DIS511 SEP-DEC 2022 INFORMATION SYSTEMS LEC 2

INFORMATION SYSTEMS

Introduction
Information system is a system that uses the resources of people, hardware, software and
telecommunications to perform input, output, process, storage and control activities that
convert data into information. Basically, information systems support operations,
decision-making and strategic advantage.

Information systems roles have expanded overtime as follows:

1950s to 1960s - the main function of information system was data processing - involved
electronic data processing systems that concerned transaction processing, record-keeping,
and traditional accounting applications.

1960s to 1970s - management reporting roles and the systems involved in this period
were management information systems which produce management reports of pre-
specified information to support decision making.

1970s to1980s - decision support role of the. Decision support systems for interactive ad
hoc support of the managerial decision-making process were developed.

1980s to 1990s - Strategic and end user support roles were added with their supporting
systems as follows:

 End user computing systems for direct computing support for end user
productivity and work group collaboration;
 Executive information systems for critical information for top management;
 Expert systems for knowledge-based expert advice for end users
 Strategic information systems for strategic products and services for competitive
advantage.

1990s to 2000s - with the Internet advancement, came the electronic business and
commerce role; intranets, extranets, and other networks.

Expansion of roles did not mean doing away with the previous roles. It only meant
addition, so that all the roles could be expected in an organization.

Components of information systems

Information systems consist of five major resources: people, hardware, software, data, and
networks.
People
People are required for the operation of all information systems. People resources include
end users and IS specialists.
End users (also called users or clients) are people who use an information system or the
information it produces. They can be accountants, salespersons, engineers, clerks,
customers, or managers. Most end users in business are knowledge workers, that is,
people who spend most of their time communicating and collaborating in teams and
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workgroups and creating, using, and distributing information.
IS specialists are people who develop and operate information systems. They include
systems analysts, software developers, system operators, and other managerial, technical,
and clerical IS personnel.
Systems analysts design information systems based on the information requirements of
end users; software developers create computer programs based on the specifications of
systems analysts, and system operators help to monitor and operate large computer
systems and networks.

Hardware
Hardware resources include all physical devices and materials used in information
processing. They include machines, such as computers and other equipment, and data
media on which data are recorded - from sheets of paper to magnetic or optical disks.

Software Resources
Software resources include all sets of information processing instructions (programs).
Procedures which include data entry procedures, error corrections procedures etc are included.
Network Resources
Network resources include communications media, communications processors, network
access and control software.

Information Products

Information products include management reports and business documents using text and
graphics displays, audio responses, and paper forms.
Data
Data can take many forms – numbers, text, images, audio etc. The data resources of
information systems are typically organized, stored, and accessed by a variety of data
resource management technologies into:
 Databases that hold processed and organized data (related information system -
MIS).
 Knowledge bases that hold knowledge in a variety of forms such as facts, rules,
and case examples about successful business practices (related information system -
Expert systems)
 Model bases that are used to transform data into a form that could easily be used in
decision making (related information system DSS).

Need for information systems

Information systems then depend on information needed and activities supported. To
perform activities, organizations have established organizational structures depicting
managerial levels and functions. For these levels and functions, there are different
information needs and information systems. Information in these structures has to flow
within an organization in a way that will help managers, and the organization, achieve
their goals. To this end, organizations are often structured horizontally and vertically-
horizontally to reflect functions and vertically to reflect management levels. We now
discuss the functions and the levels and their information systems.

Functions in organizations
Organizations are divided into functions which consist of processes that consist of
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activities. Staff could be assigned to one or more activities. Such a staff could have
supporting computer, software, networks and data. An output of one activity could be an
input of another. No doubt, systems performing the activities are networked thus
resulting in computer networks.

Basic information systems activities are the same for information systems. They include:
 Input - e.g. scanning of bar-codes
 Processing - calculating taxes
 Output - producing reports
 Storage - storing and products records
 Control - signaling to indicate error on entry etc
Depending on the services or products they provide, most organizations have functions
or departments that perform five functions: research and development (R&D),
production, marketing, accounting and finance, and human resources (personnel).
Information systems are designed so as to provide the information needed by the specific
department. Each function or department tends to have an information system named
after it. For instance, marketing function would to have marketing information systems.

For each function and related information systems, ask yourself: what process(s)
(activities/tasks/operations), decision making, and strategies does the function
involve and what are the components of its information systems. This way you can
easily comprehend the function’s information systems in terms of what is described
in literature. (It is useful here to read about a function software/package and how it
relates to the function processes and related strategies. Search the Internet if you
can.)

Functions and their information systems

Research and development: The research and development (R&D) department does
two things: ( 1 ) It conducts research, relating discoveries to the organization's
current or new products. (2) It does product development and tests and modifies
new products or services created by researchers. Special software programs are
available to aid in these functions.
Production: The production department makes the product or provides the service.
In a manufacturing company, it takes the raw materials and has people or
machinery turn them into finished goods. This department may use CAD/CAM
software and workstations, as well as robotics. It might also manage the
purchasing, handle the inventories, and control the flow of goods and services.
Marketing: The marketing department oversees advertising, promotion, and sales.
The people in this department plan, price, advertise, promote, package, and
distribute the services or goods to customers or clients. The sales reps may use
laptop computers, cell phones, wireless e-mail, and faxes in their work while on
the road. Subsystems for the marketing MIS include marketing research, product
development, promotion and advertising, and product pricing. These subsystems and their
outputs help marketing managers and executives increase sales, reduce marketing
expenses, and develop plans for future products and services to meet the changing needs
of customers.
Accounting and finance: The accounting and finance department handles all
financial matters. It handles cash management, pays bills and taxes, issues
paychecks, records payments, makes investments, and compiles financial
statements and reports. It also produces financial budgets and forecasts financial
performance after receiving information from other departments. A financial MIS
provides financial information not only for executives but also for a broader set of people
who need to make better decisions on a daily basis. Financial MIS are used to streamline
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reports of transactions. Most financial MIS perform the following functions:

 Integrate financial and operational information from multiple sources, including the
Internet, into a single system.
 Provide easy access to data for both financial and non-financial users, often through
the use of a corporate intranet to access corporate web pages of financial data and
information.
 Make financial data immediately available to shorten analysis turnaround time.
 Enable analysis of financial data along multiple dimensions - time, geography,
product, plant, and customer.
 Analyze historical and current financial activity.
 Monitor and control the use of funds over time.
 Financial MIS are used to compute revenues, costs, profits and for auditing. Auditing
involves analyzing the financial condition of an organization and determining
whether financial statements and reports produced by the financial MIS are accurate.
 Financial MIS are also used to manage funds.
o Internal uses of funds include purchasing additional inventory, updating plants
and equipment, hiring new employees, acquiring other companies, buying
new computer systems, increasing marketing and advertising, purchasing raw
materials or land, investing in new products, and increasing research and
development.
o External uses of funds are typically investment related. Companies often
invest excess funds in such external revenue generators as bank accounts,
stocks, bonds, bills, notes, futures, options, and foreign currency using
financial MIS.
Human resources: The human resources, or personnel, department finds and hires
people and administers sick leave and retirement matters. It is also concerned with
compensation levels, professional development, employee relations, and
government regulations.

 A human resource MIS (HRMIS), also called a personnel MIS, is concerned with
activities related to previous, current, and potential employees of the organization.
Because the personnel function relates to all other functional areas in the business, the
human resource (HR) MIS plays a valuable role in ensuring organizational success.
 Some of the activities performed by this important MIS include workforce analysis
and planning, hiring, training, job and task assignment, and many other personnel-
related issues. An effective HRMIS allows a company to keep personnel costs at a
minimum, while serving the required business processes needed to achieve corporate
goals.
 Human resource subsystems and outputs range from the determination of human
resource needs and hiring through retirement and outplacement. Most medium and
large organizations have computer systems to assist with human resource planning,
hiring, training and skills inventorying, and wage and salary administration. Outputs
of the human resource MIS include reports, such as human resource planning reports,
job application review profiles, skills inventory reports, and salary surveys.
 Human resource planning. One of the first aspects of any HRMIS is determining
personnel and human needs. The overall purpose of this MIS subsystem is to put the
right number and kinds of employees in the right jobs when they are needed.
Effective human resource planning can require computer programs, such as SPSS and

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SAS, to forecast the future number of employees needed and anticipating the future
supply of people for these jobs.
 Personnel selection and recruiting. If the human resource plan reveals that additional
personnel are required, the next logical step is recruiting and selecting personnel.
Companies seeking new employees often use computers to schedule recruiting efforts
and trips and to test potential employees' skills. Many companies now use the Internet
to screen for job applicants. Applicants use a template to load their CVs onto the
Internet site. HR managers can then access these CVs and identify applicants they are
interested in interviewing.
 Training and skills inventory. Some jobs, such as programming, equipment repair,
and tax preparation, require very specific training for new employees. Other jobs may
require general training about the organizational culture, orientation, dress standards,
and expectations of the organization. When training is complete, employees often
take computer-scored tests to evaluate their mastery of skills and new material.
 Scheduling and job placement. Employee schedules are developed for each employee,
showing his or her job assignments over the next week or month. Job placements are
often determined based on skills inventory reports, which show which employee
might be best suited to a particular job. Sophisticated scheduling programs are often
used in the airline industry, the military, and many other areas to get the right people
assigned to the right jobs at the right time.
 Wage and salary administration. Another HRMIS subsystem involves determining
salaries and benefits, including medical insurance and pension payments. Wage data,
such as industry averages for positions, can be taken from the corporate database and
manipulated by the HRMIS to provide wage information reports to higher levels of
management.
Levels in organizations and characteristics of information needed

The type of information required by decision makers in a company is directly related to

the level of management decision making and the structure in the decision situations
they face – hence management levels (strategic management, operational management
and tactical management). Decisions could be structured, unstructured or semistructured.
Structured decisions involve situations where the procedures to follow when a decision is
needed can be specified in advance. The inventory reorder decisions faced by most
businesses are a typical example. Unstructured decisions involve decision situations
where it is not possible to specify in advance most of the decision procedures to follow.
At most, many decision situations are semistructured. That is, some decision procedures
can be prespecified, but not enough to lead to a definite recommended decision. For
example, decisions involved in starting a new line of E-commerce services or making
major changes to employee benefits would probably range from unstructured to
semistructured.

Strategic Management
Managers at this level make strategic (long term) decisions and face unstructured
(nonprogrammable) decisions. Non-programmable decisions are the decisions in which
the problem is not routine and rules and relationships are not well defined (unstructured
or ill-structured problems). Non-programmed decisions, deal with unusual or exceptional
situations. In many cases, these decisions are difficult to quantify. Determining the
appropriate training program for a new employee, deciding whether to start a new type of
product line, and weighing the benefits and drawbacks of installing a new pollution
control system are examples. Each of these decisions contains unique characteristics, and
standard rules or procedures might not apply to them. Today, decision support systems
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help solve many non-programmed decisions.
At this level, strategic information is used by senior management in the formulation of
long-term policies. Strategic information has the following characteristics: ad hoc,
unscheduled, summarized, infrequent, largely external, forward looking, and wide in
scope.
Operational Management
Managers at this level at this level direct the performance of daily operations. They
make structured (programmable) decisions. Programmed decisions are made using a rule,
procedure, or quantitative method. For example, to say that inventory should be ordered
when inventory levels drop to 100 units is a programmed decision because it adheres to a
rule. Programmed decisions are easy to computerize using traditional information
systems. Information used here is operational information - the information used by lower
level of management to ensure that specific tasks are properly planned and controlled.
Operational information has the following characteristics: scheduled, detailed, frequent,
historical, internal, narrow focus.
Tactical Management
Managers at this level make tactical decisions. They break long term plans (from
strategic management) into implementable programs and use report (from transactions
processed in low level management) for control and they face semistructured (partially
programmable-partially non-programmable) decisions. Thus they involve tactical
information; the information used by middle management to decide how best to use the
resources of the organization to meet the strategic objectives set by senior management.
Characteristics of tactical information encompass (or are partially) those of the top and
low level management levels. Tactical information is derived from a more restricted
range of external sources, it is mainly internally generated; is summarized at a lower
level- a report might be included with summaries and raw data to back it up; is relevant to
the short and medium term; describes or analyses activities in terms of divisions or
departments; is prepared routinely/regularly; and is based on quantitative measures.
Decision making
Decision making may consist of four stages as follows: intelligence, design, choice, and
implementation.

Intelligence consists of identifying and understanding the problems occurring in the

organization—why the problem, where, and with what effects. Detailed information from
Traditional MIS systems can help identify problems, especially if the systems report
exceptions.

During solution design, possible alternative solutions to the problems are developed.
Smaller DSS systems are ideal in this stage of decision making because they operate on
simple models, can be developed quickly, and can be operated with limited data.

Choice consists of selecting from among solution alternatives. Here the decision maker
might need a larger DSS system to develop more extensive data on a variety of
alternatives and to account for all of the costs, consequences, and opportunities.

During solution implementation, when the decision is put into effect, managers can use a
reporting system that delivers routine reports on the progress of a specific solution.
Support systems can range from full-blown MIS systems to much smaller systems, as
well as project-planning software operating on personal computers.

The stages of decision making do not necessarily follow a linear path. At any point in the
decision-making process, you may have to loop back to a previous stage. One can be in
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the process of implementing a decision, only to discover that it is not working. In such a
case, one is forced to repeat the design or choice stage.

Decisions made tend to differ according to managerial levels. Decisions made at the
operational management level tend to be more structured, those at the tactical level more
semitructured, and those at the strategic management level more unstructured. Structured
decisions involve situations where the procedures to follow when a decision is needed can
be specified in advance. The inventory reorder decisions faced by most businesses are a
typical example.

Unstructured decisions involve decision situations where it is not possible to specify in

advance most of the decision procedures to follow. At most, many decision situations
are semistructured. That is, some decision procedures can be prespecified, but not
enough to lead to a definite recommended decision. For example, decisions involved in
starting a new line of E-commerce services or making major changes to employee
benefits would probably range from unstructured to semistructured.
In the choice stage, various factors influence the decision maker's selection of a solution.
One such factor is whether the decision can be programmed. Programmed decisions are
made using a rule, procedure, or quantitative method. Example is deciding when to order.
Non-programmed decisions, however, deal with unusual or exceptional situations. In
many cases, these decisions are difficult to quantify. Determining the appropriate training
program for a new employee, deciding whether to start a new type of product line, and
weighing the benefits and drawbacks of installing a new pollution control system are
examples.
Information quality
• For information products to be valuable and useful to end-user and support sound
decision making it should at least have good characteristics – which are discussed
under:
• Content, time and form dimensions as follows:
Content dimension
• Accuracy – be free from errors
• Relevance – related to needs of a specific recipient for a specific situation
• Completeness – all that is needed is provided
• Scope – broad or narrow scope or an internal or external focus
• Performance – reveal performance by measuring activities accomplished, progress
made, or resources accumulated
Time dimension
• Timeliness – provided when needed
• Currency – up-to-date when it is provided
• Frequency – provided as often as needed
• Time period – provided about past, present and future time periods
Form dimension
• Clarity – provided in a form that is easy to understand
• Detail – in detail or summary form
• Order – arranged in a predetermined sequence
• Presentation - presented in narrative, numeric, graphics, or other forms

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• Media – provided in the form of printed paper documents, video displays, or other
media.
Value of information
Information value derives from the value of the change in behaviour caused by the
information availability minus the cost of producing the information. The value of
information results from actions taken by the decision maker.
The following questions can be used to assess the value of information
• Who uses the information?
• What is it used for?
• How often is it used?
• How often is it provided but not used?
• What is achieved by its use?
• Are there alternatives to this source of information?
Cost of information
a) The cost of designing and setting up the system which produces the
information.
 System design, testing , capital cost of equipment, installation and training
b) The day to day running costs
 staff salaries, supplies (paper, disks)
c) Maintenance costs
 Scheduled and non scheduled

Types of information systems

Conceptually, the applications of information systems in the real world can be classified in
several different ways. For example, several types of information systems can be
classified as either operations or management information systems. Given the managerial
levels hence functions and the decision structures or situations (hence the characteristics
of information needed in the levels) and business functions (with the activities that have
to be performed), we can classify information systems as shown in the diagram and
described as follows:

Operations and management classification of information systems. Emphasis -

information systems that support business operations and managerial decision making.

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Source: O’Brien, J. A., Marakas, George, M, and Behl, R.: Management Information systems (Tata
McGraw-Hill Publishing Company Limited, New Delhi, 2010).

Operations support systems

Operations support systems produce a variety of information products for internal and
external use. However, they do not emphasize producing the specific information
products that can best be used by managers. Further processing by management
information systems is usually required. The role of a business firm's operations support
systems is to efficiently process business transactions, control industrial processes, support
enterprise communications and collaboration, and update corporate databases. These
systems are therefore divided into the following systems:

Transaction processing systems: These systems are an important example of operations

support systems that record and process data resulting from business transactions. They
process transactions in two basic ways. In batch processing, transactions data are accumulated
over a period of time and processed periodically. In real-time (or online) processing, data
are processed immediately after a transaction occurs. Examples: sales and inventory
processing and accounting systems.

Transaction processing systems (TPS) include order processing, inventory control,

payroll, accounts payable, accounts receivable, and the general ledger, to name just a few.
The input to these systems includes basic business transactions, such as a customer
placing an order, an employee purchasing supplies, a customer payment, an employee
signing on and off at the start and end of a day. The processing activities include data
collection, data editing, data correction, data manipulation, data storage, and document
production. The result of processing business transactions is that the organization's
records are updated to reflect the status of the operation at the time of the last processed
transaction. A TPS also collects data which is input to other essential information systems
- management information systems, decision support systems, and other special-purpose
information system. A transaction processing system serves as the foundation for these
other systems.

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Transaction processing systems support routine operations in the business. The amount of
support for decision making that a TPS directly provides managers and workers is low.
Because TPS often perform activities related to customer contacts - such as order
processing and invoicing - these information systems play a critical role in providing
value to the customer. For example, by capturing and tracking the movement of each
package, shippers such as FedEx can provide timely and accurate data on the exact
location of a package. Shippers and receivers can access an online database and, by
providing the air bill number of a package, find the package's current location. If the
package has been delivered, they can see who signed for it (a service that is especially
useful in large companies where packages can become 'lost' in internal distribution
systems and mailrooms). Such a system provides the basis for added value through
improved customer service

Process control systems: These systems monitor and control physical processes. For
example, a petroleum refinery uses electronic sensors linked to computers to continually
monitor chemical processes and make instant (real-time) adjustments that control the
refinery process.

Enterprise collaboration systems: These systems enhance team and workgroup

communications and productivity, and are sometimes called office automation systems. For
example, knowledge workers in a project team may use electronic mail to send and
receive electronic messages, and videoconferencing to hold electronic meetings to
coordinate their activities. These systems support team, workgroup, and enterprise
communications and collaboration. Examples include e-mail, chat, and videoconferencing
groupware systems.

Management support systems

When information system applications focus on providing information and support for
effective decision making by managers, they are called management support systems.
Providing information and support for decision making by all types of managers and
business professionals is a complex task. Conceptually, several major types of information
systems support a variety of decision-making responsibilities: (1) management
information systems, (2) decision support systems, and (3) executive information systems.

Management information system: These systems provide information in the form of

prespecified reports and displays to managers and many business professionals. For
example, sales managers may use their networked computers and Web browsers to get
instantaneous displays about the sales results of their products and to access their corporate
intranet for daily sales analysis reports that evaluate sales made by each salesperson. Other
examples include production performance, and cost trend reporting systems.

Management Information systems were the original type of information system

developed to support managerial decision making. An MIS produces information
products that support many of the day-to-day decision-making needs of managers and
business professionals. Management information systems provide a variety of
information products to managers. Four major reporting alternatives are provided by
such systems.
 Periodic Scheduled Reports. This traditional form of providing information to
managers uses a prespecified format designed to provide managers with
information on a regular basis. Typical examples of such periodic scheduled
reports are daily or weekly sales analysis reports and monthly financial statements.
 Exception Reports. In some cases, reports are produced only when exceptional
conditions occur. In other cases, reports are produced periodically but contain
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information only about these exceptional conditions. For example, a credit manager
can be provided with a report that contains only information on customers who
exceed their credit limits. Exception reporting reduces information overload, instead
of overwhelming decision makers with periodic detailed reports of business activity.
 Demand Reports and Responses. Information is available whenever a manager
demands it. For example, Web browsers and DBMS query languages and report
generators enable managers at PC workstations to get immediate responses or find
and obtain customized reports as a result of their requests for the information they
need. Thus, managers do not have to wait for periodic reports to arrive as
scheduled.
 Push Reporting. Information is pushed to a manager's networked workstation. Many
companies are using webcasting software to selectively broadcast reports and other
information to the networked PCs of managers and specialists over their corporate
intranets.

Decision support system: These systems give direct computer support to managers
during the decision-making process. For example, advertising managers may use an
electronic spreadsheet program to do what-if analysis as they test the impact of
alternative advertising budgets on the forecasted sales of new products.

Decision support systems answer questions such as;

 What would be the impact of employees' performance if we double the production lot at
the factory?
 What would happen to our sales if a new competitor entered the market?
Decision support systems are computer-based information systems that provide
interactive information support to managers and business professionals during the
decision-making process. Decision support systems use (1) analytical models, (2) specialized
databases, (3) a decision maker's own insights and judgments, and (4) an interactive,
computer-based modeling process to support the making of semistructured and
unstructured business decisions.

A DSS model base is a software component that consists of models used in

computational and analytical routines that mathematically express relationships among
variables. A DSS model base could include models and analytical techniques used to
express relationships. For example, it might contain linear programming models, multiple
regression forecasting models, and capital budgeting present value models. Such models
may be stored in the form of spreadsheet models or templates, or statistical and
mathematical programs and program modules.

DSS software packages can combine model components to create integrated models that
support specific types of decisions. DSS software typically contains built-in analytical
modeling routines and also enables you to build your own models. Among the applications
of DSS is what if analysis.

In what-if analysis, an end user makes changes to variables, or relationships among

variables, and observes the resulting changes in the values of other variables. For
example, if you were using a spreadsheet, you might change a revenue amount (a
variable) or a tax rate formula (a relationship among variables) in a simple financial
spreadsheet model. Then you could command the spreadsheet program to instantly
recalculate all affected variables in the spreadsheet.

Every DSS consists of at least data management, model management components, user
interface, and end users. A few advanced DSSs also contain a knowledge management
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component.

An example of decision support systems include financial planning system which enables
managers to evaluate alternative ways of achieving goals. The objective is to find the
optimal way of achieving the goal. For example, the net profit for a business is calculated
using the formula Total Sales less (Cost of Goods + Expenses). A financial planning
system will enable senior executives to ask what if questions and adjust the values for
total sales, the cost of goods, etc. to see the effect of the decision and on the net profit and
find the most optimal way.

Executive information systems. These systems provide critical information from many
sources tailored to the information needs of executives. Examples: systems for easy
access to analyses of business performance, actions of competitors, and economic
developments to support strategic planning. Executive information systems (EIS) are
information systems that combine many of the features of management information
systems and decision support systems. When they were first developed, their focus was on
meeting the strategic information needs of top management. Thus, the first goal of
executive information systems was to provide top executives with immediate and easy
access to information about a firm's critical success factors (CSFs) (that is, key factors that
are critical to accomplishing an organization's strategic objectives). EIS could also be used
in answering question such as what business should we be in, what are the competitors
doing etc? EIS consists of workstations with menus, interactive graphics and
communications capabilities that can access historical and competitive data from internal
corporate systems and external sources.

The terms executive information system (EIS) and executive support system (ESS) may
be used interchangeably. Even then, they mean different things to different people. An
EIS is a computer-based system that serves the information needs of top executives. It
provides rapid access to timely information and direct access to management reports. An
EIS is very user friendly, is supported by graphics, and provides the capabilities of
exception reporting (reporting of only the results that deviate from a set standard) and
drill down (investigating information in increasing detail). It is also easily connected with
online information services and electronic mail.

An ESS is a comprehensive support system that goes beyond EIS to include analysis
support, communications, office automation, and intelligence support etc. An effective
ESS can extract data useful to the decision maker from a wide variety of sources,
including the Internet and other electronic publishing sources.

The following are general characteristics of ESS:

Are tailored to individual executives. ESS are typically tailored to individual executives.
Are easy to use. ESS must be easy to learn and use and not overly complex – hence saves
time consuming for executives.
Have drill-down abilities. An ESS allows executives to drill down into the company to
determine how certain data was produced. Drilling down allows an executive to get more
detailed information if needed.
Support the need for external data. The data needed to make effective top-level decisions
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is often external- information from competitors, the federal government, trade
associations and journals, consultants, and so on. An effective ESS can extract data useful
to the decision maker from a wide variety of sources, including the Internet and other
electronic publishing sources.
Can help with situations that have a high degree of uncertainty. Most executive
decisions involve a high degree of uncertainty. Handling these unknown situations using
modelling and other ESS procedures helps top-level managers measure the amount of
risk in a decision.

Can help with situations that have a high degree of uncertainty. Most executive decisions
involve a high degree of uncertainty. Handling these unknown situations using modeling
and other ESS procedures helps top-level managers measure the amount of risk in a
decision.

Have a future orientation. Executive decisions are future oriented, meaning that decisions
will have a broad impact for years or decades. The information sources to support future-
oriented decision making are usually informal - from organizing golf partners to tying
together members of social clubs or civic organizations.

Are linked with value-added business processes. Like other information systems,
executive support systems are linked with executive decision making about value-added
business processes.

Other categories of information systems

Expert systems. An expert system (ES) is a knowledge-based information system that uses
its knowledge about a specific, complex application area to act as an expert consultant to end
users. Expert systems provide answers to questions in a very specific problem area by
making humanlike inferences about knowledge contained in a specialized knowledge
base. Expert systems can provide decision support to end users in the form of advice from
an expert consultant in a specific problem area. In reality they provide expert advice and
act as expert consultants to users.

Expert systems are being used for many different types of applications. Expert systems now
help diagnose illnesses, search for minerals, analyze compounds, recommend repairs, and do
financial planning. From a strategic business standpoint, expert systems can and are being
used to improve every step of the product cycle of a business, from finding customers to
shipping products to providing customer service. They could also be used for credit
application advisor, process monitor, and diagnostic maintenance systems.

The components of an expert system include a knowledge base and software modules that
perform inferences on the knowledge and communicate answers to a user's questions. An
expert system software package contains an inference engine and other programs for
refining knowledge and communicating with users. The inference engine program
processes the knowledge (such as rules and facts) related to a specific problem. It then
makes associations and inferences resulting in recommended courses of action for a user.
User interface programs for communicating with end users are also needed, including an
explanation program to explain the reasoning process to a user if requested.

Using an expert system involves an interactive computer-based session in which the

solution to a problem is explored, with the expert system acting as a consultant to an end
user. The expert system asks questions of the user, searches its knowledge base for facts
and rules or other knowledge, explains its reasoning process when asked, and gives
expert advice to the user in the subject area being explored.
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Knowledge management systems. Knowledge-based systems that support the creation,
organization, and dissemination of business knowledge within the enterprise. Examples
include intranet access to best business practices, sales proposal strategies, and
customer problem resolution systems.
Strategic information systems. Support operations or management processes that
provide a firm with strategic-products, services, and capabilities for competitive
advantage.
Functional business systems. Support a variety of operational and managerial
applications of the basic business functions of a company. Examples include
information systems that support applications in accounting, finance, marketing,
operations management, and human resource management.

Cross-Functional business systems

Integration of the enterprise has emerged as a critical issue for organizations in all
business sectors striving to maintain competitive advantage. It has been used to
develop integrated cross-functional enterprise systems that cross the boundaries of
traditional business functions. In addition many firms have moved to integrated
cross-functional client-server applications. This involved installing enterprise resource
planning (ERP), supply chain management (SCM), or customer relationship
management (CRM) systems. Enterprise resource planning, supply
chain management and customer relationship management systems are each examples
of enterprise systems.

ERP
To appreciate what ERP is, study what is given in the following diagram, then the notes

that follow:
ERP is a cross-functional enterprise system that serves as a framework to integrate and
automate many of the business processes that must be accomplished within the
manufacturing, logistics, distribution, accounting, finance, and human resources function.
(A business process is a set of coordinated and related activities that takes one or more
kinds of input and creates an output of value to the customer of that process.) It consists
of a set of integrated programs that manage a company's vital business operations for an
entire multisite, global organization.
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ERP systems integrate all the data and processes of an organization into a unified system.
A typical ERP will use multiple components of computer hardware and software to
achieve the integration. A key ingredient of most ERP systems is the use of a unified
database to store data for various system modules.

Advantages of ERP
Increased global competition, new needs of executives for control over the total cost
and product flow through their enterprises, and ever-more-numerous customer
interactions drive the demand for enterprise-wide access to real-time information. ERP
offers integrated software from a single vendor to help meet those needs. The primary
benefits of implementing ERP include improved access to data for operational decision
making, elimination of inefficient or outdated systems, improvement of work processes,
and technology standardization.

Improved Access to Data for Operational Decision Making. ERP systems operate via an
integrated database, using one set of data to support all business functions. The systems
can support decisions for the entire enterprise or business units from the start, rather than
gathering data from multiple business functions and then trying to coordinate that
information manually or reconciling data with another application. The data is integrated
to facilitate operational decision making and allows companies to provide greater
customer service and support, strengthen customer and supplier relationships, and
generate new business opportunities. For example, success in the retail industry is
determined by a retailer's ability to have the right products on shop shelves and price
correctly when customers come to buy. As a result, retailers need accurate, current, point-
of-sale data and inventory data to match the merchandise assortment in their shops to the
needs of their local markets.

Elimination of Costly, Inflexible Legacy Systems. Adoption of an ERP system enables

an organization to eliminate dozens or even hundreds of separate systems and replace
them with a single, integrated set of applications for the entire enterprise.
Improvement of Work Processes. Competition requires companies to structure their
business processes to be as effective and customer oriented as possible. ERP vendors do
considerable research to define the best business processes. They gather requirements of
leading companies within the same industry and combine them with research findings
from research institutions and consultants. The individual application modules included
in the ERP system are then designed to support these best practices, the most efficient
and effective ways to complete a business process. Thus, implementation of an ERP
system ensures good work processes based on best practices. For example, for managing
customer, the ERP system's finance module can be configured to reflect the most efficient
practices of leading companies in an industry. This increased efficiency ensures that
everyday business operations follow the optimal chain of activities, with all users
supplied with the information and tools they need to complete each step.

Upgrade of Technology Infrastructure. In an ERP system, an organization can upgrade

and simplify the information technology it employs. When implementing ERP, the
organization can eliminate the problems of multiple hardware platforms, operating
systems, and databases it is currently using - most likely from a variety of vendors.
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Standardizing on fewer technologies and vendors reduces ongoing maintenance and
support costs as well as the training load for those who must support the infrastructure.

Disadvantages of ERP

Expense and Time in Implementation. Getting the full benefits of ERP takes time and
money. Although ERP offers many strategic advantages by streamlining a company's
TPS, large firms typically need three to five years and spend lots of money to implement
a successful ERP system.

Difficulty Implementing Change. In some cases, a company has to radically change how
it operates to conform to the ERP's work processes - its best practices. These changes can
be so drastic to long-time employees that they retire or quit rather than go through the
change. This exodus can leave a firm short of experienced workers. Sometimes, the best
practices simply are not appropriate for the firm and cause great work disruptions.

Difficulty Integrating with Other Systems. Most companies have other systems that must
be integrated with the ERP system, such as financial analysis programs, e-commerce
operations, and other applications. Many companies have experienced difficulties making
these other systems operate with their ERP system. Other companies need additional
software to create these links.

Risks in Using One Vendor. The high cost to switch to another vendor's ERP system
makes it extremely unlikely that a firm will do so. After a company has adopted an ERP
system, the vendor has less incentive to listen and respond to customer concerns. The
high cost to switch also increases risk - in the event the ERP vendor allows its product to
become outdated or goes out of business. (Thus, selecting an ERP system involves not
only choosing the best software product but also the right long-term business partner).

Risk of Implementation Failure. Implementing an ERP system is extremely challenging

and requires tremendous amounts of resources, the best IS and businesspeople, and plenty
of management support. Unfortunately, ERP installations occasionally fail, and problems
with an ERP implementation can require expensive solutions.

SCM
A supply chain is a system of organizations, people, activities, information, and resources
involved in moving a product or service from supplier to customer. SCM integrates supplier,
distributor, and customer logistics requirements into one cohesive process. The supply
chain is a collection of entities, such as manufacturing plants, distribution centers,
conveyances, retail outlets, people, and information that are linked through processes
such as procurement or logistics to supply goods and services from source through
consumption. To manage the supply chain, a company tries to eliminate delays and cut
the amount of resources tied up along the way. Information systems make supply chain
management more efficient by integrating demand planning, forecasting, materials
requisition, order processing, inventory allocation, order fulfillment, transportation
services, receiving, invoicing, and payment. Supply chain management can not only
lower inventory costs but also can create efficient customer response systems that deliver
the product or service more rapidly to the customer.
Information systems make supply chain management more efficient by integrating demand
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planning, forecasting, materials requisition, order processing, inventory allocation, order
fulfillment, transportation services, receiving, invoicing, and payment.

CRM
CRM is an approach to manage a company's interaction with current and potential
customers. CRM uses IT to create a cross-functional enterprise system that integrates and
automates many of the customer-serving processes in sales, marketing, and product
services that interact with a firm’s customers. Included are tracking customer contacts,
response managing, and helping customers with product use etc. CRM recognizes that
customers are the core of a business and that a company’s success depends on effectively
managing relationships with them. CRM focuses on building long-term and sustainable
customer relationships that add value both for the customer and the company.

Major types of CRM activities include: operational, analytical, and collaborative.

Operational CRM is related to typical business functions involving customer services,
order management, invoice/billing, and sales/marketing automation and management.
Analytical CRM involves activities that capture, store, extract, process, interpret, and
report customer data to a user, who then analyzes them as needed. Collaborative CRM
deals with all the necessary communication, coordination, and collaboration between
vendors and customers.

CRM software automates and integrates the functions of sales, marketing, and service in
organization. The objective is to capture data about every contact a company has with a
customer through every channel and store it in the CRM system so the company can truly
understand customer actions. CRM software helps an organization build a database about
its customers that describes relationships in sufficient detail so that management,
salespeople, customer service providers - and even customers - can access information to
match customer needs with product plans and offerings, remind them of service
requirements, and know what other products they have purchased.

LINKS

https://www.youtube.com/watch?v=114DipNd1n8 - Decision Support Systems

https://www.youtube.com/watch?v=siMgr-PwXaI - 3 Examples of DSS

https://www.youtube.com/watch?v=EHrcZBIA3Lg - Executive Information Systems

https://www.youtube.com/watch?v=k3jo7oWzUUc - Knowledge Management - In 5 minutes or less

https://www.youtube.com/watch?v=k3jo7oWzUUc - Knowledge Management - In 5 minutes or less

https://www.youtube.com/watch?v=h7vFcUycl6w - What is ENTERPRISE INFORMATION SYSTEM?

What does ENTERPRISE INFORMATION SYSTEM mean?

https://www.youtube.com/watch?v=PVRgIXLWDHs - What is ERP? (Enterprise Resource Planning)

https://www.youtube.com/watch?v=lZPO5RclZEo - What is Supply Chain Management? Definition and

Introduction | AIMS UK

https://www.youtube.com/watch?v=hnEQq7kNFWo - What is CRM?

https://www.youtube.com/watch?v=BMtv6sbmdLc - What is CRM?

https://smallbusiness.chron.com/three-different-types-enterprise-systems-73267.html - Three Different

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 DIS511 SEP-DEC 2022 INFORMATION SYSTEMS LEC 2
Types of Enterprise Systems

https://www.webopedia.com/TERM/E/ERP.html - Best ERP Software 2019: Comparison & Reviews (read

and make short notes)

https://searcherp.techtarget.com/definition/ERP-enterprise-resource-planning - ERP (enterprise resource

planning) - (read and make short notes)
https://searchcustomerexperience.techtarget.com/definition/CRM-customer-relationship-management -
CRM (customer relationship management) (read and make short notes)
https://brandongaille.com/12-pros-and-cons-of-customer-relationship-management/ - 12 Pros and Cons of
Customer Relationship Management (read and make short notes)
https://www.ibm.com/topics/supply-chain-management - supply chain management
(read and make short notes)
https://www.valamis.com/hub/knowledge-management - Knowledge Management

https://internetofwater.org/valuing-data/what-are-data-information-and-knowledge/ - What are data,

information, and knowledge?

https://otec.uoregon.edu/data-wisdom.htm
https://theeconomyofmeaning.com/2018/06/29/the-difference-between-data-information-knowledge-and-
wisdom/ - The difference between data, information, knowledge and wisdom

REFERENCES:
Laudon, K.C. and Laudon, J. P.: Management Information Systems: Managing the Digital Firm
(Prentice-Hall of India Private Limited, New Delhi, 2006).

O’Brien, J. A.: Management Information systems: Managing Information Technology in the E-

Business Enterprise (Tata McGraw-Hill Publishing Company Limited, New Delhi, 2002).

O’Brien, J. A., Marakas, George, M, and Behl, R.: Management Information systems (Tata
McGraw-Hill Publishing Company Limited, New Delhi, 2010).

O’Leary, T. J., Williams, B. K. and O’Leary, L. I. : Microcomputing (Mitchell McGraw-Hill,

New York, 1993).

Stair R., Reynolds, G. and Chesney, T. : Fundamentals of Business Information Systems

(Cengage Learning EMEA, London, 2008).

Turban, E. and Mclean, E. and Wetherbe.: Information Technology for Management:

Transforming Organizations in the Digital Economy, John Wiley and Sons, Inc., Singapore,
2004).

Williams, B. K. and Sawyer, S. C.: Using Information Technology: A Practical Introduction to

Computer and Communications (Tata McGraw-Hill Publishing Co. Ltd., New Delhi, 2003).

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