 International Business Information System (2016-17)

Unit-1: Introduction
1.1 Information System & Its Components
1.2 Why Study Information System
1.3 Dimensions of Information System
1.4 Information System-A Socio-Technical System
1.5 Information System-A Competitive Weapon
1.6 Role of a Chief Information Officer
1.7 Data & Information Cycle

Unit-2: Levels of IS & Systems for Linking Enterprise

2.1 Different Levels of IS-TPS, MIS, ESS
2.2 Decision Support System (DSS)
2.3 Expert System
2.4 Systems for Linking Enterprise-ERP, SCM, CRM & KMS
2.5 System for Collaboration & Team Work

Unit-3: DataBase Management System

3.1 Traditional Filing System-Limitations
3.2 Database, Its Capabilities & Components
3.3 Relational & Object Oriented Database & Database in the Cloud
3.4 Data warehouse, Datamart, & Data Mining
3.5 Text Mining & Web Mining

Unit-4: Building Information System & Emerging Issues

4.1 Prototype Approach
4.2 Life Cycle Approach
4.3 Outsourcing
4.4 Virtual Organisation
4.5 Change Management

Unit-5: Emerging Issues (cont)

5.1 Cloud Computing
5.2 Cloud Sourcing
5.3 Big Data & Trends
5.4 Social Networks-(Social Media)

References:
Management Information System by Laudon & Laudon (Pub: Mc Graw)
Management Information System by by Mc Leod & G P Schell (Pub: Pearson)

UNIT-1
1.1 Information System & Its Components
Information System is an organised combination of resources-hardware resources, software resources, data
resources, people resources and communication technologies that collect transform and disseminate
information in an organisation. People have relied on information system to communicate with each other
using a variety of physical devices (hardware), information processing instructions and
procedures(software)communication channels (networks) and stored data (data resources). Information
system specials are also a critical component. People using these information systems are information
system specialists, are system analysts, software developer or system operators or simply data entry
operators.

1.2 Why Study Information System

Earlier managers did not know how information was collected, processed , stored and distributed in an
organisation. Also the technology for processing information used was also minimal. Information was not
considered an important asset for the organisation. However , today managers cannot afford to ignore
information and information system. IT is an important tool. IS and IT is considered very vital for
generating right information at the right time to enable speedy and quality decision.

This is because the business environment has changed.

There are three major changes have come about which has increased our reliance on IT. These changes are: -

 Emergency and Strengthening of a Global Economy

 Transformation of Industrial Economy to Service Based Economy
 Transformation of the Business Enterprise

Emergence and Strengthening of a Global Economy:

Many industrial economy like US, Asia , Europe – depend upon import and export. And foreign trade has
become very important for them. And this is growing day by day, leading to gradual globalisation of firms.

Today every firm is a global firm. And success of every firm depends upon how a firm operates globally. In
a global economy, the value of information increases. The cost of a wrong decision is very high and vice
versa the firm can reap huge benefits by making a right decision.

Success of a firm depends upon the quality of decisions the firm is able to take, the quicker decisions it is
able to take; which depends upon how well co-ordinated and connected its disparate units are. And this
depends upon the IT technology the firm uses. IS provides the communication and analytical power that
business needs to operate globally.

There is increasing competition-to become competitive (and be successful) firms need powerful IS.

Transformation of Industrial Economy to Service Based Economy

We have moved from agro-based economy to industrial economy and from industrial economy to
knowledge economy.

In such a economy, majorly people do not work in firms and factories but in service – based firms; like
hospitals , banks , financial services, insurance, health , education, trade, transport, real estate, dwellings
etc. Credit cards ,overnight package delivery ,world-wide reservation system are example of services based
on new information technologies.

Service sector is growing all over the world. In India, service sector is the largest sector contributing to
52.9% of the GVA (Gross Value Added), industry has a share of 32.3% and agriculture only 17 percent
approx. This sector is growing at the rate of 23.72% in 2016 (as against 9.5%in 2008). The contribution of
the IT sector is 9.5% and TCS is the market leader contributing to 10.1% of Indian IT and ITES sectors
revenue.

In a new economy and information based economy IT and IS take greater importance. Here the primary job
involves-

>working with knowledge

>distributing knowledge, and

>creating new knowledge.

Therefore productivity of employee will depend upon quality of information one is able to generate; which
depends upon IT and IS that it deploys. Management decision about IT are critically important for success of
firm. Information and the technology that deliver it have become critical and strategic resource for the firm.

Information and technology that deliver it have become critical, strategic resource for a firm.

Transformation of Business Enterprise:

The nature of organisation has changed. How a firm manages its operations has changed. How it planned,
organised and controlled has changed. How it creates value has changed.

The traditional organisations were Hierarchial, centralized, focussed on specialists, had a rigid structure and
believed in

standardized products and services.

The modern organisations are flat in structure, decentralised, promote generalist, and are flexible (Eg:
flexible man and flexible machine).

Eg:Job rotation – Stores issue material and repairs man; division of labour was the norm; now its multi-
skilling and promoting generalists is the norm.

Common platform – alto / wagon R (Gurgaon)

Manesar plant – Swift / swift D zire

“frugal design” – common parts

*NPD cycle – shorter (3 – 7 years) now to months.

Further, traditional organisation produced standardized products while the modern organisation manufacture
customised products and services.

Difference:

Traditional Firms-Modern Firms

Hierarchial- Flat structure

Centralized – Decentralised

Specialists – Generalist

Structure (rigid) – flexible (Eg: flexible man and flexible machine)

Standardized – customised products and services Eg: Ford – BLACK colour car

Traditinal organisations laid down formal plans, which were rigid, and one had to conform too strictly.
Modern organisations create informal teams which are flexible teams. They create a network of teams,
flexible teams which come into being and dissolve and disintegrate once the work is accomplished. Modern
organisations create link between people in different places. All this is enabled with the use of IT.

1.3 Dimensions of Information System

Define an IS and describe its management, organisation and technology components

There exists three dimensions of information system. They are technology dimension, management
dimension and organisational dimensions.
The Technology Dimension includes: Computer hardware and software, Data Management Technology,
Networking and Telecommunications Technology (networks, internet, intranets, extranets, www) and the IT
infrastructure that provides the platform that the system is built upon.

Handheld computers, bar code scanners , networks , desktop computers , etc are technology dimensions of
United Parcel Service (UPS).

The Management Dimension: Managers set organisation strategy for responding to business challenges. In
addition, managers must act creatively to churn out new products and services.

Eg# monitor service levels and costs are management dimensions of UPS.

*Organisational dimensions: This refers to separation of business functions that of

>sales and marketing
>human resources
>finance and accountry >manufacture and production
- unique business processes
-unique business culture
-organisational politics
#procedures for track packages and management inventory and provide information are organisation
dimensions at UPS.
Organisational dimensions of IS also include:
-hierarchy of authority , responsibility
>senior management
>operational management
>operational management
>knowledge workers
>data workers
>production or service workers
Business organisations are hierarchies consisting of three levels; they being senior , management and
operation levels. ISs serve each of these levels.
Scientists and knowledge workers often work with middle level
Using IS effectively requires a clear understanding of all the three dimensions which shape the
system.
An IS creates value for the firm as an organisation and management solution to the challenges posed
by environment.
 There is interdependence between organisation and IT : growing interdependence between ability to
use IT and to implement corporate strategy and achieve corporate goals . There is growing
interdependence between firms IS and its business capabilities.
Changes in strategy , rules and business processes increasingly require changes in hardware,
software and data bases and telecommunication.
Often what an organisation would like to do depends upon what its systems will permit it to do.

1.4 Information System-A Socio-Technical System

OR Business Perspective to Information System

Information System is defined as a set of inter-related components that help to capture inputs, process them
as outputs. It is said to consist of three activities-input,process and output.

Daigram:
There are two information systems which exist and operate in an organisation-they are the formal and
informal information systems. The information system that we refer to is the formal information system
which (may be manual or) is computerized and rely on hardware, software and communication technologies
(wired or wireless) which has been laid down by the organisation to generate information for decision
making. Informal information system that is gossip and social network, however relevant, have no
importance.
Business Perspective to Information System:
From a business perspective, information system is much more than that. It is actually a management and
organisational solution to the many problems and challenges (at the strategic level and also the operational
level that is posed by the environment to the organisation. These solutions are based on information system
and these solutions are they provide by drawing from various disciplines.
Information System draws from various disciplines. These disciplines are:
Computer Science: This refers to the methods of computation, data storage and data access.
Operations Research: This refers to mathematical models for optimization of select parameters of
organisation such as transportation, and inventory control.
These give a technical perspective to the system.
Psychology: Focuses on impact of information technology on individuals. Are the individuals accepting the
new technology or are they resisting it.
Sociology: Focuses on impact of information technology on groups and their behaviour.
These give a behavioral perspective to the system. The behavioural approach refers to the social and
intellectual units which make it work.
Since IS consists of technical and behavioural approach; IS is said to be a socio-technical system.
A socio-technical system helps it avoid a totally technical approach to information system. IT cost is
declining rapidly; but this ought not to mean that the new technology should be adopted. The approach
should not be IT for sake of IT but for the need of IT.
When a new technology is adopted, there is resistance to acceptance of this technology. This resistance is
because of fear of redundancy, fear of new method of working, change in department to which one was
working in, new people to work with; as such; technology should be de-optimized to gain acceptance.
Technology should be changed and designed to fit the organisation and individuals needs.
If a new technology is adopted, individuals who are affected should be communicated that the change is for
their benefit; therefore, constant communication is required. Much resistance can be controlled by
communication itself.
Also it needs to be identified as to who are affected, how are they affected, who would need training, what
kind of training would he/she need, for what time period.
Therefore, individuals should be changed through training*, learning and a planned organisation change to
allow technology to get acceptance, operate and prosper.
1.5 Information Technology as Competitive Advantage:
In order to use information technology as competitive advantage one must first understand where the
strategic opportunity of business exists. Two models of the firm and environment are used to identify areas
of business where IS (Information System) can provide advantage over competitors. The models are the
Value Chain model and the Porters model.

We will discuss the Competitive Forces Model developed by Michael Porter.

Competitive Forces Model:

According to Competitive Forces Model a firm faces many threats.

 Threats of New Entrants into the Market

 Pressure from Substitutive Products and Services
 Bargaining Power of Customer
 Bargaining Power of Suppliers

Competitive advantage can be achieved by enhancing the firm’s ability to deal with each one of them by
using four basic competitive strategies to deal with these competitive forces.

(i) Product Differentiation

(ii) Focussed Differentiation
(iii) Develop tight linkages with customers and suppliers
(iv) Becoming the low cost producer of goods

A brief discussion of these follow:

(i) Product Differentiation: A firm can create new products and services that can be easily
distinguished from those of its competitors. These firms provide product and services that cannot
be easily imitated (copied). In other words it uses IS/IT to provide products or services which
competitors find difficult to imitate, costly to imitate, time consuming to imitate and or also
technologically superior to imitate.

Some instance are: Financial institutions have used IS to create new products and services. Citibank
developed ATMs (and use of debit cards) and installed these machines throughout the New York
metropolitan area; anywhere and everywhere where a depositor might find time to withdraw money or
may feel the need for money. The innovation could not be imitated fast as these machines were costly to
install and the concept was technologically superior to imitate.

In the Retail world, manufacturers are using IS to create products and services that are custom tailored to
fit the precise specification of individual customers. Garment manufacturer Levi Straus equipped its
retail stores with an option called “Personal Pair” which allows customers to design jeans to their own
specifications rather than picking them off the shelf. These customers enter their measurement into a
micro-computer which transmits the customer’s specification to the Levi’s plants. Levi is able to
produce customized jeans on the lines that it manufactures its standard items.

(ii) Focussed Differentiation: In focussed differentiation, market segments are created to whom one
can target its new products and services. Such firms create new market niches by identifying
specific markets for a product or service that can serve in a superior manner. IS gives a company
competitive advantage by producing data to improve their sales and marketing technique. Such
 systems treat existing information as a resource that can be mined by organisations to increase
product market penetration and profits.
Readers Digest owns one of the largest databases in the world of over one million families and it
is continuously being updated even today. It mines its database to make market appeals. It uses
this information to make all kinds of special marketing appeals of magazines, books, tapes,
videos, CDs,- all which are produced by Readers Digest.

Sears, Roebuck & Company also adopts this strategy. It has a database of 40 million retail customer base in
USA. It carefully examines transactions of customer purchases; identifies profitable customers win more of
their business and develop flexible products, pricing and services. The cost of acquiring a new customer is
five times more than the cost of retaining an existing customer. It targets appliance buyers, tools buyers, and
gardening enthusiasts with its market appeals. It mines its computerized data

*Data Mining: Is a new approach consisting of personal or individualized messages based upon likely
individual preferences. It has a primary goal of better understanding current and potential customer in order
to boost sales and build customer loyalty. This is based on the idea that past behaviour is the best indicator
of the purchasing interest of consumers. Massive quantity of data are gathered on consumers and then
analysed to locate customers with specific interest or to determine the interest of a specific group of
customers. It uses a variety of technique to identify hidden pattern and relationship in large pools of data.
Thereby a data-image is created about each customer for example about his income, hobbies and interest.

HDFC and ICICI compile data about customers who are using net banking facilities. They create customer
profiles about who go on vacation every summer and offer tour packages to them or about those who change
vehicles every 5-7 years and their new vehicle loan scheme is offered to them.

(iii) Develop Tight Linkages with Customers and Suppliers: A firm can create tight linkages
(close relationship) with its customers and suppliers. It can develop close relationship with its
customers and bind them to its products; and bind the suppliers to a delivery schedule and price
structure. This increases the switching costs (and sometimes it becomes prohibitive). It becomes
difficult for the customer to switch to competitors products and also reduces their bargaining
power .

FedEx (Federal Express Corporation) first selects its 20,000 best customers (on the basis of of
business and number of years it has been a customer). To these customers, it gifts a PC and also a
FedEx ship software (all free of cost) with the help of which they are able to connect to FedEx Head
Quarters which is at Memphis. The customers from their own home are able to track their status of
products that they had despatched to their customers.

Even customers who were not large enough to fall in the ‘best’ category, received (free of cost) to
use with their own micro-computers for this purpose.The software connects their computers directly
to FedEx, creates shipping labels, schedules pick-ups, tracks and confirms package delivery.

(iv)Becoming the Low Cost Producer of Goods: Firms can produce goods and services at a lower
price tha its competitors without compromising on quality and the level of service They can achieve this
by collaborating with customers, distributors and suppliers and automating the flow of information
across organisational boundaries.

WalMart follows a continuous replenishment programme (CRP).Walmart operates private satellite

communication system. Point of sales terminals record bar code od each item passing the check out counter
(daily) and such purchase transaction are collected from all Walmart retail outlets. Suppliers (distribution
centers) know how much to replenish.
It uses sales data which is captured at the check-out counter, and it transmits orders to re-stock merchandise
(from its distribution centers) directly to suppliers. The suppliers can monitor product requirements, factory
scheduling once the system is in place. The benefit is: Instead of stocking for seven days (a week), it stocks
for a day only. Order cycle time is reduced. The carrying cost is reduced and this reduction in cost is passed
on to the retailers. Thus it became the lowest cost provider of goods.Distributor also knows how much of
what to manufacture. 4,000 vendors and 19 distrbution centers.

1.6 ROLE OF A CHIEF INFORMATION OFFICER (CIO)

The role of a CIO has evolved from the traditional Electronic Data Processing (EDP) manager of the early
80s to Information System (IS) manager and is finally being recognized as being crucial to the successful
deployment and use of IT in business. Today the CIO is also an important part of planning the overall
business strategy of the company and its implementation.

Report to the Finance Head

In the early days of computerisation when computerization was still making a foothold, manual operation
was the key goal of their use of IT. Therefore, in most cases, first computerisation was taken up in the
finance department-that was where the numbers lay, where inaccuracies and mistakes lay; and this was also
tedious to operate manually. That also explained why 1/3 of Information System managers reported to the
Finance Head, 1/3 report to the Personnel head and 1/3 report to the CEO. (A study of 100 select companies
revealed this). If in any company the EDP manger still reports to the finance function there is trouble. He
has to be an independent function, working in advisory capacity and reporting directly to the CEO.

Change Management-Techno-Vision to Business Vision

An IS manager has to create the appropriate infotech structure for a company. But while coping with
changing technology, combining techno-vision with business vision is also a must. Technology should be
acquired not for its own sake but for the relevance (or need) of technology to make the infrastructure
transparent to every person in the company and build the IS team. In every organisation, there are early
takers, followers and cynics too- the IS manager has to persuade and convince all of them.

IT-Functional Tussle

IS professional simply do not think like business managers. They live in a structured environment where
accuracy and predictability are valued. However, in business world, predictability is hard to find and
perfectionist thinking is something most businesses can’t afford. So what IS dictate functional managers
can’t accept. There is great need for IS managers to have in-depth knowledge of the company’s business
processes.

Business Strategies

It is thought best to include the CIO in strategic planning. Corporate strategy is increasingly beginning to
focus on the flow of information and the flow of money. To retain a competitive advantage, a company must
be able to determine the value of information that has been gleaned from data. IT executive who enable that
task will be providing critical value to their organisation.

Model

CIO must be involved when an organisation considers the IT implications for their future strategy. The IS
department should develop plans for user access and the kinds of interfaces, applications and other services
that will be necessary. They will have to think of how to manage the information flows, the new connection
to new markets and new customers. Standards, architecture and protocols must be specified. People aspect
of IT has to be addressed, new skills needed have to be identified, and competencies hired and outsourced.

Functional Expert

The growing strategy of IT has promoted many a company to hire a CIO who is more experience in business
and management than in computer hardware, application, technology or net working. So they pick up senior
managers from marketing or finance, who have some interest and expertise, train them and develop them as
CIOs. These CIOs function more as strategic business partners in the organisation and they are more
acceptable than a techno focussed CTO. For the technological issues somebody can be hired from outside.
For a national bank with multiple branches going in for large scale networking, the CIO with bankers
background is better placed from a business perspective to understand what differentiates the hundred
branch-bank-chain from its competitors and how rapidly changing IT would contribute to achieving the bank
goals.

Consultant CIO

To be an effective CIO, the right technology credentials are necessary but not sufficient. CIO needs to learn
the nitty-gritty of business strategy and a consulting background teaches this very well. Most consulting
firms offer a rich platform for exposure to a range of technologies, industries, culture and ideas that are not
available in a single company. Another benefit is the development of good interpersonal skills,
communication skills, and more important experience of selling ideas to top management.

 Learn business strategy

 Train in business strategy rather than in technology
 When called to meeting, attend and participate (contribute). Do not wait to be invited.
 Understand business processes and improve business processes.
 Thereby build creditability.
 Explain IT costs in business terms.
 Seek partnership with line.
 Be open to ideas.

Conclusion

As new generations of computer savvy CEOs move up through the ranks (or start occupying positions of
CIO) both CIO and CTO titles may vanish. This is more probable to take place as infotech literacy becomes
an increasingly important part of every executive’s professional career. At the same time organisations are
fully taking the functional responsibility of implanting technology in the mainline. Therefore, to survive,
CIOs must prove their value to the company by becoming more external and business focussed. Those who
do are likely to keep their job; else quit.

1.7 Data & Information Cycle

• The information cycle consists of five steps in a loop

• Capturing

• Verifying

• Classifying
 • Storing

• Distributing or disseminating

Capturing:

• Capturing: Refers to recording of any event that takes place in an organisation

• Eg: Employee joining the organisation

• Customer order received

• When any transaction occurs, it is recorded

• This is called capturing of data

• Once data is captured it is verified

Verification:

• Verifying: Refers to checking the validity of data to ensure that it was captured and recorded
correctly

• Check digits are used to for this purpose

• Check digit is assigned to any data element & it becomes a part of the code itself

• Check digit is a single digit

• Ranges from 0-9 or X

Check Digits:

• It helps guard against errors:

• Transcription Errors: Writing z for 2 etc

• Transposition Errors: Correct digits are written but positions are changed

• Double Transposition Errors:

• Random Errors: Any of the above

• Popular method of generating check digit is Modulas-11

Classifying:

• Classifying: Identifying and placing data items into different categories according to their common
characteristics

• Helps in search through data

• Helps in easy retrieval of data

• According to some common characteristics

• Coding structures are helpful in classification

• Characteristics of Code:

• Logical: To use ‘ACCT’ for Accounts and ‘PERS’ for Personnel Dept rather than ABCD & EFGH

• Unique: No two would have same code

• Eg: student enrolment number is unique code

• Flexible: Capacity of increasing if need be

• Standard procedures: Avoid use of S,5, Z, 2 etc

• Chunking: Break it into bits for ease of recall

• Check Digit: Make use of check digits

Types:

• Types of Codes are:

• Sequential: Generated in sequence as and when events take place

• First person assigned 001, second person assigned 002 and so on

• Block: Divides code into distinct groups

• Each group representing a different characteristic

• Eg: Pincode, ISBN number

Types (cont)

• Hierarchical Block: Developed on the basis of ascending order of significance

• Left most digit most significant-Bank identification number

• Right most digit least significant-Transaction code

• Decimal Code: Are also Hierarchical Block

• Dewey decimal system used in libraries

• Bar Code: Has maximum application

• The code lies between two outer longer bars

• Mnemonic, Phonetic and many others

• Storing: Once data is classified it is stored

• Distributing: Basic purpose of storage is distribution to requisite points in the org

• This is a continuous process which generates more data which is again captured & so on

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