tape is due.
It doesn’t end there. When a member inquires of his or her

accountabilities, we pull his or her card out and then inspect each
transaction for due dates that have lapsed. Then we compute for
the amount due.
Steel: So, what have you done so far?
Dusk: Nothing. I have been thinking of hiring an additional cashier but I

feel it will not be economically advantageous to the shop. Besides,
it would not speed-up processing anyway.
Worse, once the video CDs arrive… I don’t know what to do.
Everything’s getting more complicated! I’m too overwhelmed!
What do you suggest I do?
Steel: It’s a good thing you came to me. (Or I came to you?) I have been
dealing with companies, big and small, with problems like yours.
What you need now is my friend who is an MIS strategic plan.
Dusk: You’re not trying to scare me are you?
Steel: No, I’m not!
Dusk: So, what’s that thing called MIS strategic plan all about?
Steel: An MIS strategic plan is a plan that MIS professionals and

managers at the strategic level formulate to support their strategic
plans. The MIS strategic plan reflects the changes in the way data
and information flow in the organization and the way these are
handled by the organization.
To make things simpler, let us start with a very rough strategic

plan. How do you see your shop a few years from now?
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Module 2 33
Dusk: With my own two eyes, of course.
Steel: Funny. Very funny.
Dusk: Well, I see my shop with more members and more video tapes and
video CDs available for rent.
Steel: And how do you plan to manage all of that?
Dusk: You know what, Steel? If I knew the answer to your question,
then I would not have any problem with my shop at all.
Steel: I knew you’d say that. And that is where an MIS strategic plan
comes in. It supports your strategic plan, see?
Dusk: I get it. How do I make an MIS strategic plan then?
Steel: An MIS strategic plan is not easy to make. It can take as long as a
month for executives and MIS professionals in big business
corporations to complete the plan.
Dusk: Are you saying I have to spend a month just creating an MIS
strategic plan?
Steel: For your teeny weenie shop, it would only take a couple of days to
complete an MIS strategic plan.
Dusk: Stop calling my shop teeny weenie!
Steel: Sorry! Anyway, it all starts with resolving basic planning issues.
Here, we set the planning horizon; say, we are planning for the
next five years or so. In this way, everyone in the planning core
shares the same wavelength with everyone else. Who knows? One
might be planning for the next five years while another might be
thinking of things ten years hence.
It is also here where we formalize the structure of the planning

group by identifying the group’s librarian who will document the
activity and, at the end of the planning session, shall come up
with a compiled MIS plan.
So, I guess you will set the planning horizon and I’ll take care of
the library work.
Dusk: Good thinking. Let me see. I would set the planning horizon to
two years.
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Steel: Fine.
Dusk: That wasn’t so hard.
Steel: Now, we evaluate the current information system that the shop
is using.
Dusk: How do we do that?
Steel: A big corporation that has switched to several different systems

can actually use its previous MIS strategic plan as benchmark in
evaluating the current MIS. In our case, however, we can survey
comments from members regarding the shop’s service, the cashier’s
comments regarding the transaction processing system, and even
your opinion regarding the system’s delivery of information needed
for decision-making.
Dusk: It’s a good thing I keep a suggestion box by the shop’s door.
Steel: To further evaluate the current information system, other sources

of information such as books, periodicals, and experts in the field
provide insights on the current MIS running and on the current
trends in MIS in the market.
I would like to emphasize the importance of this stage of the

planning process. This stage of the planning process allows the
planners to evaluate the current MIS and to review all plans and
activities on-going and in-pipeline for adherence to and consistency
with the original plan and with the organization’s policies.
The current MIS is evaluated with respect to its quality and

effectiveness against the original plan. This is done because systems
reach a point where they lose their value.
Dusk: Well, definitely, the current system is not working the way it should
anymore. It has probably lost its value. It has to be changed. I
have actually received comments from members who say it takes
too long before they can sign out tapes from the shop. Sometimes
they go through all shelves and racks looking for a particular tape
only to find nothing.
My cashier has also told me of how slow the transaction processing

system is. And as for me, it is not worthwhile anymore trying to
squeeze information from the records.
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Module 2 35
Steel: It seems like you really have a big problem. Now, we identify the
constraints to our planning effort. Such issues as low budget, low
computer literacy, and too few in-house computer programmers
are some constraints that may affect the formulation of objectives
in the plan. Even policies may themselves be limiting.
Dusk: Well, I am willing to invest PhP150,000 into a new system. And

believe me, we love computers here. Problem is, none of us knows
how to create a computer program.
Steel: Well you should take up Diploma in Computer Science!
Anyway, we are now ready to identify planning objectives. To

help you out, I have structured this part of the activity. Among
the major aspects of the business that will take a great impact from
the change are the shop’s services to customers and to employees.
The shop’s policies might also change as the new system gives way
to a new culture. Definitely, the current information system will
be greatly affected too.
Dusk: This seems like a tough part. Well, in terms of service, I think we
should speed up transaction processing by adopting a new
transaction processing system.
The new system should also support inquiries by members, by

employees, and by me. Members might want to know if a certain
title is available. They may also want to know how much they
owe the shop. We must be able to respond fast.
I might also want to get a list of the names of all members with
outstanding balances. Of course, this is like scrapping out the entire
system we are using. What do you say?
Steel: Well, you’ve said a mouthful and I think you are going in the right
direction. Exploiting the power of computers can really help your
shop attain much efficiency.
Will there be changes in your policies too?
Dusk: Well, perhaps with better service, I guess I can easily justify an
increase in the membership fees and rentals.
Steel: Okay. The next step would be for me as librarian to compile an

MIS strategic plan which is basically a documentation of all we’ve
just talked about.
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Dusk: That’s it?
Steel: Nope!
Dusk: What’s next then?
Steel: Listen. I’m starved! You don’t even serve coffee?! What kind of a
friend are you?
Dusk: That would be ten pesos on you. Ha! Just kidding, man. Come on
inside and let’s go get drunk on coffee!
Steel: …while our pal here goes over the steps in the MIS operational
planning process in the following discussion.
Compile an MIS Strategic Plan
Identify the planning objectives
Identify the constraints to the planning process
Evaluate the current information system
Resolve basic planning issues
Figure 2-2. The steps in MIS strategic planning
Will our heroes succeed in their effort to put together an MIS plan? Well,
their fate is in your hands now. Let us therefore help them through the
MIS operational planning activity. Read on please.
UP Open University
Module 2 37
MIS Operational Planning

The identification of objectives, goals, and strategies happens at the MIS
strategic planning level. The identification of specific projects to meet
these objectives, goals, and strategies, however, is done through the MIS
operational planning process.
The MIS operational planning activity is a five-step process involving MIS

professionals and managers at the tactical level. I’m sure you know why
we involve the managers in the tactical level at this stage.
In the following discussion, let us consider the case of Dusk Video Shop
again.
The first step in MIS operational planning is to identify the projects that
need to be implemented in order to realize the objectives, goals, and
strategies set forth in the MIS strategic plan. Dusk and Steel may be able
to point out the development of a computer-based information system
(which includes the purchase of computer hardware and the development
of software), the purchase of more video tapes and video CDs and the
acquisition of more space for business as projects.
Bigger companies may consider hardware upgrades, software upgrades,

and the building of a new manufacturing plant as among their projects.
With the constraints identified at the MIS strategic plan and depending
on the urgency of the projects, Dusk and Steel would identify an optimum
mix of activities. Risk is a very important factor here. An organization
would not want to invest on a project with a high risk of failure. It all
depends on the planners to set criteria for evaluating projects with regard
to risk. Besides, not all the projects identified may fit into the budget.
For instance, with the idea of relocating after a few years in mind, Dusk
may find the acquisition of more space for business risky. In this case, the
development of a computer-based information system, and the purchase
of more video tapes and video CDs make it to the optimum mix.
After an optimum mix of activities is determined, Dusk and Steel would

then prioritize. The projects that made it to the optimum list are re-
evaluated to determine their priority. This is done because some projects
need immediate implementation while some are better left for later.
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Since the development of computer software takes some time, Dusk may
decide to start it the soonest. Meanwhile, he would probably want to buy
more video tapes and video CDs to rent out. The purchase of computer
hardware may come later, perhaps.
Dusk should then allocate resources to and schedule the projects. A

chart is employed here to graphically illustrate the expected activities
within a period.
Finally, Steel proceeds to compile an MIS operational plan. The compiled

plan is a documentation of the MIS operational planning activity.
Compile an MIS Operational Plan
Allocate resources to and schedule the projects
Prioritize
Identify an optimum mix of projects or activities
Identify the projects
Figure 2-3. The steps in MIS operational planning
Putting the MIS strategic plan and the MIS operational plan together yields
an MIS plan ready for implementation.
I’ve said a mouthful. Now it’s your turn. Questions…
UP Open University
Module 2 39
SAQ 2-1
What are the steps in MIS strategic planning?
SAQ 2-2
What are the steps in MIS operational planning?
SAQ 2-3
What factor is considered in identifying an optimum mix of projects
or activities?
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Case 2.1
Consider Steelfox Duck Farm, introduced in the previous module,
once again.
Wanting to dominate the duck egg industry in the locality within

the next two years, suppose Jose finally decided to relocate his
farm to the vacant lot a few hundred meters away from his house.
The thought of managing more ducks suddenly shook Jose to

realizing that he is in for more difficult times. This is because Jose
never really put serious efforts at managing his resources properly.
For example, he would indiscriminately sell duck eggs through
get-now-pay-later arrangements. As a result, he often ends up with
no duck eggs left to sell to paying customers.
Jose relies heavily on intuition (memory?) when closing a deal with

a customer. And, as you might expect, customers who have not
paid previous accountabilities often get away with it and close a
second or even a third get-now-pay-later deal! Although Jose keeps
a record of some of his transactions, the entries are so disorganized
that he would rather not read it. In fact, the book has served better
as a scratch pad rather than as a record book.
Jose intends to seek professional help for his problem on managing

resources, particularly on accounting. No, he isn’t seeing a
psychiatrist. Neither is he seeing an accountant. He is seeing you.
As an MIS professional, how would you guide Jose through the
MIS planning process?
Report to class.
Systems Development and Management

One of the most common undertakings that result from the MIS planning
process is the development of a computer-based information system (more
commonly known as CBIS). Central to this development effort is the
development and management of a system software.
UP Open University
Module 2 41
The system life cycle

Just like any other system, an information system undergoes several stages
in its life cycle. These stages are:
 conception
 development
 birth
 production
 death
Production
Birth
Development
Conception
Figure 2-4. The stages in a system’s life cycle
Let us discuss these stages one by one.
Conception stage
A computer-based information system is said to be in its conception stage
the moment someone comes up with an idea on how such a system can
help provide better information.
Just like any other idea, it may meet a lot of opposition.
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Development stage
During the development stage, the members of the project team, also called
the systems development team, (composed of systems analysts, systems
designers, programmers, and end users) get together and work towards the
realization of the idea. End users include those who will directly or
indirectly utilize the system or its outputs.
This stage is characterized by an analysis of the organization’s information

needs, a design of an information system based on the analysis, and a
translation of the design into computer instructions. The result is a system
software that is consistent with and is patterned on the organization’s
policies and information needs.
Birth stage
When development is complete, the system is ready for implementation
in the organization. It is at this stage that the information system is actually
born.
Production stage
The moment the organization implements the information system, the
information system enters the production stage. At this stage, the
information system assumes its role as provider of better information.
It is also at this stage where the information system may undergo a few
modifications to keep up with the organization’s ever-changing information
needs.
Death stage
Just as man’s productivity declines at some point, so does an information
system’s productivity and efficiency. At this point, maintaining the
information system becomes too expensive. Thus, the information system
is thrown away to make way for a new information system.
And the cycle is repeated.
Now, try answering the following question.
UP Open University
Module 2 43
SAQ 2-4
What are the stages in a system’s life cycle?
Were you able to enumerate them all?
Assessing System Feasibility

When a proposal for the development of an information system is submitted
to management, what considerations should they take in deciding whether
or not to approve the proposal?
To enlighten managers, the proposal must include a detailed non-technical

description of the proposed information system, its scope, and possibly its
interaction with existing systems. The proposal must also include
information to aid managers in determining its technological and economic
feasibility.
Technological feasibility
Technological feasibility refers to the capacity of the organization to develop,
implement, and handle the project. When skills and technology available
in the organization are sufficient to support the project, the project carries
little risk for the organization. Otherwise, the proposed project carries a
high risk. Bear in mind that resources have to be invested in any
development effort. This would mean diverting considerable amount of
resources to the undertaking.
Do you think a company in the tuna canning industry would readily shift
to the automobile industry using the same plant?
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Economic feasibility
A computer-based information system is developed not because it is fun
(frankly my dear, it isn’t) or because many are into it but because it is
economically feasible; i.e. the benefits outweigh the cost.
Benefits. Benefits may be tangible or intangible. Tangible benefits are the

monetary savings that the organization realizes when the system is
implemented. For instance, the degree to which a firm over-produces or
under-produces is greatly reduced through a manufacturing information
system.
Intangible benefits, on the other hand, are difficult to quantify. For example,
a more speedy transaction processing system in a grocery store may attract
more customers into the store. Also, a sales analysis system in the grocery
store can aid in the identification of what to sell when. While the sale is not
made by the sales analysis system, it certainly helps the store put its money
where it can grow.
Costs. Costs, in the context of computers and information systems, may

be one-time or recurring. One-time costs include the expenditures in the
development and implementation of an information system. Software
and hardware purchase and development are among the one-time costs
associated with systems development and implementation.
Recurring costs, on the other hand, refer to costs incurred in the

maintenance and in the upgrade of the system hardware and software.
Recurring costs also include consumables (such as diskettes, paper, and
ink) and charges for data communications services (such as Internet
connection).
On the whole, putting intangible benefits in proper perspective can greatly

affect the outcome of the benefit-cost analysis.
You must be starved for questions by now. Let’s munch on some more
questions. They go well with orange juice, you know.
SAQ 2-5
What are the considerations in the evaluation of a proposal for the
institution of an information system?
UP Open University
Module 2 45
SAQ 2-6
What is the difference between one-time and recurring costs?
Do you have a shovel? We’re digging deeper this time.
In-House versus Proprietary Software

Since software development is central to computerization undertakings,
let us zoom in on software and software development this time.
Let us follow the discussion of some managers in a boardroom.
Roger : Shall we make our own software or shall we buy one?
Nards : That is a tough question! Can’t you ask anything simpler?
Dongs : When are we supposed to make our own software?
Roger : We develop software in-house when no software is available for

sale to meet our needs or when one is available for sale but needs
costly modifications to tailor it to our needs.
Dongs : And when are we supposed to buy one?
Roger : We buy proprietary software when such move is less costly than
developing one.
Dongs : Easy! If there is one available for sale, then we buy one. That
saves us time and trouble.
Nards : Yeah. I heard they have one at Upward Corporation.
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Roger : The issue is not quite as simple as you may be thinking, guys. If
a software worked for another company, it doesn’t mean it will
also work for our company. You see, different organizations
have different structures and policies. And software has to reflect
these structures and policies.
Dongs : Well then we look for another software vendor such as the one
who came to me yesterday. He said they have this new software
coming out in the market soon. He said it’s 90 percent done. We
can be the first one to try it.
Roger : If the software is not yet done, then they are definitely just doing
a field test at our expense. Besides, what is 90 percent done may
take months or even years to actually complete. Now that’s a lot
of risk.
Nards : Why don’t we try the product presented to me the other day?
The vendor said it is already out in the market and needs little
modification to fit to our needs.
Roger : Let’s be more cautious here. What seems to be little modification

may actually be so extensive that we’d rather develop our own
software.
We must also realize the fact that our programmers here may
resist the implementation of proprietary software.
Dongs : Why?
Roger : Due to the Not-Invented-Here Syndrome. Programmers and

analysts tend to believe they can develop software better than
what is bought.
Dongs : So they have it too?
Roger : Yeah! So, shall we make one or buy one?
Nards and Dongs: Let’s think it over!

Your turn… Think this over quick.
UP Open University
Module 2 47
SAQ 2-7
When is software developed in-house and when is proprietary
software bought?
Approaches to Systems Development

There are basically two approaches to the development of a computer-
based information system. These are the prespecification approach and the
prototyping approach. In either method, the development effort is a
concerted effort involving all the members of the project team. Let us
investigate each of these two methods.
The prespecification approach

The prespecification approach to systems development divides the effort
into analysis, design, and programming. Figure 2-5 shows how these
stages are laid on the timetable.
As mentioned earlier, the analysis stage involves an investigation into the

information needs of the organization. These needs form the basis for the
design of the information system. The design serves as a blueprint from
which the system is implemented or coded into a program.
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Analysis
Design
Programming
Time
Figure 2-5. The prespecification approach involves analysis, design, and

programming
Observe from Figure 2-5 that the approach actually recognizes overlaps
between the analysis and design phases and between the design and
implementation phases. This flexibility allows the design to be partially
developed even while analysis is still going on.
While this sequence of activities seems logical, it has a flaw when it comes
to the development of large systems. The approach fails to recognize that
analysis is a continuous process. As a result, too much time might fall on
analysis leaving the client dumbfounded as to where his resources have
gone. If the client has to wait for years before he can actually see even a
portion of the system working, he may change his mind even before the
analysis is completed. After all, who would want to invest into something
that can only be seen three years after?
This is where prototyping comes in.
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Module 2 49
The prototyping approach

The prototyping approach is basically the same as the prespecification
approach. However, after a very general analysis of the system, which
takes little time, a prototype of the system is developed for the client to
inspect and have a feel of.
Analysis
Prototyping
Design
Programming
Time
Figure 2-6. The prototyping approach integrates a prototyping activity

into the development process
A prototype is a scaled-down model of the system to be developed. A

prototype performs the more fundamental operations of the proposed
system. Through a prototype, a communication between the client (which
includes the end users) and the developers becomes more open. This will
also make it easier for the client to communicate his or her needs to the
development team.
The development team may even find it convenient and appropriate to

develop the system by simply expanding the prototype into a full-scale
system.
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Here’s another question.
SAQ 2-8
What is the difference between the prespecification approach to
systems development and the prototyping approach?
How did that go with your orange juice?
Management of Systems Development Projects

Systems development is not an easy task basically because it follows a
rigorous process. The stages in systems development outlined earlier
(analysis, design, and implementation) are discussed in more detail in
Module 7.
Before embarking on the systems development mission, however, a systems

development team must be formed. The discussions below present several
issues associated with the management of systems development projects.
The project team

The development of a quality system requires a commitment from the
people involved in the process. Basically, people coming from different
disciplines carry out the development process. This makes the systems
development team composition heterogeneous.
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Module 2 51
The project team is composed of
 systems analysts
 systems designer
 programmers
 and end users
To oversee the entire development activity, a project leader is selected

from among the members of the team. The project leader ensures that the
mission is accomplished on or before a pre-set deadline within the bounds
of a pre-set budget. A team librarian is also chosen to perform
documentation tasks.
Unfortunately, some issues complicate the task

I am pulling out of a project leader. Take the case of an end user
my staff. She has for instance. An end user involved in the
a lot of work to do development effort reports to two supervisors:
in the office. But his or her supervisor at work and his or her
you committed supervisor in the systems development project.
20% of her time As we might expect, he or she may find himself
to the project! I or herself torn between to commitments at some
don’t care! point.
You can just imagine how disastrous the effects

of this incident are on the project development.
The project leader

Who is the better choice for a project leader, a systems analyst or an end
user?
I think a systems analyst

would be a better choice I think an end user would
for a project leader be a better project leader.
because he or she is He or she is familiar with
familiar with the systems the processes in the
development process. functional area being
Besides he or she knows a addressed. In the
lot about current marketing functional area,
technologies. my assistant sales
executive can do the job.
Which side are you on?
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The project management variables

A project basically has four constraints upon which it is set. These are
quality, scope, resources, and time. These are more often termed project
management variables.
Quality Time
Resources Scope
Figure 2-7. The project management variables are quality, scope,

resources, and time
These constraints are termed project management variables because as

the project proceeds changes in these constraints are often made. For
example, top management may want to inject more features and
functionality into the system. This expands the scope of the project.
Observe that doing this without a corresponding increase in the project
resources and without adjustment in the schedule may lead to a poor
quality output. Or perhaps management may want the system done a
month ahead of schedule. If commensurate adjustments on the scope
and project resources are not made, the system delivered may not be of
the desired quality.
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Module 2 53
SAQ 2-9
Why do some managers prefer end users to head development
projects?
SAQ 2-10
What are the four project management variables?
Why don’t you rest those eyes for a moment? By the way, you may need
a gulp of that orange juice you prepared earlier, if it’s still there.
Once you set foot on the succeeding discussion (please don’t take this
literally), you will be introduced to Application Development Tools. You
will need access to a personal computer running at least Microsoft
Windows 95 with MS Excel 97 and MS Access 97 applications to perform
the activities.
Application Development Tools

The complexity of the development of an information system as discussed
previously and as you may note in Module 7 guarantees us of several
things.
First, the system may not be delivered on schedule. Second, the

development is expensive. And third, with so many information systems
running and very few programmers around, systems maintenance forces
a work overload on programmers.
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But wait! Help is here!
The entry of application development tools into the scene promises to

empower users in the development of information systems. Application
development tools aid programmers and non-programmers alike in the
development of application software. With application development tools,
non-programmers get to create application programs that are more or
less (usually less) similar to those developed by programmers.
For this part, we focus on several tools that end users may find useful.
Personal Computer Tools

A good place for end users to start is in the mastery of software packages
like Microsoft Excel and Microsoft Access. Microsoft Excel is a spreadsheet
software while Microsoft Access is a database software.
Figure 2-8. Microsoft Excel and Microsoft Access are popular software
products from Microsoft Corporation
These tools can run on PCs, hence the name personal computer tools.
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Module 2 55
Query Languages
To retrieve data from a database, a query language is used. A query is an
instruction or sequence of instructions for the computer to execute in order
to retrieve desired data. Fortunately, with fourth generation languages (more
popularly known as 4GLs), a query consisting of a hundred lines of complex
instructions can now be made with fewer than 10 lines of simple
instructions. For instance, to list some female employee details from the
database file shown in Figure 2-9, we may issue the following instructions:
Use Employee
List EmployeeNumber, Firstname, Lastname, Position for Sex = “F”
Table 2-1. A sample database file

Employee Salary
Lastname Firstname Sex Position
Number (PhP)
12373 Bayangos Francisca F Professor 11 31,244.40
32173 Cunanan Roselyn F Instructor 5 12,600.35
12777 Flores Michael M Assistant Professor 4 16,526.25
51977 Sales Frances Marie F Associate Professor 2 19,408.40
82975 Sanidad Aurelio Benjamin M Associate Professor 7 23,912.30
41889 Tabbada Jose Diokno M Instructor 5 12,600.35
10665 Tan Eduardo M Assistant Professor 2 15,002.65
The first instruction specifies the database file to be used. The second
instruction specifies the fields to be displayed and the condition (called
the selection criterion) for which the fields are to be displayed.
Simple, isn’t it? Well, its simplicity doesn’t come close to that of query
languages that allow you to state your queries in plain English! These
query languages have a natural language interface that interprets your
queries. For example, you may issue the query.
Display the employee number, firstname, lastname and position of all

female employees.
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Table 2-2. The result of a query to a database

that contains employee details
Employee
Firstname Lastname Position
Number
12373 Francisca Bayangos Professor 11
32173 Roselyn Cunanan Instructor 5
51977 Frances Marie Sales Associate Professor 2
Graphics Generators
To report data in graphical form, graphics generators are used. Graphics
generators construct graphs from specified data. Users have the liberty to
choose the type of graph they want to be generated (such as a line, a pie,
or a bar graph) and to specify what data take what specific axes or series.
Furthermore, users may customize the graph by applying colors, adding
text, and applying other formats to increase its aesthetic value.
A very powerful feature of a graph generator is its ability to reflect in the

graph changes in the data.
Microsoft Excel is one software that performs graph generation.
Annual Sales for Pinoy Ice Cream (in gallons)
1 20 0
Durian
1 00 0 Mango
80 0 Ube
60 0
Macapuno
40 0
20 0
Ye a r
Figure 2-9. A graph created with Microsoft Excel
Application Generators
To put application generators in proper perspective, let us first look into
the two classifications of computer languages.
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Module 2 57
Computer languages may be procedural or non-procedural. Procedural

languages require that the programmer specify how an operation such as
data retrieval is to be carried out. Non-procedural languages, on the other
hand, only require that the programmer specify what data are to be
retrieved. The software takes care of the “how.”
Application generators are non-procedural languages. MIS professionals

use application generators, also called code generators, in program coding.
In using an application generator, the programmer engages in a dialogue
with the generator. From the program specifications gathered through the
dialogue, the application generator generates the source code for the
program. This makes the programmer’s work a whole lot easier, wouldn’t
it? I’m almost certain you can’t wait to get your hands on one of these
tools!
There are however some codes that are not easily generated by a code
generator and may need to be written as usual by the programmer. Such
codes, called custom codes, are then integrated into the generated code.
I assume you are eager to answer some questions now.
SAQ 2-11
What is a query?
SAQ 2-12
What is a natural language interface?
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SAQ 2-13
What is the difference between a procedural and a non-procedural
language?
SAQ 2-14
What is a custom code?
Computer-Aided Software Engineering (CASE)

Tools
Realizing how time-consuming (not to mention frustrating) systems
analysis, design, and programming can be, software developers have come
up with a handy tool kit called the CASE (short for Computer-Aided Software
Engineering) tool kit. This tool kit contains design tools, prototyping tools,
information repository tools, program development tools, and
methodology tools.
Let us look into each of these tools.
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Module 2 59
Design tools
Traditional systems design activities are carried out with lots of paper
work. Diagrams are drawn on paper making modifications very slow
and expensive.
With CASE design tools, designs can now be created on the computer.
Diagrams can easily be drawn, redrawn, and modified. For instance, in
creating a data flow diagram, one may simply click on an appropriate
symbol, draw, drag, resize, and label it. The application of colors to lines,
symbols, and text also aids in providing clarity. Zooming in and out is
easy.
Since systems can be viewed from varying levels of detail, design tools
allow us to explode a process to reveal its smaller components. Likewise,
design tools allow us to revert to a more generalized view of the system or
part of it from a level of detail.
And since the design is stored electronically, access to it is not a problem.

This feature keeps the members of the team informed of developments in
the system design.
There is even a breed of CASE design tools that validates the logic that
flows through the diagram and alerts you of possible inconsistencies.
Cool! Isn’t it?
Prototyping tools
Prototyping tools are used to create a prototype of a system. Prototyping
tools have three fundamental components:
 the user interface generator

 the screen generator
 the report generator
The user interface generator. The user interface generator aids the project
team in designing and creating a user interface. A typical user interface is
a hierarchy of menu bars, pull down menus, and pop-up menus. The
user interface is more than just as menu builder though. It provides the
team with options on the input device and on the keyboard short cuts to
be used.
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The screen generator. The screen generator aids the project team in designing
and creating screen formats for displays. The team simply informs the
screen generator of where objects and data are to be placed on the screen.
Well, the screen generator may even suggest that the team use its scrolling
display capability!
The report generator. The report generator is similar to the query language
except that it performs other tasks like formatting the output and displaying
subtotals.
The prototype that results can then be presented to the user for evaluation
and feedback.
Information repository tools

In the recent past, librarians in systems development teams had to spend
so much time putting together what is known as a data dictionary. A
data dictionary is a documentation of the data the system is supposed to
handle, including database schemas. It is also called metadata (data about
data) in some literature.
Since members of the development team need access to the data dictionary,
the librarian must come up with several copies of the dictionary.
Unfortunately, changes in the system design translate to changes in the
data dictionary. Failure to update members regarding changes can put
the development effort in jeopardy.
Fortunately, an on-line version of the data dictionary can now be built

through information repository tools. Now, this would be a sigh of relief
for a team librarian.
Program development tools

There are four categories of program development tools:
 program structure charts generators

 code generators
 program preprocessors
 test data generators
The structure charts generator. The structure charts generator creates a

hierarchical graph showing the programs comprising the information system
and their relationships, interactions, and dependencies.
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Module 2 61
The code generator. The code generator is an extremely powerful component

of a CASE tool. However, for large systems, not all programs are solely
generated by code generators. Instead, these generate what are known
as skeletal codes (partially complete programs). The programmer can then
code the rest to complete the program.
The program preprocessor. The program preprocessor subjects a program

to scrutiny by simulating the program’s execution. It identifies potential
problem areas such as those parts of the program that are poorly written,
those that have hidden bugs, and those that pose maintenance problems.
It also prepares a documentation of the program to include a variables
list, narrative comments, and even a flowchart!
The test data generator. The test data generator helps the program developer
perform program testing by supplying the needed test data.
Methodology tool
The methodology tool is an on-line facility that makes the project status
accessible to everyone in the team. This includes schedules, deadlines,
distribution of work, and all other activities related to the development
effort. It does away with the manual method and keeps the team members
abreast with developments.
Now, that would be another sigh of relief for a team librarian.
Let’s find out if you can make a sigh of relief out of the following questions.
SAQ 2-15
What tools can we find in a CASE tool kit?
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SAQ 2-16
What are the different components of a prototyping tool?
SAQ 2-17
What are the categories of a program development tool?
SAQ 2-18
What are skeletal codes?
How did you fare?
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Module 2 63
When Application Development is no

Development
Users are basically unaware of software development issues and standards
and of the fundamentals of software development. As a result, they would
rather not document their programs. Moreover, they would fail to institute
adequate controls into the system to trap errors. Furthermore, they would
perform testing inadequately. The result is a program that seems to be
working properly but is not and a program that only the developer
understands and knows how to use. …this isn’t development.
Sometimes, people take systems development tools for granted. They buy
expensive development tools just to create a very small system. …this isn’t
development either. In this case, the development of the system by
programmers is more feasible.
I’m throwing in three more questions. Can you handle them?
SAQ 2-19
What are application development tools used for?
SAQ 2-20
What are some of the application development tools available?
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SAQ 2-21
What are the four categories of program development tools?
Describe each.
How did you fare? I reckon it would be fun to try out a few activities.
Activity 2-1
Try to find out what software carrying application development
tools are available today.
Together with this learning kit is a diskette containing the files ice cream.xls
and employees.mdb.
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Module 2 65
Activity 2-2
Open the file ice cream.xls with MS Excel 97. The spreadsheet
contains data regarding the annual sales for four Pinoy ice cream
flavors - durian, mango, ube, and macapuno - from 1993 to 1997.
There is also a comparative line graph depicting the sales
performance of each ice cream flavor.
Do the following:
1. Change the sales for the mango flavor in the year 1994 to 1300.
Observe what happens to the corresponding line in the graph.
2. Set the color of the line graph for durian to green, the line graph
for mango to yellow, the line graph for ube to violet, and the
line graph for macapuno to blue.
3. Add a trend line to the line graph showing the sales
performance of durian flavored ice cream.
4. Create a bar graph for the same set of data.
Activity 2-3
Open the file employees.mdb with MS Access. Click on the forms
folder then double click on main switchboard. The rest should be
easy to follow. This is simply to illustrate the power of MS Access
as an application development tool. Honestly, I did not do any
programming to come up with all those menus and screens! Why
don’t you try it yourself? It’ll be fun, I’m sure.
If you are new to MS Excel or MS Access, I’m sure you had an interesting
time of discovery.
Let’s carry on with the discussion…
Upon completion of the systems development task, the system is ready for
operation. There are however some issues that must be addressed and
tasks that must be performed before a system is implemented and after it
has been implemented.
Would you like to know what these issues and tasks are? Read on…
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Systems Implementation
In many cases, the implementation of a computer-based information system
means the total phase-out of the old system. Often, this also means that
radical changes in the organization have to be instituted. And when
changes in organizations are made, personnel react to possible
displacement or relocation.
To raise the level of acceptance of the new system by the personnel directly
or remotely involved in the operation, an orientation program must be
made. Management must also be frank and straightforward with regard
to changes in order to minimize rumors. The personnel department must
also be actively involved from the very start of the development process.
The changes in the work flow that comes with the system may possibly
necessitate the relocation of hardware or personnel, or both. Careful
planning must be undertaken to reduce the chances of failure of the new
system.
Aside from addressing the physical requirements of the new system,

another consideration must be the creation of the files and the databases
necessary for the new system to function. In other cases, these files and
data bases already exist and only need conversion via some program.
However, inspection into the results of conversion still has to be carried
out to ensure that the conversion proceeded properly.
When the idea of adopting the new system has gained a desirable level of
acceptance, several more preparations have to be made before it is finally
implemented.
Now, before we continue, why don’t you try these questions out?
SAQ 2-22
Why do some personnel resist the implementation of a new
information system, especially one that is computer-based?
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Module 2 67
SAQ 2-23
What measures may be adopted to raise an information system’s
level of acceptance by personnel?
User Support for System Implementation

User-friendliness in software can only go so far. For this reason, the project
team is further tasked to develop user manuals and help screens and
conduct training programs for end users.
User manuals and help screens

User manuals. When introduced to the new system, end users rely heavily
on the user manual for help on how to go about tasks with the new system.
Once familiar with the system, the user manual becomes simply a user
reference material and perhaps might even serve training support when
new users come along.
For large systems addressing different levels of operation, different user

manuals are made for different users. For example, a user at the
operational level has a user manual quite different from that of another
user in the strategic level.
A user manual is a comprehensive documentation of how the system works

and how to use it. Among other things, it includes
 the objectives of the system

 a brief description of the overall system
 a glossary of terms and acronyms peculiar to the system
 instructions on how to use and operate the system
 descriptions of all outputs (on-screen or printed)
 graphical illustrations depicting the particular system in the context
of the overall system
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Help screens. User manuals may not always be the way to go. Help screens
are preferred over user manuals when the user needs assistance in the
middle of an operation. Help screens are simply on-line versions of the
user manual. However, unlike user manuals that require you to thumb
your way through the pages to locate the appropriate help topic, help
screens can be context-sensitive enough to bring you to the appropriate
topic as soon as you press the help key.
Training programs
User manuals and help screens are not sufficient to ensure that the users
are able to keep the system up and running properly.
Just imagine what might happen when Dusk Video Shop finally
implemented a computerized transaction processing system without the
benefit of a training program for the cashier.
Basically, a training program presents the following items:
 purpose and objectives of the system

 differences between the new system and the old system
 overview of system operations and procedures
 use of the user manuals and help screens
 duties and responsibilities of end users and support personnel
 a demonstration of the system in a walkthrough fashion
User training programs are delivered

not only upon the implementation of a Sir, I think I really need
new system but also upon the entry of to undergo training.
new users into the organization and You don’t expect me to
upon the introduction of modifications read this two-hundred-
into the system. We can therefore say page manual, do you?
that user training is on-going.
Now…
SAQ 2-24
What are the different user supports for systems implementation?
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Module 2 69
SAQ 2-25
When is a help screen preferred over a user manual?
SAQ 2-26
Why is user training necessary?
System Testing
Prior to actually converting the old system to the new system and actually
implementing the new system, the new system must undergo testing.
System testing is carried out to check how the different parts of the
information system - hardware, software, people, procedures, inputs, and
outputs - work together.
Testing with test data

While all programs comprising the system may have passed unit testing, a
testing procedure performed by individual programmers, there is no
guarantee that these will work perfectly as a system once integrated. To
ensure proper functioning of the system, the project team performs system
testing on the product.
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System testing is not an easy task. You can just imagine how tedious it
can get if the system were composed of a hundred different programs
and were manipulating a huge database! Worse, when errors start coming
out, the team may need to get back to the drawing board and make
modifications to meet user requirements.
One approach that may be taken is to integrate the programs into a system
phasewise. In this way, the project team is not overwhelmed by the size of
the system being tested. The phases must, however, be carefully planned.
To perform system testing, the project team compiles a set of test data to
be fed into the system or parts of it. Test data must reasonably represent
all possible situations for data. This is why even erroneous data are
included in the set to see how the system will handle the cases. Test data
basically aid the project team in locating errors in the logic of the system
and of programs in the system.
Testing with live sata

This stage of the testing process puts to test not only the system due for
implementation but also the user support materials. This is so because
this stage involves the users.
In testing the new system with live data, test data are taken from actual
data processed by the old system. Users are called upon to use the new
system to process the test data while the project team observes. The new
system’s output is then compared to the old system’s output. Again,
modifications may need to be done until the participants in the testing are
satisfied.
System Acceptance
Finally, the new system is submitted to user managers for the stamp of
approval. User managers subject the new system to scrutiny using live
data and check it against the objectives of the project set forth at the very
start.
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Module 2 71
SAQ 2-27
What is the difference between test data and live data?
Conversion
Now the new system is ready to operate. There are four ways of
implementing the new system. The choice depends largely on the nature
of the new system and of the operations of the organization.
Parallel conversion
In parallel conversion, the old and the new systems are put into operation
simultaneously while comparing their performances and outputs. When
the new system finally gains management’s confidence, the old system is
terminated.
One drawback on parallel conversion is that it demands too much from

personnel. Remember that personnel are running two systems at the same
time. This slows down operations. Also, since personnel are more familiar
with the old system, there may not be a genuine effort to adapt to the new
system.
NEW SYSTEM
OLD SYSTEM
Figure 2-10. Parallel conversion
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Direct conversion
Direct conversion on the other hand scraps the old system all together at
the end of the day and implements the new system the next day.
While this carries much risk, it does away with duplication of efforts and
ensures that everyone’s attention is on the new system. Besides, the risk
may be reduced through a thorough system testing and with sufficient
training for personnel. Catch basins or backups may also be put in place
in case failure forces a reversion to the old system.
OLD SYSTEM NEW SYSTEM
Figure 2-11. Direct conversion
Phased conversion
Phased conversion involves the gradual phase out of the old system while
the new system gradually phases in. For instance, a university may adopt
a computerized registration and record keeping system for new students
while record keeping for old students is kept at the old system. Slowly,
the new system proceeds to handle record keeping for old students.
Again, as in parallel conversion, two systems are running simultaneously.

This is very taxing on personnel. Moreover, an overall picture of the
operations is not readily available since part of the picture is in the old
system while the other is in the new system.
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Module 2 73
NEW SYSTEM
OLD SYSTEM
Figure 2-12. Phased conversion
Pilot conversion
In pilot conversion, the new system is implemented in a selected unit of
the organization. This may be done as a parallel, direct, or phased
conversion. If successful, the new system is implemented full-blown.
While this approach does away with many problems that are associated
with the three other approaches, it presents a new problem. The success
of the new system in a small part of the organization does not guarantee
that it will indeed be able to handle the actual volume of transactions it is
expected to handle once it is implemented full-blown.
Try this…
SAQ 2-28
Discuss the difference options for conversion.
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Post-Implementation Audit and Maintenance

Work does not end after implementation. The new system must in some
way be audited usually by a body not directly involved in the development
of the system. Some parameters through which a system is evaluated are
its adherence to design, its performance as against the old system, and its
operating cost.
Since not all errors in the programs in the system may come out during
testing, maintenance is conducted. Maintenance does not only cover the
correction of errors but it also includes the modification of programs to
meet new requirements and the updating of the documentation.
Oops! I’m down to my last questions.
SAQ 2-29
What is system auditing?
SAQ 2-30
What is systems maintenance?
Well, our module ends here. I hope you learned a lot. The next module,
Module 3, shall take you to a different kind of adventure as it discusses
Functional Information Systems. Well, see you there. Ta ta!
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Module 2 75

ASAQ 2-1
The following are the steps in MIS strategic planning:

1. Resolve basic planning issues.
2. Evaluate the current information system.
3. identify constraints to planning.
4. identify planning objectives.
5. compile an MIS strategic plan.
ASAQ 2-2
The following are the steps in MIS operational planning:

1. identify the projects.
2. identify an optimum mix of projects.
3. prioritize.
4. allocate resources to and schedule projects.
5. compile an MIS operational plan.
ASAQ 2-3
Risk is a very important consideration in identifying projects for the

optimum mix.
ASAQ 2-4
The stages in a system’s life cycle are conception, development, birth,

production, and death.
ASAQ 2-5
The considerations in the evaluation of a proposal for the institution of an

information system are technological feasibility and economic feasibility.
ASAQ 2-6
One-time costs are incurred in the development and implementation of a

system while recurring costs are costs incurred in the operation of a system.
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ASAQ 2-7
Software is developed in-house when no software is available for sale to

meet the organization’s needs or when the software available for sale is
too expensive. Proprietary software, on the other hand, is bought when
in-house development proves more costly.
ASAQ 2-8
The prespecifications approach to systems development involves analysis,

design, and implementation. The prototyping approach, on the other
hand, follows the same sequence of activities but includes prototyping
early in the development effort.
ASAQ 2-9
Some managers prefer end users to head development projects because

end users are familiar with the nitty-gritty of the operations of the
organization and of the ins and outs in policies which form the basis for
the computerized output.
ASAQ 2-10
The four management variables are quality, time, resources, and scope.
ASAQ 2-11
A query is an instruction or a sequence of instructions issued for the

computer to perform in order to retrieve the desired data.
ASAQ 2-12
A natural language interface is a user interface that interprets queries

expressed in a natural language.
ASAQ 2-13
A procedural language details how an operation is to be done. On the

other hand, a non-procedural language requires that the user simply
specify the desired output. It takes care of the “how.”
ASAQ 2-14
A custom code is a program code written by a programmer in a specific

programming language.
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Module 2 77
ASAQ 2-15
A CASE tool kit contains:

1. design tools
2. prototyping tools
3. information repository tools
4. program development tools
5. methodology tools
ASAQ 2-16
A prototyping tool has a user interface generator, a screen generator, and

a report generator.
ASAQ 2-17
The four categories of program development tools are structure charts

generators, code generators, program preprocessors, and test data
generators.
ASAQ 2-18
Skeletal codes are partially complete programs.
ASAQ 2-19
Application development tools are used to aid programmers and non-

programmers alike in the development of application software.
ASAQ 2-20
Some of the application tools available are:

1. personal computer tools
2. query languages
3. graphics generators
4. application generators
5. CASE tools
ASAQ 2-21
Without sufficient background on the fundamentals of software

development, non-programmers tend to snub documentation and fail to
adequately test the program. They also fail to put controls into the program.
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ASAQ 2-22
Some personnel resist the implementation of a new information system,

especially one that is computer-based, because of fear for possible relocation
or even displacement.
ASAQ 2-23
To raise the level of acceptance of the new system, orientation programs

must be conducted. Management must also see to it that personnel are
informed of changes that come along with the implementation of the new
system.
ASAQ 2-24
The different user support systems used in systems implementation are

user manuals, help screens, and training programs.
ASAQ 2-25
A help screen is preferred over a user manual when help is needed in the
middle of some operation. In this situation, being context-sensitive, a help
screen provides help faster than the thumbs can with a user manual.
ASAQ 2-26
User training is necessary because user manuals and help screens are not
always sufficient to ensure that end users are able to keep the system
running properly.
ASAQ 2-27
Test data are used by programmers to test the system and the programs in
the system. Live data, on the other hand, are actual data that come from
actual operations used by end users to test the system.
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Module 2 79
ASAQ 2-28
In parallel conversion, the old and the new systems run simultaneously.
When the new system gets the nod from management, the old system is
terminated.
With direct conversion, the old system is terminated at the end of the day
and the new system begins operations the next day.
In phased conversion, the old system gradually phases out while the new
system gradually phases in.
With pilot conversion, the new system is implemented in a certain part of

the organization. Once it gets the nod from management, it is fully
implemented.
ASAQ 2-29
Systems auditing is the evaluation of a system with regard to its adherence

to design, its performance as against the old system, and its operating
cost.
ASAQ 2-30
Systems maintenance involves the correction of errors and the modification

of programs to suit the organization’s information requirements.
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Module 3
Organizational Information
Systems
W elcome to the third module on

Management Information Systems.
This module shall tackle briefly information
Objectives
systems that have been the focus of much At the end of this module, you should
development recently. be able to:
Before we move on, I think it would be nice 1. Enumerate some qualities of a
a idea to add some cookies to our menu of good Executive Information
juices. What do you say? System,
2. Identify the different subsystems
If you have settled comfortably in your favo- in a Marketing Information
rite chair, we can begin… System, Manufacturing
Information System, and
Financial Information System,
Introduction to Functional 3. Name the main manufacturing
Information Systems resources,
4. List down sources of financial
intelligence,
In the earlier days, most information systems
5. Justify why the data processing
were function-based, i.e. each information
subsystem of a Financial
system was set up for a specific purpose
Information System should be
servicing a specific functional office. For
computer-based, and
instance, an information system may be set
6. Recommend solutions to a
up for inventory while another one may be
functional information system.
set up for accounting. Still, another
information system may be set up for the
human resource office. Each of these three information systems manages
its own data and performs its own processing tasks without any established
linkage with the other systems.
As you may come to imagine, this results to a lot of problems that stem
from the fact that functional units in an organization are actually
interdependent. Take the case of the accounting and human resources
offices. Both offices keep data regarding personnel. With function-based
information systems, functional units are like islands without bridges to
interconnect them. Hence, a duplication of data is inevitable. Worse, when
an employee gets promoted and his record needs updating, one has to
swim to other functional units so that these may perform the same
updating!
With the advent of networking technology, bridges are now available to

interconnect functional information systems. This all together institutes a
new culture among functional units - resource sharing.
Among the more pronounced functional areas in an organization are the

marketing function, the manufacturing function, and the finance function. The
Marketing Information System, the Manufacturing Information System, and
the Financial Information System are organizational information systems
associated with the three functional areas mentioned. These information
systems support their respective functional areas and at the same time
work together to support the Executive Information System. It is worth
noting, however, that information systems on human resources have
gained much development too.
Obviously, the Executive Information System is that information system

used by the organization’s top-level management. It is described briefly
in the following discussion.
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Executive Information Systems
Executive
Information
System
Marketing
Information
System
DATABASE
Manufacturing
Information
System NEW SYSTEM
Financial
Information
System
Figure 3-1. The Executive Information System sits atop

the Marketing Information System, the Manufacturing
Information System, and the Financial Information System
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Organizations design, develop and implement activities, procedures and

measures to gain good placing in the playing field. These activities,
procedures, and measures are called the critical success factors (CSF) of the
organization. For example, the institution of a point-of-sale system in a
grocery store may be perceived as critical to the store’s successful operation
amidst competition. Or perhaps linking computers into a network in an
office that will provide an electronic mail facility is critical to the
coordination of team efforts.
Different critical success factors have different effects on the performance

of an organization. Hence, an Executive Information System (EIS) is put
into place to aid executives perform monitoring. An Executive Information
System is a specialized Decision Support System (DSS) that accesses data
and information concerning the critical success factors of the organization
from the Management Information System and reports these to the
executive. Decision Support Systems are discussed in more detail in
Module 5.
Who are executives? To inject definiteness into our discussion, let us agree
that an executive is any top-level manger who exerts a strong influence
on the organization. Basically, executives are those managers we find in
boardrooms putting together strategic plans.
See if you can handle the first question in this module.
SAQ 3-1
What are critical success factors?
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Qualities of an Executive Information System

Simply put, an Executive Information System provides executives access
to information on demand in a user-friendly environment. A good
Executive Information System therefore possesses the following qualities.
 It carries a simple and user-friendly interface. It must be able to support

the user’s device preferences. A user might want to use a mouse over
a touch screen.
 It is secure. It should be able to keep from unauthorized access all data
and information it contains or accesses.
 It supports some DSS functions such as goal-seeking and what-if analysis.
This should extend the function of an EIS from merely reporting to
some analysis.
 It supports drill down. A drill down facility allows an executive to
view the details of what he sees on screen. For example, an executive
can drill down on the total expenditure to see the break down of
expenses. He can in fact go further down to the desired detail.
 It responds to queries very quickly. Even non-executives dislike waiting.
 It is capable of color graphics display. Charts and graphs are preferred
over tables when trends are sought.
 It has access to data from other computers through a network.
 It must be able to send messages to other parts of the organization
through the network. This allows the executive to communicate
comments and directives to people in the organization.
 An EIS, being an information system, can distill or filter information.
Now…
SAQ 3-2
Could you name at least four qualities of a good Executive
Information System? List them down below.
How many were you able to list down?
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Implementing an Executive
Information System
An organization planning to implement an Executive Information System
has two options. Either it buys application-development software or it buys a
prewritten EIS software.
Buying application-development software

Organizations who prefer to develop their own EIS can simply buy
application-development software. However, they have to devote resources
to the systems development process.
Buying prewritten EIS software

On the other hand, prewritten EIS software are available to organizations
that are content with tailoring these to their needs. Examples of prewritten
EIS software are Command Center (by Pilot Executive Software), Commander
EIS (by Comshare), and Executive Edge (by Execucom).
That would be all for Executive Information Systems. In a short while,

we will be introduced to three organizational functional information
systems that provide support to the Executive Information System:
 the Marketing Information System,

 the Manufacturing Information System, and
 the Financial Information System.
Each of these systems will be discussed from the input-process-output

point of view. That is, these systems will be dissected into their input and
output components.
If you are set to move on, tag along!
The Marketing Information System

The Marketing Information System supports the marketing manager in
decision-making. Since much of marketing is directed towards the
promotion and sale of some product through some strategic network of
distribution channels, a Marketing Information System is expected to
deliver information regarding product, place, promotion, and pricing, the
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four Ps in marketing. A good mix of product, place, promotion, and pricing

can shuttle a company to better performance.
Figure 3-2. Shows the different subsystems in a Marketing Information

System. Let us discuss each of these subsystems
Product
Data Subsystem
Processing
Subsystem
DATABASE
Place
Subsystem
Marketing
Research NEW SYSTEM
Subsystem
Promotion
Subsystem
Marketing
Intelligence Pricing
Subsystem Subsystem
INPUT OUTPUT
SUBSYSTEM SUBSYSTEM
Figure 3-2. The Marketing Information System and its subsystems
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The Input Subsystem

The input subsystem provides data needed to support marketing decisions.
In the input subsystem, data immediately accessible to the company (such
as those regarding salespersons, sales, and products) and data from the
environment (such as those about customers and competitors) are gathered
by different subsystems within the input subsystem. These subsystems
are the data processing subsystem, the marketing research subsystem, and
the marketing intelligence subsystem.
Data processing subsystem

The data processing subsystem keeps, among others, data on salespersons,
sales areas, products, and sales. As a result,
1. I need a report on the monthly sales made by each sales area last year.
2. Show me the names of ten salespersons who made the most sales in
January of this year.
3. How far are we from our target year-end sales?
4. How many of each product has been sold since 1996?
5. I would like to see the trend of annual sales for the past twelve years
in a line graph.
are not too much to ask for.
Marketing research subsystem

The marketing research subsystem focuses on the identification and
profiling of consumers and prospective consumers. Data on consumer
needs and wants help management decide what products to develop for
the market. For example, as consumers become more health-conscious,
management may decide on introducing food products that are very low
in fat. On the other hand, when management finds out that 90 percent of
men and 80 percent of women wear denims, it puts denim production
into consideration. Data generated by this subsystem can be categorized
into primary and secondary data. Primary data are data directly gathered
by the organization through survey or observation. Survey may be done
in the form of personal interviews, telephone interviews, or mailed
questionnaires. Others may prefer to record store activity through a video
camera. Data thus gathered may then be subjected to analysis through
some market research software.
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On the other hand, data gathered by someone else for the organization
are secondary data. For instance, an organization may not have enough
resources to survey to find out how many of the men and women in the
area wear denims. The services of another organization that sells service
may be tapped to perform the survey.
So, tell me…
SAQ 3-3
What is the difference between primary data and secondary data?
Marketing intelligence subsystem

The marketing intelligence subsystem allows an organization to position
itself in the competition by performing some form of espionage.
Environment DATABASE
data intelligence
Data
Data
Accuracy
Analysis
Check
accurate
data
Figure 3-3. The marketing detective work
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As you may see from Figure 3-3, it all starts with

data collection. Buying and studying a sample of
the competitor product, visiting outlets used by
Hmmm, I competitors as distribution channels to note
wonder what prices, and attending product launchings are
this is for… among the many activities carried out to collect
data.
Data, primary or secondary, are then evaluated

for accuracy. Data with acceptable accuracy are
then subjected to analysis, the result of which is
called an intelligence. The intelligence is then stored in a database and is
made available to people in the organization on-line.
Among the many issues that must be addressed in the implementation of

a marketing intelligence subsystem is whether a centralized and a
decentralized subsystem is better.
Centralized subsystem. When the subsystem is centralized, duplication of

efforts is minimized. In other words, it would minimize the chance of
everyone buying a sample of the competitor product or of everyone meeting
at the same product launching. With data centralized and available on-
line throughout the organization, a more complete view of the overall
situation can be achieved.
Since a centralized subsystem handles a considerably large volume of data,

filtering may be resorted to. As such, data that may seem unimportant to
top-level management but are extremely critical to people in the field may
by weeded out.
Decentralized subsystem. A decentralized subsystem, on the other hand,

scatters into smaller units that handle smaller amounts of data. This keeps
filtering from being necessitated. However, it runs the risk of duplication
of efforts. It also opens up for personal grudges to get in the way of
information sharing.
Let’s see how much we’ve absorbed so far.
SAQ 3-4
What is the difference between a centralized and a decentralized
marketing intelligence subsystem can you recall?
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SAQ 3-5
What are the different subsystems under the input subsystem of a
Marketing Information System?
The Output Subsystem

The output subsystem is divided into four areas that correspond to the
four P’s in marketing. Since the objective of the marketing manager is to
obtain a good mix of the four P’s, the four subsystems corresponding to
the four P’s must interact.
Product subsystem
The product subsystem supports product-oriented decision-making.
A product has its own life cycle that traces the sales of the product from
its introduction into the market to its pullout from the market.
Before a new product is developed and manufactured for the market,

however, management asks
1. Are we financially capable of investing into a new product?

2. Do we have the skills and equipment necessary for the manufacture
of the product?
3. Do we need to hire more skilled workers or do we train our current
work force?
4. Do we need to buy new equipment?
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When the sales begin to drop

sharply, it may be that the
product is facing stiff
competition or it is time for the An old pair of shoes: Well, I
product to retire. guess it’s all over for me, huh.
Place subsystem
Most products reach consumers via some chain of distribution channels.
These chains may be short or long.
In a short chain, the product reaches the consumer directly or almost

directly from the manufacturer. In a long chain, the product changes
hands several times before it finally reaches the consumer.
The diagram below shows an example of a relatively short chain.

Manufacturer
Wholesaler
Consumer
Retailer
Figure 3-4. A relatively short chain
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The following diagram shows how communication between channels in

a chain takes place.
PRODUCT
FEED FORWARD
Manufacturer
Wholesaler
Consumer
Retailer
FEEDBACK
MONEY
Figure 3-5. Resource flow through a simple chain
Let us trace the communication that happens in a chain.
The manufacturer sends information called feedforwards regarding new

products, improvements on products and promotions to the wholesaler.
The wholesaler echoes the same to the retailer who, in turn, echoes it to
the consumer.
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When a consumer buys a product, money changes hands from the

consumer to the retailer. The same thing actually happens when the retailer
buys from the wholesaler and when the wholesaler buys from the
manufacturer.
In turn, the retailer gives the product to the consumer. Again, this same
thing happens when the retailer buys from the wholesaler and when the
wholesaler buys from the manufacturer.
The consumer may then send feedback to the retailer who would echo it to
the wholesaler. The wholesaler echoes the same message to the
manufacturer.
This exchange is termed as resource flow.
To keep the manufacturer from

producing too much or too little goods,
a monitoring of the resource flow should
Between company be done. A successful monitoring
and retailer: You mean requires that all intermediaries make
I was producing shoes data on resource flow available.
that never left your
shelves? Yeah! And With a computer-based resource flow
they eat a lot of dust facility, transactions can actually be
too. made on-line. Consumers simply place
orders through terminals. The supplier’s
computer then processes these orders
and the supplier readies the goods for
shipment and delivery.
This system avoids paper work and the errors and delay associated with
ordering through ordinary mail.
Sales analysis can also be performed on demand through a point of sale

(POS) system. The POS system registers sales to a central computer that
does the analysis.
Inventory can also be updated in an instant. For example, when orders

arrive, a barcode reader simply scans the packages’ barcodes and (presto!)
the inventory is updated.
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Promotion subsystem
Most manufacturing firms perform personal selling. To aid salespersons,
each salesperson is provided with a laptop computer to get him on-line
when a client inquires of the availability of some product or the status of
an order already placed. An order may even be placed over the network.
Being on-line facilitates a speedier ordering procedure, which translates

to speedier processing and better-timed delivery.
Pricing subsystem
Have you ever wondered how your favorite supermarket comes up with
its prices?
Pricing may be cost-based or demand-based.
Cost-Based Pricing. In cost-based pricing, the cost of manufacturing the

product plus the mark-up equals the selling price. Sometimes, however,
the consumer is actually willing to pay more than the selling price. When
this happens, the firm loses an opportunity to profit more.
Demand-Based Pricing. Demand-based pricing requires accuracy in the

estimation of the demand. This helps management establish a valuation
of the product that is close enough to how consumers may actually value
it. This is of course done with consideration for competition. What-if
analysis may be used to zero in on a good bargain that maximizes profit
given the competition.
Break time!
SAQ 3-6
What are the different components found in the output subsystem
of a Marketing Information System?
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Before we move on to Manufacturing Information Systems, I would like

you to perform an activity. If you don’t have the time now, try finding a
convenient time to perform this.
Activity 3-1
Find a business organization in your area (perhaps a big grocery
store) and establish a link with the organization’s marketing
manager. Try to find out what subsystems we have discussed can
be found in the organization’s marketing department. Be sure to
bring with you a checklist.
Report your findings to class.
Well, those are the subsystems that we may reasonably expect from a
Marketing Information System. The Manufacturing Information System
and the Financial Information System are discussed next.
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The Manufacturing Information System
Production
Data Subsystem
Processing
Subsystem
DATABASE
Inventory
Subsystem
Industrial
Engineering NEW SYSTEM
Subsystem
Quality
Subsystem
Manufacturing
Intelligence
Cost
Subsystem Subsystem
INPUT OUTPUT
SUBSYSTEM SUBSYSTEM
Figure 3-6. The Manufacturing Information System and its subsystems
Computers find many applications in manufacturing. First, with computer

aided design, companies are able to design and redesign products faster.
Through simulation, one can put an airplane to the test and expose it to
the elements without having to build one and without having to wait for
the storms to strike. This saves time and money.
Computers also assist in manufacturing through computer aided

manufacturing. Microcomputers are programmed to handle some functions
like analysis of chocolate bars sampled from the production line.
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A microcomputer can also be programmed to control several tools at the

same time. Robots are also being employed to perform tasks that are
otherwise hazardous to human beings.
Let us now discuss the subsystems in the Manufacturing Information

System.
The input subsystem

The input subsystem of a Manufacturing Information System is made up
of three subsystems: the data processing subsystem, the industrial engineering
subsystem, and the manufacturing intelligence subsystem.
The data processing subsystem follows the flow of the three main
manufacturing resources- materials, personnel, and machines.
Materials. Materials withdrawn from the stock room undergo some

transformation to take final form. The transformation process is actually
a sequence of stages. As a material goes through each stage, its status is
keyed or scanned into a database. This allows for easy tracking of materials
as they are transformed from raw to finished goods.
Personnel. Personnel flow is monitored by providing each employee with

perhaps a card that is swiped as he times in and out of the workplace.
This aids in identifying who are not in at the moment. It can even aid in
reporting poor attendance.
Machines. Machine use is also monitored to make accessible data regarding

the machine. Usually recorded are the machine’s expected number of
hours in operation, the actual number of hours of operation, and the
number of times it has broken down.
Let’s see if you can manufacture an answer for the next question…
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SAQ 3-7
What are the three main manufacturing resources?
I bet you didn’t even have to think hard to recall.
Industrial engineering subsystem
The industrial engineer studies the manufacturing operations, identifies

areas in the manufacturing operations that need improvement, and
recommends specific improvements on these areas. He also sets production
standards by looking into the production process and determining how
long it should actually take for a process to complete.
These performance standards are then stored in a database together with

actual performance. Unusually large differences between actual and
expected performances are reported to management.
So…
SAQ 3-8
What are some functions of an industrial engineer?
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Manufacturing intelligence subsystem
The manufacturing intelligence subsystem focuses on the labor force and

the supplier force.
Labor Force. In finding the right people for the job, a request for personnel,
together with necessary qualifications, is forwarded to the personnel
department. The personnel department interacts with the environment
as it informs employment agencies, schools, government agencies, and
the community of the need for personnel.
Supplier Force. In finding the right raw materials supplier, data regarding
potential suppliers are gathered to include financial capacity and quality
control standards. These data can come from interviews and from plant
visits. A list of suppliers is also kept in the database for future reference.
You won’t find this one hard at all…
SAQ 3-9
What are the different subsystems under the input subsystem of a
Manufacturing Information System?
Peanuts? Really now.
The output subsystem

The output subsystem of a Manufacturing Information System has four
parts: the production subsystem, the inventory subsystem, the quality
subsystem, and the cost subsystem. We discuss each of these next page.
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Production subsystem
The production subsystem aids management in deciding whether or not

to create a new production facility. Also, the production subsystem aids
management in deciding whether or not to create a new plant. This may
be considered when the existing plant is already obsolete and has become
too costly to maintain, when the existing plant can no longer support the
volume of production, or when the existing plant cannot support the
production of a new product.
1. An all-patched up plant. I’d like to apply for an early retirement.

2. A shovel full of soil aimed at a plant. I can’t take anymore of
that.
3. You expect me to produce cars? I can’t even produce a can of sardines!
The production subsystem helps management decide on plant location

when one is to be put up. Among the considerations in this area are land
costs, taxes, accessibility, and the culture of the community and
surrounding communities.
The production subsystem also

performs linear programming, a
technique used to optimize a given
objective function given several
So, are you pushing constraints. For example, given that
through with your a plant is to be put up and given the
corned beef factory in locations of suppliers of raw
India? materials, linear programming can
identify the least costly scheme by
which the raw materials could reach
the plant.
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Supplier B
Client C
Supplier A
PLANT Supplier C
Client A
Client D
Client B
Figure 3-7. A map showing the proposed location of a plant

and the locations of suppliers and clients
Inventory subsystem
The inventory subsystem in the manufacturing area is concerned with

raw materials and those in the production line (called work-in-process).
Finished goods are a concern of the marketing department.
To keep production going, raw materials must be made available.

However, to keep raw materials in stock entails some costs like taxes,
insurance, and those costs associated with spoilage and obsolescence.
These costs are collectively termed as maintenance or carrying costs.
Thus, the higher the inventory, the higher the carrying cost. But we
wouldn’t want to run out of stock, would we?
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To keep carrying costs at a minimum, orders for raw materials must be

kept at a minimum especially for those materials that are not immediately
consumed. However, to cope with emergency situations such as shortage
of supply, a safety stock is maintained to prevent or at least minimize
stockout. Again, this is put at a minimum.
Aside from minimizing stockouts, safety stocks reduce backorders. A

backorder is an order from a customer that cannot be met because of a
stockout.
While minimizing the inventory level minimizes carrying costs, the

purchasing cost may actually increase. Purchasing cost is the cost associated
with purchasing such as communication costs. Since minimizing the
inventory level results to more frequent purchase, the purchasing cost
may be too much.
To balance maintenance and purchasing costs, an economic order quantity

(EOQ) formula is used.
To keep inventory alive, a Reorder Point System (ROS) is usually adopted.

When the inventory level reaches the reorder point (the point at which
stocks must be replenished), the ROS places an order on-line. This keeps
the firm from the hassles of paperwork when ordering. Besides, it keeps
the supplier informed before a stockout even happens.
Here’s something you can try…
SAQ 3-10
Can you define carrying costs, safety stock, and purchasing cost
in your own words? Write your definitions down.
Not tough enough?
Quality subsystem
The quality subsystem monitors the quality of goods from receipt as raw
materials to the time these have been transformed into finished goods.
The challenge is to keep quality high at the least cost.
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Cost subsystem
The cost subsystem prepares demand and periodic reports to reflect the
costs associated with the manufacturing process. For example, the cost
subsystem may produce a report on the equipment, their uptime,
downtime, and check-ups and repairs made. This aids management decide
on more frequent check-ups or perhaps replacement of equipment.
A final question on Manufacturing Information Systems…
SAQ 3-11
What are the subsystems in the output subsystem of a
Manufacturing Information System?
I would like you to perform another activity similar to the one you did at
the earlier part of this module. If you don’t have the time now, try finding
a convenient time to perform this. You’re the boss, anyway. I hope you
will have a great time performing this activity.
Activity 3-2
Find a business organization in your area engaged in
manufacturing (perhaps a candy factory) and establish a link with
the organization’s manufacturing manager. Try to find out what
subsystems we have discussed can be found in the organization’s
manufacturing department. Be sure to bring with you a checklist.
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The Financial Information System

Data Processing Subsystem
Expenditures during the previous month:

Junior: leather shoes (P900), socks (P65), T-shirt (P225)
Food: chicken (P550), fish (P600), vegetable (P300), bread
(P200), and milk (P200)
Bills: electricity (P500), water (P400), telephone (P750)
Others: gasoline (P600), medicine (P800), dog food (P200)
Internal Audit Subsystem
Dog food? We don’t even have a dog! (An anomaly?)

Who made that long distance call to Canada? (House rules say no
international calls may be placed through the telephone.)
Financial Intelligence Subsystem
Looking for a good bargain?

What is the dollar-peso exchange rate?
Forecasting Subsystem
Junior is finally going to college next year. What could possibly

happen to our finances once the semester sets in?
Funds Management Subsystem
I wonder how they always manage to bring the kids to a picnic on

Saturdays.
Control Subsystem
I will need PhP3000 for groceries (plus a visit to the parlor, ha!).
I will need PhP2000 for the car (plus a few bottles of beer with my
friends).
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Data
Processing
Subsystem Forecasting
Subsystem
DATABASE
Internal Fund
Audit NEW SYSTEM
Management
Subsystem Subsystem
Control
Financial Subsystem
Intelligence
Subsystem
INPUT OUTPUT
SUBSYSTEM SUBSYSTEM
Figure 3-8. The financial information system and its subsystems
Let us discuss the different subsystems in a Financial Information System.
Input subsystems
A Financial Information System has three input subsystems: the data
processing subsystem, the internal audit subsystem, and the financial intelligence
subsystem.
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Just as a person would maintain an up-to-date record of his life through a

diary, a firm maintains an up-to-date record of its existence through a
data processing subsystem. A data processing subsystem gathers,
manipulates, stores, and reports data that are historical in nature.
The financial information system particularly deals with accounting data.

Accounting data are details of business and financial transactions involving
the firm. Accounting data on a particular transaction include a description
of what the transaction was, when it was made, what goods were involved
in the exchange, how much money was involved in the exchange, and
who were involved in the exchange. These details are classified, recorded,
and summarized in diaries known as books of account.
The sale of products, the payment of overtime pay, and the purchase of
raw materials are examples of transactions involving the firm.
Demand reports for sales analysis (by the marketing manager) and overtime
report (by the manufacturing manager) can be generated by linking the
data processing subsystem of the Financial Information System to the data
processing subsystems of the other functional information systems. The
fact that this subsystem links with other data processing subsystems
necessitates that it be computer-based.
I hope you are ready for another set of questions. As usual, they should
be very easy.
SAQ 3-12
What are the functions of a data processing subsystem in a Financial
Information?
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SAQ 3-13
What are accounting data?
SAQ 3-14
What are books of accounts?
SAQ 3-15
Why should the data processing subsystem of the Financial
Information System be computer-based?
Why should the data processing subsystem of the Financial Information

System be computer-based?
I’m sure you had fun answering the questions.
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Internal audit subsystem
In the same way that the services of detectives are sought to examine a
diary and verify its authenticity, the services of auditors are sought to
examine and verify the firm’s books of account. Small organizations usually
hire external auditors to do the job. Larger organizations have their own
internal auditors to perform what external auditors would do.
Auditing is a formal examination of the firm’s books of account.
An auditor can contribute much to the development of a computer-based

Financial Information System given his or her background on controls.
Controls are measures taken to safeguard the assets of an organization. In
the context of an information system, controls are extremely necessary to
ensure data integrity.
SAQ 3-16
What are controls?
Financial intelligence subsystem
The financial function is concerned with the flow of money through the
firm.
The financial intelligence subsystem seeks to identify sources of funds and

the best investment of funds. Much of the firm’s decisions regarding the
movement of funds is strongly influenced by the stockholders, the financial
community, and the government.
Aside from these entities, access to financial intelligence is also provided

by informal communications with people in the financial community.
Publications and on-line data services also provide financial intelligence.
So…
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SAQ 3-17
What are some sources of financial intelligence?
Output subsystem
Forecasting subsystem
With so many forces surrounding an organization, the task of projecting

the organization well into the future is far too complex for an astrologer
to do. But if he had a financial information system with a forecasting
facility, he’d be better off.
Forecasts vary in the forecast horizon. Some forecasts cover a five-year

period. Others may go for as far as a ten-year period. This, of course,
depends on the needs of the organization. And as the planning horizon
goes farther into the future, the forecast becomes less and less certain.
Forecasts are based on history. This puts into proper perspective the
importance of accounting data.
Approaches to Forecasting. Varying approaches to forecasting are often

employed to enable management to derive a more convincing picture of
the organization in the future. These approaches may be quantitative or
otherwise. However, not one approach promises 100% prediction
accuracy.
Nonquantitative Approach. Insights, judgement, intuition, common sense,

and the like form the basis for nonquantitative predictions. For example,
realizing the big difference that computers make in the delivery of
education, an expert might predict that ten years from now no less than
60% of schools in the country would be implementing computer-based
curricula.
In methods of the nonquantitative nature, various insights from various

experts come into play. These insights are usually openly discussed,
synthesized, and refined as is done in a panel consensus.
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Quantitative Approach. Quantitative methods approach the structured

portion of the prediction activity. Among the more popular techniques
under this method is regression analysis.
In regression analysis, we attempt to establish a relationship between an

entity and the factors surrounding it. For example, knowing that sales is
affected by the selling price, the strength of the sales force, and the amount
invested in advertising and promotion, we could apply regression analysis
to establish how this relationship actually behaves.
Let us attempt to find out how the selling price would affect the sales of
durian given the data in the succeeding table.
Table 3-1. A table of values showing durian sales with the corresponding data
on the selling price, strength of sales force, and advertising cost
Data on Pinoy Durian Ice Cream
Sales (gallons) Selling Price Outlets Advertising Cost
1993 600 300 10 2000
1994 700 250 15 2500
1995 600 250 15 2500
1996 800 200 20 2000
1997 800 250 15 2000
We must realize that since sales is affected by changes in the selling price,
it is said to be dependent on the selling price. We must also realize that
since variations in the selling price bring about changes in sales, the selling
price is an independent variable.
Before we establish the relationship between sales and the selling price,
we may want to plot them as points on the Cartesian plane. Since sales is
dependent on the selling price, it takes the vertical axis. The selling price,
on the other hand, is posted on the horizontal.
Durian Ice Cream Sales
1000
800
Sales
600
400
200
0
0
50
100
150
200
250
300
350
400
450
Selling Price
Figure 3-9. Points from the table in 3-1 plotted on the Cartesian plane
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Since price is not the only factor affecting sales, multivariate regression is
often performed with the help of some software like the Statistical Analysis
System (SAS) and Visual Statistics (ViSta).
A more complex quantitative prediction model is the econometric model.

This model performs calculations with consideration for such economic
data as the gross national product and balance of trade. The forecast is
then subjected to the scrutiny of an economist or a panel of economists.
In practice, forecasts made through quantitative methods are subjected to

nonquantitative analysis like panel consensus. This is done to inject factors
that may not be reflected by data into the forecast.
SAQ 3-18
What are the two approaches to forecasting?
Funds management subsystem
In the finance function, much consideration is given to the flow of money

into and out of the organization. Financial managers would want to see
more money going into the organization and less moving out. Money
flowing in can be money from sales while money flowing out can be money
spent for manufacturing.
Consider the performance of a firm in terms of sales and its manufacturing

expenses. In the business, there are months when sales are low. Keeping
production at the same level all throughout the year can actually translate
to losses for the firm in lean months. Adjustment on the manufacturing
expenditures has to be made to keep the supply at pace with the actual
demand. In this way, the firm does not over-produce.
Granting credit is another way by which money flows out of an

organization. An applicant’s salary, his properties, and his civil status
are among the many considerations made before his application for credit
is even granted or rejected. Just imagine how long it might take to process
an application.
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Fortunately today, computer-based decision supports can perform what

is termed as forward chaining in an attempt to arrive at a recommendation
over the credit. In forward chaining, several if-then rules are consulted
by the support system. These if-then rules are in fact the same if-then
rules that loan evaluators would normally follow.
For instance, if the applicant is single, the rule may chain you forward to
the appropriate next-step in the evaluation process. If the applicant has
not fully paid a previous loan yet, then forward chaining may come to a
recommendation to reject the application.
And since data pertaining to the applicant and the amount applied for
can actually be taken from a database, the support system can basically
work on its own without human intervention. Of course, its output may
still be subjected to review by a credit committee.
Control subsystem
Organizations and offices within organizations all operate within the

bounds of some budget. Performance is therefore evaluated not just with
reference to outputs but also with reference to how well the organization
sticks to its budget.
There are three approaches an organization may take in budgeting.
The first approach is called the top-down approach. In this approach to

budgeting, top-level managers decide on a budget and impose it on the
organization. Allocations are then made for the different departments
that in turn would impose allocations on the smaller units within them.
Another approach is called the bottom-up approach in which lower level
managers submit budgetary requirements to upper management. The
entire organization budget is then drawn from these.
The participatory approach to budgeting requires that managers at all levels

strike a compromise on the budget. Middle managers are often caught in
between people close to the action (lower level managers) and people in
the driver-seat (top-level managers). This approach, however, offers a
better venue where top- and bottom-level managers meet.
Finally, here’s my last question for you.
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SAQ 3-19
What are the subsystems under the output subsystem of a Financial
Information System?
That should wrap up our discussion.
But before we close the session, I would like you to perform another activity
similar to the previous two activities. Again, if you don’t have the time
now, try finding a convenient time to perform this. I hope you will have a
great time performing this activity.
Activity 3-3
Find a relatively big organization in your area (perhaps a
government office) and establish a link with the organization’s
chief accountant. Try to find out what subsystems we have
discussed can be found in the organization’s accounting
department. Be sure to bring with you a checklist.
In addition, identify some problems concerning the Financial

Information System running and propose solutions to these.
The next modules shall bring you closer to the office and shall show how
offices have changed with the advent of computer technology. You’ll
surely enjoy the next modules. See you!
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ASAQ 3-1
Critical success factors are activities, procedures, and measures designed,

developed, and implemented by an organization in the belief that these
are critical to the success of its operations.
ASAQ 3-2
Check if your answers match any of the following:

1. It is simple and user-friendly.
2. It is secure.
3. It supports some DSS functions.
4. It supports drill down.
5. It responds to queries quickly.
6. It is capable of color graphics display.
7. It can communicate with other computers in the network.8. It can
filter information.
ASAQ 3-3
Primary data are data directly gathered by the organization while

secondary data are data gathered by someone else and are used by the
organization.
ASAQ 3-4
In a centralized marketing intelligence subsystem, duplication of efforts is

controlled and the availability of centralized data provides a picture of
what is happening. However, the volume of data may lead to filtering.
In a decentralized marketing intelligence subsystem, duplication of efforts
cannot be controlled. Also, since data are dispersed, a picture of what is
happening cannot be drawn.
ASAQ 3-5
The subsystems under the input subsystem of a Marketing Information

System are:
1. the data processing subsystem,
2. the marketing research subsystem, and
3. the marketing intelligence subsystem.
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ASAQ 3-6
The components of the output subsystem of a Marketing Information

System are:
1. the product subsystem,
2. the place subsystem,
3. the promotion subsystem, and
4. the pricing subsystem.
ASAQ 3-7
The three main manufacturing resources are materials, personnel, and

machines.
ASAQ 3-8
An industrial engineer studies the manufacturing operations and makes

recommendations for improvements.
ASAQ 3-9
The input subsystem of a Manufacturing Information System has the

following components:
1. the data processing subsystem,
2. the industrial engineering subsystem, and
3. the manufacturing intelligence subsystem.
ASAQ 3-10
Carrying costs include costs associated with keeping stocks in inventory

such as taxes, insurance, spoilage, and obsolescence.Safety stock is stock
maintained to cope with emergency such as shortage of supply. Purchasing
cost refers to cost associated with purchases like communication expenses.
ASAQ 3-11
The subsystems under the output subsystem of a Manufacturing

Information System are:
1. the production subsystem,
2. the inventory subsystem,
3. the quality subsystem, and
4. the cost subsystem.
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ASAQ 3-12
A data processing subsystem in a Financial Information System gathers,

manipulates, stores, and reports data.
ASAQ 3-13
Accounting data are details of business and financial transactions involving

the firm
ASAQ 3-14
Books of account are books where accounting data are classified, recorded,
and summarized.
ASAQ 3-15
The data processing subsystem of a Financial Information System must be

computer-based to enable access to data in its database by other
information systems.
ASAQ 3-16
Controls are measures taken to safeguard the assets of an organization

and to maintain the integrity of data in an information system.
ASAQ 3-17
Financial intelligence can come from communicating with people in the

financial community and from reading publications and accessing on-
line data.
ASAQ 3-18
Forecasting may be quantitative or nonquantitative.
ASAQ 3-19
The subsystems under the output subsystem of a Financial Information

System are:
1. the forecasting subsystem,
2. the funds management subsystem, and
3. and the control subsystem.
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Module 4
Office Automation
W elcome to the fourth module on

Now, it is time to focus the discussions on how
Objectives
information systems can be set up in a specific At the end of this module, you
situation. In particular, The Office. should be able to:
Before we move on, I think it would be of help 1. Identify the different

if you imagine yourself sitting in front of your technologies used for office
desk in the office. While sitting there, identify automation;
all the information systems tools that are being 2. Understand the role office
used by your office. Are these tools being used automation plays in problem
effectively? This is the question we want you solving; and
to answer after this module. This is easy to 3. Recommend a technology
answer so relax and enjoy reading this mix for an existing office.
module!
What’s Automation?
What is automation? Automation is the use of machinery to perform
physical tasks that normally are performed by human beings. The earliest
application of automation was found in the factories where machines did
those tasks that were used to be done by human workers. The factory
workers were in turn relegated to operating these machines. This set up
has easily found its way into the present.
Today, the use of machines has been extended from the factories to offices.
This gave birth to office automation.
Office automation includes all electronic systems designed to speed up the

completion of any office work. It is usually concerned with the
communication of information to and from persons both in and outside
the office and the use of electronics to do some of the office tasks that are
done manually. The ultimate goal of office automation is to increase office
productivity and, in particular, to come up with an efficient office that is
manned by a minimum number of personnel possible. Also, it is the goal
of office automation to come up with a “paperless office.” As you may
note, the use of paper in the office has increased tremendously since it
was first used. The dream of office automation is to at least minimize if
not eliminate the use of paper in offices. In this module, we will look at
the current technologies being used in offices and some of the management
issues that may arise due to the use of these technologies.
The Office
What’s in an office?
An office is usually composed of office workers and office tasks. Office workers
usually account for more than 50% of the total cost of running an office.
An office is essentially composed of the following workers:
• Managers
• Staff and Line Professionals
• Secretaries
• Clerks
We clearly know who the managers are. The staff and line professionals
are those who do not manage anybody under them but who contribute
some special skills that distinguish them from secretarial and clerical
employees. Examples of these professionals are researchers, statisticians,
administrative officers, buyers, and salespersons. We often refer to
managers and professionals as knowledge workers in an office. Secretaries
and clerks support the knowledge workers.
The secretary is usually assigned to a particular knowledge worker to

perform a variety of duties like handling correspondence, answering the
telephone, and keeping track of appointments and calendars. The clerks
on the other hand perform tasks for the secretary relieving him/her of
such activities as operating the copying machines, assembling documents,
filing and mailing.
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The nature of an office task may be any of the following:
 Decision making
 Data manipulations
 Document handling
 Communications
 Storage
Obviously, decision making is the domain of the managers. Data

manipulations are done by the staff and line professionals; document
handling are done by the secretaries, and communications and storage by
the clerks. Everyone knows that as you move up the ladder of
management, the nature of the office task you will be doing also become
more complicated.
SAQ 4-1
Enumerate the different office workers and their roles in the
organization. You may want to use the space provided below for
your answer.
That was easy! The next topics will similarly be light reading.
Let’s trace the history of office systems

The history of office systems is highly affected by the history of computers.
Before computers where invented, there were already offices in existence.
Some of the tools used in offices long before computers were invented
were typewriters, filing cabinets, and calendars on paper.
Then came the mainframes, which were available mostly to large offices
due to their costs. Besides, they were not meant to serve for ubiquitous
use. The communication between office workers within an office was
then facilitated by mainframes. Communication across offices was not
served then. Document preparation was also facilitated in terms of quality
and speed, but in terms of user friendliness mainframe computers were
only slightly better than typewriters.
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Then came the minicomputers. More and more offices adopted the
technology due to its lower cost. The office tasks it facilitated, however,
were similar to those mainframes facilitated. It was just a watered-down
version of the expensive mainframe, anyway.
Finally, the microcomputers were invented. These became ubiquitous. Even

small offices can afford them now. In the context of office automation,
the functionality of microcomputers is wider than that of mainframes
and minicomputers. Also, as the office computing environment moved
from isolated computers to a networked computing environment there
has been increased demand for office systems to support collaborative
work.
Office Tasks and Automation Tools

Let us look at some of the common office tasks and the tools used to
automate them. We should note that an office worker is usually assigned
or is responsible for a certain office task. Hence, the tasks that we will be
looking at are actually usually associated with the office workers.
The table below summarizes the tasks, who are responsible for carrying
them out, and the automation tools being used today to help facilitate the
completion of the tasks.
Table 4-1. Summary of office tasks & automation tools
Office Task Office Worker Automation Tools
Decision making Managers Decision support systems,

management information
systems
Data manipulation Staff and Line Spreadsheets, statistical

Professionals packages, small database
programs
Document handling Secretaries and Document management

Clerks programs
Communications Clerks Groupware, electronic

(delivery) mail, conferencing systems
Storage Clerks Archival programs
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Since decision support systems are quite important and since they usually
include a variety of other subtopics, we tackle this larger topic in the next
module. For this module, we look at the automation tools commonly called
the office productivity tools. Microsoft, Inc., for example, developed the
Microsoft Office software for handling some of the common office tasks.
Now, see if you can recall what you’ve just read!
SAQ 4-2
Give the office automation tools that are used by the different office
workers.
Document Management Systems

A document usually passes through several stages of development in the
office. In fact, after a document has already been created it has to be
placed somewhere for possible reuse in the future.
First, a document has to be created. For creating documents, several tools

are available: word processing, desktop publishing, presentation graphics
software, and presentation/visual aid software are among them.
Word processing
Word processing is the creation, editing, formatting, storing, and printing of a

text document. A text document is anything that can be keyed in, such as
a letter and a report. Creation is the original composing and keying in of
the document. Editing is making changes to the document to fix errors or
improve its content - for example, deleting a sentence, correcting a
misspelled word, or moving a paragraph. Formatting refers to adjusting
the appearance of the document to make it look appropriate and attractive.
For example, you might want to center the heading, make wider margins,
or use double spacing. Storing the document means saving it on a data
storage device like a hard disk or a diskette. Printing is producing the
document on paper, using a printer connected to the computer.
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In short, word processing is the use of an electronic device that facilitates

the task of preparing a typed or printed document. When it was first
introduced, it simply simulated the functions of a typewriter. But as the
technology improved, word processing does not only cater to typed text
but it now allows the inclusion of graphics and even sound and video in
the text! The “cut and paste” facility provided in most operating systems
(like Windows and MacOS) made possible the transfer of non-text data
from other software to the word processor. In fact, most word processors
can be linked with existing database systems to produce exactly the same
document for different entries in the database. This is often referred to as
mail merging. Online spelling checker, grammar checker and thesaurus
are now included in most word processors. Hence, it is now unacceptable
to have a document with misspellings in them. This manual, for example,
was prepared using a word processor.
Word processing programs, as mentioned above, help people create, edit,

format, store and print documents at a speed several times faster and
several times higher in quality than when using typewriters. Word
processing program packages are the most widely used of personal
computer applications. Many personal computer owners and users even
use their machines solely for word processing. Also, there are probably
more word processing packages in the market than any other type of
software.
 Case 4.1: Word Processing

Suppose you were hired by ICS, an institute mandated to provide
short-term computer-related training, to become its training
coordinator. Due to limitation in budget, ICS is using a word
processor for preparing the certificates of completion of the
participants in the training. As training coordinator, you decided
to use Microsoft Word for doing this. And since a hand-held
scanner is available, you decided that the certificate would include
some simple scanned graphics in it.
For you to familiarize yourself with the procedure, you decided to

do it yourself for one certificate.
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Consider the format of this certificate below.
CERTIFICATE OF COMPLETION 1
Institute of Computer Science 2
University of the Philippines Los Baños 3
4031 College, Laguna 4
PHILIPPINES 5
This certificate is hereby awarded to 6
Mr./Ms (supply your name) 7
for having completed the Word Processing Software 8

Training. Given 9
on the _____ day of (supply month) 1998 at Los Baños 10
Eliezer A. Albacea 11
Director, ICS-CAS-UPLB
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CERTIFICATE OF COMPLETION
Institute of Computer Science
University of the Philippines Los Baños
4031 College, Laguna
PHILIPPINES
The certificate is hereby awarded to
Mr./Ms (supply your name)
for having completed the Word Processing Software Training.

Given
on the _____ day of (supply month) 1998 at Los Baños.
Eliezer A. Albacea
Director, ICS-CAS-UPLB
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Module 4 127
Activity 4-1
1. Type the certificate as shown above excluding the line numbers.
It should also include the border.
2. Scan the oblation in this manual and insert it at the upper
middle portion of the frame. If a scanner is not available, you
can substitute this with any picture file available in your
machine. See the second box above.
3. Position lines 1, 2, 3, 4, 5, 7, 10, and 11 at the center of the
page.
4. Underline the phrase “Word Processing Software Training”,
change to bold the phrase “CERTIFICATE OF COMPLETION”,
and italicize your name.
5. Check for spelling errors and correct them.
6. Change the line spacing to double space for all lines in the
document.
7. Save the document in a file named certificate.doc.
The SAQ below should already be easy after doing the activity above.
SAQ 4-3
Give at least three functions that are available in word processors
but are not available in an ordinary typewriter.
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Desktop publishing
If the objective is to come up with well-designed pages that combine

elaborate charts and graphics with text and headlines in a variety of
typefaces, then what one needs is a desktop publishing software. You can
use a desktop publishing software to design sophisticated pages and, with
a high-quality printer, print professional looking final document. Before
desktop publishing came about, people had two alternatives when they
wanted to publish: the traditional publishing process (through the printing
press) or through word processing. However, both had their significant
disadvantages. For example, the quality of the word processor’s output
was not so high, the service of a printing press was expensive, and some
functions cannot simply be done.
Desktop publishing is one step beyond word processing. It refers to the

preparation of printed output whose quality is very near that produced
by a typesetter. A desktop publishing setup is usually composed of a high-
resolution screen, a laser printer, an optical character recognizer such as your
scanner, and the desktop publishing software. The high-resolution screen
will obviously allow the user to view the image of the document in the
form that is almost as clear and sharp as it will be printed in the laser
printer. In desktop publishing, what you see (on screen) is what you get
(on paper). Desktop publishing can be used to solve administrative tasks
like the preparation of documents for such internal use as correspondence,
and the preparation of reports and newsletters. It can also be used for
technical tasks like the preparation of slides, overhead transparencies,
and even manuals. Finally, it can be used for tasks involving graphics like
advertisements, brochures, and flyers which are used outside the office.
 Case 4.2: Desktop Publishing

After a year of offering training courses, ICS was able to afford to
buy a desktop publishing software. As training coordinator, your
decision was to acquire the Microsoft Publisher. So you embarked
on changing the way your certificates are prepared. Using exactly
the same textual content, you started preparing one certificate using
the desktop publisher.
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Activity 4-2
1. Discuss the differences between the facilities of a desktop
publisher and word processor in relation to the preparation of
the certificate.
2. Is the change worth the cost and effort invested to study the
new software?
After the activity above, try the following SAQ. It is important that you
do the activity before answering the SAQ.
SAQ 4-4
Give at least two differences of desktop publishers from word
processors.
Presentation graphics software
Presentation graphics software, also called business-quality graphics

software, are programs that lets you produce charts, graphs, and other
visual aids that look as if they were prepared by a professional graphics
artist. While you can produce graphics faster and make last-minute
changes if necessary, you cannot usually control the appearance of the
product when you do it yourself.
Most presentation graphics programs allow you to do the following:
 Edit and enhance charts created by other software.

 Create charts, diagrams, drawings, and text slides from scratch.
 Use a library of symbols, drawings, and pictures (commonly called
clip art) that comes with the graphics program.
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Usually, you can produce high-quality output on a variety of media like

the CRT screen, printers, plotters, overhead transparencies, or slides for
projection. Finally, these software allow you to store the images you created
for future reuse.
Presentation/Visual aids software
A presentation software is usually designed to help anyone quickly and

easily produce professional looking presentation. Most state of the art
presentation software allow one to create on-screen presentations,
augment presentations with speaker’s notes, and print out outline pages
and audience handouts. Other software like word processors and graphics
software may even import the materials produced in this software.
 Case 4.3: Presentation Software

Since most of the training being offered by ICS is on office
productivity tools, this made you the in-house expert of ICS on
office automation. Hence, every time the MIS course is offered to
the diploma students of the institute, you are invited to give the
lecture on office automation. Since, this happens almost every
semester, you decided to prepare the lessons using a presentation
software and your choice, to be consistent with the earlier software
you have been using, is the Microsoft PowerPoint software.
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Module 4 131
Activity 4-3
1. With PowerPoint, create the following as opening page:
Diploma in Computer Science
Management Information Systems
Module 4: Office Automation
by:
(your name)
For the succeeding slides, summarize this module.
SAQ 4-5
Give at least three features of presentation software that cannot be
found in overhead transparencies.
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Final word on document management systems
In all these document management systems for creating documents we

introduced so far, support for collaboration among authors found in
different geographical locations is slowly being developed. For example,
the secretary may prepare a draft of a report, the staff professional adds
some data to support the claims in the document, the graphics artist adds
pictures to make it more appealing to the reader, and finally the manager
edits the whole document. This form of collaboration is now very common
in most automated offices.
Publishing and distribution

After a document has been created, it is usually published or distributed.
When the computer system of the office is networked, distribution is
automatic. Reprographics is one method of best illustrating the publishing
and distribution of documents at the lowest possible cost. For example, in
the newspaper business, like the Wall Street Journal the paper is prepared
in one location using a desktop publisher, then this is transmitted to
multiple locations with printing facilities. The document is finally printed
in multiple copies and sold in the location of the printing facility.
Archive
Finally, a created and published document has to be archived for possible
reuse in the future. Image processing systems like scanners and document
archive systems are usually used. Storage technologies like writable CDs,
jazz drives, and zip drives for storing large and numerous documents are
now quite cheap.
Communication systems
A lot of work that takes place in an office involves multiple participants.
Message handling systems are usually designed to support this type of
collaborative work. The earliest system was to simply send the document
to the intended receiver. Then, the use of telephones together with the
printed document on paper gained popularity and served this purpose.
This was further improved by the use of fax machines. Now, computers
are used to basically add more functionality and to integrate what the
telephone and fax machines have been providing. Some examples of
communications systems are the electronic mail, bulletin board system,
voice mail, teleconferencing and groupware.
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Electronic mails
Electronic mails are messages, usually text, sent from one person to another
via computer. E-mail, as it is commonly called, can also be sent
automatically to a large number of addresses (mailing list). With e-mails,
the bulk of the source-to-destination (and vice versa) correspondence can
be implemented via mailing lists. Information from managers to other
office workers and the responses of the office workers to their manager
are delivered whether they want it or not. With e-mails, no arrangements
as to the schedule of sending and receiving of messages are needed.
 Case 4.4: E-mails

Let us stop for a while to check if everybody in this class knows
what we mean by e-mail. If you are an Internet user, please skip
this part and go to the next topic. However, if you are not, try to
get access to the Internet. You can either look for friends who have
access to it or you can wait until your next tutorial and ask your
tutor to show it to you in the learning center. One thing certain,
your tutor will provide you with his/her e-mail address.
Activity 4-4
Try to get hold of any mailing program and send your tutor a
short greeting with the document you prepared earlier
(certificate.doc) attached to your mail.
Bulletin board system
E-mails are usually quite private. If you want to send a message that
everyone can read, a bulletin board system (BBS) is appropriate for this. A
BBS is a computerized meeting and announcement system that allows
people to carry on discussions, upload and download files, and make
announcements without the people being connected to the computer at
the same time.
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There are many thousands (millions?) of BBSs around the world, most are
very small, running on a single IBM clone PC with 1 or 2 phone lines.
Some are so large that the line between a BBS and a system like CompuServe
gets crossed at some point and is not clearly drawn.
In an office, a BBS may be used for posting specific inquiries on any topic
related to the work in the office and for the others to place their responses.
Although an inquiry-response transaction can be handled by e-mail,
implementing it as a bulletin board allows for a kind of interaction wherein
inquiries are visible to all the office workers concerned and who may
perhaps have the same inquiry.
SAQ 4-6
Differentiate an e-mail system from a bulletin board system.
Voice mails
Voice mails are basically an automation of the telephone. It is exactly

similar to e-mails except that you send messages by speaking them on
your telephone rather than typing them on your keyboard. Also, you have
to use your telephone for retrieving messages. In this technology, one can
still hear the voice of the sender of the information. However, unlike in a
telephone system where both the sender and receiver have to be on the
phone at the same time, voice mails just like e-mails, can be sent anytime
and played back anytime. Hence, this can be very useful to offices whose
employees are spread across time zones. That means you wouldn’t have
to get up at two in the morning just to report to your boss in the United
States anymore.
Teleconferencing
Teleconferencing applications usually include audio conferencing, video

conferencing, and computer conferencing. This is a technology that uses
electronic transmission to permit two or more people to virtually meet
and discuss an idea or issue.
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Audio conferencing requires the use of voice communications equipment

to establish an audio link to geographically dispersed persons for the
purpose of conducting a conference. The conference call that allows more
than two persons to participate in a telephone conversation was the first
form of audio conferencing and can still be used today. This application
does not usually require the use of a computer. All you need are two-way
audio communication facilities like the PABX phone system.
In video conferencing, the audio signal is supplemented with a video

signal. As in audio conferencing, this does not require the use of computers.
Television equipment are usually used to send and receive audio and video
signals. Persons in one location can both see and hear persons in other
locations as the conference is conducted.
Computer conferencing involves the use of networked computers to allow

persons to exchange information during the conference. This application
is very similar to e-mails and in fact the same hardware and software are
used. The conference can be asynchronous where all participants do not
have to be on line at the same time. Or it could be synchronous where
everybody have to be there at the same time just like in the audio and
video conferencing.
SAQ 4-7
Discuss the differences between the three types of teleconferencing
applications.
Groupware
Groupware is a software designed to enable people to collaborate on real

work. It is a new and somewhat unshaped category of commercial
products that help groups and teams work together by sharing information
and by controlling work flows within the group. The term groupware has
attained wide recognition because of a combination of the need for groups
to work together more effectively and the technical progress in networks
and group support products. Groupware is still new that its long-term
direction is unclear. What is clear, however, is that the downsizing and
rapid organizational change of the 1990s makes the effective operation of
work groups an even more important competitive issue.
UP Open University
Many groupware products are related to specific group-related tasks like

project management, scheduling meetings, and retrieving data from shared
databases. The most popular commercial groupware package is the Lotus
Notes. Essentially, Lotus Notes is the facility that integrates e-mails, flexible
bulletin boards, and database facilities. This provides users with a variety
of communication facilities and with a way of creating systems that do
real work. Other types of groupware systems include the brainstorming
support systems and negotiating support systems. Mosaic is a good example
of the basis database facilities that could be used as part of a groupware
system.
Data manipulation tools

Two types of software fall in this category: spreadsheet programs and
database management systems.
Electronic spreadsheets
An accountant’s spreadsheet is a piece of paper with horizontal and

vertical lines dividing it into rows and columns The spreadsheet program
allows the user to simulate a spreadsheet on screen. Working with a
spreadsheet on a computer eliminates much of the toil of setting up a
manual spreadsheet. In general, it works like this: you enter the data you
want in your spreadsheet and then key in the types of calculations you
need. The electronic spreadsheet program automatically does all the
calculations for you and produces the results. The program does not make
any calculation errors, and if you want a printed copy of the spreadsheet,
it can be done quickly. Also, you can store your electronic spreadsheet on
your disk so that it can be used again. But the greatest labor-saving
contribution of the electronic spreadsheet is that when you change one
value or formula in your worksheet, all the rest of the values on the
spreadsheet are recalculated automatically to reflect the change.
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Activity 4-5 Spreadsheets

For us to get a picture of what an electronic spreadsheet can do,
please get access to Microsoft Excel.
1. Using Microsoft Excel, create the following table:
No. StudentNo Exam1 Exam2 HWork1 HWork2 FinalExam

1 78-15144 85 98 45 76 81
2 79-23412 34 45 43 91 32
3 77-23489 65 67 56 32 43
4 86-65498 78 34 78 56 56
5 82-89010 23 67 90 34 76
7 79-12987 12 19 21 76 43
Total 100 100 100 100 100
After the table has been created, try and do the following:
2. Add a column for class standing. The values in this column
are computed using the formula: ClassStand = 50% *
(Exam1+Exam2) + 20% * (HWork1+HWork2) + 30% *
FinalExam.
3. Add a row at the bottom containing basically the average
of the scores in rows numbered 1-7.
SAQ 4-8
Give at least three features of electronic spreadsheets that are not
normally available paper spreadsheet.
Database management systems
A database is an organized collection of related information or data. An

office worker may probably encounter several databases in the office. For
example, an office usually keeps track of the addresses and phone numbers
of its clients and an inventory of its supplies.
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There are problems with the traditional and manual database management
that is usually implemented in an office. This problem results from viewing
each database application independently. Hence, we usually end up with
one procedure for each database task. The solution to this problem is to
organize the different databases in the office into one integrated database.
The task of controlling access to all the data can then be concentrated in a
centralized database management system (DBMS). A DBMS is a computer
application that can help the office store, retrieve, sort, update, view, and
print information in a database. In many ways a DBMS is like a
programming language.
To create a database, a user specifies the various data and their

relationships; the DBMS then translates these logical specifications into
the necessary physical data and links. Once the database has been created,
the DBMS functions like a super access method accepting high-level queries.
A query language, a feature of many DBMS, makes it easy for even
nontechnical office workers to access the database by essentially asking
questions. A DBMS usually allows users to do the four basic operations
on data: view, update, delete, and modify.
Activity 4-6 Data Base Management System
If you got access to Microsoft Word, Excel and PowerPoint, then

you must have access to Microsoft Access!
1. Using Access, create a database with the following data:
StudentNo Exam1 Exam2 Hwork1 HWork2 FinalExam

78-15144 85 98 45 76 81
79-23412 34 45 43 91 32
77-23489 65 67 56 32 43
86-65498 78 34 78 56 56
82-89010 23 67 90 34 76
79-12987 12 19 21 76 43
After the database has been created, try and do the following:
2. Add a field for class standing. The values in this field are
computed using the formula: ClassStand = 50% *
(Exam1+Exam2) + 20% * (HWork1+HWork2) + 30% *
FinalExam.
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Module 4 139
Activity 4-6 continued
3. Add another field for the final grade. The values in this
field are computed based on the values of the class standing.
ClassStand FinalGrade
<50 5.0
50-54 4.0
55-59 3.0
60-64 2.75
65-69 2.5
70-74 2.25
75-79 2.0
80-84 1.75
85-89 1.5
90-94 1.25
95-100 1.0
4. Sort the records in descending class standing.
SAQ 4-9
Give three operations that can be done on the data stored in a
database management system.
UP Open University
Other tools
There are other tools that can serve as utilities for supporting individual
needs of offices workers. Some of them are:
 Calendars and schedulers

 Contact managers
 Clocks and calculators
 Note and idea organizers
Although they are used to support individual office workers and not for
solving a larger office task, I’m sure you’d agree when I say that they do
contribute to the overall productivity of each office worker.
Management Issues
Aside from the availability of trained office workers on the use of these
tools and the availability of hardware suitable for running these tools,
several management issues have to be considered when using these office
automation tools. Some of these issues are:
 Standardization - If you allow multiple document management systems

to be used in the office, obviously you will run into a problem of
converting one to the other.
 Licensing - These tools usually require licenses on a per user basis. Hence,
decisions on who should be using them have to be made so as not to
burden the office of the cost for these licenses.
 Training - Surely not all personnel are adept to these tools. Hence, you
have to invest in training so as to maximize the use of these tools.
 Importance of quality documents - This is an important issue if the cost is

a factor. Since quality documents can be produced only by quality
and more expensive tools and if quality is not so important, then the
office might be better off with less expensive tools.
 Time needed to produce the documents - As in the importance of quality

of documents, we can find more expensive tools that produce the
document at high speed.
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Module 4 141
Also, there are some challenges and issues related to choosing,

implementing and maintaining office automation systems. Some of them
are:
 Integration of heterogeneous software, hardware and telecommunication

systems - The challenge for an MIS manager is really on how to produce
one whole working system from out of the heterogeneous resources
available.
 Maintaining up-to-date systems without overwhelming users - We know

that computer systems do change very fast and, hence, the challenge
is on how to have state of the art technologies at all times (which is
difficult for small organizations) without really overburdening your
workers.
 Difficulty of cost/benefit analysis for office information systems - Most offices

depend on the cost/benefit analysis before adopting a technology.
Usually it is hard to quantify the benefits that one will get when
changing from one technology to another. Remember how intangible
benefits may tip the balance?
 Avoiding the temptation of applying the systems in an unfocused manner -

Here the solution is actually to hire a good MIS person who can give
sound advice on the direction of the automation in the office. Note
that having the best technologies does not necessarily result to better
productivity. It should be designed in such a way that the organization
comes up with one working system for the whole office.
Cost of Using These Tools

Using these tools in the offices will of course cost something to the
organization. Some of the costs are obvious, such as the initial cost of
hardware and software, and never-ending costs of upgrades, maintenance,
technical support, training of personnel, and lease for communication
lines. Other costs are less obvious. An example is the initial investment on
the time spent studying and learning the technology instead of going
directly into the job at hand.
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Is There a Formula for Putting Them

All Together
The independence of the discussions of the topics in this module may
have already indicated to you that there is no simple recipe that one can
take to fully automate an office. It would be more correct to say that there
are no guidelines. Each task that can be automated is unique but can
usually be automated in several ways. In short, there are many ways of
solving office problems using automation. The solution must be thought
out in a manner that considers the issues given in this module. There is
always this tendency for an organization to solve each office task
independently which usually ends up with a very costly solution to the
total problem.
What we want to push is for the organization to look at the problem of

automation as a whole and present a total solution to the whole problem.
This usually produces a cheaper and more effective solution to the problem
of office automation.
 Case 4.5: Office Automation

Let us go back and use the Dusk Video Shop case given in earlier
modules. However, let us consider an expanded version of the video
shop this time.
Dusk Video Shop started operations a few weeks ago in five

locations: Makati (central office), Los Baños, Davao, Iloilo, and
Cebu each location with 10,000 video tape titles at two copies per
title in VHS format available for rent to members. The shop’s policies
on borrowing are:
1. A membership fee of PhP100 is required of each non-member

borrower.
2. Only members with proper identification (identification card
with picture that is issued by the shop) are allowed to borrow
video tapes.
3. A member is allowed to borrow a maximum of five (5) video
tapes at any one time.
4. Borrowed tapes are due after a number of days equal to the
number of tapes borrowed at any one transaction
5. Every video tape returned after the due date is subjected to a
fine amounting to 30% of the rental for every day of delay.
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Module 4 143
Case 4.5 continued
Each location of the shop has to do the following:

1. Issue laminated identification cards with scanned pictures to
new customers.
2. Report total collection and number of tapes borrowed every
day to the central office in Manila.
3. Produce early in the morning a list of customers who are
supposed to return one or more tapes during the day.
4. Should be able to query what tapes are available in the inventory
at any one time.
5. Should regularly (weekly) produce flyers to advertise the video
shop.
The central office, aside from those given above, should be able to
consolidate the reports from the shops and produce a report on a
per branch level and on an aggregate level.
Assume that the video shop has the resources to acquire the
necessary hardware and to hire personnel with the correct skills
for the tools needed to automate the video shop.
Activity 4-7
1. Design a system of automating these functions of the video
shop. Your objective is to come up with a design that will work
and at the same time will cost least to the video shop.
2. After specifying your design, list other office tasks that can be
done by the video shop using the tools included in the design.
Internet Resources
To get more information on the topics in this module, please see the
following:
http://cac.psu.edu/~santoro/283sp98/topref.htm
In this site, you will see information on electronic mail, word processing,
spreadsheet, database management system and many others.
http://www.j-walk.com/ss/.
In this site, you will get more information on spreadsheet (its history, the
different spreadsheet programs).
UP Open University

ASAQ 4-1
Office workers and their roles in the organizations:
• Managers – people who make decisions in the organization
• Staff and line professionals – people whose special skills are used to
provide support for the decisions being made in the organization
• Secretaries – people assigned to a knowledge worker and who do

functions like handing correspondence, answering telephones, etc.
• Clerks – people who assist the secretaries for such repetitive functions
like photocopying, filing and mailing, etc.
ASAQ 4-2
Office workers and automation tools they used:
• Managers – decision support systems and management information

systems
• Staff and line professionals – usually the software used is based on the
skill, i.e., if the person is a statistician then he/she uses statistical
packages and if he/she is an accountant then the spreadsheet is used
• Secretaries – document handling software like word processors
• Clerks – communication software and storage software like emails

and archival programs
ASAQ 4-3
Functions of word processors which are not in typewriters:

1. Print any number of copies of the same document
2. Cut and paste parts of a document
3. Change the format of an already typed document
ASAQ 4-4
Differences of desktop publishers from word processors:

1. Texts and graphics can be combined in one frame.
2. Texts can be written in directions other than from left to right.
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Module 4 145
ASAQ 4-5
Features of presentation software that cannot be found in overhead

transparencies:
1. Text in one slide can be presented one at a time
2. Sounds can be incorporated in the presentation
3. Text can be animated during presentation
ASAQ 4-6
The main difference of e-mail from BSS is that e-mail is designed to facilitate
one to one communication while BSS is designed to facilitate one to many
communication.
ASAQ 4-7
Three types of teleconferencing applications:

1. Audio conferencing – use of voice communication equipment
2. Video conferencing – television equipment are usually used
3. Computer conferencing – exactly similar to video conferencing but
instead of TV equipment, computers are used.
ASAQ 4-8
Features of electronic spreadsheets that cannot be handled by the paper

spreadsheet:
1. Automatic calculation of column and row totals
2. The formula for calculations can be changed as many times as you
like
3. Hide some columns in the presentation
ASAQ 4-9
Add, edit, delete, and view records in a database are standard operations
in a DBMS.
UP Open University
Module 5
Decision Support Systems
W elcome to the fifth module on

Systems. We all know that sound
Objectives
decisions are made when properly At the end of this module, you
supported by information. This should be able to:
module will help us identify the
processing needed to produce 1. Differentiate EDP, MIS and
information necessary for decision DSS from one another;
making. 2. Discuss the decision-making
process and DSS concepts;
Before we move on, try to interview and
a manager of an organization. Ask 3. Design a simple DSS for a
him how decisions are made in his simple and actual problem.
organization. Then, sit down with a
glass of cold water and start reading
this module.
Decision-making is an integral part of any enterprise - be it a government,

military, business enterprise, or even a self-employed individual like a
farmer. Much of the success of an enterprise depends on the decisions
made by the managers.
Decision information plays an important role in situations where a manager

or a group of managers is faced with the allocation of limited resources
(Hammons and Thrall, 1979). Efficient decision-making depends upon
the information available to the decision makers or managers (Brightman,
et.al., 1968). Such information, which may include data and models from
which decisions are based, are, more often than not, far too plenty for a
single human mind to handle.
Scientific approaches to business decision-making are in large part the result

of developments in the computer industry. The power of this new tool is
enabling businesses, large and small, to improve the quality of their decisions
(Brightman, et.al., 1968), thus, the advancement of information technology
from electronic data processing (EDP) to management information system
(MIS) to the current trend the decision support system (DSS).
Quality decision-making largely rests on the ability of personnel to request

and to process volumes of information, and to make rapid and effective
decisions. The human decision maker generally performs sub-optimally
under such conditions (Weltman, 1979). His behavior is typified by
cognitive limitations of memory, attention and processing, and biases and
inconsistencies in aggregating information.
A DSS comprises of a class of information systems that draws on

transaction processing systems and interacts with the other parts of the
overall information system to support the decision-making activities of
managers and other knowledge workers in the organization (Sprague
and Carlson, 1983). It consists of a data, a model, and a dialog components,
which when manipulated and integrated with each other could come up
with information for decision support.
With the large amount of data, events and operations a manager has to
keep track of, the availability of DSS can minimize the time and effort of
managers and knowledge workers in decision-making. Instead of going
through the data and calculating supporting figures manually, managers
need only to communicate with the computer and ask for the necessary
information needed for decision-making. From the available data and
models, which can be inputted, stored and revised, the system shall come
with an answer to a manager’s query which can be used to support
decisions he is to make. A DSS shortens the decision-making process and
saves the managers time and effort in deciding matters important to an
organization.
During the times when computers were not yet invented, decisions were
made by managers using whatever information they can gather or
whatever information fed to them by their subordinates. Usually they
gathered information by observing the operations of the organization and/
or by talking to or looking at the reports submitted by lower management.
Then computers came into the scene. Information used for making
decisions which were earlier derived manually are now generated
automatically. In this module, we review the three computer-based systems
which have been used to support decisions.
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Module 5 149
These systems are: electronic data processing (EDP), management information

systems (MIS), and decision support systems (DSS). This module, however,
will discuss DSS in detail. Of course, it will be easier to understand DSS if we
learn the concepts of the decision-making process first.
Let’s Look at a Piece of History

The area of decision support came about because of developments in
theoretical organizational decision-making and interactive computer
systems. The theory of organizational decision-making were developed
mainly at the Carnegie Institute of Technology during the late 1950s and
early 1960s, while interactive computer systems were developed mainly
at the Massachusetts Institute of Technology in the 1960s.
It all started in 1971 when Michael S. Scott Morton published his paper
“Management Decision Systems: Computer-Based Support for Decision-
making”. In the same year, another paper by G. Anthony Gorry and
Michael Scott Morton entitled “A Framework for Management
Information System” was published. Both papers focused on how
computers and analytical models could help or support managers in
making key decisions. The studies of Morton were a pioneering effort in
the area of implementation, definition and test of an actual DSS.
Also in the same year, 1971, T.P. Gerrity, Jr. published his paper “The
Design of Man-Machine Decision Systems: An Application to Portfolio
Management”. This paper, however, concentrated on design issues and
his area of application was on supporting investment managers in their
daily administration of a client’s stock portfolio.
Then in 1975, J.D.C. Little published a paper “Models and Managers: The
Concept of a Decision Calculus” which focused on computer-supported
modeling. It basically identified criteria for designing models to support
management decision-making. The DSS Brandaid reported in his paper
was designed to support product, promotion, pricing and advertising
decisions.
It was in 1978 when the area of DSS matured. The first textbook titled
“Decision Support Systems: An Organizational Perspective” by Peter
G.W. Keen and Michael Scott Morton was published. This text provided a
comprehensive behavioral orientation to DSS analysis, design,
implementation, evaluation, and development.
Since the first textbook was published, the area of DSS has expanded
tremendously. It is now a common subject being taught in degree programs
in information systems and management science.
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A few specific systems that were part of the early days of the DSS
movement are given in Sprague and Carlson (1983).One is Plan Analysis
and Modeling System (PAMS) which was developed by Getty Oil for use
in supporting capital investment decision-making. Another is an Analytical
Information Management System (AIMS) developed by American Airlines
to support planning, finance, marketing and operating functions. Finally,
a CRT-based system developed by a large paper company for capacity
planning and production scheduling. Many more firms are now moving
to develop systems such as these with the main focus on supporting
managerial decisionmaking.
SAQ 5-1
What are the areas of study that contributed to the emergence of
decision support as a separate area of study?
Concepts in Decision-Making
Let us review what was discussed on decision-making in Module 1.
I bet you must have forgotten all about the stages in decision making. The
discussion below is more general than the one given in Module 1. Try and
re-read the topic on decision-making in Module 1 and then continue
reading below.
An understanding of the decision-making process is an obvious prerequisite

for an effective DSS design. It is acknowledge by many authors that one
of the most significant contributions to decision theory was made by
Herbert Simon in his book “The New Science of Management Decisions”.
Simon postulated three distinct stages in making a decision which he called
 Intelligence
 Design
 Choice
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Module 5 151
In the intelligence stage the decision maker gathers information on the

problem area which informs about its scope and implications. During the
design stage, the alternative courses of action are identified and the
outcomes or consequences of each alternative are determined. Choice
involves the selection of one alternative action based on the decision
maker’s preferences for its associated consequences. This approach of
Simon formed the basis of the “economic man” concept in decision analysis
which involves three conditions:
1. In any decision situation the decision maker is faced with a number of

different identifiable alternative courses of action.
2. To each alternative there is attached a set of outcomes or consequences.
3. The decision maker has a preference system which facilitates the
ranking of outcomes - thus resulting in the making of a right decision.
With this, we can now clearly differentiate the information provided by

an MIS and a DSS. Clearly, a DSS must provide information on the
different alternatives while in an MIS usually provides raw information
that needs further processing to produce the alternatives.
SAQ 5-2
In your own words, discuss the three stages of decision making.
Well, that was something familiar. You will also discover that the topic on
decision categories below is something that has already been introduced
before. Do not stand up continue reading as it will just take a few minutes.
You can rest later.
Problems in the organization cover a wide spectrum of complexity and

naturally they affect different groups or levels of personnel. Gorry and
Morton (1971) defined a two-dimensional categorization of decisions.
UP Open University
The first dimension of categorization relates to the part of the organization

affected by the particular problem. Three levels of decisions fall under this
category:
 Strategic
 Tactical
 Operational
While the boundaries between operational, tactical, and strategic

management are not as precise - in reality one office worker may assume
more than one role - most problems can be classified into one of these
levels.
The operational-level manager has a fairly standardized decision-making

task, much of which can actually be automated. For example, in an
inventory management situation, typical operating level decisions relate
to the reorder of stock, the correction of errors or omissions, expediting
suppliers who are late in delivering goods, and informing other parts of
the organization when deliveries have been late. At this level, there is a
large flow of data into and out of the organization.
The tactical manager is concerned with short- to medium-term implications

within the tactical area of the organization taking into account
performance at the operating level and also of those general activities
both inside and outside the organization which are likely to have an effect
in the medium-term future.
Using the inventory management situation again, the tactical manager is

likely to be concerned with setting new reorder points based on: expected
production-level changes within the organization, possible price rises,
changes in delivery patterns likely to be occasioned by a regional war or a
shipping strike. Most factual type of data relevant to tactical decisions are
derived from summaries, or the like, of data used at the operating level.
The strategic-level manager, on the other hand, concentrates almost entirely

on the wider range of issues involving the performance of the organization
in the medium- to long-term. Naturally, this manager is even more
concerned than the tactical-level manager with external factors and the
strategy decisions relate more to the future of the organization. Thus factual
data derived from the operations of the organization are less relevant in
this situation than for the operational and tactical managers. Instead,
external data are likely to be more useful. In the inventory management
situation, strategy decisions might include limitations of total inventory
holdings based on: working-capital restrictions, government regulations,
and behavior of competition.
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Module 5 153
The second dimension in the categorization is related to the degree of

structure, and hence the amount of uncertainty, involved in the problem.
This introduces the concepts of complexity and probability into the decision
analysis and alternative selection tasks. Three levels of structure can be
used to describe the range of complexity and uncertainty relevant to
decision-making: mostly structured, semi-structured, and mostly
unstructured.
The “mostly structured” category includes those decisions which are

virtually automatic and where appropriate rules can be defined - for
instance, deciding to reorder goods which fall below a fixed safety level of
stock, or the decision to reject an order where the amount of damage is
above an acceptable level. It is clear that many of these decisions can be
automated with clerical or other operational-type transaction processing,
and the name DSS is probably inappropriate in these situations. Operations
research or financial modeling techniques are effective tools for this type
of problem where uncertainty is low.
A “semi-structured” category is normally considered to include the

“decision-making under uncertainty” situation, where complete
knowledge is not available and/or rules and objectives are not specific -
e.g., deciding whether to accept a supplier’s tender on the basis of possible
poor financial standing even though the tendered price is lowest. Most
decisions which interest DSS designers fall into this category.
Decisions are said to be “mostly unstructured” when there are almost no

rules, guidelines, or precedents available to assist the decision maker -
e.g., designing a company logo. DSS can be relevant in these situations in
detecting problems and calculating the implications of alternative courses
of actions being contemplated as decisions.
SAQ 5-3
What are the three levels of decisions? Discuss each.
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 Case 5.1: Decision Categories

Auto Parts, Inc. is a chain of stores selling auto parts. One of the
major sections of this company is its inventory and purchasing
section. In this company we look at the different decisions being
made with regard to inventory management.
Our discussion of decision categories involved two dimensions.

Combining the two dimensions will yield a 3x3 matrix defining
nine (9) different categories of decisions.
Examples of problems and decisions on inventory are given in the cells of

the matrix below.
Table 5-1. A matrix of inventory problems and decisions
Manager Type Operational Tactical Strategic

Decision Type
Mostly Structured Issue an order Increase the stock Increase the stock
request for an level of an auto level of an auto part
auto part whose part because of because of a new
stock level is anticipated law on imports.
zero (0). demand.
Semi-Structured Decide on Change in order Close a branch

whether to patterns due to the due to low sales
accept a opening of several and very high local
delivery or not. new competitors. taxes.
Mostly Order a new Order a new auto Open a new type

Unstructured auto part that is part due to numerous of service aside
not part of the inquiry on its from selling auto
current inventory. availability. parts.
Activity 5-1
Construct this same matrix for the Dusk Video Shop described in
Module 4.
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Module 5 155
EDP, MIS and DSS (The Alphabet Soup)

When computers (in the form of large mainframe computers) were first
introduced, it was found out that the processing power of these machines
can actually be used to automate the generation of reports that usually
involved a lot of computations. For large organizations, the preparation
of these reports usually took time and involved a lot of personnel. Hence
when computers were proven to be useful for this purpose, most
organizations set up their electronic data processing (EDP) sections. Data
processing is the manipulation of data for the purpose of increasing their
usefulness. For example, the generation of payroll for an organization is
now being done using computers whereas before these were computed
by hand by the accounting division of the organization. Other examples
are the generation of list of personnel and summary of daily time record
of each personnel. In data processing, the information that is generated is
actually only in the form of totals aside from the summary of raw data
themselves. Its difference from the manual system is that more data are
now available to the managers. Also, the waits for the data to come are
now shorter.
Most of the information produced by data processing systems are usually

quite independent of each other and combining them to produce a more
integrated information has to be done manually.
Then came new developments in the software side of computer systems.

In particular, the database management systems (DBMS) was introduced
to help in the decision-making process. The DBMS facilitated generation
of information coming basically from more than one database. Hence, a
higher-level information can now be generated. This gave birth to the
concept of management information systems (MIS). For example, an
organization may have a database of its personnel containing all
information about each personnel and a database of the inventory of
equipment. In the MIS set up, the system can now generate a list of
personnel that can possibly still take a newly acquired equipment. This is
in the form of a list of personnel that does not have such equipment in its
care yet. It is still up to the manager to select from among the list who will
be given the new equipment. In the EDP set up, on the other hand, what
will be generated is the whole inventory itself and the list of personnel.
The managers have to match these two lists to come up with who has
what. The information generated by EDP and MIS is not adequate for
direct decision-making yet. It is more suitable for a group of managers to
be deliberated upon and come up with a decision from this.
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With the developments in interactive computer systems, decision support

systems (DSS) was coined to mean a system that produces information
higher than that produced by MIS and information that can directly
support the decisions of an individual manager. The distinction between
the design approaches to an MIS and to a DSS can be rather fine. But the
best way to differentiate the two is to look at DSS as favoring towards the
decision-making use of information as compared to the information-supply
bias of MIS. Thus a DSS has to take into account the problem specific
details as well as the decision-making style of the manager. In our earlier
example, a DSS might employ some sort of weights or priority based on
the position of a personnel. With this, the DSS can come up with a shorter
list than that produced by the MIS.
As a summary, we can view EDP as a system producing the least

information content, then followed by MIS, and then followed by DSS.
SAQ 5-4
Based on the discussion of EDP, MIS and DSS, what levels of
decisions can each support?
That was easy, wasn’t it? Now, let us look at an example to further
differentiate the three systems.
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Module 5 157
Case 5.2: EDP, MIS and DSS

The National Statistics Office is a government agency responsible
for carrying out the Annual Poverty Indicators Survey. This survey
is a very rich source of information for formulating policies on
poverty in the Philippines.
In the EDP setup, the data coming from the survey are inputted
and processed to produce summary tables. What is produced is
actually a volume of statistical tables on poverty. Decision makers
simply make their decisions based on what are given in the tables.
Since this survey is done annually, the data for the last several
years that it has been conducted are now in computer readable
format. With the MIS, it is now easy to produce a summary of the
time series on a particular field in the survey. For example, a decision
maker may ask the average annual income of Filipinos in the last
ten (10) years. He can even ask for correlation of say income and
expenditures.
Finally, to make the system a DSS, what NSO should do is

implement some of their models for forecasting and include them
in the system. In addition to this, an on-line system of querying the
system has to be included. With this, when the President of the
Philippines wants to intervene by increasing the average income
of a province, he can simply connect and on-line get different
forecasts values (due to different models used) for the annual
average income of the different provinces. With the values plus
some of his political motives, the President can basically make a
decision on where to use his social fund.
Activity 5-2
Given the Dusk Video Shop described in Module 4, describe the
information that can be generated at the EDP, MIS, and DSS levels.
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DSS Objectives
Keen and Morton (1978) defined three objectives that a DSS should
achieve. These are:
 Assist managers in making decisions to solve semistructured problems.

 Support the manager’s judgment rather than replace it.
 Improve the manager’s decision-making effectiveness rather than its
efficiency.
These objectives they said correlate with three fundamental principles of

the DSS concept - problem structure, decision support, and decision
effectiveness.
In reality, most problems are really semistructured. It is usually very

difficult to find problems that are purely structured or purely unstructured.
The DSS is not intended to replace the manager. When a manager is

confronted with a semistructured problem, the computer may be used to
solve the structured portion of the problem and the manager can tackle
the unstructured portion of it - applying judgment, intuition and doing
analyses. Hence, we can view this as the DSS and the manager working
as a team to solve a problem.
The DSS should assist the manager in coming up with the best possible
decision rather than coming up with a decision at the shortest possible
time. The quality of the decision made with the use of a DSS should never
be sacrificed for speed.
SAQ 5-5
What types of problems can be solved using DSS as a support?
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DSS Design Issues

A number of issues which need to be considered by DSS designers are
now fully identified in the literature. While it is not possible for all these
questions to be fully answered in the course of the project, both the user
and the designer need to be aware of shortcomings which may exist in
the resulting DSS. Let us look at some of these issues.
Predicting the Future with Historical Data

Most decisions of significance to the DSS designer require prediction of
future courses of events. In most instances, the systems designer has
historical data available at his disposal. These data are useful to the decision
maker in so far as they can be used to predict the future with accuracy.
For the DSS to be effective, users (decision makers) and designers of a DSS
must work closely together to ensure that the numerical database (where
the historical data is found) and the reports generated from it must permit
an acceptable level of support. Also, the reports, their content, and timing
ought to complement the other sources of information open to the decision
maker.
Text-based data and soft information

Traditionally, managers rely heavily on verbal reports as opposed to reports
produced through automation. Although the opportunities to include
comments of lower-level managers in the automated report are limited -
there are ways in which textual data can be incorporated in a computer-
based DSS. An example is to allow free text “remarks” fields or including
reference to the file number of the correspondence with the details of the
remarks.
Office automation systems, especially the combination of word processing,

electronic mail, and text storage systems, provide a more general and
potentially very sophisticated, tool for the DSS designer. When this is
integrated with a system employing a numerical database, there is a good
deal of scope for an effective design.
Formalizing the informal

In an organization, the personnel usually communicate at both the formal
and informal levels. The regular reports being prepared, the procedure
manual which describe how tasks are to be done, and the routine
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communication which describe detailed progress of work comprise the

formal processes. Informal processes can cover a wide spectrum, examples
are unofficial changes to procedures to suit the personal needs of a worker
and information exchanges which are usually done orally (or by telephone).
Obviously, the existence of these informal processes has an effect on
decision-making, and the DSS designer should include them within the
formal computerized system.
Uncertainty
When carrying out a DSS project, there is this level of uncertainly as to its
effectiveness and even on whether it can be completed or not. A design
approach must therefore be adopted which minimizes the risk of substantial
cost overruns, or simply the waste of resources on incomplete projects.
Uncertainty may originate from a number of aspects, including:
 The project objectives may be unclear or may be subject to radical

change. This can lead to a wasted effort if the wrong problem is
attacked.
 The feasibility of achieving all or even some of the objectives may be
unclear.
 User preferences for reporting and interacting with the system may
shift over time or even when the management changes.
 It is often not clear when the project is complete and the work should
stop! It should be understood that when a DSS project is carried out, it
becomes a never-ending project. Changes will always be demanded
in the future.
DSS Implementations
At this point, let us try to define a DSS. McLeod (1990) defined a DSS as a
system that supports a single manager, or a relatively small group of
managers working as a problem-solving team, in the solution of
semistructured problem by providing information or suggestions
concerning specific decisions. This definition is based on who uses the
system and what types of problems it can help solve. As a system, DSS
can be defined as an interactive information technology (IT)-based system
that helps decision-makers utilize data and models in making their
decisions. In this module, we look at the traditional DSS and the trend
lately the Organization DSS.
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Module 5 161
Traditional DSS
The traditional DSS has three major components (Sprague and Carlson,
1982), namely:
 model base
 database
 human interface
each of which interacts with the others and the user (decision-maker).
With these components, the computer-based DSS implementing this
paradigm will consist of the following:
 a model base and a software to manage it

 a database and a software to manage it
 a user interface in the form of a dialog that facilitates the interaction
between the user and the model illustrates these base and database.
Database Model Base
Database Model
Management Management
Dialog
Management
User
Figure 5-1. Components of a Traditional DSS
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The model base component contains the models which are used as basis
for generating information for decision support. Four general functions
that are extremely important in model base management are:
1. Generation - a flexible mechanism for building or generating models.

2. Restructure - a way to redefine or restructure a model in response to
changes in the modeled situation.
3. Update - a procedure for updating a model in response to change in
data.
4. Report Generation-Inquiry - operation of the model to obtain the
decision support desired.
The typical form for traditional modeling is the storage of models as

computer subroutines. Instead of a complete program with its own input,
output, and execution stream, a model may be a subroutine which is called
by the main program. Each model is a set of computer statements with an
entry and return linkage mechanism to enable it to be used as an execution
module in another program.
The database component contains data for variables involved in the

models. A partial set of capabilities required in the database area is as
follows:
 the ability to combine a variety of data sources

 the ability to add and delete data sources quickly and easily
 the ability to portray logical data structures in user terms so that the
user understands what is available and can specify needed additions
and deletions
 the ability to handle personal and unofficial data so that the user can
experiment with alternatives based on personal judgment, and
 the ability to manage this wide variety of data with a full range of
data management functions.
The operations provided by the database component may include:

dictionary operations used to catalog data in the database, creation and
deletion operations which support addition and subtraction of objects in
the database, update operations which permit values to be replaced in
the database, and query operations.
The human interface component links the model base and the database to
the users. Much of the power, flexibility, and usability characteristics of a
DSS are derived from capabilities in the interaction between the system
and the user. All the capabilities of the system must be articulated and
implemented through this interaction which is commonly called the
Dialog.
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Module 5 163
Some of the desirable capabilities of a DSS for it to support system-user

dialog are:
 the ability to handle a variety of dialog styles, perhaps with the ability
to shift among them at the user’s choice;
 the ability to accommodate user actions with a variety of input devices;
 the ability to present data with a variety of formats and output devices;
 the ability to provide flexible support for the user’s knowledge base.
A dialog style that is popular among DSS is the menu dialog. Instead of
having to type commands, a menu dialog allows the user to select from
the menu alternatives. The menu dialog seems to be quite effective for
inexperienced or infrequent users who are familiar with the problems to
be solved. For DSS that provide a large number of functions, menu dialogs
often require many menu items, and in such cases the menu should be
structured, possibly through the use of hierarchies of menus. The other
style of dialog is the use of a natural language interface. This type of a
dialog receives commands entered by the user in a natural language like
English.
Organizational DSS
An Organization DSS is system used by individuals or groups at several
workstations in more than one organizational unit who make varied
(interrelated but autonomous) decisions using a common set of tools. It
employs the use of information technology to facilitate the work of the
organization. It is designed to coordinate decision-making and disseminate
decisions across functional areas, hierarchical layers, and geographically
dispersed units.
Three of the components of Organizational DSS are the same as those of

a Traditional DSS, except maybe for the way these components are designed
and developed. Aside from the three components (model base, database,
and human interface), the Organizational DSS includes the network and
model runs (cases). The basic design of an Organizational DSS (Figure
5-2) would have one or more users with interactive computer workstations
linked to one or more servers through a local area network or wide area
network.
The component that handles the cases would keep track of the models
and the data that are used.
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Database Model Base
Database Model
Management Management
Case
Management
Dialog
Management
LAN or WAN
User User User User
Figure 5-2. Components of an organizational DSS
With the introduction of the network, this implies that the basic difference
between an Organizational DSS and Traditional DSS is that there will be
many users and that the users will be geographically distributed.
Differences between Traditional DSS

and Organizational DSS
Carter, et.al. (1992) enumerated five main differences between Traditional
and Organization DSS’s.
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Module 5 165
These are differences in:

 Purposes
 Politics
 Approach to development
 Focus on functions
 Components
The difference in components was already discussed earlier.
The primary purpose of Traditional DSS is to improve the performance of

an individual decision-maker - to improve the quality of his or her decision-
making by improving its effectiveness and efficiency. This is also one of
the main purposes of Organizational DSS. However, an Organizational
DSS serves other purposes like making sure that a multitude of
organizational goals are met. An Organization DSS facilitates sharing of
resources (data and models), thereby providing a means for communication
and coordination among personnel at the same or different levels in the
same organizational unit, and at the same or different levels across
organizational boundaries.
Since an Organizational DSS requires interaction of two or more

organizational groups, it will necessarily involve organizational politics.
Unlike a Traditional DSS which is designed for one specific decision-maker,
the development of an Organizational DSS will involve proper handling
of the politics of the organization.
A Traditional DSS is looked at as a single entity, hence its development

can be approached in an ad hoc manner. The models involved are designed
for a single decision-maker and hence usually are simpler. In an
Organizational DSS, the models have to produce a variety of results based
on a range of parameter values determined by its users.
Finally, another major difference between the two is that a Traditional

DSS is designed and developed suited for one decision-maker while an
Organizational DSS have to be designed and developed based on the
functions it has to perform.
SAQ 5-6
In your own words, discuss the five main differences between a
Traditional and Organizational DSSs.
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Simulation and Modeling

Simulation is a technique that has been employed extensively to solve
problems. Decision-making using simulation passes through several stages.
These stages are:
 Problem formulation – the definition of the problem to be studied

including a statement of the problem-solving objective.
 Model building – the abstraction of the system into mathematical-
logical relationships in accordance with the problem formulation.
 Data acquisition – the identification, specification, and collection of
data.
 Model translation – the preparation of the model for computer
processing.
 Verification – the process of establishing that a desired accuracy or
correspondence exists between the simulation model and the real
system.
 Strategic and tactical planning – the process of establishing the
experimental conditions for using the model.
 Experimentation – the execution of the simulation model to obtain
output values.
 Analysis of results – the process of analyzing the simulation outputs
to draw inferences and make recommendations for problem resolution.
 Implementation and documentation – the process of implementing
decisions resulting from the simulation and documenting the model
and its use.
One important aspect of the simulation process is the model building aspect.
Models are descriptions of systems. We concentrate on simulation models
that are built for use in digital computers. Within this context, a simulation
model is a mathematical-logical representation of a system which can be
exercised in an experimental fashion on a digital computer. We can
therefore view the model as a laboratory version of the actual system.
Once a model is developed, experiments can then be performed. These
experiments or simulations can be used to draw inferences about the actual
system.
Two types of models can be used for simulation. One is an optimizing

model that is used to produce the best alternative for the situation at hand
and the other is a sub-optimizing model that can be used over and over
until a satisfying outcome has been produced.
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There are currently many areas where simulation has been employed.
Examples of these are:
 Bank teller scheduling

 Consumer behavior prediction
 Inventory reorder system
 Job shop scheduling
 Maintenance scheduling system
One good example where simulation and modeling is used is in the

computation of oil pump price by the Energy Regulatory Board (ERB)
before the oil deregulation law. ERB has a model for the price given the
levels of the variables like price/barrel of crude oil, the peso to dollar
exchange rate, the available supply, tariff, and many other variables. If
ERB adopts an optimizing model, they can basically simply replace the
variables with values and the price will come out. They can immediately
order an increase or roll back in price based on what comes out of the
simulation. Sometimes, however, the amount of increase or decrease is
not politically acceptable to the people and/or the oil companies. In this
case, they may opt to use a sub-optimizing model. Here the government
(represented by ERB), for example, may vary the level of the tariff and
produce different values of increase or decrease until a politically
acceptable value is produced.
 Case 5.3: Decision Support Systems

One system developed to support the decision-making process of
our economic managers is the National Economic Development
Authority (NEDA) Economic Indicators Online (see: http://
www.neda.gov.ph). The system is a good example of system that
can be used for decision-making.
Activity 5-3
1. Comment on the design of this system.
2. Give recommendations on how to improve the system.
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ASAQ 5-1
Developments in theoretical organizational decision making and

interactive computer graphics are the main areas that contributed to the
developments of decision support.
ASAQ 5-2
The three stages of decision making process are:

1. Intelligence – stage when information are being gathered
2. Design – alternative courses of action based on the information gathered
are identified
3. Choice – selection of one alternative action based on the decision
maker’s preferences
ASAQ 5-3
The three levels of decisions are:

1. Strategic
2. Tactical
3. Operational
ASAQ 5-4
The levels of decisions that can be supported by the three systems EDP,
MIS and DSS are:
 EDP – operational decisions
 MIS – tactical decisions
 DSS – strategic decisions
ASAQ 5-5
DSS are suited to solve semistructured problems.
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Module 5 169
ASAQ 5-6
The differences between Traditional DSS and Organizational DSS are:

 Purpose – Traditional DSS are designed for individual decision makers
hence it is developed to improve the performance of the said decision
maker, while an Organizational DSS is usually designed to serve a
wider purpose like improving the productivity of the whole
organization.
 Politics – There is less politics in the development of a Traditional DSS

since it is developed for one decision maker, while an Organizational
DSS involves interaction between two or more organizations and hence
politics is unavoidable.
 Approach to development – a Traditional DSS may be developed in

an ad hoc manner, i.e, one small system at a time, while a Traditional
DSS has to be planned and coordinated among participating units to
ensure success.
 Focus on functions – usually a Traditional DSS is focused on an

individual decision maker while an Organizational DSS is focused on
the functions of the organization that has to be addressed.
 Components – a Traditional DSS has three components (model base,

database, and human interface), while an Organizational DSS has
the same three components plus model runs (or cases) and network in
the form of a LAN or WAN.
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Module 6
Artificial Intelligence
and Expert Systems
W elcome to the sixth module on

For sure, this module will take you to one very
Objectives
exciting journey as it talks about Artificial At the end of this module, you
Intelligence and Expert Systems. should be able to:
Have you heard about Deep Blue? It’s the 1. Describe artificial intelligence
‘intelligent’ computer which defeated and expert systems;
Kasparov — the world’s champion in chess! 2. Explain the characteristics
Probably, you now have an idea about what and structure of an expert
artificial intelligence is and what expert system;
systems can do. These systems are not so 3. Tell whether an expert system
common yet in our country as in other is appropriate for a particular
advanced nations such as the US where these situation or not; and
‘intelligent systems’ can be found in businesses, 4. Explain how other areas of AI
manufacturing, engineering, and many can be applied to Information
other fields. In this module, we will learn Systems.
what these systems are, their structures
and characteristics, and their common
applications.
Activity 6-1
Find at least one software product/system that claims to be
intelligent or so you think it is in a sense. It would be advantageous
if your company or institution is using this product. If your
company does not have a system of this nature, you may go out
and look for one. You may also surf the Internet or consult books
to find one. On the space provided below, write the system’s name
and a description of what it does.
System’s Name Description
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Module 6 173
The Thing called “Artificial Intelligence”

Before we formally describe artificial intelligence (AI), let’s look at some
applications of AI in different areas so that at least you may be able to
gauge how ‘hi-tech’ the systems you found in Activity 1 really are.
MYCIN. A system developed at Stanford University that performs

diagnosis and gives advice on the cure of contagious diseases.
MACSYMA. A system for symbolic mathematics developed at

Massachusetts Institute of Technology. It performs integral and differential
calculus and other mathematical operations.
Autonomous Land Vehicle, an ‘intelligent car’ being developed at the

Carnegie Mellon University and Munich, Germany. Any idea how
intelligent it is? You can command to it and say, ‘Go to work, car! And it
will drive you safely to your office.
The first two systems are first expert systems while the third is an ‘intelligent
system’ still in its prototyping stage. In businesses, these systems are now
prevalent. Here are some of the interesting applications:
 give advice in firing employees

 give advice in granting welfare benefits
 help choose the most suitable job applicant
 schedule airline flights
 give advice about the company’s tax payment
 help managers recommend investment strategies
 help in planning the processing of perishable goods by estimating the
expected demand
 diagnose illnesses and suggest treatment
 diagnose water-waste treatment plants
 diagnose problems in complicated electronic devices
 control assembly robots in factories
 control nuclear power plants
Now, you see that this thing called AI has a very large potential of being
applied to anything where human intelligence is required! Can you
imagine a future where everything is run by machines? At this point,
many questions may ring through your mind. But we have to answer the
most basic one first: What is artificial intelligence? Computer systems that
possess intelligence are said to have artificial intelligence. Just like the
term intelligence, the term artificial intelligence is defined by many experts
in different ways. But all of them have these two general ideas: (1) it
relates to the study of the processes of human thinking, and (2) it is
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concerned with the representation of these processes so that machines,

(e.g. computers, robots, etc.) can exhibit an intelligent behavior. We say
an intelligent behavior is present if there is the ability to:
 understand and to learn from past experiences,

 deduce ideas from uncertain and contrasting messages,
 make fast and efficient response to new situations,
 use knowledge in solving problems,
 face complex situations,
 make inferences in simple but logical manner, and
 distinguish the relative importance of the different elements of a
situation.
Artificial intelligence is the study of computer programs that behave

intelligently. Technically speaking, AI is the field that studies methods of
using symbols to represent knowledge or information and using heuristics
in processing these information. To build a machine that possesses man’s
intelligence is the ultimate goal of AI. However, the capabilities of current
technologies are far from supporting this yet. Computers don’t have the
ability (yet) to learn from experiences at the same level as humans do.
Before you dream about how AI will be used in the year 2031, let’s have a
quick warm-up.
SAQ 6-1
In your own words, describe artificial intelligence in 5 sentences.
Use the space below.
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What are Expert Systems?

As we have learned from the previous section, AI has many applications.
And when AI is incorporated to a computer system, we call the system an
‘intelligent system’. Some of the major intelligent systems and areas of
application of intelligent systems are the following:
 expert systems
 natural language processing
 speech recognition
 robotics and sensory system
 fuzzy logic
 neural networks
 computer vision
Among the intelligent systems, expert systems (also called knowledge-

based systems) are the most common since they emerged early and were
in fact the first applications of AI. These systems imitate the abilities of a
human expert in solving problems. Expert systems function as consultants.
MYCIN and MACSYMA, the systems I mentioned to you earlier, are
examples of expert systems. (Note: We will discuss the other intelligent
systems on the list in the last section of this module.)
The first expert system installed for business use was built by General
Electric to capture the knowledge of a senior locomotive repair expert
who was approaching retirement. The system was built to help
repairpersons diagnose mechanical problems. Once the problem is found,
a video tape instructs the repairperson in making the needed repairs.
Each expert system has the ability to make inferences, explain its actions
or decisions, give solutions to complex problems given uncertain
information, and acquire new knowledge.
To avoid confusion, I think it’s necessary to point out the difference

between an expert system and a decision support system. An expert system
is very similar to a DSS since both intend to provide a high level of problem-
solving support to their users. But they differ significantly in that an ES
has the ability to explain its line of reasoning in reaching a particular
solution. This is deemed significant because very often, the explanation
on how a solution is reached is more valuable than the solution itself.
An expert system is usually used by non-experts so they can perform the

job of an expert. With this, you can clearly see why expert systems have
been so prevalent. But let’s look closely at the other benefits of such systems.
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Benefits of an expert system

Expert systems are very common in the business setting because these
have many potential benefits. Here are some of them:
 Increased productivity and output. Machines are faster than humans

are.
 Higher quality. Machines are more consistent and less prone to error
when doing manual and repetitious tasks.
 Solves the problem of unavailability or inadequacy of experts. When experts
in a field are rare, hard to retain, retiring, leaving the job, or have to
travel across a wide geographic area to do the task, expert systems are
good substitutes.
 Operations in hazardous environment. By using an expert system,
humans may no longer be exposed to dangerous work environments
that may threaten their health or lives.
 Easy access to help and knowledge. An expert system is always available
for consultation and advising.
 Reliable. Expert systems don’t get tired, get sick, go on strike, or argue
with the boss. They always consider all the details of a situation and
do not forget any given information and potential solutions.
 Provides training. A novice user eventually becomes an expert because
the explanations given by the system can serve as training.
Parts of an expert system

Now, let’s see what makes an expert system act like a human expert. An
expert system is composed of five general parts: (1) knowledge base, (2)
inference engine, (3) user interface, (4) explanation subsystem, and (5) knowledge
acquisition/refining system. Let’s look at each part in more detail.
Knowledge base. It contains the pertinent knowledge so the problem will

be understood and solved. Knowledge base has two elements: (1) facts
and (2) rules that will be applied so that the facts can be used to solve a
particular problem.
Inference engine. It’s the brain of the system. Reasoning and coming up with
a conclusion are its main functions. In the process of doing these, it
determines which rule will be applied and what questions to ask the user.
It then makes inferences from the rules applied on the information given.
The newly inferred knowledge is added to its memory.
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User interface. It allows the system and the user to communicate. This
communication is usually in a question-and-answer format. Graphical
interfaces may also be used. But in the future, it is expected that users will
use voice and natural languages to communicate with the system.
Explanation subsystem. It explains the decisions and actions of the system

by answering the following questions: (1) Why did the system ask a
particular question? (2) How was the conclusion reached? (3) Why was a
certain alternative solution rejected? (4) What is the plan to reach a
particular solution? For instance, “What remains to be known before a
final diagnosis is determined?”
Knowledge acquisition/refining system. An expert system must be able to

refine and expand its knowledge just like a human expert. By adding
new knowledge to its knowledge base and by providing more effective
reasoning, it will be able to refine its knowledge and improve its
performance.
After knowing the parts of the system, it’s good if you see the interaction
of these parts. You will see the relationship of these parts in the following
diagram.
User Interface Inference

User
Engine
Search Module
Explanation
Subsystem Control Module
Knowledge Working Memory

Base
Facts
Knowledge Expert and
Acquisition Knowledge
Rules Subsystem Engineer
Figure 5-3. Diagram showing the relationships of user, explanation

subsystems and knowledge acquisition
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You will notice that in the diagram, the inference engine has two modules.
The search module contains a searching algorithm for finding facts and
rules. The control module, of course, controls the process of inference. The
working memory is a kind of database which contains descriptions of the
current problem, the input information, and for storing intermediate
results.
I thought you might get bored with all these technical terms, so let’s have
another warm up.
SAQ 6-2
1. Consider the software product(s)/system(s) you found in
Activity 6-1. Are these expert systems? If not, what
characteristic(s) is/are missing?
System’s Name Missing Characteristic(s)

1.
2.
3.
4.
1.
2.
3.
4.
1.
2.
3.
4.
1.
2.
3.
4.
2. Draw a diagram that will show the components of an expert

system and how these components are related to one another.
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Module 6 179
Did you get it? If you did, I think you deserve a (virtual) cold
drink to freshen you up. It’s on your left. You may drink it
now.
If you didn’t, don’t be sad. It’s not really that easy to remember
all these things at once.
How do you create an expert system?

The process of developing an expert system is also called knowledge
engineering. It starts with knowledge acquisition. In this step, knowledge is
elicited from human experts, books, documents, and other possible sources.
The next step is knowledge representation. This involves determining how
the knowledge will be stored in the knowledge base (that is, what format,
coding, or representation will be used) and entering the knowledge in the
knowledge base. Developing the inference engine, which will allow the
system to make inferences based on the information in the knowledge
base, is the third step. And, finally, an explanation subsystem is developed
so that the system will have the ability to explain its actions and decisions.
You may think that knowledge acquisition may be very trivial and is not
a very critical part of developing the system. Actually, this is the most
difficult and time-consuming step in the process. This difficulty is due to
three main reasons: (1) the inherent inability of many experts to clearly
and precisely express their knowledge, (2) difficulty of representing the
structure of knowledge inside the machine, and (3) many individuals are
involved in the process — the experts, the knowledge engineer (title given
to a system engineer for an expert system), the users, and the team who
will implement the system. To solve this difficulty, new tools have emerged
to facilitate automated knowledge acquisition. These tools are programs
which the knowledge engineer can use to make the process of knowledge
acquisition faster.
Applications of expert systems

As I have mentioned to you earlier, expert systems are common and they
have a wide range of application. If I attempt to write all of them, I may
not finish this module before the course is offered. So I decided to simply
classify them into the following categories to give you an idea of the most
common areas of application of expert systems.
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Interpretation. Inferring descriptions of situations based on observation.

Prediction. Inferring possible outcomes of a situation.
Diagnosis. Finding the defect of something based on observation.
Design. Designing something while considering some restrictions.
Planning. Building a plan to meet some objectives.
Monitoring. Comparing observation with original plan.
Prescribing. Giving solutions to defect.
Repairing. Implementing the given solution to the defect.
SAQ 6-3
You are hired by the country’s largest and leading bank as their
new MIS manager. The management wants to automate the loan
application processing. Do you think an expert system is
appropriate? Explain your answer in 5 sentences.
Did you get it right? This isn’t really that easy, so don’t be hard on yourself
if you didn’t. We will have more case studies during our tutorials so you
can practice your analytical skills some more.
If YES, excellent! You’ve just been one of my bright learners!
Other AI Technologies
The things we will discuss in this section are really very interesting. So,
although I think you may feel tired and sleepy at this time, let’s continue
our journey through AI. To wake you up, you may stretch your arms and
do some bending, look at the window to see the sky, or look at that picture
you’ve kept in your wallet for a long time. Done? Ok, let’s go!
Natural language processing

Natural language processing (NLP) is the branch of AI which is concerned
with understanding and generating natural languages like English,
Japanese, Spanish and Filipino. Important applications of NLP include
textual analysis, machine translation, and providing interface between
computers and its users. Textual analysis systems attempt to summarize
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Module 6 181
or interpret text, and machine translation systems attempt to automatically

translate text from one language to another. The understanding and
generation of natural language has been a major AI research area mainly
because it has greatest potential to revolutionize the way users
communicate with machines. Although menu-driven and icon-based
systems (like in Windows) have simplified the end-user’s communication
with computers, it’s still best if there are machines that can understand
and respond appropriately to spoken word.
Today, there are many commercially available translation software, and

software with natural language interfaces. Examples of the latter include
Paradox from Borland International and INTELLECT from Trinsic
Corporation.
Speech recognition and synthesis

Closely related to NLP, speech recognition and synthesis is the research area
in AI whose goal is to develop machines which can respond to, interpret,
and generate spoken words. When we combine the speech recognition
system and the natural language processing system, the result is a system
which does not only recognize human voice but also understands human
speech. Speech recognition gives the machine the ability to ‘hear’ you
while you speak which entails mere identification of individual words
and does not include analysis of the meaning of the words spoken. NLP
is the process devoted to do the latter.
Speech synthesis gives the machine the ability to speak to its users. Simple
playback of recorded voice is not speech synthesis. What speech synthesis
refers to are the real creation of words from the basic phonemes of a
language and the formulation of different male and female voices. Any
type of software can benefit from this technology – as a user you need not
read the output on screen because it can provide output you can simply
listen to while doing whatever it is you might be doing.
The combination of these technologies with NLP provides the easiest,

fastest, and most natural way of communicating with computers – it’s
always faster and easier to speak than to type commands and inputs. If
we have such systems, we can actually access databases and other
information in remote locations through telephones.
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Robotics
Robotics is the area of AI concerned with simulating human motor abilities
in machines. Robots have been important in manufacturing for more
than a decade now accomplishing simple but important tasks like welding
and painting. Robots have many advantages especially in hazardous
environments. Robots are tireless in repetitive tasks, produce more
consistent high-quality output than humans, and are not subject to dangers
of paint inhalation or retinal damage. Some robots incorporate a certain
amount of visual perception and thus are able to perform assembly tasks
of greater complexity.
Computer vision
Computer vision aims to provide machines with the ability to analyze
sensor data and recognize objects in the physical world. The visual images
are used to control the operations or to instruct computers and other
devices, such as robots.
Fuzzy logic
Uncertainty is the key idea in fuzzy logic. Most often, things aren’t always
right or wrong, true or false. In making decisions, answers are always
clouded by maybes. In fuzzy logic, everything has a degree of certainty.
This degree of certainty is a value from 0 to 1 – 0 for false and 1 for definitely
true. The numbers between 0 and 1 are used to indicate to what extent
an answer is uncertain. These numbers are very important in arriving at
a good solution to the problem. I will not elaborate more on how fuzzy
logic really works because I’m sure that if I do it here, you’ll just get bored
and fall asleep. You may read on this topic later if you are really interested.
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Neural networks
Although expert systems have been successfully applied to many business
problems, there are some difficulties that have severely hampered their
development, namely (1) the enormous time and effort required to extract
the expert’s knowledge and translate it into rules; and (2) the inability of
an expert system to use inductive learning and inference to adapt to
changing relationships in the decision environment. A new technology
called neural network provides solutions to these problems. After it has
been given an initial training set, the system can learn and adapt to new
configurations of the problem.
Neural networks simulate the biological processes of the human brain

(composed of neurons) and nervous system in general. Neural nets, as
they are commonly called, attempt to tease out meaningful patterns from
vast amounts of data. Neural nets can recognize patterns too obscure for
humans to detect, and they adapt as new information is received. It has
been used in digitizing hand-written text, proofreading, remote sensing,
medical imaging, target tracking and classification, and other pattern-
recognition tasks. Here are some actual systems used in the US. Bank
America uses a neural network to evaluate commercial loan applications.
American Express uses a neural system to read handwriting on credit
card slips. The state of Wyoming in US uses a neural system to read
hand-printed numbers on tax forms. The oil giants Arco and Texaco are
using neural networks to help pinpoint oil and gas deposits below the
earth’s surface.
Many major businesses around the world are currently devoting significant
resources to investigate ways in which expert systems, neural networks,
and other AI technologies in general can be used to help them cope with
problem situations and make better and more consistent decisions fast.
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This is the end of the module, I hope you enjoyed studying it. If you did,
I’m sure you won’t go without answering the last SAQ below.
SAQ 6-4
1. The following are actual systems already implemented and used
today. Identify what AI technologies are suited for each and
explain why.
a) Carnegie Mellon University has developed an autonomous

vehicle called ALVINN which learns to drive by itself up to
55mph for as long as 90 miles without human intervention.
b) An international investment company uses a system that

can estimate the expected profit from stocks, cash, and
bonds in order to determine the best allocation of assets.
The company invests assets in different countries around
the world and it has to determine the credit worthiness of
these countries as well as the estimated performance of the
basic economic ratio. After that, it has to choose particular
stock base on company, industrial and economic data. After
considering the estimated foreign exchange rate, interest
rate, and other factors the final stock portfolio will be arrived
at.
2. The spacecraft that landed on Mars in the 70s was not designed
for travel on the planet’s surface, so they sat immobile, gathering
data from their immediate surroundings. A better way to
explore Mars is to send people there. They could drive over
the surface, make surveys, make quick decisions on where to
explore and adapt to any changes in the plan. Humans,
however, cost a great deal to transport to outer space.
Astronauts need a lot of facilities not only for survival but also
for comfort since a trip to Mars takes several years. The ship
will also be heavier and more complex since it must be able to
return the crew back to Earth. Propose a solution to this
problem.
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ASAQ 6-1
We may describe AI differently, but I think we may agree that something

will be common in our descriptions. Check this out...
Artificial intelligence is so called because it is not intelligence that directly

comes from humans but from machines. AI is intelligence transferred by
humans to a machine so that it can perform what is supposed to be done
by humans. Like for many artificial things, the technology has not reached
perfection (yet). AI as a branch of study in computer science aims to
build the ultimate machine — a machine which can think, act intelligently,
and acquire new knowledge at the same level as humans do. (The last
sentence may sound something impossible, irrevocable, disagreeable, but
maybe inevitable.)
If you missed the points I’ve mentioned here, you may be amazed at
yourself because you might have thought you have something concrete
on your mind but you’re maybe at a loss to fully describe it. And yet
when you start describing it, you may feel you need more than 5 sentences.
ASAQ 6-2
1. You may have found a system that may seem to act intelligently but
actually is not an expert system because it lacks one or more of the
characteristics of a true ES. You should keep in mind that an expert
system must have the following abilities:
 infer based on facts and rules contained in the knowledge base
 create solutions to problems even if the information are uncertain
 explain the decisions and actions made through the explanation
subsystem
 refine and expand knowledge
So, are the systems you found expert systems? It doesn’t matter if they’re
not. What matters is that you’re able to identify whether a particular
system is an expert system or not.
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User Interface Inference

User
Engine
Search Module
Explanation
Subsystem Control Module
Knowledge Working Memory

Base
Facts
Knowledge Expert and
Acquisition Knowledge
Rules Subsystem Engineer
2. Your diagram may have a different look. But I just would like you to
be sure our arrowheads are pointing to the same items.
ASAQ 6-3
There is no right or wrong answer here. But you must be able to justify
your answer.
If your answer is yes, you must have mentioned the following points.
 A loan application system will allow junior loan officers (not experts
yet) to get the abilities of an expert loan officer.
 A loan application system will provide up-to-date information

regarding the conditions of the industry, interest rates, credit ratings
of the applicant’s customers, and many other information which will
allow the bank to give a better and faster service to the clients.
On the other hand, if your answer is no, your defense should include
these:
 Loan application is a sensitive thing for the bank’s customers and using
a computer system is very impersonal and cold which will make the
customers feel the bank is uncaring.
Expert systems do not have any common sense, no feelings, and no real
ability to reason. Loan application cannot be based only on written
information but also on the actual situation in life of a customer that only
a human being can feel and understand.
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ASAQ 6-4
1) Our answers may vary so I’ll just outline here the features that the
actual systems have. We can discuss the other technologies that you
may have incorporated in your answers in our tutorials.
a) The system used neural network and computer vision, because

the automobile must make steering decisions based on where it
finds the road in video images. It should be able to drive on a
variety of roads, not just the one it was initially tested on. Only a
learning program can solve this problem by finding similarities
between roads it knows how to drive and those it does not. Neural
nets can handle things even when the unexpected happens.
b) The system used by this company is composed of a combination of

the following:
 Expert system. A rule-based expert system which gives the
needed information about countries and needed information
in choosing stocks.
 Neural network. It performs estimation based on the data found
on the system’s database.
 Fuzzy logic. It supports in predicting the different assessment
factors which do not have proper or insufficient information.
For instance, the credibility of a rule in the rule base is expressed
as a probability. And thus the result of a rule is a probability
value or the degree of certainty in fuzzy logic.
Each of these components interacts with other components and each one
contributes to arrive at a better decision. The figure below shows the
structure of the actual system.
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Databases
Data Company Industry Econometric Data on
Maintenance Data Data Data countries
Stock
Neural Forecaster Market
Forecast
S P
FuzzyNet t o
Country o r
Choose Country List c t
k f
o User
Stock l
Choose Stock List i
o
Rule base
Knowledge Rules Rules on Attribute Rules on
Acquisition On Company Industry Rule Countries
2. Robots, instead of astronauts, will be sent to Mars. They can spend

years in space with few amenities and need not be returned to earth.
Combining technologies in robotics and computer vision, the robot
can perceive its environment and navigate the Martian surface. And
thus will be able to gather information. With an expert system, it can
respond to events as they occur and decide what to do next. Humans
on Earth could carry out some of the decision making, but delays in
communication will require the robot to perform autonomously for
significant periods.
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Module 7
Systems Analysis
and Design Overview
W elcome to the final module on

Systems. It is now time to summarize
Objectives
the steps needed to carry out an At the end of this module, you
information systems development should be able to:
project.
1. Discuss the steps in the
As you go through the steps of information systems
systems analysis and design, you will development cycle (systems
be asked to carry out the steps on an life cycle); and
organization of your choice. We, 2. Design an information system
therefore, suggest that you scout for a small organization.
around for a small- to medium-size
organization that you can use as a
case in this module.
Before staring to read this module, however, we suggest you get some
fresh air first. Inhale deeply with your eyes closed for one minute and this
should be enough to get you ready for this module.
Information systems development is a long and tedious process where

each step in the process is different in nature from the other steps. Due to
this, the people responsible for carrying out the task of developing
information systems need a more detailed representation or methodology
to follow. Without an adequate methodology, less experienced developers
may have difficulty knowing what aspect of the project should be worked
on at any given time. This need for a formal representation or methodology
was actually felt fairly early in the history of the development of

information systems. At this in time, however, the procedure for carrying
out a system development project is now set and well tested. Once the
project has been chosen, the systems development cycle commences. In
this module, our concern is the discussion of the steps involved in the
system life cycle.
What’s Systems Analysis and Design

Systems analysis is the process of studying an existing system to determine
how it works and meets user needs. It is also a study of systems problems
with the ultimate goal of coming up with various alternative solutions.
Systems analysis lays the ground work for improvements to an existing
system. The analysis involves an investigation, which in turn usually
involves establishing a relationship with the client (organization contracting
to have the work done) for whom the analysis is being done and with the
users (people who will have contact with the system) of the system. For
example, in a university registration system the client will be the university
administration and the users are the school employees and the students.
Systems design is the process of developing a plan for an improved system,

based on the results of the systems analysis. It is also a method whereby
the particular solution chosen in the analysis is elaborated, and an
appropriate detailed design is produced ready for programming. For
example, if the analysis of the registration process reveals that students
spend a lot of time standing in lines when they register in the closing days
of the registration period, then the new system design might consider a
preregistration process and details how this will be done.
Let’s review what you’ve just read!
SAQ 7-1
Define system analysis and design.
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Module 7 191
The Systems Analyst

The systems analyst (sometimes called systems analyst/designer) is usually
the person responsible for the analysis and design tasks associated with
the development of an information system. The analyst assumes several
roles during the whole process of systems development. Among these roles
are:
 Analyst - studies the existing system in detail.

 Designer - proposes new procedures for information flow, reporting,
and computer processing.
 Technical writer - documenting the results of the design effort - different
versions may be needed for ordinary users from that of the
programmers who will implement the system.
 Consultant - advises options available to users and indicating the
implications of each option.
 Team member - being a member of the design team, the analyst has to
work with the other computer specialists in the team.
 Behavioral scientist - attempts to design a man-machine interface that
will satisfy the needs of the users.
Consequently, to be effective, the analyst has to combine a variety of skills,

some technical and some social. This is the reason why effective system
analysts are so few and are usually highly paid.
Systems Development Life Cycle

Inexperienced information systems developers usually jump into the
project by immediately doing some programming to solve the problem at
hand. This usually ends up with a system that does not meet users’ needs
and which usually lay unused in the computers of the client. To produce
an effective system, most analysts and developers follow a standard systems
development life cycle. The system development life cycle is the evolutionary
process that is followed in implementing a computer-based information
system or subsystem. There is agreement among developers that systems
development follows a sequence of steps, but they do not agree yet on the
level of details of each of the steps. In this module, we consider the following
general steps:
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 Phase 1.
Preliminary investigation (or simply determining the problem)
 Phase 2.
Analysis (or understanding the existing system)
 Phase 3.
Design (or planning for a new system)
 Phase 4.
Development (or doing the work to create the new system
based on the design)
 Phase 5. Implementation (or converting to the new system)
Preliminary
Investigation
Analysis
Design
Development
Implementation
Systems Development Life Cycle
Figure 7-1. The stages in the systems development life cycle
Preliminary Investigation
The preliminary investigation, more popularly known as the feasibility study
or systems survey, is the initial investigation and brief study of the problem.
It consists of the groundwork necessary to determine if the systems project
should be pursued. The systems analyst needs to determine what the
problem is and what to do with it. The ultimate goal is to come up with a
rough plan of how to proceed with the project.
At this stage, the most useful tool to the analyst is the organizational chart
of the client organization. The organizational chart will provide the analyst
with a lot of information on the lines of authority and the flow of
information within the client organization. It will also provide the analyst
with a way of identifying where to start gathering information necessary
to understand the problem.
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Module 7 193
The preliminary investigation is usually carried in two stages:
1. definition of the problem and

2. feasibility study.
One of the main objectives in the preliminary investigation is to define the

problem. The analyst, the client, and the users must agree on the nature
of the problem at hand. They begin by determining the true nature of the
problem. Sometimes what appears to be the problem is actually just a
symptom of the true problem. Hence, it is important that we have a clear
definition of the problem. After the nature of the problem has been settled,
the next step is to establish the scope of the problem. This is critical because
problems tend to expand if no firm boundaries are set. Limitations are
also necessary to stay within the eventual budget and schedule. We usually
advise the analyst and client to agree on what the new system is supposed
to do and not do. If the scope of the project is too broad the project may
not be finished and if it is too narrow it may not meet the user needs. The
scope will make you understand what the user needs - or what the user
thinks the system should be able to provide. These user needs can now be
stated as objectives of the systems development project. It is important to
state the objectives that will later become the basis of the system
requirements.
The preliminary investigation should produce a feasibility study of the

problem. A feasibility study is a brief look at the major factors influencing
the system, which will allow the manager to solve the defined problem or
achieve the desired objectives. Usually, a feasibility study includes a short
study of the following aspects of the system:
 Technical - Are the hardware, software, and personnel present in the

organization to perform the necessary processing?
 Economic - Is it economical to implement a new system?
 Operational - Will it be possible to implement a system that will fit in
the existing structure of the organization?
 Schedule - Is it possible to implement the system within the time allowed
for this?
The analyst must gather information to answer these questions. Finally, a

brief report, perhaps telling management what you found and listing your
recommendations have to be prepared. The report should allow
management to select from the following choices:
 Drop the matter.

 Fix the problem immediately.
 Authorize you to go on to the next phase for a closer look.
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SAQ 7-2
Describe briefly the two stages in the preliminary investigation stage.
 Case 7.1: Preliminary Investigation

Suppose you are a systems analyst of ICS Experts, Inc., a company
offering Information Technology (IT) consulting services. Your
company was hired to look at the current system and make
recommendations on a possible new system for UniWorld Sales,
Inc. (UWS). You were assigned to handle this job and you were
told to see Mr. Santos, the MIS head of the company.
You learned from Mr. Santos that the company sells groceries and
is composed of one (1) main store, where the management office
of the whole company is found, and fifteen (15) branches, all of
which are in the Metro Manila area. The management as told by
Mr. Santos is satisfied with the sales but is quite convinced that the
cost of operations is quite high.
In particular, Mr. Santos said the management is disturbed by

inventory problems. There is frequent stock shortage and customer
dissatisfaction is on the rise. The company has PC servers at the
main office. Although an MIS section is present, this suffers from
very fast staff turnaround due to the obsolete system it has at
present. The management envisions more sophisticated technology
for the inventory system for which outside expertise is needed to
design it.
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Case 7-1 continued
Mr. Santos introduces you to Ms. Reyes who is in charge of

purchasing and inventory. Mr. Santos said that management has
already sent a memorandum to all company personnel telling them
of your presence and the management support of a study of the
current system. Before you left Mr. Santos, you were able to obtain
a copy of their organization chart (shown in Figure 7-2).
In subsequent interviews with Ms. Reyes and other personnel of

the company, you discovered a deteriorating customer service due
to a lack of information about inventory supplies. Then, together
with Ms. Reyes, you determined the problem definition (shown in
Figure 7-3). The management accepts your report, in which you
outline the problem definition and suggest a full analysis.
President
Administrative Assistant
Vice President Vice President Vice President

Sales Administration Information Systems
Accounting Hardware
Marketing
Maintenance
Customer Payroll Software

Service Maintenance
Purchasing and Personnel

Inventory
ORGANIZATIONAL CHART
Figure 7-2. The UniWorld Sales, Inc. organizational chart
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UniWorld Sales, Inc.: Problem Definition
Nature of the Problem

In the current manual inventory system,
 Products are always out of stock
 Little interstore communication about stock items
 No information about day-to-day stock levels
 Ordering done by intuition
Scope
 The project will be limited to the development of
an inventory system using the latest technology
Objectives
The new automated system should:
 maintain adequate stock in all branches
 reorder stock automatically
 allow stock distribution among stores
 allow management to access inventory
information
 easy to use
 reduce cost of inventory function
Figure 7-3. The problem definition for UniWorld Sales, Inc
Activity 7-1
Remember the organization we asked you to identify at the
beginning of this module. Carry out a preliminary investigation
on such organization.
Systems analysis
The purpose of systems analysis is to understand the existing system. A
related goal is to come up with the systems requirements of the new system.
Once you know the shortcomings of the existing system, then you can
basically add this to the requirements of the new system. The best way to
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Module 7 197
understand a system is to gather all data about it; this data can then be
organized and analyzed. Hence, in the system analysis phase you will be
concerned with data collection and data analysis. Note that it is possible
that the existing system may or may not be a computerized system.
However, in most cases nowadays, the existing system is a combination
of manual and computerized systems.
Data collection
Data collection is an expensive process. There are no standard procedures

for gathering data because each system is unique. But there are certain
sources that are commonly used. These are:
 Written documents
 Interviews
 Questionnairess
 Observations
Written documents include procedure manuals, reports, forms, and other

kinds of materials with bearing on the problem at the hand. One extreme
case is when there are very few or no trails to follow. The other extreme
case is when there are so many documents that it is difficult to know
what exactly is the existing system. At the very least, collect all the forms
currently being used in the organization. It is usually a good idea to collect
all the current forms being used by the organization as this will give a lot
of information on the content and data flow of the existing system.
There are two types of interviews - structured and unstructured. A structured

interview includes only questions that have been planned and written
out in advance. The interviewer sticks to these questions and asks no others.
A structured interview is usually desirable as it is straightforward.
However, the unstructured interview is often more productive. An
unstructured interview includes questions prepared in advance, but the
interviewer is willing to vary from the line of questioning and pursue
other subjects if they seem appropriate. Interviews have certain
drawbacks. One is cost. Usually interviews are time-consuming and will
involve a large number of people.
Data collection via questionnaires is done by sending the questionnaires

to the respondents. Here the respondents independently provide their
responses. One disadvantage of this method is that the respondents cannot
ask for clarification. Neither can the collector follow up a question. The
reason of course is that this data collection mode is off-line or not face-to-
face.
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The worst that can happen in this mode of data collection is when no one
from among the respondents returns the questionnaire and thus we end
up with no data.
Finally, the analyst may opt to just observe by going into the organization
and watch how data flows, who interrelates with whom, how paper moves
from desk to desk, and how it comes into and then leaves the organization.
This form of observation is non-participatory. Another form of observation
is participant observation; in this form the analyst temporarily joins the
activities of the group. This practice is usually necessary in studying a
very large and complicated organization.
Data analysis
The data collection system may probably produce a lot of data in different
formats and details. It is now time to organize data gathered to get ready
for analysis. There are two very useful tools for systems analysis, namely:
data flow diagrams and decision tables.
A data flow diagram is a sort of road map that graphically shows the flow
of data through a system. It is a very useful tool for depicting procedures
and data flow. Although one can actually make a narrative summary of
the procedures and data flow in a system, a picture is usually easier to
follow. As they say, “a picture (in this case a diagram) paints a thousand
words”.
A decision table, sometimes called decision logic table, is a standard table of

the logical decisions that must be made regarding potential conditions in
a given system. Decision tables are useful in cases that involve a series of
interrelated decisions; their use ensures that no alternatives are overlooked.
They are even useful references to the programmers who will ultimately
implement the system.
System requirements
We mentioned earlier that the purpose of gathering and analyzing data is

to ultimately produce a set of system requirements for the new system.
After data analysis, the analyst must be ready to list the precise system
requirements. The importance of accurate requirements cannot be
overemphasized because the design of the new system will be based on
the system requirements.
Report to management
The main output of this phase is a report detailing the current system,
summarizing the problems found in the current system, and describing
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Module 7 199
the system requirements. Also, a recommendation has to be made on what

course of action should be done next. If management decides that it is
worth pursuing the systems requirements given, then you can proceed to
the next step.
SAQ 7-3
What are the tools used for systems analysis?
 Case 7.2: Systems Analysis

Ms. Reyes was quite helpful in providing you with a picture of the
current inventory system. She also helps set up interviews with
store managers and arranges to have you observe procedures in
the stores and at the warehouse.
Out-of-stock situations are common in all branches, but stock

shortages are not uniform across all stores. Frequently, however,
one store will be out of stock of an item that is available in the
warehouse or in another store. The present system does not have
the feature of allowing the transfer of items from one branch to
another. There is a tendency for stock to be reordered only when
the shelf is empty or nearly so.
Inventory-related costs are quite high, especially for special orders

of some stock. Reports to management are minimal and often too
late to be useful. Finally, there is no way of correlating order
quantities with sales records or with inventory situations.
During this stage, you also analyze the data as it is gathered. You
prepare data flow diagrams of the various activities relating to
inventory. Shown below is the data flow diagram to handle
purchasing in the current system. Shown in Figure 7-5 is the
decision table currently in use.
Your report to management includes the list of system requirements

given in Figure 7-6.
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Store
Requisition
Ordering
System
Order
Order (copy)
Invoice
Validation
System Supplier
Order = Invoice Rejected
Invoice
Verified
Invoice
Main Office:
Accounts
Payable
DATA FLOW DIAGRAM OF

CURRENT SYSTEM
Figure 7-4. The data flow diagram for the current purchasing system
UP Open University
Module 7 201
In the data flow diagram, circles represent processes or procedures, the

rectangles are the sources or destinations of data, the arrows are the
direction of flow data, and the labels of the arrows are the descriptions of
the data.
Table 7-1. The decision table for the current system
Rules
Order Procedure 1 2 3 4 5 6
Condition Entries
Valid Requisition Y Y Y Y Y Y
Available in the warehouse Y N N N N
Available in another store Y N N N
Required order Y N N
Special order Y N
Action Entries
Get goods from warehouse X
Transfer goods from another store X
Determine vendor X
Send purchase order X
Hold requisition X X
Send back-order notice X
Reject requisition X
Decision Table for the Current System
UniWorld Sales, Inc.: Systems Requirements
The system should be able to:

• capture inventory data from sales transactions
• implement automatic inventory reordering
• implement standardized interstore transfer system
• provide regular and on-demand reports to management
• provide security and accounting controls
• provide a user interface that can be learned in a one-hour
training
Figure 7-5. The Uni World Sales, Inc. system requirements
UP Open University
Systems design
The systems design phase is the phase in which you actually plan the new
system. This phase is done in two stages: preliminary design stage and the
detailed design stage. In the preliminary design, the analyst establishes
the new system concept and in the detailed design stage the analyst
determines the exact design. The reason why we pass through a
preliminary design is for the analyst to make sure that management
approves the overall plan before spending time on details.
Preliminary design
A preliminary design usually answers some general questions about the

system in relation to the system requirements. General questions like the
following have to be answered in the preliminary design.
 Should the system be centralized or distributed?

 Should the system be on-line or not?
 Should packaged software be used or should programmers be
employed to develop the system?
 How will the input data be captured?
 What sort of reports will be generated?
The list of questions can go on. The objective of the preliminary design is
to illustrate how the system will work and not to show how the system
will finally be developed.
One common method of showing how the system will work is to develop
a prototype for it. Here, management will have a clear picture of what
will happen. A prototype is a limited working system - or subset of a
system - that is developed quickly, sometimes in just a few days. A prototype
is a working model, one that can be modified and fine-tuned. The idea is
that users can get the idea of what the system might be like before it is
fully developed. If they are not satisfied, they can revise their requirements
before a lot gets invested in developing the new system.
Detailed design
In this stage, every part of the system is considered in detail. Detailed

design activities usually includes:
 designing output forms and screens

 planning input forms and procedures
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Module 7 203
 drawing system flowcharts

 planning file access methods and record formats
 planning database interfaces
 planning communications interfaces
 designing system security controls
 considering human factors
Also at this stage, the analysts already formulate the overall logic by
preparing program structure charts and pseudocodes. Normally, the
detailed design includes the following:
 Output requirements
 Input requirements
 Files and databases
 Systems processing
 Systems controls and backup
Usually, the first thing that is designed is the supposed output of the system.
This is natural since you as analyst should first know what the client
wants the system to produce as output. In designing this, you have to also
specify the medium - paper, CRT, or file. The medium will usually affect
the contents of the output - what data are needed for the reports. In the
final design, you may need to draw on paper the actual appearance of
the output on CRT and on paper.
Once the output has been determined, you now have to design what kind
of input is needed to produce the desired output. Again, the medium will
play a major role in the design. Here the design will include a snap shot of
the screen on paper if the input is supposed to be done on-line.
Files and databases have to be specified in terms of how they will be

organized and accessed. The files may be organized sequentially, directly,
or indexed. This of course determines the method of accessing these files.
If databases are employed, you may have to coordinate with the database
administrator for controlling and updating the databases.
One important part of the detailed design is the algorithm for the processing
part of the system. Here, the tools available are flowcharts and
pseudocodes. This part has to be specified properly as this part is usually
being passed to a programmer for implementation. If this is erroneous,
the programmer will never be able to produce the specified output from
the specified input.
Finally, to make sure that the whole process is correct, controls must be
placed throughout the stages of the processing. For example, the input
part might include range checks to make sure that the user inputs only
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legal values for the input. Controls for preventing fraud and tampering
must also be instituted. Backups and restoring from backups must be
incorporated so that when there is hardware failure, data loss is avoided.
SAQ 7-4
Give at least three differences of a preliminary design from a
detailed design.
 Case 7.3: Systems Design

As part of the preliminary design, you are proposing several
alternatives. One is a centralized system where processing is done
at the main office and reports generated everyday for distribution
to the branches. The second is to allow each branch to do the
processing. The third, which you recommend, is a compromise of
the two alternatives. The processing is done at the main office but
the data will be edited locally before transmission to the main office.
Your recommendation is to use a point-of-sale (POS) terminals at

the store check out counter, where inventory data is basically
determined from the goods that are sold. There will be two-way
data transmission between the stores and the branches. All files
will be maintained at the central site. Outputs will be in the form
of regular reports and on-demand status reports on terminal
screens (accessible to all managers).
Below we show the design as viewed by the users. The key feature
of the design is an automatic reorder procedure - done by making
the computer generate order forms for products that fall below
critical value.
You make a formal presentation to management outlining a brief

description of the problem, anticipated benefits, design in general
terms, schedules, and expected costs. With the money saved you
determined that the company will be able to regain its investment
to the new system in two years. The management accepts your
recommendation and you proceed with the detailed design.
UP Open University
Module 7 205
Case 7.3 continued
You proceed to design the printed reports and screen displays for
the managers. Then you make a detailed plan on the use of wand
readers to read bar codes, plan to download the price file daily to
the POS terminals, plan all files on disk to be backed up everyday,
write the algorithms for the system (see Figure 7-7 below), and
design a data communication system. Each of these must be
specified in detail (which we will skip here).
Finally, you make another presentation to management including technical

people and people from the MIS division. This is to gather their comments
on your detailed design.
POS POS POS  POS Store Manager PC
Channel
High Speed
Modem
High Speed
Modem
Company
Server
Purchasing
and Inventory
PC
Users’ View of the System
Figure 7-6. A users’ view for the proposed system
UP Open University
Edit and
Sales Product
Price Lookup
Transactions Price File
Program
(POS)
Sales
Receipt
Branch Processing
Main Office Processing
Inventory Inventory
Program Database
Sales
Transfer Reorder
Transaction
Notice Report
File
System flowchart for the new system
Figure 7-7. The flowchart for the proposed system
Activity 7-3
Using the same organization we asked you to identify at the
beginning of this module, propose a systems design for the
organization.
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Module 7 207
Systems development
At this stage, we now have the design. As an analyst, you are required to
prepare the schedule to monitor the principal activities in the systems
development. The development of the system usually involves
programming, program testing and system testing.
For the schedule, usually the analyst will prepare a Gantt chart, a chart
indicating the schedule deadlines and milestones at certain stages of the
system development phase.
The job at this point is passed on to a team of programmers who will

implement the design produced. A good design usually specifies
everything, from algorithms to programming languages and programming
environments. Documentation (describing the logic and detailed data
formats) is also ongoing at this stage.
Programs are not simply developed and turned over to the clients. While
the programs are being developed, they are actually being tested
individually by the programmers. This type of testing is called unit testing
as they are done to test the individual algorithms in the system. After
everything has been tested individually, they are combined to form the
whole system. The entire system is then tested. This is called system testing
and the objective is to determine whether all programs work together
satisfactorily. Finally a volume testing is done where the system is tested
with real (or live) data in large amounts. This usually reveals errors that
do not show up with test data.
SAQ 7-5
Give the tests being conducted during the system development
phase.
UP Open University
 Case 7.4: Systems Development

Conferring with Mr. Santos of MIS, you prepare a Gantt chart of
the schedule (see below). Program design specifications were
prepared in the previous stages using pseudocode. In the actual
implementation of the programs, it was decided that Visual BASIC
be used since this is available in most PCs and it has available
libraries for programming the user interface very easily. Then you
work with the programmers to develop a test plan. Some inventory
data, both correct and erroneous, are prepared to test the new
system. You and the programmers continue to build on the
documentation by implementing the pseudocode and by preparing
detailed data descriptions, logic narratives, program listings, test
data results, and other related data that can be used in the future
by others in understanding the system.
Month 1 2 3 4 5 6 7 8 9 10 11 12
Program specifications
Programming
Unit testing
Program documentation
System testing
System implementation
Gantt chart: Schedule of systems development and implementation
Figure 7-8. A Gantt chart showing the schedule of tasks in systems

development and implementation
Activity 7-4
beginning of this module, carry out systems development for the
organization.
UP Open University
Module 7 209
Implementation
At this stage, the system has already been developed and is ready to be
used. However, since we will be dealing with people and with delicate
processes that may have dire consequences to the organization when these
fail, we cannot just simply tell the organization to use the new system. We
have to follow a slow procedure of doing this. The stages involved in the
implementation (and as you may recall from Module 2) are as follows:
 Training
 System Conversion
 Evaluation
Often, the systems analysts do not give personnel training the attention it
deserves since they are preoccupied with the computerized aspect of the
system. But the system cannot be better than the people using it. Hence,
effort should be made to conduct this before the actual conversion.
The system conversion stage is the time when you actually pull the plug
on the old system and make the new one run. Depending on the delicate
nature of the process, there are four ways of doing the conversion. Direct
conversion is a method where the user simply stops using the old system
and starts the new one - a somewhat risky method since there is no other
system to fall back on if anything goes wrong. A phased conversion is one
where the organization eases into the new system one step at a time so
that all the users are using some of the system. In contrast, a pilot conversion
is one where the entire system is allowed to be used by some of the users
and is extended to all users once it has proved successful. In parallel
conversion, old and new systems are operating simultaneously for some
time, until users are satisfied that the new system performs to their
standards.
Is the new system working at the level acceptable to the users? Did it meet
the original specifications, budget, and schedule? These are some of the
questions asked during the evaluation. The ultimate goal of course is to
come up with adjustments that will improve the system in the future.
SAQ 7-6
What are the four ways of doing the conversion from the old system
to the new system?
UP Open University
 Case 7.5: Implementation

During the systems development stage, you can actually start to
write the user and technical manuals. This is to allow you to proceed
with the training once the whole system has been fully tested.
Before the system can be fully operational, you have to do a lot of

data input activities. You must enter all the product prices and the
current inventory of the stores. In consultation with management,
you decided that the product prices will be entered in one week
and the current inventory will be entered on a Sunday hiring as
many data encoders as possible to do the job in one day. This is to
capture the state of inventory of the store before the system is run.
Again, in consultation with management, you have decided that

a parallel run will be adopted. Mr. Santos assigned a programmer,
an accountant, and an inventory personnel to evaluate the system.
Their job is to monitor any possible error and to suggest
improvements to the system. Since the documentation of the system
is quite comprehensible, it is easy for the team of evaluators to
check the system completely.
Activity 7-5
beginning of this module, Propose an implementation strategy for
the organization.
UP Open University
Module 7 211
ASAQ 7-1
Systems analysis – process of studying an existing system to determine

how it works and meets users needs.
System design – process of developing a plan for an improved system,

based on the result of the system analysis.
ASAQ 7-2
The two stages of preliminary investigation are:
1. Definition of the problem – stage where the true nature of the problem
is determined.
2. Feasibility study – stage when a brief look is done at the major factors
influencing the system, which will allow the manager to solve the
defined problem or achieve the desired objectives.
ASAQ 7-3
The tools for systems analysis are:
1. Data flow diagrams – road map that geographically shows the flow
of data through the system.
2. Decision logic tables – standard table of the logical decisions that must
be made regarding potential conditions in a given system.
ASAQ 7-4
The preliminary design is used to establish the system concept and it usually
answers certain general questions about the system requirements. The
detailed design, on the other hand, is already the exact design and it is
where every aspect of the system is given in detail.
UP Open University
ASAQ 7-5
The tests done during system development phase are:
 System test – the system is tested to determine whether all programs

work together satisfactorily
 Volume test – the system is tested with real and voluminous data
ASAQ 7-6
The four ways of doing the conversion from the old to the new system
are:
 Direct conversion – the user simply stop using the old system and
starts the new one
 Phased conversion – the organization eases into the new system one
step at a time so that all the users are using some parts of the system
 Pilot conversion – the system is allowed to be used by some users and

is extended to all users once it is proven to work up to the standards
 Parallel conversion – old and new systems are operating simultaneously

for some time, until the new system is running to standards
UP Open University
Module 7 213
References
Alter, S. (1996). Information systems: A management perspective. Menlo Park,
CA: Benjamin/Cummings.
Brightman, R.W., Luskin, B.J., & Tilton, T. (1968). Data processing for deci-
sion making: An introduction to third generation information systems. New
York: MacMillan.
Brooks, C.H.P., et.al. (1982). Information systems design. New Jersey:
Prentice-Hall.
Capron, H.L. (1990). Computers: Tools for an information age. Redwood
City, CA: Benjamin/Cummings.
Cardus, D.C., Hammons, C., & Thrall, R.M. (1979). Multiple objective ben-
efit-cost models for decision makers. Academic Press.
Carter, G.M, Murray, M.P, Walker, R.G., & Walker, W.E. (1992). Building
organizational decision support systems. Academic Press.
Davis, G.B. (1985). Management information systems: Conceptual, founda-
tions, structure and development. Boston: McGraw-Hill Book Co.
Edwards, P. (1993). Systems and analysis and design. Boston: McGraw-Hill.
Everest, G. (1985). Database management. Boston: McGraw-Hill Book Co.
Finkelstein, C. (1992). Strategic systems development. Addison-Wesley.
Gane, C. Structured systems, analysis, tools and techniques. New Jersey:
Prentice-Hall, Inc.
Gerrity, T.P. Jr. “The design of man-machine decision systems”, Sloan
Management Review. (1997):12 (2) 59-75.
Gorry, G.A. & M.S. Scott Morton. “A framework for management infor-
mation systems”. Sloan Management Review, 1971:pp.55-70.
Keen, Peter G.W. & Michael Scott Morton. (1978). Decision support sys-
tems: An organizational perspective. Reading, MA: Addison-Wesley.
Little, J.D.C. “Models and Managers: The Concept of a Decision Calcu-
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Martin, J. (1993). Principles of object-oriented analysis and design. Simon &
Schuster Company.
McLeod, R., Jr. (1990). Management information systems. New York: MacMillan.
Pritsker, A.A.B, & Pegden, C.C. (1979). Introduction to Ssimulation and
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istration, Harvard University.
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Simon, H.A. (1975). Administrative behavior. New York: MacMillan.
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Hall, Inc.
Sprague, R.H. & Carlson, E.D. (1983). Building effective decision support
systems. Grolier, Inc.
Weltman, G. (1979). Adaptive computer-aided decision systems. Academic Press.
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Management Information

University of the Philippines

Copyright © 1998 by Eliezer A. Albacea and Xavier Aurelio Q. Tabbada

Published in the Philippines by the UP Open University

First edition, 1998

Layout by Helen M. Creer

Printed in the Philippines

Management Information Systems (MIS) is the application of information

Here you will be trained to utilize your business-based backgrounds in

Institute of Computer Science

Module 1 Information Processing in Perspective, 1

Module 2 Systems Planning and Development, 29

Module 3 Organizational Information Systems, 81

Module 4 Office Automation, 119

Module 5 Decision Support Systems, 147

Module 7 Systems Analysis and Design Overview, 189

W elcome to the first module on Management

Let us take a look at a very simple situation. Suppose a sari-sari store

Customer Name Amount Due

Figure 1-4. A list indicating names of customers of a sari-sari store with

The way data is defined seems to attach to it a certain characteristic of

Before we move on to a more detailed discussion on information and

For information to be qualified as information for management, it has to

Decision makers rely heavily on information for decision-making. As much

Aside from these, management information should be complete. This does

As you might have expected, through filtering, only information relevant

Of course, the information becomes useless if it is not delivered when and

By now, you should be able to qualify information for management.

Information can come from various sources inside and outside an

What is an information system? An information system is a complex

Information systems can be found in every organization, big or small. As

1. A membership fee of PhP100.00 is required of each non-member

As expected, the task of maintaining an index card for every member is

Tabbada, Pamela Bago Oshiro, Mintal, Davao City

Figure 1-9. Sample index cards utilized by Dusk in keeping records of

As a result, many information systems today are computer-based. A

Figure 1-10 shows how these components take their places in an

INPUT PROCESSES OUTPUT

Figure 1-10. The six basic components of a computer-based information

Central to the information system is the process component. A process

An information system instituted to support management functions such

So, are you ready to face some more questions?

You know where to find my answers.

Information Systems and the Human Heart

Now, try the activity that follows.

When you have identified an organization of your choice, establish

Do you see how some personnel support the information needs of

Present your findings to class.

In a short while, we shall be discussing Information Resource

Information Resource Management

Today, modern organizations look at information as their fourth major

Information Resource Management or IRM is a concept that values information

Recall from the previous module that Management Information Systems

The competitive advantage that comes from providing management with

I guess you’re ready for a couple more of questions.

Information and Decision-Making

The degree to which information needed for decision-making is available

 the strategic level,

Figure 1-11. An organizational model showing the layers of management

Managers in the strategic level are tasked to identify long-term strategies

As an example, suppose managers in the strategic level of a software

only be accomplished if the organization had the best programmers,

Now, try answering these questions.

How did you find the questions? Easy, right?