Understanding Information Systems

Information Systems Defined

• An information system collects, stores, and processes data to provide useful, accurate, and timely information.
• This typically occurs within an organizational context.
• Information systems include data, people, machines, networks, and procedures.
• People and machines collect, process, output, and store data.
• Networks transmit and receive data.
• Procedures govern how data is handled.

Users of Information Systems

• Information systems are used by people within an organization and by the organization's customers.
• Employees are classified as workers or managers.
• Workers directly execute the organization's mission and usually collect data for information systems.
• Managers determine organizational goals and plan how to achieve them.
• Executive managers plan an organization's long-range goals for profitability, market share, and membership levels.
• This is known as Strategic Planning.
• Mid-level managers figure out how to achieve long-range goals through sales, marketing, or new product development.
• Setting goals achievable in a year or less is Tactical Planning.
• Low-level managers schedule employees, order supplies, and handle day-to-day operations through Operational Planning.

Information Systems in Organizations

• Information systems automate routine tasks, for a quicker and more effective job performance.
• Information systems are important for decision support.
• Decision-making includes problem recognition, devising and analyzing possible solutions, and selecting a course of action.
• There are three types of problems: structured, semi-structured, and unstructured.
• Structured problems are routine and have easily identifiable required information.
• Example: Figuring out which customer gets overdue notices.
• Semi-structured problems are less routine and may need subjective judgement.
• Example: Retail business deciding how much holiday inventory to stock.
• Unstructured problems need human intuition.
• The relevant information might be missing, and parts of the solution may not be handled using concrete models.
• Example: Lee's Fifth Avenue deciding whether to stock Gucci handbags.

Types of Information Systems

• Organizations need different information systems based on their problems and missions.
• Small businesses require one for accounting, inventory, and payroll.
• Enterprise Information Systems integrate several systems, supporting inventory management, point-of-sale, e-commerce, payroll, and managerial planning.
• Information systems can be classified as: operation support system and management support systems
• Operation support systems produce a variety of information products, but do not emphasize information needed by managers.
• Further processing by MIS is usually needed.
• Operations support systems process data generated by business operations

Major Categories of Operation Support Systems

• Process control Systems monitor and control industrial processes, and Enterprise Collaboration Systems support team, workgroup, and enterprise communication and collaboration.
• Transaction Processing Systems process data resulting from business transactions, update operational databases, and produce business documents.
• A transaction is an exchange between two parties recorded and stored in a computer system.
• Transaction Processing Systems (TPS) provide a way to collect, process, store, display, modify, or cancel transactions.
• Business transaction processing examples: payroll, accounting, inventory, and point of sale systems.
• TPS processes transactions using batch processing, in which transactions data are accumulated then processed periodically or in real-time or online processing
• This means data is processed immediately after a transaction occurs which is often referred to as an OLTP System (Online Transaction Processing System).
• TPS' reporting capabilities are usually limited. While a TPS can generate detail reports, managers often require more complex reports to analyze data.

Management Support Systems

• Management support systems provide support needed for effective decision making by managers, mainly: Management Information Systems, Decision Support Systems, and Executive Information Systems.
• Management Information Systems (MIS) provide reports and displays to support business decision-making using transaction process system data.
• MIS produce scheduled reports that include Summary reports and the Exception reports
• Management Information Systems (MIS) produce ad hoc reports
• Traditional MIS software that generates reports is not flexible enough to provide needed information to managers, plus an MIS cannot create models or projections.
• Decision Support Systems (DSS) help people make decisions by manipulating data, analyzing data from external sources, generating statistical projections, and creating data models for scenarios.
• Executive Information Systems (EIS) which is a specialized DSS designed to provide senior managers with data relevant to activities like setting policies, planning, and preparing budgets.
• Decision makers use DSS to design decision models and make queries.
• A decision model is a numerical representation of a realistic situation.
• A decision query is a question or set of instructions describing data that must be gathered to make a decision.
• A DSS's are most appropriate in situations where they are used by trained professionals, plus a major limitation of most DSS is that they need users to have an in-depth knowledge of business problems.
• DSS also require a good background on what-if models and statistics.

Other Categories of Information Systems

• Expert Systems are knowledge-based systems that provide expert advice and act as expert consultants to users.
• Neural Networks are a computer system that makes decisions based on built in data, it can also create its own information from hundreds of lightning-fast trial-and-error attempts.
• The Neural network uses computer circuitry to mimic how a brain might process information and remember things.
• Knowledge Management Systems are knowledge-based systems that support the creation, organization, and dissemination of business knowledge within the enterprise.
• Strategic Information Systems support operations or management processes that provide a firm with strategic products, services, and capabilities for competitive advantage.
• Functional Business Systems support operational and managerial applications of a company's basic business functions.
• Cross-functional information systems incorporate several types of information systems providing a variety of functions.