DBB2202 Management Info Sys Merged

DBB2202: Management Information System Manipal University Jaipur (MUJ)
BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 4
DBB2202
MANAGEMENT INFORMATION
SYSTEM
Unit 1: Understanding MIS 1

Unit 1
Understanding MIS
Table of Contents
SL Topic Fig No / Table SAQ / Page No
No / Graph Activity
1 Introduction to Management Information - -
Systems 4
1.1 Objectives - -
2 History of MIS - 1
2.1 Impact of MIS 1 - 5-8
2.2 Transformation Stage – Manual systems to - -
automated systems
3 Role and Importance - 2
3.1 MIS Characteristics - -
3.2 Functions of MIS 2 - 9-15

3.3 Disadvantages of MIS - -
3.4 Role of IS in Business 3, 4 -

4 MIS Categories - 3
4.1 Classification - - 15-16
4.2 Relationships - -
5 Managers and Activities in IS - 4
17
5.1 View of Structure of MIS - -
6 Types of Computers Used by Organizations in - 5
Setting up MIS
6.1 Desktop Personal Computer - -
18
6.2 Notebook Computers - -
6.3 Personal Digital Assistant (PDA) - -

7 Hardware support for MIS - 6
7.1 Advantages of a Personal Computer (PC) 5 - 19- 20
7.2 Classification of Computers - -

8 Modern Organisations - - 21-24

8.1 IT enabled Organisations - -
8.2 Networked Organisations 6 -
8.3 Dispersed Organisations - -
8.4 Knowledge Organisations 7 -

9 IS in the Organisations - 7 24-26
10 Managing in the Internet Era 1 - 26-27
11 The IT Interaction Model 8, 9 8 27-29
12 Summary - - 30
13 Terminal Questions - - 31
14 Answers - - 31-34

1. INTRODUCTION TO MANAGEMENT INFORMATION SYSTEMS

For a better understanding of this unit, you must have prior knowledge of the Organization
system, information, data and records. The growth of organizations and the level of
complexity in functioning have made people realize the facts. You can now question how
such enormous information is maintained.. With the competitive business environment and
the changes happening, maintaining the high volume of information is a huge challenge for
the higher echelons of the organization. The Information needed by an organization for
different applications is difficult to be made available at the right time at the right level. In
this unit you will study about the evolution of MIS and significance of MIS in organizations.
You will study about the impact of MIS on any business. You will also know the different
phases of the development of MIS and finally you will know the hardware support needed
for MIS. MIS is an integrated system which provides information support for decision making
in organizations. There may be various definitions of MIS, but you can see all of them defining
MIS as a decision making methodology which helps keep organisation-wide plans in control.
1.1 Objectives
After going through this unit, you will be able to:
❖ Explain the basics of MIS

❖ Describe the role and significance of MIS in business, types and its classification
❖ Apply the concepts of MIS in various businesses
❖ Explain the phases of development in MIS
❖ Explain managers’ view of the information system
❖ Describe the hardware support needed

2. HISTORY OF MIS
The industrial revolution gradually replaced man power with machines. There emerged the
use of computer for data processing. The digital computer was mainly designed to handle
scientific calculations. From 1940 to 1960 computers were used commercially for census
and payroll work which involved large amounts of data processing. Sincethen the
commercial applications have exceeded the scientific applications.
Computer Based Information systems are of vital importance in modern organizations.

System professionals analyze, design, develop, implement and manage state-of-the-art
telecommunications, multi-media and other computer-based information systems. In
addition to maintaining traditional transaction processing systems, today's IS professionals
are involved in exciting developments in computing systems, such as decision support and
expert systems, database development and enhancement, development and use of Graphical
User Interfaces (GUI), systems design using object oriented programming, design and
management of telecommunications systems, and the management of end-user computing.
So you can define MIS as a method of generating information which is used by management
or organizations for decision making, control of activities and operations etc.
2.1 Impact of MIS

Electronic communication increases the overall amount of communication within the
organization. You can find the following advantages obtained from MIS.
a) Quicker information availability
b) Anytime anywhere access to information
c) Promotenon redundancy
d) Quick decision-making
e) Quick & fast actions
f) Increased productivity
g) Reduced transaction rate
Information can be stored, retrieved and communicated far more easily and effectively.
There is an enormous role of information technology (IT) on operations. The following can
be the examples you can list for the areas in which MIS is used. When you are travelling or
driving, the transponder-equipped vehicles can re-route you in real time; Voice-recognition

systems for greater warehouse inventory accuracy, collaborative editing of graphical

documents by geographically-remote individuals, and even electronic storage/retrieval of
documents to reduce volume are great examples of Information systems. : is part of theu The
hospital management system is another example of MIS. Non-computerized data from
previous years only documented the number and location of counseling sessions, while the
new MIS provides much more specific and detailed data. The impact of computer-based
information systems reflects in the decisions made by managers themselves in their work ..
As a manager at any organization you can use anon-going process of change that evolves
over time and situations. In an organization you can develop a system, shape it and desiign
it to tackle different situations.
You can see MIS in the field of education system too, playing a very significant role, where
we come across the usage of LCDs, Smart boards, internet etc., in class rooms. In the traffic
control system, an Intelligent Transportation System (ITS) disseminates real-time traffic
information to travelers. It helps travelers in making their route choice decisions based on
the traffic congestion information and in proper decision making in predicting the traffic
congestion and making the right choice. In tourism MIS has led to radical changes in the hotel
reservation system, tourist information system,, transportation modes available, images of
the facilities that could be provided etc.

Fig 1.1: Impact of MIS in different areas
You cannot limit the impact of MIS to some specific areas. It has wide range of applications
and has a unique impact on each system.
Transformation Stage – Manual systems to automated systems The value of Information

is not a present-day discovery. We have always observed that information is the asset of any
organization. Information existed since the “Big bang”., but the value of information is being
used only after the industrial revolution. Traditional information systems are said to contain
data, which is then processed. The processed data is called information. The processing of
data takes place by selecting the required facts and organizing them in a way to form
meaningful information which is used for some organizational needs.
In Manual systems, a series of action takes place which may be similar as well as different to
processing in traditional systems. For instance, in hospital information systems a patient’s
details can be viewed differently by the administrator as well as the patient. One may view
it as a record to take a print out, and to the other it may be the source of description of his
ailment What is common between the two systems is the idea of transformation.
Transformation occurs when the participants pick some cues from their environment,
which may be data or situations, and then define and redefine what to do next. They do this
by either processing data or developing a situation, altering the system each time to

transform it to a state closer to theirgoal or objective. When a fact from either type of systems
is presented for manipulation, transformation can occur. Thus, transformation is common to
both types of systems.
A transformation has to necessarily go through the following stages –

a) appraisal of the procedures
b) types of documents
c) storage systems
d) formulations and coding
e) verification and validation
f) review
g) documentation
After the industrial revolution manual systems were gradually transformed into digital
forms by means of computer and related instruments.
SELF ASSESSMENT QUESTIONS – 1
1. Consider any of the area of your choice and explain how MIS will have an
impact on this area.
2. An organization uses MIS for ______________, __________________ and ______________ .
3. Data is processed to form .

3. ROLE AND IMPORTANCE

You will find the following factors contributing to the role of MIS. You need to study about
the characteristics, functions and disadvantages of MIS to know the role of IS in business.
3.1 MIS Characteristics

• It supports transaction handling and record keeping.
• It is also called integrated Database Management System which supports in major
functional areas.
• It provides operational, tactical, and strategic level managers with easy access to timely
and for the most part, structured information.
• It supports decision –making which is a vital role of MIS.
• It is flexible which is needed to adapt to the changing needs of the organization.
• It promotes security system by providing access only to authorized users.
• MIS not only provides statistical and data analysis but also works on the basis of MBO
(management by objectives). MIS is successfully used for measuring performance and
making necessary changes in the organizational plans and procedures. It helps to build
relevant and measurable objectives, to monitor results, and to send alerts.
• Coordination: MIS provides integrated information so that all the departments are
aware of the problems and the requirements of the other departments. The decision
makers can effectively use the data across the different departments and can make an
informed decision.Duplication of data is reduced since data is stored in the central part
and the same data can be used by all the related departments.
• MIS eliminates redundant data.
• It helps in maintaining consistency of data. It is divided into subsystems. to facilitate
ease of use.
• MIS assembles, processes, stores, retrieves, evaluates and disseminates information.
3.2 Functions of MIS

The main functions of MIS are:
• Data Processing: Gathering, storage, transmission, processing and getting output of the
data. Making the data into information is a major task.

• Planning: Planning reports are produced based on the enterprise restrictions on the
companies and helps in planning each functional department to work reasonably.
• Control: MIS helps in monitoring the operations, and inspects the plans.. It controls the
timely actions of the plans and analyzes the reasons for any deviation from the plan,
thereby helping managers take timely and right decisions
• Prediction: Prediction is based on the historical data by applying the prior knowledge
methodology, by using modern mathematics, statistics or simulation. Prior knowledge
varies on the application and with different departments.
• Assistance: It stores related problems and frequently used information Through this
one can seek instant answers to problems, thereby resulting in economic benefit for the
organisation
• Database: This is the most important function of MIS. All the information needs a
storage space which can be accessed without causing any anomalies in the data.
Integrated Database avoids the duplication of data and thereby reduces redundancy
and hence consistency will be increased.
• The major function of MIS lies in the application of the above functions to support the
managers and the executives in an organization in decision-making.

Fig. 1.2: MIS Function
3.3 Disadvantages of MIS

The following are some of the disadvantages of MIS:
• MIS is highly sensitive: MIS is very helpful in maintaining and logging the information
of any authorized user. This needs to be monitored constantly.
• Quality of outputs is governed by quality of inputs.
• MIS budgeting: There is difficulty in maintaining indirect cost and overheads. Capturing
the actual cost needs to have an accrual system having true costs of outputs which is
extremely difficult. It has been difficult to establish definite findings.
• MIS is not flexible to updating itself to changes.
• Information accountability is based on qualitative factors like morality, confidence or
attitude which will not have any base.

3.4 Roles of IS in Business
Fig. 1.3: Graphical representation to show the History of roles of IS
From figure 1.3 you will observe that the business applications of Information systems have
expanded significantly over the years. You will see how in each decade information has
transformed from simple data processing to E-Business and E-Commerce.
Data Processing: 1950s-1960s

Data processing was done electronically. During this age data was used for simple
calculations, transactions and storage purposes. Some of the applications include transaction
processing, record keeping and traditional accounting applications.
Management Reporting: 1960s-1970s

: From figure 1.3 you can observe that management reports of pre-specified information are
prepared and maintained. This is to support decision making.
Decision Support: 1970s-1980s

Decision support systems were interactive and provided ad hoc query support, that aided in
the managerial decision-making process.

Strategic and End User Support: 1980s-1990s

End user computing systems give direct computing support for end user productivity and
work group collaboration. These include:
i. Executive Information Systems: Top management needs critical information at the
right time which is provided by EIS.
ii. Expert Systems: give advice to the end users based on the Knowledge.
iii. Strategic Information Systems: Strategic products and services for competitive
advantage.
Electronic Business and Commerce: 1990s-2000s

E-business and E-commerce systems were dependent on Internet. They include Web
enabled enterprises, global e-business operations. Electronic commerce on the internet,
intranets, extranets, and other networks became popular
We all know that MIS plays a very important role in the management, administration and
operation of an organization. These three vital roles are the applications of information
technology. When you consider any business enterprise it must support the following:
a) Business Processes and Operations: MIS allows easy access to information by the
workers, and user friendly coordination through internet interface. It has the fastest
access to information, and application of ERP software is easier. In the process of
inventory, payroll of employees, buying new merchandise, analyzing the current
market trends, recording customer purchases and billing etc., MIS support is a vital role.
Any retail store without computer based information system cannot work efficiently.
b) Managers and His Employees in Decision Making: – Being managers you need to
have updated information in real-time to make accurate decisions based on the
available data and the knowledge rather than on guesses. MIS provides you the ability
to make decisions from an informed stance rather than a haphazard one. MIS answers
many questions like - When to hire people? How many people to hire ?Where to deploy
those people ? What are the customers’ views towards the product? etc.. For example,
it will help you in taking decisions on what lines of merchandise need to be added or
discontinued, or on what kind of investment you need to make. These are some typical
decisions made based on an analysis provided by computer-based information
systems.

c) Competitive Advantage Strategies: Today, MIS is one of the most dynamic and
influential areas for businesses, where creative approaches emerge to address
constantly changing environments. The MIS specialist requires a solid understanding
of business operations, in addition to computer operations, because these systems are
used in all functional areas of the organization (such as accounting, manufacturing,
marketing and finance). For example, store management might make a decision to
install touch-screen kiosks in all of their stores, with links to their e-commerce web-
site for online shopping. This might attract new customers and build customer loyalty
because strategic information systems can help provide products and services that give
a business a comparative advantage over its competitors.
The primary role of the MIS specialist is to ensure organizational effectiveness through the
design, development and implementation of computer-based information systems. The
major roles of the business applications of a Management Information System may be
represented in a pyramid form as shown below. The apex of the pyramid represents the Top
Level Management and the base of the pyramid represents the Bottom Level Management.
The intermediate layer is the Middle Level Management.
With MIS today we can run businesses more quickly and efficiently.
Fig. 1.4: Major Roles of the Business Applications of IS

4. What are the disadvantages of MIS?
5. _____________give advice to the end users based on the Knowledge.
6. When you are a manager of an organization and you are supposed to hire
people to your team,. how will you use MIS for decision making?
4. MIS CATEGORIES
4.1 Classification
MIS is classified into various types. The classification depends on the following aspects –
a) Functionality
b) Utility
c) Area of application
d) Processing type
e) Frequency of usage
Various management activities like the ones which deal with scheduling, planning, resource
allocation, product design, processes, and competitive strategy are the functional
classifications of MIS.
Some of the processes like artificial intelligence, generating management related

information, providing aid in decision making, necessary support systems, and executive
information system are the utility classification of MIS.
Depending upon the area where MIS can be used, MIS is classified as Banking IS, Insurance
IS, Production IS, Data warehouse IS, Public IS etc. Depending upon the type of management
service in processing a data to generate information, MIS is classified into various processing
types like – Online transactions, Batch processing, distributed processing, multi-
processing etc.
An MIS system is a system in which there is a constant need for review of the system. A
mechanism can be built in the system to look into its performance, and the outcome of such
performed tasks may be assessed. This may be done periodically at fixed intervals of time.

4.2 Relationships
Though different types of IS exist in any organization, you can relate them to each other
directly or indirectly. The information generated in one department may be used by another
department to generate further information to be used by other departments and so on. Thus
there exists a relationship between various types of IS being used in any organization.
7. How is MIS categorized?

8. Consider yourself the manager in the department of production and give an
example in which you create a module of information system that can be
used by other departments of the organization.

5. MANAGERS AND ACTIVITIES IN IS

In today’s business world a manager’s jobchanges from being a technician to a system
manager who would try and solve the business problems.
5.1 View of Structure of MIS

Different kinds of information systems serve different levels in an organization. As a manger,
you will access each level of system and its sub system, depending upon the following levels
of classification.
Operational-level Systems help you in keeping track of the daily routine activities.For
example, recording daily sales and placing orders.
Knowledge-level Systems form the workstations and office systems in your organization
which help you in including the latest technology in the working of the organization.
For example, preparing displays for advertisements.
Management-level Systems help in administrative activities and in your decision-making.
For example, the monthly sales figures by territory.
Strategic-level Systems help the senior executives of your organization in addressing issues
like planning and decision-making.
For example, predicting the profit trend for the next 5 years.
9. How do you differentiate between data and information?
10. How are Knowledge-level Systems used?
11. Explain the conversion process of data into information.

6. TYPES OF COMPUTERS USED BY ORGANIZATIONS IN SETTING UP

MIS
A computer is an electronic device used for processing data. It helps you in generating the
desired information as output based on certain input data. These outputs form the basis for
making a lot of decisions in an organisation. There are various types of computers that may
be used by an organization for effectively implementing MIS. Some of the types commonly
used in business are desktop computer, notebook computer, PDA etc.
6.1 Desktop Personal Computer – These are systems which are kept on top of desks
in various offices, residences, class rooms, departmental stores, showrooms etc. Desktop
personal computers are meant to be operated by a person sitting in front of the computer.
6.2 Notebook Computers – These are smaller in size as compared to desk top
computers. The screen size is approximately 11”x8”. It is possible for a person to carry it in
a bag. It is similar to the size of a note book, hence the name notebook computer. It is
operated sometimes by placing it on the lap of a person, hence it is also known as laptop
computer. It is very convenient to use it for day to day applications when mobile.
6.3 PDA – These are small hand held devices known as personal digital assistant. It is
possible to carry a PDA in a pocket, hence is very convenient to use. It has simple applications
like taking notes, phone, calendar, camera, etc. One can even have internet access on a PDA
thus bringing the information of the entire world wide web on hand.
Answer true or false

12. PDA is a system which is kept on top of desks in various offices,
residences, class rooms, departmental stores, showrooms etc.
13. It is possible to carry a notebook computer in pockets, hence is very
convenient to use.

7. HARDWARE SUPPORT FOR MIS

Generally hardware in the form of personal computers and peripherals like printers, fax
machines, copiers, scanners etc., are used in an organization to support various MIS activities
of the organization.
7.1 Advantages of a PC: you can find the following advantages a personal computer
offers:
a) Speed – A PC can process data at a very high speed. It can process millions of
instructions within a few seconds.
b) Storage – A PC can store large quantities of data in a small space. It eliminates the need
for storing the conventional office flat files and box files which require lots of space. The
storage system in a PC is such that the information can be transferred from one place
to another place in electronic form.
c) Communication – A PC on the network can offer great support as a communicator in
communicating information in the form of text and images. Today a PC with internet is
used as a powerful tool of communication for every business activity.
d) Accuracy – A PC is highly reliable in the sense that it can be used to perform
calculations continuously for hours with a great degree of accuracy. It is possible to
obtain mathematical results correct up to a great degree of accuracy.
e) Conferencing – A PC with internet offers facility for video conferencing worldwide.
Business people across the globe travel a lot to meet their business partners, colleagues,
and customers etc., to discuss business activities. By video conferencing inconvenience
of traveling can be avoided.
A block diagram of a computer may be represented as-
Fig. 1.5: Block diagram of a Computer

Input unit is used to give input to the processor. Examples of input unit – keyboard, scanner,
mouse, bar code reader etc.
A processor refers to the unit which processes the input received the way it has been
instructed. In a computer the processor is the CPU – Central Processing Unit. It does all
mathematical calculations, logical tasks, storing details in the memory etc.
Output unit is used to give outputs from the computer. Examples of output unit – Monitor,
printer, speakers etc.
7.2 Classification of Computers: Computers are classified as follows:

a) Depending upon the processor used – e.g.: Intel PI, PII, PIII, PIV, AMD, Celerons etc.
b) Depending upon the purpose for which it is used, a computer may be a general purpose
computer or a specific purpose computer. General purpose computers are the ones
used for general tasks like business analysis, letter typing, generating reports for
management decisions, scheduling activities, preparing balance sheets, invoice etc.
Specific purpose computers are custom built for specific tasks like space research,
weather forecasting, satellite sensing etc. Specific purpose computers are designed to
perform tasks for which they are intended and for no other applications.
c) Depending upon the size: A computer may be classified based upon its size and
voluminous computing speed as micro computers, mini computers, main frames and
super computers. Super computer is the largest in size and also the fastest in computing
speed.
14. A PC can data at a very high speed.
15. A PC with offers facility for video conferencing worldwide.
16. A processor refers to the unit which processes the

received the way it has been instructed.

8. MODERN ORGANISATIONS
Modern organisations emerging in 20th century are far different from the traditional
organisations. The organisational structures are being changed. Boundary-less
Organisational structure, Virtual organisations, Matrix organisations etc., are few examples
of modern organisations.
A Boundaryless organisation is not determined by any predetermined structure.

Organisations are eliminating the formal chain of command, removing the limits of span of
control, and empowering the departments thereby empowering the teams within.
A Virtual organisation has all the elements of a traditional organisation, but also utilises
recent development on technologies to complete the work. The virtual organisation is
composed of employees working from their own home offices, they are also connected by
technology, but sometimes the employees meet face to face, depending upon the nature of
work.
8.1 IT Enabled Organisations

An organisation, which relies on an intensive application of information technology is
referred to as an IT enabled organisation. These organisations use technology for a
competitive advantage. These organisations use digital data to make decisions, to guide
future actions, and to learn for future. IT enabled organisations are responsive, open and
efficient. In order to be responsive, these organisations understand and respond to people’s
changing needs and expectations. These are open to experiment; they believe in sharing their
experiences and what they have learned. These organisations are more efficient, since they
work in a more responsive and open way.
8.2 Networked Organisations

The Networked organisations are also modern organisations and are examples of a
boundaryless organisation. Generally, they are small core organisations, but they outsource
their major business functions. In this way, organisations can concentrate on their core
activities, and other works can be given to other companies which have expertise in those
areas.

However, these networked organisations can run into several problems. Their Problems can
be listed as follows:
• Selecting wrong activities to be outsourced
• Choosing incapable vendors
• Making poor contracts
• Losing control over outsourced activities
• Missing hidden costs
Fig 1.6: Networked Organisation
Salient Features of a Networked Organisation:

• Is based on the relationship with suppliers, distributors, and other stakeholders.
• Has no horizontal or vertical boundaries within the organisation.
• Is more focused towards deciding how and with whom to develop and maintain
relationships.
• Is usually a temporary work arrangement between numbers of companies.
• Gains authority from individual, recognized knowledge and skill, rather than hierarchy.
Advantages of a Networked Organisation:

• Motivated and focused employees in the core organisation
• Optimum utilisation of the best talent
• Reduced chances of dealing with environmental uncertainty
• Flexibility of re-structuring

• Beneficial for small firms
Disadvantages/Limitations of a Networked Organisation:

• Problems in co-ordination with members
• Reliability issues
• Tough to maintain close control on processes
8.3 Dispersed Organisations

Is an organisation that consists of a small core of full-time employees, but temporarily hires
specialists to work on opportunities when it arises. A dispersed team or virtual team
coordinates the work, predominantly with electronic information and communication
technologies, to complete the tasks. The employees of a dispersed organisation never meet
face to face. The team allows companies to select the best talent without geographical
constraints.
8.4 Knowledge Organisations

Organizing knowledge is an intellectual discipline concerned with various activities, for
example indexing, describing the documents, classification etc., It discusses the processes
which help the resource findable. For making resources findable, they must be organized.
Knowledge can also be organized through a Knowledge Organisation System. Every
organisation makes a system to organize knowledge, so that it can easily be found and shared
with the employees in the organisation.
Knowledge sharing makes employees empowered. Chances of repetition of work and com-
mitting mistakes by the employees get reduced, given the prior knowledge about the work
they are doing. The experiences of people who have worked earlier can be recorded and
saved at one place.

1. CREATING 2.
KNOWLEDGE APPLYINGKNOWLE
DGE
3. SHARING
THE KNOWLEDGE
Fig 1.7: Process of Organising Knowledge
9. INFORMATION SYSTEM IN ORGANISATIONS

9.1 What are Information Systems?
Information systems are a collection of interrelated complementary networks of various
software, hardware, human resources and organisations. These are used to collect data, filter
and process them, then analyse and visualise the data and finally distribute them.
9.2 Components of a Typical Information System

• Hardware: These are the physical components, such as the CPU, Keyboard, Hard drive,
Monitor, etc.
• Software: These are the set of programs and instructions which directs the hardware
to function. For example, MS Office, Operating systems etc.
• Data: These are basically the collection of various facts.. Any fact e.g., name, age,
address, can be a data. These may or may not be very useful for everyone. We need to
collect, aggregate and then index and organize the data. Organi- zations can then use
these data to make further decisions.
• Process: This is another important component of the information system. It is a
sequence of steps to follow in order to achieve a desired result.

• Feedback: This is the most important component of an information system. After

completion of sending the data, the feedback provided ensures that the data or the
information sent is accepted exactly as it was sent. .
9.3 Types of Information Systems:

Organisations use different types of information systems according to the required purpose:
• Office Automation System
• Transaction Processing System
• Decision Support System
• Executive Information System
• Business Expert System
Apart from these, organisations also use some specific information systems like Supply chain
information system, Customer relationship management system, Enterprise resource
planning system, among others.

17. An information system is collection of _________________ complementary

networks of various softwares, hardwares, human resource and
organisations.
18. ____________ are basically the collection of various facts.
19. Identify the correct steps for Process of Organizing Knowledge:
a) Creating Knowledge, Implementing the Knowledge, Sharing the Knowledge
b) Implementation the Knowledge, Creating Knowledge, Sharing the Knowledge
c) Sharing the Knowledge, Implementing the Knowledge, Creating Knowledge
d) Implementing the knowledge, Sharing the Knowledge, Creating Knowledge
10. MANAGING IN THE INTERNET ERA

Today, there are a lot of changes in the internal as well as fundamental economic theory and
practice, which is the new digital or IT economy. Rapid economic globalization, is considered
by the transformation of national economies into a single global economic space triggered
by fast technological progress. The Internet is represented as a network of computers. It can
easily meet the communication needs of both businesses and private users.
The development in computer and communication technology has made distance, speed, vol-
ume, and complex computing, an easy task..Now in the Internet age, information and
communication technologies have merged and called, Internet Technology. This Information
Technology is changing the economic structure as well as the national and international
economic system.There is no denying the fact that the MIS contributes to organisational
efficiency and effectiveness. However, since the last few decades, there is a revolutionary
change in the use of information, and information systems, in organisations. Today, many
organisations are using information and information systems as tools for gaining and
sustaining competitive advantage. In this Internet era, information is regarded as a
resource just like the other traditional ‘four M’s’ – men, money, materials, and machines of
an organisation.

The concept of an information system has passed through several stages. In 1950, informa-
tion was considered a necessary evil. Today, it is regarded as an important strategic resource
for an organisation.
Time-period Concept of Information System Aims of Information

Information System
1950-1965 Necessary evil: aby- Electronic Data A by-product Faster paper process-ing
product
1966-1970 General Purpose Management reporting Speedy general report
Support system requirement
1971-1985 Specific management Decision support system Improvement, tailor- made
control sup-port decision making
systems
1986- Strategic resource: Strategic informationsystem Promote survival and

competitive weapon growth of the organi-sation
Table 1: Changing Concepts of Information Systems
11. THE IT INTERACTION MODEL

The Information Technology (IT) Interaction Model signifies the changing aspects of infor-
mation systems in organisations. It emphasises that the effects of an information system for
an organisation appear over time, and that it is the result of the interaction of the system
with the organisation. The following Fig. 1.8 shows that a business organisation does not
exist in a vacuum. It is surrounded by places, things, natural resources, important
obstructions and people. All these factors are called as organisational environment. This
environment can reflect in the internal and external data which effects the organisation.
The internal data, which exists in the system, aims to identifying the strength and weakness
of an organisation. In the face of competition, it can help the management shape the future
of an organisation. The external environment exists outside the organisation. It can be classi-
fied in different ways like local, national, and international, geographically or,as past, present
and future, according to the time. Or, economic or non-economic, depending on the finance
involved. The economic environment consists of: fiscal policy, monetary policies, industrial
policy, income policy, etc. The non-economic environment consists of social, political, legal,
educational, cultural, physical, and technological factors which can affect organisations.

Source:www.economicsdiscussion.net/management/management-information-system/
management-information-system/32411
Fig 1.8: The IT Interaction Model
Fig. 1.9 shows the interaction of information technology (IT) at the different levels of the
organisation .As shown in the figure strategic information is needed at the top level for
strategic decision makers (so Enterprise information system), technical information is
needed at the middle level for the technical decision maker (so Management system and
decision support system helps). For knowledge management, a KWS system is required. At
the operational level a Transactional processing system, or TPS, is needed for the operational
decision maker.

Fig 1.9: IT - MIS Model at Different Levels
20. The important characteristics of an information system are ________________,

______________ and _______________
21. A high-level manager must be concerned with the _______________ level of
management.
22. An is a planned system of the collecting, processing, storing and

disseminating data in the form of information needed to carry out the functions
of management.
23. The distinction between ES and IS is that ES refers to ___________ whereas anIS is
a social system that uses IT

12. SUMMARY
• After going through this unit you have learnt the fundamentals of MIS. The role and
significance of MIS in business, and its classifications are explained. Also you can
understand the impact of MIS on business and the various phases of a business. It is
possible to understand the various phases of development in MIS based on the type of
system required in any organization. You have learnt about the conversion of data to
information and the intermediate process involved. You have also learnt about the
various types of computers used in MIS and the different types of input and output
devices. YYou have been introduced to organisations and their structures.
Organisations and information are influenced by each other. Infor- mation systems are
built to serve the interest of the firm. Modern organisations emerging in 20th century
are far different from the traditional organisations. The organisational structures are
being changed. Boundary-less Organ- isational structure, Virtual organisations, Matrix
organisations etc., are few examples of modern organisations.An information system is
a collection of interrelated complementary networks of various software’s,
hardware’s, Human Resource and organisations.

13. TERMINAL QUESTIONS

1. Write a note on the origin and impact of MIS.
2. Explain the transformation stages from manual systems to automated systems.
3. What are the characteristics of MIS?
4. Explain the functions of MIS.
5. Explain how MIS controls the Information in an organization.
6. Explain how MIS can be classified.
7. Explain the manager’s activity in IS.
8. What are the various types of input and output devices used in MIS?
9. Explain the various views on MIS structure.
10. Explain the advantages of using a computer in business.
11. How will we define an Organization?
12. Q2. Write down the components of the Information System.
14. ANSWERS
Self Assessment Questions
1. Refer 2.1, Figure 1
2. Decision making, Control of activities and operations
3. Information
4. Refer 3.3
5. Expert systems
6. 6. Refer 3.4
7. 7. Refer 4.1
8. 8. Refer 4.2
9. 9. Refer 5.1
10. 10. Refer 5.2
11. 11. Refer 5.1, Figure 5
12. False
13. False
14. Process
15. Internet

16. Input
17. Interrelated
18. Data
19. (a)
20. Accuracy, Timeliness, Completeness
21. Strategic
22. MIS.
23. Enterprise System
Terminal Questions
1. Refer 2 and 2.1
2. Refer 2.2
3. Refer 3.1
4. Refer 3.2
5. Refer 3.4
6. Refer 4.1
7. Refer 5
8. Refer 7
9. Refer 5
10. Refer 7
11. An Organisation is an entity which comprises of a group of people, gathered to achieve
a common goal and is connected to an external environment.
12. Following are the major components of an Information System:
a. Hardware
b. Software
c. Data
d. Process
e. Feedback

Case Study
Basic concepts of Information Management
Consider the case of a newly opened bazaar in your area, that is trying to increase its sales.
The data available may include the historical data of sales, may be for the last 24 months,
promotion expenses and the feedback from the customer survey. All these data may be the
mixture of all the three or individual depending upon the needs of the application. However,
data is by itself interesting.
But in order to use this data for better sales analysis, data needs to be organized to form
meaningful information. This analysis will be used for decision making throughout the
different levels of management.
The bazaar may have a few outlets in various places. Therefore, storing this information is a
vital issue. There comes the picture of storing the data in the database which can be
centralized and integrated. This method of storing the data in the database for the use of
different levels of management, accessing anywhere, anytime the data through the single
source is called integrated database management system.
The data can be organized to a meaningful information and can be presented in various
forms i.e. equations, charts figures and tables. This kind of representation creates
relationships among two or more data. And this kind of representation can be used to decide
how to proceed with a particular task.
The manager needs to have the knowledge of how to analyze the available data and make
appropriate decisions. The manager has to be very particular in collecting the data from the
data bank. Data bank is the stock of data with respect to the bazaar, which consists of all the
possible data available on the bazaar. When the manager collects the appropriate data, he
should prepare proper models to apply and different possible ways to analyze the data for
making better decisions.
This can be done manually by the manager, which needs the knowledge of the business or
the knowledge can be fed into the computers and an automated system can be designed to
analyze and make decisions. These systems are called Expert Systems.

Though wisdom comes from knowledge, in DBMS wisdom is the advanced invention of
Information Technology. Defining wisdom includes the representation of ability to learn
from experience and the knowledge obtained from that experience and to adapt the system
to the changing environment. An automated wisdom system can be created by the use of
artificial intelligence. In a bazaar, wisdom system should be able to give the manager
knowledge about the current trends, the potential problems which exist, new strategies to
overcome these problems, prepare models for these strategies and implement these models
by the use of appropriate and new technology.
In order to obtain data to produce information, knowledge and wisdom, the database must
be built strong enough to handle large amounts of data and transactions. The entities and
their attributes need to have a strong relationship.
Here the only difficulty with respect to database is the authorized access to the database.
Data from the databank must be accessed only by the authorized person. Not all the data
must be accessible to all the persons involved in the bazaar.
Discussion Questions:
1. What are the basic concepts of information management that you have got form this
case discussion?
2. What is the use of relationship among the data?
3. What do you understand from ‘a wisdom system’? Explain in your own words.
4. If you are a database designer, then how do you provide security to the data against the
unauthorized users of the bazaar information system?

ADMINISTRATION
SEMESTER 4
DBB2202
SYSTEM
Unit 2: Conceptual Fundamentals 1

Unit 2
Conceptual Fundamentals
Table of Contents
No / Graph Activity
1 Introduction - -
3
1.1 Objectives - -
2 The Decision Making Process 1, 2, 3 1 4-8
3 System Approach to Problem Solving 4 2 9-11
4 The Structure of Management Information - 3
System
4.1 Operating Elements of an Information 5, 6, 7 -
System
4.2 Management Information Support for 9, 1 - 11-23
Decision Making
4.3 Management Information System 2 -
Structure Based on Management Activities
4.4 MIS Based on Organizational Functions 10, 11 -
5 Classification of Information 3 - 24-25
6 Quality of Information - - 25
7 Need for Data Management - -
26
8 History of Data Use - -
9 Summary - -
27
10 Terminal Questions - -
11 Answers - - 28-29

1. INTRODUCTION
In the previous unit, you came to know about the role and importance of MIS in which you
studied the characteristics, functions, necessity and role of information system in business.
In unit 1 you also studied the different types of computers and hardware requirements to
support MIS. In this unit you will get to know more of the basic concepts of MIS.
Conceptual foundation is considered to be one of the very important topics while studying
basics concepts of Information systems. This fundamental information includes the topics
like competitive advantage and its applications, MIS components and behavioral, managerial
and technical concepts. In this unit we will discuss the decision making process and system
approach in problem solving. We will also get to know how to use support systems for
planning. We will study about control and decision making by management.
1.1 Objectives
After studying this unit, you should be able to:
❖ Define Decision making process

❖ Identify the need for decision making process
❖ Describe the system approach to problem solving
❖ Elaborate the structure of Management Information System
❖ Classify Information
❖ Explain importance of quality of Information
❖ State the need for data Management
❖ Describe the history of data use

2. THE DECISION MAKING PROCESS

Managers will very often cebusiness challenges in their organizations. They need to adopt a
new strategy and execute the plans laid by senior management. Therefore being a manager
our role of taking good decisions is very important. Decisions vary at different levels. At the
senior level, managers have to make strategic decisions about products and services to
produce for long term. At the middle level, the managers execute the senior management
decisions. At the operational level, the manager’s responsibility is to monitor the daily
activities of the organization. The different levels of management and its types can be shown
in a triangular structure as shown in the figure 2.1.
Fig. 2.1: Relationship between the levels of management and types of decisions
Managers at all the three levels must be

o creative
o best in decision making
o best solutions provider for the problems which come in the way.
The system should support the managers to meet the three parameters.

Decision is a result of choosing a particular course of action after considering the possible
alternatives. Usually decisions are taken in situations of uncertainty. The conditions under
which decisions are made and the different types of decisions are as shown in figure 2.2.
Decisions are taken in various types of environments. There are four different types of
environment under which decisions are taken in the organizations. They are
o Ambiguity: doubtfulness in interpreting a problem
o Certainty: state of assured fact
o Uncertainty: state of having limited knowledge, unable to describe exactly theexisting
state or future outcome or more than one possible outcome.
o Risk: state of quantifiable likelihood of loss or fewer returns than expected.
Fig. 2.2: Decisions
There are different types of decisions which serve the different types of environment. They
are,
o Structured Decisions: These types of decisions are also called programmed decisions.
Structured decisions are those decisions made under established environment and
their outcome can be predicted The decisions are taken in an environment which is

fully understood by the managers. These kinds of decisions are used for daily routine
activities and specialized processes.
The following are the characteristics of structured decisions.

1. These decisions are routine/structured
2. These decisions are repetitive/short term
3. They are definite procedures to be followed
4. They have well laid down norms
5. They are known situations
6. Used at lower/operating levels of management
Structured decisions are taken based on the techniques of standard operating procedure,
organizational hierarchy structure, operation research, and mainly using computers.
o Semi Structured Decisions: these are the kinds of decisions in which some aspects of
the problems are structured and others are unstructured. These decisions require
human judgment.
o Unstructured decisions: these decisions are also referred to as non- programmed
decisions. These are the decisions that has no standardization to resolve in a situation
and are very complex. The following are the characteristics of structured decisions
1. These decisions are innovative
2. These decisions can be used in new or complex situations
3. They are very helpful in terms of important and critical conditions
4. They are strategic in nature
5. These decisions are helpful in long term
Unstructured decisions are taken, based on the techniques of judgment, intuition, creativity,
business acumen, complex/specially designed computer programs and by trained
executives.
Steps in Decision Making Process:

Decision making process involves the following steps as shown in figure 2.3.
1. Identifying a Problem or Opportunities: The most important step is to identify the

problem or to identify the opportunities. We also need to analyze whether the

opportunity we looked for has really any value to our customers. Suppose a problem is
identified, we still need to think whether the problem is really worth solving, or if any
opportunity is identified, we need to think whether grabbing that opportunity is worth
it.
2. Generate Alternative Course of Action/gather Information: always generate
alternative solutions to the problem so that if one is observed to have faults, then we
can easily switch to the other one. Always try to ask questions out of those solutions
designed. We need to predict the situation while generating alternative solutions.
3. Analyze Information: when we find alternative solutions, we should think about the
alternative course of action if one solution goes wrong. Whenever a solution to a
problem is found, we should always try to interpret it in all the different ways.
4. Implement the Course of Action: After analyzing the alternative course of action, the
next step is to put that plan in place. For this we need to identify the resources required
to execute the decision and allocate the resources to implement the decision. To get the
buy-in from the team would help in successful implementation of the plan.
5. Monitor, Follow up and Initiate Corrective Action: after implementation, the most
important thing is to test the performance of the decision implemented. Therefore,
regular monitoring is required to identify the merits and demerits of the
implementations for further improvement. As soon as we find a fault it needs to be
reported and follow up action must be taken to fix the problem.

Fig. 2.3: Steps in Decision Making
1. At level, managers have to make strategic decisions

about products and services to produce for long term.
2. means doubtfulness in interpreting a problem.
3. Which decisions are also referred to as non-programmed decisions?
4. decisions require human judgment.

3. SYSTEMS APPROACH TO PROBLEM SOLVING

Systems approach: Systems approach is a problem solving method which helps to define a
problem, analyze a problem and identify alternative solutions select the suitable solution
from the alternatives, design the desired mix of the solutions, implement and test the
solutions and most importantly evaluate the effectiveness of the solution.
System Context: In any given situation, identifying the systems, subsystems and
components of the system, is system context.
Problem: It is an undesirable condition which leads to unwanted results in an organization.
Problem Solving: Problem solving is a process of identifying the problem, gathering and
processing relevant information, analyzing and designing alternative solutions,
programming and implementing the program and follow up action and evaluation.
The following chart will show a description of time sequenced activities and logic to be
performed by the computer for carrying out data processing on computer.

Fig. 2.4: Flow chart of sequence of activities in problem solving
Basically problem solving is a process consisting of six steps which include the following:
o Recognizing and defining the problem: Some stimulus indicates that a decision must be
made, whether it is positive or negative.
o Identifying the alternatives: both obvious and creative alternatives are desired. In
general, the more significant the decision, the more alternatives that should be
generated.
o Evaluating the alternative: each alternative is evaluated to determine its feasibility,
measure of success and its consequences.
o Selecting the best alternative: consider all situational factors and choose the best
alternative
o Implementing the chosen alternative: the chosen alternative is implemented into the
organization system.

o Follow up and evaluation: how the chosen alternative (as in step 4) has been
implemented (as in step 5), is to be seen by the manager.
5. ______________________ is a condition that causes undesirable results in an

organization.
6. is recognizing systems, subsystems and components of
the system in a situation.
4. THE STRUCTURE OF MANAGEMENT INFORMATION SYSTEM

4.1 Operating Elements of an Information System:
The structure of the management information system is comprised of four related
classifications which are as shown in figure 2.5. The four classifications are:
o Operational elements
o Decision support for decision making
o Management activities
o Organizational functions
The working of the management information is as shown in figure 2.5.

Fig. 2.5: Structure of MIS
o Operating elements: Operating elements help in supporting various types of decision

making at different levels in the organizational functions. These operating elements are
classified into three types. They are:
a. Physical components
b. Processing functions
c. Outputs for users of information
a. Physical Components: the basic physical components any organization’s information
system has are, hardware, software, database, procedures and people/experts in
information technology function.
o Hardware is the machines or physical electronic equipment which is composed of
procedures for mechanical, magnetic or electronic use. The most important

functions of hardware are Input, Output, secondary storage for data and programs,
CPU and communication devices like LAN or modem.
o Software in general is the set of programs that is used to control and coordinate the
task of the hardware components of the computer. There are two types of software.
▪ Application software
▪ System software.
o Database is an organized collection of data in the form of rows and columns which
is used to store and manage the data of various applications. When you store data
in the database it appears as though all the data are in a single location.
o Procedures: procedures are a set of instructions that is used to complete a task.
These procedures may be in the physical form such as a manual. This manual can
be used by the user to prepare the input, how to operate the instrument or to expect
the result of your input.
o People/experts in information technology function: these are the specialists on the
technical side of the computer. These include system analysts, programmers,
computer operators, data preparation personnel, information systems
management, data administrators etc.
b. Processing functions: while the physical components describe what the information
system has, the processing functions describe what the system does.
Figure 2.7 explains how the processing functions works:

Fig. 2.6: Processing functions
o A transaction is any activity that takes place in organizations. For example, making a
sale of a product or buying a raw material for a product.
o There are three things which are essentially required in the performance of a
transaction. They are:
▪ The need to decide if the transaction has to takes place
▪ Performance needs to be reported, confirmed or explained
▪ Communicating the transaction information to those who have to keep a record for
future use or background information.
c. Outputs for users: The following figure 2. 8explains that the user of MIS provides
inputs and receives outputs in five major types.
They are

Provides
Receives
inputs
Data Output
Transaction
data
documents Process
Fig. 2.7: Outputs for users
After the processing, the user of MIS provides inputs and receives outputs in five types.
They are
o Transaction documents
o Preplanned reports
o Preplanned inquiry responses
o Ad hoc reports and inquiry responses
o User machine dialog results
o Transaction Documents: Reports are significant products of an information system.
The different kinds of reports produced are Schedule reports, Ad hoc reports and
Exception reports. Reports and inquiry responses provide four types of information.
They are
• Monitoring information: on the basis of financial report status, the information
confirms that actions have been taken.
• Problem finding information: problem identification can be done by the format used
to present the information.
• Action information: information is presented with action specified or implied.
• Decision support: the various report inquiries are used to make a decision or
performance analysis.
o Preplanned Reports: these reports have regular format and have specific content, and
usually run on a regularly scheduled basis. These reports are used to get the status or
condition at a given point of time. These reports will record the occurrences and make
a brief of what has occurred during a period such as a week, a month or a year. These

reports are useful when you need to present the results to data and project to the end
of the period.
o Preplanned inquiries responses: inquiries deal with limited outputs. The inquiry is
entered online and responses are received via computer immediately, may be
automated reply of system generated.
Exception Reports and Ad hoc Reports

Exception Reports are reports produced only when exceptional conditions occur, or reports
produced periodically which contain only exceptional conditions/information. These
reports are generated automatically. For example, these reports are used to print the list of
names of the participants who are attending a conference. These reports have to state the
names of those who are participating in the conference and the location from where the
participant’s number is less than ten. These reports have to be generated two weeks before
the start of the conference. Such reports are called as exception reports.
o Ad hoc Reports are those reports that are unique, unscheduled and are situation
specific Such reports require analysis of data whose format is not preplanned. .
4.2 Management Information Support for Decision Making

Basically decision is the outcome of any analysis. The decision process is a “collection of
steps, starting with information output and analysis and culminating in resolution, namely a
selection from several available alternatives. The information is needed for both structured
and unstructured decisions.
Table 2.1: Differences between structured and unstructured decisions
Sl.
Structured decision Unstructured decision
No.
1 Pre-planned or pre- Not pr-eplanned
specified
2 Programmable Non programmable
3 Routine and frequently Not routine and very rarely
repeated used

The Relationship between Information System and Decisions-making

The need for information in an organization is met by information system. Information is
very important for planning and control. Decision making is a very important necessity of
management function. When any function of the organization needs to take a decision, the
major input to take a decision is information. To make a right decision you should have right
information.
The decision is a choice that leads to the commitment of resources for future course of action.
The decision process consists of three important phases as shown in the figure 2.9.
Intelligence
Design
Choice
Fig. 2.9: Decision process flow chart
o Intelligence Phase: In this phase, it searches the environment for conditions that call
for decisions. Here, input is taken and processed to identify the problems or the
opportunities.
o Design Phase: after the identification of problems or opportunities, design phase
invents, develops and analyses the possible course of action. In the design phase, it
develops the processes to understand the problem, to generate the solutions and to test
for feasible solutions.
o Choice phase: many alternative solutions are available. It is the design phase, where it
selects an alternative course of action from the existing ones. The best solution is
chosen and implemented.

The above model is called Simon’s model of decision making process.
4.3 Management Information System Structure Based on Management

Activities
The major component of management activities is information. The requirement of
information differs with the level of activity of management. In section 2.4 we came to know
that organization structure works on three levels of management such as strategic planning
which is unstructured and is called decision maker level, Tactical management which is
semi- structured and operational management which is highly structured and is the base for
any action.
o Planning and control information: the two broad categories of information are planning
information and control information. Planning information is more related to strategic
management whereas control information is related to operational level management.
Differences between planning and control information

Table 2.2: Differences between planning and control information
Planning information Control Information

Covers wider time span Related to short time span
Trends and patterns are more important Finer details are important
Purpose is to guide planning by projectingInvite managerial intervention to
trends and patterns correct a deviation if any
4.4 MIS Based on Organizational Functions

The functions of organizational subsystems
Major organizational functions subsystems are

o Marketing
o Manufacturing
o Finance
o Logistics
o Information processing
o Personnel
o Top management

Each of these functional subsystems is unique, though they share common support systems
used by more than one subsystem. The parameters for uniqueness are their procedures,
programs, models, etc.
The database is the primary means of integration of the various subsystems. The following
are the subsystems.
o Transaction processing
o Operational control information system support
o Managerial control information system support
o Strategic planning information system support
In all these subsystems the unique data are required for the information systems. These data
are arranged such that they are retrieved by many subsystems of the same system. These
data are reorganized into a master database which is managed by database management
system.
Managerial Activities Subsystems

The activities of the various subsystems vary with the levels of management. The different
subsystems of the organization are interrelated as we discussed earlier. The information
processing, related to the function, requires applications to perform the functions like
transaction processing, operational control, management control and strategic planning.
Synthesis of a Management Information Structure

As we already know the structure of MIS consists of
o support for decision making
o Management activity
o Organizational functions
These approaches need to be synthesized to form a proper MIS structure. After synthesis we
get two categories of MIS structure. They are,
o Physical structure: this defines the physical structure of MIS in terms of
implementation.
o Conceptual structure: this defines the functioning of information processing
components.

Decision Making Models

The main function of a manager is decision making. There are many situations in which a
manager may have to take decisions which may vary from time to time, situation to situation,
system to system or place to place. Therefore different models have been introduced to help
managers to make decisions They are
o The classical model: In this model,
• Manager collects all the information necessary for a particular situation for decision
making.
• He would take decisions in the best interests of the organization.
o The administrative model: In this model,
• The manager is more concerned about himself.
• Manager collects all the information necessary for a particular situation for decision
making.
• He would take a decision which suits his best interests and that may not be best for
the organization.
• Expediency and opportunism are involved.
o The Herbert Simon model: This model is based on three interrelated phases as we
studied in the earlier sections. In this model,
• The important phases are, intelligence phase, design phase, and choice phase.
• Intelligence phase:
• The three environment needed to be studied under intelligence phase are societal
environment, competitive environment, and organizational environment.

Fig. 2.10: The intelligent Phase- Phase I
The inputs from environment undergo synthesizing in the intelligence phase. This phase
identifies a problem or an opportunity. This identification is based on the information like,
whether the process has risk or risk reduction, performance or profit, demand or supply
issues of a product, service issues, etc. Both problem identification and identifying the
opportunity are the two important aspects of an organization, which are addressed by
Intelligence phase.
o Design Phase: This is the second phase in Herbert Simon Model. This step involves
three main tasks which are important to synthesize the information. They are:
• Inventing
• Developing
• Analyzing
You can see the working of a design phase in figure 2.11.

Fig. 2.11: Design Phase-Phase II
After the information undergoes the inventing, developing or analyzing steps it gives,
• the alternative solutions to the problem
• Course of action for the problem/opportunity
• Responses towards the problem/opportunity
This phase does involve the following iterative steps:

1. Support in understanding the problem.
2. Support for generating solutions by manipulating the model to develop insights,
creating/using the databases retrieval system. This helps in generating the solutions.
3. Support for testing feasibility of solutions which analyses in terms of the environment
it affects, which you have studied in intelligent phase.

o Choice Phase: this phase will make the best possible solution out of the alternatives
generated in the design phase. In order to do this, it needs a choice procedure and the
information of the best choice.
Limitations of Simon’s Model

• This model does not give clarity of implementation and mechanism for feedback
aspects.
7. _______________________are the set of programs that is used to control and

coordinate the tasks of the hardware components of the computer.
8. is an organized collection of data in the form of rows and columns.
9. is any activity that takes place in an organization.
10. State whether the following statements are true or false:

a) Reports are significant products of an Information system.
b) Responses are entered online.
11. The Herbert Simon model consists of ,

and phases.
12. and are the two broad categories of information.
13. After synthesizing the inputs, the intelligence phase identifies ______________________and
.
14. Design phase involves ,

and .

5. CLASSIFICATION OF INFORMATION
Processed data is Information. Information has contextual meaning and thus is a powerful
asset used by managers in making decisions on business matters.
There are different mechanisms to collect data. They could be from primary or secondary
source, surveys and interviews.
Data in a Management Information System goes through three steps:

1. Data Acquisition – Data is converted from physical form (paper forms, identity
credentials etc. ) into digital format and stored in computers (in database)
2. Data transformation – This is about conversion of data from its original format into any
other form required for further processing to feed into analysis or reporting
Management of Information - It is a set of process that involves identifying, acquiring,

organising, storing and developing information.
Data could be classified based on the following:

1) Characteristics –
a. Actionable:This could be data or information that is actionable or not.
b. Recurring: Some data could be recurring and to be collected at regular intervals.
Examples could be leaves, attendance etc.
c. Internal Vs External: This depends on the source - examples for external data could
be competitive information in contrast to all information internal to the
organisation
2) Application –
a. Planning – data that feeds into plans in an organisation. Budget numbers , sales
forecast etc. could fall in this category
b. Control – data that reflects on executing the plan and that which is needed to keep
the plan on track; The Return-on-Investment and budget controls like travel
expenditure, sales figures region-wise etc. are examples
c. Knowledge – Data from research or any archival data key to the organisation.Any
intellectual property is an example here.

3) Management Hierarchy - The types of data stored and used depend on the management
hierarchy. This is tabulated in 2.3 below.
Table 2.3: Hierarchy of Management Activities
Levels Activities
Strategic planning Definition of goals, policies and general
guidelines, charting course for organization,
choice of business direction, market strategy,
product mix
Management control and Acquisition of resources, acquisition of tactics,
tactical planning plant location, new product establishment and
monitoring of budget, structuring of work,
training of personnel
Operational planning and Effective and efficient use of existing facilities
control and resources to carry out activities within
budget constraints
6. QUALITY OF INFORMATION
Some attributes of Information are:
• Intrinsic : It talks about accuracy of information.
• Contextual : It talks about relevancy of Information.
• Accessibility : It talks about access to information, in other words, how secure is the
information.
• Representational : It talks about compatibility and format of information.
Other aspects of Information that determine the value (or) quality of information are listed
here:
• Data should be dependable.
• Data should be up to date
• The information is relevant and accurate
• It should be accurate
• It should be comparable, say between current and past data
• It should be unbiased
• It should be complete in itself.

7. NEED FOR DATA MANAGEMENT

As with any business, data will grow in volume in quite a short span of time. So there are
challenges with managing data. Having said that, there are some good practices about
managing data for business. They are :
1. Align with organisational goal.
a. Only data that makes sense for business needs to be collected and maintained
2. Quality of data is prime
a. As discussed in the previous section, if the quality is lost, there is no meaning in
having a MIS
3. Data should be secure.
a. Access priveleges and access controls are required to ensure that data does not get
into wrong hands as well as all privileged people get access to the data.
8. HISTORY OF DATA USE

Use of data dates back to the 1960s, when high level programming languages accessed and
manipulate data. Then evolved data management system and SQL (Structured Query
Language) using which tabular data was queried, manipulated and reported. Then came
NOSQL and the data management moved onto cloud, making it secure and accessible across.
Now Artificial Intelligence is the technology that works on data and works towards
automating mundane tasks.

9. SUMMARY
Let us sum up what we have discussed in this unit.
• The managerial roles and decisions vary at different levels of the organization like
senior managers, middle managers and operational managers.
• The decision making process consists of three main types of decisions like structured,
semi structured and non-structured decisions.
• Problem solving is a six step process which includes identifying a problem, gathering
and sorting relevant information, developing and analyzing alternatives, programming,
implementing and follow up and evaluation.
• Structure of MIS mainly consists of 4 important components. They are operating
elements, decision support for decision making, management activities and
organizational functions.
• Information can be classified based on characteristics, application or management
hierarchy

1. Explain the steps in the decision making process in detail.
2. Describe the time sequenced activities and logic, to be performed by the computer for
carrying out data processing.
3. Elaborate the working of Management Information System.
4. Explain the synthesis of Management Information System.
5. Discuss the classification of data
6. State determinants of data quality

11. ANSWERS
1. Senior
2. Ambiguity
3. Unstructured
4. Semi structured
5. Problem
6. System context
7. Software
8. Database
9. Transaction
10.
a. True
b. False
11. Intelligence, Design and choice
12. Planning and control information
13. Problem and opportunity
14. Inventing, developing and analyzing
Terminal Questions
1. Refer Section 2, Decision Making Process
2. Refer Section 3, System approach to problem solving, figure 4- flowchart of sequence
of activities in problem solving
3. Refer section 4, the structure of Management Information System
4. Refer 4, MIS based on organizational functions.
5. Refer 5 Classification of Information
6. Refer 6 Quality of Information

E Reference:
• http://www.the-happy-manager.com/steps-in-decision-making.html
• http://www.buzzle.com/articles/6-steps-to-decision-making-process.html
• http://mennta.hi.is/starfsfolk/solrunb/system.htm
• http://www.jstor.org/pss/2628797

ADMINISTRATION
SEMESTER 4
DBB2202
SYSTEM
Unit 3: Kinds of Information Systems 1

Unit 3
Kinds of Information Systems
Table of Contents
No / Graph Activity
1 Introduction - -
3
1.1 Objectives - -
2 Types of Management Systems 1 1
2.1 Transaction Processing Systems (TPS) - -
2.2 Knowledge Based systems (KBS) - -
2.3 On Line Analytical Processing Systems 2 -

(OLAPS) 4-15
2.4 Executive Information Systems (EIS) 3 -
2.5 Decision Support Systems (DSS) - -
2.6 Business Process Systems (BPS) 4 -
2.7 Object Oriented Systems (OOS) 5 -

3 Concepts of Management Organization - 2
3.1 Management organizations - -
3.2 Concepts of management organization - -

16-19
3.3 Technical implementation issues - -
3.4 Management Theories - -
3.5 Behavioural factors - -

4 Summary - - 19
6 Answers - - 20-21

1. INTRODUCTION
In the previous unit you have studied the conceptual fundamentals of MIS In this unit you
will learn the different types of MIS. An organization consists of many functions both
technical and managerial and people working for various departments. Therefore an
Information System of an organization is not only with respect to one department or one
function but also a combination of management, technology and organization.
1.1 Objectives:
After going through this unit student will be able to:
❖ Describe the actual perspective of MIS with respect to an organization

❖ Explain the types of MIS
❖ Define the basics concepts and relationships of MIS
❖ Explain the concept of management organization

2. TYPES OF MANAGEMENT SYSTEMS

MIS systems are extensively used in generating statistical report of any organization
Management also uses MIS for decision making, from the low level management to the top
level management. In order to perform tasks using Information systems, use of technical
technology is required. So, it is a combination of 3 components i.e. organization, technology
and management. Figure 3.1 shows the view of information from the perspective of an
organization.
The main purpose of Information systems is to assist the management in decision making.
The various processes in decision making require information in various forms. Basically,
information is provided by the systems to the management at various levels like strategic
planning, management control, and operational control; while the nature of information at
the operational level is highly structured, the nature of information at the top level –
strategic, is highly unstructured. Similarly the volume of information processed is very high
at the bottom level where as it is less at the top level.
Management activities at different levels can be divided, depending upon the nature of
management functions like – marketing function, financial function, personnel function etc.
Fig. 3.1: View of Information

The conceptual framework and some of the types of management systems which are
information based are –
a) Transaction processing systems (TPS)
b) Knowledge based systems (KBS)
c) On line analytical processing systems (OLAPS)
d) Executive information systems (EIS)
e) Decision support systems (DSS)
f) Business process systems (BPS)
g) Object oriented systems (OOS)
2.1 Transaction Processing System (TPS)

A transaction is the smallest unit of business activity. Transactions are mainly observed at
the bottom level of the management. Plenty of operational activities at the bottom level
result in one or more transactions. Every transaction may be considered to generate
information. The information generated can be highly structured. Structured information is
easy to process further
Transactions that happen at an operational level get recorded through a Transaction Pro-
cessing System. This system plays a central part to the role and functions of an operations
manager. The aim of a TPS is to address common and routine issues in organisations, such
as:
• Target sales of the day from customers
• Details of inventory stock – sold and in store
• Details of financial transactions made with vendors and suppliers
These systems are seen performing the following functions:

• Recording daily sales through point of sale systems
• Preparing salary sheets using data from payroll systems
• Keeping track of inventory through digital stock control systems
• Managing passenger booking and cargo shipments through online tracking systems
The processing system captures data of collection and processing of transactions to the last
detail. All activities in an organisation will be recorded, modified, retrieved, and processed

as required by management. Therefore, this system needs to have reliable technology with
well laid out processes for collecting, recording, storing and analysing data.
TPS may further be classified as online systems or batch systems. In online systems there is
direct interaction of the operator and the TPS system. In batch systems activities of the same
type are batched into groups and then processed.
1. Batch Processing: This is one of the conventional ways of processing transactions in

factories or manufacturing units. Production takes places in batches that are assigned
to assembly line supervisors and foremen.
Before the introduction of these systems, all transactions were recorded manually in log
books and processed weekly or as scheduled.
2. Online Processing: In this type of processing, every single transaction is processed

immediately. A TPS at factories and manufacturing units enables the production and
operations managers, supervisors, and their foremen to record transactions live, as
they occur, and retrieve later for processing costs, payrolls, and absenteeism, etc.
TPS offers the following characteristics. These characteristics are responsible for the TPS to
perform methodical, standardized and reliable transactions.
• Reliability: TPS incorporates safeguard and disaster recovery methods to ensure
transaction security and also remain always operational.
• Rapid processing: TPS processes transactions very fast due to the virtual transaction
processing.
• Standardization: To maximize efficiency of the transactions, TPS interfaces consider
identical data for every transaction, irrespective of the customer.
• Controlled access: TPS can have access restrictions
• User-friendliness: Today, most of these systems, especially those operated by several
users, are designed to be user-friendly. Once the required inputs are made, the pre-
determined sequencing of the system provides timely, reliable output to the user.
• Transaction processing qualifiers: ACID is the acronym used to specify the TPS
qualifiers. They are
– Atomicity

– Consistency
– Isolation
– Durability
Examples of online systems: enquiry, checking availability of tickets etc. Examples of batch
systems: entering parcel details belonging to one destination, processing students’ marks in
one subject etc.
The key components of a typical TPS are as follows:

• Input: Organisations record routine transactions in various forms, such as invoic- es,
cash receipts, goods reports, delivery receipts, and remittances made through cheques,
cards, etc. All such documents are direct evidence of transactions happening in an
organisation. These will be entered into the computer systems in their respective file
sections throughout business hours.
• Processing: The input data gets keyed into the system to get processed. However,
before being entered into the system, data is sorted. It is then allotted to operators for
processing under the supervision of managers.
• Output: Documents and reports which are in the form of printed output or screen
displays, along with files stored in the system, are the outputs of the data processing.
A. Storage: Data gets stored on internal and external memory of a system. The data is
stored as files and databases that can be retrieved and used when required.
2.2 Knowledge Based System (KBS)

KBS are the systems based on knowledge base. Knowledge base is the database maintained
for knowledge management which provides the means for data collections, organization and
retrieval of knowledge. The knowledge management manages the domain where it creates
and enables an organization for adoption of insights and experiences.
There are two types of knowledge bases:

a. Human readable knowledge bases: They are designed to help people to retrieve
knowledge. The information needs to be processed by the reader. The reader can access
the information and synthesize his own.

b. Machine readable knowledge bases: Some knowledge bases are processed by the
computer. The semantics of the knowledge base are read and processed by the code
and presented through the web interface for people’s consumption.
KBS refers to a system of data and information used for decision making. The system is
automated to work on the knowledge based data and information required in a particular
domain of management activity. The processing is done, based on the past decisions taken
under suitable conditions. Decision making is based on the fact that the condition is similar
to the past situation, hence the decision is also similar.
Examples of KBS are intelligent systems, robotics, neural networks etc.
2.3 Online Analytical Processing (OLAP)

OLAP refers to a system in which there are predefined multiple instances of various modules
used in business applications. Any input to such a system results in verification of the facts
with respect to the available instances.
The querying process of the OLAP is very strong. It helps the management take decisions
like, which month would be appropriate to launch a product in the market, what should be
the production quantity to maximize the returns, what should be the stocking policy in order
to minimize the wastage etc.
A model of OLAP may be well represented in the form of a 3D box. There are six faces of the
box. Each adjoining face with common vertex may be considered to represent the various
parameter of the business situation under consideration. E.g.: Region, Sales & demand,
Product etc.

Fig. 3.2: Model of OLAP
2.4 Executive Information Systems (EIS)

Executive Information Systems EIS was coined in MIT (Massachusetts Institute of
Technology) in the 1970s. The first EIS was developed by large firms willing to take risks to
gain competitive advantage. By the mid 1980s, several vendors had developed broad
customer bases, and support for EIS technology continues even today. Executive information
system may be considered to be useful at any level of management, especially at the middle
level and the bottom level. It mainly revolves around the day to day activities of management
but not in strategic decisions. Examples where EIS can be used – assigning responsibilities
to subordinates, analyzing the data generated out of a management process, documenting
the reports generated, plotting trends, sales forecast etc. It is very useful to the Executives to
make decisions in selecting the level of details, if further investigation is needed. The EIS will
allow the executive to drill down from any figure to see its supporting data. EIS works in the
top-down approach which helps in better decisions. These are the types of information
which is used by EIS:
• Accounting systems that can relate revenue to specific operational areas.
• Determining strategy that has the Information ofmarkets, customers and suppliers.
• Computer systems and organizations that share information.

• The information use is often short-term and volatile.
EIS in future will be very useful with respect to intelligence, multimedia, informed and
connective Executive Information Systems. You can see the typical working of EIS in figure
3.3.
Fig. 3.3: Executive Information System
Executive Information Systems are of two distinct types:

• The Data Driven: Data driven systems interface with databases and data warehouses.
They collate information from different sources and present them to the user on an
integrated dashboard style screen.
• The Model Driven: Model driven systems use forecasting, simulations and decision
tree like processes to present the data. Service providers continuously improve their
products and offer new ways of doing business due to the effect of emerging trends.
Modern EIS systems can also present industry trend information and competitor behavior
trends, if needed. They can filter and analyze data; create graphs, charts and scenario
generations; and offer many other options for presenting data. It is difficult to implement the

EIS due to the initial cost of the implementation. Once the initial cost is calculated, there is
the additional cost of support infrastructure, training, and the means of making the company
data meaningful to the system. An EIS does not depend just on one-time setup.. It has to
support and provide timely and accurate data on the production of meaningful data on an
ongoing basis It can provide information to executives and improve the ability to make some
decisions and take actions. An EIS provides a competitive edge to the business strategy
within in a very short span of time.
2.5 Decision Support Systems (DSS)

DSS is an interactive computer based system designed to use all the resources available and
arrive at a decision. In management, many a time, problems arise out of situations for which
simple solution may not be possible. To solve such problems you may have to use complex
theories. The models that would be required to solve such problems may have to be
identified..
You may gather and present the following information by using decision support application:
DSS uses all of your current information assets, including legacy and relational data sources,
cubes, data warehouses, and data marts.
Following are a couple of examples that can be achieved using DSS:

• Comparative sales figures between one week and the next
• Projected revenue figures based on new product sales assumptions
DSS can provide theconsequences of different decision alternatives, given past experience in
a context that is described. Managers may sometimes find it difficult to solve such problems.
E.g.– In a sales problem, if there are multiple decision variables modeled as a simple linear
problem but having multiple optima, it becomes difficult to take a decision, since any of the
multiple optima would give optimum results. But the strategy to select the one most suitable,
under conditions prevailing in the market, requires skills beyond the model.
It would take some trials to select a best strategy. Under such circumstances it would be easy
to take a decision, if a ready system of databases of various market conditions and
corresponding appropriate decisions is available.. It is a flexible system which can be
customized to suit the organization’s needs. It can work in the interactive mode in order to

enable managers to take quick decisions. You can consider decision support system as the
best when it includes high-level summary reports or charts and allows the user to drill down
for more detailed information.
A DSS has the capability to update its decision database. Whenever the manager feels that a
particular decision is unique and not available in the system, the manager can choose to
update the database with such decisions. This will strengthen the DSS to take decisions in
future.
There is no scope for errors in arriving at decisionswhen such systems are used as an aid
DSS is a consistent decision making system. It can be used to generate reports of various
levels of management activities. It is capable of performing mathematical calculations and
logical calculations, depending upon the model adopted to solve the problem. You can
summarize the benefits of DSS into the following:
• Improves personal efficiency
• Expedites problem solving
• Facilitates interpersonal communication
• Promotes learning and training
• Increases organizational control
• Generates new evidence in support of a decision
• Creates a competitive advantage
• Encourages exploration and discovery on the part of the decision maker
• Reveals new approaches to problem-solving.
2.6 Business Process Systems (BPS)

The development of a business process system is because of the need to solve a business
problem. A business process system is basically spread over various levels of the
management, from the top to the bottom. The processes at the top level are basically meant
to handle strategic problems. At the middle level the process is oriented towards generating
information for planning, scheduling etc. And at the bottom level processes are highly
structured and are mainly meant for routine transactions.

Fig. 3.4: Business Process Reengineering Cycle
Each business process may be further divided into sub processes. Each process generates
information which is communicated to the other processes, depending upon the
requirements of those processes. E.g. - Billing, inventory, quality control, distribution,
maintenance, etc.
2.7 Object Oriented Systems (OOS)

It is a system developed as models which are representative of real world cases. The
principles required to understand a real world problem are modelled as business objects
which are then used in various business applications. An object model is a system which is
an abstraction of a real world business problem containing all the necessary functions and
data storage facility to contain details of a business object.
A number of objects may be developed in order to customize them to the needs of the
organization.

Fig. 3.5: Object Oriented Systems
A complete business system requires models from three different perspectives – Class
model, State model and Interaction model.
A class model indicates the static structure of the objects and their relationships with other
business objects. A state model indicates the changes that take place in the objects with
respect to time. Interaction model indicates how to coordinate objects with other objects to
achieve business goals. Some of the special features of object modeling are – polymorphism,
inheritance, templates etc.
Polymorphism means the behavior of the object differently to different messages.

Inheritance refers to the mechanism of acquiring properties of one object class by another
object class. The object which inherits properties is said to belong to a class called the derived
class and the object class from which the properties are derived is called the base class. A
template refers to a mechanism of implementing a class object wherein any type of data can
be accepted for a specified routine. A template can be used to define a family of business
objects performing a categorical task.
A system which combines the concepts of Object oriented system and that of data storage
and data access is known as object oriented database system. It is a powerful means for data

storage and retrieval since the object concept encompasses both data and the procedure
together in the class. This is known as encapsulation.
Data abstraction is used in inheritance. The system is supported on multiple system and
hierarchy of classes and its sub classes. These methodologies are useful in various complex
applications. With the support of technologies like artificial neural networks and expert
systems, it is possible to access data from database and also process complex data in a very
simple manner. Neural networks are a process where it is possible to capture the thought
process going on in the brain of a human being. Expert system refers to the system which
contains the knowledge database of human expert suggestions stored in the computer
database.
1. Nature of information at the operational level is .
2. is the smallest unit of business activity.
3. Transaction processing system is classified as and

________________ systems.
4. A system must possess test to be

transaction processing qualified.
5. is a web that makes a description of the system that
a system can understand.
6. refers to a system in which there is predefined
multiple instances of various modules used in business applications.
7. systems use forecasting, simulation and decision tree
like processes to present the data.
8. is a system developed as models which are
representative of real world cases.
9. means the behavior of the object differently to
different messages.

3. CONCEPTS OF MANAGEMENT ORGANIZATION

3.1 Management Organizations
An organization is a structure that uses the resources from the environment like manpower,
raw materials, capital etc., and produces outputs like products and services . It constitutes
the rules, policies, responsibilities and procedures that are adopted by the organization to
produce the output.
3.2 Concepts of Management Organization

Various concepts used in a management organization are basically functional subsystems of
the management. The functional subsystems are categorized into operations sub system,
transaction subsystem and control subsystem. Each one has a particular set of data files
which are used only by that subsystem.
Apart from these specific files there are general files containing data required by other sub
systems. Each sub system is supported by general software and application specific program
to process data. E.g. – software for logistics, accounting, production scheduling, sales and
distribution, network analysis, etc.
3.3 Technical Implementation Issues

The following indicate the common technical implementation challenges
• Level of complexity must be low This can be accomplished by simplicity in the design.
• System response time and reliability must be high.
• Inadequate functions . Design phase should ensure that all functions are covered
• Lack of equipment . Hhardware and software can help
• Lack of standardization .Standards help integration and dissemination of information
in a uniform and consistent manner)
• Problems with the networks (such as connectivity),distributed management support
systems (MSS) are on the rise
• Mismatch of hardware and software
• Low level of technical capacity of the project team. This can be addressed by sufficient
documentation, online help and training where required.

[“Source: Decision support systems and intelligent systems – by Efraim Turban and Jay E
Aronson.”]
3.4 Management Theories

There are multiple theories of management organisations. These are briefly explained
below
3.4.1 Systems Theory of management

The system theory views an organization as a unified whole, composed of interacting and
interrelated subsystems, which are people, technology, structure and management.These
are the four dimensions in which the entire strategy and operation of the organization is
devised and implemented.
3.4.2 Behavioural Management Theory

Under this theory, better understanding of human behavior at work, such as motivation,
conflict, expectation, and group dynamics etc. helps improve productivity. Any change to be
brought into the organization is thought through these behavioural aspects and rolled out.
3.4.3 Scientific Management Theory

The primary aim of scientific management is to create productivity through greater
efficiency in production and increased pay for workers, through the application of scientific
methods.
3.4.4 Contingency Theory of Management

Leaders following the Contingency theory of management can be explained thus:
(1) consideration leader behaviors that include building good rapport and interpersonal
relationships and showing support and concern for subordinates and
(2) initiating structure leader behaviors that provided structure (e.g., role assignment,
planning, scheduling) to ensure task completion and goal attainment. This theory states that
leadership styles, organization structure, job design, motivational approach, control system,
and management of change and conflicts should be situation specific.
The contingency variables are business strategy, external environment, technology,

company size and type of work.

3.5 Behavioral Factors

The implementation of computer based information systems in general and MSS in
particular is affected by the way people perceive these systems and how they adopt them.
User resistance is a major behavioral factor associated with the adoption of new systems.
The following are compiled by Jiang et al. (2000); reasons that employees resist new systems
are:
• Change in job content
• Loss of status
• Change in interpersonal relationships
• Loss of power
• Change in decision making approach
• Uncertainty or unfamiliarity or misinformation
• Job security
The major behavioral factors are:

a) Decision styles – symbolic processing of AI is heuristic; DSS and ANN are analytic
b) Need for explanation – ES provides explanation, ANN does not, DSS may provide partial
explanation. Explanation can reduce resistance to change
c) Organizational climate – some organizations lead and support innovations and new
technologies whereas others wait and lag behind in making changes
d) Organizational expectations – over expectation can result in disappointments and
termination of innovation. Over expectation was observed in most early intelligent
systems.
e) Resistance to change – can be strong in MSS because the impacts may be significant.
Many can resist (Alter 1980; Guimarraies et al. 1992)(see AIS in Focus 18.3).

10. An organization is a structure that uses the resources from the environment
like manpower, raw materials, capital etc., and returns the outputs like
products and services to the environment.
11. User resistance is a major behavioral factor associated with the adoption of
new systems.
4. SUMMARY
After going through this unit you can understand the various types of Management systems
and the basics concepts of MIS. You must be able to find the role and significance of MIS in
business and its functional relationships. You have also understood the types, TPS, KBS,
OLAPS, etc. you have learnt the various concepts of management organization and the issues
involved in implementation. You will be able to explain the behavioral factors of
Management Information Systems.

1. Explain Knowledge based systems. Give an example.
2. Explain Transaction processing system. Give an example.
3. Explain Decision Support System. Give an example.
4. Explain Business process system. Give an example.
5. Explain OLAP. Give an example.
6. What is meant by executive information system?
7. What is meant by polymorphism and inheritance in business systems?
8. Explain the various behavioral factors of management organization.
6. ANSWERS
1. Highly structured
2. Transaction
3. Batch and online
4. ACID
5. Semantic web
6. OLAP
7. Model driven
8. OOS
9. Polymorphism
10. True
11. True
Terminal Questions
1. Refer 1.2
2. Refer 1.3
3. Refer 1.5
4. Refer 1.6
5. Refer 1.3
6. Refer 1.4
7. Refer 1.7

8. Refer 2.4
References:
• Management Information System by CSV Murthy, Himalaya Publishing House, fourth
edition 2010.

ADMINISTRATION
SEMESTER 4
DBB2202
SYSTEM
Unit 4: Planning and Control 1

Unit 4
Planning and Control
Table of Contents
SL Topic Fig No / Table / Graph SAQ / Page No
No Activity
1 Introduction - -
3
1.1 Objectives - -
2 Differences between planning and 1 1
control information
2.1 The Planning Process - - 4-7
2.2 Guidelines for a successful 1 -

Planning process
3 Systems Analysis - 2
3.1 Introduction to Systems 2 -

Analysis
3.2 SDLC 3 -
3.3 Roles of a Systems Analyst - - 7-12

3.4 Feasibility of Systems - -
3.5 Types of Feasibility Study - -
3.6 DFD - -
3.7 Data Dictionary - -

4 Systems Design - 3
13-15
4.1 Introduction to SD - -
5 Role of MIS in Organisational - 4 16-17
Planning
6 Role of MIS in Controlling the - 5 18-19
Organisation
7 Communication in Organisations 4, 5, 6 6 20-26
8 Summary - - 27
10 Answers - - 28

1. INTRODUCTION
In the previous unit we were discussing the different types of information system..In this
unit you will study the planning and control process and difference between them.. We will
discuss the hierarchy of management activity in which you are going to study the
information systems for strategic planning, management control and operation control. You
will also be studying the functional activities of various sub systems.
1.1 Objectives
❖ Compare between planning and control information

❖ List the roles of a system analyst
❖ Elucidate Data Flow Diagram
❖ Describe System design
❖ Describe the role of MIS in organisation planning
❖ Describe the role of MIS in controlling an organisations
❖ Importance and types of communication in an organisation

2. DIFFERENCES BETWEEN PLANNING AND CONTROL INFORMATION

2.1 The Planning Process:
This is the process which is used by managers to identify and choose the goals and courses
of actions for the organizations. The planning process does the following:
• The result of planning process is the organizational plan. This details the goals to be
attained.
• The manager’s decisions are towards achieving these goals of the organization.
• First step to build MIS in an organization.
Three Stages of Planning Process

Planning works in three stages as shown in figure 4.1.
Fig. 4.1: Stages of Planning Process
• Define the Business: In this stage of planning process, the organization’s goals and
missions are identified. Defining the business is determining the organization’s
missions and goals. This stage will help you in gathering the information in order to
carry out any data analysis.

• Strategy Formulation: Analysing the current situation and developing strategies. This
step will take the information from the first stage and make analysis and report on the
scenario. This situation also helps in developing a strategy to perform an action. This
formulates any strategy.
• Strategy Implementation: This stage is about allocating resources and
responsibilities and implement the action plan and reach the goals and missions set in
the first stage.
You should always note that different groups of people will have different names for the
phases in planning with a different number of steps. But the process must fall under the
broad categories of the three 3 stages mentioned above. Normally the typical phases in the
planning process are as shown in the following.
2.2 Guidelines for a Successful Planning Process

Whenever any planning process is implemented, it must lead to a productive environment.
When a planning is done of any kind, it must be implemented otherwise the plan is a failure.
The following guidelines will help you to understand how to make your plan work
successfully.
1. Involve the right person in the planning process: when a manager begins the planning
process, he should get the feedback from all the responsible persons who are in the
process of carrying out that plan. It is the manager’s main responsibility to involve all
the people during the discussion or the review of the plan to get their input.
2. Write down the planning information and communicate it widely: . It is always better to
write down the planning process and to communicate it through mail.. When it is
communicated orally there are absolute chances of many things getting missed, or may
not be understood completely. Also wider communication ensures that the information
flows to all and the understanding is the same.
3. Goals and objectives must be smarter: Here the phrase ‘SMART’ goals and objectives
means that the goal is Specific, Measurable, Acceptable, Realistic, with a Timeframe.
The plan should be complete in all respect to take it to execution.
4. Build in the accountability: there must be someone who is responsible for the
completion of the project. It means there must be a final sign off on the project

agreement with a set completion date by the responsible parties. The people who are
involved in the process must review the status of the plan. Also we must ensure that
there is an authority that signs off on the plan with their signature to indicate that they
agree with and support its contents like, responsibilities in the procedures, policies, job
descriptions, performance review processes, etc.
5. Note deviations from the plan and re-plan accordingly: there may be possibilities for
deviations in the plan. A plan is more an overall guideline and not a set of rules. But
when any change or deviationoccurs, the planner must follow it and re-plan
accordingly.
6. Evaluate the planning process and the plan: the feedback from all the participants is very
important in the planning process . It is important to get everyone’s buy-in and
incorporate any feedback from them into the plan. The Manager should also ensure that
the goals are being met, in the regular reviews of the implementation of the plan. All
the process of implementation must be in a written document and should be read the
next time, before starting the subsequent planning process.
It is important to know the differences between planning and control information. The table
4.1 will give you briefly, the differences between planning and control information.
Table 4.1: Differences between planning and control information
Parameter Planning Information Control Information

Purpose used for working futuristic trends Used for assessing actual performance
or forecast that is pre-budgeted.
Function It looks for and analyses trends looks for specific details for functional
and patterns activity.
Scope Covers the entire organisation Applicable to specific departments
Timespan Longer timespan Shorter timespan

1. Which are the three stages of planning?
3. SYSTEMS ANALYSIS
3.1 Introduction to Systems Analysis
System analysis is the survey and planning of the project, the study and analysis of the
existing business and information system and the definition of business requirements.
System analysis involves two phases: study phase and definition phase.
A repository is a collection of databases associated with the applications and the project.
Fig. 4.2: Diagrammatic Representation of System Analysis
Survey Phase – The purpose of the survey phase is to determine the worthiness of the
projects and to create a plan to complete those projects deemed worthy. To accomplish the
survey phase objectives, the system analyst will work with the system owner, system users,
IS manager and IS staff to:
• Survey problems, opportunities and solutions
• Negotiate project scope

• Plan the project

• Present the project
3.2 SDLC
System development cycle stages are sometimes known as System Study. System concepts
which are important in developing business information systems expedite problem solving
and improve the quality of decision-making. The system analysts have to do a lot in this
connection. They are confronted with the challenging task of creating new systems and
planning major changes in the organization. The system analyst gives a system development
project meaning and direction.
The typical breakup of an information system’s life cycle includes a feasibility study,
requirements, collection and analysis, design, prototyping, implementation, validation,
testing and operation. It may be represented in the form of a block diagram as shown below:
Fig. 4.3: SDLC

a) Feasibility study – This phase is about determining the cost effectiveness of the
various alternatives in the designs of the information system and the priorities among
the various system components.
b) Requirements, collection and analysis – During this phase the mission of the
information systems is understood in terms of the application areas of the system
within the enterprise and the problems that the system should solve.
c) Design – It is concerned with the specifications of the information systems structure.
There are two types of design: database design and application design. The database
design is the design of the database and the application design is the design of the
application programs.
d) Prototyping – A prototype is a simplified implementation that is produced in order to
verify practically that the previous phases of the design were well conducted. Any
changes or lessons learnt will be incorporated into the final implementation.
e) Implementation –It is concerned with the programming of the final operational
version of the information system. Implementation alternatives are carefully verified
and compared.
f) Validation and testing – It is the process of assuring that each phase of the
development process is of acceptable quality and is an accurate transformation from
the previous phase.
3.3 Roles of a Systems Analyst

Systems analysts are the facilitators of the study of the problems and the needs of a business,
to determine how the business systems and information technology can best solve the
problems, and accomplish improvements for the business.
The system analyst is responsible for examining the total flow of data throughout the
organization. Various aspects of an organization like personnel interactions and procedures
for handling problems of the computer are studied by him. The person involved in the system
development is known as a system analyst. His main role is as a consultant, supporting and
maintenance expert; he should work with a cross section of people and should have the
experience of working with computers. He is a problem solver and takes problems as a
challenge and enjoys meeting challenges. He knows how to use the right tools, techniques
and experience at the right time.

3.4 Feasibility of Systems

Feasibility is a measure of how beneficial the development of an information system would
be to an organization. Feasibility analysis is the activity by which it is measured.
Feasibility study is a preliminary study which investigates the information needs of the
prospective users and determines the resource requirements, costs, benefits and feasibility
of a proposed project. The data is first collected for the feasibility study. Later on, the findings
of the study are formalized in a written report that includes preliminary specifications and a
development plan for the proposed system. If the management approves the
recommendations of the report, the development process can continue.
3.5 Types of feasibility study

The goal of feasibility study is to evaluate alternative systems and to propose the most
feasible and desirable system for development. The feasibility of a proposed system can be
evaluated in four major categories:
a) Technical Feasibility: It is a measure of a technology’s suitability to the application
being designed or the technology’s ability to work with other technologies. It measures
the practicality of a specified technical solution.
b) Economic Feasibility: It is the measure of the cost effectiveness of a project. It is also
known as cost-benefit analysis.
c) Operational Feasibility: It is a measure of how comfortable the users are with the
project
d) Schedule Feasibility: It is a measure of how reasonable the project schedule is and if
the project can complete within the set timelines..
3.6 DFD
Data flow diagrams represent the logical flow of data within the system. DFD does not
explain how the processes convert the input data into output. It does not explain how the
processing takes place.
DFD uses a few symbols like circles and rectangles connected by arrows to represent data
flows. DFD can easily illustrate relationships among data flows, external entities and stores.

DFD can also be drawn in increasing levels of detail, starting with a summary high level view
and proceeding to more detailed lower level views.
Rounded rectangles represent processes that transform flow of data or

work to be done.
Rectangle represents external agents- the boundary of the system. It is
the source or the destination of data.
The open-ended boxes represent data stores, sometimes called files or
databases. These data stores correspond to all instances of a single
entity in a data model.
Arrow represents data flows, inputs and outputs to the end from the processes.
A number of guidelines should be used in constructing DFD.

• Choose meaningful names for the symbols in the diagram.
• Number the processes consistently. The numbers do not imply the sequence.
• Avoid complexity in the DFD. Keep it simple.
3.6 Data Dictionary

The data dictionary is used to create and store definitions of data, location, format for storage
and other characteristics. The data dictionary can be used to retrieve the definition of data
that has already been used in an application. The data dictionary also stores some of the
descriptions of data structures, such as entities, attributes and relationships. It can also have
software to update itself and to produce reports on its contents and to answer some of the
queries.
3.7 Types of System Analysis and Design

There are types of system analysis and design that serves different types of situations in an
organisation. They are explained below.
• Open or Closed Systems: An open framework should associate with its current
circumstance. It gets contributions from and conveys outputs to the outside world. A
closed framework does not communicate with its current circumstance. It is detached
from natural impacts.
• Permanent or Temporary System: A permanent or temporary system perseveres for a
long time—for instance, business arrangements. It is made for a specified time and after
that, it is annihilated.

• Adaptive and Non-Adaptive System: An adaptive system reacts to the climate's

adjustments in an approach to improve its presentation and to endure—for instance,
people and creatures. A non-adaptive system is a framework that does not react to the
climate—for instance, machines.
• Deterministic or Probabilistic System: The deterministic framework works in an
anticipated way and the communication between framework segments is known with
surety. For instance, two atoms of hydrogen and one particle of oxygen make water.
The probabilistic system shows questionable conduct.
State whether the following statements are True or False

2. Feasibility is a measure of how beneficial the development of an
information system would be to an organization.
3. The goal of feasibility study is to evaluate alternative systems and to
propose the most feasible and desirable system for development.
4. DFD uses a few symbols like circles and rectangles connected by
arrows to represent information flows.

4. SYSTEMS DESIGN
4.1 Introduction to SD
The business application system demands designing of systems suitable to the application
in a project. The major steps involved in the design are the following:
Input Design – Input design is defined as the input requirement specifications as per a
format required. Input design begins long before the data arrives at the device. The analyst
will have to design source documents, input screens and methods and procedures for getting
the data into the computer.
They have to be user-friendly interfaces to get data into the system.
Output Design – The design of the output is based on the requirement of the user – manager,
customer etc. The output formats have to be readable and easily understandableTherefore,
the designer has to design appropriateoutput format.
Development – When the design and its methodology are approved, the system is
developed using appropriate business models. The development has to be in accordance
with a given standard. The norms have to be strictly adhered to.
Testing – Exhaustive and thorough testing must be conducted to ascertain that the system
produces the right results. Testing is time consuming: Test data must be carefully prepared,
results reviewed and corrections made in the system. In some instances, parts of the system
may have to be redesigned. Testing an information system can be broken down into three
types of activities: unit testing, system testing and acceptance testing. Unit testing or
program testing consists of testing each program separately in the system. The purpose of
such testing is to guarantee that programs are error free. Testing should be viewed as a
means of locating errors in programs, focusing on finding all ways to make a program fail.
Once detected, all errors can be fixed in the program and tested again. System testing tests
the functioning of the information system as a whole. It tries to determine if discrete modules
will function together as planned and whether discrepancies exist between the way the
system actually works and the way it was conceived. Among the areas examined are
performance time, capacity for file storage and handling peak loads, recovery and restart
capabilities and manual procedures. Acceptance testing provides the final certification that

the system is ready to be used in a production setting. Systems tests are evaluated by users
and reviewed by management. When all parties are satisfied that the new system meets their
standards, the system is formally installed and deployed at the customer site.
Implementation and Maintenance

Conversion – Conversion is the process of changing from the old system to the new system.
Four main conversion strategies can be employed. They are – the parallel strategy, the direct
cutover strategy, the pilot strategy and the phased strategy.
In a parallel strategy both the old system and its potential replacement are run in parallel
for a time until everyone is assured that the new one functions correctly. This is the safest
conversion approach because, in the event of errors or processing disruptions, the old
system can still be used as a backup. But, this approach is very expensive, and additional staff
or resources may be required to run the extra system.
The direct cutover strategy replaces the old system entirely with the new system on an
appointed day. At first glance, this strategy seems less costly than the parallel conversion
strategy. But, it is a very risky approach that can potentially be more costly than parallel
activities if serious problems with the new system are found. There is no other system to fall
back on. Dislocations, disruptions and the cost of corrections are enormous.
The pilot study strategy introduces the new system to only a limited area of the
organization, such as a single department or operating unit. When this version is complete
and is working smoothly, it is installed throughout the rest of the organization, either
simultaneously or in stages.
The phased approach strategy introduces the new system in stages, either by functions or
by organizational units. If, for example, the system is introduced by functions, a new payroll
system might begin with hourly workers who are paid weekly, followed six months later by
adding salaried employees (who are paid monthly) to the system. If the system is introduced
by organizational units, corporate headquarters might be converted first, followed by
outlying operating units four months later.
Moving from an old system to a new system requires that end users be trained to use the
new system. Detailed documentation showing how the system works from both a technical

and an end-user standpoint is finalized during conversion time, for use in training and
everyday operations. Lack of proper training and documentation contributes to system
failure, so this portion of the systems development process is very important.
Production and Maintenance

After the new system is installed and conversion is complete, the system is said to be in
production. During this stage the system will be reviewed both by users and technical
specialists to determine how well it has met its original objectives and to decide whether any
revisions or modifications are in order. In some instances, a formal post implementation
audit document will be prepared. After the system has been fine-tuned, it will need to be
maintained while it is in production, to correct errors, meet requirements or to improve
processing efficiency.
Once a system is fully implemented and is being used in business operations, the
maintenance function begins. Systems maintenance is the phase for monitoring the system
for possible improvements..
Maintenance is also necessary for other failures and problems that arise during the
operation of a system. End-users and information systems personnel then perform a
troubleshooting function to determine the causes of and find solutions to such problems.
Maintenance also includes making modifications to an established system due to changes in

the business organizations For example,the new e-business and e- commerce initiatives may
require major changes to existing business systems.
5. is defined as the input requirement specifications as per a

format required.
6. ______________ is the process of changing from the old system to the new
system.
7. _____________is also necessary for other failures and problems that arise
during the operation of a system.

5. ROLE OF MIS IN ORGANISATIONAL PLANNING

Management Information System in the organisation context is all about three steps:
• Data Capture from external and internal sources
• Data Processing to lead to appropriate use for decision-making to achieve the set goals
• Data Storage for retrieval periodically.
There are certain characteristics of MIS:

• It integrates data from various departments
• It adopts a systems approach as in, it stores data in various sub systems
• Right data needs to be allowed for access by the right people
• Appropriate data is collected, processed and stored to help management of the
organisation
• All of this is meant to direct the organisation to the future towards achieving its goals
and objectives
Organisational Plans are made to help improve the performance of the organistion. Usually
the organization structure is reviewed and changed to help ease of work and coordination
to achieve the set goals. The structure should foster better utilization of resources and aid
leaders make the appropriate decisions at the right time. MIS plays an important role in each
of these.
5.1 Types of Organisational Planning

Let us now look at the types of organisational plans and the role of MIS in each of them:
Strategic Plan: The plan for a timespan of one to two years giving the organisation a
direction is the strategic plan. MIS provides data and information related to competition and
past performance thus helping in setting the long term and short term goals for the
organisation. Sales forecast, budget , profit planning and personnel planning come under
this.
Tactical Plan: The blueprint of the strategy plan for a year timeperiod is the tactical plan.
MIS provides data related to product portfolio, resource & budget allocation etc. Inventory
control, sales management, relocation analysis , production scheduling, contract cost
analysis, profitability analysis etc. come under this tactical plan.

Operational Plan: The plan that elaborates on the day to day activities – MIS gives input for
budget and resource allocation at project level. Order tracking, machine controls, cash
management, employee records, finance and accounts, training & talent management, order
tracking etc, are some areas covered in an operational plan
Contingency Plan : The plan to tackle the uncertain situations. The identification of risks
and the mitigation and contingency plans come under this type.
8 What are the characteristics of MIS that help in organisational planning?

9. What are the different types of plans prepared in an organisation that MIS
contributes to?

6. ROLE OF MIS IN ORGANISATIONAL CONTROL

The role of MIS in controlling the organisation happens at three levels namely at top level
(strategic), middle level( managerial and knowledge) and low level (operational). MIS has
various systems like the following through which control is accomplished:
Query system – it helps in addressing point questions regarding the data
Analysis system – it helps in analysing the data to make inferences that can help in problem
solving.
Modelling system – this is a tool for experts and senior managers to model the data to
analyse data patterns, drill down or slice and dice across various dimensions and perform
what-if analysis.
Decision support system – This encompasses all tools to help devise multiple alternatives
and arrive at a suitable decision.
Another perspective is to understand how MIS helps in controlling various functions:

• Marketing- MIS provides adequate analysis tools which helps in product comparison,
measuring strategies of competitors and provides sales data to make new marketing
techniques.
• Finance- MIS keeps record to report analysis. It keeps financial information safe and
accessible to senior management only.
• Production- MIS follows standards at production level. It helps in controlling use to raw
materials and its disposition.
• Personnel- MIS keeps employees data safe and secure. It can manage leave details,
working status and salary structures.
Let us understand the different attributes of MIS through which it controls the organisation:
• Helps in standardisation of system – As MIS is integrated, it helps standardise
subsystems and give a uniform, seamless view of data
• Gives direction to the organisation – Meaningful information is available at the right
time to make the timely and right decisions. There is periodic analysis of trends etc, and
thus targets are achieved.

• Improve managerial efficiency – data is available in appropriate format and modelling

techniques help managers in a major way to improve their day to day execution
• Process control system – Monitoring procedures helps in tracking the current activity
and the statistical tools help in predicting future trends and make plans to tackle them
effectively
• Effective data storage – Technology like cloud help access of data from anywhere
anytime
• Balance conflicting information – Appropriate separation and grouping of data that
is reliable helps resolve conflicts
• Predict future – by the prediction techniques, organisation plans are fed back and
tweaked to get the plan into traction.
• Maintain confidentiality – MIS protects from internal and external threats to
confidentiality of data.
• Cost reduction – MIS in all, saves cost and improves productivity
10. What are the attributes of MIS that help control an organisation ?

7. COMMUNICATION IN ORGANISATIONS
Effective Communication by managers in organisations is crucial to perform the basic func-
tions of management, that is, planning, organising, leading and controlling.
Communication serves as a foundation for the planning process. All the essential information
must be communicated to the managers who are in the top level management.
Figure 4 depicts the classification of communication media used in a management process
COMMUNICATION MEDIA
NON-VERBAL
SPEAKING
ORAL
GESTURES
LISTENING
PROXIMITY
WRITING
WRITTEN
READING
SILENCE
Fig 4.4: Classification of Communication Media
7.1 Importance of Communication

The importance of communication in a business enterprise can be described as follows:
• Communication is a source of information to employees. It helps identify and assess the
alternative course of actions.
• Communication improves employee motivation. Employee morale can be improved by
informing employees about the work to be done and clarifying about their work
performance and providing feedback on how to further improve their performance.

An effective communication system needs managerial influence in delivering and receiving

messages.
The main responsibility of a manager is to develop and regularise an effective

communication system in an organisation. A manager should identify the various barriers, if
any, to effective communication., analyse and identify the reasons for their occurrence, and
take preventive measures to avoid those barriers.
7.2 Communication Process

The main components of a communication process are given below:
A. Context: The communication is affected by the context in which it takes place. This
context can be physical, social, chronological, or cultural. A context should precede a
communication. The sender chooses the message to communicate within a context to
the recipient.
B. Sender/Encoder: A sender or encoder, is a person who sends or initiates a message. A
sender can make use of symbols, words, graphic, or visual aids to convey a message
through a medium to produce the required response.
Fig 5: The Communication Process
C. Message: A message is a key idea or factor that the sender wants to communicate. It is
a sign that expresses the response of a recipient.

D. Medium: Medium is a means used to exchange or transmit a message. The sender must
select an appropriate medium for transmitting a message. Else, the message may not
be transmitted or conveyed to the recipients at all.
E. Recipient/Decoder: A recipient or a decoder is a person to whom a message is
intended or aimed at.
F. Feedback: Feedback is the main element of a communication process. It allows a
sender to analyse the efficacy of a message – as it confirms the correct interpretation of
a message by the decoder.
7.3 Types of Communication

There are different methods of communication. However, they can be broadly classified into
three types:
• Oral communication
• Written communication
• Body language
Figure 6 elucidates the types of communication in an organisation.
Fig 4.6: Types of Communication
• Oral Communication
In oral communication, the speaker should ensure that the listeners understand what is
being said and communicated. Therefore, a communicator—especially managers and
leaders, or any speaker or presenter—needs to have effective communicating skills. At the
same time, a communicator should also be a good listener.
Some examples where effective oral communication is required are:

• Meetings

• Workshops
• Telephone calls
• Presentations
• Tele/video conferences
• Podcast/webcast, etc.
• Written Communication
Writing is mostly used for mass communication or where detailed communication, with
facts, figures, illustrations, and statistics needs to be shared.
Some examples or forms of written communication are:

• Letters
• Reports
• Minutes of Meetings
• Emails
• Newsletters
• Surveys
• Twitter
• Blogs
• Body Language
Body language refers to nonverbal communication, in terms of facial expressions, gestures

and body movement. Though neither oral nor written, with these implied messages, we
express, with the subtle usage of the body. These messages are the most powerful in
branding, presentation, and image of an employee.
7.4 Examples of Communication in Organisations

Communication in organisations includes both internal and external. It can be formal and
informal. Communication serves as a foundation for the planning process. All the essential
information must be communicated to the managers who are in the top level management.

4..4.1 Formal Communication

Formal communication is defined as communication taking place through the various official
channels in an organisation. This type of communication takes place between managers or
employees or between a senior and junior.
It may be oral or written but complete record of such communication is maintained in an

organisational database.
It is broadly classified into two types:

• Vertical communication
• Horizontal communication
• Vertical Communication: This involves the flow of information and ideas between
persons of same or different departments carrying different positions. For example, a
worker of one department may communicate with a manager of the same or another
department.
• Upward Communication: This involves the flow of information upward -- from
assistants to supervisors in the form of suggestions, opinions, grievances, reports,
applications for granting leave etc. In this form of communication, junior employees
may be involved in the decision-making process.
• Downward Communication: This involves the flow of information downwards, from
supervisor to the assistants in the form of orders, instructions, directions, circulars etc.
• Horizontal Communication: This is also called as lateral communication. This refers
to the flow of communication between two divisions, that is, between employees of the
same rank, or hierarchy, in an organisation.
For example, a production manager can contact a sales manager about delivery of goods,
quantity of goods, stock details etc.
Formal communication has both advantages and disadvantages. These are as follows:
Advantages of Formal Communication

• Maintenance of Authority: In formal communication, the authority of a supervisor
over juniors stays maintained and balanced.

• Orderly Flow of Information: The flow of information is passed through a definite

channel. Hence the flow of information is systematic and disciplined.
• Confidentiality Stays: In formal communication, confidentiality is maintained.
• Source of Information: The source of each information can be easily located and
identified.
Disadvantages of Formal Communication

• Work Overload: Formal communication increases the workload of various managers
since all communication is transmitted through a fixed channel, mainly them.
• Distortion of Information: Sometime an information passes through several levels
over a period of time. By the time it reaches the intended receiver, it gets distorted.
• Lack of Personal Touch: Formal communication is mostly conveyed in an impersonal
manner, often not directly by the original sender. Here personal warmth and
involvement may be found lacking.
4.7.4.2 Informal Communication

Informal communication takes place in an organisation without following the formal lines of
authority to convey messages. Such type of communication usually takes place among work-
ers to exchange their views and to satisfy their social needs to their higher officials.
Advantages of Informal Communication

• Speedy and Spontaneous: In this mode of communication, messages flow at a faster
speed in a spontaneous way.
• Free Environment: Informal communication is done in a free environment where
there is no pressure on any employee.
• Social Relations: It helps in establishing better relationships as it provides a good
platform for employees at social gatherings—not only in the organisation but outside
the workplace too.
• Supplementing Role: Informal communication supplements formal communication.
Some concerns, may be difficult to communicate through formal channels. For example,
attitudes and opinions of workers about management plans and policies etc. These can
be easily conveyed through informal communication.

Disadvantages of Informal Communication

Tracing Accountability: In informal communication, it is usually not possible to trace the
source of disinformation or hold a person accountable for giving out misleading facts.
• Unreliable Information: Often, information received through this mode of

communication is undependable. Therefore, important decisions cannot be based on
informal communication.
• Leakage of Information: Sometimes, this form of communication may lead to the
leakage of important information which can do more harm than serve any benefit to an
organisation. The Figure 7 depicts the flow of formal and informal communication.
11. What are the types of communication happening in an organisation?

8. SUMMARY
In this unit you have studied the meaning of planning and the different stages in the planning
process. You have also studied about the guidelines for a successful planning process. In this
unit you have studied about the system analysis as the survey and planning of the project,
the study and analysis in the existing business. We have also discussed system development
life cycle and roles of a system analyst. We have briefed you on how the system is designed,
implemented and maintained.We have elaborated on the importance of planning and
controlling in an organisation and how MIS plays a role in it. The importance and ways of
communication in an organisation was covered.
Glossary
Words Meaning
SDLC System development Life cycle is a process of creating and
altering the systems, and the models in which the system is
working
DFD Data flow Diagram- is a graphical representation of flow of
data from one entity to another entity
Entity It is an object which has characteristics

1. Explain the system development life cycle.
2. What is meant by feasibility of a system? What are its various types?
3. Explain DFD and Data Dictionary.
10. ANSWERS
1. Define the business, strategy formulation and strategy implementation
2. True
3. True
4. False
5. Input Design
6. Conversion
7. Maintenance
8. Refer section 5
9. Refer section 5.1
10. Refer section 6
11. Refer section 7
Terminal Questions
1. Refer 3.2
2. Refer 3.4
3. Refer 3.5 and 3.6
E Reference:
• http://www.knowledgebank.irri.org/economics/index.php/planning-and- control
• http://www.tandf.co.uk/journals/titles/09537287.asp

ADMINISTRATION
SEMESTER 4
DBB2202
SYSTEM
Unit 5: MIS Planning and Development 1

Unit 5
MIS Planning and Development
Table of Contents
No / Graph Activity
1 Introduction - -
3
1.1 Objectives - -
2 Planning - 1
4-9
2.1 Planning of Information Systems 1, 2 -
3 Development - 2
9-14
3.1 Development of Information Systems 1, 3 -
4 Stages of Traditional MIS Planning - - 15-17
5 Essential Steps for Development of MIS - - 18-20
6 Challenges for the Manager - -
6.1 What Information to Build? - -
6.2 How Much to Spend on Information - - 20-25

Systems?
6.3 What level of capabilities should be - -
created with information Systems?
7 Summary - - 26
9 Answers - - 27
10 References - - 27

1. INTRODUCTION
In the previous unit you studied the difference between the planning and control process.
You also studied the system development life cycle and system design. Any enterprise
requires one or more systems for handling routine transaction processing. A system which
is made up of interrelated processes works towards achieving a goal. The system requires
proper feeding of information, to function effectively. Hence, it is important to plan the
system properly and to develop a process from concept into a reality in business. The success
of any information system in management depends upon how well the system has been
planned and developed.
In this unit you will study the planning and development of information systems.
1.1 Objectives
❖ Elucidate planning of information systems

❖ Elaborate the development of information systems
❖ Understand the challenges for a manager and what capabilities is to be built into the
information system
❖ Understand in detail about the information system spend, services and the roadmap

2. PLANNING
2.1 Planning of Information Systems
a) Development of Long Term Plans of the MIS
Many organisations have purchased computers for data processing and for meeting the
statutory requirements like filing the Income tax returns to the government. Computers are
used mainly for computing and accounting the business transactions and have not been
considered as a tool for information processing.
Organisations have invested in computers and expanded their use by adding more or bigger
computers to take care of the numerous transactions in the business. In this approach, the
information processing function using the computers n has never got its due importance as
a great asset to the organisation. In fact, this function is misinterpreted as mere data
processing for expeditious generation of reports and Income Tax returns, and not as
information processing for management actions and decisions.
However, the scene has been changing since the late eighties as computers have become
more versatile in the function of Storage, Communications, Intelligence and Language. The
computer technology is so advanced that the barriers of storage, geographical spread
(distance), understanding of language, and speed are broken.
Computer has become user-friendly. It can communicate to any distance and share data,
information and physical resources of other computers. A computer can now be used as a
tool for information processing and communication. It can be used for storing large database
or knowledge base. It can be used to know the current status of any aspect of a business
due to its online real time processing capability.
With the advancement of computer technology, more popularly known as information

technology, it is now possible to recognise information as a valuable resource just like money
and capacity. It is necessary to link data acquisition, storage, use, and disposal as per the
business needs in order to achieve the business objectives. Such a broad-based activity can
be executed only when it is conceived as a system. This system should deal with management
information and not with data processing alone. It should provide support to management
planning, decision making and action. It should support the needs of the lower management

as well as that of the top management. It should satisfy the needs of different people in the
organisation at different levels having varying managerial capabilities. It should provide
support to the changing needs of business management.
In short, we need a Management Information System flexible enough to deal with the
changing information needs of the organisation. It should be conceived as an open system
continuously interacting with the business environment with a built-in mechanism to
provide the desired information as per the new requirements of the management. The
designing of such an open system is a complex task. It can be achieved only if the MIS is
planned, keeping in view the plans of the business management of the organisation.
The plan of MIS is consistent to the business plan of the organisation. The information
needed for the implementation of the business plan should find place in the MIS. To ensure
such an alignment possibility, it is necessary that the business plan – strategic or otherwise,
states the information needs. The information needs are then traced to the source data and
the systems in the organisation which generate such a data. The plan of development of the
MIS is linked to the steps of the implementation in a business development plan. The system
of information generation is so planned that strategic information is provided for the
strategic planning; control information is provided for a short term planning and execution.
The details of information are provided to the operations management to assess the status
of an activity and to find ways to make up, as necessary. Once the management needs are
translated into information needs, it is left to the designer to evolve a plan of MIS
development and implementation.
b) Contents of the MIS Plan

A long term MIS plan provides direction for the development of the systems, and provides a
basis for achieving specific targets. The plan will have list of tasks with timeframes, which
will be dealt by the designer under the support of the management.
c) MIS Goals and Objectives

It is necessary to define the objectives of the MIS which will be in alignment with the business
goals. Management philosophy, policy constraints, business risks, internal and external
environment of the organisation are among the factors that will be considered before
arriving at the MIS goals and objectives.

The goals and the objectives of the MIS should be so stated that they can be measured. Some
examples could be like the following:
• It should provide online information on the stock, markets and the accounts balances.
• The query processing should not exceed more than set time, say three seconds.
• The focus of the system will be on the access and computing capabilities that help the
end users.
You can view the difference between business plan and MIS plan in the below table 5.1.
Table 5.1: Business Plan vs. MIS Plan
Business plan MIS plan

Business goals and Management information system,
objectives. Business plan objectives consistent to the business goals
and strategy. and objectives.
Strategy planning and Information strategy for the business plan,
decisions. implementation plays a supportive role.
Management plan for 1. Architecture of the Management
execution and control. Information System to support decisions.
Operation plan for the 2. System development schedule, matching
execution. the plan execution.
3. Hardware and software plan for the
procurement and the implementation.
Such statements of the goals and objectives enable the designer to set the direction and
design implementation strategies for the MIS Plan.
Strategy for the Plan Achievement

The designer has to take a number of strategic decisions for the achievement of the MIS goals
and objectives. They are:
a) Development Strategy: An online, a batch, a real time technology platform.
b) System Development Strategy: Any approach to the system development –
Operational vs. Functional; Accounting vs. Analysis; Database vs. Conventional
approach; Distributed vs. Decentralised processing; one Database vs. multiple
databases, SSAD vs. OOT.
c) Resources for System Development: In house vs. external, customised development
vs. the use of packages.

d) Manpower Composition: Analyst, programmer skills and know-how.
Working of MIS
The architecture of the MIS plan provides a system structure, its input, output and linkages.
It also provides a way to handle the systems or subsystems by way of simplification, coupling
and decoupling of subsystems. It spells out in detail the subsystems from the data entry to
processing, analysis to modelling, and storage to printing.
The System Development Schedule

A schedule is made for the development of the system. While preparing the schedule due
importance is given to information requirement and the logical system development.
Further, unless the systems are fully developed, their integration is not possible. This
development schedule is to be weighed against the time scale for achieving certain
information requirements linked to a business plan. If these are not fully met, it is necessary
to revise the time schedule and also the development schedule, whenever necessary.
Hardware and Software Plan

Considering the technical and operational feasibility, the economics of investment is worked
out. The procurement plan is made after selecting the hardware and software. Usually
businesses take a phased approach of investment, starting from the lower configuration of
hardware scaling up steadily as development takes place. The process is to balance the
technical decisions with the financial decisions. The system development schedule is linked
with the information requirements which in turn are linked with the goals and objectives of
the business.
The selection of the architecture, the approach to the information system development and
the choice of hardware and software are the strategic decisions in the design and
development of the MIS in an organisation. The organisations which do not care to take
proper decisions in these areas suffer from over-investment, under-utilisation and are not
able to meet the critical information requirements.

It is important to note the following points:

1. The organisation's strategic plan should be the basis for the MIS strategic plan.
2. The information system development schedule should match the implementation
schedule of the business plan.
3. The choice of information technology is a strategic business decision and not a financial
decision. A model of MIS Plan is given in the following table
Table 5.2: Model of the MIS Plan
Contents Particulars Focus

Corporate Business environment and Where are we?
information current operations.
Information on KRA.
Corporate mission/ Current and new Where do we want to
goals/ objectives mission/goals/objectives reach?
Business risks and Clear quantitative What is the risk?
rewards statements on these factors Support information
showing a trade-off to resolve risk.
between the risk and
rewards.
Business policy and Details of the strategic and How do we achieve
strategy policy decisions affecting the goals and
Information needs the business . objectives? What is
Strategic/planning, the key information?
managerial operational.
Architecture of the Information Technology What are the tools
plan details required?
Schedule of Details of the systems and When and how will it
development subsystems and their be achieved?
linkages charted against the
time scale.
Organisation and Manpower and delegation Who will achieve it?
execution of the details. Internal and
plan external resources.
Budget and ROI Details on the investment How much will it cost?
schedule and benefits. Budget and ROI.
1. strategy is used in a real time technology platform.

2. Which contents focus on business environment to find “ where are we”?

3. DEVELOPMENT
3.1 Development of Information Systems
a) Development and Implementation of the MIS
Once the plan for MIS is made, the development of the MIS calls for determining the strategy
of development. As discussed in unit 4, the plan consists of various systems and subsystems.
The development strategy determines where to begin and in what sequence the
development can take place, with the sole objective of assuring information support.
The choice of the system or the sub-system depends on its position in the total MIS plan, the
size of the system, the user's understanding of the systems and the complexity, and its
interface with other systems. The designer first develops systems independently and starts
integrating them with other systems, broadening the system’s scope and meeting the varying
information needs.
Determining the position of the system in the MIS is easy. The real problem is the degree of
structure and formalisation in the system and procedures which determine the timing and
duration of development of the system. Higher the degree of structured-ness and
formalisation, greater the stabilisation of the rules, the procedures, decision-making and the
understanding of the overall business activity. Here, it is observed that the user's and the
designer's interaction is smooth, and their needs are clearly understood and respected
mutually. The development becomes a method of approach with certainty in input process
and outputs.
b) Prototype Approach
When the system is complex, the development strategy is Prototyping of the System.
Prototyping is a process of progressively ascertaining the information needs, developing
methodology, trying it out on a smaller scale with respect to data and complexity, ensuring
that it satisfies the needs of the users, and assessing the problems of development and
implementation.
This process, therefore, identifies the problem areas, inadequacies in the prototype vis-à-vis
fulfilment of the information needs. The designer then takes steps to remove the
inadequacies. This may call upon changing the prototype of the system, questioning the

information needs, streamlining the operational systems and procedures thereby changing
user interaction.
In the prototyping approach, the designer's task becomes difficult, when there are multiple
users of the same system and the inputs they use are used by some other users as well. For
example, a lot of input data comes from the purchase department, which is used in accounts
and invenevetory management.
It requires, of all personnel, to appreciate that the information is a corporate resource, and
all have to demonstrate positive attitude as originators of data and contribute to fulfil the
corporate information needs. When it comes to information, the functional, the
departmental, the personal boundaries do not exist. This calls upon each individual to
comply with the design needs and provide without fail the necessary data inputs whenever
required as per the specifications discussed and finalised by the designer.
Bringing the multiple users on the same platform and changing their attitudes toward
information, as a corporate resource, is the managerial task of the system designer.
c) Life Cycle Approach

There are many systems or sub-systems in the MIS which have a life cycle, that is, they have
birth and death. Their emergence may be sudden or may be a part of the business need, and
they are very much structured and rule- based. There is clarity of inputs and their sources.
Similarly there is a definite set of output and their content and format are also defined
clearly. These details more or less remain static from the day the system emerges and remain
in that static mode for a long time. Minor modifications or changes do occur but they are not
significant in terms of handling either by the designer or the user of the system. Such
systems, therefore, have a life and they can be developed in a systematic manner, and can be
reviewed after a year or two, for significant modifications, if any.

Fig. 5.1: Life Cycle Approach to the Development of MIS
Examples of such systems are pay roll, share accounting, basic financial accounting, finished
goods accounting and dispatching, order processing, and so on.
These systems have a fairly long duration of survival and they contribute in a big way as
sources of data to the Corporate MIS. Therefore, their role is important and needs to be
designed from the view point of an interface to the Corporate MIS.
The Table below shows the differences between the two approaches, helping the designer
select an approach.

Table 5.3: Comparison of Approaches
Prototyping approach Life cycle approach

• Open system with a high • Closed systems with little or no
degree of uncertainty about uncertainty about the information
the information needs. needs. The system remains valid
• Necessary to try out the for a long time with no significant
ideas, application and change. The design would remain
efficiency of the information stable.
as a decision support. • No need to try out the application
• Necessary to control the cost of the information as it is already
of the design and proven.
development before the scope • Scope of the design and the
of the system and its application is fully determined with
application is fully clarity and experimentation is not
determined. Experimentation necessary.
is necessary. • The user is confident and confirms
• User of the system wants to the specifications and the
try out the system before he information needs.
commits the specifications • The system and application is
and the information universal and governed by the
requirements. organisational principles and
• The system and application is practices.
highly custom oriented.
d) Implementation of the Management Information System

The implementation of the system is a management process. It brings about organisational
changes; it affects people and changes their work style. The process evokes a behaviour
response which can be either favourable or unfavourable, depending upon the strategy of
system implementation.
In the process of implementation, the system designer acts as a change agent or a catalyst.
For a successful implementation he has to handle the human factors carefully.
The design should be in such a way that the change from the current to the new system is
seamless and the users are able to adopt that in a smooth manner. With the introduction of
MIS, some users may encounter a role change and thus develop job insecurity – They may
feel that their new role reduces their importance in the organisation. The work design may

make the new job impersonal, and a fear complex creeps in that the career prospects may be
affected.
There are certain guidelines to the systems designer for successful implementation of the
system.
1. The role of the MIS user is to offer a service and not to demand terms.
2. Remember that the system design is for the use of the user and it is not the designer's
prerogative to dictate the design features. In short, the designer should respect the
demands of the user.
3. Technical needs should not be mixed up with the information needs. The MIS designer
should try to develop a suitable design with appropriate technology to meet the
information needs. Information needs should not be modified unless it is technically
infeasible to implement.
4. The System should be designed to meet the current and prospective information need.
5. Design the system to ensure sound application of the information in decision-making.
6. Explain to the users about the importance of the quality of data input and that the
system can produce quality output based on the quality of input only.
7. Impress upon the user that the information is a corporate resource and that they are
expected to contribute to the development of the MIS.
8. Ensure that the user makes commitment to all the requirements of the system design
specifications. Ensure that he appreciates that his commitment contributes largely to
the quality of the information and the successful implementation of the system.
9. Ensure that the overall system effort has the management's acceptance.
10. Enlist the user's participation from time to time, so that he is emotionally involved in
the process of development.
11. Realise that through serving the user, he is his best guide on the complex path of
development.
12. The system design should accommodate the fact that the users may not be so
knowledgeable to use a computerised system. Hence, the designer should be willing to
consider and accommodate this aspect during the design and development of the
system and facilitate smooth adoption.
13. Impress upon the user that changes to the new systems comes at a cost .

14. Impress upon the user that perfect information is non-existent; his role, therefore, still
has an importance in the organisation.
15. Ensure that other organisation problems are resolved first before the MIS is taken for
development.
16. Conduct periodical user meetings on systems, where you get the opportunity to know
the ongoing difficulties of the users.
17. Train the user in computer appreciation and systems analysis, to see a buy-in during
the design and development of the system as well as during adoption.
Implementation of the MIS in an organisation is a process where organisational

transformation takes place. This change can occur in a number of ways.
The Lewin's model suggests three steps in this process. The first step is Unfreezing the
organisation to make the people more receptive and interested in the change. The second
step is Choosing a course of action where the process begins and reaches the desired level
of stability, and the third step is Refreezing, where the change is consolidated and
equilibrium is reinforced. Many a time, this process is implemented through an external
change agent, such as a consultant playing the role of a catalyst.
The significant problem in this task is the resistance to change. The resistance can occur due
to three reasons, viz., the factors internal to the users of information, the factors inherent in
the design of the system and the factors arising out of the interaction between the system
and its users. The problem of resistance can be handled through education, persuasion, and
participation. This can be achieved by improving the human factors, providing incentives to
the users and eliminating the organisational problems before implementing the system.
3. is a process of progressively ascertaining the information needs.

4. The implementation of the system is a
process.
5. Refreezing is a step where the change is consolidated and equilibrium is
reinforced (true/false)

4. STEPS IN MIS PLANNING

Traditional MIS focused on storage and processing of large amount of information which
helped the executives in retrieving specific information needed for planning and running the
organization.
Computers are part and parcel of information processing and hence its role can be listed :
• Business Planning: Computers help making business plans a lot easier. It covers a whole
breadth of activities from planning daily activities, assignment and deadline to using
financial instrument to create budget and project proposal.
• Recording Data: Data is crucial for the growth of the organisation from consumer data
to financial document to worker record there is never ending information that the
organisation has to store.
• Communication: It is one of the most common used for business computers with
employees, customer etc.
• Documentation: It helps in preparation of documentation through spreadsheet,
memos, PowerPoint presentation etc.
4.1 Stages in MIS Planning

The various stages in MIS planning can be explained as below:
• Strategic Planning: Align strategic planning with organisational planning. The MIS
plan should serve towards the organization objective and abide by organisation
policies.
• OIRA – Organisation Information Requirement Analysis: The first phase of OIRA
consists of assessing current and projected information needs to support decision
making and operations of the organisation. The second phase of OIRA consists of
assembling a master development plan.
• Resource Allocation: Resource allocation consists of developing hardware, software,
data communications, facilities, personnel and financial plans needed to execute the
master development plan defined in the OIRA stage
• Project Planning: Project planning consists of creating the requirements, time and
cost estimates and schedule . Tracking the plan with checkpoints to be used for
evaluating project progress will help making the plan successful.

4.2 Steps to create MIS Plan

The main goals and objective of the MIS is to support the business goals in line with the
management philosophy and consider the policy constraints, business risk, internal and
external environment of the organisation . It should be made in such a way that they can be
measured and the MIS provide the necessary information by way of its storage and retrieval
The various steps to create MIS Plan are explained below:

1. Define Outcome:
MIS outcome should align with the organisation objectives and have clear tangible
information outcomes that can be referred and used in effective decision-making in all
initiatives that take the organisation forward towards its goals.
2. Team formation:
Both human resources and technological resources need to be considered carefully. The
successful implementation of an MIS requires a combination of people and technology.
Determine resources and skills needed for each of the three phases of an MIS (develop, scale,
and sustain)
3. Define System needs:

Conduct a self-inventory to map out what information systems and reporting relationships
already exist. If it was not already existing, then establish common benchmarks, and
common reporting requirements. Describe high-level information requirements having in
mind how key types of individuals (e.g. managers, directors, auditors, donors) will use the
MIS data. Determine technical requirements for your specific context - Offline data entry or
automatic transmission of data to a central database when communication networks are
available
4. Estimate Cost: Here cost needs to be driven based on each of the phases of the MIS
project, described below.
a. Pilot: the functional, technical, and organizational complexity of the project drives
costs
b. Scale: the number of future users and the cost per user to deploy it are the most
important variables. The cost per user depends on the way in which users will access

the system (for example, desktop computer, mobile phone, paper) and their training
needs.
c. Sustain: Apart from the number of users, the selected technology is critical here. For
example, any solution that requires local software installation and maintenance will
be more expensive than a centralized system, such as a web-based or cloud system.
5. Select right vendors: this will help you to evaluate the merit of each proposal, Evaluate
the cost of each proposal and select a vendor, Make a contract or memorandum of
understanding.
6. Identify right solution: Identify Right Solution: Identify the best system for your
organisation depending on your resources and expected use (i.e. build a software
system from scratch) to Software as a service (SaaS) this will help you to Evaluate the
merit of each proposal, Evaluate the cost of each proposal and select a vendor, Make a
contract or memorandum of understanding.
7. Implementation Plans: Track the milestone and define work plan for development,
pilot. and scale up. Don’t forget to include training of MIS users.
8. Risk Management: There are different types of project risk that are needed to be
managed and for successful MIS adoption.
a. Lack of governance: Many cite lack of leadership buy-in as the most important factor
for project failure
b. Poor management: The management team lacks the technical capacity or the
organisational authority to provide the project the attention it needs.
c. Development risk: Relates to changing user requirements and a misunderstanding
of the technology that is being used.
d. Deployment risk: Stems from a failure to manage the changes that will affect the
organisation because of the new information system.
e. Operational risk: Arises when the organisation is not ready to support newly
introduced technologies over the longer term

5. ESSENTIAL STEPS FOR MIS DEVELOPMENT

We have discussed about MIS planning earlier. The next steps are system Analysis, design,
implementation and System operation and maintenance.
• System analysis –
o Problem definition - Define the problem and scope of existing system and determine
the objectives of new system.
o Feasibility study - Consider project feasibility and create feasibility report
mentioning threats, constraints, integration and security of system.
o Gather and analyse the information, define prototypes for new system. Evaluate
alternatives and information needs.
Some techniques for System analysis include:

1. Data flow diagrams - Used to graphically represent the flow of data in information
system. It describes the processes involved in flow of data from input to storage and
then to report generation.
2. Logic modelling – It is the graphical representation of shared relationships among
resources, activities and outcomes.
3. Data modelling – It is the process of creating data model for data stored in database. It
shows the associations between different data objects.
4. Rapid application development - Form of agile software development method which
uses minimal planning for rapid prototyping.
5. Object oriented analysis - Technical approach for designing and analysing an
application, system or business by applying object-oriented programming.
• System design - Prepare a Software Requirement Specification (SRS) document,
specifying the software, hardware, functional and network requirement of system.
There are different types of system design namely,
o Logical design – This type creates an abstract representation of data flow, input and
output of system.
o Physical design – This relates to actual input and output processes of the system.
o Architectural design - Also known as high level designs that focuses on the design
of system architecture.

• Detailed system design - Design of applications, networks and interfaces. Prepare

detailed and complete set of specifications and then prepare a design document.
• Implementation - Implement the design into source code. Combine all modules to
detect errors and prepare a test report. Integrate IS into environment and install the
new system. The test plans should cover the following:
o Purpose - Purpose of implementing the new system designs and the objectives to
be met.
o Definition - What tasks it can perform and for what user base it is suitable.
o Test inputs - Output from Transaction processing system is used as input for MIS.
o Detailed specification of test procedure - How the test will be conducted, what will
be its duration and what processes will be tested.
o Details of expected outputs - Standards as to what are the expected result of the
test procedure.
• Operation & Maintenance - Include all activities which is required at the time of
installation. The following should be considered before deploying the MIS system:
o Data security, backup and recovery - Taking backup to an external device so as to
facilitate data recovery in case of data loss. Also, ensuring that data is safe from
external threats.
o Systems control - Maintaining proper control over the systems operations and
authority to use.
o Testing of the system - To ensure that it is bug free.
o Hardware and software - They should deliver expected processing speed.
o System capacity - Capacity to hold data and expected response time.
o Proper documentation - User guide, user reference or operations manual, system
reference manual etc.
Implement changes in software and handle residual errors and resolve any issues existing
after test phase
Best Practices
• Increase adoption – Train users to increase adoption. All users including top
management should be trained for providing good knowledge of the content and
function of the system.

• Follow a definite goal - It should follow a definite organisational goal and time.
• Perform cost and benefit analysis - Benefits of the system should exceed the cost
involved in collecting, analysing and presenting information.
• Planning for information storage - Information should be stored in disaggregated files
and new data should be stored in relevant categories along with existing data.
• Review of MIS at proper intervals - It helps in identification of deficiencies in the system
and their timely addressal.
6. CHALLENGES FOR THE MANAGER

In today’s dynamic environment, a manager has to face many challenges to implement the
Information System using IT. Managers have to decide what information to build, how much
to spend on it, what level of capabilities should be created etc. These are the challenges you
will learn about in this unit.
6.1 What Information to Build?

Information today is considered as a resource of the organisation and not just a by-product
of transaction processing. Information is a resource required by the entire organisation. A
new concept of Information Resource Management, (IRM) focuses on the concept of informa-
tion, availability and its usage for the efficient management. Information, organisation can
be classified on basis like characteristics, application, and management hierarchy. The
following figure represents this classification.

INFORMATION
CLASSIFICATION BY
CHARACTERISTICS APPLICATION
ACTION VS NON ACTION

INFORMATION INFORMATION
RECURRING VS. NON
KNOWLEDGE
INFORMATION
Fig: Classification of Information
1. Classification by Application
In terms of applications, information can be categorised as follows:
• Information for Planning: This is required for making standard process and
procedure for an organisation and used in all strategic, tactical, and operation levels .
• Information for Controlling: This is required for gaining control overall business
activities with the help of feedback mechanism and used for controlling and
utilization of important processes in a system.
• Information for Knowledge: Knowledge is defined as “information about
information”. Knowledge information is acquired through experience and learning,
and collected from archival data and research studies.
• Organisational Information: This type of information deals with the environment
and culture of an organisation in the light of its objectives.
• Functional/Operational Information: This information is usually internal in
nature, like the daily schedules in a manufacturing plant . This is classified as
Functional/Operational Information.
2. Classification by Management Hierarchy
When information in an organisation required for decision-making is classified based on
Anthony’s Classification of Management, it is generally categorized into the following three
types:

• Strategic (Top Level) Information: This type of information concerns long term
policy decisions which define the objectives and goal of any business. It checks how
these objectives will be met in future, like commissioning a new plant, launching a new
product, diversification of business etc.
• Tactical (Middle Level) Information: This type of information concerns with
business resources, like budgeting, quality control, inventory, production and service,
among others.
• Operational (Low Level) Information: This type of information concerns with the
implementation of the process and procedures to achieve the defined objectives and
goals in a planned and timely manner.
6.2 How Much to Spend on Information Systems?

As in the case of small businesses, spending on the Information Technology for the
information system is a balancing act. Budgets have to be maintained for financial stability,
yet technology required must be updated on a timely basis. Therefore, it is necessary to
determine the budget which can be spent on the information system of the organisation to
maintain competitive advantage. At the same time, organisations have to keep track of what
competitors are spending on. According to a study, the average spending of organisations on
IS was 3.28%. But another study says that the small businesses spend around 6.9%, mid-
sized businesses spend around 4.1%,and in large companies, the percentage drops to 3.2%
of their revenue that is spent on IS.
To decide the spending amount, you need to know What are we spending on IS right now?
Every business needs a budget for IS irrespective of its size. Firstly, determine the budget for
the IS required. Then, add it to the expenditures on information technology over the past
year. Next, match it with the business goals. Accordingly, the budget of IS should be increased
or decreased.
This budgeting of the Information System is regarded as economic feasibility. It encompasses

a study of all the expected costs and benefits of the proposed information systems expected
to provide the business perspective. Since most benefits of an information system are intan-
gible, it is not quite simple to study this aspect. Some tangible and intangible benefits are:

Tangible Beneﬁts
• Increased productivity
• Low operating costs
• Optimised workforce
• Lower vendor costs
• Reduced expense growth rate
Intangible Beneﬁts
1. Improved asset utilisation
2. Improved resource control
3. Improved organisation planning
4. Availability of timely information
5. Increased flexibility
6. Improved employee morale
7. Increased job satisfaction
8. Improved decision making
9. Improved brand image
10. Improved operations
For doing tangible cost-benefit analysis, different capital budgeting models like the Net Pre-
sent Value, Internal Rate of Return can be applied. For intangible cost-benefits analysis –
portfolio analysis and scoring models are useful.
6.3 What level of capabilities should be created with information

Systems?
An information system is an organized set of components for collecting, transmitting, stor-
ing, and processing data to deliver information for taking action. It is important to stress that
in business firms and other organisations, this information is necessary for both operations
and management. Most information systems in today’s organisations are built around the
information technologies of computers and telecommunications. They are computer-based
information systems and in the 21st century, information technology becomes the
fundamental technology of any business. This is because it provides efficient operations of
both a small business or a large corporation. Provides effective management, supports the

search for competitive advantage in the marketplace, enables economic growth by
transforming to newer and advanced technologies, enables globalisation and global
competition.
No organisation can apply its IT to its activities without this ‘information system literacy’.
For an individual, it is necessary to perform the duties of a manager or professional, conduct
a firm’s activities efficiently, and to find opportunities in marketing a company’s products.
The information systems facilitate organisations to support and manage its operations.
Information systems include:

• Transaction Processing Systems: Necessary for operational data processing.
• Management Reporting Systems: Capable of producing reports for specific time peri-
ods, designed for managers responsible for specific functions or processes in a firm.
• Decision Support Systems: Designed for the support of individual and collective
decision making.
• Executive Information Systems: Support the long-term strategic view that senior
executives and company boards need to take of the business.
• Professional Support Systems: Support performance of tasks specific to a given.
Product service.
• Office Information Systems: Support and help coordinate knowledge work in an
office environment by handling documents and messages in a variety of forms - text,
data, image, and voice.
Information systems of an organisation can be connected to those of its suppliers, customers,

and business partners, or to the providers of information itself about the external environ-
ment of the firm. These are increasingly connected into inter-organisational systems that
help several firms share information to coordinate their work, collaborate on common
projects, or sell and buy products and services.
A strategic information system assists a firm in realizing its long-term competitive goals.
The implementation of information systems in an organisation should result in the following:

1. Enhanced competitive position – increased market shares or profits
2. Increased productivity - lower costs per unit of output

3. Improved quality of products or services leading to higher customer satisfaction

4. Improved decision-making ability
5. Ability to respond faster to the demands of the marketplace
6. Enhanced ability to communicate and collaborate within the firm and with customers
and suppliers
7. Enhanced goodwill of employees
Information systems offer a host of capabilities that can be used to achieve business results.
By implementing systems that suit specific business needs, a firm can efficiently respond to
the demands of its environment. The principal capabilities of information systems are:
1. Fast and accurate data processing, with large-capacity storage and rapid
communication between sites
2. Instantaneous access to information
3. Means of coordination (brings parts of an organisation, or several collaborating organ-
isations, together in a common effort)
4. Spanning across boundaries so that the organisation can stay aware of its envi-
ronment and provide information to its customers, suppliers, and the public at large.
5. Support for decision making
6. Supporting organisational memory and learning which provides the knowledge from
the past and present organisational activities and can be stored as data and knowledge
base for the future.
7. Routinising organisational practice
8. Differentiation of products and services
9. Modeling (a simplified representation of a real object or phenomenon that helps to
understand or develop the modeled object)
10. Automation (replacing human labor, for example, with information systems).

7. SUMMARY
From this unit you have understood the concept of planning and developing an information
system for an organization. In the concept of planning you have studied the differences
between business goals and MIS goals.You have also understood the challenges for a
manager and what information gets built into the Information System. We concluded with
the capabilities required for the Information Systems.
1. Write a note on the planning aspects of Information Systems.
2. Write a note on the development aspects of Information Systems
3. What are the classification types of Information to build into an information system ?
4. What are the benefits from an information system ?
5. What are the capabilities to be built into an Information System?

9. ANSWERS
1. Development
2. Corporate information
3. Prototyping
4. Management
5. True
Terminal Questions
1. Refer 2
2. Refer 3
3. Refer 4.1
4. Refer 4.2
5. Refer 4.3
10. REFERENCES
1. Davis, G.B., 1974. MIS Conceptual Foundations, Structure and Development, McGraw
Hill: New York.
2. Jawadekar, W.S. 1998, Management Information System, Tata McGraw Hill Publishing
Company Ltd.
3. Kanter, J., 1972. Management Oriented MIS, Prentice Hall Inc: Englewood-Cliffs. Zani,
W.S., 1973., “ABlue Print for MIS”, Harvard Business Review.

ADMINISTRATION
SEMESTER 4
DBB2202
SYSTEM
Unit 6: MIS and BPR 1

Unit 6
MIS and BPR
Table of Contents

No / Graph Activity
1 Introduction - -
3
1.1 Objectives - -
2 Business Process Re – Engineering 1 1
2.1 Basics of BPR - - 4-6
2.2 Importance of BPR - -
3 Improving a process in BPR 2 2 7-9
4 Object Oriented methodology 3 3 10 - 12
5 BPR – Current Focus 4, 5, 6, 7 4
5.1 Concept of Database - -
13 - 20
5.2 Data mining - -
5.3 Data warehousing - -
6 Data and Information - 5
6.1 Measurement of Data - - 21 - 24
6.2 Information as a Resource - -
7 Information in Organisational Functions 8 6
7.1 Types of Information Technology - - 25 - 29
7.2 Types of Information System - -
8 Summary - I 30
10 Answers - - 31 - 32

1. INTRODUCTION
In the previous unit you studied the alternatives for planning and development of
information systems. In this unit you will get to know about the basics and the importance
of different methodologies. As more and more business functions get added to the existing
process, it becomes inevitable to think of alternative and better processes. It may not be
always possible to replace an existing system, but the existing system can be enhanced or
redesigned. If we have to change the process it is necessary to know all the conditions which
affect the process and accordingly incorporate a change mechanism. The methodologies
which may be adopted to bring about changes are called reengineering.
In this unit you will learn about different methodologies to adapt a business to the changes.
The methodologies may include object oriented, BPR, database, data mining and data
warehousing.
1.1 Objectives
After studying this unit, you will be able to:
❖ Explain the fundamentals of business process re-engineering (BPR)

❖ Describe importance of BPR
❖ Explain various stages in BPR
❖ Answer how to improve a process
❖ Describe Business object model
❖ Explain Current focus of BPR
❖ Define data and its sources
❖ Describe the characteristics of good data and its applications
❖ Explain the interlinking between data and information
❖ Explain the importance of information in today’s world
❖ Understand the significance of information systems in the organisational framework

2. BUSINESS PROCESS RE-ENGINEERING
2.1 Basics Of BPR
The existing system in an organization is totally re-examined and radically modified for
incorporating the latest technology. This process of change for the betterment of the
organization is called Business Process Re- engineering. This process is mainly used to
modernize and to make organizations efficient. BPR directly affects performance. It is used
to gain an understanding of the process of business and to make it better and to redesign,
thereby improving the system.
BPR is mainly used for changes in the work process. Latest software is used and accordingly
the business procedures are modified, so that documents are worked upon more easily and
efficiently. This is known as workflow management.
2.2 Importance of BPR
Business process is a set of activities performed by various individuals, departments or

organizations that is mainly used for transactions in business. We all do them at one point or
another either as a supplier or as a customer. You will really appreciate the need of process
improvement or change in an organization’s conduct of business if you had to wait in a queue
for a long time to purchase something from a shop The process is called the check-out
process. It is called a process because a uniform standard system has been maintained to
perform such a task. The system starts with forming a queue, receiving the needed item from
the shop, getting it billed, payment which involves billing, paying amount and receiving the
receipt of purchase and the process ends up with the exit from the store.
The above activities take place between the customer and the supplier, which form the
process steps; this example explains the business process. The business process may be
getting admission to a college and graduating from the college, building a house, and
implementing new technology in an organization etc.
A Process can be represented by a triangle and figure 6.1 shows continuing process of
Business.

Fig. 6.1: Continuous process
[Source: BPR Online learning center, six sigma]
Business process reengineering is a major innovation changing the way organizations

conduct their businesses. Such changes are often necessary for profitability or even survival.
BPR is employed when major IT projects such as ERP are undertaken. Reengineering
involves changes in structure, organizational culture and processes. Many concepts of BPR
change organizational structure. Team based organization, mass customization,
empowerment and telecommuting are some of the examples. The support system in any
organization plays an important role in BPR. ES, DSS, AI (discussed later) allow business to
be conducted in different locations, provide flexibility in manufacturing, permit quicker
delivery to customers and support rapid paperless transactions among suppliers,
manufacturers and retailers. Expert systems can enable organizational changes by providing
expertise to non experts. It is difficult to carry out BPR calculations using ordinary programs
like spreadsheets etc. Experts make use of applications with simulation tools for BPR.
Reengineering is basically done to achieve cost reduction, increase in quality, improvement
in speed and service. BPR enables a company to become more competitive in the market.
Employees work in teams comprising of managers and engineers, to develop a product. This
leads to the formation of interdisciplinary teams which can work better than mere functional
teams. Coordination becomes easier and great results can be achieved faster. The entire
business process of developing a product gets a new dimension. This has led to
reengineering of old functional processes in organizations.

Here are some benefits of BPR:
• Cost Reduction
• Productivity Improvement
• Improved capability of the organisation
• Improved customer service/product quality
Self-Assessment Questions - 1
1. ______________ is a group of activities performed by various departments, various

organizations or between individuals, that is mainly used for business transactions.
2. A process can be represented by ____________ .

3. IMPROVING A PROCESS IN BPR
Any organization will have a number of processes aligned with their business activities. Over
years the processes may have to be improved. For any improvement it is necessary to first
observe the existing processes, understand and analyze them, and set up suitable
performance parameter in order to measure the effectiveness of the processes.
Organizations will have to work on increasing the efficiency of the system in terms of
information generated, how much of the information is utilized, what is the percentage of
redundant information if any, speed of the process, service and quality. In order to meet the
requirement of the competitive market, businesses need to improve their business
processes. The supply graph needs to be equalized with the demand graph to have
equilibrium. Over a course of years, organizations have adopted drastic changes in their
business processes. This is because we have many companies in the market serving similar
kinds of markets and if customers are not satisfied by the product they are ready to move on
to another product. Therefore an organization follows a standard model to innovate. The
model adopted for business process improvement attempts to understand the current work
process and improve its performance. The model consists of the following steps.
• Document the current business process.

• Analyse the process through customer feedback.
• Identify Improvement opportunities in the existing process
• Plan and design the new business process
• Create Future State Changes: Define and design the new process and identify a metric
to measure its effectiveness
• Execute Future State Changes: Implement the new process, roll out training and
improve adoption

Fig. 6.2: Improving model of BPR
Now the new process can, at a future point in time be improved based on its effectiveness.
This model helps in achieving improvement gradually in an effective and incremental way.
It accelerates the business process. The most obvious is technology. The scope of internet on
the business enhances the improvement level. Changes are the necessary tools of market.
Changes are an essential part of market to exist in the market place, to meet the competency
in the market, even to survive in the market. BPR gives a way to make a rapid change and
drastic improvement.
The principles of BPR are to:
Examine all processes
Prioritize actual work
Eliminate unnecessary work
Thus Business process reengineering helps in the reorganization of the entire work force
along with various flows, minimizing the wastages, and giving the system a new dimension.
Organizations can obtain very large pay-off from their investments in information
technology for their MIS. The process of reengineering brings about a radical change in the
flow of the information and related documents from one business function to another very
efficiently. This process of management is called ‘work flow management’.
Most companies want to improve their quality in every field, such as in products, services
and operations. Various methods to improve a process could be:
a) A concept called total quality management (TQM) is used, to make everybody and all
the processes in an organization contribute towards better quality. The latest in quality

management is Six sigma. It is a specific measure of quality, representing 3.4 defects

per million opportunities.
b) Another method to improve is to benchmark. Benchmarking is setting standards for
products, service and other activities and then measuring performances against the
standards.
c) Customer focus – a process may be redesigned to meet the customer demands in terms
of service, product features and quality.
d) Shorter cycle time – it eliminates many hidden costs arising out of errors in the process.
Such errors may be trapped in the early stage of the process if the cycle time is reduced.
BPR can achieve success by doing the following:
(i) Business needs analysis: There are cost benefits to be accomplished that guide the
association to become more competitive.
(ii) BPR team composition: A basic examination of all operational cycles is taken, with
important inquiries being posed about the set-up method of working and how it can
be created.
(iii) Ongoing consistent improvement: There is a longing to look at past assignments and
traditional functional boundaries and spotlight on results. With this, you can limit
whole cycles into less but more significant enhancements.
Some causes of BPR failures include lack of training and lack of adequate infrastructure. So
investing time in improving business processes is key to BPR success.
3. Any organization will have a number of ___________ aligned with its business
activities.
4. Business process reengineering helps in ________of the entire work force along with
various flows, ____________ the wastages, and giving the system a new dimension.
5. A concept called ___________ is used, to make everybody and all the process in an
organization contribute towards better quality.

4. OBJECT ORIENTED METHODOLOGY
Objects are the important parts of our daily life. Objects are natural and manmade, in
business, and in products. Objects can be categorized, described, organized, combined,
manipulated and created. The object oriented methodology uses the object oriented
techniques to study the objects of the system. This methodology helps us to know the
behavior of the objects, and response time to different events. It is also used to study the
relationships existing between the two objects of same organization or an inert organization.
Object oriented methodology is defined as the system that supports and facilitates
development of software components, that can be heavily reused and leveraged across
multiple applications. Thus it enables the effective use of existing resources and also to share
with the other resources. We can gain high production with less cost and better quality.
The OOM life cycle consists of six stages:
• Business planning
• Business architecture definition
• Technical architecture definition
• Incremental delivery planning
• Incremental design and build
• Deployment
An object contains values scored in instance variables within the object. An object contains
deep level of nesting within itself, governed by the parameters of the business process
modeling. An object has mainly a procedure defined within and a set of values called
attributes. The procedure is called methods which operate on the attributes. A process may
be broken down into a set of procedures and attributes. This can then be represented as a
business process object model. Object that contains the same types of values and the same
methods are grouped into what are known as ‘classes’. A class is nothing but a definition of
the object. It is a set of similar objects which is an instance of the class. It has the following
advantages in management information systems over other conventional methods –

a) New processes can be easily added in future whenever required.

b) Processes may contain features called objects which may be used as communication
entities in a system.
c) Object once designed for a particular usage may be reused for other purposes in a
process.
d) Attributes of the object are well secured.
e) The object can be modified and expanded very easily without affecting the existing
process.
Example of a class
Class prof = {Prof Rao, Prof Bhushan, Prof Shiv, Prof Ravi…….}
The objects and their behavior are shown in the diagrammatic

representation as shown in the figure 6.3.
Fig. 6.3: Objects and their behavior
It is observed that there always exists a behavior between two entities. This behavior
establishes relationship between two or more classes.

There are two major issues in object oriented methodology
1. Object oriented Analysis/Design

• BOOCH, UML, OMT, Catalysis methods
• Constraints, formal approach, analysis patterns, unified process, etc.
2. Object oriented programming
• OO languages :Smalltalk, C++, Java
• Design Patterns, Frameworks, Class Libraries, etc.
6. A ___________ has mainly a procedure defined within and a set of values called
_________.
7. _________ and __________ are the major issues of OOM.

5. BPR – THE CURRENT FOCUS

The primary focus of BPR is the process. The main reasons for the process being important
are:
1. Processes are the essential part for every enterprise. It is observed that organizations
are famous not by their products but by their processes. For example, four wheeler
vehicles produced by Toyoto is not really different from the vehicles produced by any
of its major competitors (Tata Motors or Hyundai). What matters is the process by
which the vehicles are produced and delivered to the customer and also the service
rendered by them which differentiate them from other major competitors. So, now a
days companies pay more importance to accelerating their process rather than
thinking of producing a better product.
2. There are eight major processes in any organization.
• The strategic management process
• The innovation process
• The customer service process
• The resource management process
• Supply chain management process
• Logistics management process
• Measurement process
• Other supporting processes
What this classification means is that whatever happens in the company is the result of
any of the above processes. In short, firms are bundles of processes.
3. Customers feel the importance of processes. Even customers demand that an

organization improve its processes as they want to know whether the organization has
understood its processes and also to keep the processes under control.
A process needs to be understood and documented so that it can be used for future
enhancement and reliability.

Apart from the usual ways of managing a process in any business information system, it is
necessary to enhance the value of the process and also the methods used in improving the
process. Some of the concepts of information management for effective information systems
are the traditional concept of database, the emerging concepts of data mining and data
warehousing.
5.1 Concept Of Database – Database is a data structure used to store organized

information. A collection of programs that enables you to store, modify, and extract
information forms a database. A database is typically made up of many linked tables of rows
and columns. For example, a company might use a database to store information about its
products, its employees, and financial information. Databases are now used also in nearly all
e-commerce sites to store product inventory and customer information. Database software,
such as Oracle, MySQL, PostgreSQL, Microsoft SQLServer etc. are designed to help companies
and individuals organize large amounts of information in a way in which the data can be
easily searched, sorted, and updated.
The following are examples of database applications:
• Computerized library systems

• Automated teller machines
• Flight reservation systems
• Inventory Systems
Technically DBMSs widely differ. There are different structures which contribute DBMS
organization. They are relational, network, flat, and hierarchical. Query is a request for
information from a database which is a question.
The example for a query may be
SELECT * FROM Manipal WHERE DEPT = “Management”
Here * represents ALL. So, the above query will list out all the records of management
department from the database MANIPAL. The above query is written in what is called query
language. The information from a database can be presented in a variety of formats. Most

DBMSs include a report writer program that enables you to output data in the form of a
report. Many DBMSs also include a graphics component that enables you to output
information in the form of graphs and charts.
5.2 Data Mining – Data mining is primarily used as a part of information system today,
by companies with a strong consumer focus, for example in retail, financial, communication,
and marketing organizations. It enables these companies to determine relationships among
"internal" factors such as price, product positioning, or staff skills, and "external" factors
such as economic indicators, competition, and customer demographics. And it enables them
to determine the impact on sales, customer satisfaction, and corporate profits. Finally, it
enables them to "drill down" into summary information to view detailed transactional data.
With data mining, a retailer can use point-of- sale records of customer purchases to send
targeted promotions based on an individual's purchase history. By mining demographic data
from comment or warranty cards, the retailer can develop products and promotions specific
to certain customer segments.
Data Mining is a collaborative tool which comprises database systems, statistics, machine
learning, visualization and information science. Based on the data mining approach used,
different techniques from the other disciplines can be used, such as neural networks,
artificial intelligence, fuzzy logic, knowledge representation, high performance computing
and inductive logic programming.
Fig. 6.4: Data Mining Process
[Source: Data mining: concepts and techniques By Jiawei Han, Micheline Kamber]

Data mining refers to extracting or mining knowledge from large amounts of data. There may
be other terms which refer to data mining, such as knowledge mining, knowledge extraction,
data/pattern analysis, data archaeology, and data dredging. The knowledge discovery as a
process may consist of the following steps:
1. Data Cleaning: It removes inaccuracies and inconsistent data.

2. Data Integration: It is where multiple data sources are verified to ensure data
correctness.
3. Data Selection: Data relevant to the analysis task are retrieved from the database.
4. Data Transformation: Data are transformed or consolidated into forms appropriate for
mining by performing summary or aggregation operations, for instance.
5. Data Mining: A process where intelligent methods are applied in order to extract data
patterns.
6. Pattern Evaluation: To identify the truly interesting patterns representing knowledge,
based on some sets of parameters.
7. Knowledge Presentation: Visualization and knowledge representation techniques are
used to appropriately present the mined knowledge to the users.
When you look at the above steps you will find that data mining is a very important step in
knowledge representation..
By now you would have understood the importance of the data architecture given the
purpose of data mining.

Fig 6.5: Architecture of a typical Data Mining System
Source: researchgate.net
The architecture of the data mining has the following components:
1. Database, data warehouse and information repository: This is one or a set of databases,
data warehouse, and information repository which can be used for data cleaning and
data integration.
2. Database server: This server is responsible for fetching the relevant data.
3. Data mining engine: This helps in accessing the data through applications. It accesses
data from the warehouse with the help of standard data connectivity mechanisms.
Usually database drivers are used to connect the database.
4. Pattern evaluation model: It acquires the data to be evaluated from the database,
producing the patterns. This model scans the data. It searches and creates interesting
patterns based on the thresholds.
5. Graphical user interface: It communicates between the user and the data mining
system. It allows the user to interact with the system and specify the data mining
queries or tasks.

Data mining is applicable to any kind of information repository. Some of these may be
relational databases, data warehouse, transactional databases, advanced database
management systems, WWW and files. Advanced database systems include object oriented
databases, object relational databases, and application oriented databases.
The best example for data mining which is so close to our lives is Google. The success of
Google depends on the use of data mining techniques in the analysis of data in the search
engine to meet your search demand.
5.3 Data Warehousing – Data Warehouse is defined as a collection of database which

is referred to as relational database for the purpose of querying and analysis, rather than just
transaction processing. Data warehouse is usually maintained to store heuristic data for
future use. Data warehousing is usually used to generate reports. Integration and separation
of data are the two basic features needed to be kept in mind while creating a data warehouse.
The main outputs from data warehouse systems are either tabular listings (queries) with
minimal formatting or highly formatted "formal" reports on business activities. This
becomes a convenient way to handle the information being generated by various processes.
Data warehouse is an archive of information collected from wide multiple sources, stored
under a unified scheme, at a single site. This data is stored for a long time permitting the user
an access to the archived data for years. The data stored and the subsequent report
generated out of a querying process enable quick decision making. This concept is useful for
big companies having plenty of data on their business processes. Big companies have bigger
and complex problems. Decision makers require access to information from all sources.
Setting up queries on individual processes may be tedious and inefficient. Data warehouse
may be considered under such situations.

Data warehouse Architecture:
Fig. 6.5: Data warehouse Architecture
[Source: Introduction to Data Warehousing, Anand Deshpande, CEO, Persistent Systems Pvt.
Ltd.]
Data warehouse is the central part of data repository. Data warehousing provides a strategic
approach to all businesses. Data warehouse is broadly famous for its characteristics like:
a. Subject oriented: Data warehouse has the ability to analyze the data. The ability to
define by subject matter makes DW subject oriented.
b. Integrated: This resolves the problems of conflicts and inconsistencies existing in the
units of measure.
c. Non volatile: Once the data enters into the warehouse it shall not change. This
characteristic is very important because, after all, the purpose of heuristic data is for
future use.
d. Time variant: The data warehouse focuses on change over time. To discover new trends
in business, analysts need large amounts of data which is contrasted to OLTP (Online
transaction Processing) which works on heuristic data.

Table 6.1: Differences between OLTP and Data warehouse

Particulars OLTP Data warehouse
Structures Complex data Multidimensional data
structures structures
Indexes Few Many
Joins Many Some
Duplicated date Normalized DBMS De-normalized DBMS
Derived data and Rare Common
aggregates
It is observed that all companies are profit oriented and also want to exist in the market along
with their competitors. Data warehousing is of strategic value because it enables us to
achieve the former while avoiding the latter. This is the strategic spirit in which we should
understand, implement, and manage data warehousing. A very powerful introduction to a
data warehousing business case has said the following:
"The strategic intent of our data warehousing is to enable the business to win in the
marketplace every day, with every customer, and with every purchase. By repositioning our
operational data and combining it with selected foreign data, we will empower our
employees so that they can routinely delight and excite our customers. Through our unique
appreciation of the value of our data assets, we will elevate our data warehouses to the point
where they become a compelling and durable contributor to the sustainable competitive
advantage of the business. In this way, data warehousing will enable the business to impress
its attitude on the marketplace and prevail over its competitors who have already lost."
BPR uses all these technologies like data bases, data mining, and data warehousing and helps
the company to perform a strategic and object oriented performance.
8. _____________model scans the data.

9. _______________ is a collaborative tool which comprises database systems, statistics,
machine learning, visualization and information science.
10. ________________, _______________ , ________________ and _______________ are the
characteristics of data warehouse.

6. DATA AND INFORMATION
The term data, refers to the facts and figures specific to an event, phenomenon, observation,
action performed and associated with the previous or existing period of time. Data items
refer to an elementary description of things, events, activities, and transactions that are
recorded, classified and stored, but not organised to convey any specific meaning.
Data Sources
There can be many sources of data. Data could be out of its original stored location by
digitising the manual documents. Subsequently, it could be out of a database, file, or any of
the multiple static and dynamic pages streaming through the internet. For example, Myntra
— an online fashion brand, before displaying items, verifies their availability with the
inventory. If the inventory database does not confirm availability of stocks, then it will not
display them. In a broader perspective, data source refers to any collection of data, which
provides a standardised means for access to relevant facts that are archived for use by
appropriate functions.
Data Processing
The collection and translation of raw data into a usable form, is called Data Processing. It is
performed by a team of data scientists and data engineers.
The raw data is collected, filtered, sorted, processed, analysed, stored, and then presented in
a readable format. Data processing significantly affects most organisational activities, such
as:
• Product development and design

• Marketing and market research
• Sales and invoicing
• Customer development and retention
• Accounting and taxes
• Human resources and payroll
• Regulatory compliance

In other words, data is an asset for every organisation. Managing it becomes a major
challenge for every data scientist because of the following reasons:
• New data is added constantly and rapidly. All records need to be updated accordingly
and scrutinised by cyber auditors.
• Often the data is spread across the whole organisation. It becomes cumbersome to
collect and use by different methods and devices.
• Data security, quality, and integrity are critical, yet can be jeopardised.
• Often data is created and used offline, without going through quality control checks.
Therefore, the validity of the data may be questionable.
• Often, data may become redundant and obsolete. Yet, discarding it may create issues
for data managers.
6.1 Measurement Of Data
Since the inception of computer systems, the unit of measurement to indicate, measure and
store data has been bits and bytes.
A. Computer memory and measurement of data are expressed using a binary system of
coding — zero and one. A bit can be either zero or one, as it follows the electrical values
of no current and positive current. A byte comprises of eight bits
B. The cluster of bytes will become the unit of measurement for any data processing,
sorting, or storing purposes. Usually, bytes are expressed in the American Standard
Code for Information Interchange (ASCII) characters, such as any alphabet or number.
C. The computer systems memory, in terms of data capacity, is expressed in kilo bytes,
megabytes, terabytes, exabytes, zettabytes, and yottabytes. One kilobyte (KB) is equal
to 1,024 bytes; one megabyte (MB) will be equal to 1,024 kilobytes, or 1,048,576
(1024×1024) bytes.
D. Similarly, one gigabyte (GB) is equal to 1,024 megabytes, or 1,073,741,824
(1024×1024×1024) bytes or (1024)3. A terabyte (TB) is equal to 1,024 gigabytes, one
petabyte is equal to 1,024 terabytes. While an exabyte (EB) is 1,024 petabytes (PB). A
zettabyte (ZB) is equal to 1,024 exabytes (EB) and one yottabyte (YB) is equal to 1,024
zettabytes.

E. Data could also be measured in qualitative formats to represent an observational

variable. In all probability, every form of data will have to be organised and logical to
be useful for analysing and decision making.
F. To measure qualitative data, various scales are used, such as Likert scale — having five
points, seven point or nine points, defining the degree variance in observational values.
For example, the character of a person may be measured considering the five point
Likert scale as: Very good (5), Good (4), Fair (3), Poor (2), and Very Poor (1).
G. However, while using such scales, the reliability and validity of those scale applications
must be verified according to the facts to be measured.
6.2 Information as a Resource
In today’s digital world, information is devoured by everyone to make choices daily.

Organisations need well-processed data for many reasons. Some being:
• Information is the basis for communication. It is difficult to convey any message across
organisational functions without appropriate information.
• Information is the key to all organisational activities that binds it together.
• Decision making becomes challenging in the absence of proper information and
knowledge.
• Information and knowledge are instruments to monitor and control deviations from
plans and to make forecasts.
• Information is timeless. It can be from history, current period and invariably used for
analysis, including for future use.
• Accurate, simple, and organised information helps understand complex problems or
situations.

11. Which of the following is a data?

A. Delhi recorded 327 deaths due to Covid-19, 15% lower than the previous
week.
B. Marks obtained in English: 98, 97, 86, 79, 88, 76, 74, 71, 83, 91.
C. Weekly weather report predicts a heavy rain-fall with thunder and wind
speed of 80-110 km per hour.
D. All the above
12. Which of the following statements does not have any attribute of
information?
a. An inventory lists 23 packets of 2GB RAM, 6GB RAM, 15 TVS Keyboards,
and 3 Fujitsu Monitors of 24”.
b. Stanford is organising a Global Webinar on Sustainable Development
Goals.
c. All students of MBA, 2nd Semester are hereby informed to submit their
internal assessments by May 5, after which marks will not be assigned.
d. V-90, XL-95
13. Only the structured and organised ________ can be converted into useful
information.
14. It is difficult to process _______ form, as it leads to vague interpretations, and
decisions based on such statements cannot be relied.
15. Data must be verified for its validity and reliability before considering for any
processing. [True/False]

7. INFORMATION IN ORGANISATIONAL FUNCTIONS

Reliable information relating to products, employees, competitors, markets, economic and
financial aspects and the organisational environment is required to build and strengthen
organisations. Information links every stakeholder to the organisation and ensures proper
functioning.
Organisational and managerial functions — such as planning, organising, staffing, directing

and controlling — are integrated with information systems that enable them to perform
their job effectively.
A. Planning: Planning: Goals and objectives are laid down using the current and forecast
data. Plans are drawn considering the human resources, machinery, finance, logistics,
that will be needed to implement both long-term and short-term strategies.
B. Organising: If plans are based on authentic information, then adherence to the plan
and process will ensure good results. Information system can provide insights into how
an organisation structure can be changed to execute the plan effectively.
C. Staffing and Directing: To organise resources and implement organisational plans,
certain skill-sets become essential. The right set of people need to be recruited, trained,
directed, motivated, and rewarded to achieve results.
D. Controlling: Any deviations from laid down plans must be monitored and controlled.
These, in turn, depend on information relating to possible threats and risks, and help
management take appropriate actions.
7.1 Types Of Information Systems
Information System (IS) is the bridge between a user and technology. With an IS, we
associate terms like computers, IT, software and hardware, Java and html, email, among
others. Simply speaking, it is a system connected with managing information that is useful in
our daily lives.

Some Information Systems used across Organisations are
1. Transaction Processing System (TPS): A transaction processing system that collects,

stores, modifies and retrieves the data transactions of an enterprise. These systems also
attempt to provide predictable response times to requests.
2. Office Automation Systems: An Office Automation System can support in word
processing, mail communications to guarantee all correspondence information is in
one unified area.
3. Knowledge Management Systems: A knowledge management system stores data that
is crucial to business, for example data to seek insights about customers and thus help
improve customer satisfaction
4. Management Information Systems: A management information system utilises
different types of information from a Transaction Processing System to assist centre
administration towards running the business efficiently
5. Decision Support Systems: A decision support system analyzes large amounts of data
and presents an organization with the best possible options available, so that a well
informed decision is made.
6. Executive Support Systems: An Executive Support System helps enterprise leaders to
handle non-routine matters that improves the overall execution.
Examples of Information Systems
Any enterprise that is involved in business, economic, social, medical and educational activi-
ties, using inputs to transform into outputs, through systematic processes, needs an IS as an
intermediate resource. Examples of such systems to name a few are:
• Train, Bus and Airline Reservations — booking of seats, scheduling, remittances,

boarding list, and special needs
• Bank operations — electronic deposits, transfers, and withdrawals with payment
gateways
• Integration of department using softwares like ERP
• Logistics management applications for transportation systems
• Cybernetic System — a self-regulating system with feedback and control components

Uses of an IS
The advent of interactive technology, through commercial applications, has made e-

commerce successful. Groceries, clothing, linen, furnishings, even white goods can be
delivered at our doorstep. From entertainment, to air tickets, almost everything is accessible
through the Internet on company websites.
Components of an IS
A. Human Resources and Customers: An IS involves human intervention at three

levels and consumers at the end. Human resources are required initially at the
source of information, then at the user level, and then at the mediation level.
Customers are then required to finally consume the products and services.
For example, industries create products and services, then they are marketed by people
both within the organisation and outside it by distributors. Similarly, news gets created
by some groups and gets disseminated through news agencies and broadcasting groups,
and finally read and consumed by an audience.
B. Data Resources: An IS comprises of raw data that needs to be processed meaning- fully
by the end users. Usually, it will be in an encoded form: tables, number codes,
algorithms etc. It may be organised and/or unorganised.
C. Software: All the data will be either represented through a software or a software base,
which includes front-end and back-end processing. Front-end software is called
packages, which are user-friendly, such as Microsoft Office utilities, Windows 10, etc.
Whereas back-end software includes programmes, such as Java, C++, Cobol, .NET, Scala,
HTML, Python etc. These back-end software are used to prepare user-friendly,
customised packages for companies and individuals.
D. Hardware: This is the physical infrastructure required to load software. This includes,
hard drive, Central Processing Unit, Monitor, Key-board, Mouse, Printer, etc. Needless
to say, these are required to store, process, and manage data.

1. Networking Tools: Physical and wireless networks play a key role in making tech-
nology operational for users across the world. Cables, the physical wiring connecting
electrical systems, along with optical fibres, broadband cables and routers providing
wireless fidelity (Wi-Fi) are among the important tools required to make networks
work, not to mention satellite communications. At the user level, browsers like Goo-
gle, Chrome, Firefox, Explorer, etc., help access websites through which information is
displayed.
2. Processes: To interlink all the above tools and systems, processes are required to
produce the expected outcomes. Thus, an IS continuously collects and processes data
using the above listed components to provide information.
(Source: https://witanworld.com/article/2019/10/03/information-systems-and-future)
Fig 2: Components of an Information System

16. Data helps in linking all the function of an organisation

a. Five
b. Eight
c. Six
d. Seven
17. Knowledge in a business organisation is acquired - through proper .
a. Data
b. Facts and numbers in the retrieval system
c. Information
d. All the above
18. Any Knowledge based on the unstructured and unorganised data or
information will be to take future decisions.
a. Fundamentally strong
b. Positive and incremental
c. Weak and unreliable
d. Ineffective
19. Which of the components is not part of hardware systems?
a. Floppy Disc
b. Printers
c. Scanner
d. Android
20. Browsers like Google, Chrome, Firefox, and Explorer are part of
a________________.

8. SUMMARY
After going through this unit, you have learnt the fundamentals of business process re-
engineering (BPR), the importance of BPR and the various steps in BPR. You have also
understood how to improve a process. You have also learnt the importance of Object
oriented methodology and different database methodologies in solving BPR. Business object
model is introduced and the significance of business object models to MIS is explained.
Activity 1
Read the article “Impact of Data Mining on Business Intelligence” and come out with
your own example for each industry.
1. Explain what is meant by BPR. What is its significance?

2. Explain the object oriented methodology.
3. How are data mining and warehousing useful?
4. Explain the importance of strategy.

10. ANSWERS
1. Business process
2. Triangle
3. processes
4. reorganization, minimizing
5. TQM.
6. Object, attribute
7. Object Oriented Analysis/Design, Object oriented programming
8. Pattern Evaluation model
9. Data Mining
10. subject oriented, integrated, non volatile, and time variant
11. B.
12. D
13. data
14. Inconsistent
15. True
16. A
17. D
18. C
19. D
20. Networks
Terminal Questions
a. Refer 2
b. Refer 4
c. Refer 5
d. Refer 5.3

References:
1. Management Information System by CSV Murthy, Himalaya Publishing House, fourth

edition 2010.
E-References:
http://docshare.tips/

BACHELOR OF BUSINESS ADMINISTRATION

SEMESTER 4
DBB2202
SYSTEM
Unit 7: MIS Organization Structure 1

Unit 7
MIS Organization Structure
Table of Contents

No / Graph Activity
1 Introduction - -
3
1.1 Objectives - -
2 MIS at Management levels - - 4
3 Strategic Level Planning - - 5-6
4 Operational Level Planning - 1 7-8
5 Economic and Behavior Theories - 2
5.1 Build and Use - - 9 - 13
5.2 MIS for Competitive Advantage - -
6 Decision Making with A MIS 1, 2, 3 3
6.1 Strategic Decisions - -
14 - 20
6.2 Tactical Decisions - -
6.3 Operational Decisions - -
7 Enhancing Decision Making for the Digital - - 21 - 23
Firm
8 Summary - - 24
10 Answers - - 24
11 Suggested Books and E-References - - 25

1. INTRODUCTION
In the earlier unit you studied the relationship between MIS and BPR. You also get to know
the methodologies for information management. In this unit we will discuss on
organizational structure of MIS. In order to achieve integration, an organization uses many
systems to perform various functions.
1.1 Objectives:
❖ Explain management level planning of MIS

❖ Describe the MIS strategic and Operational planning
❖ Explain Behavior and economic theories
❖ Describe the strategic, operational and tactical decisions made using MIS
❖ Explain how MIS helps enhancing decision making for a digital firm

2. MIS AT MANAGEMENT LEVELS

As discussed in previous units, there are four main functions of a manager, namely:
Planning: Managers are involved in translating the overall direction of the organisation into
plans that can be executed to achieve the goals Planning is a series of activities defined as to
how and when to be performed
Organising: Managers sequence the various activities and provide procedures to perform
them
Staffing: This is about assigning human resources to these activities. They may need to be
hired and trained to perform the tasks
Directing & Controlling: This is the process of supervising the subordinates and supporting
and leading them, verifying if the job is done well in terms of the outcomes. This involves
influencing the behaviour to get the job done.
Planning
Decisions made about what task has to be done, when it has to be done, by whom and how it
has to be done are called planning. The first step involved in planning is analysis. The goals
have to be targeted, have to be identified and the various resources available have to be taken
into account. The interests of various groups associated with the organization have to be
considered. The groups can be stakeholders and directors, employees, management,
customers, suppliers, the government and the public. The process of business planning can
be broadly classified as strategic level and operational level.

3. STRATEGIC LEVEL PLANNING

This planning is adopted by the top level executives in the organization. They decide on the
goals to be targeted and the different strategies to be adopted by the organization. They
include plans to acquire resources, to diversify, research and development, manufacturing a
new product, sales and marketing, setting up of the infrastructure and human resource
planning.
Johnson and Scholes state, ‘Strategic planning helps determine the direction and scope of an
organisation over the long term, matching its resources to its changing environment and in
particular, its markets, customers and clients, so as to meet stakeholder expectations’.
The different steps in strategic planning are:
• Defining Mission statement & strategic objectives

• The mission statement reflects the organisation’s vision.
• The financial and strategic objectives are set based on the mission
• The financial objectives imply the sales target while the strategic objectives imply the
market reputation of the firm
• Analyzing the business environment
• Internal analysis of the firm – The internal analysis of the firm consists of SWOT
analyses, which detects the strengths and weaknesses associated with an
organisation. The firm’s threats and opportunities determine the area where the firm
would grow. The SWOT analysis typically determines the internal environment of an
organisation.
• Analysis of firm’s industry – Porter's Five Forces Model analyses the whole industry
in which the firm is indulged in.
• Analysis of external environment – The firm can analyse its external environment by
adopting the PESTAL analysis, which involves observation of political and economic
environments and so on.
• Formulating the strategy
• The firm generates various insights with the help of environmental scanning. After
this, the firm tries to match the endowments of strength with the firm’s potential

opportunities. Besides this, the firm addresses its weaknesses with the observation
of threats. Hence, the firm formulates various strategies along with the development
of competitive advantage.
• Implementing the strategy
When the firm formulates its strategies for using MIS and fulfils the objectives, it undertakes
three elements for implementing the strategies.
• Program – The program entails the criteria by which the firm accomplishes its
operations.
• Budgets – The budgets are inclusive of all expenditures by which the firm can finance
its operations.
• Figures – The figures play their roles in the accomplishment of whole operations.
Strategic level planning is required in three hierarchies of an organisation, where the

corporate level and business unit level are associated with the top-management decisions.
Strategic level planning for the functional level implies the formulation of appropriate plans
for various departments such as production, marketing and so on.
The objectives that can be achieved through strategic plan are:
1. Operational Excellence
2. Customer & Supplier intimacy & thereby customer satisfaction
3. Improvement in decision-making
4. Efficient business and services model
No plan is complete without parameters to measure its success. So measurable parameters

are identified and target values set to monitor the progress against the plan. Performance
measurements are done at regular and appropriate intervals and necessary changes are
incorporated to the plan.

4. OPERATIONAL LEVEL PLANNING

The operational planning decides on the investment and the cost control. The main objective
is always to maximize the profit and to minimize the cost. The investment and financial
controls are established. They include managing the inventory, the cash flow, fixed assets
etc. Proper budget has to be allocated to labor, transportation, advertising and other
overheads.
Costing and pricing of products are also an important aspect of operational planning. The
costs of the products are identified by taking into account the cost involved in production
and marketing. The prices of the products, are fixed considering the cost and the market
demand. It also depends on customer as a buyer or a seller.
An organization is a structure which takes in capital, raw materials, manpower, machines etc
as input. The inputs are processed and output is produced in the form of different products
and services. They are also comprised of their own rules, regulations, policies and
procedures to be followed.
Just to elaborate on the differences between strategic and operational planning :
• Operational planning is based on analytical thinking while strategic planning is based

on a specific vision for the future time period.
• Operational planning is designed for accuracy while strategic planning is designed for
effectiveness.
• Operational planning focuses on the tactical and executive sides while strategic
planning focuses on the theoretical side.
Steps in Operational Planning
1. SWOT analysis:
a. Strengths and Weakness are internal to the organisation.

b. Opportunities and threats usually come from outside the organisation
2. Setting goals
a. Based on the SWOT analysis, goals need to be defined.

3. Formulate goals: Specific and measurable goals should be formulated which must be
agreed by all the members.
4. Describe means to achieve the goal – this refers to the “know-how”
5. Set time period for achieving the goal
6. Prepare work schedule with resources assigned with described responsibilities
Inventory control, Sales management and analysis of capital investment could be few
management information system in the operational level.
Good execution of operational plan will result in the following:
• Increased efficiency levels

• Improved quality of decisions
• Improved employee productivity and improved morale
Self-Assessment Questions -1
1. The operational planning decides on the _________ and the cost ________ .
2. __________ and ___________ of products are also an important aspect of operational
planning.

5. ECONOMIC AND THE BEHAVIOR THEORIES

Economic Theory – Economic theories of MIS are generally originated from operational
research. The economic theories of MIS deals with the application of modeling activities in
business and testing mathematical tools. The purpose of economic theories in MIS is to come
up with effective and optimum ways to test business operations.
Transactional agency theory of MIS is the relationship of interested individuals with the
agency costs. The owner employs agents for performing work on his behalf. The agent needs
to be managed and supervised. This leads to the involvement of IT in the function.
The cost theory of MIS is the theory focusing on the transactional cost. This theory suggests
that when a firm wants to succeed it must focus on lowering its transactional costs. This can
be done by expansion, taking over small firms, hiring more employees and market
integration. IT helps in lowering the transactional costs by facilitating organisational growth
by reducing costs and increasing efficiency.
With growing economy and reduction of cost of information technology, it has become more
feasible to replace the manpower like middle managers and clerical workers with
information technology. This also reduces the space required. The transaction costs like
searching for the suppliers and the vendors, communicating with them on a daily basis,
monitoring the workflow, tax and insurances, getting information on various products and
their sales etc., have been reduced. The management costs are reduced and the efficiency
increased due to the use of information technology and thus the revenue of the organization
increases.
Behavior Theory – The acquisition and distribution of information is done easily at a

much lower cost. The senior executives can be in direct contact with the lower level working
units and get information about the working. Similarly, any information to be distributed to
the working units is also done directly, without any middle managers or supervisors. The
outcome of the introduction of information technology is the change in the organizational
structure, policies and procedures. When introduced, it may face a lot of resistance.

Types of Behavior Theory
• Contiguity theory of MIS deals with the idea of individual interest. It is a link between
individual ideas, memories and innovations with his experience. This theory states that
the more an individual is experienced the more quality ideas he can generate.
• Classical conditioning refers to a behavioral theory in MIS that states that the
response of an individual is automatic in certain situations. The response of an
individual is unconscious or unintentional in diverse situations.
• Operant conditioning theory is a behavior theory in MIS that states the process where
an organisational manager can learn the behavior through diverse consequences. This
theory establishes a link between individual behavior and situational consequences.
Behavior theories in MIS helps in:
1. Eliminating the middle-level managers by establishing a direct link between the top-
level managers and lower-level executives.
2. Facilitating better decision-making by establishing a centralised MIS in an organisation
as a whole.
3. Reducing the transactional, operational and functional costs.
5.1 Build And Use
Managers need to understand certain essential features of organizations in order to build

and use information systems successfully. All modern organizations are hierarchical,
specialized and impartial. They use explicit standard operating procedures to maximize
efficiency. All organizations have their own cultures and policies arising from differences in
interest groups. Organizations differ in goals, groups served, social roles, leadership styles,
incentives, surrounding environments and types of tasks performed. These differences
create varying types of organizational structures and they also help explain differences in
organizations’ use of information systems.
What impact do information systems have on organizations? Information systems and

the organizations in which they are used interact with and influence each other. The
introduction of a new information system will affect organizational structure, goals, work

design, values, competition between interest groups, decision making and day-to-day
behavior. At the same time, information systems must be designed to serve the needs of
important organizational groups and will be shaped by an organization’s structure, tasks,
goals, culture, politics and management. Information technology can reduce transaction and
agency costs and such changes have been accentuated in organizations using the internet.
The information systems department is the formal organizational unit that is responsible for
the organization’s information systems function. Organizational
characteristics and managerial decisions determine the role this group will actually play.
How do information systems support the activities of managers in organizations?
There are many different models of what managers actually do in organizations that show
how information systems can be used for managerial support. Early classical models of
managerial activities stressed the functions of planning, organizing, coordinating, deciding
and controlling. Contemporary research, looking at the actual behavior of managers, has
found that managers’ real activities are highly fragmented, variegated and brief in duration,
with managers moving rapidly and intensely from one issue to another. Managers spend
considerable time pursuing personal agendas and goals and contemporary managers shy
away from making grand, sweeping policy decisions.
The nature and level of decision making are important factors in building information
systems for managers. Decisions can be structured, semi- structured or unstructured, with
structured decisions clustering around the operational levels of the organization and
unstructured decisions around the strategic planning level. Decision making can also take
place at the individual level or at the group level. Individual models of decision making
assume that human beings can rationally choose alternatives and consequences based on
the priority of their objectives and goals. Organizational models of decision making illustrate
that real decision making in organizations takes place in areas where many psychological,
political and bureaucratic forces are at work.
Information systems have been most useful to managers by providing support to their roles
in disseminating information, providing liaison between organizational levels and allocating

resources. However, some managerial roles cannot be supported by information systems

and information systems are less successful in supporting unstructured decisions.
5.2 MIS For Competitive Advantage
How can businesses use management information systems for competitive

advantage?
Businesses can use strategic information systems to gain an edge over competitors. Such
systems change organizations’ goals, business processes, products, services or
environmental relationships, driving them into new forms of behavior.
Information systems can be used to support strategy at the business, firm and industry level.
At the business level of strategy, information systems can be used to help firms become low-
cost producers, differentiate between products and services, or serve new markets.
Information systems can also be used to “lock in” customers and suppliers using efficient
customer response and supply chain management applications. Value chain analysis is useful
at the business level to highlight specific activities in the business where information
systems are most likely to have a strategic impact.
At the firm level, information systems can be used to achieve new efficiencies or to enhance
services by tying together the operations of disparate business units so that they can function
as a whole or by promoting the sharing of knowledge across business units. At the industry
level, systems can provide competitive advantage by facilitating cooperation with other
firms in the industry, creating consortiums or communities for sharing information,
exchanging transactions or coordinating activities. The competitive forces model,
information partnerships and network economics are useful concepts for identifying
strategic opportunities for systems at the industry level.
Why is it so difficult to build successful information systems including systems that

promote competitive advantage?

Information systems are closely intertwined with an organization’s structure, culture and
business processes. New systems disrupt established patterns of work and power
relationships, so there is often considerable resistance to them when they are introduced.
Implementing strategic systems often requires extensive organizational changes and a

transition from one socio-technical level to another. Such changes are called strategic
transitions and are often difficult and painful to achieve. Not all strategic systems are
profitable, and they can be expensive to build. Many strategic information systems are easily
copied by other firms, so that strategic advantage is not always sustainable.
State whether the following statements are True or False
3. The management costs are reduced and the efficiency increased due to the use
of information technology and thus the revenue of the organization increases.
4. Information systems can be used to support strategy at the business, firm and
industry level.

6. DECISION MAKING WITH A MIS

Decision making is vital to all management activities. Managers have to make decisions for
setting goals, targets and objectives. They need to determine organisational structure, pre-
pare plans of action, manage employees, and introduce innovations in any business enter-
prise. All these activities would require decisions to be made.
Steps of Decision Making Process
The following are the important steps of the decision making process:
1. Identify the need/purpose of a decision

2. Gather information
3. Identify alternatives
4. Brainstorm and analyses different choices
5. Evaluate alternatives
6. Select the best alternative
7. Execute the decision
8. Evaluate results
Figure 1 given below depicts the different steps in the decision making process normally fol-
lowed by an organisation.
In other words, decision-making process can be divided into three phases namely,
• Intelligence: Raw data is collected, processed and examined to identify problems that
calls for decisions. This covers steps 1 &2
• Design: Inventing, developing and analysing the different decisions’ alternatives and
testing the feasibility of implementing decisions. This involves steps 3 to 5
• Choice: In this phase, the manager evolves a selection criterion such as maximum profit,
least cost etc. He selects the most satisfied one as a choice.

Step 1. Identify the Purpose
To start with, the problem has to be clearly analysed. There are some questions a manager
should ask to identify the purpose of the decision.
• What exactly is the problem?

• Why should the problem be solved?
• Who are the affected parties?
• Whether the problem has a deadline or a specific timeline to solve?
Step 2. Gather Information
Next, identify the information required and its sources. Gather information related to the
reasons causing the problem and about the stakeholders involved. Tools such as, Check
Sheets and Word Processor can be used.
Step 3. Identify Alternatives
Equipped with information, managers may face several directions or actions as alternatives
to choose from. Here, use the baseline criteria for judging alternatives. For example, profit is
one of the main factors in every decision-making process. Companies make good decisions
to increase profits. Likewise, baseline principles should be identified and adopted
appropriately.

Fig 1: Steps in the Decision Making Process
Step 4. Brainstorm and Analyze Choices
Brainstorming by managers and stakeholders to list down all the ideas, choices or solutions
can prove to be a helpful tool for both analysing the problem and solutions. Before idea
generation, it is important to understand the origin and causes of the problem and how to
prioritise these.
Step 5. Evaluation of Alternatives
Using appropriate principles and decision-making criteria to evaluate each alternative, is an

important step in the decision-making process. It is important to decide the criteria first.
Decision making becomes simpler then to use to the criteria to evaluate the alternatives

Step 6. Select the Best Alternative
Here, the selection of the best alternative is an informed decision to be made. Note that man-
agers have already followed a methodology to derive alternatives.
Step 7. Execute the Decision
It is the process of converting the decision into a plan, or a sequence of activities The plan
can now be executed by a manager across the floor of the company.
Step 8. Evaluate the Results
In this final step, managers need to evaluate the outcome of their decision. Also, check
whether any changes or corrections are required. Note that this experience can be helpful,
as a best practice, in making other decisions in future.
Types of Managerial Decisions
The decision that a manager has to make may range from setting up goals and targets for the
entire business enterprise to specific decisions regarding daily operations. From these
points of view, managerial decisions can be broadly classified into three categories, namely:
strategic, tactical, and operational decisions. Figure 2 shows the different types of
managerial decisions in an organisation.
Fig 2: Types of Managerial Decisions

A company generally makes three types of decisions:
(1) Strategic decisions

(2) Tactical decisions
(3) Operational decisions
Rational decision is the one, which efficiently ensures the achievement of the goal for which
the decision is made.There are three dimensions of rationality :
• Degree of satisfaction of human interest

• Degree of feasibility in achieving the objective
• Consistency in decision-making
Before getting into the types of decisions made in an organisation, let us understand some
problems in making rational decisions:
1. Ascertaining the problem: The main task is to define the problem in clear terms. The
management may define the problem as “sales are declining.” The decline of sales is
symptomatic; the real problem maybe somewhere else.
2. Insufficient knowledge: For perfect rationality, comprehensive information leading to
complete knowledge is necessary. An essential function of a manager is to detect
insufficient knowledge and find enough information to facilitate decision-making.
3. Not enough time: The decision-maker is under pressure to make decisions. If time is
limited, one may make hasty decisions that may not satisfy the test of the rationality of
the decision.
4. Environment: Sometimes, one is forced to make a decision, but the environment is not
conducive for it. The decision may fail the test of rationality as the environmental
factors considered in the decision making turn out to be untrue.
5. Other limitations: One has to make sure that all the aspects and factors of the situation
must be considered while making a rational decision.

6.1 Strategic Decisions
Strategic decisions are the long-term choices of actions implemented in whole or in a major
part of a business. These have contributed directly to the achievement of common goals of
the company.
Figure 3 shows the strategic decisions taken by the top level management.
OWNERS/BOARD OF
STRATEGIC
DIRECTORS
DECISIONS
TACTICAL MANAGERS
DECISIONS
OPERATIONAL MOST
DECISIONS EMPLOYEES
Fig 3: Strategic Decisions
A board of directors, whose members are elected by a company’s shareholders, makes

strategic decisions for an enterprise. Strategic decisions are a set of decisions and plans that
have a long-term or material impact on a company. These often include:
• The election process of officers and executives

• Shareholder distribution
• Company’s assets
• Employee benefit plans and other agreements
• Other long-term strategies like products & services to invest in

6.2 Tactical Decisions
These decisions refer to the implementation of strategic decisions. They are directed
towards developing divisional plans, structuring the workflows, establishing distribution
channels, making usage of resources such as men, materials, and money. These decisions are
taken at the middle level of management.
Tactical points requiring decisions include the following factors:
• Size and structure of a work force

• Sales and marketing strategy in the enterprise
• Signing in the non-disclosure agreements
• Work assignments allocated to particular groups and employees
• Large purchases done within a previously approved budgets
• Roadmap of the products and services
6.3 Operational Decisions
These decisions are related to daily operations of a company. They have a short-term horizon
as these are made repeatedly. These decisions are based on facts regarding the events, and
do not require much business judgment.
Operational managers and other employees make operational decisions for the company.
Operational managers include mid-level, supervisory and lower-level management.
Decisions made by them include:
• Scheduling activities for the employees

• Training on specific routines in a company (e.g., sales, computer training, etc.)
• Purchasing office supplies

7. ENHANCING DECISION-MAKING IN DIGITAL FIRMS
Good IT infrastructure and a sound MIS soes not always produce positive results. The
following are the three main reasons : Information quality, management filters, and
organizational culture
People in all types of managerial roles who are involved in decision-making in any level in
the organisation need to be mindful of these and handle them appropriately.
Information Quality. High-quality decisions require high-quality information. All

corporate databases and files have varying levels of inaccuracy and incompleteness, which
in turn will degrade the quality of decision making.
Table 12-3 describes information quality dimensions that affect the quality of decisions. If
the output of information systems does not meet these quality criteria, decision-making will
suffer.
QUALITY DIMENSION DESCRIPTION
Accuracy Does the data represent reality?
Integrity Is the structure of data and inter-relationship between entities and

attributes consistent?
Consistency Is the data definition consistent all across the system?
Completeness Are all the necessary data present?
Validity Is the data factually sound?
Timeliness Is the data available when needed?
Accessibility Is the data accessible and usable?
Management Filters. Even with timely, accurate information, some managers make bad
decisions. Managers (like all human beings) absorb information through a series of filters to
make sense of the world around them. Managers have selective attention, focus on certain
kinds of problems and solutions, and have a variety of biases that reject information that
does not conform to their prior conceptions

Organizational Inertia and Politics. Organizations are bureaucracies with limited

capabilities and competencies for acting decisively. When environments change and
businesses need to adopt new business models to survive, strong forces within organizations
resist making decisions calling for major change. Decisions taken by a firm often represent
the balance of the firm’s various interest groups rather than the best solution to the problem.
Decision Analysis
Decision analysis (DA) is a systematic, quantitative, and visual approach to addressing and
evaluating the important choices that businesses sometimes face. The idea is used by large
and small corporations alike when making various types of decisions, including
management, operations, marketing, capital investments, or strategic choices.
The following are the Steps in modelling analytically the process of decision-making:
• What-If Analysis: Decisions are made using a model of the problem for developing
various solution alternatives & testing them for best choice. The model is built with
some variables and relationship between variables . in reality, the considered values of
variables and relationships may not hold good and therefore solution needs to be tested
for an outcome, if considered values of variables or relationship change. We test the
effect on a solution by changing the value of several variables simultaneously or
changing the relations between them.
• Sensitivity Analysis: It helps to understand the significance of variable in decision
making and improves the quality of decision making. Only one variable is changed, and
the rest are kept unchanged and the effect on the solution is studied in this model of
decision analysis
• Goal seeking analysis: This helps to fix all the factors so that one can achieve the actual
goal easily.
• Goal Achieving analysis: The goal is fixed, and all variables and values are analysed in
order to help to seek the goal.

Typically in an organization, GDSS is used for decision making and analysis. A group
decision-support system (GDSS) is an interactive computer-based system used to facilitate
the solution of unstructured problems by a set of decision makers working together as a
group . GDSS, gives tools and advances intended unequivocally for cooperative choice
making .
5. In decision-making process, we choose more than one course of action from a few
possible alternatives. [True/False]
6. Strategic decisions are majorly carried out by the ___________level of management.
7. Operational decisions are related to_________ operations of an enterprise.
8. In the process of information gathering, tools such as ____________ can be effectively
used.

8. SUMMARY
In this unit you have studied about the organizational structure of MIS in an enterprise. You
have studied about the Management Information System at various levels. You have also
studied about strategic level planning and operational level planning. You have come to
know how to use management information system for competitive advantage.
1. Describe the operational level planning process in any organization.

2. How can we use MIS for competitive advantage?
10. ANSWERS
1. True
2. True
3. False
4. Investment, cost control
5. Costing, pricing
6. True
7. True
8. False
9. Top Level
10. day to day
11. Check sheet
Terminal Questions
1. Refer 4, Operational Level planning process

2. Refer 5.2, MIS for competitive advantage

11. SUGGESTED BOOKS & E-REFERENCES
• James A. O’Brien George M Marakas, Information Systems, 15th Edition: McGraw-Hill

• Kenneth C. Laudon, Jane P. Laudon, 13th Edition 2014, Global Edition: Pearson England
• A.K Gupta, 2000, Management Information System: Sultan Chand Publications
• Jawadekhar, Management Information System, A Global Digital Perspective: McGraw-
Hill
REFERENCES
• https://www.business.com
• https://learn.saylor.org
• https://leadingage.org/case-studies
• http://docshare.tips/

ADMINISTRATION
SEMESTER 4
DBB2202
SYSTEM
Unit 8: Enterprise Resource Planning 1

Unit 8
Enterprise Resource Planning
Table of Contents

No / Graph Activity
1 Introduction - -
3
1.1 Objectives - -
2 Basics of ERP - 1 4
3 Evolution of ERP - 2I 5 -6
4 Enterprise Systems in Large Organizations - 3
4.1 ERP Before and After - -
4.2 Best Practices - -
4.3 Implementation - -
4.4 Process Preparation - - 7 - 15
4.5 Configuration - -
4.6 Consulting Services - -
4.7 Customization Services - -
4.8 Maintenance and Support Services - -
5 Benefits and Challenges of Enterprise - -
16 -19
Systems
6 Features and Scope of ERP - 4
6.1 Features of ERP - - 20 - 22
6.2 Scope of ERP - -
7 Summary - II 23
9 Answers - - 23 - 24

1. INTRODUCTION
In the previous unit, you studied the Management Information System at various levels. You
have also studied strategic level planning and operational level planning. You have come to
know how to use management information system for competitive advantage. In this unit
you will study about a package that helps in performing the basic functions of organizations,
which is termed as Enterprise Resource Planning. ERP is one of the systems, which is a
unique process. Today's ERP systems can cover a wide range of functions and integrate them
into one unified database. An organization needs to carry out its processes in various
departments like Human Resource, Marketing, finance, accounting and banking transactions,
business communication, etc. Today, they can all fit under one umbrella - the ERP system
with the help of information systems.
To have a better understanding of Enterprise Resource Planning, you should have

knowledge of enterprise, resource, functional information systems etc.
1.1 Objectives
❖ Describe Enterprise Resource Planning

❖ Elaborate the working of enterprise systems in large organizations
❖ List the benefits and challenges of enterprise systems
❖ State the objectives of ERP system
❖ Explain various technologies in ERP
❖ Describe the scope and features of ERP

2. BASICS OF ERP
Enterprise: Enterprise is a complete business consisting of functions, divisions, and other
components which are used to complete specific objectives and tasks. Enterprise includes
people achieving goals and objectives with the available resources.
Resources: Resources are the assets of any organization. These assets are assigned to
activities and are used in the process of producing an output, product or services. Resources
include money, man and material.
Enterprise Resource Planning: It is an integrated cross functional software that

reengineers manufacturing, distribution, finance, human resources and other basic business
processes of a company to improve its efficiency, agility and profitability. ERP is built with a
vision to providing businesses with an integrated information system. ERP software consists
of integrated modules that give a company a real-time cross functional view of its core-
business processes such as production, order processing and sales and its resources such as
cash, raw materials, production capacity and people.
1. _________________is a complete business, consisting of functions, divisions and other

components which are used to complete specific objectives and tasks.
2. Resources include _____________ , ______________ and ______________ .
3. ______________are built with a vision to providing businesses with an integrated
information system.

3. EVOLUTION OF ERP
Manufacturing Management Systems have evolved in stages over the past few decades, from
a simple means of calculating material requirements to the automation of an entire
enterprise. Around 1980, over-frequent changes in sales forecasts entailing continual
readjustments in production as well as the unsuitability of the parameters fixed by the
system, led MRP (Material Requirement Planning) to evolve into a new concept :
Manufacturing Resource Planning (or MRP2) and finally the generic concept Enterprise
Resource Planning (ERP).
In 1960s, Inventory management and control was used to maintain optimum inventory stock
in warehouse. Focus was on manufacturing systems only and MRP was around inventory
control only. Later in 1970s MRP (Materials Requirements Planning, then Manufacturing
Resource Planning) came in to help schedule the production processes However inventory
and materials management restricted to manufacturing sector alone. Even in that sector,
these tools did not provide the needed benefits. At this juncture, in 1980s the MRP-II
(Manufacturing Requirements Planning) was designed to take care the entire coordination
from parts purchase to optimising the production process.
In 1990s ERP was born. It is based on client-server architecture. While it focussed on

integration it gave flexibility. Beyond 2000, ERP-II evolved and included the accounting,
financial and CRM operations. All of these were designed as modules that could be
customised and integrated based on the business model of the organisation.
ERP systems now attempt to cover all basic functions of an enterprise, regardless of the
organization's business or charter. Non-manufacturing businesses, non-profit organizations
and governments all now utilize ERP systems.
To be considered an ERP system, a software package must provide the functions of at least
two systems. For example, a software package that provides both payroll and accounting
functions could technically be considered an ERP software package.
However, the term is typically reserved for larger, more broadly based applications. The
introduction of an ERP system to replace two or more independent applications eliminates

the need for external interfaces previously required between systems, and provides
additional benefits that range from standardization and lower maintenance to easier and/or
greater reporting capabilities. Organisations reaped the benefits from ERP as it gave access
to real-time data.
Examples of modules in an ERP which formerly would have been standalone applications
include: Manufacturing, Supply Chain, Financials, Customer Relationship Management
(CRM), Human Resources, Warehouse Management and Decision Support System.
Activity 1
Read the article on Evolution of ERP
4. The initials ERP originated as an extension of .

4. ENTERPRISE IN LARGE ORGANIZATIONS

Some organizations – typically those with sufficient in-house IT skills integrate multiple
software products and choose to implement only portions of an ERP system and develop an
external interface to other ERP or standalone systems for their other application needs. For
example, one may choose to use the HRMS from one vendor, and the financials systems from
another and perform the integration between the systems, themselves.
This is very common in the retail sector, where even a mid-sized retailer will have a discrete
Point-of-Sale(POS) product and financials application, then a series of specialized
applications to handle business requirements such as warehouse management, staff
rostering, merchandising and logistics, ERP delivers a single database that contains all data
for the software modules, which would include:
Manufacturing: Engineering, Bills of Materials, Scheduling Capacity, Workflow Management,

Quality Control, Cost Management, Manufacturing Process, Manufacturing Projects,
Manufacturing Flow.
Supply Chain Management: Inventory, Order Entry, Purchasing, Product Configuration

Supply Chain Planning, Supplier Scheduling, Inspection of goods, Claim Processing,
Commission Calculation.
Financials: General Ledger, Cash Management, Accounts Payable, Accounts Receivable, Fixed
Assets.
Projects: Costing, Billing, Time and Expense, Activity Management.
Human Resources: Payroll, Training, Time & Attendance, Roistering, Benefits.
Customer Relationship Management: Sales and Marketing, Commissions, Service, Customer

Contact and Call Center support.
Data Warehouse and various Self-Service interfaces for Customers, Suppliers, and
Employees.

Enterprise Resource Planning is a term originally derived from manufacturing resource

planning that followed materials requirements planning. MRP evolved into ERP when
"routings" became a major part of the software architecture and a company's capacity
planning activity also became a part of the standard software activity. ERP systems typically
handle the manufacturing, logistics, distribution, inventory, shipping, invoicing, and
accounting for a company. Enterprise Resource Planning or ERP software can aid in the
control of many business activities, like sales, marketing, delivery, billing, production,
inventory management, quality management, and human resource management.
ERP systems saw a large boost in sales in the 1990s as companies faced the Y2K problem in
their legacy systems. Many companies took this opportunity to replace their legacy
information systems with ERP systems. This rapid growth in sales was followed by a slump
in 1999, at which time most companies had already implemented their Y2K solution.
ERPs are often incorrectly called back office systems indicating that customers and the
general public are not directly involved. This is contrasted with front office systems like
customer relationship management (CRM) systems that deal directly with the customers, or
the eBusiness systems such as eCommerce, eGovernment, eTelecom, and eFinance, or
supplier relationship management (SRM) systems.
ERPs are cross-functional and enterprise wide. All functional departments that are involved
in operations or production are integrated into one system. In addition to manufacturing,
warehousing, logistics, and information technology, this would include accounting, human
resources, marketing, and strategic management.
ERP II means open ERP architecture of components. The older, monolithic ERP systems
became modularised.
EAS – Enterprise Application Suite is a new name for formerly developed ERP systems which
include (almost) all segments of business, using ordinary Internet browsers as thin clients.

4.1 ERP Before and After
Before
Prior to the concept of ERP systems, departments within an organization (for example, the
human resources (HR)) department, the payroll department, and the financial department)
would have their own computer systems. The HR computer system (often called HRMS or
HRIS) would typically contain information on the department, reporting structure, and
personal details of employees. The payroll department would typically calculate and store
paycheck information. The financial department would typically store financial transactions
of the organization. Each system would have to rely on a set of common data to communicate
with each other. For the HRIS to send salary information to the payroll system, an employee
number would need to be assigned and remain static between the two systems to identify
accurately an employee. The financial system was not interested in the employee-level data,
but only in the payouts made by the payroll systems, such as the tax payments to various
authorities, payments for employee benefits towards provident funds, and so on. This
provided complications. For instance, a person could not be paid in the payroll system
without an employee number.
After
ERP software, among other things, combined the data of formerly separate applications. This
made the worry of keeping numbers in synchronization across multiple systems disappear.
It standardized and reduced the number of software specialties required within large
organizations.
4.2 Best Practices
When implementing an ERP system, organizations essentially had to choose between

customizing the software and modifying their business processes to the "Best Practice"
function delivered in the vanilla version of the software.
Typically, the delivery of Best Practice applies more usefully to large organizations and
especially where there is a compliance requirement such as IFRS, Sarbanes-Oxley or Basel II.

This is because the procedure of capturing and reporting legislative or commodity content
can be readily codified within the ERP software, and then replicated with confidence across
multiple businesses that have the same business requirement.
Where such a compliance or commodity requirement does not underpin the business
process, it can be argued that determining and applying a Best Practice actually erodes
competitive advantage by homogenizing the business as compared to everyone else in the
industry sector.
4.3 Implementation
Implementing an ERP system is not an easy task to achieve, in fact it takes lots of planning,
consulting and in most cases 3 months to 1 year +. ERP systems are extraordinarily wide in
scope and for many large organizations can be extremely complex. Implementing an ERP
system will ultimately require significant changes on staff and work practices. While it may
seem reasonable for an in house IT staff to head the project, it is widely advised that they
work with ERP implementation consultants due to the fact that they are specifically trained
in implementing these types of systems.
One of the most important traits that an organization should have when implementing an
ERP system is ownership of the project. Because so many changes take place and its broad
effect on almost every individual in the organization, it is important to make sure that
everyone is on board and will help in making the project and using the new ERP system a
success.
Usually organizations use ERP vendors or consulting companies to implement their

customized ERP system. There are three types of professional services that are provided
when implementing an ERP system, they are Consulting, Customization and Support.
Because of their wide scope of application within a business, ERP software systems are
typically complex and usually impose significant changes on staff work practices.
Implementing ERP software is typically not an "in- house" skill, so even small projects are
more cost effective if specialist ERP implementation consultants are employed. The length
of time to implement an ERP system depends on the size of the business, the scope of the

change and the willingness of the customer to take ownership of the project. A small project
(e.g., a company of less than 100 staff) may be planned and delivered within 3-9 months;
however, a large, multi-site or multi-country implementation may take years.
To implement ERP systems, companies often seek the help of an ERP vendor or of third-party
consulting companies. These firms typically provide three areas of professional services:
consulting, customization and support.
4.4 Process Preparation
ERP vendors have designed their systems around standard business processes, based upon
best business practices. Different vendors have different types of processes but they are all
of a standard, modular nature. Firms that want to implement ERP systems are consequently
forced to adapt their organizations to standardized processes as opposed to adapting the
ERP package to the existing processes. Neglecting to map current business processes prior
to starting ERP implementation is a main reason for failure of ERP projects. It is therefore
crucial that organizations perform a thorough business process analysis before selecting an
ERP vendor and setting off on the implementation track. This analysis should map out all
present operational processes, enabling selection of an ERP vendor whose standard modules
are most closely aligned with the established organization. Redesign can then be
implemented to achieve further process congruence. Research indicates that the risk of
business process mismatch is decreased by:
⎯ linking each current organizational process to the organization's strategy;

⎯ analyzing the effectiveness of each process in light of its current related business
capability;
A disadvantage usually attributed to ERP is that business process redesign to fit the
standardized ERP modules can lead to a loss of competitive advantage. While documented
cases exist where this has indeed materialized, other cases show that following thorough
process preparation ERP systems can actually increase competitive advantage.

4.5 Configuration
Configuring an ERP system is largely a matter of balancing the way you want the system to
work with the way the system lets you work. Begin by deciding which modules to install, and
then adjust the system using configuration tables to achieve the best possible fit in working
with your company’s processes.
Modules – Most systems are modular simply for the flexibility of implementing some
functions but not others. Some common modules, such as finance and accounting are
adopted by nearly all companies implementing enterprise systems; others however, such as
human resource management are not needed by some companies and therefore not adopted.
A service company for example will not likely need a module for manufacturing. At times
companies will not adopt a module because they already have their own proprietary system
they believe to be superior. Generally speaking, the greater the number of modules selected,
the greater the integration benefits, but also the increase in costs, risks and changes involved.
Configuration Tables – A configuration table enables a company to tailor a particular aspect

of the system to the way it chooses to do business. For example, an organization can select
the type of inventory accounting – FIFO or LIFO – it will employ or whether it wants to
recognize revenue by geographical unit, product line, or distribution channel.
So what happens when the options the system allows aren’t just good enough? At this point
a company has two choices, both of which are not ideal. It can re-write some of the enterprise
system’s code, or it can continue to use an existing system and build interfaces between it
and the new enterprise system. Both options will add time and cost to the implementation
process. Additionally, they can dilute the system’s integration benefits. The more customized
the system becomes the less possible seamless communication becomes between suppliers
and customers.
4.6 Consulting Services
Consulting Services – usually consulting services are responsible for the initial stages of ERP
implementation, they help an organization go live with their new system, with product
training, workflow, improvement in ERP's use in the specific organization etc.

Consulting team is typically responsible for your initial ERP implementation and subsequent
delivery of work to tailor the system beyond "go live". Typically such tailoring includes
additional product training, creation of process triggers and workflow, specialist advice to
improve how the ERP is used in the business, system optimization, assistance writing
reports, and complex data extracts or implementing Business Intelligence.
The consulting team is also responsible for planning and jointly testing the implementation.
This is a critical part of the project, and one that is often overlooked.
Consulting for a large ERP project involves three levels: systems architecture, business
process consulting (primarily re-engineering) and technical consulting (primarily
programming and tool configuration activity). A systems architect designs the overall
dataflow for the enterprise including the future dataflow plan. A business consultant studies
an organization's current business processes and matches them to the corresponding
processes in the ERP system, thus 'configuring' the ERP system to the organization's needs.
Technical consulting often involves programming. Most ERP vendors allow modification of
their software to suit the business needs of their customers.
For most mid-sized companies, the cost of the implementation will range from around the
list price of the ERP user licenses to twice this amount (depending on the level of
customization required). Large companies, and especially those with multiple sites or
countries, will often spend considerably more on the implementation than the cost of the
user licenses, three to five times more is not uncommon for a multi-site implementation.
4.7 Customization Services
The Customization is the process of extending or changing how the system works by writing
new user interfaces and underlying application code. Such customizations typically reflect
local work practices that are not currently in the core routines of the ERP system software.
Examples of such code include early adopter features or interfacing to third party
applications. The Professional Services team is also involved during ERP upgrades to ensure
that customizations are compatible with the new release. In some cases the functions
delivered via a previous customization may have been subsequently incorporated into the

core routines of the ERP software, allowing customers to revert to standard product and
retire the customization completely.
Customizing an ERP package can be very expensive and complicated, because many ERP
packages are not designed to support customization, so most businesses implement the best
practices embedded in the acquired ERP system. Some ERP packages are very generic in
their reports and inquiries, such that customization is expected in every implementation. It
is important to recognize that for these packages it often makes sense to buy third party
plug-ins that interface well with your ERP software rather than reinventing the wheel.. While
it can seem like a considerable – and expensive – overhead to the customization project, it is
critical that someone is responsible for the creation and the user testing of the
documentation. Without the description on how to use the customization, the effort is largely
wasted as it becomes difficult to train new staff in the work practice that the customization
delivers.
4.8 Maintenance And Support Services
Once your system has been implemented, the consulting company will typically enter into a
Support Agreement to assist your staff to keep the ERP software running in an optimal way.
It is a good practice to form a committee headed by the consultant and heads of department
of all users of ERP who can manage the change requests. This will allow direct long term
projections into the client's needs, thus minimizing future conversion patches on a more
dedicated approach to initial conversion.
A Maintenance Agreement typically provides you rights to all current version patches, and
both minor and major releases, and will most likely allow your staff to raise support calls.
While there is no standard cost for this type of agreement, they are typically between 15%
and 20% of the list price of the ERP user licenses.

5. Manufacturing resource planning followed ______________ .

6. ______________________ is a new name for formerly
developed ERP systems which include all segments of business using ordinary
internet browsers as thin clients.
7. Who have designed their systems around standard
business processes, based upon best business practices?
8. ___________________an ERP system is largely a matter of balancing the way you
want the system to work with a way it works.
9. ___________________ are used by the system for the flexibility of implementing some
functions but not others.
10. __________________ system is when a single database is utilized and contains all
data for various software modules.

5. BENEFITS AND CHALLENGES IN ERP

Benefits: In the absence of an ERP system, a large manufacturing company may find itself
with many software applications that do not talk to each other and do not effectively
interface.
1. Cost Savings: In the absence of ERP, every department has its own IT infrastructure
and its associated costs to maintain them. Added to that, they spend lots of human
effort integrating data and cross verifying reports produced by different
departments. In this business context, ERP is a great solution to have . “Focussed IT
costs” spent on ERP can help reap benefits.ERP system helps to decrease costs and
streamline spending plan. It minimizes the training requirements and the effort in
discussion between departments, as the ERP system takes care of it.
2. Unified View: It permits unified view to the prime business processes by making data
available from every division that can be appropriately accessed by the workforce.
ERP helps update the information progressively to avoid mistakes between the
various departments and make the work measures precise. For example, “Inventory
levels” seen by the sales department as well as the purchase departments are the
same and hence there is consistency in reading the status.
3. Improved Reporting & Planning: ERP system provides an ability to analyse the
functions across different divisions without any confusion of multiple spreadsheets..
For example, ERP helps to forecast as precisely as possible, update each new change,
and ultimately plan the accompanying system and activities.
4. Modularity: It offers applications that can effectively be implemented in accordance
with the business needs. Each application is designed to make integration with the
other modules seamless. This is an important benefit during the early stages of ERP
integration when modules are integrated in phased manner
5. Improved Efficiency: ERP optimises and automates some work cycles to make them
quicker and more proficient. The system thus can minimise the efforts required by
the workers in order to execute their daily operations. It helps in eradicating the
repetitive manual processes

6. Improved Customer Service: With the help of this system, the sales team of an entity
can concentrate on building customer relationships. With processes automated and
simplified, employees can provide better responses to customer queries, improve the
customer experience. These will result in better customer retention rates
7. Data Security & Quality: An ERP system maintains a single repository of information,
which then helps in improving the accuracy, consistency and security of an entity’s
data. The ERP system has inseparable controls to assure the security of the data. It
maintains different access controls to different sets of users, depending upon their
role and authority in the organization.
8. Standardised Business Processes: By standardising their own processes and systems,
businesses will be able to improve productivity. Then these processes will deliver
continuous results, which will allow them to continuously improve their way of
operating the business.
Tasks that need to interface with one another may involve:
• A totally integrated system

• The ability to streamline different processes and workflows
• The ability to easily share data across various departments in an organization
• Improved efficiency and productivity levels
• Better tracking and forecasting
• Lower costs
Disadvantages –
While advantages usually outweigh disadvantages for most organizations implementing an

ERP system, here are some of the most common obstacles experienced:
Challenges:
Related to Business process re-engineering: Identification of existing processes that can

benefit from ERP consolidation is a big challenge for the workers. Integration of all
information is difficult for organisations with various divisions or units . Customisations in
many situations are limited. If the ERP system is not adequate, then the company would

adapt its existing processes, which would be considered as backward. This adaption will take
extra efforts of the workforce. Re-engineering of business processes to fit the "industry
standard" prescribed by the ERP system may lead to a loss of competitive advantage.
Sometimes, the system may be over-engineered relative to the actual needs of the customer.
Lack of Flexibility: ERPs are often seen as too rigid and too difficult to adapt to the specific
workflow and business process of some companies – this is cited as one of the main causes
of their failure. Systems can be difficult to use. Systems are too restrictive and do not allow
much flexibility in implementation and usage. . Lack of flexibility can be reduced by choosing
an effective software at the right time . ERPs may be too rigid for specific organizations that
are either new or want to move in a new direction in the near future.
Resistance to Change: Many problems that organizations have with ERP systems are due to
inadequate investment in ongoing training for personnel involved, including those
implementing and testing changes, as well as a lack of corporate policy protecting the
integrity of the data in the ERP systems and how it is used. People are not open to changes
and this results in a delay in integrating an effective system. Management should make
constructive efforts to change the minds of people by adapting such processes . Without any
satisfaction and a proper discussion of the management team, no process can result in
increasing profitability.
ERP Adoption Issues: The system can suffer from the "weakest link" problem – inefficiency
in one department or in one of the partners may affect other participants. Some large
organizations may have multiple departments with separate, independent resources,
missions, chains-of-command, etc., and consolidation into a single enterprise may yield
limited benefits. There are frequent compatibility problems between the various legacy
systems of the partners. Many of the integrated links need high accuracy in other
applications to work effectively. A company can achieve minimum standards, and then over
the course of time "dirty data" will reduce the reliability of some applications. Once a system
is established, switching costs are very high for any one of the partners (reducing flexibility
and strategic control at the corporate level). The blurring of company boundaries can cause
problems in accountability, lines of responsibility, and employee morale. Resistance to

sharing sensitive internal information between departments can reduce the effectiveness of
the software.
Other Issues: In addition, ERP systems can be very expensive to install often ranging from
30,000 US Dollars to 500,000,000 US Dollars for multinational companies.ERP vendors can
charge sums of money for annual license renewal that s unrelated to the size of the company
using the ERP or its profitability.Technical support personnel often give replies to callers,
that are inappropriate for the caller's corporate structure. Computer security concerns arise,
for example when telling a non-programmer how to change a database on the fly, in a
company that requires an audit trail of changes so as to meet some regulatory standards.

6. ERP: FEATURES & SCOPE
Integration is an extremely important part of ERP. ERP's main goal is to integrate data and
processes from all areas of an organization and unify them for easy access and work flow.
ERPs usually accomplish integration by creating one single database that employs multiple
software modules providing different areas of an organization with various business
functions. Although the ideal configuration would be one ERP system for an entire
organization, many large organizations usually create an ERP system and then build upon
the system and external interface for other standalone systems which might be more
powerful and perform better in fulfilling an organization’s needs. Usually this type of
configuration can be time consuming and does require lots of labor hours.
6.1 Features of ERP
Enterprise wide integration: ERP is a central view of essential financial, operational and
business data across all departments. Data silos lead to inefficiency, missed opportunities
and departments working at cross-purposes. The primary, and maybe most significant,
benefit of ERP is a central view of essential financial, operational and business data that can
be shared across the organization in near-real-time.
ERP systems provide the means to develop business intelligence by turning that data into
reports and insights that a company can use to re-allocate resources or capitalize on new
market opportunities, among other actions.
Automation: ERP provides the ability to automate repetitive mundane tasks so that the
employees can divert their efforts towards more value-added tasks. Some examples are tasks
in payroll, order processing, invoicing, reporting and more. Automation minimizes the time
spent on manual data entry, reduces errors and lets employees focus on more value-added
tasks. The nature of an ERP system means that data entered by one user is available across
the organization. So, for example, an inventory tracking module could automatically trigger
a shipment and invoice when a certain SKU becomes available. That translates into more
revenue and a better customer experience. Or, line-of-business executives could
automatically receive up-to-date reports on cash flow and other metrics to inform decisions.

Unified Visibility: Before ERP systems, each department in an organization would most
likely have its own computer system, data and database. Unfortunately, many of these
systems would not be able to communicate with one another, or need to store or rewrite
data to make it possible for cross computer system communication. For instance, the
financials of a company were on a separate computer system from the HR system, making it
more intensive and complicated to process certain functions. Usually this is a module that
can be accessed by an organization’s customers, suppliers and employees. Once an ERP
system is in place, usually all aspects of an organization can work in harmony instead of
every single system needing to be compatible with each other. ERP platforms allow
companies to track, surface and understand business metrics—a powerful feature. They do
this by facilitating companywide access to near-real-time data from a common database. As
data is consistent at a given point in time, all departments see same data and use same
definitions. For large organizations, increased productivity and less types of software are the
result.
Analysis & Reporting: Using data more effectively is a perennial priority for business
leaders . The power of data analysis is enabling employees to gather a wide variety of
information and spin it into actionable insights—on new business opportunities as well as
ways to optimize current operations, reduce costs, spot fraud and better serve customers.
ERP reporting modules compile information about business operations into reports that
empower stakeholders to make more informed decisions, enhance business processes and
identify problem areas before the business suffers. Reports may include visual
representations, such as charts, graphs and dashboards, hopefully revealing trends and
patterns to improve business results.
6.2 Scope Of An Ideal ERP System
An ideal ERP system is when a single database is utilized and contains all data for various
software modules. These software modules can include:
a. Manufacturing: Some of the functions include: engineering, capacity, workflow

management, quality control, bills of material, manufacturing process, etc.

b. Accounts & Finance: Accounts payable, accounts receivable, fixed assets, general
ledger and cash management, etc.are covered in this module
c. Human Resources: Benefits, training, payroll, time and attendance, etc.are serviced
here
d. Supply Chain Management: This module covers Inventory, supply chain planning,
supplier scheduling, claim processing, order entry, purchasing, etc.
e. Project Management & Custom reporting: Costing, billing, activity management,
time and expense, etc.can be done using this module.
f. Customer Relationship Management: Sales and marketing, service, commissions,
customer contact, call center support, etc. can be covered by this ERP module.
State whether the following statement are True or False:
11. ERP delivers a single database that contains all data for the software modules.
12. All functional departments that are involved in operations or production
are integrated into one system.

7. SUMMARY
After going through this unit students can understand the concept of planning out MIS at
various management levels. Student have learnt about the advantages and disadvantages of
ERP. This unit covers conceptual topics to enable the students to understand the best
practices and consultancy services.
Activity 2
Read the article 8 Reasons Why ERP is Important and list applications of the same in
your domain of work
1. What is ERP? Explain the situations before and after its existence.
2. Explain the customization process in ERP.
3. What are the advantages and the disadvantages of ERP?
4. Explain the challenges in ERP.
9. ANSWERS
1. Enterprise
2. Money, Man and Material
3. Enterprise Resource Planning
4. MRP
5. Material Requirements Planning
6. Enterprise Application Suite
7. ERP vendors
8. Configuring
9. Modules
10. Ideal ERP

11. True
12. False
Terminal Questions
1. Refer section 2 and 4.1, enterprise resource planning and ERP before and after
2. Refer section 4.7, customization services
3. Refer section 5, benefits and challenges
4. Refer section 5, benefits and challenges
References:
• Management Information system, CSV Murthy, Himalaya Publishing House, fourth

edition, 2010
E-References:
• http://docshare.tips/
• https://www.slideshare.net/
• https://www.studymode.com/
• https://www.coursehero.com/

ADMINISTRATION
SEMESTER 4
DBB2202
SYSTEM
Unit 9: E-Enterprise System 1

Unit 9
E-Enterprise System
Table of Contents
No / Graph Activity
1 Introduction - -
3
1.1 Objectives - -
2 Managing the E-enterprise 1 - 4-7
3 Organisation of Business in an E-enterprise 2 1 8-12
4 E-business - - 13-15
5 E-commerce 3 2 16-22
6 E-communication - - 23-24
7 E-collaboration - 3 24-26
8 Centralising Services - - 27
9 Security Levels - - 28-31
10 Technology Roadmap for the organisation - - 31-32
11 Summary - I 32-33
13 Answers - - 34-35

1. INTRODUCTION
In the previous unit, you studied the basics of enterprise resource planning and its evolution.
You also studied how enterprise resource planning is used in large organisations. We
discussed the advantages and disadvantages of ERP in a system and figured out how an ideal
ERP system should look.
The emergence of Internet, business organisation of the 20th century has undergone
structural, cultural and qualitative changes, and a new organisational structure has emerged
which is known as e-business enterprise. e-business enterprise enables employees,
professionals, teams, groups, vendors and customers to perform business operations
through electronic exchange of data and information anywhere at any time. The business
operations are performed through e-communication and e- collaboration initiatives.
Therefore, e-business enterprise has a global market, reach, source and global competition.
In this unit you will study how to manage and enterprise with the help of four model of e-
Enterprise; eBusiness, eCommerce, eCommunication and eCollaboration. e-Enterprise is not
an dictionary word. It is just a coined term by the author to increase the effectiveness of the
meaning.
1.1 Objectives
❖ Explain the challenges of an e-business management.

❖ Compare and contrast e-enterprise business model with traditional business organisation
model.
❖ Explain the four business models that the enabling capabilities of technology have given
rise to.
❖ Explain the strength of ERP, SCM and CRM.
❖ Explain how a manager's role and responsibilities are changed in an e-enterprise
❖ Describe how manager is a knowledge worker in an e-enterprise.
❖ Explain the applications and systems used in e-communication.

2. MANAGING THE E-ENTERPRISE

Due to Internet capabilities and web technology, the definition of traditional business
organisation has undergone a change where scope of the enterprise now includes other
company locations, business partners, customers and vendors. It has no geographic
boundaries as it can extend its operations where Internet works. All this is possible due to
Internet and web, moving traditional paper driven organisation to information driven
Internet enabled e-business enterprise. e-business enterprise is open twenty-four hours a
day, and being independent, managers, vendors and customers can transact business
anytime from anywhere.
Thus, Internet capabilities have given e-business enterprise a cutting edge to increase the
business value. It has opened new channels of business, as buying and selling can be done on
Internet. It enables businesses to reach new markets anywhere across the world due to
communication capabilities. It has empowered customers and vendors / suppliers through
secure access to information to act on, wherever necessary. The costs of business operations
have come down significantly due to the elimination of paper- driven processes, faster
communication and effective collaborative work. The effect of these radical changes is the
reduction in administrative and management overheads, reduction in inventory, faster
delivery of goods and services to the customers.
In e-business enterprise the traditional people organisation based on ‘Command and

Control’ principle is absent. It is replaced by people organisations that are empowered by
information and knowledge in performing their roles. They are supported by information
systems, application packages, and decision-support systems. It is no longer a functional,
product and project or matrix organisation of people but e- organisation where people work
in network environment as a team or work group in virtual mode.
e-business enterprise is more process-driven, technology-enabled and uses its own

information and knowledge. It is lean in number, flat in structure, broad in scope and is a
learning organisation. In e-business enterprise most of the things are electronic, using digital
technologies and working on databases, knowledge bases, directories and document
repositories. The business processes are conducted through enterprise software like ERP,

SCM, and CRM supported by data warehouse, decision support, and knowledge management
systems.
Today most of the business organisations are using Internet technology, network, and
wireless technology for improving business performance, measured in terms of cost,
efficiency, competitiveness and profitability. They are using e-business and e-commerce
solutions to reach faraway locations to deliver products and services. The enterprise
solutions like ERP, SCM, and CRM run on Internet (Internet / Extranet) & Wide Area Network
(WAN). The business processes across the organisation and outside, run on e-technology
platform using digital technology. Hence today's business firm is also called e-enterprise or
Digital firm.
The goals of e-enterprise are as follows:

• Enhancement of program performance using technology
• Providing better service to customers and stakeholders
• Functioning as a transformative model with shared governance
The paradigm shift to e-enterprise has brought four transformations, namely:

• Domestic business to global business.
• Industrial manufacturing economy to knowledge-based service economy.
• Enterprise Resource Management to Enterprise Network Management.
• Manual document driven business process to paperless, automated, electronically
transacted business process.
These transformations have made the conventional organisational design obsolete. The
basis of the conventional organisational design has been command & control which is now
collaborate & collective winning. This change has affected the organisational structure, scope
of operations, reporting mechanisms, work practices, workflows, and business processes at
large. The comparison between the conventional organisational design and e-enterprise is
summarized in Table - 9.1.

Table 9.1: Comparison between Conventional Design and e-Organization
Conventional Organization Design e-enterprise

• Top heavy organizational structure • Flat organizational structure
• Work & work place location at one 1. Separation of work from work
place place location
• Manual & document-based work flows 1. Paperless work flows
• High administrative & management • Low overheads

overheads
• Inflexible, rigid and longer business 3. Flexible, agile and responsive
process cycles process cycles
• Private business process systems for • Public business processes
self use. They are refrained for usage and systems for use by
by customers, vendors and business customers, vendors and
partners business partners alike
• Low usage of technology • Use of internet, wireless and
network technologies
• All about command and control • Collaborate and collective
win
In e-enterprise, business is conducted electronically. Buying and selling is possible on

Internet. Books, CDs, computers, white goods and many such goods are bought and sold on
Internet. Buyers and sellers, through Internet, drive the market and Internet-based web
systems. The new channel of business is well-known as e-commerce. On the same lines,
banking, insurance, healthcare etc., are being managed through Internet e-banking, e-billing,
e-audit, & the use of Credit cards, Smart card, ATM, e-money are the examples of the e-
commerce applications.
The digital firm, which uses Internet and web technology and uses e-business and e-
commerce solutions, is a reality and is going to only increase in number.
MIS for e-business is different compared to the conventional MIS design of an organisation.
The role of MIS in an e-business organization is to deal with changes in global markets and
enterprises. MIS produces more knowledge-based products. Knowledge management

system is formally recognized as a part of MIS. It is effectively used for strategic planning for
survival and growth, increase in profit and productivity and so on.
To achieve the said benefits of e-business organisation, it is necessary to redesign the

organisation to realize the benefits of digital firm. The organisational structure should be
lean and flat. Get rid of rigid, established infrastructure such as branch office or zonal office.
Allow people to work from anywhere. Automate processes after re-engineering the
processes to cut down process cycle time. Make use of groupware technology on Internet
platform for faster response processing.
Another challenge is to convert domestic process design to work for international processes,
where integration of multinational information systems using different communication
standards, country-specific accounting practices, and laws of security are to be adhered to
strictly.
Internet and networking technology has thrown up another challenge of enlarging the scope
of an organisation where customers and vendors become part of the organisation. This
technology offers solutions to communicating, co-ordinating, and collaborating with
customers, vendors and business partners. This is not just a technical change in business
operations but also a cultural change in the mindset of managers and workers to look beyond
the conventional organisation. It means changing the organisational behaviour to take the
competitive advantage of the e- business technology.
The last but not the least important is the challenge to organise and implement information
architecture and information technology platforms, considering multiple locations and
multiple information needs arising due to global operations of the business, into a
comprehensive MIS.

3. ORGANISATION OF BUSINESS IN AN E-ENTERPRISE

Internet technology is creating a universal bench or platform for buying and selling of goods,
commodities and services.
Essentially, Internet and networks enable integration of information, facilitate

communication, and provide access to everybody from anywhere. And software solutions
make them faster and self-reliant as they can analyze data information, interpret and use
rules and guidelines for decision-making. These enabling capabilities of technology have
given rise to four business models that work together in an e-enterprise organisation. They
are:
• e-business • e-communication
• e-commerce • e-collaboration
These models work successfully because Internet technology provides the infrastructure for
running the entire business process of any length. It also provides e-mail and other
communication capabilities to plan, track, monitor and control the business operations
through the workers located anywhere. It is capable of linking disparate systems such as
logistics, data acquisition and radio frequency used systems and so on. Low cost connectivity
and physical, virtual and universal standards of Internet technology make it a driving force
to change conventional business model to e-business enterprise model.
Internet has enabled organisations to change their business processes and practices. It has
dramatically reduced cost of data and information processing, its sending and storing.
Information and information products are available on electronic media, and are a resident
on the network. Once everyone is connected electronically, information can flow seamlessly
from any location to any other location. For example, product information is available on an
organisation’s website which also has a feature of order placement. An order placed is
processed at the backend and status of acceptance or rejection is communicated
instantaneously to the customer. Such order is then placed directly on the order board for
scheduling and execution. These basic capabilities of Internet have given rise to number of
business models. Some of them are given in Table 9.2.

Table 9.2: Business Models
Business Model
Description Example
Virtual Store Provides information about product amazon.com,

and sells and delivers directly to rediff.com, ebay.com.
customer or business organization.
Information Provides information of interest and yahoo.com, msn.com
Store earns revenue from sharing and rediff.com.
advertising.
Transaction Processes bills for payment, icici.com
Process telephone, electricity, money transfer billjunction.com
& banking transactions, membership seekandsource.com
for club registration.
Online Provides a marketing platform where eauction.com
Marketing buyers and sellers can meet to seekandsource.com
exchange information, negotiate and
place order for delivery. Examples
are shoes, commodities.
Content Selling News, music, photos, articles, timesofindia.com
pictures, greetings are stored and gartner.com
sold at a price. aberdeen.com
Online Service Offers services to individuals and Railway, restaurant,
businesses at large and generates airlines booking.
revenue. Examples: Tours and Online maintenance
travels, manpower recruiting and service. Online
maintenance services. examination.
Virtual Provides platform to meet people of Linux Group, New
Communities common interests. Software user Groups, Application
groups, professional groups like Package User Groups,
doctors, managers, user groups. Community Groups
e-Learning Provides contents. e-books, CDs, sifyelearning.com

lessons, conducts test and offers coursera.com
certification. udemy.com
The primary activities play an important role in the organisation of activities in an e-business
system: These include activities which can add value to the product and exceed the costs
incurred. Competitive strategies can be best applied in such activities. How the information
system can raise operational efficiency, which is evaluated at this stage of value chain.

Key primary activities would inclide the following:

• Inbound logistics:This is about receiving and storing the goods
• Operations: Certain procedure is followed for converting raw materials into output. For
an e-business company, like in the previous stage, it includes branding or packaging
which can add value to the product.
• Outbound logistics: This covers activities for distributing the goods or services to the
customer. It involves storing products which are required to be shipped to the
consumer.
• Marketing & Sales: Various effective strategies have been undertaken in order to
improve the visible and appropriate consumers that can be targeted easily by adopting
certain marketing strategies. It involves the activities undertaken by companies to
convince or attract the consumer so that he/she can buy the goods or services of the
companies. An e-business company can take steps to run ads on any social website or
it can start e-mail marketing as well by creating a list of emails.
• Service: It includes all the activities which help in maintaining the products of the
company. Then, by providing effective services, it can help in improving customer
experience as well. For an e-business company, it would include activities of repairs,
warranties or replacements.
Procurement, HR activities, technology and other infrastructure related activities would be

some supporting key activities
The Internet and networks provide platform and various capabilities whereby
communication, collaboration, and conversion have become significantly faster, transparent
and cheaper. These technologies help to save time and resource, and enable faster decision-
making. The technology adds speed and intelligence to the business process, improving
quality of service to the customer.
The business process of serving the customer by offering goods, products or services is made
up of the following components.
• Enquiry processing
• Order preparation
• Order placement

• Order confirmation
• Order planning
• Order scheduling
• Order manufacturing
• Order status monitoring
• Order dispatching
• Order billing
• Order receivable accounting
• Order payment processing
The entire process in parts or in full can be handled through the technologies and software
solutions. It provides important strategic, competitive advantage. Further, the technology is
flexible and capable of handling any business models such as:
• Retailing, Trading, Auctioning
• Manufacturing, Distribution & Selling
• Outsourcing, Subcontracting
• Servicing, Training, Learning, Consulting
The resultant effect is the reduction in the cost of business operations, improved customer
loyalty and retention and better quality of service to the customer.
Four major applications, mentioned earlier, make this achievement possible. We go into
details of each one of them.

1. In e-business enterprise, traditional people organisation based on

'Command Control' principle is strengthened. (True/False)
2. e-business enterprise is more process-driven, technology-enabled and uses its
own information and knowledge to perform. (True/False)
3. Customer satisfaction and high level customer service are possible using
knowledge-based proactive management systems. (True/False)
4. In e-enterprise, business is conducted manually. (True/False)
5. MIS for e-business is the same as the conventional MIS design of an

organisation. (True/False)

4. E-BUSINESS
The scope of e-business is limited to executing the core business processes of an
organisation. These processes may have external interface like suppliers, customers,
contractors, consultants and so on. The core business processes of an organisation are
procurement, manufacturing, selling, distribution, delivery and accounting. These core
processes are best run by application packages like Enterprise Resource Planning (ERP). If
the definition of enterprise is made wider, including customers, suppliers and distributors,
application package like Supply Chain Management (SCM) is best suited for the planning and
execution of the entire business process.
In addition to these core processes, organisations use Internet enabled systems and other
technologies to handle these processes more effectively.
Transaction processing, workflow, work group and process control applications are the
backend support systems to main ERP / SCM enterprise management systems.
For example, when a supplier sends goods, it is received in the warehouse. This event is
processed e-way using e-business systems suite. The receipt, documents and packages are
read by bar coding system. Then receipt processing is done to confirm the validity of dispatch
by the supplier, confirmation of quality, acknowledging the receipt, updating the inventory,
communication of receipt to manufacturing, updating the purchase order, effecting material
accounts and supplier accounts, creating a liability in payables and posting it into cash flow
projections. You will observe that receipt processing is first done at locations like warehouse,
and 'Procurement' module of ERP takes over to effect seamlessly all updates and changes.
In this event processing, workflow system is used where quality of goods is checked,
confirmed and certified in stages by three agencies in the organisation. This event is
processed by a work group, which includes receiver at the warehouse, QA inspector and
warehouse manager, playing their respective roles in the receipt processing, as specified in
the workgroup application. Having accepted the goods, automated and process controlled
the goods movement, warehouse system takes over, and reads the receipt record to move
the goods physically to an assigned bin on a rack.

e-business systems use internet / intranet / extranet capabilities to process an event in a

seamless manner covering all technical, commercial, business aspects and implications of an
event. They perform internal business operations and interface with external agencies.
e-business system scope manages cross-functional application systems as a single business

process. It integrates cross functions seamlessly, automates the tasks, and updates the
information in real time. The ERP/ SCM and now Customer Relations Management system
(CRM) are a family of software solution packages dedicated to the core management of
functions of a business. They are supported by front-end and back-end systems and
applications designed for transaction processing, workflow management, work group
processing and automated process control. e- business systems use client/server
architecture and run on Internet platform. e-business systems lay the foundation for other
enterprise applications, namely e-commerce, e-communications, and e-collaboration.
The current e-business system scope is built through ERP, dedicated to manufacturing
resource management for effective use of capacity and enhancing productivity. SCM is
dedicated to logistics and distribution management and CRM is dedicated to customer
relations management for customer satisfaction.
IT, the backbone of e-enterprise, enables more precise target marketing towards intended
audience. Organisations use websites and portals to store and share information, use
networks to communicate, co-ordinate, and collaborate amongst structured teams and
virtual teams. Employees use notebook computers or Personal Digital Assistant (PDAs). Most
of the processes are automated and they use Internet, Intranet, and Extranet for
communication and e-business application packages to run the functional systems in an
integrated manner.
In Marketing System, IT helps to reach customers directly and is in a position to understand

customer behaviour and customer's demographic/ psychographic profile; it then helps to
segment market by customer for advertising, promotion and contact.
In Manufacturing System, IT helps to automate a number of management processes relating

to resource, capacity, engineering & design, maintenance and support. The application of IT

is so strong that it is termed as Computer Integrated Manufacturing (CIM) or Computer

Aided Manufacturing (CAM).
CIM adds value in manufacturing by way of simplification of processes in production and

design. Automation of simplified processes using process control devices, numerically
controlled machines and robots and lastly integration of all core and support processes
contributes to manufacturing excellence.
In Accounting and Finance system, IT application is very strong. e-business applications in

this area are capable of accounting every business entity such as material, men, machines,
cash, customer, vendor and so on. All processes, which deal with transaction, computing,
accounting and analysis are automated using system intelligence and knowledge driven
intelligent systems.
The architecture of these processes help to receive inputs from other functional systems like
marketing, manufacturing and HR, and processes the same to account and analyzes the
impact on the business performance, be it cost, profit or productivity. An integrated e-
business system is capable of forecasting resources requirement, managing resources,
budgeting capital, sales, manpower, and measuring financial performance.

5. E-COMMERCE
e-commerce is a second big application next to ERP. It essentially deals with buying and
selling of goods. With the advent of internet and web technology, e-commerce today covers
an entire commercial scope online including design and development, marketing, selling,
payment, delivery and servicing of goods. Some e-commerce applications add order tracking
as a feature for customers to know the delivery status of the order.
The entire model successfully works on web platform and uses Internet technology. e-
commerce process has two participants, namely buyer and seller, like in the traditional
business model. And unique and typical to e-commerce, there is one more participant known
as 'Merchant Server’. Merchant server in e-commerce secures payment to seller by
authorisation and authentication of commercial transaction.
e-commerce process model can be viewed in four ways and categories:

• B2C: Business Organisation to Customer
• B2B: Business Organisation to Business
• C2B: Customer to Business Organisation
• C2C: Customer to Customer
In B2C model, a business organisation uses websites or portals to offer information about a
product, through multimedia clippings, catalogues, product configuration guidelines,
customer histories and so on. A new customer interacts with the site and uses interactive
order processing system for order placement. On placement of order, secured payment
systems come into operation to authorize and authenticate payment to seller. The delivery
system then takes over to execute the delivery to customer.
In B2B model, buyer and seller are business organisations. They exchange technical &
commercial information through websites and portals. Then model works along similar lines
to B2C. More advanced B2B model uses Extranet and conducts business transactions based
on the information status displayed on the buyer’s application server. Auto component
industry uses this model for supplying parts and components to auto manufacturers based
on the inventory levels and production programme.

In C2B model, customer initiates actions after logging on to seller's website or to server. On
the server of the selling organisation, e-commerce applications are present for the use of the
customer.
The entire Internet banking process works on C2B model where account holders of the bank
transact a number of requirements such as seeking account balance, payment, money
transfer and so on.
In C2C model, customer participates in the process of selling and buying through the auction
website. In this model, website is used for personal advertising of products or services. E-
newspaper website is an example of advertising and selling of goods to the consumer.
In all models, there are two channels: one channel deals with information delivery and
sharing, and another deals with the commercial aspect of buying and selling. Some
illustrations of the two channels are listed below for all the four models.
In B2B model, the participants in e-business are two organisations with relations as buyer-
seller, distributor-dealer and so on.
Information Delivery Application

• Issuing business circular
• Product catalogue publications
• News clippings
• Messaging
Transaction Processing Application

• Order processing
• Order execution
• Payment processing
• Money transfer
In B2C model, the participants in e-business are an organisation and customer as an

individual. The customer is an individual consumer. The e-business applications in B2C are
the following:

Information Delivery and Sharing Application

• Organisation manual
• Database of knowledge
• Business information

• Payments to employee
• Issue of shares / bonds
• Delivery through courier
In C2B, the customer / consumer deals with a business organisation in individual capacity.
Information Delivery and Sharing application

• Download information from website
• Check bank balance

• Requesting an item
• Obtaining travel advance
• Inquiry processing
• Credit card payment
• Cash withdrawal through ATM
In C2C, both the parties are individuals and play the role of buyer / seller as the case may be.
Information Delivery and Sharing Application

• Messaging e-mail
• Reports
• News groups
• Interest groups

• Payment approvals
• Memos
• Sanctions and confirmations

• Issues and receipts
Broadly, information delivery and sharing application is built into back-end systems which
collect data and process it to create information databases. The users of these databases
could be organisations or individuals in the capacity of buyer or seller. The participants have
an authorized access to information and have rights to read, write or use it in any of the
application.
In B2C, messaging and information downloading is a big application. Inter organisation

communication applications, like news bulletin, communicating change of rules,
announcements and price revisions are very common in B2C. In the case of a bank,
announcing new interest rates, financial products, opening of a new branch, and so on is a
communication application.
Crediting interest on fixed deposits, dividend on shares, refund of unused share amount are
applications which fall within the domain of B2C, where partner 'C’ - an individual in B2C
model - is outside the organisation.
In C2B model, a customer interacts with information databases such as product catalogues
and price information, configures the product, compares the costs, places the order and has
it delivered after the electronic payment process. Products like computers, books, CDs, music
systems and different services are purchased through e-commerce application. Bill
payments are a big application of C2B model. The electronic mail, video conferencing and
news groups are other big applications where information is shared through electronic
communications.
In C2C model, e-business revolves around two individuals who deal with each other in their
individual capacities and play a designated role as buyer/seller, teacher/student,
manager/officer, brother/sister etc. e-mailing, sending e-greetings, payments, ordering and
sending gifts are the C2C model applications.
In all models, basic business and communication processes are executed through electronic
documents. Table - 9.3 shows an example of these documents.

Table 9.3: Paper Document vs. e-Document
Information on paper Information on E-document

Product information brochure Product catalogue document database
Order on paper Electronic order
Confirmation letter e-mail
Payment cheque Electronic cash, credit card, e-cheque
All transactions are paperless, hence confirmations, approvals, signatures etc., are
electronically carried out and the participant is informed through e-communications.
It should be noted that B2B business models actually run with the help of B2C, C2B and C2C
models. These models work under the umbrella of B2B. The execution process using these
models is assisted by portals, websites, e-mail, web directories and Internet Service
Providers (ISP). Each organisation in e-business environment has its website and e-mail
address and they are linked to portals which provide basic information. The portal is a
website dedicated to a specified class of items where focus is on information about the items
and not so much on who makes it. They are essentially information providers to users to
transact through e-business models. Some portals have scope of buying and selling, besides
information sharing. Search engines like Yahoo, Alta Vista, and Lycos are higher-level portals,
which help you find web addresses of buyers and sellers, for you to choose your e-business
partner.
e-business models are developed using these intermediaries. The components of e-business
models are:
• Internet / Extranet for internal communication
• Internet for external communication
• Network and TCP / IP protocols and tools for delivery mechanism
• Web server and web browser software for access, process, download and mailing.
• Back-end systems for application processes
The people involved in e-business model other than the users of the models are:
• Web master • Content provider
• Web designer • Content designer
• Web developer / programmer • Web administrator

Web master controls the website inflow/outflow, content management and regulation of the
traffic. The role is similar to DBA in RDBMS environment. Web designer conceptualizes and
visualizes the requirements of the parties and creates a web design, which is attractive,
useful and easy to handle. He plays the role of an architect and an interior designer of the
website. Web developer/programmer writes web pages using HTML, DHTML, XML, CGI
script and other tools. They are also involved in programme writing for transaction
processing, information processing, providing links to other sites, writing interfaces for
connectivity to other databases and to back-end ERI or legacy system. Content providers are
responsible for creating the text, images and a multimedia input to the site. These people are
subject experts and are key people in making a website a grand success. They develop
content, targeting the visitors of the website. The content designers give website layout,
icons, positioning and display ideas to deliver the content to the viewers. They provide input
in terms of aesthetics, colours, navigation through different information layers and so on.
Web administrator maintains the website. He is a trouble-shooter, in case of any problem.

The administrator is the first contact point to the users / viewers to solve their difficulties.
The job is to keep the website very responsive and to keep content latest and up-to-date.
Web administrator is responsible for performing viewer analysis in terms of number of hits,
website areas frequently accessed and the business generated.
All buying and selling does not succeed through e-commerce. Products and services that are
standard in nature, where the need for customer interaction is less are the ones, best-suited
for e-commerce. e-commerce culture is mostly virtual and impersonal. An e-commerce site
must create confidence in the buyer, showing competitive prices, providing assurance to its
performance and details of post-sale support. Faster processing in every step and covering
entire buying and selling cycle are very much essential. The look and feel of an e-commerce
website should be customer-friendly and attractive. Finally, security and reliability of
information, transactions, and order fulfilment are an absolute necessity.

6. e-business systems use and run on Internet platform.

7. Inter organisation communication applications, like news bulletin, communicating
change of rules, announcements and price revisions are very common in .
8. In model, a customer interacts with information databases such as product
catalogues and price information, configures the product, compares the costs, places
the order and gets it delivered after the electronic payment process.
9. business models actually run with the help of B2C, C2B and C2C
models.
10. ______________controls the website inflow/outflow, content management and regulation
of the traffic.
11. The look and feel of an e-commerce website should be .
12. The job of is to keep the website very responsive and to keep contents
latest and up-to-date.

6. E-COMMUNICATION
In e-business world, e-communication system is a backbone of all processes whose role is to
share information via messages or store information that can be downloaded by the
customer. This is done through many applications and systems. Most popular and widely
used messaging systems are e-mail & voice-mail. Through these systems both parties
communicate on ongoing basis. It provides facilities to store, delete and search mails,
supporting the reference need of the user. This system is popular when one to one
communication is needed.
When there is a need for communication in real time, systems available are voice
conferencing, Video conferencing and electronic meeting. Voice conferencing is conducted
on telephone network using speaker phones or networked PCs with Internet telephone
connectivity. Video conferencing provides capabilities of video and audio for participants
situated at different locations. Video conferencing also becomes an interacting and effective
communication system when it has a feature of white boarding and document sharing. In
electronic meeting system, participants sit in a meeting room with networked PCs and online
screen projector to discuss the agenda items. This system is useful to solve some problems
and communication within small groups.
Another e-communication system which is kind of offline is known as web publishing. Web
publishing uses websites and portals for storing documents, catalogues, drawings, pictures
and so on, for sharing. Such information is stored on documents. In this system, a user
searches, navigates, selects and downloads documents for self-use. Web publishing is
popular amongst research organisations, educational bodies, government organisations, and
large business and commercial bodies. These organisations have large information sets and
documents to share with the community.
e-communication systems are capable of sending messages, documents, and files in any
format over Internet. The communication could be online in offline mode and online in real
time mode. All e-communication systems have sufficient safeguards, which make them
secure for use. Internet and web technologies are used for forming different interest groups
to communicate and share the information. These groups are popularly known as 'user

groups' who have common interest in a subject, technology or tool, and come together with
the objective of improving the quality of the subject of interest by sharing the experience.
Enterprise information portal is another tool used for information posting and
communicating to users or customers. Portal is a web-based interface on an integrated
internet / intranet / extranet platform allowing customers to use applications and other
services. It provides secure access to all users and consumers to search for information,
analyse the situation and communicate. The difference between a website and a portal is that
the latter is a comprehensive multipurpose repository of information, applications and tools
to serve the consumers. Most of the information needs are met at one place like a portal,
eliminating excessive surfing, providing quick access to various resources and applications.
Relatively, website is a focussed platform with a limited objective of sharing and
communicating the information.
7. E-COLLABORATION
Every business has a number of work scenarios where groups of people work together to
complete tasks and to achieve a common objective. The groups could be teams or virtual
teams with different number of members. They come together to perform a task to achieve
some results. The process is called collaboration. The collaboration now is possible with
e-technologies which put these teams in network with Internet support for communication,
access to different databases and servers. These capabilities help to create collaborative
work systems and allow members to work together cooperatively on projects and
assignments. The biggest advantage of E-collaboration is that it taps the collective wisdom,
knowledge and experience of the members. The collaboration team or group could be within
an organisation and between organisations as well.
Since E-collaboration works on an Internet platform and uses web technology, work groups
/ teams need not be at one physical location. They can be at different locations and form a
virtual team to work on a project or assignment.
E-collaboration uses e-communication capabilities to perform collaborative tasks or project

assignments. Its effectiveness is increased by the software called 'GroupWare' that enables

the members of the group to share information, invoke an application and work together to
create documents and share them and so on. GroupWare is collaboration software.
E-collaboration helps to work effectively on applications like calendaring and scheduling

tasks, event project management, workflow applications, work group applications,
document creation and sharing, and knowledge management.
E-collaboration system components are Internet, Intranet, Extranet and LAN, WAN networks
for communication through GroupWare tools, browsers. Application packages are software
suite, which help process customer requirements. It is supported by databases present on
various servers like mail server, material database, knowledge server, document server and
so on.
Let us illustrate these two models using an event in a business such as receipt of material for
a job, to be processed on the shop floor. In this event there is a transaction receipt of material,
which needs to be processed, and then a workgroup will use this information of material
receipt. Each member of this workgroup has a different goal.
In workflow application, different members with a single goal of processing receipt of

material for inventory, process the transaction in its logical serial order. While in work group
application, the members have different assignments, in a sense independent of each other,
but they share information of receipt of material to complete their assignment.
All four applications: e-business, e-commerce, e-communication and E-collaboration run

Internet, Intranet, Extranet and other networks and use web technology extensively. In the
execution of these applications, e-organisations use the ‘GroupWare’ software and tools.
GroupWare is capable of handling core processes like communication, integration,
collaboration and delivery, and expedites processing of transaction, application and system.
The GroupWare thus becomes an integral part of the enterprise e-solution, designed to
manage the enterprise business.
For all four applications, packaged software solutions are available, broadly called
Enterprise Resource Planning (ERP), Customer Relation Management (CRM), and Supply
Chain Management (SCM). All three packages are then integrated into one customised suite

known as Enterprise Application Integration (EAI). EAI supports e-organisation functioning

through MIS.
MIS in e-organisations deviates from traditional report formats to automated intelligent

knowledge driven system. It forces the manager to act quickly to the response displayed on
the screen. Most of the decisions of middle and operational managements are delegated to
IT-enabled information and knowledge-driven systems. They are supported by the rule-
based transaction processing system, decision support systems, expert systems, artificial
intelligence (AI) systems, and data warehouse and mining systems. MIS in e-organisations
deviates from the conventional model of 'Capture - Compute - Process - Analyse - Report -
Think and Act' to 'Point - Click - Respond - Act'.
13. The most popular and widely used messaging systems are .
14. When there is a need for communication in real time, systems
available are , and .
15. _______________________provides capabilities of video and audio for
participants situated at different locations.
16. Video conferencing also becomes an interacting and effective
communication system when it has a feature of and
____________________.
17. In , participants sit in a meeting room with networked PCs and
online screen projector to discuss the meeting agenda.
18. _____________________uses websites and portals for storing documents,
catalogues, drawings, pictures and so on for sharing.
19. Internet and web technologies are used for forming different interest groups
to communicate and share the information. These groups are popularly
known as .
20. The biggest advantage of is that it taps the collective wisdom,
knowledge and experience of the members.
21. __________________ help in automatic scheduling, notification and reminding, to
the participants.

8. CENTRALISING SERVICES
The final component in building an effective organisational structure is deciding at what
level in the organisation, decisions should be made. Centralisation is the degree to which
formal authority is concentrated in one area or level of the organisation.
In a typical highly centralised structure, the top management makes most of the key
decisions in the organisation, with very little input from lower-level employees.
Centralisation lets top managers develop a broad view of operations and exercise tight
financial controls. It can also help to reduce costs by eliminating redundancy in the
organisation. But centralisation may also mean that lower-level personnel do not get a
chance to develop their decision-making and leadership skills and that the organisation is
less capable to respond quickly to customer demands.
In a highly decentralised organisation, decision-making authority is pushed down the

organisational hierarchy, giving lower-level personnel more responsibility and power to
make and implement decisions. Decentralisation can result in faster decision-making and
increased innovation and responsiveness to customer preferences.
Decentralisation also relates to span of control.
Span of control means the manageable number of subordinates of a manager. The bigger the
number of the subordinates a manager controls, the broader is her/his span of control.
The best span of control is determined by the following five factors:

1. Nature of the task,
2. Location of the workers,
3. Ability of the manager to delegate responsibility,
4. Amount of interaction and feedback between the workers and the manager,
5. Level of skill and motivation of the workers.

9. SECURITY LEVELS
Security in information system is not a new concept. It started since the day the first main-
frame computer was developed. Even when information systems were not computer-based,
organisations would strive to keep the confidentiality of their data and used coded languages
in transmitting messages. With the invention of computers and telecommunications
systems, organisations started using more computer-based information systems, especially
networked systems.
However, because these are inter-connected with several computers, information Systems
have become easy targets of threats as the Internet has thousands of unsecured computer
networks, which are in communication with each other. Therefore today, IS security has
assumed more significance than ever before.
Today, organisations need to understand the potential threats/risks to their information

systems and must have well-defined strategies to manage those risks. IS security refers to
the policies, procedures and technical measures adopted to prevent potential threats to the
resources. Let us understand the various categories of threats to information systems, their
prevention and management.
IS Security Threats
The different categories of IS security threats are as follows:

1. Privacy has become an important social issue today.. Collected and stored data can be
used or misused for future use. It can be distributed, sold, or used without a user or
consumer’s knowledge. An employer can use information technology to monitor the
employees like the time spent by an employee on the computer. monitor electronic
communication in the form of e-mail, reveal company data to monitor employee’s
emails. Privacy of hardware and software consumers is another important issue.
2. Crimes involving illegal system access and use of computer services are also a concern.
Systems left unattended over weekends without proper security have been unethically
used commercially.
3. Hackers make use of their computer knowledge to gain access to other computers.
Sometimes, files, passwords, programs, or processing power are stolen. An intruder

may alter the data or destroy the data making it unusable and useless. A hacker can
write a small password sniffer that can steal passwords and gain access to data and
files. There are Antisniff programs that can detect and block a password snifter.
4. All types of computer systems and equipments have also been stolen from offices.
Depending on the nature of the computer crime that an organisation anticipates, it may
adopt controls. The controls are expensive to implement and the organisation must evaluate
the cost against the benefit.
To summarise, here is a list of control guidelines:

a) At a corporate level, efforts to safeguard data and files include the installation of
specialized hardware and software. For instance, data and information are encrypted
to prevent unauthorised use. Two-way authentication ( OTP check followed by
successful password entry ) and SSL encryption can be of use here. SSL stands for
Secure Sockets Layer – it is the standard technology for keeping an internet connection
secure and safeguarding any sensitive data that is being sent between two systems.
b) Use of biometric is also becoming popular to authorise employee entry and exit .The
fingerprint identification ,Iris and retina scans have now become sophisticated
identification methods. The latest is the use of a magnetic card that is checked by a
magnetic card reader to allow entry.
c) Upgrade your software with the help of patches, which are developed by vendors
whenever a security gap is found in the software. Anti-malwares are also required to
be kept update from time to time.
d) Guest logins are always misused. Group accounts should also be avoided. Such accounts
become public very quickly and nobody can be held responsible.
e) Remote-logins also create a serious threat to security. For example Linux does not
permit super-user remote-login.
f) Every organisation should have a firewall installed. Firewall is a network security
device that monitors and filters incoming and outgoing network traffic based on an
organization's previously established security policies. At its most basic, a firewall is
essentially the barrier that sits between a private internal network and the public
Internet. It is a good idea to have dedicated servers for applications that communicate

with the outside world. Encourage people to have separate passwords for Intranet and
Internet
g) In certain cases, the law requires that an audit trail must be on. A document once
created cannot be changed without leaving an audit trail. Most of the ERP packages, for
instance, leave audit trail. In case of a crime, the audit trail can be of immense help.
An information system performs key functions for an organisation. If for some reason, the
system becomes non-functional for some time, the consequences may be unacceptable.
Organisations usually have a set of emergency procedures for critical functions. For instance,
a library may issue books recording them manually if the information system becomes
temporarily unavailable.
The main reasons for system failures include power failure, data corruption, disk failure,
network failure etc. Nature also plays its role sometimes in the form of a fire, flood, or earth-
quake. In addition, labor unrest or human errors may also render a system unusable.
One of first stops of disaster planning is to identify threats. Not all the threats listed earlier
will be a concern to an organisation. After identifying the threats, appropriate disaster
recovery plans should be implemented. You will now learn about disaster recovery plans.
Hardware backup - In case of a natural disaster or due to technology failure, the hardware
may become unusable. There are companies and firms that provide disaster recovery
services. A company may provide a hot site that has an operational, ready to use system. This
is an expensive option, as the system is kept up to date, usually in a different seismic zone.
The next option is to maintain a cold site. A cold site provides the infrastructure but not the
processing power and data. In case of a problem, the backup system is made operational.
Some companies provide data backup services. You can keep a copy of your data in electronic
form.
Software Backup - Software programs are precious assets of an organisation that must be
protected. A human error may delete a software package or a hardware failure may make it
inaccessible. A simple strategy is to make copies of software and keep them safely. In
addition, one may like to keep another copy off-site in a safe environment.

The least one should do is take regular backup. If the data is too large, incremental backups
can be taken or selected data may be backed up at regular intervals.
The smart strategy is to be in pro-active mode rather than reactive mode. It may be less
expensive to plan and avoid possible downtime than suffer losses.
10. TECHNOLOGY ROADMAP

Innovative technology has to be planned and created. A technology roadmap is a visual
document which communicates an organisation’s plan – the goals, initiatives, and
enhancements to transform into a high-performing IT organisation. This allows us to
visualise and balance work of different scopes and types like technical debts, core
infrastructure, and growth- oriented innovation. Organisations rely on different
technologies to support their business operations. These are often complex and resource-
intensive. Therefore, the infrastructure must be planned for use in an organised manner.
The technology roadmap pictures the application of the plans for new solutions and maintain
existing ones. It also helps stakeholders and cross-functional teams better grasp the
requirements needed to reach the end goal and provides a clear path to the entire
organisation.
As each organisation has its own unique needs, roadmaps are customised to suit the specific
goals and objectives of an organisation. It includes some key components like goals and
initiatives which an organisation is hoping to achieve through technology. New system
capabilities provide the enhanced technology like adding CRM system to track the
customers’ requirements, Release plans to focus on the new capabilities of the systems
needed by the business, Milestones allow the stockholders to understand the progress
towards the long- term goals, resources, training, risk factors, status reports to keep
everyone informed etc.
Effective roadmaps are developed based on inputs from the key stakeholders which allows
the organisation to understand the objectives and needs of its each area. Stakeholders who
are responsible for the technology roadmap are usually the IT Manager, General Managers,
Product Managers and those from , Operations, Engineering, Finance, Sales and Marketing,
Legal among others.

So, maintaining a great technology roadmap helps teams to identify the key technology
intiatives that will support the needs of the organisation. This also reveals any potential risk
factors to the organisation and helps an organisation prepare for them accordingly. As plans
evolve, the technology roadmap should be updated to reflect any changes in projects, timing,
or priority. This allows the entire team to visualise the detailed plans and how they might
impact employees and their work.
11. SUMMARY
• In e-business enterprise, the traditional people organisation based on 'Command
Control' principle is absent
• e-business enterprise is more process driven, technology enabled and uses its own
information and knowledge to perform.
• Customer satisfaction and high level customer service are possible using knowledge-
based proactive management systems.
• In e-enterprise, business is conducted electronically/ on the internet
• e-business systems use client / server architecture and run on Internet platform.
• Inter organisation communication applications, like news bulletin, communicating
change of rules, announcements, price revisions, etc. are very common in B2C.
• In C2B model, a customer interacts with information databases such as product
catalogues and price information, configures the product, compares the costs, places
the order and has it delivered after the electronic payment process.
• B2B business models actually run with the help of B2C, C2B and C2C models.
• Web master controls the website inflow/outflow, content management and regulation
of the traffic.
• The job is to keep the website very responsive and to keep contents latest and up-to-
date.
• The look and feel of e-commerce website should be customer-friendly and attractive.
• The concept of a work group is that a set of information has a multiple use and the users
concerned draw this information to perform their roles.
• All four applications: e-business, e-commerce, -communication and E- collaboration
run Internet, Intranet, Extranet and other networks and use web technology

extensively. You must be able to describe the different electronic systems of

organisation of business.
Activity 1
Read the article The Role of Software Agents In E-Commerce:
Present and Future Challenges and suggest application of the same in Retail Business.

1. Explain the challenges before an e-business management.
2. Compare and contrast e-enterprise business model with traditional business
organisation model.
3. Briefly explain the four business models that the enabling capabilities of technology
have given rise to.
4. Explain the strength of ERP, SCM, CRM and why it is necessary to integrate them by a
solution like Enterprise Application Integration (EAI).
5. Explain how in e-enterprise, the manager's role and responsibilities are changed.
Explain how a manager is a knowledge worker in e-enterprise.
6. Explain the applications and systems used in e-communication.

13. ANSWERS
1. False
2. True
3. True
4. False
5. False
6. Client / server architecture
7. B2C
8. C2B
9. B2B
10. Web master
11. Customer-friendly and attractive
12. Web administrator
13. E-mail & voice-mail
14. Voice conferencing, Video conferencing and Electronic meeting
15. Video conferencing
16. White boarding ; document sharing
17. Electronic meeting system
18. Web publishing
19. User groups
20. E-collaboration
21. GroupWare tools
Terminal Questions
1. Refer to 2
2. Refer to 2
3. Refer to 3
4. Refer to 5
5. Refer to 5
6. Refer to 6

E-Reference:

ADMINISTRATION
SEMESTER 4
DBB2202
SYSTEM
Unit 10: Trends in MIS 1

Unit 10
Trends in MIS
Table of Contents
No / Graph Activity
1 Introduction - -
3
1.1 Objectives - -
2 Decision Support Systems (DSS) - 1
2.1 Introduction to DSS - -
2.2 Characteristics of DSS - -
2.3 DSS components 1 - 4-7
2.4 Model of DSS 2 -
2.5 Types of DSS - -
2.6 Advantages & Disadvantages of DSS - -

3 Artificial Intelligence (AI) - 2
3.1 Introduction to Artificial Intelligence - -
3.2 Introduction to Neural Networks - -
3.3 Artificial Intelligence and Neural 3 -

Networks 8-15
3.4 Introduction to Expert Systems - -
3.5 Expert Systems Structure - -
3.6 Differences between DSS and ES - -
3.7 Business Applications - -

4 Summary - - 16
6 Answers - - 17

1. INTRODUCTION
In the previous unit you studied the basics of e-business and the four process models of e-
commerce. For the last few decades MIS has been perceived differently by people in different
organizations. MIS has been evolving in different forms under different levels of
management. Some of the developments are recent and some are still in the developing
stage. The research continues. In this unit we will discuss some of the new trends in MIS such
as Decision Support Systems (DSS), Artificial Intelligence (AI), etc.
1.1 Objectives
❖ List various trends in MIS.

❖ Elaborate Decision Support System and its components
❖ Describe Expert system and its structure of MIS
❖ Describe Artificial Intelligence systems
❖ Explain Neural networks

2. DECISION SUPPORT SYSTEMS

2.1 Introduction to DSS
DSS is an interactive, flexible computer based information system. It uses rules and models
for processing data to support various managerial levels, ranging from top executives to
mangers, in their decision-making. It supports all phases of decision-making: intelligence,
design, choice and implementation.
A DSS is usually built to support the solution to a certain problem and does not replace the
decision-maker. As such, it is called a DSS application. It is user-friendly with strong
graphical capabilities.
2.2 Characteristics of DSS

Decision support system has these characteristics:
• It helps in facilitating and enhancing the decision-making process or activities involved
in this process.
• These systems are designed for interactive use by the decision makers so that they can
interact and feed inputs to simulate various conditions and arrive at decisions.
• In case of ad-hoc decision tasks, decision support system can be routinely used by the
decision makers.
• It provides certain capabilities which would support the tasks related to the decision-
making process which include data analysis and identification of implementation.
• Users can easily access the data from multiple sources which are required.
• It enables professionals to develop data models and generate analytical reports
• It also enables delivery of these reports to various users.
2.3 DSS Components

The components of a DSS include a database for query and analysis, software with models,
data mining and other analytical tools and a user interface.
The DSS database is a collection of current or historical data from a number of applications.
It can be a small database or a massive data warehouse from a large company which is
continuously being updated.

The DSS software system includes software tools for data analysis. They contain various
OLAP tools, data mining tools or a collection of mathematical and analytical models. A model
can be a physical model, a mathematical model or a verbal model. Most commonly used are
the statistical functions such as mean, median, standard deviation and scatter plots.
Optimization models, such as linear programming, are used to determine optimal resource
allocation.
TPS External data

DSS
database
DSS software system

Models
OLAP tools
Data mining tools
User Interface
User
Fig. 10.1: Components of a Decision Support System

2.4 Model of DSS
The model of a DSS may be represented as a block diagram as indicated below –
Fig. 10.2

2.5 Types of DSS

These can be categorised into five types:
• Communication-Driven DSS
Communications-driven DSSs are used to conduct a meeting, for users to collaborate with
partners and internal teams. The most common technology used to deploy this type of DSS
is a web or client server. For example: chats and instant-messaging software, online
collaboration and net meeting systems.
• Data-Driven DSS
Data-driven DSSs are targeted for use by managers, staff and suppliers of products or service
providers. It is used to query a database or data warehouse to seek specific answers for
specific purposes.
• Document-Driven DSS
The purpose of such a DSS is to search web pages and find documents on a specific set of
keywords or search terms. The usual technology used to set up such DSSs are via the web or
a client or server system.
• Knowledge-Driven DSS
It is essentially used to provide management advice or to choose products or services. The
typical deployment technology used to set up such systems are client or server systems, the
web, or software running on stand-alone PCs.
• Model-Driven DSS
Model-driven DSSs are complex systems that help analyse decisions or choose between
different options. These are used by managers and staff members of a business to make
decisions in sales domain like sales forecast etc. and making purchase decisions.
2.6 Advantages & Disadvantages of DSS

Advantages of DSS are
• It helps in enhancing the speed of decision-making activities which would help in
improving the overall efficiency.
• It allows a better interaction and contact level amongst different members within an
organisation which improves the interpersonal communication of members.

• It helps in reducing an overall cost of taking decisions as it allows web servers or client
systems for its implementation which consumes less costs as compared to other system
of management information system.
• It is mostly used for non-programmed decisions because it discloses new approaches
and sets for making these decisions more accurate and productive.
• The DSS allows for interaction for better evaluation or selection of choices, so there is
satisfaction about the final decision made.
• It helps in increasing the capabilities of decision makers as they are equipped to make
future decisions effectively and efficiently. This increases their power of controlling and
managing the business outcomes better.
Disadvantages of DSS include

• The cost to develop and implement a DSS is a huge capital investment, which makes it
less preferrable by smaller organisations.
• A DSS may lead to information overload because an information system tends to con
sider all aspects of a problem.
• Implementation of a DSS can cause fear and backlash from junior-level employees.
1. DSS uses rules and models for processing data, to support various
managerial levels, ranging from top executives to mangers, in their decision-
making. It supports all phases of decision-making: intelligence, design,
choice and implementation.
2. The TPS database is a collection of current or historical data from a number
of applications or groups.

3. ARTIFICIAL INTELLIGENCE (AI)

3.1 Introduction to Artificial Intelligence
Artificial Intelligence is a science and technology based on various functions to develop a
system that can think and work like a human being. It can reason, analyze, learn, conclude
and solve problems. Artificial intelligence (AI) broadly refers to any human-like behaviour
displayed by a machine or system. Computers are programmed to “mimic” human behaviour
using extensive data from past examples of similar behaviour. More precisely, the aim is to
obtain a knowledge based computer system that will help managers to take quick decisions
in business.
Artificial Intelligence can be classified into various branches like Natural Language
Processing (NLP), Speech Recognition, Automated Programming, Machine Learning, Pattern
Recognition and Probabilistic Networks. Most of the software developed for AI has been
through Prolog, C++, Java and LISP. These programming languages provide facility for
creating various functions of a business activity, extension of a function, handling dynamic
situations in business, providing uniformity in application etc.
A business decision making process depends upon the level of risk and uncertainty involved
in the problem. To model the uncertainty and the risk of natural language processing and the
concept of fuzzy logic is used in developing an AI for business application. For problems
related to finance applications apart from fuzzy logic concepts, two other concepts of AI are
being researched. These are genetic algorithm and chaotic models. AI is also being applied
to the functions of marketing like – Selling, Forecasting and Communication etc.
3.2 Introduction to Neural Networks (NN)

It is modelled on the basis of the neuron structure of the human brain. A neuron is a micro
cell which is connected to thousands of other micro cells in the brain and all the other parts
of the human body containing nerves. The entire neural network is realized in the form of
software. It is a system which tries to learn from the database and the manager then decides
what the right answer is. The software renders the computer as a problem solver.
The neural networks go on building strong database for problem solving, depending upon
the decisions taken by the manager in the form of response and confirmation given to the

system by the manager. Neural networks can be used in various business applications like
forecasting, stock analysis, market analysis etc.
Advantages of Neural Networks:

Neural networks are used to forecast some complex data patterns. When designed properly,
they can be used as experts for a particular project. They have the ability to adjust to the
changing environment and thus are very flexible. For example, they can forecast net asset
values of mutual funds with 40% accuracy. They take into account all variables, relationships
between the data and detect patterns and trends in any set of data.
Disadvantages of Neural Networks

The process of designing the neural networks is very complex and time consuming. Although
data is stored online, neural networks require hardware to create them in the first place. The
hardware cost increases as complexity of the problem increases. The setup also requires
additional effort to maintain. The programming involved is complex and requires months of
effort to create an algorithm capable of carrying out a task. Dependency on data is one of the
leading disadvantages of Neural Networks, and data needs to be watched all the time. If there
are errors in the data, the result will be faulty, which poses serious threat. Sometimes, there
is instability in problem solving. With the data constantly changing, it is difficult to repeat a
solution to a problem and impossible to explain how they arrived at that solution. Neural
network results are often criticized because of the fact that they are unable to give
justification for how a particular solution has been arrived at. The rules are not completely
understood.
3.3 Artificial Intelligence and Neural Networks

Artificial intelligence is a field of science and technology based on disciplines such as
computer science, biology, psychology, linguistics, mathematics and engineering. The goal of
AI is to develop computers that can simulate the ability to think, see, hear, walk, talk and feel.
In other words, simulation of computer functions normally associated with human
intelligence, such as reasoning, learning and problem solving.
Stages of Artificial Intelligence

There are three stages of AI namely,

Artificial Narrow Intelligence excels at repetitive jobs. For this type of AI, speech
recognition, object identification, and facial recognition are all second nature.
Artificial General Intelligence is still a theory that is being investigated. It is defined as

artificial intelligence with human-level cognitive capabilities in a variety of disciplines such
as language processing, image processing, computational reasoning, and so on.
Super Artificial Intelligence refers to when robots outperform humans regarding intellect
and cognitive ability. ASI-enabled machines will outperform humanity in every way of
Artificial Intelligence
Types of Artificial Intelligence:

Interactive AI : This deals with chatbots and innovative personal assistance.
Text AI : This deals with text recognition and speech-to-text conversion.
Visual AI: This deals with computer vision and augmented reality.
Analytic AI: This deals with sentiment analysis and supplier risk assessment.
Functional AI : This deals with IoT solutions and robots.
Expert systems Visual perception Natural languages

Learning systems Tactility Speech recognition
Fuzzy logic Dexterity Multi-sensory interfaces
Genetic algorithms locomotion Virtual reality
Neural networks Navigation
Intelligent agents
Fig. 10.3

AI can be grouped under three major areas: cognitive science, robotics and natural
interfaces. [Source MIS 7th edition, James O Brien and George M Marakas- Tata Mc Graw Hill].
Cognitive science focuses on researching how the human brain works and how humans think
and learn. Applications in the cognitive science area of AI include the development of expert
systems and other knowledge-based systems that add a knowledge base and some reasoning
capability to information systems. Also included are adaptive learning systems that can
modify their behavior based on the information they acquire as they operate. Chess-playing
systems are some examples of such systems.
Fussy logic systems can process data that are incomplete or ambiguous. Thus, they can solve
semi-structured problems with incomplete knowledge by developing approximate
inferences and answers, as humans do.
Neural network software can learn by processing sample problems and their solutions. As
neural nets start recognizing patterns, they can begin to program themselves to solve such
problems on their own.
Neural networks are computing systems modelled after the human brain’s mesh like
network of interconnected processing elements, called neurons. The human brain is
estimated to have over 100 billion neuron brain cells. The neural networks are a lot simpler
in architecture. Like the brain, the interconnected processors in a neural network operate in
parallel and interact dynamically with each other.
This enables the network to operate and learn from the data it processes, similar to the
human brain. That is, it learns to recognize patterns and relationships in the data. The more
data examples it receives as input, the better it can learn to duplicate the results of the
examples it processes. Thus, the neural network will change the strengths of the
interconnections between the processing elements, in response to the changing patterns in
the data it receives and the results that occur.
For example, neural network can be trained to learn which credit characteristics result in
good or bad loans. The neural network would continue to be trained until it demonstrated a
high degree of accuracy in correctly duplicating the results of recent cases. At that point it
would be trained enough to begin making credit evaluations of its own.

Genetic algorithm software uses Darwinian (survival of the fittest), randomizing and other
mathematical functions to simulate evolutionary processes that can generate increasingly
better solutions to problems.
Robotics: AI, engineering and physiology are the basic disciplines of robotics. This
technology produces robot machines with computer intelligence and computer-controlled
human like physical capabilities. This area thus includes applications designed to give robots
the power of sight, or visual perception; touch or tactile capabilities; dexterity or skill in
handling and manipulation; locomotion, or the physical ability to move over any terrain; and
navigation or the intelligence to properly find one’s way to a destination.
Natural Interfaces: The development of natural interfaces is essential to the natural use of
computers by humans. Development of natural languages and speech recognition are major
thrusts in this area of AI. Being able to talk to computers and robots in conversational human
languages and have them understand us as easily as we understand each other is a goal of AI
research. This involves research and development in linguistics, psychology, computer
science and other disciplines.
Other natural interface research applications include the development of multi-sensory

devices that use a variety of body movements to operate computers. This is related to the
emerging application area of virtual reality. Virtual reality involves using multi-sensory
human– computer interfaces that enable human users to experience computer simulated
objects, space activities and worlds as if they actually existed.
Goals of AI:
Artificial Intelligence's significant goals include

• Logic, problem-solving: AI algorithms simulate humans' step-by-step reasoning
when solving puzzles or making logical deductions.
• Knowledge representation: Knowledge representation and knowledge
engineering are central to AI research. Many of the problems that machines are
expected to solve will require extensive world knowledge. The things AI needs
to represent are objects, properties, categories, and relationships between
objects; situations, events, states, and times; Cause and Effect;

• Planning: Intelligent agents must be able to set goals and achieve them. Agents should
also be able to ascertain the consequences of its actions.
It calls for an agent to assess its environment, make predictions, evaluate its
predictions, and adapt based on its assessment.
• Learning: Machine learning, a fundamental concept of AI research since the field's
inception, is the study of computer algorithms that automatically improve through
experience.
• Social Intelligence: It is an interdisciplinary field spanning computer science,
psychology, and cognitive science.
• Creativity: A sub-field of AI addresses creativity theoretically (philosophical,
psychological perspective) and practically (the specific implementation of systems that
produce novel and useful outputs).
• General Intelligence: Many researchers think that their work will eventually result
in a machine with artificial general intelligence, combining all the skills described above
and exceeding human capacity in most or all of these areas.
3.4 Introduction to Expert Systems

An expert system is a knowledge-based information system that uses its knowledge of a
specific, complex application area to act as an expert consultant to end users. It is a
component of Artificial Intelligence. Expert systems provide answers to questions in a very
specific problem area by making human like inferences on 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.
3.5 Expert Systems Structure

The components of an expert system include a knowledge base and software modules that
perform inferences on the knowledge in the knowledge base and communicate answers to a
user’s questions.
The knowledge base of an expert system contains –

Facts about a specific area, Heuristics (rule of thumb) that expresses the reasoning
procedures of an expert on the subject. There are many ways that knowledge is represented
in expert systems:

Case-based reasoning: Representing knowledge in an expert system’s knowledge base in the

form of cases.
Frame-based knowledge: Knowledge represented in the form of a hierarchy or network of

frames. A frame is a collection of knowledge about an entity, consisting of a complex package
of data values describing its attributes.
Object-based knowledge: Knowledge represented as a network of objects. An object is a data

element that includes both data and the methods or processes that act on those data.
Rule-based knowledge: Knowledge represented in the form of rules and statements of fact;
rules are statements that typically take the form of a premise and a conclusion such as: IF
(condition), Then (conclusion).
Software resources: 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.
3.6 Differences between DSS and ES

It is possible to integrate ES with DSS. There may be some components which look similar in
DSS and ES, but one should understand the differences between them. It then becomes clear
as to how integration of ES with DSS can be realized.
A DSS helps a manager to take a decision whereas an ES acts as a decision maker or an

advisor to the manager.
A DSS is meant only for decision making whereas an ES provides expertise to the manager.
The spectrum of complexity is high in DSS and low in ES, since ES addresses issues related
to specific areas only.
DSS does not have the capability to reason whereas an ES has.
A DSS cannot provide detailed explanation about the results whereas an ES can.

Hence by integrating the two it is possible to the blend their advantages and derive the best
out of the two.
3.7 Business Applications

Expert systems help diagnose illnesses, search for minerals, analyze compounds,
recommend repairs, and do financial planning. So from a strategic business point, 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. ES provides a
cost reduced solution, consistent advice with low level of errors, solutions to handling
equipment without the interference of humans etc. It provides a high degree of reliability
and faster response time. It helps to solve complex problems with in a small domain.
It is capable of analyzing a problem and can construct a business model appropriate to the
characteristics of the application. Based on the model, necessary objectives and constraints
are identified. It identifies appropriate tools to serve the model. It uses the tools to solve the
problem and also does the what–if analysis aimed at understanding the sensitivity of the
model.
3. is a science and technology based on various functions

to develop a system that can think and work like a human being.
4. A is a micro cell which is connected to thousands of other
micro cells in the brain and all the other parts of the human body
containing nerves.
5. The goal of AI is to develop computers that can the
ability to think, see, hear, walk, talk and feel. In other words, simulation of
computer functions normally associated with human intelligence, such as
reasoning, learning and problem solving.
6. provide answers to questions in a very specific problem area
by making human like inferences on knowledge contained in a specialized
knowledge base.

4. SUMMARY
In this unit we discussed on
• the various trends in MIS, the Decision Support System and its components.
• The theoretical explanation of expert system and its MIS structure.
• The concepts of Artificial Intelligence systems and its types. The relationship between
AI and various other applications.
• Neural networks and their applications in business information system.
1. Explain the Decision Support Systems in detail.
2. What is Artificial Intelligence? How is it different from Neural Networks?
3. How can expert systems be useful in MIS and management decision making process?
4. What are the differences between DSS and ES?

6. ANSWERS
1. True
2. False
3. Artificial Intelligence
4. Neuron
5. Simulate
6. Expert System
Terminal Questions
1. Refer 2
2. Refer 3
4. Refer 3.6
E Reference

ADMINISTRATION
SEMESTER 4
DBB2202
SYSTEM
Unit 11: MIS – Support Models and Knowledge Management 1

Unit 11
MIS – Support Models and Knowledge
Management
Table of Contents
No / Graph Activity
1 Introduction - -
4
1.1 Objectives - -
2 Philosophy of Modelling - - 5
3 DSS: Deterministic Systems - -
3.1 DSS Models 1 - 6-9

3.2 Forecasting: Time Series Analysis and - -
Exponential Smoothing
4 Market Research Methods - - 10
5 Ratio Analysis for Financial Assessment - - 10-11
6 Management Science Models - 1
6.1 Budgeting Models - -
6.2 Break-even Analysis Model - - 11-16
6.3 Return on Investment Analysis 2, 1 -
6.4 Model for Cash Budgeting 2 -

7 Procedural Models 3, 4 - 17-18
8 Project Planning and Control Models 5, 6, 3, 4, 5, 6, 7 - 18-22
9 Cost Accounting Systems - - 23
10 Operations Research Models: Mathematical - -
Programming Techniques
10.1 Linear Programming - -
10.2 Dynamic Programming - - 23-29

10.3 Non-linear - -
10.4 Transportation - -
10.5 Sequencing - -

10.6 Queueing - -
10.7 Inventory - -
10.8 Simulation - -
11 Knowledge Management 7, 8, 9 2
11.1 Knowledge Management Systems 10, 8, 9 -
11.2 Tools for Knowledge Management - - 30-40
11.3 Approaches to Develop KM Systems 11, 12, 13 -
11.4 Knowledge-based Expert System (KBES) 14 -
12 Summary - - 41
14 Answers - - 42-43

1. INTRODUCTION
In the previous unit you have also studies u studied various trends in MIS. You have studied
Decision support model. Decision Support Systems are an application of Herbert Simon
Model. As you have studied in the earlier unit, this model has three phases, viz. Intelligence,
Design and Choice, the Decision Support System basically helps the information system in
the intelligence phase where the objective is to identify the problem and then go to the design
phase for solution. The choice of selection criterion varies from problem to problem. It is,
therefore, necessary to go through these phases again and again till a satisfactory solution is
found. In the use of three phase cycle, you may use inquiry, analysis and models to come to
a rational solution.
The Decision Support System helps in making a decision and also in its performance
evaluation. These systems can be used to validate the decision by performing sensitivity
analysis on various parameters of the problem.
In this unit, you will learn about the concepts and philosophy of DSS, the types of DSS and
their relevancy in the design of MIS. You will also learn various DSS models. You will also
learn about the factors contributing to the knowledge building process.
1.1 Objectives
❖ Elaborate the concept and philosophy of Decision Support Systems.

❖ List and describe various types of DSS.
❖ Describe Operations Research Models.
❖ Explain the concept of Knowledge Management.

2. PHILOSOPHY OF MODELLING
In decision-making, we know that there are two types of decisions – Programmable and Non-
programmable.
• The Programmable decision: The Decision Support Systems can be built around the
rules. The inputs, processing methodology, analysis and choice of decision-making are
pre- determined and can be computerised in this situation.
• The non-programmable decision: Here the rules are not fixed or pre-determined, and
require the user to go through the decision- making cycle every time, as indicated in the
Herbert Simon Model.
The Decision Support System refers to a class of systems which support the process of
decision-making but does not always give a decision itself. The nature of the decision is such
that the decision-makers need a variety of information, when same or similar types of
decisions are to be made. With the given information, more details could also be sought and
the demand for additional information is continuously made till the decision-maker is fully
satisfied. The reason for changing the demands is also because the methods of decision-
making undergo a change from time to time. The quantum and the scope of information also
changes depending upon the risk in decision-making. The higher the risk, more information
may be sought.

3. DSS: DETERMINISTIC SYSTEMS
There are number of situations where the management must make a decision, based on the
analysis of business statistics. Since the organisation may have the information, the decisions
are drawn based on the data from the database(s). Most of these situations are structured,
and therefore, can be put in the form of business models. A fair assumption is made that the
model has business and decision-making validity. If the management can design such models
duly tested, they can be used by the decision-makers, whenever the need arises. All such
tools and models act as the support systems for decision-making. The tools and the models
are generally standard but need to have a custom design to suit the organisation's specific
needs in the specific situation. The Decision Support Systems based on such tools or models
have found extensive use, as a number of computer-based software tools and packages are
available at reasonable prices. These packages are hardware independent and have proven
the application areas. The ranges of packages available are from the PC to the main frame
computer systems. The packages are also available for popular network systems.
The origins of these tools and models lie in the domains of Business Management, the
Management Science and the Operations Research. Some are universally known and proven
tools and have application in Business Management. While designing the models, a flexible
approach is taken to solve varied decision-making problems. They undergo a change over a
period. The most significant advantage of the Decision Support System is its use in sensitising
the decisions and assessing their implications on the result or business performance. The
second advantage of such a system is in focusing on the critical issues in business. The third
advantage of the Decision Support System is that it provides higher management ability to
delegate decision-making to the lower level, once the other models are tested.
3.1 DSS Models

The Decision Support System can be based on three different approaches:

DSS
Management Operations
Models
Models Models
Fig. 11.1: Types of Tools/Models
1. Behavioural Models
Behavioural models are useful in understanding the behaviour amongst the business
variables. The decision-maker can then make decisions giving due regard to such
behavioural relationships.
The trend analysis, forecasting, and the statistical analysis models belong to this category.
Trend analysis indicates how different variables behaved in trend setting in the past and
hence, also in the future. A regression model shows the correlation between one or more
variables. It also helps in identifying the influence of one variable on the other. These types
of models are largely used in process control, manufacturing, agricultural sciences,
medicines, psychology, and marketing. Behavioural analysis can be used to set the points for
alert, alarm, and action for the decision-making.
2. Management Science Models

Management science models are developed on the principles of business management,
accounting, and econometrics. In many areas of management, the proven methods of
management control are available which can be used for the management decisions. There
are also several management systems, which can be converted into the Decision Support
System models.
The budgetary systems, the cost accounting systems, the system of capital budgeting for
better return on the investment, the ABC analysis, the control of inventory through the
maximum-minimum levels, the MRP systems, etc., are the examples of the use of the
management science in the Materials Management. Production planning and control,
scheduling and loading systems are the examples in Production Management. Manpower
planning and forecasting are the examples in relation to Personnel Management.

Some of these models can be used straight away in the design of the Decision Support System.
While some others require the use of management principles and practices, most of the
procedures based on decision-making models belong to this category. One can develop a
model for selection of a vendor for the procurement of an item, based on the complex logical
information scrutiny. Such models take away the personal bias of the decision-maker.
3. Operations Research (OR) Models

A model is representation of some real or abstract situation. Operations research models
are basically mathematical models representing systems, processes or environment in the
form of equations, relationships or formulae. The activities in this step include defining
interrelationships among variables, formulating equations, using known OR models or
searching suitable alternate models. The proposed model may be field tested and modified
in order to work under environmental constraints. The model may also be modified until the
outcome is satisfactory
These models represent a real-life problem situation in terms of the variables, constants and
parameters expressed in algebraic equations. Since the models are mathematical; there are
solutions to these problems. In arriving at the solution, methods of calculus, matrix algebra,
probability and set theory are used. These models have clarity to the extent that each of them
has a set of assumptions which must be true in real life. Further, if the assumptions are valid,
the solutions offered are realistic and practical; the model represents the real-life problem
situations.
Linear Programming Model: A linear programming model, a system of equations

representing an electrical network or differential equations representing dynamic systems,
etc.
Dynamic Programming Model: This is a model that considers time as an important

variable.
3.2 Forecasting: Time Series Analysis and Exponential Smoothing

It is possible to generate a forecast for the next period demand with the help of a simple
average of two previous periods. However, the simple average of the past two periods to
forecast the next period may not be correct. In such cases, exponential average is used where

more weight is given to the latest period and less weight to the older period. If a three period
model is constructed, it would be as under:
Sale for Period → t + 1 = St+1

St+1 = aD1 + (1 – a) aDt-1 + (1 – a)2 aDt-2 + (1 – a)3 aDt-3
‘a’ is a weight expressed in a fraction and D is the actual Demand at period t. The larger value
of ‘a’ means the new average will be more influenced by the demand of the latest period and
less by the older period.
The forecasting model is a Decision Support System, and there are many models to choose
from. The most important decisions are based on forecasts. A forecasting model needs
continuous scrutiny, built-up on the accurate data on the variables and the parameters to be
derived from the other information systems developed in the organisation.

4. MARKET RESEARCH METHODS
Several methods are available, whereby you can forecast or judge the behaviour of the
consumers in respect of their buying decisions. The questionnaires are designed and
computerised to assess these aspects of the buying behaviour.
For example, through a survey, the Marketing Manager can forecast the response rate, the
recall rate on the various advertising campaigns and its influence on the buying decision. The
survey methods are used to find the influencing factors on the buying decisions.
5. RATIO ANALYSIS FOR FINANCIAL ASSESSMENT
The ratio analysis is a standard method of assessing the financial status of the organisation.
A model of these ratios can be computerised and be readily used to assess the status, if
certain changes are expected. There are some ratio norms prescribed by financial
institutions to govern the financial condition of an organisation. They are also used in
decision-making for advancing loans to companies. There are more than a dozen ratios
which deal with all aspects of business. They are liquidity ratio, solvency ratio, profitability
ratio, efficiency ratio, coverage ratio etc.
• Liquidity Ratio: It is used to measure the liquidity of the working capital of the
company. It covers two ratios – current ratio and quick ratio. Current ratio is a ratio of
current assets to the liabilities. Quick ratio is defined as a ratio of quick assets to the
current liabilities
• Solvency Ratios- They are also referred to as financial leverage ratios; the debt portion
is analysed with the assets and equity. Debt to asset ratio measures the ability to pay
off the debt of the company with its available assets. Shareholder equity ratio compares
the total equity of the company in terms of debt.
• Profitability Ratios- The generation of profits after operational costs is analysed in
profitability ratios. Return on assets, equity, invested capital and capital employed are
the measures used to govern a business.
• Efficiency Ratios- The utilisation of resources is compared with the maximisation of
profits. This can be measured across accounts payable, accounts receivable and
inventory management.

• Coverage Ratio- It checks the interest and other obligation disbursements.
6. MANAGEMENT SCIENCE MODELS
6.1 Budgeting Models

Controlling the business performance through the budget system is an accepted
management practice. In this approach, various budgets are prepared, viz., the Sales Budget,
the Production Budget, the Capacity Budget, the Manpower Budget, the Expense Budget, the
Inventory Budget, etc. Using these budgets the profits are estimated.
Budgets are also used for planning and control. The system is used to find out whether the
performance is under the budget or over the budget. This gives the manager a self evaluation
tool for assessing the current status and also provides some insight into the operations of
the Company.
The use of Spread Sheet, Lotus-1-2-3, Visicalc, Framework and many others are a standard
tool for these applications, where planning, budgeting and analysis are required. The spread
sheet packages can handle hundreds of rows and columns and provide the analysis on the
percentage basis. Each manager can prepare simple spread sheets for his areas of operations,
where the data is drawn from a computerised Mini or Mainframe Systems. These packages
provide a graphical presentation in the form of line charts, Bar charts and Histogram, etc.,
for visual impact.
6.2 Break-even Analysis Model

This model is simple but very useful for determining the volume of business activity at which
there is no loss or profit. The model is used to decide the alternatives based on the cost,
volume and price.
FC 1,00,000
BEP = = = 1000
REV − VC 200 − 100
BEP = FC / (REV – VC)

BEP = FC / (REV – VC)

FC = Fixed cost
REV = Revenue per unit BEP = Break Even Point TC = total Cost
VC = Variable Cost
N = No. of Units demanded
Suppose FC = 1,00,000, VC/Unit = 100 and Rev = 200 then BEP is calculated as above.
This model can be built for a company, for the product groups or for any activity, where you
can identify the fixed cost, the variable cost and the revenue at each activity level in terms of
the units demanded. The advantage of this model is that it tells you what the break-even
point for the given level of costs and revenue is. If there are possibilities of altering the costs,
it would tell its impact on the break-even point, i.e., if the price is reduced, the revenue will
come down and the break-even point will go up further.
The costs are generally not linear over the entire range of activity. The cost would go up after
a certain range and would remain steady till some level and further increase is then expected.
The break-even model can be built for the multiple activities and for the non-linear costs.
The computerised model helps in assessing the various parameters of the business and its
sensitivity towards the profit/loss. The model is very popular when the costs are known and
are controllable. It is a very handy tool for a quick decision on the price, cost considerations,
etc., and can be used very effectively for commercial negotiations.
6.3 Return on Investment Analysis

Investment decisions are very common in business organisations and they are of two types.
First, one has to invest in one among the several alternatives which are competing with each
other. For example, you want to buy a machine for which three alternatives are available,
and each alternative has a different investment amount and a different flow of gains or
savings. Then, the second decision the management has to take is how to allocate the total
funds to the various investment projects. For example, an organisation may have Rs. 100
million and the investment projects are worth Rs. 150 million. The management, therefore,
has to take a decision as to how to allocate Rs. 100 million to these projects?

Therefore, in the investment decisions, the investments are evaluated based on discounting
the value of the money of the further cash flow to the current period and net gains are
compared.
In investment analysis, the Net Present Value (NPV) is calculated and compared with all the
investment alternatives.
NPV = (PV of further Cash flow) – Investment = PV – 1 The formula used for the present value
PV is:
1 − [1 + 𝑖]−𝑇
𝑃𝑉 = 𝑆 [ ]
𝑖
Where T is the number of period, in which an amount S for each period is to be received and
i is a discount rate.
If the stream of cash inflow (savings or gains) are unequal each ‘S’ will be evaluated
separately to compute the NPV.
Let us consider the following example in selecting an investment plan:
Table 11.2: Example for the investment plan
Particulars Plan A Plan B

Investment in Rs. Million 1.4 2.1
Savings / Gain per year in Rs. Million = S 0.475 0.55
No of years savings or gain would occur = T 10 10
Discount Rate = i 18% 18%
Plan A
1−[1+0.18]−10
PV =0.475[ ]= 2.134 therefore, NPV = 2.134 -1.4 =0.734
0.18
Plan B
1−[1+0.18]−10
PV = 0.55[ 0.18
]=2.471. Therefore NPV =2.471 -2.1 =0.371

From the above data: since Plan A has more NPV we should select plan A. Using these
concepts of the present value of future cash flow, a Decision Support System can be built
considering the following factors:
• The number of investment proposals.
• Differential investments.
• Different cash inflows of savings.
• Different criteria for selection, i.e., the payback period, the rate of return and the
internal rate of return.
• Maximising the return by allocating limited funds to the several investment proposals.
Corporate Model of Return on Investment

This model is popularly known as Du-Pont Model where the composition and the analysis
of the Return on Investment are shown. This model is better than the above discussed
individual ratio model and its analysis, as this model provides an insight into the
relationships of the various factors affecting the return on investment. The Du-Pont Model is
shown in Fig. 11.2.

Fig. 11.2: Du-Pont Model
Suppose you have to make a decision on buying a business, then this model will be useful.
This model also gives the decision alternatives to improve the return on investment in the
current business.
6.4 Model for Cash Budgeting

Cash budgeting is a continuous process. With careful cash planning, a company should be
able to maintain sufficient cash balance for its needs, yet not be in a position where it is
holding excessive cash. This kind of planning will help raise the short-term loans and
simultaneously focus on the issues which are affecting the financial management. A typical
statement of cash budgeting is given in Table 11.3.
Table 11.3: A typical Statement of Cash Budgeting
(Figures are in rupees million)

January February March April
Cash Balance 42 46 40 48
Cash Inflow
Cash Sales 23 93 28 21
Collections 60 200 166 130
Loans 110 0 0 0
Total Inflow 193 293 194 151

Cash Outflow
Pay Suppliers 173 264 62 168
Operating Expenses 14 33 27 13
Statutory Payments 2 2 2 2
Misc. Outflow 0 0 191 70
Total Outflow 189 299 282 253
Cash Balance (+/ ) +46 +40 -48 150
This shows that in the month of March and April, additional funds raised through external
sources will be needed.
1. are not necessarily for decision-making but they are desirable

to keep track of the major aspects of a business or a function.
2. are based on comparative analysis and use of a formula or an
algorithm.
3. The trend analysis, forecasting and the statistical analysis models belong to
category.
4. Are developed on the principles of business management,
accounting and econometrics.
5. Manpower planning and forecasting are the examples in relation to
___________________.
6. A considers two costs, viz., the cost of waiting time to customer
and the cost of idle time of the facility and decides on the facility design with a
pre-determined service standard.

7. PROCEDURAL MODELS
There are a number of decisions which are made on the basis of well- defined rules and
procedures. Unless certain conditions are satisfied the decision rules will not be applied.
The use of rules, formulas or mathematical expressions is the basis for the model. For
example, the reordering procedure for an inventory item is as under.
If the stock level is less than the Recorder level, then draw a purchase order of the quantity
equal to the Economic Order Quantity (EOQ).
This ordering rule is developed on the model of the Economic Order Quantity (EOQ) –
Required Order Level (ROL) system as shown in Fig.11.3.
Fig. 11.3: EOQ Model
It is possible to control the inventory of some items based on such models. These models can
be computerised and be made a part of the Decision Support System. The decision models
can be developed by using non- mathematical expressions or a formula. If the conditions are
satisfied the decision is automatic.
Fig. 11.4: Vendor Selection Process Model

Let us take a decision problem of selecting a vendor by using the non- mathematical
expressions. The selection of vendor is based on the following conditions:
Vendor : Is the vendor approved (AP)?

: What is the performance rating (PR) of the vendor ?
: How many orders are pending on the vendor (Order Pending)?
: What is the level of order quantity (OQ)?
These conditions can be put in a model as shown in Fig. 11.4.
8. PROJECT PLANNING AND CONTROL MODELS

The PERT (Programme Evaluation and Review Technique) and the CPM (Critical Path
Method) techniques have emerged as very powerful tools for planning and control of
projects. These techniques show the inter- dependencies of each activity in the project.
Several computer software packages are available which can be used effectively for planning,
monitoring, and controlling of large number of tasks and activities in a project.
Management Considerations of PERT/CPM:

1. The project manager considers the sequencing of activities before implementation of
the project.
2. Inter-dependencies between the activities are described more clearly showing the
possible bottlenecks in future.
3. Focus is on those select activities which are critical for the project completion.
4. It provides an easy method of planning the project in a different manner, with available
resources.
5. A running estimate is provided of the most probable time in which a project will be
completed and the probability of it being completed in time.
6. Any activity which is entering into cost and time over-runs is quickly identified.

Network Drawing and PERT/CPM Statistics:
Fig. 11.5: Rules of Network Drawing
Estimating Activity Time

When the network is completed, every event is assigned a number for reference. Then, the
next step is to estimate the completion time of each activity. The time estimate (te) is based
on "three" time estimates: The optimistic, the most likely and the pessimistic, they are
denoted as:
to = The optimistic time estimate. tm = The most likely time estimate.
tp = The pessimistic time estimate.
𝑡𝑜+4 𝑡𝑚+𝑡𝑝
The activity time estimate te= 6
Drawing the PERT Network

The next step is to draw a network of the project from start to finish.
The critical path is that path which takes the longest time from start to end.
Let us take a sample project as under:

Table 11.4: List of data from a sample project
Most likely Immediate

Activity
duration (Days) Predecessors to activity
A 5 ---
B 8 D
C 6 A,D
D 11 ---
E 7 A,C
Drawing the network from the above data we get the figure below:
Fig. 11.6: Critical Path
The slack is a time resource which a project manager can use for manipulating the start and
finish of the activity. Critical activities are those where the slack is zero, which means that
there is no flexibility with that activity. So that activity becomes critical. In the network D, X,
C, E, are the critical activities: While A and B are non-critical. This is shown below:
Table 11.5: Start and Finish of the activity
Early Early Finish Late Start Late Finish

Activity Slack
Start (ES) (EF) (LS) (LF)
A 0 5 6 11 6
B 11 19 16 24 5
C 11 17 11 17 0
D 0 11 0 11 0
E 17 24 17 24 0
Slack = LS – ES or LF – EF
Project Completion Time = Sum of activity times on a critical path
=D+X+C+E

= 6 + 0+11+7 = 24 days
Probability of Completing the Project

Suppose the project is scheduled for completion in 24 days. We can estimate the probability
of completion in 24 days in the following manner.
Table 11.6: Time sheet
Activity Tile to Time tp σ = (tp – to)/6 σ2

A – – – –
B – – – –
C 3 2 0.83 0.69
D 7 20 2.16 4.66
E 4 10 1.00 1.00
Σ σ2 = 6.35, therefore σ = 2.35

Z = 25 – 24 /2.35= 1/2.35 = 0.4255 or 0.43
A normal probability curve table indicates against 0.43, that is, the project will be completed
in 24 days with 67 per cent probability.
Table 11.7: Activity Crashing for Control of Time
Cost for
Activity Normal Crash Crash
Normal
Distribution Duration Cost Rs.
Duration Rs.
A 5 500 3 1000
B 8 800 – –
C 6 900 – –
D 11 1200 7 1600
E 7 1000 5 2000
Activity B and C cannot be crashed. Activity A can be crashed to 3 days and it will cost Rs
1000 as against Rs 500. If the project is to be controlled in time, it is necessary to crash the
activities which are on the critical path.

Table 11.8: critical path from the table 11.7
Reduction In
Critical Cost Cost
Duration
Activity Increase Slope
C – – –
D 4 400 100
E 2 1000 500
So, if the project is to be completed in 20 days as against 24 days, it is economical to crash

the activities D and E as the cost increase per day in case of D is Rs 100 and as that of E is Rs
500. MS Project is one of the standard packages for Project Management.

9. COST ACCOUNTING SYSTEMS

The cost data is an important data which is used in many business decisions, such as pricing
- make or buy, purchasing, allocation of overheads, etc. Most of the companies which are in
competitive business rely on the formal cost accounting systems used for business decisions
and also for the cost control. There are three cost accounting systems:
• Job order cost system
• Process cost system
• Period cost system
The companies install these systems, as the case may be, and build a cost database for
support in decision-making.
10. OPERATIONS RESEARCH MODELS: MATHEMATICAL

PROGRAMMING TECHNIQUES
Mathematical Programming Technique is a vast area of application. The programming

techniques are applicable when certain conditions are met and the problem can be expressed
in a mathematical form in terms of the decision variables. The programming techniques are
based on such mathematical models which give unique feasible solutions satisfying the
constraints on resource, capacity, demand, etc.
10.1 Linear Programming Model (LP)

Many business and economic activities are concerned with the problem of planning. If the
availability of resource is in abundance, the need for linear programming problems would
not arise at all. In any organisation, the resources available are limited and the business
problem statement is always formulated to :
• Maximise profit, whose variables are restricted to values satisfying a system of linear
constraints
• Minimise cost function, whose variables are restricted to values satisfying a system of
linear constraints

Linear programming is a technique for determining an optimum schedule of independent

activities in view of the available resources. Linear relationship between two or more
variables is the one in which the variables are directly proportional.
The general linear programming problem calls for optimising (maximising/minimising) a

linear function of variables called the ‘objective function’ subject to a set of linear equations
and/or inequalities called the constraints or restrictions.
Linear programming is a special mathematical model. This model is applicable where the
decision variables assume the values which are non- zero, and the relationship among the
various variables is linear. There are limitations called constraints to use the variables or a
combination thereof.
Computer-based LP software packages like LINDO, LINGO are available on almost all the
computer systems. Besides solving linear programming problems, the solution provides a
variety of management information through sensitivity analysis.
Let us look at an example “Production Allocation Problem” where the linear programming
can be applied.
A firm manufactures two types of products, A and B and sells them at different profits. Each
product is processed on two machines at different rates. The availability of machines are
restricted to different timelines. Such problems can be formulated as a linear programming
problem.
10.2 Dynamic Programming

In many situations, the decision-making process consists of selecting a combination of plans
from a large set. While considering the problem as a whole, the problem has some important
drawbacks like
• lot of computational work and too much time is involved.
• all combinations may not satisfy the limitations and thus may be infeasible.
• the number of combinations is so large.

So, in order to overcome the difficulties, the given problem is divided into sub-problems or
stages. One stage at a time is considered and the various infeasible combinations are
eliminated with the objective of reducing the volume of computations.
The mathematical technique of optimising a sequence of interrelated decisions over a period

of time is called dynamic programming (DP). It uses the idea of recursion to solve a complex
problem, broken into a series of sub-problems. The word dynamic has been used because
time is explicitly taken into consideration. The objective in dynamic programming is to select
a decision policy so to optimise the returns that are in the form of costs or benefits.
Mathematically a dynamic programming problem DPP is a decision–making problem in n

variables, the problem being sub-divided in to n sub-problems and each such problem being
a decision-making problem in one variable only. The solution to a DPP is achieved
sequentially starting from one (initial) stage to the next till the final stage is reached. This
dynamic programming technique was developed by Richard Bellman in the early 1950.
Dynamic programming can be called as recursive optimisation.
10.3 Non-linear Programming

One of the important assumptions of linear programming problem is the linear relationship
among the decision variables. This means that each decision variable will have an
independent effect on the objective and will contribute a constant and proportional amount
to it and that each constraint will involve a linear relationship. In many real-world cases,
decision variables do not always utilise a constant and independent amount. In addition,
each decision variable may not always make a constant and independent contribution to the
objective function which we seek to optimise In some situations the decision variables
frequently have interrelated, rather than, independent, effects on the objective criterion.
For example, consider a company that sells razors and blades. Since these products
complement each other in the market, one may expect that a growth in razor sales increases
the demand for blades. As a consequence, the profit from blades may depend on razor sales,
apart from the number of sales for blades. In other words, razor and blade sales make
interrelated contributions to the objective criterion.

A variable utilisation rate or interaction among the decision activities creates a non-linear
relationship in the corresponding constraint expression. As a result, the mathematical model
consists of a nonlinear objective function and/or at least one non-linear constraint
expression, which is offer referred to as a non-linear program.
10.4 Transportation
The objective of the problem is to transport a commodity (single product) from more than
one centre, called origins (or sources, or supply or capacity centres) to more than one places
called destinations (sinks or demand or requirement centres) and the costs of transportation
from each of the origins to each of the destinations being different and known. It is further
assumed that
• The availability as well as requirements of the various centers are finite and contains
the limited resources.
• The cost of transportations is linear.
The problem is to transport the goods from various origins to different destinations in such
a manner that the cost of transportation is minimum.
The distinct feature of transportation problems is that sources and jobs must be expressed
in terms of only one kind of unit.
10.5 Sequencing
The selection of the appropriate order in which waiting customers may be served is called
sequencing. A practical situation may correspond to an industry producing a number of
products, each of which is to be processed through different machines, of course, finite in
number.
The effectiveness measure (time, cost, distance, and so on) is a function of the order or
sequence of performing a series of jobs (tasks).
Suppose there are n jobs to perform, each of which requires processing on some or all of m
different machines. The effectiveness (that is, cost, time, mileage, and henceforth) can be
measured for any given sequence of job at each machine, and the most suitable sequence is

to be selected (which optimises the effectiveness measure) among all (n!)m theoretically
possible sequences.
Although theoretically, it is always possible to select the best sequence by testing each one,
in practice, it is impossible because of the large number of computations involved. For
example, if there are 4 jobs to be processed at each of the 5 machines (i.e., n = 4 and m = 5),
the total number of theoretically possible different sequences will be (4!)5 = 7,962,624. So,
easier methods of dealing with such problems are needed. That is, a technique which helps
us arrive at an optimal sequence without trying all or most of the possibilities is needed.
10.6 Queueing
Queue is a common word that means a waiting line or the act of joining a line. It is formed
when the number of customers arriving is greater than the number of customers being
served during a period of time.
Depending on the server status, the incoming customer either waits at the queue or gets
served. If the server at the counter is free at the time of arrival, the customer can get served
without a waiting time. In this process, over a period of time, the system may experience
‘customer waiting’ and/or ‘server idle time’. In any service system involving queuing
situation, the objective is to design the system in such a manner that the average waiting
time of the customers is minimised and the percentage utilization of the server is maintained
above at a desired level.
A queuing system can be described by

i. the input (or arrival pattern)
ii. the service mechanisms (or service pattern)
iii. the queue discipline
iv. customer behavior
A queuing system consists of one or more servers, an arrival pattern of customers, service
pattern, queue disciple, the order in which the service is provided and customer behavior.

10.7 Inventory
Inventory is defined as any idle resource of an enterprise. It is stock of goods, commodities
or economic resources that are kept for the purpose of future business affairs. Inventory may
be kept in any form—raw materials in process, finished product, packaging, spares and
others—stocked in order to meet the expected demand. It is important to maintain some
inventories for the smooth functioning of an enterprise. Suppose a firm is not maintaining
inventories; if a sales order comes, it has to purchase the raw materials required, wait till
these arrive and then start production. This increases the waiting time of customers to get
the delivery goods.
The disadvantages of not maintaining inventories are: raw materials are purchased at a high
price because of piecemeal buying; production costs would be high because of not being able
to take advantage of batching, and so on.
Meaning of Inventory Control

Inventory control may be defined as ‘the function of directing the movement of goods
through the entire manufacturing cycle from the requisitioning of raw materials to the
inventory of finished goods in an orderly manner to meet the objectives of maximum
customer-service with minimum investment and low-cost plant operation.’
There are two basic functions.

i. Maintaining an accounting record to handle the inventory transactions concerning each
inventory item. For inventory transactions, a record-keeping system called Kardex file
is maintained for each inventory item.
ii. Deciding inventory replenishment decisions. There are two basic replenishment
decisions:
When is it necessary to place an order (or produce) to replenish inventory?

If the demand of an item is independent of that of other items, then the recorder point
technique can be used to know the time of replenishment.
How much is to be ordered (or produced) in each replenishment?
The decision about the number of units to order (or produce) for replenishment depends on
the types of inventory costs.

10.8 Simulation
There are many problems of real life which cannot be represented mathematically due to the
stochastic nature of the problem, the complexity in problem formulation, or the conflicting
ideas needed to properly describe the problem under study. In such situations simulations
can be used.
Simulation analysis is a natural and logical extension of the analytical and mathematical
techniques used for solving problems in Operations Research. Simulation, which can be
called management laboratory, determines the effect of alternate policies without disturbing
the real system. Recent advances in simulation methodologies, software availability, and
technical developments have made this technique one of the most widely used and popularly
accepted tools in Operations research and System Analysis. Simulation helps us in deciding
the best policy with the prior assurance that its implementation will certainly prove to be
beneficial to the organisation.
Simulation is a representation of reality using a model or other device which will react in the
same manner as reality under a given set of conditions.
Simulation is the use of a system model that has the designed characteristics of reality in
order to produce the essence of actual operation.
According to Donald G. Malcolm, a simulated model may be defined as one which depicts the
working of a large-scale system of men, machines, materials and information operating over
a period of time in a simulated environment of the actual real world conditions.

11. KNOWLEDGE MANAGEMENT (KM)

Knowledge Management has the following processes:
• Define, capture, manipulate, store, and develop.
• Develop information systems for knowledge creation.
• Design applications for improving organisation's effectiveness.
• Create knowledge set, i.e. intellectual capital to increase economic value of the
organisation.
• Continually upgrade knowledge to keep the intellectual capital growing.
• Distribute and share knowledge with the concerned as appropriate.
Effective use of knowledge depends on how a user decides to perform the work and the
personal ability to pick and choose and further manipulate for effective behaviour. Hence,
with formal KM in place in the organisation, use of KM still depends on the person’s initiative,
ability to envision and the problem solving skills.
Fig. 11.7: Forces Driving KM Initiatives

The physical view of KMS is shown in Fig. 11.8.
Fig. 11.8: Physical View of KMS
KM system is a superset of systems built over present information system architecture. It is

not a transaction processing system and it does not have standard system components which
when implemented would create IC. It would be appropriate to clear some doubts on
knowledge and KM for its acceptance in the organisation as an asset.
Fig. 11.9: KM System: A Conceptual View
11.1 Knowledge Management Systems

The time has come to handle the knowledge-IC systematically, for use in the strategic
management of business. Knowledge over a period gets developed in an organisation and it
resides in the people, the information files and the databases. It is not always explicit but is
tacit in character and content, to know and to acquire. To bring knowledge as a critical input
in the management process, it is necessary to have knowledge management systems. The
knowledge management system therefore deals with the definition, acquisition,

construction, storage, delivery, and application of knowledge. KMS handles two types of
knowledge. One is tacit and other is explicit.
The knowledge has a structure and character. On the subject of, “Why build KMS?”, it is
necessary to understand 'Knowledge' in terms of its meaning, evaluation and migration.
Table 11.9 shows the journey to knowledge from data.
Knowledge, therefore, is an essence of business management intelligence, residing in

individuals, groups of individuals, systems in the form of information set, models, processes
and databases. Use of knowledge is critical to an organisation, hence knowledge creation,
storage, distribution and delivery is very important, calling for establishing formal KMS.
Table 11.9: Journey of Knowledge
Particulars Data Information Knowledge

Made of Events Trends / Projections Expertise
Analysis
Carriers Transactions Graph / Patterns Learning &
Frames Acquisition
Usage Representation Viewing, Decision- Modelling, Inferring
making Application, usages
Human Observation Forecasting, Experience, up
Interaction Interpretation Judgement gradation
Purpose Archiving for Performance Strategising
Use Management business moves
Process Automation System design for Knowledge
through IT information products Management
processes and
systems
Knowledge Management System Architecture

KMS architecture deals with knowledge identification, generation and delivery for
application in business. Figure 11.10. show KMS architecture.

Fig. 11.10: KMS Architecture
Identification of Knowledge
In a given business scenario, knowledge needs to be defined and identified for further
processing. Table 11.10 gives the total scope and category of knowledge.
Table 11.10: Scope and Category of Knowledge
Category Knowledge Purpose Impact

Tacit Explicit
Workplace – √ Acting Speed
Knowledge Effectively
Business √ √ Functioning Performance
Knowledge Effectively
Intellectual – √ Performing Growth
Capital Effectively
Components
After identifying the knowledge in terms of scope and category, the next step is to survey for
locating the source for such knowledge in the organisation. On locating the valid source, it is
necessary to put it into a structure for understanding and application.
Most organisations succeed in structuring workplace knowledge and some part of business
knowledge. It is difficult to construct the intellectual capital components first and then put
them in some sort of structure. This structure is a model for communication, understanding
and application. It is necessary where an organisation is facing cut-throat competition.

Knowledge Generation
After identification, definition and structuring, the knowledge process must be set for
acquisition of knowledge. On acquisition, knowledge needs to be manipulated for
understanding, presentation and usage.
Next step then is to integrate knowledge sets to build knowledge databases for access and
distribution. Manipulation and integration processes would bring knowledge closer to its
application at the right place and in right form..
The toughest job is to give meaningful definition and presentation to tacit knowledge for
ease of use or application.
Many decision scenarios call for simultaneous application of tacit and explicit knowledge. Its
generation as a set is difficult. It, however, can be achieved through training of concerned
personnel in the organisation.
Knowledge Delivery
One may create knowledge and place it in knowledge database, but owing to its nature, it
needs to be protected and made secure and also simultaneously made available to users for
viewing, manipulating and application.
The system for access control, authorisation and authentication of knowledge for the
purpose of update, alter, delete, etc. are necessary. Developing systems for packaging
knowledge and for delivery for ‘ready to use’ are also necessary.
11.2 Tools for Knowledge Management

KM deals with knowledge generation, knowledge codification and refinement and
knowledge transmission. The tools that are available to handle all these functions of
knowledge management are:
• Database management tools.
– For data management and seeking knowledge through SQL queries.

– Data warehousing, Data mart, Data mining tools.

– For business information creation and using Data Mining Tools, OLAP Tools to seek
knowledge on different views and scenarios.
• Process modelling and Management tools.
– For recording standard processes as an explicit knowledge for use in the
organisation.
• Work flow management tools.
– For recording the process of workflow as an explicit knowledge for group workers.
• Search engine tool.
– For locating specific information through search algorithms.
• Document management tools – like Lotus notes.
• These tools are known as database management tools for documents. They are useful
to search and manipulate documents to create new knowledge.
11.3 Approaches to Develop KM Systems

The knowledge body, tacit or explicit is an output of two basic approaches as shown in Fig.
11.11.
Fig. 11.11 : Approach to KM Systems
Moving to knowledge from data is a conventional approach to KM, defining knowledge as

just-in case requirement but untested. Moving from results backward to knowledge is a
refined approach, which has passed the test of utility. In both the cases KMS has the following
roles to play as shown in KMS becomes successful in an organisation when developers and
users recognise and appreciate the barriers in the system implementation. The barriers
however lose strength when competitive processes force

Fig. 11.12: Role of KMS
organisations to come out of these barriers. The barriers are at four different locations:
• People in the organisation
– Resistance to change
– Lack of motivation to learn
– Turnover of people
– Resistance to share knowledge
• Management of the organisation
– Ego problem
– Loss of power of possession
– Fear of losing to competition
• Organisation structure
– Complex, distributed, based on different principles of structuring, thereby posing
problems in storage, distribution sharing and security
• Knowledge itself
– Universal definition of 'knowledge' with respect to context
– Unanimity in coding, classifying and storing of knowledge

– Decision on specific knowledge to declare it as a general knowledge
Fig. 11.13: Categories of Al Systems
11.4 Knowledge-based Expert System (KBES)

Decision-making or problem-solving is a unique situation riddled with uncertainty and
complexity dominated by the resource constraints and a possibility of several goals. In such
cases, flexible systems (open systems) are required to solve the problems. Most of such
situations, termed as unstructured situations, adopt two methods of problem solving,
generalized or the Knowledge-based Expert System (KBES).
In a generalised approach, all alternatives are considered and the resolution of the problem
is by trial and error, with no assurance whether it is the best or the optimum, while, in the
knowledge based approach, only limited alternatives are considered and the resolution is
made by a logical reasoning with the assurance of the local optimum. The generalised
approach is dominated by a procedure or method, while the knowledge based approach is
dominated by the reasoning process based on the knowledge.
The KBES has three basic components which are necessary to build the system as shown in
Fig. 11.14.

Fig. 11.14: KBES Model
Knowledge Base
It is a database of knowledge consisting of the theoretical foundations, facts, judgments,
rules, formulae, intuition, and experience. It is a structural storage with facilities of easy
access.
Inference Mechanism
It is a tool to interpret the knowledge available and to perform logical deductions for a given
situation.
User Control Mechanism

It is a tool applied to the inference mechanism to select, interpret and deduce or enter. The
user control mechanism uses the knowledge base in guiding the inference process.
In the KBES, the three components are independent of each other. This helps in modifying
the system without affecting all the components. Like in the database application, where the
data is independent of its application, in KBES, knowledge is independent from application,
i.e., inference process. The KBES database stores the data, the cause-and-effect relation rules,
and the probability information on event occurrences.
For example, the knowledge base of Health Care would have knowledge such as "obesity
leads to high blood pressure," "there are 60 per cent chances that smokers may suffer from
cancer." The KBES, therefore, stores and uses knowledge, accepts judgments, questions
intelligently, draws inferences, provides explanation with reasons, offers advice and
prompts further queries for confirmation.
In the KBES, the knowledge database uses certain methods of knowledge representation.
These methods are – Semantic Networks, Frames and Rules.

The characteristics of a variety of tables are used to represent knowledge tn a table. A table
in a drawing room inherits the characteristics of a table in a drawing room.
Frames
The second method of representing the knowledge is putting the same in frames. The
concept of frame is to put the related knowledge in one area called a frame. The frame is an
organised data structure of knowledge. The frames can be related to other frames. A frame
consists of slots representing a part of the knowledge. Each slot has a value which is
expressed in the form of data, information, process and rules.
Rules
The third method of representing the knowledge is rule-based. A rule is a conditional
statement of an action that is supposed to take place, under certain conditions. Some rules
can be constructed in the form of 'If Then' statements.
Inference Mechanism
Having created a knowledge database, it is necessary to create the inference mechanism. The
mechanism is based on the principle of reasoning. When reasoning is goal driven, it is called
Backward Chaining to goal and when it is data driven it is called Forward Chaining to goal.
For example, if there is a breakdown in a plant, then looking backward for the symptoms and
causes, based on the knowledge database, is backward chaining. However, if the data which
is being collected in the process of plant operations is interpreted with the knowledge base,
it can be predicted whether the plant will stop or work at low efficiency. The data here is
used to infer the performance of the plant and this is called forward chaining.
The choice between backward or forward chaining really depends on the kind of situation.
To resolve a problem after the event, one has to go from goal (breakdown, stoppage, etc.) to
data, i.e., it is a case of backward chaining. But if the question is of preventing a breakdown,
then the data would be monitored in such a way if it is directing towards a goal (breakdown,
stoppage), then it is a case of forward chaining.

7. In ________________ system, the costs are assigned to the jobs passing through the
plant and are accumulated by recording the basic job statistics on the job card.
8. The basic characteristic of the Decision Support System is that it is based on
.
9. is applicable where the decision variables assume the
values which are non-zero, and the relationship among the various variables
is linear.
10. Quadratic programming, integer programming and dynamic programming are
all special cases for ___________________.
11. ______________________ is a tool to interpret the knowledge available and to
perform logical deductions in a given situation.
12. __________________ deals with knowledge identification, generation and
delivery for application in business.
13. KM deals with knowledge generation, knowledge codification and
refinement and _________________.
14. When reasoning is goal-driven, it is called _____________ and when it is data -
driven it is called __________________.

12. SUMMARY
• The Decision Support System refers to a class of system which supports in the process
of decision- making but does not always give a decision by itself.
• Types of Decision Support System are:
➢ Status Inquiry Systems
➢ Data Analysis Systems
➢ Information Analysis Systems
➢ Accounting Systems
➢ Model- based Systems
• There are a number of situations where the management has to make a decision based
on the analysis of business statistics. Since the organisation will have the database
information, these decision situations draw data from the database(s).
• The Decision Support System can be based on three different approaches:
➢ Behavioural Models
➢ Management Science Models
➢ Operations Research (OR) Models
• The knowledge over a period gets developed in the organisation and it resides in
people, information files and databases. It is not always explicit but is tacit in character
and content, to know and acquire. To bring knowledge as a critical input in the
management process, it is necessary to have knowledge management systems.
• Effective use of knowledge depends on how a user decides to perform the work and the
personal ability to pick and choose and further manipulate for effective behaviour.
Hence, with formal KM in place in organisations, use of KM still depends on the person’s
initiative, ability to envision and the problem solving skills.


1. Explain the concept and philosophy of Decision Support Systems.
2. Explain different types of Decision Support Systems.
3. The Decision Support Systems can be based on three different approaches. Briefly
explain each of these approaches.
4. Briefly explain the following:
a) Break-even Analysis Model
b) Return on Investment Analysis
5. Explain briefly the following cost accounting systems:
a) Job order cost system
b) Process cost system
c) Period cost system
14. ANSWERS
1. Accounting Systems
2. Data Analysis Systems
3. Behavioural Models
4. Management Science Models
5. Personnel Management
6. Queuing Theory
7. Job Order Cost System
8. Some tool, technique or model
9. Linear Programming Model
10. The mathematical programming models
11. Inference Mechanism
12. KMS architecture
13. Knowledge transmission
14. Backward Chaining to goal; Forward Chaining to goal

Terminal Questions
1. Refer to 2
2. Refer to 2
3. Refer to 3
4. Refer to 6
5. Refer to 9
References
1. Operations Research by AM Natarajan, P. Balasubrmanie,, A. Tamilarasi , O’Reilly
Media
2. E References
https://lib.convdocs.org/
https://www.coursehero.com/

ADMINISTRATION
SEMESTER 4
DBB2202
SYSTEM
Unit 12: Organization and Computer Networks 1

Unit 12
Organization and Computer Networks
Table of Contents
SL Topic Fig No / SAQ / Page No
No Table / Activity
Graph
1 Introduction - -
3
1.1 Objectives - -
2 Basics of Computer system - -
2.1 Computer Parts - - 4-5
2.2 Computer Types - -

3 Basic Network Terminologies, Definitions and - 1
Applications
3.1 Local Area Network (LAN) - -
3.2 Wide Area Network (WAN) - -
3.3 Metropolitan Area Network (MAN) - -
3.4 Point to Point Links - -
3.5 Circuit Switching - -

5-11
3.6 Packet Switching - -
3.7 Modem - -
3.8 Transmission Control Protocol (TCP) - -

&User Data gram Protocol (UDP)
3.9 World Wide Web (WWW) - -
3.10 Voice Telephony (VoIP) - -
3.11 Internet - -
4 The Intranet and the Extranet - 2
4.1 Intranet and Its Application to Business - - 11-14
4.2 Extranet and Its Application to Business - -

5 Summary - - 15
7 Answers - - 16

1. INTRODUCTION
In the previous unit you have studied the different support models for MIS such as DSS
models, market research methods, ratio analysis for financial assessment and management
science models.
Information Systems have grown powerful year after year. The role of the traditional MIS
has been obscured by newer software applications. Computerization is necessary to support
the organization by way of effective utilization of MIS package like ERP, ecommerce, and DSS.
In future, MIS is likely to be verbal and qualitative in nature. It will depend upon the strength
of the organizations’ Information Systems. Most of the enterprises are growing and their
systems have to scale to match the needs. The ever-growing demands of the systems will
force out the old conventional systems and bring in newer systems. The next decade is going
to witness several fundamental and qualitative changes in the practice of management of
commercial enterprises and other types of organizations.
These changes would be necessitated by better rates of economic growth, intensification of

competition, diversification and rapid technological developments, continuing fluidity in
economic-political environments and socio-political changes, involving the values and
attitudes of people working in organizations at all levels. To support these demands and
meet newer challenges in business, organizations will have to resort to various technologies.
In this unit you will study such possible technologies which will enable the enterprises to
support their MIS.
1.1 Objectives
❖ Define the basic terminologies in networks

❖ Elaborate the use of network in business applications
❖ Differentiate the types of networks
❖ Elucidate how intranet and extranet will help growing organizations

2. BASICS OF COMPUTER SYSTEM

A computer system is an integrated form of different components like hardware, software,
tools for input and output.
Computer Types:
There are four types of computers namely Personal Computers (PC), mainframe systems,
mini and super computer.
Personal computers are the commonly used systems, say in schools, for office work and for
personal use.
Large organisations use mainframe computers. Banks generally need mainframe computers
to process the volume of data
Minicomputers were first introduced in the 1960s and were named for their limited size in
comparison to other computers at that time. A minicomputer's capabilities fall somewhere
between those of a mainframe and a personal computer. So they are often referred to as
midrange computers.
Supercomputers are the most powerful computers ever built, as well as some of the largest
in terms of physical size. These devices are capable of processing massive quantities of data,
with the fastest supercomputers capable of performing over one trillion calculations per
second.
Characteristics of Computer
The following are the characteristics of a computer system
1. Speed: A computer is quite faster than human when it comes to conducting

mathematical calculations. It outperforms humans in terms of speed and precision.
Millions (1,000,000) of instructions can be processed per second by computers.
2. Precision: Computers are 100% accurate in their measurements. Data inconsistency or
inaccuracy can trigger errors.
3. Diligence: The computers can accurately perform millions of tasks or calculations in
that it is highly reliable. There are no signs of exhaustion or a loss of focus. It also has a
memory that is superior to that of humans.

4. Versatility: Versatility refers to a computer's ability to perform a variety of tasks with

the same accuracy and performance.
5. Reliability: A PC is solid as it gives predictable outcome for comparable arrangement of
information i.e., if we give a set of information and receive an output, we can be assured
that we will get a similar outcome as long as we provide the same input.
6. Automation: Computer performs all the tasks automatically, that is, it performs tasks
without manual intervention.
3. BASIC NETWORK TERMINOLOGIES, DEFINITIONS AND

APPLICATIONS
Though there are plenty of network terminologies, it may not be required to learn everything
at this stage. Here, only the basic terminologies are introduced along with their definitions
and applications.
3.1 LAN – A Local Area Network (LAN) is a computer network covering a small
geographical area. It could be used in small places like a home, office, educational institutions
etc. LAN may be used to transfer data with reasonably high data transfer rates. Ethernet over
unshielded twisted pair cabling, and Wi-Fi are the two most common technologies currently
being used with LAN.
3.2 MAN – Metropolitan Area Networks, or MANs, are large computer networks usually
spanning a city. They typically use wireless infrastructure or Optical fiber connections to link
their sites. The IEEE 802-2001 standard describes a MAN as being:
“A MAN is optimized for a larger geographical area than is a LAN, ranging from several blocks
of buildings to entire cities. MANs can also depend on communications channels of
moderate-to-high data rates. A MAN might be owned and operated by a single organization,
but it usually will be used by many individuals and organizations. MANs might also be owned
and operated as public utilities. They will often provide means for internetworking of local
networks. Metropolitan area networks can span up to 50km, devices used are modem and
wire/cable “.

3.3 WAN – Wide Area Network (WAN) is a computer network that covers a broader area
than MAN. The coverage is beyond metropolitan cities and states. It uses routers and public
communications links with a very high data transfer rates. The largest and most well-known
example of a WAN is the Internet. WANs are used to connect LANs and other types of
networks together, so that users and computers in one location can communicate with users
and computers in other locations. Many WANs are built for one particular organization and
are private. Others, built by Internet service providers, provide connections from an
organization's LAN to the Internet. WANs are often built using leased lines. At each end of
the leased line, a router connects to the LAN on one side and a hub within the WAN on the
other. Leased lines can be very expensive. Instead of using leased lines, WANs can also be
built using less costly circuit switching or packet switching methods explained later in this
unit.
3.4 Point to Point LINKs – A point-to-point link provides a single, pre- established WAN
communications path from the customer premises, through a carrier network such as a
telephone company, to a remote network. Point-to-point lines are usually leased from a
carrier and thus are often called leased lines. For a point-to-point line, the carrier allocates
pairs of wire and facility hardware to your line only. These circuits are generally priced based
on bandwidth required and distance between the two connected points.
3.5 Circuit Switching – Switched circuits allow data connections that can be initiated
when needed and terminated when communication is complete. This works much like a
normal telephone line works for voice communication. Integrated Services Digital
Network (ISDN) is a good example of circuit switching. When a router has data for a remote
site, the switched circuit is initiated with the circuit number of the remote network. In the
case of ISDN circuits, the device places a call to the telephone number of the remote ISDN
circuit. When the two networks are connected and authenticated, they can transfer data.
When the data transmission is complete, the call can be terminated.
3.6 Packet Switching – Packet switching is a WAN technology in which users share
common carrier resources. Because this allows the carrier to make more efficient use of its
infrastructure, the cost to the customer is generally much better than with point-to-point
lines. In a packet switching setup, networks have connections into the carrier's network, and

many customers share the carrier's network. The carrier can then create virtual circuits
among customers' sites by which packets of data are delivered from one to the other through
the network. The section of the carrier's network that is shared is often referred to as a cloud.
3.7 Modem – A modem is a device that interprets digital and analog signals, enabling data
to be transmitted over voice-grade telephone lines. At the source, digital signals are
converted to a form suitable for transmission over analog communication facilities. At the
destination, these analog signals are returned to their digital form.
3.8 TCP (Transmission Control Protocol) and UDP (User Datagram

Protocol) – These are the protocols by which data is transmitted over networks. TCP
makes a virtual "connection", which gives some level of guarantee of reliability. UDP is a
best-effort, connectionless transport, in which data packets that are lost in transit will not be
re-sent. The application protocols sit on TCP and UDP. These define the specific messages
and data formats sent and understood by the applications running at each end of the
communication. Examples of these protocols are HTTP, FTP, and SMTP.
3.9 WWW – The World Wide Web is a huge set of interlinked documents, images and other
resources, linked by hyperlinks and URLs. These hyperlinks and URLs allow the web servers
and other machines that store originals and cached copies of these resources to deliver them
as required, using HTTP (Hypertext Transfer Protocol). HTTP is only one of the
communication protocols used on the Internet. Web services also use HTTP to allow
software systems to communicate in order to share and exchange business logic and data.
3.10 Voice Telephony (VoIP) – VoIP stands for Voice over IP, where IP refers to the
Internet Protocol that underlies all Internet communication. This phenomenon began as an
optional two-way voice extension to some of the instant messaging systems in businesses
across the world. In recent years, many VoIP systems have become as easy to use and as
convenient as a normal telephone. The benefit is that, as the Internet carries the actual voice
traffic, VoIP can be free or cost much less than a normal telephone call, especially over long
distances and especially for those with always-on Internet connections. Thus, VoIP is
maturing into a viable alternative to traditional telephones. Interoperability between
different providers has improved.

3.11 Applications Based on Network Topology

Based on topology, the network is classified into the following:
• Star Topology: Star topology is a network topology in which each network component
is physically connected to a central node such as a router, hub or switch. In a star
topology, the central hub acts like a server and the connecting nodes act like clients. It
is very reliable – if one cable or device fails then all the others will still work. It is high-
performing as no data collisions can occur. It is easy to diagnose network problems.
Some advantages include that if the hub fails, the entire network collapses and it costs
more to cable the star configuration.
• Bus Topology: All devices in the network are connected by one central network cable.
The single cable, where all data is transmitted between devices, is referred to as the
bus, backbone, or trunk. Ethernet networks also use a bus topology. In a bus topology,
one computer in the network works as a server and other computers behave as clients.
The purpose of the server is to exchange data between client computers. It works very
efficiently well when there is a small network. The length of cable required is less than
a star topology. It is easy to connect or remove devices in this network without affecting
any other device. It is very cost-effective as compared to other network topology i.e.
mesh and star.
• Ring Topology : A ring topology is a network configuration where device connections
create a circular data path. Each networked device is connected to two others, like
points on a circle. Together, devices in a ring topology are referred to as a ring network.
All data flows in one direction, reducing the chance of packet collisions. A network
server is not needed to control network connectivity between each workstation. Data
can transfer between workstations at high speeds. A major disadvantage of a ring
topology is that if any individual connection in the ring is broken, the entire network is
affected.
• Mesh Topology: A mesh topology is a network setup where each computer and network
device is interconnected with one another. This topology setup allows for most
transmissions to be distributed even if one of the connections goes down. It is a
topology commonly used for wireless networks. Manages high amounts of traffic,
because multiple devices can transmit data simultaneously. A failure of one device does

not cause a break in the network or transmission of data. However, the cost to
implement is higher than other network topologies, making it a less desirable option.
Building and maintaining the topology is difficult and time consuming.
• Tree Topology: Tree topology is a hybrid network topology in which star networks are
interconnected via bus networks. Tree networks are hierarchical, and each node can
have an arbitrary number of child nodes. This topology provides a hierarchical as well
as central data arrangement of the nodes. .As the leaf nodes can add one or more nodes
in the hierarchical chain, this topology provides high scalability. The other nodes in a
network are not affected if one of their nodes gets damaged or does not work. But this
network can be difficult to configure in comparison with the other topologies. It can
also be expensive.
3.12 Internet: The Internet, sometimes called the "Information Superhighway", is a

worldwide, publicly accessible series of interconnected computer networks that transmit
data by packet switching, using the standard Internet Protocol (IP). It is a "network of
networks" that consists of millions of smaller domestic, academic, business, and government
networks, which together carry various information and services, such as electronic mail,
online chat, file transfer, and the interlinked web pages and other resources of the World
Wide Web (WWW). The concept of sending electronic text messages between parties in a
way analogous to mailing letters or memos predates the creation of the Internet. Even today
it can be important to distinguish between Internet and internal e-mail systems. Internet e-
mail may travel and be stored unencrypted on many other networks and machines, out of
both the sender's and the recipient's control. During this time it is quite possible for the
content to be read and even tampered with by third parties, if anyone considers it important
enough. Purely internal or intranet mail systems, where the information never leaves the
corporate or organization's network, are much more secure.
In the late 1960s, the U.S. Department of Defense came up with the idea of creating of a
network of computers as a means of communication. This was useful for them initially in
case of some national emergency such as a nuclear war. Thus, if one of these centers was
destroyed, the others would still function. This first computer network was called
DARPANET, which later became very famous as ARPANET. This idea was a real success, and
researchers and educators saw the possibilities of using such networks in their own fields,

and in the mid 1980s created NSFNET (the National Science Foundation Network) which
linked five supercomputer centers. Today, the ever-growing network of computers around
the world is called the Internet.
Internet is defined as network of networks in which computers communicate among

themselves through some communication medium. The communication medium can be
cable wire, micro waves or satellite. Thousands of computers are interconnected across the
world with the help of network. This helps in exchange of information in all types of
communication. Internet is a very essential part of any kind of business as it connects people-
to-people, organization-to-organization in no time and with less cost. Internet acts as an
accelerator to the business and stands as a back bone.
In order to connect yourself to internet you need to have very less components. You need to
have a computer, a browser program and a modem. For instance, a Macintosh or a PC is
connected to a phone line or wireless and internet is accessed through internet explorer or
Netscape navigator. Internet is made out of several parts. The important are WWW, email,
mailing lists, discussion forums and news groups, Group chatting, Telnet, FTP, etc.
According to Hughes (in 1993), World Wide Web is: "a wide-area hypermedia information
retrieval initiative, aiming to give universal access to a large universe of documents". To be
simpler WWW which is popularly called the WEB is a system of interlinked hypertext
documents which allow collaborating with remote sites and sharing the information. That
means WWW is a part of Internet.
Benefits: Speed, vast resources and the ability to directly communicate the users make the
Internet most useful to the world.
• It is considered superior to the best and the biggest libraries in the world.
• Communication is a very important benefit of internet.
• With the invention of internet phone, one can talk with people who are abroad without
paying abroad call charges and free of cost.

1. LAN may be used to transfer data with reasonably high data transfer rates.
2. Packet circuits allow data connections that can be initiated when needed and
terminated when communication is complete.
3. TCP and UDP are the protocols by which data is transmitted over networks.
4. THE INTRANET, EXTRANET AND INTERNET

4.1 Intranet and Its Application to Business
An intranet is a private computer network. Intranet uses Internet protocols and network
connectivity to securely share part of an organization's information or operations with its
employees. The same concepts and technologies of the Internet such as clients and servers
running on the Internet protocol suite are used to build an intranet. HTTP, FTP and other
Internet protocols are used in intranet. There is often an attempt to use Internet technologies
to provide new interfaces with corporate "legacy" data and information systems.
Intranets are generally restricted to employees of the organization while extranets can
generally be accessed by customers, suppliers or other approved parties.
Increasingly, intranets are being used to deliver tools and applications, e.g., collaboration (to
facilitate working in groups and teleconferencing) or sophisticated corporate directories,
sales and CRM tools, project management etc., to increase productivity. Intranets are also
being used as culture change platforms. For example, large numbers of employees discussing
key issues in an online forum could lead to new ideas.
Intranet traffic, like public-facing web site traffic, is better understood by using web metrics
software to track overall activity, as well as through surveys of users. Most commonly,
intranets are owned by the communications, HR or CIO areas of large organizations.
Advantages of intranets
a) Increased Productivity: Intranets can help users to locate and view information faster
and use applications relevant to their roles and responsibilities. With the help of a web
browser interface, users can access data held in any database the organization wants
to make available, anytime and – subject to security provisions – from anywhere within

the company workstations, increasing employees' abilities to perform their jobs faster,
more accurately, and with confidence that they have the right information. It also helps
to improve the services provided to the users.
b) Reduced Time: With intranets, organizations can make more information available to
employees in less time.
c) Improved Communication: Intranets can serve as powerful tools for communication
within an organization, vertically and horizontally. From a communications standpoint,
intranets are useful to communicate strategic initiatives that have a global reach
throughout the organization. The type of information that can easily be conveyed is the
purpose of the initiative and also what the initiative is aiming to achieve, who is driving
the initiative, results achieved to date, and who to speak to for more information. By
providing this information on the intranet, the staff have the opportunity to keep up-
to-date with the strategic focus of the organization.
d) Web Publishing: Web publishing allows 'cumbersome' corporate knowledge to be
maintained and easily accessed throughout the company using hypermedia and Web
technologies.
e) Business operations and management: Intranets are also being used as a platform for
developing and deploying applications to support business operations and decisions
across the inter-networked enterprise.
f) Cost-effective: Users can view information and data via web-browser rather than
maintaining physical documents such as procedure manuals, internal phone list and
requisition forms.
g) Enhanced Collaboration: With information easily accessible by all authorized users,
teamwork is enabled.
4.2 Extranet and Its Application to Business

An extranet is a private network that uses Internet protocols, network connectivity and
possibly the public telecommunication system to securely share part of an organization's
information or operations with suppliers, vendors, partners, customers or other businesses.
An extranet can be viewed as part of a company's Intranet that is extended to users outside
the company. It has also been described as a "state of mind" in which the Internet is perceived
as a way to do business with a pre-approved set of other companies business-to-business

(B2B), in isolation from all other Internet users. In contrast, business-to-consumer (B2C)
involves known server/s of one or more companies, communicating with previously
unknown consumers/ users.
An extranet may be considered as a private intranet mapped onto the Internet or some other
transmission system not accessible to the general public, but is managed by more than one
company's administrators.
An extranet requires security and privacy. These can include firewalls, server management,
the issue and use of digital certificates or similar means of user authentication, encryption of
messages.
There are a variety of commercial extranet applications, some of which are for pure file
management, and others which include broader collaboration and project management
tools. Also there exists a variety of Open Source extranet applications and modules, which
can be integrated into other online collaborative applications such as Content Management
Systems.
Companies can use an extranet to:

• Exchange large volumes of data using Electronic Data Interchange (EDI)
• Share product catalogues exclusively with wholesalers or those "in the trade"
• Collaborate with other companies on joint development efforts
• Jointly develop and use training programs with other companies
• Provide or access services provided by one company to a group of other companies,
such as an online banking application managed by one company on behalf of affiliated
banks
• Share news of common interest exclusively with partner companies
Disadvantages
Extranets can be expensive to implement and maintain within an organization (e.g.:
hardware, software, employee training costs)
Security of extranets can be a big concern when dealing with valuable information. System
access needs to be carefully controlled to avoid sensitive information falling into the wrong
hands.

Extranets can reduce personal contact (face-to-face meetings) with customers and business
partners. This could cause a lack of connections made between people and a company, which
hurts the business when it comes to loyalty of its business partners and customers.
4. is a private computer network.

5. With intranets, organizations can make more information available to employees
in time.
6. Web publishing allows 'cumbersome' corporate knowledge to be maintained
and easily accessed throughout the company using ________________and
technologies.
7. A requires security and privacy.

5. SUMMARY
In this unit you have studied the basics of networks. You have also studied the various types
of inter organizational networks, their appropriateness to the organizational setup and their
benefits to organizations. we have discussed the various types of networks ranging from LAN
/ WAN to intranet and extranet and their utilities.
1. Explain the need for networking organizational functions.
2. What is the difference between LAN and WAN?
3. Explain what is meant by switching and the types of switching.
4. What is Intranet? How is it useful to an organization?
5. Explain the advantage and disadvantage of Extranet.
6. What is the difference between WWW and internet?
7. What are the benefits of Internet?

7. ANSWERS
1. True
2. False
3. True
4. Intranet
5. Less
6. hypermedia and Web
7. Extranet
Terminal Questions
1. Refer.1
4. Refer 3.1
5. Refer 3.2
6. Refer 2.8 and 2.10
7. Refer 2.8 and 2.10
References
edition 2010.
E Reference:

ADMINISTRATION
SEMESTER 4
DBB2202
MANAGEMENT INFORMATION SYSTEM
Unit 13: Database Management Systems 1

Unit 13
Database Management Systems
Table of Contents
SL Fig No / Table SAQ /

Topic Page No
No / Graph Activity
1 Introduction - -
3-4
1.1 Objectives - -
2 Types of Databases and Users - 1 4- 8
3 DBMS - 2 9-13
4 Designing of DBMS - 3 13-21
5 Summary - - 22
7 Answers - - 22
8 References 23

1. INTRODUCTION
In the previous unit you have studied about the organization of MIS. we discussed the scope
of technology in MIS. we also discussed about the basic concepts of computer networks like
LAN, WAN, MAN, point to point links, switching techniques and internet. You have also
studied the difference between internet, intranet and extranet. In this unit you will study the
database management system which is essential for the maintenance of information and
helps in accessing the information for analytical purposes. Here in the table 13.1, we will list
for your reference the basic terminologies to continue with our study in Database
management system.
Data is a raw fact which can be stored and has

Data
specific meaning.
A DBMS is a complex set of software programs that
DBMS-Definition controls the organization, storage and retrieval of
data in a database.
• Collection of related data
What does it • A complete definition or description of the
consist of? database structures and constraints.
• Set of programs to access those data.
• All areas where computers are used,
Where is the including business, engineering, law,
DBMS used? education, banking, airline reservation, hotel
room booking etc.
• Transactional data like in banking industry
• Multimedia databases can store pictures,
Examples of video clips and sound messages.
DBMS • Geographic information system can store and
analyze maps, weather data and satellite
images.

1.1 Objectives:
❖ Explain the scope of technology in supporting Information Technology and MIS.

❖ Describe Processing of Data, Transaction, Application and Information for MIS.
❖ Examine the role and importance of human factors in IS Design.
❖ Explain the relevance of IT to MIS Design.
❖ Enumerate the steps in a quality assurance programme.

2. TYPES OF DATABASES AND USERS

Let us first learn the different types of databases:
2. TYPES OF DATABASES AND USERS
Types of databases:
The database is broadly classified in to four levels. They are
• Flat file
• The Hierarchical database
• The network database
• The relational database
Flat Files: A flat file is a collection of data stored in a two-dimensional database. Here
similar yet discrete strings of information are stored as records in a table. The columns of
the table represent one dimension of the database, while each row is a separate record.
The information stored in a flat file is generally alphanumeric and the structure of a flat
file is based on a uniform format as defined by the type and character lengths described by
the columns.
One of the most prominent flat file examples is a comma-separated values (CSV) file.
Columns and rows are typically delimited by tabs or commas, such as in CSV files. A flat file
database comprises a single table. It is hard to change the data format and to update the
flat file database. It is a poor data base when the queries become complex.
The Hierarchical Database: It resembles a tree structure. In this database, each link is
nested to an order to keep data organized in a particular order on a same level list. For
instance, a hierarchal database of sales may list each day’s sales as a separate file. Within
this nested file are all of the sales (same types of data) for the day.
The Network Database: In this type of database, a record is stored with a link to other
records – in effect, networked. They are sometimes referred to as a pointer, that means, it
can be a variety of different types of information such as node numbers or even a disk
address.

The Relational Database: The relational model represents the database as a collection of
relations having a set of rows and columns each of which is assigned a unique name.
Relation consists of a relational schema [structure of table] and relational instance [data
in a table at a particular time]; there is a close correspondence between the concept of
table and the mathematical concept of relation.
In relational model we use certain conventions. For instance, a row is called a tuple and a
column is termed as an attribute. The domain of a relational schema is a pool of legal
values.
Student [Reg. No, name, Addr, Phone, D-birth, GPA]
In this example, Student is a relation and the attributes [columns] are Reg. No, Name, Addr,
Phone, D-birth. A possible tuple for the Student relation is [‘MBA02C1101', ' Nupur
Rastogi’, '440, 1-main, 2nd cross, Airport Road, Kodenahalli, Bangalore-560008',
25256789, 11-Jan-1986].
The domain of each attribute is as follows:
Reg.No. : 10 alphanumeric characters

Name : characters
Addr : Alphanumeric characters
Phone : 7 digits
D-birth : Date

Characteristics of a relation:
1. The tuples in the relation need not be ordered.
2. Each tuple in the relation is an entity.
Object-Oriented Data bases: An object-oriented database (OOD) is a database system that

can work with complex data objects — that is, objects that mirror those used in object-
oriented programming languages.
In object-oriented programming, everything is an object, and many objects are quite

complex, having different properties and methods. An object-oriented database
management system works in concert with an object-oriented programming language to
facilitate the storage and retrieval of object-oriented data.
With an OOD, data objects are stored with all of its properties in the database. When your
program terminates, the objects continue to persist, stored in the OOD. When your program
starts up again, it can retrieve an object with the properties from the database. The process
of storing and retrieving a complex data object with an OOD is transparent to the user of the
database.
Types of Database Users
With so much complexity in data, a database can be managed by users whose roles are clearly
and distinctively defined.
Different persons who are involved in the design, use and maintenance of a large database
are defined as roles below:
1. Database Administrator [DBA]

2. Database Designers [DBD]
3. End Users
4. System Analysts and Application Programmers
5. DBMS System Designers and Implementers
6. Tool Developers
7. Operators & Maintenance Personnel

2.2 Database Administrator [DBA]
• Database is one of the primary resources used by many people in an Organization.

• Administering the Database Management System (DBMS) and the associated
software is the Database Administrator’.
• He is responsible for creating, modifying, and maintaining the Database.
• He grants permission to the users of the database.
• He stores the profile of each user in the database.
• He defines procedures to recover the database resulting from failures due to human,
natural or hardware causes.
• He usually has the complete authority to access and monitor the database.
2.3 Database Designers [DBD]

• A Database Designer should design the database in such a manner that it should meet
the requirements of the clients.
• Design of DBMS may have requirements to ensure faster access to data, reliable data
fetching and consistent & concurrent updates to data etc.
2.4 End Users

• People, who access the database, query and update the database and generate the
various reports are the end users. The database primarily exists for their use.
• End users can access the DBMS through menus or through SQL queries
2.5 Systems Analysts and Application Programmers

• System analysts collect the information regarding requirements of the end users and
develop specifications for canned transactions (Standardized queries and updates
with carefully programmed data validity checking) that meet their requirements.
• Application programmers implement specifications developed by the System
analysts, in the form of programs; they are also responsible for testing, debugging,
documenting and maintaining these programs. These are the programmers who
write menu applications.

2.6 DBMS System Designers and Implementers

People who implement the DBMS modules and interfaces as a software package are
called system designers and implementers.
2.7 Tool Developers

• Tools are the third party optional software packages which are not available with
the DBMS by default. They include packages for DB design, performance monitoring
and graphical interactions. In many cases, independent software vendors develop
and market these tools. They are called Tool Developers.
2.8 Operators and Maintenance Personnel
These are the system administration personnel that are responsible for the actual
running and maintenance of the hardware and software environment for the DB
system.
Self-Assessment Questions – 1
1. In ___________ type of database, a record is stored with a link to other records.

2. ___________ and __________ are the types of end users?

3. DBMS
3.1 Functions: The basic functions of DBMS in addition to centralised databases are:
3. DBMS
1. Distributed query processing: Distributed query processing means the ability to
access remote sites and transmit queries and data to the various sites via the
communication network.
2. Data tracing: DDBMS should have the ability to keep track of the data distribution,
fragmentation and replication by maintaining DDBMS catalog.
3. Distributed transaction management: In DDBMS transactions that access data from
more than one site, synchronize the access to distributed data and maintain integrity
of the overall database.
4. Distributed database recovery: The ability to recover from individual site crashes and
other types of failures.
5. Security: Data security is of utmost importance. The authorization/access privileges
of the users have to be managed to ensure data security.
6. Distributed directory (catalog) management: A directory contains information
(Metadata) about data in the database. The directory may be global for the entire
Distributed database , or local for each site. The placement and distribution of the
directory are design and policy issues.
These functions increase the complexity of a DDBMS over a centralized DBMS. A

Centralized Database provides a complete view of your data. For example, you can
query for the number of customers worldwide or the worldwide inventory level of a
product. It is easier to manage a centralized database than several distributed
databases.

3.2 Comparison between File Processing System and DBMS
Table 13.2: Traditional File system Vs Modern DBMS
Traditional File System Modern Database Management Systems
In Traditional file processing, data • Data definition is part of the DBMS

definition is part of the application • Application is independent and can be
program and works with only specific used with any application.
applications.
File systems are Design Driven; they • One extra column (Attribute) can be
require design/coding change when new added without any difficulty
kind of data occurs. • Minor coding changes in the
E.g.: In a traditional employee, the master Application program may be

file has Emp_name, Emp_id, Emp_addr, required.
Emp_design, Emp_dept, Emp_sal, if we
want to insert one more column
‘Emp_Mob number’ then it requires a
complete restructuring of the file or
redesign of the application code, even
though basically all the data except that in
one column is the same.
Traditional File system keeps redundant Redundancy is eliminated to the maximum

[duplicate] information in many locations. extent in DBMS if properly defined.
This might result in the loss of Data
Consistency.
For e.g.: Employee names might exist in

separate files like Payroll Master File and
also in Employee Benefit Master File etc.
Now if an employee changes his or her last

name, the name might be changed in the

pay roll master file but not be changed in
Employee Benefit Master File etc. This
might result in the loss of Data
Consistency.
In a File system data is scattered in various This problem is completely solved here.
files, and each of these files may be in
different formats, making it difficult to
write new application programs to
retrieve the appropriate data.
Security features are to be coded in the Coding for security requirements is not
Application Program itself. required as most of them have been taken
care of by the DBMS.
3.3 Advantages
The following are the advantages of DBMS:
1. Integrity (accuracy) can be maintained

2. Security features protect the Data from unauthorized access
3. Modern DBMS supports internet based application.
4. In DBMS the application program and structure of data are independent.
5. Consistency of Data is maintained. Redundancy is reduced
6. Data located on a server can be shared by clients
7. DBMS supports multiple views, as DBMS has many users and each one of them might
use it for different purposes, and may require viewing and manipulating only on a
portion of the database, depending on requirement.
3.4 Disadvantages
1. Database systems are complex, difficult and time-consuming to design.
2. Substantial hardware and software costs.
3. Damage to database affects virtually all application programs.

4. Extensive conversion costs in moving from a file-based system to a database system.
Initial training required for all programmers and users.
3. In DBMS the redundancy of data is ________________.
4. DBMS support __________________ as DBMS has many users and each one of them
might use it for different purposes.

4. DESIGNING OF DBMS
4.1 Data, Information and its Structure
4. DESIGNING OF DBMS
People use the terms ‘data’ and ‘information’ synonymously but they actually convey very
distinct features.
• Data is a raw fact which has been collected for a specific purpose. Data can be anything
from binary to a combination of alpha and numeric characters. Data can be any of these
following forms:
o linguistic expressions (e.g. name, age, address, date, ownership)
o symbolic expressions (e.g. traffic signs)
o mathematical expressions (e.g. E = mc2)
o signals (e.g. electromagnetic waves)
These data are collected for a specific purpose which may serve one or more activity of the
same domain.
The fact describes the elements such as opinions, comments or description of an event or
object. When this data is processed it becomes a meaningful piece of data which can be used
for further action. The data that has been processed is referred to as Information.
Information is a data that has been processed into a form that is meaningful to a recipient
and helps in analysis and decision making.
It is observed that information is obtained from the data but not all data produce useful
information. Information is useful when it is relevant, reliable, accurate, up- to-date, timely,
complete, intelligent, consistent and convenient to the recipient. An information system is
designed so as to process data into a meaningful form, i.e. to accept input, manipulate it in
some way, and produce output.
Data base management systems help in gathering and providing reports. The set of data
which is stored in rows and columns to perform a specific task is referred to as Data base
management systems.

The main function of the information systems is to convert data into information. The
following figure shows how data is converted into information using the intermediate
processes.
The information system can perform its function only with a proper organization and
structure without which it is impossible to convert data into information. Figure 13.1 shows
the organizational structure of the information.
Data represents a fact or statement of event without relation to other things. Ex: It is raining.
Information embodies the understanding of a relationship of some sort, possibly cause and
effect.
Ex: The temperature dropped 15 degrees and then it started raining.
Knowledge represents a pattern that connects and generally provides a high level of
predictability as to what is described or what will happen next.
Ex: If the humidity is very high and the temperature drops substantially, the atmosphere is
often unlikely to be able to hold the moisture, so it rains.
Fig. 13.1: The Process of Changing Data into Information (Organizational structure)

e.g.: It rains because it rains. And this encompasses an understanding of all the interactions
that happen between raining, evaporation, air currents, temperature gradients, changes, and
raining.
Figure 13.2 shows the diagrammatic transition of data to information, to knowledge and to
wisdom.
Fig. 13.2: Transition of data to information, knowledge and wisdom.
4.2 Entity, Instance and Attributes
Entity: An entity is something that has a distinct, separate existence, though it need not be
of a material existence. For instance, employee.
Attribute: The property that describes an entity is an attribute. It is a characteristic or

property of an object, such as weight, size or color.
Relationship: Describes the relationship between two or more entities.
Schemas: The description of a database is called the database schema [or the Meta data].
The description of the data base means defining the names, data type, size of a column in a

table and database [actual data in the table] itself. Description of a database is specified
during database design and is not frequently changed.
Roll No.
Name
Semester
Branch
Instances: The collection of data stored in the database, at a particular moment is a database
instance or database state or snapshot. These change very frequently due to addition,
deletion and modification.
Roll No.
Name
Semester
Branch
1
Priya Janardhan
ii
E&C
4.3 Data and Mapping

Data mapping is also referred to as database mapping. Data mapping is used as a first step to
a wide variety of data integration tasks including data transformation between a data source
and a destination. An attribute will map to zero or more columns in a relational database.
You must also remember while mapping that all attributes are not persistent; some are used
for temporary calculations. For example, a Student object may have an average mark
attribute that is needed within your application but isn’t saved to the database because it is
calculated by the application. Because some attributes of an object are objects in their own
right, a Customer object has an Address object as an attribute – this really reflects an
association between the two classes that would likely need to be mapped, and the attributes
of the Address class itself will need to be mapped. The important thing is that this is a
recursive definition: At some point the attribute will be mapped to zero or more columns.
The easiest mapping among all is the property mapping of a single attribute to a single
column. It is even simpler when each has the same basic types,

e.g. they’re both dates, the attribute is a string and the column is a chart, or the attribute is a
number and the column is a float.
Data mapping is used as the first step to a wide variety of data integration tasks. That means
Data transformation, identification of data relationships, detection of hidden sensitive data
and consolidation of multiple databases.
4.4 Database architecture:
The architecture followed in the database design is three-tier-architecture. The Three-

schema Architecture has three levels of architecture, an internal level, a Conceptual level and
an External level. The three schema architecture is also referred to as Client Server
Architecture. In this architecture the major advantage lies in that, the division of the
architecture into levels allows both the developers and the users to work on their own levels.
They do not need to know the details of the other levels and they do not have to know
anything about the changes in the other levels. Figure 13.3 shows the diagrammatic
representation of a three-schema architecture. Note that each of these schemas is only
descriptions of data; the data really exists only at the physical level.
1. Internal level
• This is a description of the physical storage structure of the database.

• Operations performed here are translated into modifications of the contents and
structure of the files.
• It has an internal schema.
• It describes the complete details of the stored records and access methods used to
achieve efficient access to the data.
2. Conceptual level
• This hides the details of the physical storage structures and concentrates on
describing entities.
• This level is independent of both software and hardware.

3. External level or view level
• This is the outermost layer.

• This layer is the closest to the users.
• The data viewed by individual users is called External level.
Fig. 13.3: The Three-Schema Architecture
4.5 Database Languages and Interfaces
As a database supports a number of user groups, DBMS must have languages and interfaces
that support each of these user groups.
DBMS Languages
DDL: The data definition language is used by the DBA and database designers to define the
conceptual and internal schemas.
• The DBMS has a DDL compiler to process DDL statements in order to identify the
schema constructs and to store the description in the catalogue.
• In databases where there is a separation between the conceptual and internal
schemas, DDL is used to specify the conceptual schema, and SDL, storage definition
language is used to specify the internal schema.

• For a true three-schema architecture, VDL, view definition language, is used to specify
the user views and their mappings to the conceptual schema. But in most DBMSs, the
DDL is used to specify both the conceptual schema and the external schemas.
Data Manipulation Languages (DMLs)
• Data Manipulation Language (DML) is a family of computer languages used by

computer programs or database users to retrieve, insert, delete and update data in a
database.
• Currently, the most popular data manipulation language is that of SQL, which is used
to retrieve and manipulate data in a Relational database.
• Data manipulation languages were initially used only by computer programs, but
with the advent of SQL these have come to be used by DBMS users as well.
• Data manipulation languages have their functional capability organized by the initial
word in a statement, which is almost always a verb. In the case of SQL these verbs are
"select", "insert", "update", and "delete".
• Data manipulation languages tend to have many different "flavors" and capabilities
between database vendors.
• There has been a standard established for SQL by ANSI, but vendors still provide their
own extensions.
Two main types of DML:
High-level/Non procedural
• Can be used on its own to specify complex database operations.

• DBMS allow DML statements to be entered interactively from a terminal, or to be
embedded in a programming language.
• If the commands are embedded in a general purpose programming language, the
statements must be identified, so that they can be extracted by a pre-compiler and
processed by the DBMS.
• High-level DMLs, such as SQL can specify and retrieve many records in a single DML
statement.

• High-level languages are often called declarative, because the DML often specifies
what to retrieve, rather than how to retrieve it.
Low Level/Procedural
• Must be embedded in a general-purpose programming language.

• Typically retrieves individual records or objects from the database and processes
each separately.
• Therefore, it needs to use programming language constructs such as loops.
• Low-level DMLs are also called ‘record at a time DMLs’ because of this.
Data control Language (DCL)
Data Control Language (or DCL) consists of statements that control security and concurrent
access to table data.
Data control languages are used to control access to the tables and database etc. GRANT &
REVOKE are related to granting and revoking access. Transaction Control commands also
fall in this category. COMMIT, SAVEPOINT, SET TRANSACTION and ROLLBACK are related
to managing control over the database transactions.
DBMS Interfaces
Types of interfaces provided by the DBMS include:
Menu-Based Interfaces for Web Clients or Browsing
• Present users with lists of options (menus)

• Lead user through formulation of request
• Query is composed of selection options from menu displayed by the system.
Form-Based Interfaces
• Display a form to each user.

• User can fill out a form to insert new data or fill out only certain entries.

• Designed and programmed for naïve users as interfaces to canned transactions.
Graphical User Interfaces
• Display a schema to the user in diagrammatic form. The user can specify a query by
manipulating the diagram. GUIs use both forms and menus.
Natural Language Interfaces
• Accept requests in written English or other languages and attempt to understand

them.
• Interface has its own schema, and a dictionary of important words. Uses the schema
and dictionary to interpret a natural language request.
Interfaces for Parametric Users
• Parametric users have a small set of operations they perform.

• Analysts and programmers design and implement a special interface for each class of
naïve users.
• Often a small set of commands are included to minimize the number of keystrokes
required. (i.e., function keys)
Interfaces for the DBA
• Systems contain privileged commands exclusively for DBA staff.

• Includes commands for creating accounts, setting parameters, authorizing accounts,
changing the schema, reorganizing the storage structures etc.
5. The property that describes an entity is an ___________.
6. Define Schema and Instances and give one example for each
7. _________________ language is defined as the description of database
8. ______________ is a family of computer languages used by computer programs or
database users to retrieve, insert, delete and update data in a database.
9. ________________ and ______________ are the types of DMLs.

5. SUMMARY
In this unit you have studied the basic concepts of database. You have studied the differences
5. SUMMARY
between data, information, knowledge and wisdom and also about the comparison between
file system and DBMS. You have studied the advantages and disadvantages of database
management systems. We have briefed the three-tier architecture. we discussed the
importance of database in maintaining the management information system.
1. Explain the different types of database users.
2.6.Compare
TERMINAL QUESTIONS
File system and DBMS
3. Explain 3-tier Architecture with a neat diagram.
4. Explain database interfaces.
7. ANSWERS
Self-Assessments Questions
7. ANSWERS
1. Network
2. Casual users and naive users
3. Reduced
4. Multiple views
5. Attribute
6. The description of a database
7. Data definition language
8. Data manipulation language,
9. High-level/Non procedural and low level/ procedural
Terminal Questions
1. Refer 2
2. Refer table 1
3. Refer 4.4 Refer 4.5

References
1. Management Information System by CSV Murthy, Himalaya Publishing House,

fourth edition 2010.
E- References

ADMINISTRATION
SEMESTER 4
DBB2202
SYSTEM
Unit 14: Strategic Management Information System 1

Unit 14
Strategic Management Information System

Table of Contents
SL Topic Fig No / Table SAQ / Page
No / Graph Activity No
1 Introduction - -
3–4
1.1 Objectives - -
2 Background - 1 5
3 Performance 1,2 2 6–9
4 Product Differentiation and Value Chain 3 3 10 – 13
5 How it influences Organizational goals 4 - 14 – 18
6 The Five Levels 5 - 19 – 20
7 Governance modes in the use of IT 6.7 4 21 – 24
8 Summary - 5 25
10 Answers - - 26

1. INTRODUCTION
In the earlier units you learnt about Database Management systems which gave you a
complete description of how DBMS functions. You have also learnt about the advantages
and the disadvantages of DBMS. In the last unit you learnt about the designing of DBMS.
You have learnt the basic concepts of DBMS like data, information, entity, database
instance and attributes.
In this unit you will study the performance and growth of strategic management systems.
The growth of Information System and technology during the last two decades has been
phenomenal. During this growth, many branches have evolved in the field of Information
science. One such branch is strategic IS. It is mainly about providing an assistance to
perform the routine tasks efficiently and effectively to the members of the organisation.
Strategic IS enables organizations in realizing its goals. Strategic Information System
(SIS) is a support to the existing system and helps in achieving a competitive advantage
over an organization’s competitors, in terms of its objectives.
In this unit you will study the critical aspects of the strategic information system. You will
also study the theoretical concepts and the ways in which
the same are realized in practice. The flow of the unit is in such a way that it starts with
the development of the contemporary theory of strategic uses of corporations' internal
information systems, leading to systems which transcend the boundaries of the
organizations. The unit then examines the processes whereby strategic information
systems are created or identified.
Strategic information system is related to the systems that contribute significantly to the
achievement of an organization's overall objectives. The body of knowledge is of recent
origin and highly dynamic and the area has an aura of excitement about it. The emergence
of the key ideas, the processes whereby strategic information systems come into being
are assessed, areas of weaknesses are identified, and directions of current and future
development suggested.

1.1 Objectives
❖ Explain the fundamentals of strategic Information systems

❖ Elaborate the driving force of information technology in strategic activities
❖ Describe value chain and IT
❖ Elucidate how IT influences organizational goals

2. BACKGROUND
Information system is regarded as a tool to provide various services to different management
functions. The tools have been developing year by year and the application of the tools has
become more and more diverse. In management it is now a very powerful means to manage and
control various activities and decision-making processes. The original idea of automating
mechanical processes got quickly succeeded by the rationalization and integration of systems. In
both forms, IS was regarded primarily as an operational support tool, and secondarily as a service
to management.
It was found that, in some cases, Information Technology (IT) is critical to the implementation of
an organization's strategy. An organization’s strategy supported by the information system
fulfilling its business objectives has come to be known as Strategic Information System. The
strategic information system consists of functions that involve gathering, maintenance and
analysis of data concerning internal resources and intelligence about competitors, suppliers,
customers, government, and other relevant organizations.
State whether the following statements are true or false
1. Strategic Information System (SIS) is a support to the existing system and helps in
achieving a competitive advantage over an organization’s competitors, in terms of
its objectives.
2. The original idea of automating mechanical processes got quickly succeeded by the
rationalization and integration of systems.

3. PERFORMANCE
Out of the many possible interpretations of a strategy an organization adopts in business, it is
found that a majority are about dealing with competition between corporations. Competition
means cultivating unique strengths and capabilities and defending them against imitation by
other firms. Another alternative sees competition as a process linked to innovation in product,
market or technology. Strategic information systems theory is about the use of information
technology to support or sharpen an enterprise's competitive strategy. Competitive strategy is an
enterprise's plan for achieving sustainable competitive advantage over, or reducing the edge of,
its adversaries. The performance of individual corporations is determined by the extent to which
they manage the following (as given by Porter) –
a) the bargaining power of suppliers;
b) the bargaining power of buyers;
c) the threat of new entrants;
d) the threat of substitute products; and
e) rivalry among existing firms.
Fig. 14.1: Forces driving industry

competition

Porter’s Forces Driving Industry Competition (Porter 1980)
There are two basic factors considered to be adopted by organizations in their strategies:
a) low cost
b) product differentiation
Enterprises can succeed, relative to their competitors, if they possess sustainable competitive
advantage in either of these two. Another important consideration in positioning is 'competitive
scope', or the breadth of the enterprise's target markets within its industry, i.e., the range of
product varieties it offers, the distribution channels it employs, the types of buyers it serves, the
geographic areas in which it sells, and the array of related industries in which it competes.
Under Porter's framework, enterprises have four generic strategies available to them
whereby they can attain above-average performance.
They are:
a) cost leadership;
b) differentiation;
c) cost focus; and
d) focused differentiation.
Figure 14.2 indicates the Porter's representation of four strategies
Fig. 14.2: Porter’s representation of generic strategies
Porter’s Four Generic Strategies (Porter 1980)
According to Porter, competitive advantage grows out of the way an enterprise organizes and
performs discrete activities. The operations of any enterprise can be divided into a series of
activities such as salespeople making sales calls, service technicians performing repairs, scientists

in the laboratory designing products or processes, and treasurers raising capital. By performing
these activities, enterprises create value for their customers.
The ultimate value an enterprise creates is measured by the amount customers are willing to pay
for its product or service. A firm is profitable if this value exceeds the collective cost of performing
all the required activities. To gain competitive advantage over its rivals, a firm must either provide
comparable value to the customer, but perform activities more efficiently than its competitors
(lower cost), or perform activities in a unique way that creates greater buyer value and
commands a premium price (differentiation).
As per Borden 1964, quoted in Wiseman 1988 – many differentiation bases can be classified as 4
Ps as given below:
• product (quality, features, options, style, brand name, packaging, sizes, services,
warranties, returns);
• price (list, discounts, allowances, payment period, credit terms);
• place (channels, coverage, locations, inventory, transport); and
• Promotion (advertising, personal selling, sales promotion, publicity).
The various attributes listed above can sharpen the firm’s product with the support of a suitable
information technology.
Strategic MIS Approach
The strategic MIS approach shall be explained as follows:
• Business-led approach: This approach to strategic information systems planning takes the
assumption that the business directions and plans are the only foundations for information
systems; and business planning should be the only force that drives strategic information
systems planning (Galliers & Leidner, 2003). Therefore, business leads the information
systems while information systems cannot lead business strategies
• Organisation-chart approach: In this approach, the strategic MIS is designed based on the
traditional and functional areas, such as finance, administration, production, R&D and
extension.
• Data-collection approach : This approach involves collecting all the data which might be
relevant to the strategic MIS design. The collected data are then classified and they influence
the way the data could be exploited significantly at a later stage. In this approach,
information system could lead the business strategies.

3. _____________ is an enterprise's plan for achieving sustainable competitive advantage
over, or reducing the edge of, its adversaries.
4. The two basic factors which may be considered to be adopted by organizations in
their strategies are ____________ and ____________.

4. PRODUCT DIFFERNTIATION AND VALUE CHAIN

Product differentiation is the degree to which buyers perceive products to be different from
alternative suppliers. It is expressed by economic theory, the degree to which buyers perceive
imperfections in product substitutability. The buyers of differentiated products may have to pay
a price when satisfying their preference for something special, in return for greater added- value.
The connection between the producer and buyers may be reinforced, at least to the level of
customer loyalty, and perhaps to the point of establishing a partnership between them. Such a
relationship imposes 'switching costs' on the buyer, because its internal processes become
adapted to the beneficial peculiarities of the factor of production, and use of an alternative would
force internal changes. Hence product differentiation also serves as an entry barrier. In addition,
a continuous process of product differentiation may produce an additional cost advantage over
competitors and potential entrants, through intellectual property protections, such as patents
and the cost of imitation.
Basis of Product differentiation
1. Price: The most popular determinant of which the target audience would be drawn to a
brand's product is its price. It distinguishes a high-end commodity from a low-cost one.
Zara's goods, for example, are considered high-end.
2. Features: Size, shape, ingredients, origin and other characteristics distinguish goods in the
same price range. They also assist the brand in justifying its high pricing decisions.
3. Performance & Quality: A high-quality commodity stands out from low-cost alternatives.
Duracell, for example, lasts ten times longer than normal batteries.
4. Product Reliability: Some goods have a reputation for being more reliable than others. That
is, there is a lower chance that they will malfunction or fail within the specified time frame.
5. Looks: In the case of clothing and other luxury goods, looks are extremely important in
differentiating a product.
6. Distribution Channels: Distribution channels are also essential in differentiating a product
from the competition. Amway, for example, uses a targeted distribution approach to
establish itself as a high-quality brand.
7. Complexity: In the technology industry, the level of complexity of a product's use is a key
element in differentiating goods.
8. Location: A product's manufacturer, brand's home country and retailer's location all play a
role in distinguishing it from its competitors.
9. Marketing activities: Marketing efforts result in a brand picture that serves as a good
product differentiator. Other marketing activities, such as product promotion, complement
the differentiation strategy.
10. After-Sale Services: Good after sale services help consumers trust the brand and help them

distinguish it from the rivals or alternatives.
The activities performed by a particular enterprise can be analysed into primary

activities, which directly add value to the enterprise's factors of production, which
are together referred to as the 'value chain', and supporting activities. Figure 14.3
depicts product differentiation and value chain representation.
Fig. 14.3: Product Differentiation and Value Chain representation
The primary activities are the tasks that are directly concerned with the conversion of
information into production and delivery activities. They contain the following items:
1. Inbound Logistics: Receiving, storing, distributing and other operations that make products
and services accessible for operational processes are included. Material processing and
transportation are a few examples of these operations.
2. Operations: The activity of converting an input raw material into a finished product that is
ready for sale is referred to as service. Examples include operations like assembly and
packaging.
3. Outbound Logistics: As the name implies, outbound logistics refers to the activities that
assist in the collection, storage and delivery of a commodity to a customer.
4. Marketing and sales: They cover things such as advertisement, promotion, sales, marketing
analysis, public relations and others that are used to make consumers aware of a product
or service and generate demand for it.
5. Service: It is described as a service given to a customer in order to increase or preserve the
product's value. It includes financing, after-sales support and other services.
6. Support activities are those that aid in the completion of the primary activities. These are
the following:

7. Procurement: This operation assists the organisation by providing all necessary inputs,
such as materials, equipment and other consumable products, that are needed for the
organisation's primary activities to be completed.
8. Technology Growth: Technology development necessitates a significant financial
expenditure as well as years of research and development. Its advantages, on the other
hand, can be enjoyed for many years by the company.
9. Human Resource Management (HRM): It is the most common and significant practice in an
organisation, outperforming all other primary activities. It entails managing personnel
collection, retention, promotion, relocation, assessment, and dismissal.
10. Infrastructure: This is the management framework that offers services to the entire
enterprise, including planning, financing, information management, quality control, legal
and government relations among other things.
Porter’s Enterprise Value-chain (Porter 1980)
Value-addition activities like production, marketing delivery and servicing of the product. These
activities are connected in a chain. Support activities include those providing purchased inputs,
technology, human resources or overall infrastructure functions to support the primary activities.
It is possible to reduce the transaction cost by proper coordination of all the activities. It should
be possible to gather better information for various controls and to replace the same by less
costlier activities. It will also be possible to reduce the overall time required to complete an
activity.
Therefore coordination is very important to achieve competitive advantage. For this it is

necessary to manage the value chain as a system rather than as separate parts. An enterprise's
value chain for competing in a particular industry is embedded in a larger stream of activities.
What Porter termed as 'value system', may be referred to as the 'industry value-chain'.
This chain consists mainly of the suppliers and the distribution channels. Any activity of an
organization is subjected to one or more of the following –
• New technologies – Newer technologies change the direction of the value chain.
• Shifting buyer needs –The buyers have been increasing their demands to satisfy their
needs in the form of convenience and better prices and features. These demands influence
a change in the related market segments.
• Variation in industry segmentation – The value system undergoes a change depending
upon the existence of old and new systems and their components in the value chain.
Organizations which fail to adjust will have to close their businesses.
• Changes in the costs – It is possible to gain competitive advantage by optimizing the

activities based on present conditions. Enterprises which continue to work on the older
approaches in outdated modes of operations suffer.
• Changes in government regulations–If there is a change in the standards of the product
of the enterprise, with respect to the environmental controls, restrictions on entry to the
market, and trade barriers affect the performance of the enterprise.
5. Product differentiation is the degree to which buyers perceive products to be
different from alternative suppliers.
6. The buyers of differentiated products may have to pay a price when satisfying their
preference for something special, in return for no value.
7. Newer technologies change the direction of the value chain.

5. HOW IT INFLUENCES ORGANIZATIONAL GOALS
There is always a mention about what IT contributes to corporate strategy. It was

recognized that corporations achieved a significant competitive advantage by adopting
suitable IT concepts in building up their strategies. It quickly became incumbent on
competitors to neutralize that advantage, and hence to avoid 'competitive disadvantage'
(Vitale 1986, Warner 1987, Brousseau 1990). The notion of 'competitive necessity' was
created to complement that of 'competitive advantage'. Comparison was drawn between
'sustainable' and 'contestable' competitive advantages (Clemons 1986, Feeny & Ives
1989, Ciborra 1992). Though there are many kinds of advantages which can possibly be
derived from innovative use of IT, it is possible to quickly neutralize them with others. A
distinction needs to be made between the sustainability of the original advantage, and of
any derived advantage.
An enhancement to Porter’s framework of competitive strategy is the notion of 'alliance'

(Barrett & Konsynski 1982, Gummesson 1987, EDP Analyzer 1987, Johnston & Vitale
1988, Rockart & Short 1989, Wiseman 1989, Konsynski & McFarlan 1990, Ford 1990,
Bowersox 1990). This refers to chains or clusters of organizations which collaborate in
order to gain competitive advantage over other similar organizations, or to neutralize the
advantage of one or more competitor organizations. The innovations in IT and their
strategic importance to enterprise are compatible with a company’s existing
characteristics and advantages (Beath & Ives 1986, Clemons & Row 1987, Ives & Vitale
1988, Hopper 1990). An important facet of this is the notion of 'strategic alignment' of IT
policies and initiatives with the directions indicated by a corporation's senior executives
(Henderson & Venkatraman 1989, Earl 1989, Broadbent & Weill 1991). An outline of
factors that influence organizations’ strategic goals are summarized in the figure 14.4.

Fig. 14.4: Scott Morton’s Five Forces Influencing Organization’s Objectives (Scott
Morton 1991)
Organizations are facing the re-conceptualization of the role of information technology in

business.
Effect of Information Technology on Organisations

• Integration of Business Functions: IT helps integrate different business functions which
otherwise would make it a challenge. Each department works in its silo. For example, if the
marketing department wants a piece of information from the sales department, it involves
effort and there is waste of time. Through appropriate use of IT where the different business
functions are integrated, this becomes easy. The integration not only reduces effort, but also
presents a seamless unified picture.
• Reduction in levels of hierarchy: Large, bureaucratic organizations, which primarily
developed before the computer age, are often inefficient, slow to change, and less competitive
than newly created organizations. Some of these large organizations have downsized,
reducing the number of employees and the number of levels in their organizational
hierarchies. Behavioural researchers have theorized that information technology facilitates
flattening of hierarchies by broadening the distribution of information to empower lower-
level employees and increase management efficiency
• Data Management: Data is the most powerful asset to an organisation. Efficient data
management can help an organisation stay focussed and achieve the goals.
• Communication: Communication is a great tool in business. With advanced communication
tools, employees and managers can easily make informed decisions that can benefit the
business. With appropriate communication tools the entire organisation can stay aligned
towards its goal and objectives.
• Decision Support : Decision Support systems help executives in making well informed
decisions

Examples:
The following are few examples of the influence of IT on multiple aspects of running the business.
• Virtual Office: In the recent years of pandemic, the concept of Virtual Office sought wider
acceptance. It is truly an example of the effect of IT on organisations.
A virtual office is a company that operates as one unit but does not exist in one specific
location. The creation of web-based office productivity software and services, such as
videoconferencing, has helped drive the growth in virtual offices. The costs of operating a
virtual office are much less than a traditional office, and that's why this type of setup is popular
among small businesses and startups.
• Supply Chain management: With a reliable supply chain software that allows real-time
information sharing, manufacturers and suppliers can collaborate better and avoid
production delays due to insufficient raw materials.IT offers better visibility and
transparency that lead to better accountability and control over the production of goods.
Manufacturers that have clear visibility on production can make adjustments to make the
process more efficient as well as
foresee problems and prevent them. As a shipper or logistics provider, you can ensure
customer satisfaction by improving order tracking and delivery. Distributors can rely on
supply chain management tools, no longer have to worry about excess or insufficient stock.
Instead, they can predict demands and effectively manage inventory and orders.
Let us discuss the Role of IT in Supply Chain Management.

• Integrated & Coordinated Supply Chain: A supply chain works efficiently if it is well
integrated and well coordinated. IT performs this crucial task by bringing in multiple
technologies and combining them in the best possible manner to optimise the supply chain.
These technologies make the collection of even the most basic data possible. In turn, this
allows precise and detailed data analysis possible leading to sound decisions.
• Increased Productivity: IT provides the link to pass required information seamlessly across
all departments. This helps increase productivity.
• Cost Reduction: IT permits optimum utilisation of resources and assets. Old data is used to
study the trends and technology is used to analyse it for improving performance. To reduce
the cost, resources should be used optimally and efficiently. In the supply chain system, IT
helps in making each decision and step in the most cost-efficient manner. The use of IT helps
in reducing the overall expenses.
• Product Improvement: IT consists of tools and applications that can be used to gain early
awareness. In a market where the customer wants something new regularly, the product will
either have to evolve or it will go out of demand. To stay in business, you will have to

introduce product improvement at all levels. The kind and extent of product improvement
can be validated with the help of IT.
• Supply Chain Visibility: Information makes the entire supply chain visible to the managers.
The manner in which the information flows from one collaborator to the other and the impact
it has on others is used by the managers in making strategic decisions.
Customer Relationship Management: The businesses can enhance their relationships with
customers through CRM and therefore it leads to greater customer loyalty, retention and
profitability. Information technology and information systems have a significant role in CRM and
can be used to enhance CRM process to satisfy customer needs.
• CRM represents Customer Relationship Management. It's an innovation used to oversee
connections with clients and potential clients. A CRM framework assists associations with
building client connections and smooth out measures so they can expand deals, improve
client care, and increased benefit.
Let us see how IT helps in CRM

• Identify and classify leads: One of the primary advantages of a CRM framework is that it can
assist you with recognising and adding new leads effectively and rapidly and classifying them
precisely. By the use of CRM, one can understand their clients better, so that they can
strategically pitch and up-sell and cross-sell thereby increasing the business with existing
clients too.
• CRM can help predict Sales forecast, manage sales pipelines better
• Improve items and administrations: A regularly neglected advantage of CRM programming is
that it will assemble data from an enormous assortment of sources across your business. This
gives you extraordinary bits of knowledge into how your clients feel and what they are saying
about your association – so you can improve what you offer, spot issues early and distinguish
holes.
• ERP: It is multi-platform software. It supports business planning activities to a larger extent.

It maintains all data in common platform so as to bridge any information gap across
departments in the organisation. It is intended to eliminate business problems
The role of IT in ERP:
• Accurate data, Instant visibility and real-time access to information helps make well-informed
decisions… for example, Know your supply vs demand. Reduce or increase inventory as
needed.

• Automatically process transactions and generate your audit trail and reports. This instantly
can improve your month-end closings and can help flag any anomalies. improving your
visibility, which improves accuracy. ERP systems can help you plan your production more
efficiently and reduce unnecessary wasted time. Better scheduling and accurate records
ensure focus on priorities.
This leads to shorter lead times.
• Calculate and control your costs and have an accurate picture of product cost and margins.

6. THE FIVE LEVELS

Scott Morton proposes five levels of complexity at which reconfiguration can be applied. The
following five levels indicate how it is possible to reconfigure strategic information system based
on the influence of IT.
1. Localized exploitation: This is a part of the evolutionary level and exists within individual
business functions. It addresses the local efficiency and effectiveness of an information
system.
2. Internal integration: This is a part of the evolutionary level and exists between different
systems and applications. It includes automation and evolves out of rationalization using a
common IT platform. Efficiency and effectiveness are enhanced by coordination and
cooperation within the enterprise.
3. Business process redesign: This is a part of the revolutionary level. It involves a more
thorough re-evaluation of the enterprise value-chain and the production process. The
changes have far more reaching impact in the organisation.
4. Business network redesign: This is also a part of the revolutionary level. It involves
reconfiguration of the scope and the tasks of the business network to help in the creation
and delivery of products and services. Coordination and cooperation extend, selectively,
beyond the enterprise's boundaries.
5. Business scope redefinition: It is also a part of the revolutionary level. It involves
migration of functions across the enterprise's boundaries. It may change the organization's
conception of the business itself.
Fig. 14.6: Scott Morton’s five Levels of IT-Induced Reconfiguration (Scott

Morton 1991)
The nature of business governance is like a continuum ranging from loosely coupled classic
relationship (open-market transactions) to a tightly coupled unique specialised relationship.
The cost is relatively lower to switch the participant from one to another in the former than the

latter.
The nature of IT governance ranges from a common role to a unique role . By common role, it
means that the position of any player is no different from another in the network. By unique
role it is meant that the position occupied by the different players are different because of their
use of a dedicated, proprietary network, or their offering of specialized, value-added software
or other services on the standard communication network).

7. GOVERNANCE MODES IN THE USE OF IT
Entire business is conceptualized from a loosely-coupled system through to a tightly coupled

system. The specific mode of functioning is dictated by the nature of the product, of its exchange
value and of its criticality. This is dictated by the business strategies independent of the IT. The
nature of IT governance ranges from a common role to a unique role. These two dimensions are
indicated in the figure 14.6.
Fig. 14.7: ScottMorton’s Classification of Governance Modes (Scott Morton 1991)
The use of IT in organizations’ strategic planning and application reduces the coordination costs
by reducing the costs of accumulating, storing, and communicating information. It is necessary
to mitigate transaction risks. This is possible through modularity and making replica of
knowledge, open standards, intuitive user interfaces, and interconnection among networks. It is
easier to duplicate and transfer codified information without any security measures.
What is IT Governance ?
The question of how the information systems department should be organized is part of the
larger issue of IT governance.
IT governance
• Should include the strategy and policies for using information technology within an
organization.
• Specify the decision rights and framework for accountability to ensure that the use of
information technology supports the organization’s strategies and objectives
• Decide how much should the information systems function be centralized
• Decisions must be made to ensure effective management and use of information technology,
including the return on IT investments
• Identify decision-makers and define the decision-making process

• Make infrastructure Investment decisions
• Define processes to implement the decisions
Firms with superior IT governance will have clearly thought out the answers
Roles in IT Governance
The information systems department consists of specialists, such as programmers, systems

analysts, project leaders, and information systems managers. Programmers are highly trained
technical specialists who write the software instructions for computers. Systems analysts
constitute the principal liaisons between the information systems groups and the rest of the
organization. It is the systems analyst’s job to translate business problems and requirements into
information requirements and systems. Information systems managers are leaders of teams of
programmers and analysts, project managers, physical facility managers, telecommunications
managers, or database specialists. They are also managers of computer operations and data entry
staff. Also, external specialists, such as hardware vendors and manufacturers, software firms, and
consultants, frequently participate in the day-to-day operations and long-term planning of
information systems.
In many companies, the information systems department is headed by a chief information officer
(CIO). The CIO is a senior manager who oversees the use of information technology in the firm.
Today’s CIOs are expected to have a strong business background as well as information systems
expertise and to play a leadership role in integrating technology into the firm’s business strategy.
Large firms today also have positions for a chief security officer, chief knowledge officer, and chief
privacy officer, all of whom work closely with the CIO. The chief security officer (CSO) is in charge
of information systems security for the firm and is responsible for enforcing the firm’s
information security
The CSO is responsible for educating and training users and information systems specialists about
security, keeping management aware of security threats and breakdowns, and maintaining the
tools and policies chosen to implement security. Information systems security and the need to
safeguard personal data have become so important that corporations collecting vast quantities of
personal data have established positions for a chief privacy officer (CPO). The CPO is responsible
for ensuring that the company complies with existing data privacy laws.
The chief knowledge officer (CKO) is responsible for the firm’s knowledge The CSO is responsible
for educating and training users and information systems specialists about security, keeping
management aware of security threats and breakdowns, and maintaining the tools and policies
chosen to implement security. Information systems security and the need to safeguard personal
data have become so important that corporations collecting vast quantities of personal data have

established positions for a chief privacy officer (CPO). The CPO is responsible for ensuring that
the company complies with existing data privacy laws. The chief knowledge officer (CKO) is
responsible for the firm’s knowledge management program. The CKO helps design programs and
systems to find new sources of knowledge or to make better use of existing knowledge in
organizational and management processes. End users are representatives of departments outside
of the information systems group for whom applications are developed. These users are playing
an increasingly large role in the design.
Enterprises which are benefited and facilitated by IT generally assume one of the following forms:
• Vertical quasi-integration – In this form, the existing relationships with customers and
suppliers can become more tightly coupled.
• Outsourcing – In this form, activities previously performed within one enterprise, due to
high transaction risk, may be shifted to third-party providers. This enables them to benefit
from the higher production economics, such as scale and specialization.
• Quasi-diversification – In this form, the enterprises cooperate across markets to leverage
their key resources in new areas. It is focused on exploiting increased economics of scale
and scope in those resources. It may now be possible to establish relationships with other
firms that were previously not possible due to high coordination costs or high transaction
risks.
The higher the exploitability, the higher the inter-relatedness of an industry. The greater the
scope for competitive SIS, the better it is for the organization.
On the other hand, the lower the interrelatedness and the lower the exploitability, the
greater the likelihood of co-operative SIS. A more substantial degree of cooperation is
possible. The entire industry may suspend competition in respect of some aspects of its
operations and pursue a joint strategy of collaboration. Collaboration may be in the interests
of the customers since it may result in lower costs, higher quality or greater reliability. In
the interest of the suppliers, it may lead to a reduction in the variability of their customers'
demands.

Table 14.1
[Source: Management Information Systems, The McGraw Hill Companies, James A O’Brien
and George M Marakas]
Strategy Company Strategic use of Business benefits

information
technology
Cost Dell computer Online build to Lowest cost producer
leadership Priceline.com order Buyer-set pricing
ebay.com Online seller Auction-set prices
bidding
Online auctions
Differentiation AVNET Marshall Customer/supplier Increase in market
e-commerce share
Moen Inc. Online customer Increase in market
design share
Consolidated Customer online Increase in market
Freightways shipment tracking share
Innovation Charles Schwab Online discount Market leadership

& Co. stock trading
Federal Express Online package Market leadership
tracking and flight
management
Amazom.com Online full-service
Market leadership
customer systems
Growth Citicorp Global intranet Increase in global
market
Wal-Mart Merchandise Market leadership
ordering by global
satellite network
Toys Us Inc. POS inventory Market leadership
tracking
Alliance Wal-mart/Procter Automatic inventory Reduced inventory
& Gamble replenishment by cost/increased sales
supplier
Cisco systems Virtual Agile market
manufacturing leadership
alliances
Online one-stop Increase in market
Staples INC. and
shopping with share
partners
partners
10. The notion of _____ was created to complement that of _______.
11. ________may be in the interests of the customers since it may result in lower costs, higher
quality or greater reliability.

9. SUMMARY
After going through this unit, you must have studied the fundamentals of strategic Information
systems and the driving force of information technology in strategic activities. You have discussed
the different types of driving forces and their functions. You have also studied the concepts of
product differentiation and value chain in IT and their significance. You have also studied the
different aspects of how IT influences organization goals.
Activity - 5
Participate in the crossword on The Need for Management Information Systems on Strategic
Planning Process in Libyan Health Service Organizations and apply the learnings to the
management of a local hospital.

1. Give a brief background of the strategic information systems.

2. As per Porter, how can the performance of individual corporations be determined?
3. How is it possible to attain above-average performance? Explain under Porter framework.
4. What is Value chain and what is its significance in MIS?
11. ANSWERS
1. True
2. True
3. Competitive Strategy
4. Low cost and Product Differentiation
5. True
6. False
7. True
8. Competitive necessity, competitive advantage
9. Collaboration
Terminal Questions
1. Refer 2
2. Refer 3
3. Refer 3
4. Refer 4
References
edition 2010.
E-Reference
http://train-srv.manipalu.com/

ADMINISTRATION
SEMESTER 4
DBB2202
MANAGEMENT INFORMATION SYSTEM
Unit 15: Security and Ethical Issues 1

Unit 15
Security and Ethical Issues
Table of Contents

No / Graph Activity
1 Introduction - -
3
1.1 Objectives - -
2 Control Issues in Management Information - 1
Systems
2.1 General & Application Control - -
4-10
2.2 Procedural Control - -
2.3 Physical Facility Control - -

3 Security Hazards 1 2
3.1 Types of Cyber Crime - -
3.2 Information Security Policy - -

11-20
3.3 Security Techniques - -
3.4 Procedural Security Techniques - -
3.5 Practices in drafting Security Policy - -

4 Ethical Issues - 3 21-26
5 Technical solutions for Privacy Protection - 4 27-34
6 Summary - - 35
8 Answers - - 35

1. INTRODUCTION
In the previous unit you studied the performance of strategic management information
system. You have also studied the importance of product differentiation and the value chain.
You have studied the different levels of differentiation. You have also studied how IT
influences organizations goals. In this unit, you will study how to handle security issues and
what the ethical challenges that exist in MIS are. Information systems operate in real-world
situations or environments which are always changing and there are lots of problems or
pitfalls inevitably present. Information systems are vulnerable to various threats and abuses.
So, like any other asset the resources of information systems i.e., hardware, software and
data, need to be protected, preferably by built-in control, to assure their quality and security.
This is one of the reasons to enforce control on management information systems.
1.1 Objectives
After going through this unit, you will able to:
❖ Explain control issues in management information systems
❖ Describe administrative control
❖ Explain the security hazards which are very damaging if not taken care of.
❖ Explain ethics in business information systems

2. CONTROL ISSUES IN MANAGEMENT INFORMATION SYSTEMS
Control
Control is the process through which a manager assures that the actual activities are
according to standards, leading to the achievement of common goals.
The first step in control process is to set a standard of performance. Next is to measure the
progress and compare against the standard set and devise the action plan based on the
deviation to achieve the goal.
Why do we need to control management information system?
Information systems operate in real world situations which are always changing and there
are lots of problems. Information systems are vulnerable to various threats and abuses. Some
of the points are, memory, communications links, microwave signals, telephone lines etc.
Information systems controls are both manual and automated and consist of both general
controls and application controls.
2.1 General Controls
General controls include the controls in the computer programs as well as the data files used
across the organisation. So in principle, general controls should be built int during the design
of the computer software program itself. It applies to all computer based applications, so it
includes the combination of hardware, software, and manual procedures that create an
overall control environment. General controls include software controls, physical hardware
controls, computer operations controls, data security controls, controls over
implementation of system processes, and administrative controls.

Application Controls
Application controls are specific controls unique to each computer application, such as
payroll or order processing. They include both automated and manual procedures that
ensure that only authorized data are completely and accurately processed by that
application.
Application controls can be classified as
Input controls: These check data for accuracy and completeness when they enter the
system. There are specific input controls for input authorization, data conversion, data
editing, and error handling.
Processing controls: These establish that data are complete and accurate during updation.
Output controls: The output controls ensure that results of computer processing are
accurate, complete, and properly distributed.
Types of General Control
The resources of information systems like hardware, software, and data need to be
protected, preferably by built in control, to assure their quality and security.
Software control: This control is used to monitor the use of system software and prevent
unauthorized access of software programs, system software, and computer programs.
Hardware control: This control is to ensure that computer hardware is physically secure. It
constantly checks for equipment malfunction. Organizations that are critically dependent on
their computers also must make provisions for backup or continued operation to maintain
constant service.
Computer operations control: There has to be a regular audit to oversee the work of the
computer department to ensure that programmed procedures are consistently and correctly
applied to the storage and processing of data. They include controls over the setup of
computer processing jobs and backup and recovery procedures for processing that ends
abnormally.

Data security control: These controls are meant to oversee the work of the computer
department to ensure that programmed procedures are consistently and correctly applied
to the storage and processing of data. They include controls over the setup of computer
processing jobs and backup and recovery procedures for processing that ends abnormally.
Implementation Control: This control is to audit the systems development process at various
points to ensure that the process is properly controlled and managed.
Administrative control: This is to formalize standards, rules, procedures, and control

disciplines to ensure that the organization’s general and application controls are properly
executed and enforced.
Information System Control
Information system control assures the accuracy, validity and proprietary of the information
system activities. Control must be there to ensure proper data entry processing techniques,
storage methods and information output. Accordingly, management information system
controls are designed to see or monitor and maintain quality, security of the input process,
output and storage activities of an information system. The different types of information
system control are
• Input control
• Processing control
• Output control
• Input Control
As we know, whatever we give to a computer, the computer processes it and returns the
result to us. Because of this very fact, there is a need to control the data entry process. The
types of input control are:
i) Transaction codes: Before any transaction can be input into the system, a specific code
should be assigned to it. This aids in its authorization.
ii) Forms: A source document or screen forms should be used to input data and such
forms must adhere to certain rules.
iii) Verification: Source document can be verified to improve accuracy.

iv) Control-totals: Data entry and other system activities are frequently monitored by the
use of control-total. For example, record count is a control-total that consists of
counting the total number of source documents or other input records and comparing
them at other stages of data entry. If totals do not match, then a mistake is indicated.
v) Check digit: These are used for checking important codes such as customer number to
verify the correctness.
vi) Labels: It contains data such as file name and date of creation, so that a check can be
made that the correct file is being used for processing.
vii) Character and field checking: Characters are checked for proper mode – numeric,
alphabetic, alphanumeric fields – to see if they are filled in properly.
• Processing Control
Input and processing data are so interrelated that we can take them as the first line of
defence. Once data is fed into the computer, controls are embedded in various computer
programs to help detect not only input errors but also processing errors. Processing –
controls are included to check arithmetic calculations and logical operations. They are also
used to ensure that data are not lost or do not go unprocessed. Processing control is further
divided into hardware and software control.
1) Hardware control – They are built in the hardware itself to verify the accuracy of
processing.
2) Software control – They are designed to assure that right data is being processed. They
are, like operating systems or other software checks. Checking internal file labels at the
beginning and at the end of the magnetic tape and disk files is an example of software
control. Yet another software control is the establishment of check points during the
processing of the program. They also help to build an audit trial.
• Output Control
These are developed to ensure that the processed information is correct, complete and is
transmitted to an authorized user in a timely manner. The output controls are mostly of the
same kind as the input controls, e.g. Output documents and reports are thoroughly and

visually verified by computer personnel and they are properly logged and identified with
route slips. Control totals at the output stage are compared with control totals at both the
input and the processing levels. A hard copy of listing is maintained for evidence. The end
user is contracted for feedback about the quality of information.
• Storage Control
Control responsibility of files of computer programs and databases is given to the librarian
or the database administrator. They are responsible for maintaining and controlling access
to the information. The databases and files are protected from unauthorized users as
accidental users. This can be achieved with the help of security monitor. The method includes
assigning the account code, password and other identification codes. A list of authorized
users is provided to a computer system with details such as types of information they are
authorized to retrieve or receive from it.
A three-level password system is also used in which firstly the user has to give his or her
unique ID. Then he is asked for his password in order to get access to the information. Finally,
to access an individual file, a unique file name is to be entered. Sometimes for a writing
purpose, a different name is given to a file and this is another way to control the error.
Lastly, many firms also use backup files which are the duplicate files of data or programs,
stored somewhere else. Files are also protected by file retention measures which involve
copies of files from previous periods. If current files are corrupted then they are used to
reconstruct new files. Usually, several generations of files are kept for controlling.
2.2 Procedural Control
These methods provide maximum security to the operation of the information system. Some
of the examples are:
Separation of duties: Each activity related to computerized information system, like systems
development, computer operation and control of dataand program files, is assigned to
different groups of persons. Programmers, System analysts and Database administrators
have different access levels to ensure security.

Authorization requirements : The formal review must take place before authorization is
given, on getting a request for some system development, changes or system conversion. For
example, if program change is done by the maintenance programmer, it should be approved
by the affected department’s manger as well as by the manager of programming and the
manager of computer operation. Thus, conversion to new hardware and software,
installation of newly developed information system or change to the existing program is
subject to a formal notification so that accuracy and integrity of information processing
operation can be maintained.
2.3 Physical Facility Control
Physical facility control are methods that protect physical facilities and their contents from
loss and destruction. Computer centers are prone to many hazards such as accidents, thefts,
fire, natural disasters, sabotage, vandalism, unauthorized uses, industrial espionage,
destructions etc.. Therefore, physical safeguards and various control procedures are
required to protect the hardware, the software and the vital data resources of the computer
using organizations. There are three types of physical facility control they are
• Physical protection control

• Telecommunication control.
• Computer failure control
Physical Protection Control: Many types of controlling techniques, such as one in which
only authorized personnel are allowed access to the computer centre, exist today. Such
techniques include identification badges for information services, electronic door locks,
security alarm, security policy, closed circuit TV and other detection systems like fire
detection and extinguishing systems, fire proof storage vaults for the protection of files,
emergency power systems, humidity temperature and dust control etc., are installed to
protect the computer centre.
Telecommunication Control: The telecommunication processor and control software play

a vital role in the control of data communication activity. Data can be transmitted in coded
from and it is decoded in the computer centre itself. The process is called encryption.

Computer Failure Controls : Computers can fail for several reasons like power failures,
electronic circuitry malfunctions, mechanical malfunctions of peripheral equipment and
hidden programming errors. To protect from these failures, any measure with automatic and
remote maintenance capabilities may be required. Adequate electrical supply, humidity
control, air conditioning and fire prevention standards must also be set up. Computer
operators must be trained and supervised carefully. Fault tolerant computer systems may
be installed to ensure against computer failure.
Insurance – Adequate insurance coverage should be secured to protect the computerized

information system used by business firms. Financial losses are very huge in amount. Many
insurance companies offer special computer security policies. These include insurance
against fire, natural disasters, vandalism and theft, insurance for data process error or
omissions, and insurance for the bonding of information services personnel as a protection
against fraud etc. The amount of such insurance should be enough so as to replace the
affected computer equipment and facilities. Insurance is also available to cover the cost of
reconstructing data and program files.
SELF-ASSESSMENT QUESTIONS – 1

1. Control is the process through which a manager assures that the actual activities
are according to standards, leading to the achievement of common goals.
2. Input control is further divided into hardware and software controls.
3. A list of authorized users is provided to a computer system with details such as the
types of information they are authorized to retrieve or receive from it.
4. Insurance is also available to cover the cost of reconstructing data and program
files.
1.

3. SECURITY HAZARDS
When large amounts of data are stored in electronic form, they are vulnerable to many more
kinds of threats than when they existed in manual form. Information systems in different
locations are connected through communications networks. Thus the potential for
unauthorized access, abuse, or fraud is not limited to a single location but can occur at any
access point in the network. They can stem from technical, organizational, and
environmental factors compounded by poor management decisions.
The architecture of a Web-based application typically includes a Web client, a server, and
corporate information systems linked to databases. Each of these components presents
security challenges and vulnerabilities. Floods, fires, power failures, and other electrical
problems can cause disruptions at any point in the network.
Figure 8-1 illustrates the most common threats against contemporary information In the
multi-tier client/server computing environment illustrated here, vulnerabilities exist at each
layer and in the communications between the layers. Users at the client layer can cause harm
by introducing errors or by accessing systems without authorization. It is possible to access
data flowing over networks, steal valuable data during transmission, or alter messages
without authorization. Radiation may disrupt a network at various points as well. Intruders

can launch denial-of service attacks or malicious software to disrupt the operation of Web
sites. Those capable of penetrating corporate systems can destroy or alter corporate data
stored in databases or files.
Here are some examples of the computer as a target of crime and as an instrument of crime.
Computers as Target of Crime:
• When confidentiality of protected data is breached

• When a computer is accessed without authority
• Knowingly accessing a protected computer to commit fraud
• Intentionally accessing a protected computer and causing damage, negligently or
deliberately
• Knowingly transmitting a program, program code, or command that intentionally
causes damage to a protected computer
• Threatening to cause damage to a protected computer
Computers as Instruments of Crime:
• Theft of trade secrets

• Unauthorized copying of software or copyrighted material such as articles, books,
music, and video
• Using e-mail for threats or harassment
• Intentionally attempting to intercept electronic communication
• Illegally accessing stored electronic communications, including e-mail and voice mail
• Transmitting or possessing objectionable content using a computer
Cybercrime is a crime that involves a computer and a network. The computer may have been
used in the commission of a crime, or it may be the target. Cybercrime may harm someone's
security and financial health

3.1 Types of Cyber Crime:
Identity theft
It happens when a digital criminal imitates another person's character to rehearse

breakdown. This is typically done by getting to individual subtleties of another person. like,
date of birth, credit and charge card numbers, visa numbers and so on. When the data has
been gained by the digital crook, it very well may be utilised to make online purchases etc.
Copyright infringement
Copyright encroachment involves the unapproved utilisation of protected materials. It

occurs when the violating party exercises any of the creator’s exclusive rights to the work
without permission. This includes all manners of distribution (selling, broadcasting,
performing, etc.), adaptation or other copying of the work. Infringement can occur whether
or not the violating party seeks monetary gain.
Hacking
Hacking is utilised to by-pass security controls to acquire unapproved admittance to a

framework. When the aggressor has accessed the framework, they can do anything they
desire. A portion of the normal exercises done when framework is hacked are as follows:
a) Introduce programs that permit the aggressors to keep an eye on the client or control
their framework distantly
b) Destroy sites
c) Take delicate data
Computer virus
A computer virus is a type of malicious software, or malware, that spreads between

computers and causes damage to data and software. Computer viruses aim to disrupt
systems, cause major operational issues, and result in data loss and leakage. A key thing to
know about computer viruses is that they are designed to spread across programs and
systems

Having understood about cyber crimes,let us understand the threats to information security
in general
Threats to Information Security
• Technology with weak security – New innovation is being delivered each day. Mostly,
new devices have some type of internet access yet there is no arrangement made for
security. This presents an intense danger – each unstable association implies weakness.
• Social media attacks – Cybercriminals are utilising web-based media as a medium to
disperse a complex geological assault called 'water holing'. The aggressors distinguish
and taint a group of sites and expect that individuals from the target association will
visit.
• Mobile malware – Mobile malware is malicious software designed to target mobile
devices, such as smartphones and tablets, with the goal of gaining access to private data.
• Neglecting proper configuration – Organizations keep dismissing the significance of
appropriate security settings. Lack of encryption is one such example. This can lead to
key information leakage
• Outdated security software – If the security software is not kept up to date, it can lead
to compromises. Periodic update of computer anti-virus software is critical to
information security.
• Corporate data on Personal Devices can be one way of information leak.
• Inadequate security technology – Lack of sufficient investment into appropriate
security technology is one major threat.
Organisations should formulate Information Security policy and have a committee to ensure
compliance.
3.2 Information Security Policy:
The purpose of the policy might be to make a general way to deal with data security, identify
and appropriate data security breaks like abuse of organisations, information, applications
and PC frameworks. The policy should maintain moral and legitimate obligations and regard
client rights, including how to respond to requests and protests

The security strategy should address all information, programs, frameworks, offices, other
tech foundation. A working data security strategy needs to cover all characterised targets
concerning security and system. The executives should concur on these goals
The Authority and access control policy should be in the following lines:
Hierarchical pattern - A ranking director may have the position to choose what information
can be shared and with whom. The security strategy may have various terms for a ranking
director versus a lesser representative. The arrangement should layout the degree of power
over information and IT frameworks for each hierarchical job.
Network security policy - Clients are simply ready to get to organisation and workers
through extraordinary logins that request validation, including passwords, biometrics, ID
cards or tokens. You should screen all frameworks and record all login endeavors.
The arrangement ought to group information into classifications, which may incorporate ‘top
secret’, ‘secret’, ‘confidential’ and ‘public’. Your goal in grouping information is to:
a. Guarantee that touchy information don’t reach people with lower access levels
b. Ensure security for exceptionally significant information, and dodge unnecessary safety
efforts for irrelevant information
Awareness should be created among employees regarding the security methodology and
components, including information insurance measures, access assurance measures and
touchy information grouping.
Designate staff to do client access audits and make updates to the security strategy as
required. Duties ought to be plainly characterised as a feature of the security strategy.
Security of the information system can be broken because of the following reasons:
i) Malfunctions: In this type of security hazard, all the components of a system are
involved. People, software and hardware errors cause the biggest problems. More
dangerous are the problems which are created by human beings due to omission,
neglect and incompetence.

ii) Fraud and unauthorized access: This hazard is due to dishonesty, cheating or deceit.
This can be done through –
a. Infiltration and industrial espionage
b. Tapping data from communication lines
c. Unauthorized browsing through lines by online terminals, etc.
iii) Power and communication failure: In some locations, they are the most frequent
hazards than anywhere else because availability of both of them depends upon the
location. Sometimes communication channels are busy or noisy. There are power cuts
and sometimes a high voltage surge destroys a sensitive component of the computer.
iv) Fire hazard: It can happen because of electrical short circuits, flammable liquids etc.
v) Sabotage and riots: Sometimes the employees destroy the computer centre in case of
strike/ lockout or there may be chances of riots in the area.
vi) Natural disasters: Natural disasters are not controllable. They are not frequent
hazards, but if they happen they destroy things or ruin them. Examples are earthquake,
floods, tornadoes and lightening.
vii) General hazards: This category covers many more hazards which are not covered
anywhere and are difficult to define, and come spontaneously.
3.3 Security Techniques
Security can be maintained at two levels: physical and procedural. Physical Security –
Physical security is further divided into:
a) Physical Controlled Access: Access control protection is the basis to a security system.
If at the entry level one can stop unwanted or unauthorized persons, then half of the
problems can be solved and harm can be reduced. This can be done with the help of the
following methods
- guard and special escorts, sign-in/sign out, badges, closed circuit monitors, paper
shredders, one way emergency door and a combination of various approach or
control devices.
b) Physical Location: Location of the computer system is an important consideration in
security planning.
This can be achieved by having any one of these:

1. Locating the computer centre at a remote location that is distant from airport, heavy
traffic and steam boiler.
2. The computer centre can be located in a separate building.
3. The computer site should not contain any sign identified by an outsider.
4. Power and communication lines are under ground. Air intake devices should be duly
fenced and placed very high.
5. Back up of the system is kept at a distant place other than the computer centre.
c) Physical Protection: Additional protective measures should be considered in the
overall protection plan.
These items are:
1. Dumps and devices
2. Emergency power (UPS) is maintained
3. Adequate and separate air conditioners, humidity control devices are there to
control environment.
4. The equipment in the computer system is covered by plastic cover when not in use.
5. Fire and smoke detectors are kept to protect against fire break downs.
3.4 Procedural Security Techniques
Physical security deals with a number of hazards like fire, natural disasters, etc., while
procedural controls deal with access control only. Sometimes procedural techniques take
the help of physical techniques. Procedural techniques comprise the following ways:
a) Integrity – In the context of security integrity means the assurance that the system is
functionally correct and complete. Integrity implies keeping up information in its right
state and keeping it from being inappropriately adjusted, either coincidentally or
intentionally. A considerable lot of the methods that guarantee privacy will likewise
ensure information integrity. There are different apparatuses that help give a safeguard
of trustworthiness to data. Checksums can assist you with confirming information
uprightness, and variant control programming and regular reinforcements can assist
you with re-establishing information to a right state if needed.
b) Isolation – In any system in which a high level of security is to be maintained, all
components of the computer should be used in isolation. In a computer based

information system, this isolation should be maintained between users and

information as well as between hardware and software resources and processes.
c) Confidentiality – This is the component that most promptly rings a bell when you
consider data security. An information is secret when it is accessed by only the
individuals who are approved to access it. To guarantee privacy, you should have the
option to recognize who is attempting to get to information and square endeavours by
those without approval.
d) Authorization – Once a person has been identified, the question arises as to what
authority he has. To maintain security, procedures must be set up to determine who
has access to what files, who has the right to make additions and deletions, and who is
responsible for administration of the database?
e) Authentication –It implies checking that clients are who they say they are and that
each information showing up at objective is from a trusted source. This rule, whenever
followed, ensures that the real message is received from a trusted source through a
legitimate transmission.
f) Monitoring – Monitoring is the act of watching or checking or guarding something.
This activity eventually, either accidentally or intentionally, breaks the control. Some
specific system capabilities which support the monitoring in the security system is
installed for detection of security violation, if violation is serious then it immediately
locks the system from further work. All exceptional conditions shall be reported to the
internal.
g) Audit - The system should collect data concerning all user access, like user, terminal
and type of processing date, time of day and items accessed. These reports are reviewed
by the auditor and the security officers systematically.
3.5 Practices in drafting Security Policy
After the main risks are identified, the organisation will need to develop a security policy for
protecting the company’s assets. A security policy consists of statements ranking
information risks, identifying acceptable security goals, and identifying the mechanisms for
achieving these goals.

Information & Data Classification: The following questions will help frame the security
policy:
What are the company’s most important information assets?
Who generates and controls this information in the firm?
What existing security policies are in place to protect the information?
What level of risk is management willing to accept for each of these assets?
Management must estimate how much it will cost to achieve this level of acceptable risk. The
security policy drives policies determining acceptable use of the firm’s information
resources and which members of the company have access to its information assets. An
acceptable use policy (AUP) defines acceptable uses of the firm’s information resources and
computing equipment, including desktop and laptop computers, wireless devices,
telephones, and the Internet. The policy should clarify company policy regarding privacy,
user responsibility, and personal use of company equipment and networks. A good AUP
defines unacceptable and acceptable actions for every user and specifies consequences for
noncompliance.
For example, security policy at multinational companies require every employee equipped
with a laptop or mobile handheld device to use a company-specified device and employ a
password or other method of identification when logging onto the corporate network.
Security policy also includes provisions for identity and access management. Identity
management consists of business processes and software tools for identifying the valid users
of a system and controlling their access to system resources. It includes policies for
identifying and authorizing different categories of system users, specifying what systems or
portions of systems each user is allowed to access, and the processes and technologies for
authenticating users and protecting their identities.
An identity management system might capture the access rules for different levels of users
in the human resources function. It specifies what portions of a human resource database
each user is permitted to access, based on the information required to perform that person’s
job. The database contains sensitive personal information such as employees’ salaries,

benefits, and medical histories. The access rules illustrated here are for two sets of users.
One set of users consists of all employees who perform clerical functions, such as inputting
employee data into the system. All individuals with this type of profile can update the system
but can neither read nor update sensitive fields, such as salary, medical history, or earnings
data. Another profile applies to a divisional manager, who cannot update the system but who
can read all employee data fields for his or her division, including medical history and salary
There has to be Security Incident Response Plan in place, which should help remediate when
security breaches happen. This should clearly articulate the corrective action to mitigate the
damage as well as arrest further breach.
Government-implemented guidelines, for example, the General Data Protection Regulation

(GDPR) ensures the security of end clients.
The policy should cover rules and guidelines about the use of personal gadgets like mobile
phones and other handheld devices for official purposes. The guideline would cover the use
of appropriate software in those devices that are secure enough to handle official data
SELF-ASSESSMENT QUESTIONS - 2
5. In _____________type of security hazard, all the components of a system are
involved.
6. Physical security deals with a number of hazards like fire, natural disasters,
etc., while procedural controls deals with _____________only.

4. ETHICAL ISSUES
Ethics is a study of the principles and practices which guide in deciding whether the action
taken is morally right or wrong. Well-defined and accepted codes of conduct largely ensure
the obligation of the ethical use of IT for competitive advantages and material progress.
Ethics is about values and human behaviour. Values and human behaviour are primarily
regulated by various legal provisions and can be enforced through courts. When an IT
solution is thought and designed, it is necessary to check whether it is legally tenable, along
with technical, operational and economic feasibility. Checking for legal feasibility protects
you from violation or breach of law enacted for privacy protection and the obligation to
provide healthy, hygienic and congenial work atmosphere.
Respecting ethical values means making a beginning to protect generally accepted individual
human rights. The rights are:
a. The right to healthy life and work safety.

b. The right to privacy.
c. The right to private intellectual property (Information & Knowledge).
d. The right to dissent.
e. The right to fair treatment and no discrimination.
Being ethical means making ethical choices of IT solutions and being responsible,
accountable for action and consequences. Ethics in MIS are bound to protect and safeguard
the individuals and society by using information systems responsibly. Most professions
generally have defined a code of ethics or code of conduct and guidelines that all
professionals must follow. In short, the code of ethics makes the individuals who act by free
will, responsible and accountable for their specific actions.
Technology Trends that raise Ethical Issues
Ethical issues long preceded information technology. Nevertheless, information technology

has heightened ethical concerns . There are four key technological trends responsible for
these ethical stresses and they are summarized here.

The doubling of computing power every 18 months has made the information systems as
their core production processes in most organisations. As a result, the dependence on
systems and the vulnerability to system errors and poor data quality have increased. Social
rules and laws have not yet adjusted accordingly. Standards for ensuring the accuracy and
reliability of information systems are not universally accepted or enforced.
Advances in data storage techniques and rapidly declining storage costs have been
responsible for the multiplying databases on individuals—employees, customers, and
potential customers—maintained by private and public organizations. These advances in
data storage have made the routine violation of individual privacy both cheap and effective.
Massive data storage systems are inexpensive enough for regional and even local retailing
firms to use in identifying customers.
Advances in data analysis techniques for large pools of data are another technological trend
that heightens ethical concerns because companies and government agencies are able to find
out highly detailed personal information
Some of the ethical issues faced by organisations shall be explained as follows:
Unauthorised use of computer systems and networks at workplace is a time and resource
theft breaching the organisational ethics. For example, private consulting, personal finances
and playing video games etc. Internet abuse causes illegal usage and access and transferring
of confidential data, hacking, non-work-related downloads or uploads. Using the internet for
leisure and external needs is also one of the ethical issues.Software piracy is referred to as
an unauthorised copying of computer programs. Users should purchase the software with a
license for fair use.Viruses and worms are programs that work by inserting into another
program. These programs copy the annoying routines into the various networked computers
to spread the virus.
Hacking Tactics
Hacking is the act of exploring methods for breaching defense and exploiting weaknesses in
a computer system or network The various hacking tactics leading to ethical issues shall be
explained as follows:

1. Denial of service: It refers to hammering a website’s equipment with too many

requests for information which clogs the system, slows down the performance, or leads
to site crashing.
2. Scans: These are widespread probes of the internet used to determine the types of
computers, services and connections which looks out for weaknesses.
3. Sniffer: These are the programs that search individual’s data as they pass through the
internet. It usually captures the passwords and even the entire content.
4. Spoofing: It involves faking an e-mail address or web page to trick the users into
passing along their critical information like passwords or credit card numbers.
5. Social engineering: It is used to gain access to a computer system by talking to the
unsuspected company’s employees to get valuable information like passwords.
6. Malicious applets: These programs misuses a computer’s resources, and later modify
the files on the hard disk, send fake emails or steal the user passwords.
7. War dialing: This is a program that automatically dials thousands of telephone
numbers for searching a way in through a modem connection.
8. Dumpster diving: This program goes through a company’s garbage files to find
information to help them break into the computer system.
Ethical Issues in MIS:
The major ethical issues in MIS shall be explained as follows:
1. Personal privacy: Due to the large-scale distribution of the network, data or

information transmission takes place in amounts which leads to the huge chances of
disclosure of information and violation of the privacy of any individual or a group.
2. Access right: It is a high priority issue for the management information system with
advancement in technology. E-commerce and electronic payment systems have
increased the impact of this ethical issue.
3. Harmful actions: This refers to the damage or negative impact to the like, the loss of
significant information, loss of property, ownership, destruction of property and other
substantial impacts.

4. Trade secrets: This law protects the private aspects of ideas which is known only to
the discoverer. Once the idea is disclosed, trade secret is lost, and it is only protected
by the law
5. Liability: Every company must make sure that every word they say about their product
could be legally valid as stated in written. All agreements should be available in writing
to protect against any liability.
6. Piracy: It is an activity in which the illegal copy of the software is created. It is entirely
up to the owner of the software to backup copies of their software.
Ethical Choice
Ethical choices are decisions made by individuals who are responsible for the consequences
of their actions. Responsibility is a key element of ethical action. Responsibility means that
you accept the potential costs, duties, and obligations for the decisions you make.
Accountability is a feature of systems and social institutions: It means that mechanisms are
in place to determine who took responsible action, and who is responsible. Systems and
institutions in which it is impossible to find out who took what action are inherently
incapable of ethical analysis or ethical action. Liability extends the concept of responsibility
further to the area of laws. Liability is a feature of political systems in which a body of laws
is in place that permits individuals to recover the damages done to them by other actors,
systems, or organizations.
Ethical Analysis
When confronted with ethical issues, the following five-step process should help:
1. Identify the facts: Find out who did what to whom, and where, when, and how. Simply
getting the facts straight helps define the solution. It also helps to get the opposing
parties involved in an ethical dilemma to agree upon the facts.
2. Define the conflict or dilemma and identify the higher-order values involved. Ethical,
social, and political issues always reference higher values. The parties to a dispute all
claim to be pursuing higher values (e.g., freedom, privacy, protection of property, and
the free enterprise system). Typically, an ethical issue involves a dilemma: two

diametrically opposed courses of action that support worthwhile values. An example

could be that of two competing values: the need to improve health care record keeping
and the need to protect individual privacy.
3. Identify the stakeholders. Every ethical, social, and political issue has stakeholders:
players in the game who have an interest in the outcome, who have invested in the
situation, and usually who have vocal opinions. Find out the identity of these groups
and what they want. This will be useful later when designing a solution.
4. Identify the options that you can reasonably take. You may find that none of the options
satisfy all the interests involved, but that some options do a better job than the others.
5. Identify the potential consequences of your options. Some options may be ethically
correct but disastrous from other points of view. Other options may work in one
instance but not in other similar instances. It is better to ask yourselves if the choice
can be picked consistently over time.
Ways to overcome ethical issues
There are certain ways used to overcome the ethical issues which shall be explained as
follows:
Protecting privacy: You need to encrypt your email and send newsgroup postings through
anonymous remailers. Instruct your internet service provider to not sell your name and
information to mailing list providers and other marketers.
Security management: The major goal of security management is the accuracy, integrity,
and safety of all information on the system processes and resources.
Encryption: Here the data is transmitted in a scrambled format. It can be unscrambled by

authorised users only. It is the most used method for safety of information.
Firewall: It is used as a gatekeeper system that protects a company’s intranets and other
computer networks from intruders. It provides a filter and safe transmission point for
internet and other network access.

Virus defenses: In an organisation, it is important to centralise the updating and distribution

of antivirus software. By using a security suite, virus can be detected with firewalls, web
security and other content blocking features.
Patents & Copywrights work as a very powerful legal tool in safeguarding the computer
software both before and after a security breach. This type of breach is usually mishandling
and misuse of data and computer programs, documentation and similar material.
Policies to safeguard against Ethical issues
The policies for ethical issues shall be explained as follows:
1. Purchasing and using the hardware equipment and learning how to safely dispose them
2. Using licensed software to ensure that all the software are up to date with the latest
security patches
3. Adapting to rules on how to create passwords depending on complexity enforcement

and changing the passwords for higher protection
4. Training to be provided to all the users involved
7. Ethics is a study of the principles and practices which guide in deciding whether
the action taken is morally right or wrong.
8. Checking for technical feasibility protects you from violation or breach of law
enacted for privacy protection and the obligation to provide healthy, hygienic and
congenial work atmosphere.
9. Respecting ethical values means making a beginning to protect generally accepted
individual human rights

5. TECHNICAL SOLUTIONS TO PRIVACY PROTECTION

Protecting the privacy of individuals or organisations assumed critical importance on the
emergence of Internet and web technology. As Internet and web enabled solutions became
common, an individual's / organization’s risk of privacy exposure increased many fold.
Implementation of codes of ethics and respecting the moral values are an obligation to the
organisation. Some technology solutions are also available to ensure such protection and
obligation.
Before understanding these technology solutions, let us know how Internet and web enabled
IT solutions affect the privacy of individuals. The data entered, processed and sent through
Internet passes through different computer systems installed on network across the world.
These systems are capable of keeping the record of this communication traffic and can also
capture and store the communication with all connecting references and identities.
This activity of capturing data, monitoring its use, and storing happens at backend without
the knowledge of the user. The communication system capabilities can identify and analyse
the following:
a. Identification of a person or location from where an action has started through

registration record.
b. Which files, websites and web pages have been visited?
c. Which transactions have been attempted and completed, namely buying, selling,
displaying, downloading and others.
If one can put these information sets together and analyse, the personal data, and the
behavioural traits of an individual can be understood. There is commercial demand for such
personal information. This information can then be used proactively for relation building
and business promotions.
Cookies: Web sites can learn the identities of their visitors if the visitors voluntarily register
at the site to purchase a product or service or to obtain a free service, such as information.
Web sites can also capture information about visitors without their knowledge using cookie
technology. Tools to monitor visits to websites have become popular because of their ability
to track the visitors and their usage of the websites. Many websites ask for information about

the visitors and the visitors volunteer to register the information. But personal information
can be collected without the knowledge of the visitors using 'cookies.' The technology
produces tiny files deposited on the computer hard disc known as 'cookies.' These cookies
are designed to collect the data about the visitors and retain them for future guidance.
Web bug: 'Web bug' is another tool, which provides server capability to monitor the
behaviour of the visitor. Web bugs are tiny graphic files inserted in e-mail messages and web
pages, which monitor the visitor behaviour. These tiny files identify the visitor, and keep
track of the pages visited and transmit this information to website monitor computers.
To contain these practices, a website owner provides facility on-site by displaying boxes,
which show how the site would be using the information and give options to visitor to 'Opt-
Out' or 'Opt-In.' When the visitor chooses 'Opt-Out' the permission to collect and use the
information is accorded by the visitor. If choice is 'Opt-In' then the visitor has not given
consent to collect and use information.
It is also a practice in web community to declare on site an organisation's privacy policy for
visitors’ review. 'Trustee' seals, back such publication. This seal is a stamp of confirmation
that an organisation has agreed to adhere to established privacy principles of disclosure,
choice, access and security. Such publications are also known as legal notice, disclaimer, and
privacy policy.
If a visitor wants self-generated technical solutions to safeguard privacy of information,

privacy protection tools are available. The presence of cookies can be controlled using
'Cookie Crusher' tools which come along with the browser. Similarly 'Blocking ads' tools
control or block the ads which pop up, based on a visitor's interest. Encryption technology
helps scramble message or data so that nobody can read and understand.
Spyware: Spyware are software programs that can secretly install itself on an Internet
user’s computer by piggybacking on larger applications. Once installed, the spyware calls
out to Web sites to send banner ads and other unsolicited material to the user, and it can also
report the user’s movements on the Internet to other computers. Some types of spyware also
act as malicious software. These small programs install themselves surreptitiously on

computers to monitor user Web surfing activity and serve up advertising. Thousands of
forms of spyware have been documented.
Many users find such spyware annoying and some critics worry about its infringement on
computer users’ privacy. Some forms of spyware are especially nefarious. Keyloggers record
every keystroke made on a computer to steal serial numbers for software, to launch Internet
attacks, to gain access to e-mail accounts, to obtain passwords to protected computer
systems, or to pick up personal information such as credit card numbers. Other spyware
programs reset Web browser home pages, redirect search requests, or slow performance by
taking up too much memory.
The Consequences of Privacy Failure
When data privacy is violated, it can result in loss of reputation, irreparable damage to the
brand , losing customer trust and loyalty and leading to revenue loss
Potential Impact of implementing Privacy Protection :
• Regulatory & legal : Most American and European privacy law is based on a regime
called Fair Information Practices (FIP). FIP is a set of principles governing the
collection and use of information about individuals. FIP principles are based on the
notion of a mutuality of interest between the record holder and the individual. In
Europe, privacy protection is much more stringent than in the United States. Unlike the
United States, European countries do not allow businesses to use personally
identifiable information without consumers’ prior consent. The European
Commission’s Directive on Data Protection went into effect, broadening privacy
protection in the European Union (EU) nations. The directive requires companies to
inform people when they collect information about them and disclose how it will be
stored and used. Customers must provide their informed consent before any company
can legally use data about them, and they have the right to access that information,
correct it, and request that no further data be collected.
• Internal process impact: Business units, affiliates and subsidiaries will require
updated privacy statements and assurance of required practices. Due diligence is
needed for all strategic marketing agreements, joint ventures, mergers and acquisitions

• Financial : Implementing defensible data privacy practices costs money. The cost
varies depending on the business context, situation and the implementation.
• International impact: Global entities must quickly establish processes for
international data protection regulations in Europe and Asia-Pacific. Any potential data
export to the U.S. by global entities could be interpreted under the international privacy
regulations.
A privacy failure, even a merely perceived failure to protect customer data, could result in
the loss of consumer trust, affect customer retention and cause significant damage to brand
and company reputation which is a potential disaster for a customer-focused business
strategy.
Solutions : Privacy policy
In general, most Internet businesses do little to protect the privacy of their customers, and
consumers do not do as much as they should to protect themselves. Many companies with
Web sites do not have privacy policies. Of the companies that do post privacy policies on
their Web sites, about half do not monitor their sites to ensure they adhere to these policies.
The vast majority of online customers claim they are concerned about online privacy, but
less than half read the privacy statements on Web sites.
The online industry has preferred self-regulation to privacy legislation for protecting
consumers. In 1998, the online industry formed the Online Privacy Alliance to encourage
self-regulation to develop a set of privacy guidelines for its members. The group promotes
the use of online seals, such as that of TRUSTe, certifying Web sites adhering to certain
privacy principles. Members of the advertising network industry, including Google’s
DoubleClick, have created an additional industry association called the Network Advertising
Initiative (NAI) to develop its own privacy policies to help consumers opt out of advertising
network programs and provide consumers redress from abuses.
Technical Solutions
P3P: There are now tools to help users determine the kind of personal data that can be
extracted by Web sites. The Platform for Privacy Preferences, known as P3P, enables
automatic communication of privacy policies between an e-commerce site and its visitors.

Users can use P3P to select the level of privacy they wish to maintain when interacting with
the Web site. The browser then enables users to adjust their computers to screen out all
cookies or let in selected cookies based on specific levels of privacy. For example, the
“Medium” level accepts cookies from first-party host sites that have opt-in or opt-out policies
but rejects third-party cookies that use personally identifiable information without an opt-
in policy.
Intellectual Property
Information technology has made it difficult to protect intellectual property because

computerized information can be so easily copied or distributed on networks. Intellectual
property is subject to a variety of protections under three different legal traditions: trade
secrets, copyright, and patent law.
Trade Secrets
Any intellectual work product used for a business purpose can be classified as a trade secret,
as long as it is not based on information in the public domain.. In general, trade secret laws
grant a monopoly on the ideas behind a work product and they vary from state to state.
Software that contains novel or unique elements, procedures, or compilations can be

included as a trade secret. To make this claim, the creator or owner must take care to bind
employees and customers with nondisclosure agreements and to prevent the secret from
falling into the public domain.
Copyright
Copyright is a statutory grant that protects creators of intellectual property from having
their work copied by others for any purpose. The intent behind copyright laws has been to
encourage creativity and authorship by ensuring that creative people receive the financial
and other benefits of their work. Most industrial nations have their own copyright laws, and
there are several international conventions and bilateral agreements through which nations
coordinate and enforce their laws. Copyright protects against copying of entire programs or
their parts. Damages and relief are readily obtained for infringement.

Patent Law
A patent grants the owner an exclusive monopoly on the ideas behind an invention for 20
years. The congressional intent behind patent law was to ensure that inventors of new
machines, devices, or methods receive the full financial and other rewards of their labor and
yet make widespread use of the invention possible by providing detailed diagrams for those
wishing to use the idea under license from the patent’s owner. The key concepts in patent
law are originality, novelty, and invention
Businesses have an array of technologies for protecting their information resources. They
include tools for managing user identities, preventing unauthorized access to systems and
data, ensuring system availability, and ensuring software quality. Here are some
technological solutions to protect/detect data privacy
1. Identity management & authentication: To gain access to a system, a user must be

authorized and authenticated. Authentication refers to the ability to know that a person
is who he or she claims to be. Authentication is often established by using passwords
known only to authorized users. Passwords can also be “sniffed” if transmitted over a
network or stolen through social engineering. New authentication technologies, such
as tokens, smart cards, and biometric authentication, overcome some of these
problems.
2. Firewall: Firewalls prevent unauthorized users from accessing private networks. A
firewall is a combination of hardware and software that controls the flow of incoming
and outgoing network traffic. It is generally placed between the organization’s private
internal networks and distrusted external networks, such as the Internet, although
firewalls can also be used to protect one part of a company’s network from the rest of
the network
3. Intrusion Detection System (IDS): In addition to firewalls, commercial security
vendors now provide intrusion detection tools and services to protect against
suspicious network traffic and attempts to access files and databases. Intrusion
detection systems feature full-time monitoring tools placed at the most vulnerable
points or “hot spots” of corporate networks to detect and deter intruders continually.
The system generates an alarm if it finds a suspicious or anomalous event. The

intrusion detection tool can also be customized to shut down a particularly sensitive
part of a network if it receives unauthorized traffic.
4. Anti-virus /Anti-spyware : Antivirus software is designed to check computer systems
and drives for the presence of computer viruses. Often the software eliminates the virus
from the infected area. However, most antivirus software is effective only against
viruses already known when the software was written. To remain effective, the
antivirus software must be continually updated.
5. Securing wireless networks: Encryption: Many businesses use encryption to protect
digital information that they store, physically transfer, or send over the Internet.
Encryption is the process of transforming plain text or data into cipher text that cannot
be read by anyone other than the sender and the intended receiver. Data are encrypted
by using a secret numerical code, called an encryption key, that transforms plain data
into cipher text. The message must be decrypted by the receiver.
6. Digital certificates: Digital certificates are data files used to establish the identity of
users and electronic assets for protection of online transactions. A digital certificate
system uses a trusted third party, known as a certificate authority (CA, or certification
authority), to validate a user’s identity
7. Security in the cloud : When processing takes place in the cloud, accountability and
responsibility for protection of sensitive data still reside with the company owning that
data. Understanding how the cloud computing provider organizes its services and
manages the data is critical. Cloud users need to confirm that regardless of where their
data are stored or transferred, they are protected at a level that meets their corporate
requirements. They should stipulate that the cloud provider store and process data in
specific jurisdictions according to the privacy rules of those jurisdictions. Cloud clients
should find how the cloud provider segregates their corporate data from those of other
companies and ask for proof that encryption mechanisms are sound. It’s also important
to know how the cloud provider will respond if a disaster strikes, whether the provider
will be able to completely restore your data, and how long this should take. Cloud users
should also ask whether cloud providers will submit to external audits and security
certifications. These kinds of controls can be written into the service level agreement
(SLA) before to signing with a cloud provider

8. Securing mobile platform: If mobile devices are performing many of the functions of
computers, they need to be secured like desktops and laptops against malware, theft,
accidental loss, unauthorized access, and hacking attempts. Mobile devices accessing
corporate systems and data require special protection. Companies should make sure
that their corporate security policy includes mobile devices, with additional details on
how mobile devices should be supported, protected, and used. They will need tools to
authorize all devices in use; to maintain accurate inventory records on all mobile
devices, users, and applications to control updates to applications; and to lock down
lost devices so they can’t be compromised. Firms should develop guidelines stipulating
approved mobile platforms and software applications as well as the required software
and procedures for remote access of corporate systems. Companies will need to ensure
that all smartphones are up to date with the latest security patches and
antivirus/antispam software, and they should encrypt communication whenever
possible.
10. As Internet and web enabled solutions became common, an individual's risk of
privacy exposure increased many fold.
11. The activity of capturing data, monitoring its use, and storing happens at the
front end without the knowledge of the user.
12. Web bugs are plain text files inserted in e-mail messages and web pages, which
monitor the visitor behavior.

6. SUMMARY
In this unit you have studied the control issues in management information systems. Youalso
studied the ways in which administrative departments exercise control over systems. you
have also studied the security hazards which are very damaging if not taken care of, and the
ethics in business.
7. Terminal Questions
1. What are the various control issues in MIS?
2. Explain the various security hazards faced by an information system.
3. What are the ethical issues in MIS?
8. ANSWERS
1. True
2. False
3. True
4. True
5. Malfunction
6. access control
7. True
8. False
9. True
10. True
11. False
12. False
Terminal Questions
1. Refer 2
2. Refer 3
3. Refer 4

Reference :

edition 2010.
E Reference:
https://lib.convdocs.org/

DBB2202 Management Info Sys Merged

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

DBB2202 Management Info Sys Merged

Uploaded by

Copyright:

Available Formats

DBB2202: Management Information System Manipal University Jaipur (MUJ)

Unit 1: Understanding MIS 1

3.1 MIS Characteristics - -

3.2 Functions of MIS 2 - 9-15

3.4 Role of IS in Business 3, 4 -

4.1 Classification - - 15-16

6.3 Personal Digital Assistant (PDA) - -

7.1 Advantages of a Personal Computer (PC) 5 - 19- 20

7.2 Classification of Computers - -

Unit 1: Understanding MIS 2

8.1 IT enabled Organisations - -

8.2 Networked Organisations 6 -

8.3 Dispersed Organisations - -

8.4 Knowledge Organisations 7 -

Unit 1: Understanding MIS 3

1. INTRODUCTION TO MANAGEMENT INFORMATION SYSTEMS

❖ Explain the basics of MIS

Unit 1: Understanding MIS 4

Computer Based Information systems are of vital importance in modern organizations.

2.1 Impact of MIS

Unit 1: Understanding MIS 5

systems for greater warehouse inventory accuracy, collaborative editing of graphical

Unit 1: Understanding MIS 6

Fig 1.1: Impact of MIS in different areas

Transformation Stage – Manual systems to automated systems The value of Information

Unit 1: Understanding MIS 7

A transformation has to necessarily go through the following stages –

SELF ASSESSMENT QUESTIONS – 1

3. Data is processed to form .

Unit 1: Understanding MIS 8

3. ROLE AND IMPORTANCE

3.1 MIS Characteristics

3.2 Functions of MIS

Unit 1: Understanding MIS 9

Unit 1: Understanding MIS 10

Fig. 1.2: MIS Function

3.3 Disadvantages of MIS

Unit 1: Understanding MIS 11

3.4 Roles of IS in Business

Fig. 1.3: Graphical representation to show the History of roles of IS

Data Processing: 1950s-1960s

Management Reporting: 1960s-1970s

Decision Support: 1970s-1980s

Unit 1: Understanding MIS 12

Strategic and End User Support: 1980s-1990s

Electronic Business and Commerce: 1990s-2000s

Unit 1: Understanding MIS 13

Fig. 1.4: Major Roles of the Business Applications of IS

Unit 1: Understanding MIS 14

SELF ASSESSMENT QUESTIONS – 2

4. What are the disadvantages of MIS?

5. _____________give advice to the end users based on the Knowledge.

Some of the processes like artificial intelligence, generating management related

Unit 1: Understanding MIS 15

SELF ASSESSMENT QUESTIONS – 3

7. How is MIS categorized?

Unit 1: Understanding MIS 16

5. MANAGERS AND ACTIVITIES IN IS

5.1 View of Structure of MIS

For example, preparing displays for advertisements.

Management-level Systems help in administrative activities and in your decision-making.

For example, the monthly sales figures by territory.

SELF ASSESSMENT QUESTIONS – 4