UNIT 1

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Introduction to MIS & Information Concepts

Learning Objectives:
After studying this unit, you will learn:

Definition, Purpose, Objectives of MIS

Role of MIS in Business Organization with particular reference to Management Levels
Location of MIS in the Organization – concept and design.
Data and Information – meaning and importance
Relevance of Information in Decision Making
Sources and Types of Information
Assessing Information needs of the Organization
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1.1 Introduction:

Management Information Systems (MIS), referred to as Information Management and Systems, is

the discipline covering the application of people, technologies, and procedures collectively called
information systems, to solving business problems.
“'MIS' is a planned system of collecting, storing and disseminating data in the form of
information needed to carry out the functions of management.”
Academically, the term is commonly used to refer to the group of information management methods
tied to the automation or support of human decision making, e.g. Decision Support Systems, Expert
Systems, and Executive Information Systems.
Management : Management is art of getting things done through and with the people informally
organized groups. The basic functions performed by a manager in an organization are: Planning,
controlling, staffing, organizing, and directing.
Information : Information is considered as valuable component of an organization. Information is
data that is processed and is presented in a form which assists decision maker. System : A system is
defined as a set of elements which are joined together to achieve a common objective. The elements
are interrelated and interdependent. Thus every system is said to be composed of subsystems. A
system has one or multiple inputs, these inputs are processed through a transformation process to
convert these input( s) to output.

MIS DEFINITION:

The Management Information System (MIS) is a concept of the last decade or two. It has been
understood and described in a number ways. It is also known as the Information System, the
Information and Decision System, the Computer- based information
System. The MIS has more than one definition, some of which are give
below.
1. The MIS is defined as a system which provides information support for decision making in the
organization.
2. The MIS is defined as an integrated system of man and machine for providing the information to
support the operations, the management and the decision making function in the organization. 3. The
MIS is defined as a system based on the database of the organization evolved for the purpose of
providing information to the people in the organization.
4. The MIS is defined as a Computer based Information System.

Thought there are a number of definitions, all of them converge on one single point, i.e., the MIS is
a system to support the decision making function in the organization. The difference lies in defining
the elements of the MIS. However, in today.s world MIS a computerized .business processing
system generating information for the people in the organization to meet the information needs
decision making to achieve the corporate objective of the organization. In any organization, small or
big, a major portion of the time goes in data collection, processing, documenting it to the people.
Hence, a major portion of the overheads goes into this kind of unproductive work in the
organization. Every individual in an organization is continuously looking for some information
which is needed to perform his/her task. Hence, the information is people-oriented and it varies with
the nature of the people in the organization.

The difficulty in handling this multiple requirement of the people is due to a couple of reasons. The
information is a processed product to fulfill an imprecise need of the people. It takes time to search
the data and may require a difficult processing path. It has a time value and unless processed on
time and communicated, it has no value. The scope and the quantum of information is individual
dependent and it is difficult to conceive the information as a well-defined product for the entire
organization. Since the people are instrumental in any business transaction, a human error is
possible in conducting the same. Since a human error is difficult to control, the difficulty arises in
ensuring a hundred per cent quality assurance of information in terms of completeness, accuracy,
validity, timeliness and meeting the decision making needs.

In order to get a better grip on the activity of information processing, it is necessary to have a
formal system which should take care of the following points:
Handling of a voluminous data.
Confirmation of the validity of data and transaction.
Complex processing of data and multidimensional analysis.
Quick search and retrieval.
Mass storage.
Communication of the information system to the user on time.
Fulfilling the changing needs of the information.
The management information system uses computers and communication technology to deal with
these points of supreme importance.
1.2 Objectives of MIS :

1. Data Capturing : MIS capture data from various internal and external sources of organization.
Data capturing may be manual or through computer terminals.
2. Processing of Data : The captured data is processed to convert into required information.
Processing of data is done by such activities as calculating, sorting, classifying, and summarizing. 3.
Storage of Information : MIS stores the processed or unprocessed data for future use. If any
information is not immediately required, it is saved as an organization record, for later use. 4.
Retrieval of Information : MIS retrieves information from its stores as and when required by
various users.
5. Dissemination of Information : Information, which is a finished product of MIS, is
disseminated to the users in the organization. It is periodic or online through computer terminal.
1.3 Characteristics of MIS :

1. Systems Approach : The information system follows a systems approach. Systems approach
means taking a comprehensive view or a complete look at the interlocking sub-systems that operate
within an organization.
2. Management Oriented : Management oriented characteristic of MIS implies that the
management actively directs the system development efforts. For planning of MIS, top-down
approach should be followed. Top down approach suggests that the system development starts from
the determination of management‘s needs and overall business objective. To ensure that the
implementation of system‘s polices meet the specification of the system, continued review and
participation of the manager is necessary.
3. Need Based : MIS design should be as per the information needs of managers at different levels.
4. Exception Based : MIS should be developed on the exception based also, which means that in an
abnormal situation, there should be immediate reporting about the exceptional situation to the
decision –makers at the required level.
5. Future Oriented : MIS should not merely provide past of historical information; rather it should
provide information, on the basis of future projections on the actions to be initiated. 6. Integrated :
Integration is significant because of its ability to produce more meaningful information. Integration
means taking a comprehensive view or looking at the complete picture of the interlocking
subsystems that operate within the company.
7. Common Data Flow : Common data flow includes avoiding duplication, combining similar
functions and simplifying operations wherever possible. The development of common data flow is
an economically sound and logical concept, but it must be viewed from a practical angle. 8. Long
Term Planning : MIS is developed over relatively long periods. A heavy element of planning
should be involved.
9. Sub System Concept : The MIS should be viewed as a single entity, but it must be broken down
into digestible sub-systems which are more meaningful.
10.Central database : In the MIS there should be common data base for whole system
1.4 ROLE OF THE MANAGEMENT INFORMATION SYSTEM:

The role of the MIS in an organization can be compared to the role of heart in the body. The
information is the blood and MIS is the heart. In the body the heart plays the role of supplying pure
blood to all the elements of the body including the brain. The heart works faster and supplies more
blood when needed. It regulates and controls the incoming impure blood, processes it and sends it to
the destination in the quantity needed. It fulfills the needs of blood supply to human body in normal
course and also in crisis. The MIS plays exactly the same role in the organization.
(1) The system ensures that an appropriate data is collected from the various sources, processed,
and sent further to all the needy destinations. The system is expected to fulfill the
information needs of an individual, a group of individuals, the management functionaries:
the managers and the top management.
(2) The MIS satisfies the diverse needs through a variety of systems such as Query Systems,
Analysis Systems, Modeling Systems and Decision Support Systems the MIS helps in
Strategic Planning, Management Control, Operational Control and Transaction Processing.
(3) The MIS helps the clerical personnel in the transaction processing and answers their queries
on the data pertaining to the transaction, the status of a particular record and references on a
variety of documents. The MIS helps the junior management personnel by providing the
operational data for planning, scheduling and control, and helps them further in decision
making at the operations level to correct an out of control situation.
(4) The MIS helps the middle management in short them planning, target setting and controlling
the business functions. It is supported by the use of the management tools of planning and
 control. The MIS helps the top management in goal setting, strategic planning and evolving
the business plans and their implementation.
(5) The MIS plays the role of information generation, communication, problem identification
and helps in the process of decision making. The MIS, therefore, plays a vita role in the
management, administration and operations of an organization.

1.5 Organizational Need for MIS in a Company

To facilitate the management decision making at all levels of company, the MIS must be integrated.
MIS units are company wide. MIS is available for the Top management. The top management of
company should play an active role in designing, modifying and maintenance of the total
organization wide management information system. Information system and Information
technology have become a vital component of any successful business and are regarded as major
functional areas just like any other functional area of a business organization like marketing,
finance, production and HR. Thus it is important to understand the area of information system just
like any other functional area in the business. MIS is important because all businesses have a need
for information about the tasks which are to be performed. Information and technology is used as a
tool for solving problems and providing opportunities for increasing productivity and quality.
Information has always been important but it has never been so available, so current and so
overwhelming. Efforts have been made for collection and retrieval of information, However,
challenges still remain in the selection analysis and interpretation of the information that will further
improve decision making and productivity.
MIS for a Business Organization :
1. Support the Business Process : Treats inputs as a request from the customer and outputs as
services to customer. Supports current operations and use the system to influence further
way of working.
2. Support Operation of a Business Organization : MIS supports operations of a business
organization by giving timely information, maintenance and enhancement which provides
flexibility in the operation of an organizations.
3. To Support Decision Making : MIS supports the decision making by employee in their
daily operations. MIS also supports managers in decision making to meet the goals and
objectives of the organization. Different mathematical models and IT tools are used for the
purpose evolving strategies to meet competitive needs.
4. Strategies for an Organization : Today each business is running in a competitive market.
MIS supports the organization to evolve appropriate strategies for the business to assented in
a competitive environment.

1.6 Prerequisites of an Effective MIS

Essential Requirement of an Effective MIS :

(i) Qualified System and Management Staff : The prerequisite of an effective MIS is that it
should be managed by qualified officers. These officers should have a mutual understanding about
the roles and responsibilities of each other. be understand clearly the view of their fellow officers.
For this, each organization should have two categories of officers :
(a) System and Computer Experts who in addition to their expertise in their subject area , they
should also be capable of understanding management concepts to facilitate the understanding of
problems asked by concern. They should also be clear about the process of decision making and
information requirements for planning.
(b) Management experts who should also understand quite-clearly the concepts and operations of
a computer. This basic knowledge of computer will be useful will place them in a comfortable
position, while working with systems, technicians in designing or other wise, of the information
system.
(ii) Futuristic Perspective : An effective MIS should be capable of meeting the future
requirements of its executives as well. This capability can be achieved by regular monitoring and
updating the MIS.
(iii) Support of Top Management : For a management information system to be effective, it must
receive the full support of top management. The Reasons for this are :
(a) Subordinate managers are usually lethargic about activities which do not receive the support of
their superiors.
(b) The resources involved in computer based information system are larger and are growing larger
and larger in view of importance gained by management information system. (iv) Common
Database : It is an integrated collection of data and information which is utilized by several
information subsystems of an organization. A common database may be defined as a super file
which consolidates and integrates data records formerly stored in a separate data file. Such a
database can be organized as an integrated collection of data records into a single super file or it can
be organized as an integrated collection of several data file.
(v) Control and maintenance of MIS : Control of the MIS means the operation of the system as it
was designed to operate. Some times, users develop their own procedures or short cut methods to
use the system which reduces its effectiveness.

1.7 Various type of Information System

A business has several information systems :

(A) Formal Information System
(B) Informal Information System
(C) Computer Based Information System
(a) Formal Information System : It is based on organizational chart represented by the
organization.
(b) Informal Information System : It is an employee based system designed to meet personal and
vocational needs and to help in the solution of work-related problems. It also funnels information
upward through indirect channels. It works within the framework of the business and its stated
policies.
(c) Computer Based Information System (CBIS) : This category of information system depends
mainly on the computer for handling business application. System analysis develops different types
of information system to meet variety of business needs. There is class of system known as
collectively as computer based information system. They are categorized in the following 6 classes:
i) Transaction Processing System (TPS)
ii) Management Information System (MIS)
iii)Decision Support System (DSS)
iv)Executive Support System (ESS)
v)Office Automation Systems (OASs), and
vi)Business Expert Systems (BESs)
The organization has executive support systems (ESS) at the strategic level; management
information systems (MIS) and decision-support systems (DSS) at the management level;
knowledge work systems (KWS) and office systems at the knowledge level; and transaction
processing systems (TPS) at the operational level. Systems at each level in turn are specialized to
serve each of the major functional areas. Thus, the typical systems found in organizations are
designed to assist workers or managers at each level and in the functionsof sales and marketing,
manufacturing, finance, accounting, and human resources.

1. Transaction Processing System:

TPS processes transaction and produces reports. It represents the automation of the fundamental,
routine processing used to support business operations.It does not provide any information to the
user to his/her decision-making. TPS uses data and produces data .Previously, TPS was known as
Management Information System. Prior to computers, data processing was performed manually or
with simple machines. The domain of TPS is at the lowest level of the management hierarchy of an
organization.
2. Management Information System (MIS)
MIS is an information system, which processes data and converts it into information.A management
information system uses TPS for its data inputs. The information generated by the information
system may be used for control of operations, strategic and long-range planning. Short-range
planning, management control, and other managerial problem solving. It encompasses processing in
support of a wide range of organizational functions & management processes. MIS is capable of
providing analysis, planning & decision making support. The functional areas of a business may be
marketing, production, human resource, finance and accounting.
3. Decision Support System (DSS)
A decision support system (DSS) is an information system application that assists decision-making.
DSS tends to be used in planning, analyzing alternatives, and trial and error search for solution. The
elements of the decision support system include a database, model base & software. The main
application areas of DSS are Production, finance and marketing.
DSS can be differentiated from MIS on the basis of processing the information. MIS processes data
to convert it into information. DSS processes information to support the decision making process of
a manager.

4. Executive Support System (ESS)

Executive Support System (ESS) is an extension of the management information system, which is a
special kind of DSS; An ESS is specially tailored for the use of chief executive of an organization to
support his decision-making. It includes various types of decision-making but it is more specific
and person oriented.
5. Office Automation Systems (OAS)
Office automation refers to the application of computes and communication technology to office
functions. Office automation systems are meant to improve the productivity of managers at various
levels of management of providing secretarial assistance and better communication facilities.
Office activities may be grouped under two classes, namely
i)Activities performed by clerical personnel (clerks, secretaries, typist, etc.,) and ii)Activities
performed by the executives (managers, engineers or other professionals like economist, researches
etc.)
In the first category, the following is a list of activities.
a) Typing
b)Mailing
c)Scheduling of meetings and conferences,
d) Calendar keeping, and
e)Retrieving documents
The following is a list of activities in the second category (managerial
category) a)Conferencing.
b)Production of information (messages, memos, reports, etc.) and controlling performance.
6. Business Expert Systems:These systems are one of the main types of knowledge-based
information systems. These systems are based on artificial intelligence, and are advanced
information systems. A business expert system is a knowledge based information system that uses
its knowledge about a specific, complex application area to act as an expert. The main components
of an expert system are:
a. Knowledge Base
b. Interface Engine
c. User Interface

1.8 Information Concepts

The word .information. is used commonly in our day to day working. In MIS, information has a
precise meaning and it is different from data. The information has a value in decision making while
data does not have. Information brings clarity and creates an intelligent human response in the
mind. In MIS a clear distinction is made between data and information. Data is like raw materials
while the information is equivalent to the finished goods produced after processing the raw material.
Information has certain characteristics. These are: Information
▪ Improves representation of an entity
▪ Updates the level of knowledge.
▪ Has a surprise value.
▪ Reduces uncertainty.
▪ Aids in decision making.
The quality of information could be called good or bad depending on the mix of these
characteristics. Devis and Olson defines information as a data that has been processed into a form
that is meaningful to the recipient and is of real or perceived value in the current or the prospective
actions or decisions of the recipient. Data is defined as groups of non-random symbols in the form
of text, images or voice representing quantities, actions and objects. Whether an entity is a data or
information, it must be transferred through communication from the Source. to the Destination
without loss of content. The general model for such communication is given in Fig.

The above model of communication is used in the MIS. The MIS is equivalent to the transmitter
which provides information and sends through reports (channel) to the various receivers, which is
decoded or interpreted by the receiver at the destination. The poor quality of information due to
various factors would create confusion and misunderstanding, which is equivalent to a Noise and a
Destortion in the communication model. A good MIS communicates the information without a
noise and a distortion to the user.

1.9 Information Presentation

Presentation of the information is an art. The data may be collected in the best possible manner and
processed analytically, bringing lot of value in the information; however, if it is not presented
properly, it may fail to communicate anything of value to the receiver. The degree of
communication is affected by the methods of transmission, the manner of information handling and
the limitations and constraints of a receiver as the information processor and the organization as the
information user.
The methods used for improving communication are summarization and message routing. The
concept of summarization is used to provide information which is needed in the form and content.
The information can be summarized in a number of ways as shown in Table .
The principle behind summarization is that too much information causes noises and distortions, i.e.,
confusion, misunderstanding and missing the purpose. The summarization suppresses the noise and
the distortions.
Another method of improving the degree of communication is through message routing. The
principle here is to distribute information to all those who are accountable for the subsequent
actions or decisions in any manner. That is if the information is generated with a certain purpose for
a primary user, then such information may have secondary purposes to some other users in the
organization. This is achieved by sending the copies of the reports or documents to all the
concerned people or users. The principle of the message routing achieves the spread of information
to the appropriate quarters.
Knowledge is a power and an intelligent person in the organization can misuse this power to
achieve personal goals undermining the functional and organizational goals. This tendency should
be curbed. Further, the decision maker may call for the information on the grounds that, just in case
required, he should readily have it. Apart from the misuse of information, it has an impact on the
cost of information processing. In order to curb the misuse of information, a control is exercised on
the content of information and its distribution.

1.10 Bias in information

While choosing the appropriate method of communicating information a care has to be taken to see
that is not biased. For example, while using the techniques of classification or filtering the
information, it should not happen that certain information gets eliminated or does not get classified.
That is, a deliberate bias in covering certain information is to be avoided. This bias enters because
people try to block sensitive information which affects them. To overcome this problem, a formal
structure of organization should be adopted and the type of information and its receiver should be
decided by the top management.
Many a times the data and the information are suppressed but the inferences are informed, with no
or little possibility of verification or rethinking. In this case one who draws inferences may have a
bias in the process of collection, processing and presentation of data and information. Though the
deliberate enforcement of the inference on the receiver avoids a possibility of the multiple
inferences, but in this case processor.s bias is forced on the receiver. For example, organizations
have departments like Corporate Planning, Market Research, R and D, HRD and so on, which
collect the data and analyze it for the company and communicate the inferences. In all these cases
personal bias, organizational bias and management bias may be reflected in the entire process of
collection processing, and communication inference.

The presentation of the information will generate a bias and may influence the user. For example, if
the information is presented in an alphabetical order and if it is lengthy, the first few information
entities will get more attention. If the information is presented with a criteria of exception, the
choice of exception and deviation from the exception creates a bias by design itself. For a quick
grasp, the information is presented in a graphical form. The choice of scale, the graphic size and the
colour introduced a bias in the reader.s mind.
The base, which may creep in inadvertently because of the information system design, can be
tackled by making the design flexible, so far as reporting is concerned. Allow the manager or the
decision maker to choose his classification or filtering criteria, the scope of
information, the method of analysis and the presentation of inference. However, somewhere balance
needs to be maintained between the flexibility of the design and the cost, and its benefits to the
managers. Disregarding the bias in information, it must have certain attributes to increase its utility
as shown in Table.
Redundancy is the repetition of the parts or messages in order to circumvent the distortions or the
transmission errors. The redundancy, therefore, sometimes is considered as an essential feature to
ensure that the information is received and digested. In MIS the redundancy of data and
information, therefore, is inevitable on a limited scale. Its use is to be made carefully so that the
reports are not crowded with information.

1.11 Characteristics of Information:

The parameters of a good quality are difficult to determine, however, the information can be termed
as of a good quality if it meets the norms of impartiality, validity, reliability, consistency and age.
The quality of information has another dimension of utility from the user.s point of view. The users
being many, this is difficult to control. Therefore, if one can develop information with due regards
to these parameters, one can easily control the outgoing quality of the information with the probable
exception of the satisfaction at the users end.
Following are the essential characteristic features :
(i) Timeliness : Timeliness means that information must reach the recipients within the prescribed
timeframes. For effective decision-making, information must reach the decision-maker at the right
time, i.e. recipients must get information when they need it. Delays destroys the value of
information. The characteristic of timeliness, to be effective, should also include up-to-date, i.e.
current information.
(ii) Accuracy : Information should be accurate. It means that information should be free from
mistakes, errors &, clear Accuracy also means that the information is free from bias. Wrong
information given to management would result in wrong decisions. As managers decisions are
based on the information supplied in MIS reports, all managers need accurate information.
(iii) Relevance : Information is said to be relevant if it answers especially for the recipient what,
why, where, when, who and why? In other words, the MIS should serve reports to managers which
is useful and the information helps them to make decisions..
(iv) Adequacy : Adequacy means information must be sufficient in quantity, i.e. MIS must provide
reports containing information which is required in the deciding processes of decision-making. The
report should not give inadequate or for that matter, more than adequate information, which may
create a difficult situation for the decision-maker. Whereas inadequacy of information leads to
crises, information overload results in chaos.
(v) Completeness : The information which is given to a manager must be complete and should
meet all his needs. Incomplete information may result in wrong decisions and thus may prove costly
to the organization.
(vi) Explicitness : A report is said to be of good quality if it does not require further analysis by the
recipients for decision making.
(Vii) Impartiality: Impartial information contains no bias and has been collected without any
distorted view of the situation. The partiality creeps in, if the data is collected with a preconceived
view, a prejudice, and a pre-determined objective or a certain motive.
(viii)Validity: The validity of the information relates to the purpose of the information. In other
words, it is the answer to the question-dose the information meet the purpose of decision making for
which it is being collected? The validity also depends on how the information is used. Since the
information and the purpose need not have one to one correspondence, the tendency to use it in a
particular situation may make the information invalid. For example, if the quality of the
manufactured product is deteriorating and it is decided to select the causes of poor quality, then one
must collect all the possible causes which may affect the quality. Quality is a function of the raw
material, the process of manufacture, the tools applied, the measures of the quality assessment, the
attitude of the people towards the control of quality. However, if the information collected talks
only about raw materials and the process of manufacture, then this information is not sufficient and
hence it is not valid for all the decisions which are required to control the quality.
(ix) Reliability: It is connected to the representation and the accuracy of what is being described.
For example, if the organization collects the information on the product acceptance in the selected
market segment, the size of the sample and the method of selection of the sample will decide the
reliability. If the sample is small, the information may not give the correct and a complete picture
and hence it is not reliable. The reliability is also affected from the right source.
(x)Consistency:The information is termed as inconsistent if it is derived form a data which dose not
have a consistent pattern of period. Somewhere, the information must relate to a consistent base or a
pattern. For example, you have collected the information on the quantity of production for the last
twelve months to fix the production norms. If in this twelve months period, the factory has worked
with variable shift production, the production statistics of the twelve months for comparison is
inconsistent due to per shift production. The consistency can be brought in by rationalizing the data
to per shift production per month. The regularity in providing the information also helps in
assessing the consistency in the information.
(xi)Age: If the information is old, it is not useful today. The currency of the information makes all
the difference to the users. If the information is old then it does not meet any characteristics of the
information viz., the update of knowledge, the element of surprise and the reduction of uncertainty,
and the representation. Maintaining these parameters at a high degree always poses a number of
problems. These problems are in the management of the operations, the sources, the data processing
and the systems in the organization. A failure to maintain the parameters to a high degree affects the
value of the information to the decision maker.

1.12 Different types of Information

Classification of Information : The information can be classified in a number of ways provide to

better understanding.
Jhon Dearden of Harvard University classifies information in the following manner : (1) Action
Verses No-Action Information : The information which induces action is called action
information. ‗No stock‗report calling a purchase action is an action information. The information
which communicates only the status is No-Action Information. The stock balance is no-action
information.
(2) Recurring Verses No-Recurring Information : The information generated at regular intervals
is recurring information. The monthly sales reports, the stock statement, the trial balance, etc are
recurring information. The financial analysis or the report on the market research study is
norecurring information.
(3) Internal and external information : The information generated through the internal sources of
the organization is termed as Internal Information, while the information generated through the
govt. reports, the industry survey etc., termed as External Information, as the sources of the data
are outside the organization.

The information can also be classified, in terms of its application :

(i) Planning Information : Certain standard norms and specifications are used in planning of any
activity. Hence such information is called the Planning Information. e. g. Time standard, design
standard.
(ii) Control Information : Reporting the status of an activity through a feedback mechanism is
called the Controlling Information. When such information shows a deviation from the goal or the
objective, it will induce a decision or an action leading to control.
(iii) Knowledge Information : A collection of information through the library records and the
research studies to build up a knowledge base as an information is known as Knowledge
Information.
(iv)Organization Information : When the information is used by everybody in the organization, it
is called Organization Information. Employee and payroll Information is used by a number of
people in an organization.
(v) Functional/ Operational Information : When the information is used in the operation of a
business it is called Functional/Operational Information.
(vi) Database Information : When the information has multiple use and application, it is called as
database information. Material specification or supplier information is stored for multiple users.

1.13 Difference between Data Processing and Information Processing

Data Processing : Data Processing is a process that converts data into information or knowledge.
The processing is usually assumed to be automated and running on a computer. Because data are
most useful when well-presented and actually informative, data-processing systems are often
referred to as information systems to emphasize their practicality. Nevertheless, both terms are
roughly synonymous, performing similar conversions; data-processing systems typically manipulate
raw data into information, and likewise information systems typically take raw data as input to
produce information as output. Data processing is that a business has collected numerous data
concerning an aspect of its operations and that this multitude of data must be presented in
meaningful, easy-to-access presentations for the managers who must then use that information to
increase revenue or to decrease cost. That conversion and presentation of data as information is
typically performed by a data-processing application.

Information Processing : Information processing is the change or processing of information in any

manner detectable by an observer. Information processing may more specifically be defined in
terms by Claude E. Shannon as the conversion of latent information into manifest information.
Latent and manifest information is defined through the terms of equivocation, remaining
uncertainty, what value the sender has actually chosen, dissipation uncertainty of the sender what
the receiver has actually received and transformation saved effort of questioning - equivocation
minus dissipation. Practical Information Processing can be described as a cycle, where data which
may have no inherent meaning to the observer is converted into information, which does have
meaning to the observer.

1.14 Methods of Data and Information Collection:

Several methods are available for the collection of data. The choice of method will have an impact
on the quality of information. Similarly the design of data collection method also decides the quality
of data and information. The methods of data collection and processing become a part of the MIS.
The various methods of data collection are explained in Table . An awareness of these methods is
essential to the manager. Further, he should also nunderstand the potential problems of bias,
currency, and the fact versus the opinion in the various types of methods. The observation, the
experiment, the survey and the subjective estimation are the methods chosen for data collection and
information about a specific problem, while the remaining methods are chosen to collect data on a
routine basis without any particular problem whatsoever.
Following are the methods of data collection :
i. Observation
ii. Experiment
iii. Survey
iv. Subjective Estimation
v. Transaction Processing
vi. Purchase from Outside
vii. Publication
viii. Government Agencies

Methods of Data and Information Collection :

The specific methods analysts use for collecting data about requirements are called fact – finding
techniques. These include the interview, questionnaire, record inspections (on – site review) and
observation. Analysts usually employ more that one of these techniques to help ensure an accurate
and comprehensive investigation.
1 )Interview
Analysts use interviews to collect information from individuals or from groups. The respondents are
generally current users of the existing system or potential users of the proposed system. In some
instances, the respondents may be managers or employees who provide data for the proposed
system or who will be affected by it. Although some analysts prefer the interview to other fact –
finding techniques, it is not always the best source of application data. Because of the time required
for interviewing, other methods must also be used to gather the information needed to conduct an
investigation.
It is important to remember that respondents and analysts converse during an interview – the
respondents are not being interrogated. Interviews provide analysts with opportunities for gathering
information form respondents who have been chosen for their knowledge of the system under study.
This method is frequently the best source of qualitative information (opinions, policies, and
subjective descriptions of activities and problems). Other fact finding methods are likely to be more
useful for collecting quantitative data (numbers, frequencies, and quantities).
This method of fact – finding can be especially helpful for gathering information from individuals
who do not communicate effectively in writing or who may not have the time to complete
questionnaires. Interviews allow analysts to discover areas of misunderstanding, unrealistic
expectations, and even indications of resistance to the proposed system.
Interviews can be either structured or unstructured:
Unstructured interviews, using a question – and – answer format, are appropriate when analysts
want to acquire general information about a system. This format encourages respondents to share
their feelings, ideas, and beliefs.
Structured interviews use standardized questions in either an open response or closed – response
format. The former allows respondents to answer in their own words; the latter uses a set of
prescribed answers.
Each approach has advantages and disadvantages. The success of an interview depends on the skill
or the interviewer and on his or her preparation for the interview. Analysts also need to be sensitive
to the kinds of difficulties that some respondents create during interviews and know how to deal
with potential problems. They need to consider not only the information that is acquired during an
interview, but also its significance. It is important to have adequate verification of data through
other data collection methods.
2 ) Questionnaire
The use of questionnaires allows analysts to collect information about various aspects of a system
from a large number of persons. The use of standardized question formats can yield more reliable
data than other fact – finding techniques, and the wide distribution ensures greater anonymity for
respondents, which can lead to more honest responses. However, this method does not allow
analysts to observe the expressions or reactions or respondents. In addition, response may be
limited, since completing questionnaires may not have high priority among the respondents.
Analysts often use open – ended questionnaires to learn about feeling, opinions, and general
experiences or to explore a process or problem.
Closed questionnaires control the frame of reference by presenting respondents with specific
responses form which to choose. This format is appropriate for electing factual information. The
high cost of developing and distributing questionnaires demands that analysts carefully consider the
objective of the questionnaire and determine what structure will be most useful to the study and
most easily understood by the respondents. Questionnaires should also be tested and, if necessary,
modified before being printed and distributed.
As with interviewees, recipients, of questionnaires would be selected for the information they can
provide. The analysts should ensure that the respondents, background and experiences qualify them
to answer the questions.
3 )Record Review
Many kinds of records and reports can provide analysts with valuable information about
organizations and operations. In record reviews, analysts examine information that has been
recorded about the system and user. Record inspection can be performed at the beginning of the
study, as an introduction, or later in the study, as a basis for comparing, actual operations with the
records indicate should be happening.
Records include written policy manuals, regulations and standard operating procedures used by
most organizations and a guide for managers and employees. They do not show what activities are
actually occurring, where the decision – making power lies, or how tasks are performed. However,
they can help analysts understand the system by familiarizing them with what operations must be
supported and with formal relations within the organization.
4 ) Observation
Observation allows analysts to gain information they cannot obtain by any other fact – finding
method. Through observation, analysts can obtain firsthand information about how activities are
carried out. This method is most useful when analysts need to actually observe how documents are
handled, how processes are carried out, observers know what to look for and how to assess the
significance of what they observe.

1.15 level of business activity with reference to information required

While developing an information management strategy within an organization, it is useful to

consider informations need at on three levels :
(i) Corporate (Top Level )
(ii)Team, Division, Business Unit (Middle Level)
(iii)Individual (Low Level )
The needs of each of these three levels must be met if a coordinated and effective solution is to be
maintained in the long-term.
Failure to address any one of the levels will lead to areas of the business or individuals finding their
own solution, which may not fit well within the strategic goals of the organization. (i) Corporate
(Top Level Information) : At the top level corporate information that is useful for the whole
organization. This 'global' information is generally well addressed by the corporate intranet.
Examples of corporate information include policies and procedures, HR information, online forms,
phone directory, etc. Interestingly, there may be a limited amount of truly global information, and it
may not deliver the greatest (measurable) business benefits. (ii) Team, division, business unit
(Middle level) : The middle level is perhaps the most important, as it covers all the information
shared within teams, divisions, business units, etc. This information may be critical to the day-to-
day activities of the group, but of little interest to the rest of the organization. Examples include
project documentation, business unit specific content, meeting minutes, etc. This level is generally
poorly-served within organizations, although collaboration tools are increasingly being used to
address team information needs. It is also being recognized that it is this 'local' information that may
be the most valuable, in terms of driving the day-to-day activity of the organization.
(iii) Individual (Low Level) : At the lowest level the personal information need of staff exists
throughout the organization. Examples include correspondence, reports and spreadsheets. In most
organizations, staff must struggle with using email to meet their information management needs.
While staff generally recognizes the inadequacy of e-mail, they have few other approaches or
technologies at their disposal.
Managing the Levels : While managing the information at each of the three levels, consider
aspects need consideration:
(a) An information management solution must be provided for staff at each of the three levels. If
corporate solutions aren't provided, then staff will find their own solutions. This is the source of
poor-quality intranet sub-sites, and other undesirable approaches.
(b) A clear policy must be developed, outlining when and how it will apply at all the three levels
and how information should be managed at each level.
(c) Processes must be put in place to 'bubble up' or 'promote' information from lower levels to
higher levels. For example, some team-generated information will be critical for the whole
organization.
(d) As much as possible, a seamless information management environment should be delivered that
covers all the three levels.
1.16 Categories of Information
• Strategic Information- relates to ling range planning policies that are direct interest to upper
management and for long range goals. For example- population growth, trends in financial
investment, human resources.
• This information is achieved with the aid of DSS.
• Managerial Information- It is of direct use to middle management and department heads for
implementation and control. For example- sales analysis, cash flow projections, and annual
financial statements.
• This information is of use in short and intermediate range planning- i.e. months rather than years.
• It is maintained with the help of MIS.
• Operational Information- It is short term, daily information used to operate departments and to
enforce the day to day rules and regulations of the business. For example- daily employee absence
sheets, overdue purchase orders, current stock.
This information is achieved with the aid of TPS.
• It is established by data processing systems. Informal Information Systems • It is an employee
based system designed to meet personnel and vocational needs and to help solve, work related
problems.
• It relies on computer for handling business applications.

1.17 TYPES OF INFORMATION SYSTEMS

An information system is a collection of hardware, software, data, people and procedures that are
designed to generate information that supports the day-to-day, short-range, and long-range activities
of users in an organization. Information systems generally are classified into five categories: office
information systems, transaction processing systems, management information systems, decision
support systems, and expert systems. The following sections present each of these information
systems.

1. Office Information Systems

An office information system, or OIS (pronounced oh-eye-ess), is an information system that

uses hardware, software and networks to enhance work flow and facilitate communications among
employees. Win an office information system, also described as office automation; employees
perform tasks electronically using computers and other electronic devices, instead of manually.
With an office information system, for example, a registration department might post the class
schedule on the Internet and e-mail students when the schedule is updated. In a manual system, the
registration department would photocopy the schedule and mail it to each student‘s house.

An office information system supports a range of business office activities such as creating and
distributing graphics and/or documents, sending messages, scheduling, and accounting. All levels of
users from executive management to nonmanagement employees utilize and benefit from the
features of an OIS.
 The software an office information system uses to support these activities include word processing,
spreadsheets, databases, presentation graphics, e-mail, Web browsers, Web page authoring,
personal information management, and groupware. Office information systems use communications
technology such as voice mail, facsimile (fax), videoconferencing, and electronic data interchange
(EDI) for the electronic exchange of text, graphics, audio, and video. An office information system
also uses a variety of hardware, including computers equipped with modems, video cameras,
speakers, and microphones; scanners; and fax machines.

2. Transaction Processing Systems

A transaction processing system (TPS) is an information system that captures and processes data
generated during an organization‘s day-to-day transactions. A transaction is a business activity such
as a deposit, payment, order or reservation.

Clerical staff typically perform the activities associated with transaction processing, which include
the following:

1. Recording a business activity such as a student‘s registration, a customer‘s order, an employee‘s

timecard or a client‘s payment.

2. Confirming an action or triggering a response, such as printing a student‘s schedule, sending a

thank-you note to a customer, generating an employee‘s paycheck or issuing a receipt to a client.

3. Maintaining data, which involves adding new data, changing existing data, or removing
unwanted data.

Transaction processing systems were among the first computerized systems developed to process
business data – a function originally called data processing. Usually, the TPS computerized an
existing manual system to allow for faster processing, reduced clerical costs and improved customer
service.

The first transaction processing systems usually used batch processing. With batch processing,
transaction data is collected over a period of time and all transactions are processed later, as a
group. As computers became more powerful, system developers built online transaction processing
systems. With online transaction processing (OLTP) the computer processes transactions as they
are entered. When you register for classes, your school probably uses OLTP. The registration
administrative assistant enters your desired schedule and the computer immediately prints your
statement of classes. The invoices, however, often are printed using batch processing, meaning all
student invoices are printed and mailed at a later date.

Today, most transaction processing systems use online transaction processing. Some routine
processing tasks such as calculating paychecks or printing invoices, however, are performed more
effectively on a batch basis. For these activities, many organizations still use batch processing
techniques.

3. Management Information Systems

While computers were ideal for routine transaction processing, managers soon realized that the
computers‘ capability of performing rapid calculations and data comparisons could produce
meaningful information for management. Management information systems thus evolved out of
transaction processing systems. A management information system, or MIS (pronounced em
eye-ess), is an information system that generates accurate, timely and organized information so
managers and other users can make decisions, solve problems, supervise activities, and track
progress. Because it generates reports on a regular basis, a management information system
sometimes is called a management reporting system (MRS).
Management information systems often are integrated with transaction processing systems. To
process a sales order, for example, the transaction processing system records the sale, updates the
customer‘s account balance, and makes a deduction from inventory. Using this information, the
related management information system can produce reports that recap daily sales activities; list
customers with past due account balances; graph slow or fast selling products; and highlight
inventory items that need reordering. A management information system focuses on generating
information that management and other users need to perform their jobs.

An MIS generates three basic types of information: detailed, summary and exception. Detailed
information typically confirms transaction processing activities. A Detailed Order Report is an
example of a detail report. Summary information consolidates data into a format that an
individual can review quickly and easily. To help synopsize information, a summary report
typically contains totals, tables, or graphs. An Inventory Summary Report is an example of a
summary report.

Exception information filters data to report information that is outside of a normal condition.
These conditions, called the exception criteria, define the range of what is considered normal
activity or status. An example of an exception report is an Inventory Exception Report is an
Inventory Exception Report that notifies the purchasing department of items it needs to reorder.
Exception reports help managers save time because they do not have to search through a detailed
report for exceptions. Instead, an exception report brings exceptions to the manager‘s attention in an
easily identifiable form. Exception reports thus help them focus on situations that require immediate
decisions or actions.

4. Decision Support Systems

Transaction processing and management information systems provide information on a regular

basis. Frequently, however, users need information not provided in these reports to help them make
decisions. A sales manager, for example, might need to determine how high to set yearly sales
quotas based on increased sales and lowered product costs. Decision support systems help provide
information to support such decisions.

A decision support system (DSS) is an information system designed to help users reach a decision
when a decision-making situation arises. A variety of DSSs exist to help with a range of decisions.

A decision support system uses data from internal and/or external sources.

Internal sources of data might include sales, manufacturing, inventory, or financial data from an
organization‘s database. Data from external sources could include interest rates, population trends,
and costs of new housing construction or raw material pricing. Users of a DSS, often managers, can
manipulate the data used in the DSS to help with decisions.

Some decision support systems include query language, statistical analysis capabilities,
spreadsheets, and graphics that help you extract data and evaluate the results. Some decision
support systems also include capabilities that allow you to create a model of the factors affecting a
decision. A simple model for determining the best product price, for example, would include factors
for the expected sales volume at each price level. With the model, you can ask what-if questions by
changing one or more of the factors and viewing the projected results. Many people use application
software packages to perform DSS functions. Using spreadsheet software, for example, you can
complete simple modeling tasks or what-if scenarios.

A special type of DSS, called an executive information system (EIS), is designed to support the
information needs of executive management. Information in an EIS is presented in charts and tables
that show trends, ratios, and other managerial statistics. Because executives usually focus on
strategic issues, EISs rely on external data sources such as the Dow Jones News/Retrieval service or
the Internet. These external data sources can provide current information on interest rates,
commodity prices, and other leading economic indicators.

To store all the necessary decision-making data, DSSs or EISs often use extremely large databases,
called data warehouses. A data warehouse stores and manages the data required to analyze
historical and current business circumstances.

5. Expert Systems

An expert system is an information system that captures and stores the knowledge of human
experts and then imitates human reasoning and decision-making processes for those who have less
expertise. Expert systems are composed of two main components: a knowledge base and inference
rules. A knowledge base is the combined subject knowledge and experiences of the human experts.
The inference rules are a set of logical judgments applied to the knowledge base each time a user
describes a situation to the expert system.

Although expert systems can help decision-making at any level in an organization, nonmanagement
employees are the primary users who utilize them to help with job-related decisions. Expert systems
also successfully have resolved such diverse problems as diagnosing illnesses, searching for oil and
making soup.

Expert systems are one part of an exciting branch of computer science called artificial intelligence.
Artificial intelligence (AI) is the application of human intelligence to computers. AI technology can
sense your actions and, based on logical assumptions and prior experience, will take the appropriate
action to complete the task. AI has a variety of capabilities, including speech recognition, logical
reasoning, and creative responses.

Experts predict that AI eventually will be incorporated into most computer systems and many
individual software applications. Many word processing programs already include speech
recognition.

Integrated Information Systems

With today‘s sophisticated hardware, software and communications technologies, it often is

difficult to classify a system as belonging uniquely to one of the five information system types
discussed. Much of today‘s application software supports transaction processing and generates
management information. Other applications provide transaction processing, management
information, and decision support. Although expert systems still operate primarily as separate
systems, organizations increasingly are consolidating their information needs into a single,
integrated information system.

, there are a variety of requirements for information. Senior managers need information to help
with their business planning. Middle management need more detailed information to help them
monitor and control business activities. Employees with operational roles need information to help
them carry out their duties.

As a result, businesses tend to have several "information systems" operating at the same time. This
revision note highlights the main categories of information system and provides some examples to
help you distinguish between them.

1.18 Nolan's Six-stage Model for Growth of MIS

One of the stages of growth model, helping in the understanding of the role of information systems,
 in an organization's strategy and its maturity. Earlier, in a similar model called the four-stage
growth model the maturity of an organization was captured in terms of use of information systems.
The stages are,
1. Initiation-in which the primary focus is cost reduction and only specialized applications are run with
a specialized staff. Management in not very keen on monitoring the information system. 2. Expansion-
in which application increase rapidly. Specialization of staff and applications is
the order of the day. Management begins to take note of the new way of doing things. 3.
Formalization-in which emphasis is laid on control and specialization, is built around control.
Management controls information systems.
4. Maturity-in which database oriented applications proliferate. Information is used as a resource.
Nolan's Stages of Growth Model

I II III IV V VI

INITIATIONS • Proliferation of • IT/IS is • Greater use of • Data in becomes

applications considered as an database administration partners of users
• Users are "hands important in data
off" in approach • Little function • Greater IT/IS • Applications management
management budget are in sync with
• Extensive IT/IS control • Centralized the organization •
planning controls are • IT/IS dept now Applications
• Huge allocation applied for works on a • Shift from reflect real
• Cost reduction of financial professional IT/IS booking
IT/IS information
primary focus resources utility model after DP to needs
• No reduction holistic
• Functional • Rapid growth of • Formal planning
application is in fundamental use in IT/IS use information
and control within management
• Strategic
focus planning of
of IT • IT/IS dept MATURITY IT/IS
CONTROL INTEGRATION DATA
• MIS dept/IS
CONTAGION ADMIN • IT/IS dept
dept is not under w often but application
strict management importation incompa with development.
control and tible unsatisf becomes
• sever actory important
IS/IT al • outcome
perfo crisis Unhapp • Managers of
y users • Steering IT/IS dept
rman occur committees
ce Applicat considered at par
• Use of are widely with other dept
belo ions are used for
database

Nolan (1979) indicated that there are six stages in the information system evolutionary process. It is
an improvement over the four-stage model. The stages are:
1. Initiation- in which the organization has an operational focus and tries to get operational
efficiency and thereby limited value from the information systems.
2. Contagion-in which the organization moves towards online systems after having tasted
success in the initiation stage. More users are added.
3. Control-in which the management exercises control and makes a cost-benefit type of
 assessment.
4. Integration-in which the organization moves away from an ad hoc isolated solutions based
on information system to a service based information system. This is the stage when the
organization transitions from a data processing outlook about information systems to more
holistic information-based decision-making approach towards information systems. A more
comprehensive approach towards information systems results in changes in the
organization's behavior towards information systems and initiates a new appreciation for
data and information.
5. Data administration-in which the organization begins to appreciate the value of information
and makes efforts to centralize the data management to take advantage of the benefits of
information based decision-making.
6. Maturity-in which the organization creates synergies in its corporate objectives and
information systems planning so that the two can work in a synchronized manner.
These are the stages as Nolan has described in this research. However, no empirical proof exists of
this stage growth model of information system maturity.

1.19 ROLE OF MIS IN IMPROVING DECISION MAKING:

Decision making is an essential part of any business. This is because a majority of operations in an
organization turn around decisions made by the management. In order to make decisions more
effectively, it is very important to have a good management information system since decisions are
based on information available. The effectiveness of every business information is dependent on the
timing and content of the business information presented and management actions. The need for
management information system is felt when the managers have to make proper business decisions,
the manger will have to rely on his judgment but he must have information on the basis which he
arrives at business decisions. If an organization have a significant management information system,
it is easy for an organization to take decision on the basis of available information. Good MIS
ensures good decision making just in the same way bad MIS drive the making of bad decisions.MIS
plays a crucial role in decision making through its systematic tools, timely information and adequate
managerial policies and regulations. The quality of managerial decision-making depends upon the
qualitative information and the managers should therefore develop an environment that encourages
the growth and quality information. Management information systems give managers fast
component to information. It includes interaction with other decision support systems, information
examination, cross referencing of external information and possible data removal techniques. These
systems provide information and strategic technique with practical decisions. Finally, Management
Information systems play the crucial role of providing a wide range of alternatives from which
decision makers are able to make their preferred decision. This is important for companies in the
modern day generation where any minor fall in decision making can lead to very infinite losses.

1.20 IMPACT OF THE MANAGEMENT INFORMATION SYSTEM

Since the MIS plays a very important role in the organization, it creates an impact on the
organization.s functions, performance and productivity.
The impact of MIS on the functions is in its management. With a good support, the management of
marking, finance, production and personnel become more efficient. The tracking and monitoring of
the functional targets becomes easy. The functional, managers are informed about the progress,
achievements and shortfalls in the probable trends in the various aspects of business. This helps in
forecasting and long- term perspective planning. The manager.s attention is brought to a situation
which is exceptional in nature, inducing him to take an action or a decision in the matter. A
disciplined information reporting system creates a structured data and a knowledge base for all the
people in the organization. The information is available in such a form that it can be used straight
away or by blending analysis, saving the manager.s valuable time.
The MIS creates another impact in the organization which relates to the understanding of the
business itself. The MIS begins with the definition of a data entity and its attributes. It uses a
dictionary if data, entity and attributes, respectively, designed for information generation in the
organization. Since all the information system use the dictionary, there is common understanding of
terms and terminology in the organization brining clarity in the communication and a similar
understanding an even of the organization.
The MIS calls for a systemization of the business operation for an affective system design. A well
designed system with a focus on the manger makes an impact on the managerial efficiency. The
fund of information motivates an enlightened manger to use a variety of tools of the management. It
helps him to resort to such exercises as experimentation and modeling. The use of computers
enables him to use the tools techniques which are impossible to use manually. The ready-made
packages make this task simpler. The impact is on the managerial ability to perform. It improves the
decision making ability considerably. Since the MIS works on the basic systems such as transaction
processing and databases, the drudgery of the clerical work is transferred to the computerized
system, relieving the human mind for better work. It will be observed that a lot of manpower is
engaged in this activity in the organization. It you study the individual.s time utilization and its
application; you will find that seventy per cent of the time is spent in recording, searching,
processing and communication. This is a large overhead in the organization. The MIS has a direct
impact on this overhead. It creates a information- based work culture in the organization.

1.21 MIS : ORGANISATION

Management information systems (MIS) should be designed, viewing the organization as discussed
earlier. MIS design should give due weight age to the human side of the organization and its
culture. The task and technology are the physical aspects of the organization which can be
ascertained very easily. But culture and people are very difficult to assess from the design point of
view. The structure of the five sub-systems should be considered while designing the MIS. MIS
design should give reports in line with the organization structure. This means that the main decision
makers and the power centers must be recognized in the MIS. Let us discuss these aspects of the
organization structure and their implications.
In a tall hierarchy with a high degree of centralization, the MIS should give control information to
the higher management where decision making in concentrated. If the system is structured on the
functional basis where the functional head is a key decision maker and all the functions have
equally important role to play, then the MIS will have a functional design with the information
support to the functional head. Further, in such a set-up, an integrated MIS would be necessary,
reporting the corporate status of the business to the top management.
If the organization works on a standardized system where rules, policies, systems and procedures
have been laid down, then these become part of the MIS. The processing routines in the MIS
incorporate these features as an integral part. This is safe as it has already been approved by the
management of the organization. Along with the information, if the decision making responsibilities
are also clearly defied and allocated, then the MIS can produce information reports by processing
the data and summarizing the results in line with the decision maker.s position in the structure.
If the basic model of the organization is modified as a product or a project organizationnsystem,
then the MIS should focus on the management of planning and control of the multiple functions.
Besides these functions, he has to know the trouble spots and shows the interconnection with the
other functions. It must summaries all information relating to the span of control of product or
project manger. The MIS should be able to cater to the view of the product or the project manager
and also of the top management.
In the organization culture provides sufficient incentive for efficiency and results, the MIS should
support this culture by providing such information which will aid the promotion of efficiency. If the
culture encourages delegation of power and authority, then the MIS should incorporate the decision
making rules in the system. The organization system is an open system and MIS should be so
designed that it highlights the critical business, operational, technological and environmental
changes to the concerned level in the organization, so that the action can be taken to correct the
situation. The principle of the feed forward control should be extensively used as a design feature to
provide a prior warning to the decision maker. Since the organization system has a dynamic role to
play to meet the changing needs of a business, the MIS becomes a common support system for
playing the dynamic role.
When an organization is moving through the business phases of introduction, growth, maturity and
decline, MIS should provide an information support, relevant to that phase of the business cycle.
This means the designer of MIS should foresee such requirements and make the design flexible
enough to support such requirements.
The organizational learning helps to tone up the behavior of the organization. The MIS should
support the learning mechanism by identifying the cause and effect in a given situation. It should
keep the records of action and provide help to analyze the best action in a given situation. It should
be help to build various decision models for use by the managers. The information support should
be such that the group of enterprising manager should be able to improve their capabilities to
perform batter.
The design of the MIS, in isolation from organizational factors, is destined to fall as it just does not
fit into the structure. Since organization systems in the same business differ for various reasons
such as the leadership style, the management style, culture and group of people as a body and so on,
it is difficult to evolve a standard model of the MIS for a business and/or an industry.
MIS plays a very important role in creating organization behavior which in turn sets the goals for
achievement. Technology and people decide the organization structure and style of the management.

1.22 MIS AND THE INFORMATION CONCEPT

The goal of the MIS should be to provide the information which has a surprise value and which
reduces the uncertainty. It should simultaneously build the knowledge base in the organization by
processing the data obtained from different sources in different ways.
The designer of the MIS should take care of the data problems knowing that it may contain bias and
error by introduction of high level validations, checking and controlling the procedures in the
manual and computerized systems. While designing the MIS, due regard should be given to the
communication theory of transmitting the information from the source to the destination.
A special care should be taken to handle a noise and a distortion on the way to destination. The
presentation of information plays a significant role in controlling the noise and distortion which
might interrupt, while communicating information to the various destinations. The principles of
summarization and classification should be carefully applied giving regard to the levels of
management. Care should be taken in the process that no information is suppressed or
overemphasized.
The utility of information increases if the MIS ensures that the information possesses the necessary
attributes. The redundancy of the data and the information is inevitable ob a limited scale. MIS
should use the redundancy as a measure to control the error in communication. The information is a
quality product for the organization. The quality of information as an outgoing product can be
measured on four dimensions, viz., the utility, the satisfaction, the error and the bias. The MIS
should provide specific attention to these quality parameters. A failure to do so would result in a
wasteful expenditure in the development of the MIS and poor usage of investment in the hardware
and software.
The quality can be ensured if the inputs to the MIS are controlled on the factors of impartiality,
validity, reliability, consistency and age. MIS should make a distinction between the different kinds
of information for the purpose of communication. An action, a decision-oriented information should
be distinguished from a no-action/knowledge-oriented information. The information could be of
recurring type or an ad hoc type. The MIS also needs to give regard to the information used for
planning, performance control, and knowledge database. A distinction between these factors will
help make the decisions of communications, storage and also the frequency of reporting.
Since the decision maker is a human, it requires recognizing some aspects of human capabilities in
the MIS design. These human capabilities differ from manager to manager and the designer has to
skillfully deal with them. The differences in the capabilities arise on account of the perception in
assessing the locus of the management control, the faith and the confidence in the information
versus knowledge, the risk propensity, the tolerance for ambiguity, the manipulative intelligence,
the experience in decision making and the management style.
The MIS design should be such that it meets the needs of the total organization. For design
considerations and for the operational convenience, the organization is divided into four levels, viz.,
the top, the middle, the supervisory and the operational. The top management uses the MIS for goal-
setting and strategic planning, deals with key information of a higher degree of accuracy where the
perceived value of the information is very high. As against this, the lowest level management and
the operational management uses the MIS to know the status by calling information of the
current period in detail where the perceived value of information is the lowest and it usually insists
on getting the information in a fixed format.
The MIS design, therefore, should ensure the input data quality by controlling the data for the
factors, viz. impartiality, validity, reliability, consistency and age. The data processing and the
decision making routines should be developed in such a manner that the data is processed after
thorough validation and checking, and the analysis thereof is further reported to the various levels
and individuals with due regard to the differences in the individual management style and human
capabilities.
Recognizing that the information may be misused if it falls into wrong hands, the MIS design
should have the features of filtering, blocking, suppressions and delayed delivery. Since, the MIS
satisfies the information needs of the people in a particular organization, the design of the MIS
cannot be common or universal for all the organizations. The principles of design and the use of the
information concepts in design does not change but when it comes to the applications, the design
has to give a regard to the organization structure, the culture, the attitudes and the beliefs of the
people and the strengths and the weaknesses of the organization.

1.23 Step by step installations of MIS in an organization

After informally analyzing your data needs and procedures, if a manager feels uncomfortable about
his or her ability to establish an MIS for the organization, he or she should engage the services of an
MIS consultant to assist in creating the system. Together, the manager and the consultant will
follow a series of steps to get an overview of the existing MIS, the way it currently functions, and
what is needed to improve it. The consultant will assist in assessing, and responding to,
organizational needs. The consultant may also help a manager decide whether computerization, or a
good manual MIS, is preferable. Whether or not a consultant is engaged, managers should review
some of the problems that may make an MIS less effective.
The following table provides a systematic way of reviewing how a well-designed MIS functions at
every level. The table can serve as a checklist for managers and consultants in creating,
institutionalizing, or revising an MIS.

UNIT 2
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System Development
________________________________________________________________________________
Learning Objectives:

After studying this unit, you will learn:

Concept of System
Types of Systems – Open, Closed, Deterministic, Probabilistic, etc.
Relevance of choice of System in MIS
Integration of Organization Systems and Information Systems
 System Development Life Cycle
System Analysis, Design and Implementation
MIS Applications in Business

2.1 DEFINING A SYSTEM

A collection of components that work together to realize some objectives forms a system. Basically
there are three major components in every system, namely input, processing and output. In a system
the different components are connected with each other and they are interdependent. For example,
human body represents a complete natural system. We are also bound by many national systems
such as political system, economic system, educational system and so forth. The objective of the
system demands that some output is produced as a result of processing the suitable inputs. A well-
designed system also includes an additional element referred to as „control‟ that
provides a feedback to achieve desired objectives of the system.
Term system is derived from the Greek word „Systema‟ which means an organized relationship
among functioning units or components.

Definition of System :
"A system is an orderly grouping of interdependent components linked together according to a plan
to achieve a specific objective".

2.2 Characteristics of a System:

• Organization
• Interaction
• Interdependence
• Integration
• Central Objective
i) Organization-It implies structure and order.
ii) Interaction-It refers to manner in which each component functions with other components of the
system.
iii)Interdependence-Units/parts are dependent on each other.
iv)Integration-The parts of a system work together within the system even though each part
performs a unique function.
v)Central Objective-Objective may be real or stated. All the components work together to achieve
that particular objective.

2.3 Elements of a System

In most cases, systems analysts operate in a dynamic environment where change is a way of life.
The environment may be a business firm, a business application, or a computer system. To
reconstruct a system, the following key elements must be considered:
1. Outputs and inputs.
2. Processor(s).
3. Control.
4. Feedback.
5. Environment.
6. Boundaries and interface.
1 ) Outputs and Inputs : A major objective of a system is to produce an output that has value to its
user. Whatever the nature of the output (goods, services, or information), it must be in line with the
expectations of the intended user. Inputs are the elements (material, human resources, and
information) that enter the system for processing. Output is the outcome of processing. A system
feeds on input to produce output in much the same way that a business brings in human, financial,
and material resources to produce goods and services. It is important to point out here that
determining the output is a first step in specifying the nature, amount, and regularity of the input
needed to operate a system. For
example, in systems analysis, the first concern is to determine the user‟s requirements of a proposed
computer system – that is, specification of the output that the computer is expected to provide for
meeting user requirements.
2) Processor(s) : The processor is the element of a system that involves the actual transformation of
input into output. It is the operational component of a system. Processors may modify the input
totally or partially, depending on the specifications of the output. This means that as the output
specifications change so does the processing. In some cases, input is also modified to enable the
processor to handle the transformation.
3) Control : The control element guides the system. It is the decision – making subsystem that
controls the pattern of activities governing input, processing, and output. In an organizational
context, management as a decision – making body controls the inflow, handling and outflow of
activities that affect the welfare of the business. In a computer system, the operating system and
accompanying software influence the behaviour of the system. Output specifications determine
what and how much input is needed to keep the system in balance.
In systems analysis, knowing the attitudes of the individual who controls the area for which a
computer is being considered can make a difference between the success and failure of the
installation. Management support is required for securing control and supporting the objective of
the proposed change.
4 )Feedback: Control in a dynamic system is achieved by feedback. Feedback measures output
against a standard in some form of cybernetic procedure that includes communication and control.
Output information is fed back to the input and / or to management (Controller) for deliberation.
After the output is compared against performance standards, changes can result in the input or
processing and consequently, the output.
Feedback may be positive or negative, routing or informational. Positive feedback reinforces the
performance of the system. It is routine in nature. Negative feedback generally provides the
controller with information for action. In systems analysis, feedback is important in different ways.
During analysis, the user may be told that the problems in a given application verify the initial
concerns and justify the need for change.
Another form of feedback comes after the system is implemented. The user informs the analyst
about the performance of the new installation. This feedback often results in enhancements to meet
the user‟s requirements.
5) Environment
The environment is the “suprasystem” within which an organization operates. It is the source of
external elements that impinge on the system. In fact, it often determines how a system must
function. For example, the organization‟s environment, consisting of vendors, competitors, and
others, may provide constraints and, consequently, influence the actual performance of the business.
6 ) Boundaries and interface
A system should be defined by its boundaries – the limits that identify its components, processes
and interrelationship when it interfaces with another system. For example, a teller system in a
commercial bank is restricted to the deposits, withdrawals and related activities of customers
checking and savings accounts. It may exclude mortgage foreclosures, trust activities, and the like.
Each system has boundaries that determine its sphere of influence and control. For example, in an
integrated banking – wide computer system design, a customer who has a mortgage and a checking
account with the same bank may write a check through the “teller system” to pay the premium that
is later processed by the “mortgage loan system.” Recently, system design has been successful in
allowing the automatic transfer of funds form a bank account to pay bills and other obligations to
creditors, regardless of distance or location. This means that in systems analysis, knowledge of the
boundaries of a givensystem is crucial in determining the nature of its interface with other systems
for successful design.
2.4 Types of systems

The frame of reference within which one views a system is related to the use of the
systems approach for analysis. Systems have been classified in different ways.
Common classifications are: (1) physical or abstract, (2) open or closed, and (3) “man –
made” information systems.

1 Physical or abstract systems

Physical System– These are tangible entities that may be static or dynamic in operation. For
example- parts of a computer center are the desks, chairs etc. that facilitate operation of the
computer. They are static and a programmed computer is dynamic. Physical systems are tangible
entities that may be static or dynamic in operation. For example, the physical parts of the computer
center are the officers, desks, and chairs that facilitate operation of the computer. They can be seen
and counted; they are static. In contrast, a programmed computer is a dynamic system. Data,
programs, output, and applications change as the user‟s demands or the priority of the information
requested changes.
Abstract System – These are conceptual or non physical entities. For example- the abstract
conceptualization of physical situations. A model is a representation of a real or planned system. A
model is used to visualize relationships. Abstract systems are conceptual or non-physical entities.
They may be as straightforward as formulas of relationships among sets of variables or models –
the abstract conceptualization of physical situations. A model is a representation of a real or a
planned system. The use of models makes it easier for the analyst to visualize relationships in the
system under study. The objective is to point out the significant elements and the key
interrelationships of a complex system.

2 Open or Closed Systems

Another classification of systems is based on their degree of independence.
An open system has many interfaces with its environment. It permits interaction across its
boundary; it receives inputs from and delivers outputs to the outside. An information system falls
into this category, since it must adapt to the changing demands of the user.
A closed system is isolated from environmental influences. In reality, a completely closed system is
rare. In systems analysis, organizations, applications and computers are invariably open, dynamic
systems influenced by their environment.
Characteristics of Open Systems
• Input from outside- Open systems are self adjusting and self regulating. When functioning
properly open system reaches a steady state or equilibrium.
• Entropy- Dynamic systems run down over time resulting in loss of energy or entropy. Open
systems resist entropy by seeking new input or modifying the processes to return to a steady state. •
Process, output and cycles- Open system produce useful output and operate in cycles, following a
continuous flow path.
• Differentiation- They have a tendency toward an increasing specialization of functions and a
greater differentiation of their components. For example the role of machines and people
tendtoward greater specialization and greater interaction.
• Equifinality- Goals are achieved through differing courses of action and a variety of paths.
3.Deterministic or Probabilistic System
Deterministic System – It operates in a predictable manner and the interaction between
parts is known with certainty. For example: Two molecules of hydrogen and one molecule of
oxygen makes water.
Probabilistic System – It shows probable behavior. The exact output is not known. For
example: weather forecasting, mail delivery.

4.Social, Human Machine, Machine System

• Social System- It is made up of people. For example: social clubs, societies • Human Machine
System- When both human and machines are involved to perform a particular a particular task to
achieve a target. For example:- Computer. • Machine System- Where human interference is
neglected. All the tasks are performed by the machine.

5.Natural and Manufactured

Natural System- The system which is natural. For example- Solar system, Seasonal System.
Manufactured System- System made by man is called manufactured system. For example
Rockets, Dams, Trains.

6. Permanent or Temporary System

Permanent System- Which persists for long time. For example- policies of business. Temporary
System- Made for specified time and after that they are dissolved. For example setting up DJ
system.

7.Adaptive and Non Adaptive System

Adaptive System- respond to change in the environment in such a way to improve their
performance and to survive. For example- Human beings, animals.
Non Adaptive System-The system which doesn‟t respond to the environment. For example
Machines

8.Man Made Information Systems

• Information System may be defined as a set of devices, procedures, and operating systems
designed around user based criteria to produce information and communicate it to the user for
planning, control and performance.

9.Formal Information Systems

• It is based on the organization represented by organization chart.
• The chart is a map of positions and their authority relationships, indicated by boxes and connected
by straight lines.

2.5 SYSTEM LIFE CYCLE:

System life cycle is an organizational process of developing and maintaining systems. It helps in
establishing a system project plan, because it gives overall list of processes and sub-processes
required for developing a system.
System development life cycle means combination of various activities. In other words we can say
that various activities put together are referred as system development life cycle. In the System
Analysis and Design terminology, the system development life cycle also means software
development life cycle.
Following are the different phases of system development life cycle:
 1. Preliminary study
2. Feasibility study
3. Detailed system study
4. System analysis
5. System design
6. Coding
7. Testing
8. Implementation
9. Maintenance
The different phases of system development life cycle is shown in

Fig.below. PHASES OF SYSTEM DEVELOPMENT LIFE CYCLE

(1) Preliminary System Study:

Preliminary system study is the first stage of system development life cycle. This is a brief
investigation of the system under consideration and gives a clear picture of what actually the
physical system is? In practice, the initial system study involves the preparation of a „System
Proposal‟ which lists the Problem Definition, Objectives of the Study, Terms of reference for Study,
Constraints, Expected benefits of the new system, etc. in the light of the user requirements. The
system proposal is prepared by the System Analyst (who studies
the system) and places it before the user management. The management may accept the proposal
and the cycle proceeds to the next stage. The management may also reject the proposal or request
some modifications in the proposal. In summary, we would say that system study phase passes
through the following steps:
• problem identification and project initiation
• background analysis
• inference or findings (system proposal)

(2) Feasibility Study:

In case the system proposal is acceptable to the management, thenext phase is to examine the
feasibility of the system. The feasibilitystudy is basically the test of the proposed system in the light
of itsworkability, meeting user‟s requirements, effective use of resourceand of course, the cost
effectiveness. These are categorized as technical,operational, economic and schedule feasibility. The
main goalof feasibility study is not to solve the problem but to achieve thescope. In the process of
feasibility study, the cost and benefits are estimated with greater accuracy to find the Return on
Investment(ROI). This also defines the resources needed to complete the detailed investigation. The
result is a feasibility report submitted tothe management. This may be accepted or accepted with
modificationsor rejected. The system cycle proceeds only if the managementaccepts it.

(3) Detailed System Study:

The detailed investigation of the system is carried out in accordancewith the objectives of the
proposed system. This involves detailedstudy of various operations performed by a system and their
relationshipswithin and outside the system. During this process, dataare collected on the available
files, decision points and transactionshandled by the present system. Interviews, on-site observation
andquestionnaire are the tools used for detailed system study. Usingthe following steps it becomes
easy to draw the exact boundary of the new system under consideration:
• Keeping in view the problems and new requirements
• Workout the pros and cons including new areas of the system
All the data and the findings must be documented in the form of detailed data flow diagrams
(DFDs), data dictionary, logical data structures and miniature specification. The main points to be
discussed in this stage are:
 • Specification of what the new system is to accomplish based on the user requirements. •
Functional hierarchy showing the functions to be performed by the new system and their
relationship with each other.
• Functional network, which are similar to function hierarchy but they highlight the functions
which are common to more than one procedure.
• List of attributes of the entities – these are the data items which need to be held about each
entity (record)

(4) System Analysis:

Systems analysis is a process of collecting factual data, understand the processes involved,
identifying problems and recommending feasible suggestions for improving the system functioning.
This involves studying the business processes, gathering operational data, understand the
information flow, finding out bottlenecks and evolving solutions for overcoming the weaknesses of
the system so as to achieve the organizational goals. System Analysis also includes subdividing of
complex process involving the entire system, identification of data store and manual processes. The
major objectives of systems analysis are to find answers for each business process: What is being
done, How is it being done, Who is doing it, When is he doing it, Why is it being done and How can
it be improved? It is more of a thinking process and involves the creative skills of the System
Analyst. It attempts to give birth to a new efficient system that satisfies the current needs of the user
and has scope for future growth within the organizational constraints. The result of this process is a
logical system design. Systems analysis is an iterative process that continues until a preferred and
acceptable solution emerges.

(5) System Design:

Based on the user requirements and the detailed analysis of the existing system, the new system
must be designed. This is the phase of system designing. It is the most crucial phase in the
developments of a system. The logical system design arrived at as a result of systems analysis is
converted into physical system design. Normally, the design proceeds in two stages:
• Preliminary or General Design
• Structured or Detailed Design
Preliminary or General Design: In the preliminary or general design, the features of the new
system are specified. The costs of implementing these features and the benefits to be derived are
estimated. If the project is still considered to be feasible, we move to the detailed design stage.
Structured or Detailed Design: In the detailed design stage, computer oriented work begins in
earnest. At this stage, the design of the system becomes more structured. Structure design is a blue
print of a computer system solution to a given problem having the same components and inter
relationships among the same components as the original problem. Input, output, databases, forms,
codification schemes and processing specifications are drawn up in detail.
In the design stage, the programming language and the hardware and software platform in which the
new system will run are also decided.
There are several tools and techniques used for describing the system design of the system. These
tools and techniques are:
• Flowchart
• Data flow diagram (DFD)
• Data dictionary
• Structured English
• Decision table
• Decision tree
Each of the above tools for designing will be discussed in detailed in the next lesson. The system
design involves:
i. Defining precisely the required system output
ii. Determining the data requirement for producing the output
iii. Determining the medium and format of files and databases
iv. Devising processing methods and use of software to produce output
v. Determine the methods of data capture and data input
vi. Designing Input forms
vii. Designing Codification Schemes
viii. Detailed manual procedures
5. Documenting the Design

(6) Coding:
The system design needs to be implemented to make it a workable system. This demands the coding
of design into computer understandable language, i.e., programming language. This is also called the
programming phase in which the programmer converts the program specifications into computer
instructions, which we refer to as programs. It is an important stage where the defined procedures
are transformed into control specifications by the help of a computer language. The programs
coordinate the data movements and control the entire process in a system. It is generally felt that the
programs must be modular in nature. This helps in fast development, maintenance and future
changes, if required.

(7) Testing:
Before actually implementing the new system into operation, a test run of the system is done for
removing the bugs, if any. It is an important phase of a successful system. After codifying the whole
programs of the system, a test plan should be developed and run on a given set of test data. The
output of the test run should match the expected results. Sometimes, system testing is considered a
part of implementation process. Using the test data following test run are carried
out: • Program test
• System test
Program test: When the programs have been coded, compiled and brought to working conditions,
they must be individually tested with the prepared test data. Any undesirable happening must be
noted and debugged (error corrections)
System Test: After carrying out the program test for each of the programs of the system and errors
removed, then system test is done. At this stage the test is done on actual data. The complete system
is executed on the actual data. At each stage of the execution, the results or output of the system is
analysed.
During the result analysis, it may be found that the outputs are not matching the expected output of
the system. In such case, the errors in the particular programs are identified and are fixed and
further tested for the expected output. When it is ensured that the system is running error-free, the
users are called with their own actual data so that the system could be shown running as per their
requirements.

(8) Implementation:
After having the user acceptance of the new system developed, the implementation phase begins.
Implementation is the stage of a project during which theory is turned into practice. The major steps
involved in this phase are:
• Acquisition and Installation of Hardware and Software
• Conversion
• User Training
• Documentation
The hardware and the relevant software required for running the system must be made fully
operational before implementation. The conversion is also one of the most critical and expensive
activities in the system development life cycle. The data from the old system needs to be converted
to operate in the new format of the new system. The database needs to be setup with security and
recovery procedures fully defined.
During this phase, all the programs of the system are loaded onto the user‟s computer. After loading
the system, training of the user starts. Main topics of such type of training are: • How to execute the
package
• How to enter the data
• How to process the data (processing details)
• How to take out the reports
After the users are trained about the computerized system, working has to shift from manual to
computerized working. The process is called „Changeover‟. The following strategies are followed
for changeover of the system.
(i) Direct Changeover: This is the complete replacement of the old
system by the new system. It is a risky approach and requires
comprehensive system testing and training.
(ii) Parallel run: In parallel run both the systems, i.e., computerized and manual, are executed
simultaneously for certain defined period. The same data is processed by both the systems. This
strategy is less risky but more expensive because of the following:
• Manual results can be compared with the results of the computerized system. •
The operational work is doubled.
• Failure of the computerized system at the early stage does not affect the working of the
organization, because the manual system continues to work, as it used to do. (iii) Pilot run: In this
type of run, the new system is run with the data from one or more of the
previous periods for the whole or part of the system. The results are compared with the old system
results. It is less expensive and risky than parallel run approach. This strategy builds the confidence
and the errors are traced easily without affecting the operations.
The documentation of the system is also one of the most important activity in the system
development life cycle. This ensures the continuity of the system. There are generally two types of
documentation prepared for any system. These are:
• User or Operator Documentation
• System Documentation
The user documentation is a complete description of the system from the users point of view
detailing how to use or operate the system. It also includes the major error messages likely to be
encountered by the users. The system documentation contains the details of system design,
programs, their coding, system flow, data dictionary, process description, etc. This helps to
understand the system and permit changes to be made in the existing system to satisfy new user
needs.

(9) Maintenance:
Maintenance is necessary to eliminate errors in the system during its working life and to tune the
system to any variations in its working environments. It has been seen that there are always some
errors found in the systems that must be noted and corrected. It also means the review of the system
from time to time. The review of the system is done for:
• knowing the full capabilities of the system
• knowing the required changes or the additional requirements
• studying the performance.
If a major change to a system is needed, a new project may have to be set up to carry out the
change. The new project will then proceed through all the above life cycle phases.

2.6 Roles of System Analyst

The system analyst is the person (or persons) who guides through the development of an
information system. In performing these tasks the analyst must always match the information
system objectives with the goals of the organization.

Roles of System Analyst:

The primary objective of any system analyst is to identify the need of the organization by acquiring
information by various means and methods. Information acquired by the analyst can be either
computer based or manual. Collection of information is the vital step as indirectly all the major
decisions taken in the organizations are influenced. The system analyst has to coordinate with the
system users, computer programmers, manager and number of people who are related with the use
of system. Following are the tasks performed by the system analyst:
1. Defining Requirement: The basic step for any system analyst is to understand the requirements
of the users. This is achieved by various fact finding techniques like interviewing, observation,
questionnaire etc. The information should be collected in such a way that it will be useful to
develop such a system which can provide additional features to the users apart from the desired.
2. Prioritizing Requirements: Number of users uses the system in the organization. Each one has a
different requirement and retrieves different information. Due to certain limitations in computing
capacity it may not be possible to satisfy the needs of all the users. Even if the computer capacity is
good enough is it necessary to take some tasks and update the tasks as per the changing
requirements. Hence it is important to create list of priorities according to users requirements. The
best way to overcome the above limitations is to have a common formal or informal discussion with
the users of the system. This helps the system analyst to arrive at a better conclusion. 3. Gathering
Facts, data and opinions of Users: After determining the necessary needs and collecting useful
information the analyst starts the development of the system with active cooperation from the users
of the system. Time to time, the users update the analyst with the necessary information for
developing the system. The analyst while developing the system continuously consults the users and
acquires their views and opinions.
4. Evaluation and Analysis: As the analyst maintains continuous he constantly changes and
modifies the system to make it better and more user friendly for the users.
5. Solving Problems: The analyst must provide alternate solutions to the management and should a
in dept study of the system to avoid future problems. The analyst should provide with some flexible
alternatives to the management which will help the manager to pick the system which provides the
best solution.
6. Drawing Specifications: The analyst must draw certain specifications which will be useful for
the manager. The analyst should lay the specification which can be easily understood by the
manager and they should be purely non-technical. The specifications must be in detailed and in well
presented form.

Some more roles of System Analyst:

Role of System Analyst differs from organization to organization. Most common responsibilities of
System Analyst are following :
1) System analysis
It includes system's study in order to get facts about business activity. It is about getting information
and determining requirements. Here the responsibility includes only requirement determination, not
the design of the system.
2) System analysis and design:
Here apart from the analysis work, Analyst is also responsible for the designing of the new
system/application.
3) Systems analysis, design, and programming: Here Analyst is also required to perform as a
programmer, where he actually writes the code to implement the design of the proposed application

2.7 The Systems View of an organization

This idea of looking outward, of looking beyond the walls of the company office building is not
new. What is relatively new to many executives, is the idea of looking at the world as a collection of
systems that create a whole and examining the relationships between those systems to determine
how they affect the whole. Systems Theory, as applied to organizational management, puts forth the
premise that all organizations are systems, and all systems are part of larger systems. How a
subsystem fits the needs of the larger system ultimately determines if that subsystem prospers or is
left to wither on the vine.

It‘s this concept that the adept leader can use to get a more ―holistic‖ view of his organization.
Understanding how the company relates to the larger system in which it exists and operates, and
then how the company‘s internal systems contribute or detract from that larger relationship can
provide a more relevant analysis.

It really isn‘t as esoteric as it may sound. Once you grasp the concept it will be easy to see how it
applies to your organization. Let‘s spend a moment on a definition and then we can address
application.

In Systems Theory, a system is defined in two ways:

Externally, by its purpose. Each system has a role that it plays in the higher-level system in
which it exists. Using the auto company example we can say that the auto company is a system
whose role is to provide cars to the next higher-level system, the auto market. The auto market in
turn has its multiple roles that it plays in the next higher-level systems of transportation and
national economy and so on.
Internally, by its subsystems and internal functions. Each system is made up of components
and sub-systems that interrelate and contribute to the overall purpose of the parent system. In the
auto company those components might consist of engineering, production, marketing, finance,
human resources and sales all of which should be supporting the system‘s purpose of providing
cars to the higher system, the auto market.

Systems Theory in Managing Organizations

Defining the Higher-Level System and the Organization’s Role in It

So for a leader, the first step in developing a holistic view of the organization is to define the
higher-level system in which it exists/operates, and its role/purpose in that higher-level system.
Where does it fit? What kind of role does it play and what value does it bring to the purpose of the
higher-level system? If a company does not have a role to play in the higher-level system, then it
does not belong in that system; and if it cannot find a role in any higher-level system, it is in
effect redundant and will ultimately die. Additionally, and sadly more common, if a company
cannot accurately define what its role is in the higher-level system, even if it has something relevant
to offer, it will be treated as if it had no role at all.

If a higher-level system cannot perceive value by including a particular sub-system, it will ignore
that sub-system. This typically means the end of that sub-level system‘s participation in the higher
level system. That‘s the reason nobody makes buggy whips or vinyl music records anymore.

Designing the Internal Functions and Subsystems of the Organization

Once you have defined the higher-level system in which your company operates, and established
your company‘s purpose within it, then it‘s time to look at the components or subsystems of your
organization. These subsystems and components, knowingly or unknowingly, all interact and play a
part in achieving or detracting from the company‘s purpose. Ideally of course, these subsystems and
their interrelationships should be designed and organized in a way that collectively promotes the
organization‘s purpose, and achieve zero or sustainable negative entropy for the organization. While
there is much to discuss about entropy and organizations, a simple macro explanation is that entropy
occurs when a system‘s resources are depleted over time and its subsystems descend into chaos.
Zero entropy is thus a state where resources do not deplete over time, and negative entropy where
resources increase over time; in both cases with the subsystems maintaining current relevance and
focus on the system purpose.
In the auto company example, it needs to define its market, the range of products and services for
that market, and how to produce and deliver those products and services in an exchange with the
auto market, in a way that its resources do not get depleted. When it achieves that, the auto
company will have reached a state of business sustainability. Of course all companies would like to
grow, and not just maintain the business; however we all know that growth needs to be kept
sustainable or the result could be detrimental. For example, if the auto company increases its market
share so rapidly, that it is unable to match that pace with getting the people and systems it needs in
place to ensure good quality control, then it could get into problems. In Systems Theory, when we
talk about negative entropy in successful systems, it is always about sustainable negative entropy.
It can be argued that assuming the organization knows its true purpose, then how that organization‘s
subsystems are organized will determine the success or failure of the organization. Subsystems,
functions, and their inter-relationships are thus optimized to achieve the organization‘s purpose; this
is distinct from optimization of subsystems for their own purposes. Consequently, if a subsystem
does not have a role in the organization‘s purpose, then it does not belong in the organization
system.

It kind of sounds like we are back to the traditional response of auditing departments doesn‘t it? But
did you note the difference? This time we defined a purpose first. We identified what our role is in
the higher-level system. We know what we must do to succeed in that higher-level system. It‘s only
after we have that firmly established that we use it to determine the organization and effectiveness
of our subsystems.
UNIT 3
________________________________________________
Information systems (TPS, DSS, EIS, ES)

Learning Objectives:

After studying this unit, you will learn:

Types of information systems: TPS,DSS,EIS,ES

Definition, Basic features and Components of Transaction Processing System (TPS)
Definition, Basic features and Components Decision Support System (DSS)
Definition, Basic features and Components Executive Information System (EIS)
Definition, Basic features and Components, Expert System (ES)

___________________________________________________________________________________

TRANSACTION PROCESSING SYSTEMS (TPS) 3.1

TRANSACTION PROCESSING SYSTEMS

An efficient transaction processing system is a pre-requisite for developing efficient management
information systems.

A transaction may be defined as an activity, such as making a purchase or a sale, manufacturinf a

product,promoting an employee and so on. Thus the concept of a transaction as used in Information
systems is wider as compared to its usage in accounting systems where a transaction involves
transfer of money or money's worth (goods or services) from one entity to another. Performance of
a transaction requires records to:

1. Direct a transaction to take place.

2. Report,confirm, or explain its performance
3. Communicate the transaction to those needing a record for background information or
reference.

To ensure the performance of transactions involved in organizational activities, transaction

processing system is required.TPS is mostly used by lower level management to make operational
decisions.
DEFINITION OF TPS:
TPS Process day–to–day transactions of an organisation to carry on its business
operations.According to Laudon and Laudon:
―TPS are computerised systems that perform and record the daily routine transactions necessary to
conduct the business.‖

TPS provide base for developing other information systems.

Transaction processing systems were among the earliest computerized systems. Their
primary purpose is to record, process, validate, and store transactions that take place in the various
functional areas/of a business for future retrieval and use. A transaction processing system (TPS) is
an information system that records company transactions (a transaction is defined as an exchange
between two or more business entities).

Transaction processing systems (TPS) are cross-functional information systems that process
data resulting from the occurrence of business transactions.

Transactions are events that occur as part of doing business, such as sales, purchases,
deposits, withdrawals, refunds, and payments. Transaction processing activities are needed to
capture and process data, or the operations of a business would grind to a halt.
Let us look at a simple example of a business transaction. McDonald's, which sells a large
number of hamburgers every day, orders raw materials from its suppliers. Each time the company
places an order with a supplier, a transaction occurs and a transaction system records relevant
information, such as the supplier's name, address, and credit rating, the kind and quantity of items
purchased, and the invoice amount.

Types of Transactions
Note that the transactions can be internal or external.

When a department orders office supplies from the purchasing department, an internal
transaction occurs, when a customer places an order for a product, an external transaction occurs.

• Internal Transactions: Those transactions, which are internal to the company and are
related with the internal working of any organization. For example Recruitment Policy,
Promotion Policy, Production policy etc
• External Transactions: Those transactions, which are external to the organization and are
related with the external sources, are regarded as External Transaction. For example sales,
purchase etc.

3.2 Characteristics of Transaction Processing Systems

1. A TPS records internal and external transactions for a company. It is a repository of data
that is frequently accessed by other systems
2. A TPS performs routine, repetitive tasks. It is mostly used by lower-level managers to
make operational decisions
3. Transactions can be recorded in batch mode or online. In batch mode, the files are
updated periodically; in online mode, each transaction is recorded as it occurs. 4. There are
six steps in processing a transaction. They are data entry, data validation, data processing
and revalidation, storage - output generation, and query support.
3.3 FEATURES OF TRANSACTION PROCESSING SYSTEMS
There are certain features of TPS which distinguish these from other information systems of an
organisation:

1. In many cases organizations are required to process transactions in a way that is required by
its external stakeholders.e. a large business organisation is required to maintain its financial
transactions as prescribed by Incomr Tax Act.
2. TPS are major procedure of information for other types of systems.e.g. purchase processing
systems supply data to the organization‘s general ledger systems which are responsible for
maintaining records of the organization for producing reports,such as trail balance,profit and
loss account,and balance sheet.
3. TPS handel detail of data and these data shows the result of various activities usually on
historical basis.TPS reflect what has already happened rather than projecting what is likelt to
happen in future.
4. TPS span the boundary of the organization and connect the elements of its environment.TPS
connects the organization with its customers and suppliers.This connectivity ensures faster
transaction processing which results into increased operational efficiency.
5. TPS serve the basic need of operational level of the organization.At the operational level,
objectives. tasks. and resources are pre-defined and are highly structured. Therefore. the
decisions are made on the basis of predefined criteria. For example. a decision' regarding
granting credit to a customer can be made by the superior concerned as the criteria for
allowing credit are pre-defined by higher:level managers.
6. TPS are relevent to all the four functional areas of a business organization-production
,marketing,finance,and human resource-because each functional area needs some kind of
transaction processing.

7. A TPS supports different tasks by imposing a set of rules and guidelines that specify how to
record, process, and store a given transaction. There are many uses of transaction processing
systems in our everyday lives, such as when we make a purchase at retail store, deposit or
withdraw money at a bank, or register for classes at a university. Almost all organizations,
regardless of the industry in which they operate, have a manual or automated TPS
8. A TPS is the data life-line for a company because it is the source of data for other information
systems, such as MIS and DSS (Decision Support Systems). Hence, if the TPS shuts down,
the consequences can be serious for the organization
9. A TPS is also the main link between the organization and external entities, such as customers
suppliers, distributors, and regulatory agencies
10. TPS exist for the various functional areas in an organization, such as finance, accounting,
manufacturing, production, human resources, marketing quality control, engineering, and
research and development. Until a few years ago, many companies viewed the TPS for each
business function as separate entity with little or no connection to other systems in the
company. Today, however, many companies are trying to build cross-functional TPS to
promote the free exchange of information among different business units. This is a desirable
goal, but is still very difficult to achieve
3.4 COMPONENTS OF TRANSACTION PROCESSING SYSTEMS
A computer-based transaction processing system has the following sixcomponents:
1. Input.
2. Data capture
3. Data validation
4. ProcessIng and revalidation
5. Storage and Output generation
6. Query support
1. Input :- Various Inputs of a TPS are in the form of source documents such as customer
orders,purchase orders, invoices, employee time cards, etc.These documents serve the following
purposes in a TPS:

capturing of data.
Facilitating operations by communicating data and authorising another operation in the
process.
Statidardising operations by indicating what data are required for recording and what actions
need to be taken.
Providing a permanent file for future use if documents are retained.
Methods for Data Entry:

• Keyboard/video display terminals

• Optical character recognition (OCR) devices, such as optical scanning wands and
grocery check-out scanners.
• Magnetic ink character recognition (MICR) devices, such as MICR reader/sorters used
in banking for check
• Other technologies, including electronic mice, light pens, magnetic stripe cards, voice
input, and tactile. Input also be used as input device depending upon the application
requirement
2. Data Capture

We could capture transaction data as close as possible to the source that generates the data.
Salespersons capture data that rarely changes by prerecording it on machine-readable media, or by
storing it on the computer system.

Ways of Data Capturing

• Capture data by using machine-readable media initially (bar-coded and magnetic stripe
credit cards), instead of preparing written source documents
• Captures data directly without the use of data media by optical scanning of bar codes
printed on product packaging. It ensures the accuracy and reliability of data by
comparing

3. Data Validation
There are two steps in validation: error detection and error correction, Error detection is
performed by one set of control mechanisms, error correction is performed by another

Some commonly used error detection procedures are checking the data for appropriate font (text,
numbers, etc), checking for aberrations (values that are too low or too high), and checking for
missing data, invalid data, and inconsistent data. Missing data refers to fields that are missing a
mandated data value.

For example, if the number of hours worked by a part-time employee is missing on a payroll form;
that is a missing-data error.

Invalid data is data that is outside the range .For example, if the number of hours worked by a part
time employee is 72 hours per week instead of the 1120 hours, then we have invalid data

Inconsistent data means that the same data item assumes different values in different places
without a valid reason. For example, if payroll records show that an employee worked 25 hours per
day.
4. Processing:- Processing involves the use of journals (books of primary entry) and, registers to
provide a chronological record of inputs. Journals are used record financial accounting transactions,
and registers are used to record other types of data not directly related to accounting. Some of the
more common journals that are kept are as follows:

Sales journal-used to keep records of sales.

Purchase journal-to keep records of purchases.
Cash book-to keep records of cash received and disbursed.
Accounts receivable book-to keep records of debtors.
Accounts payable book-to keep records of creditors.
All the above books are often used in conjunction with a separate general ledger to proVide a
complete book keeping system. Special columns can b{' used in these books of original entry to
facilitate recording transc4:tions and their classification.

5. Storage:- The computer stores various records in files.There are several type of files which are
classified as transaction file and master file. A transaction file is a collection transaction input
data.Transaction files usually contain data that are of temporary nature. A master file contains data
that are of a more permanent nature or of continuing interest. For exarnple,credit sales file is a
chronologicro record osf sales on account.There may be several on account sales made to a single
customer during a period. However. the total amount standing due in the name of the customer
cannot be ascertained unless these transactions are processed.The process of posting sales to the
accounts receivable ledger summarises credit sales to the customer.

Output:- Variety of outputs can be generated from a TPS which can be used for various purposes.
These outputs are in the form of documents.Some of these outputs can be used as inputs for further
processing. For example. a customer invoice is an output of the order-entry application system but
the same invoice can be used as input for processing customer account. Some common outputs of a
TPS are trial balance, profit and loss account, balance sheet,etc. Besides various reports can be
prepared for plannIng and control at operational level .
6. Query Support

The last step in processing a transaction is querying (asking questions of) the system. Query
facilities allow users to process data and information that may otherwise not be readily available.
For example, a sales manager may query the system about the number of damaged items in a given
store

Many transaction processing systems allow you to use the Internet, intranets, extranets, and web
browsers or database management query languages to make inquiries and receive responses
concerning the results of transaction processing activity. Typically, responses are displayed in a
variety of pre-specified formats or screens. Examples of queries include:
• Checking on the status of a sales order
• Checking on the balance in an account
• Checking on the amount of stock in inventory
3.5 METHODS FOR PROCESSING TRANSACTIONS
There are three different methods commonly used for processing transactions and updating master
files:

1. On-line entry with immediate processing

2. On-line entry with subsequent processing
3. Batch processing
 1. On-line entry with immediate processing:- In this processing transactions are entered on
line,validated, and if found valid valid, are processed imediately.A response with the result
of processing or confirmation of completion or processing is generally provided to user at
the input terminal.
There are many situations in which on-line entry with immediate processing is required, for
example ,railway/airline reservation,share trading etc.The main advantage of this approach
of processing is that of the transaction is known immediately.Beside the master files are kept
up to date every time.
2. On-line Entry with Subsequent Processing:- In on-line entry with subsequent processing
method,data are entered on-line and validated, but their their processing is done on periodic
batch basis.In on-line entry with immediate processing. transactions are validated a
processed at the time of entry while in subsequent processing method transactions are
processed after certain time gap.The main advantage of this type of processing is that
computer capacity is used for on-line entries and after this process is over, the computet
capacity can be used for imput processing. In super markets and similar situations on-line
entry with subsequent processing method is followed.
3. Batch processing:- In batch processing which is the most conventional method of transacton
processing, transactions are accumulated over a period of time.when sufficient number of
transactions are accumulated, these are processed in batches.the process of batches can be
daily,weekly, or even monthly,depending on the volume of transactions and other
considerations.other considerations may be in the form of reporting cycle, action initiating
etc. for example transaction involving inventory control may be processed on daily
or weekly basis,depending on the volume of transactions.the major disadvantage of batch
processing is the delay in detecting and correcting errors.

Out of three methods of transaction processing. which method should be adopted depends on a
number of factors. specially the computer capacity and nature of transactions. When computers
were first introduced for transaction processing. batch processing method was in use because of the
capacity limitations of computers. However. with increas~d capacity of computers. on-line
processing is becoming more common. Besides the computer capacity. nature of transactions should
also be taken into account.

If the processing is transaction-oriented with immediate completion of transaction processing being

desirable. on-line processing is preferable. If the processing is periodic (for example. payroll). batch
processing is more suitable.

Decision Support Systems (DSS)

3.6 Decision Support Systems (DSS)
A decision support system can be defined as a system that provides information for making semi
structured and unstructured decision.

Keen and Scoff Morton have defined DSS as follows:

"Decision support systems (DSS) represent a different approach to information system support for
semi-structured and unstructured decisions. They support a variety of unstructured decision
processes.

According Laudon and Laudon :-

―A decision support system is a computer system at the management level of an organization that
combines data, sophisticated analytical tools, and user-friendly software to support semi-structured
and unstructured decision making.‖

Decision Support Systems (DSS) help executives make better decisions by using historical
and current data from internal Information Systems and external sources. By combining massive
amounts of data with sophisticated analytical models and tools, and by making the system easy to
use, they provide a much better source of information to use in the decision-making process.
Decision Support Systems (DSS) are a class of computerized information systems that
support decision-making activities. DSS are interactive computer-based systems and subsystems
intended to help decision makers use communications technologies, data, documents, knowledge
and/or models to successfully complete decision process tasks.
3.7 Features of Decision Support Systems
There are several features of decision support systems that distinguish them from other
information systems of an organization. These features are as follows:

1. The philosophy of decision support systems is to give users the tools necessary to analyze
important blocks of data, using easily controlled sophisticated models in flexible
manner‘s are designed to deliver capabilities, not simply to respond to information
needs.
2. DSS are tightly focused on a specific decision or set of decisions, such as routing,
queuing, and evaluating and so on. Thus they are not used for general purpose.
3. DSS are aimed at higher-middle and top management with emphasis on change,
flexibility and quick response. A greater emphasis is placed on models, graphics, and
assumptions.
4. The design of DSS applies a different set of skills than the design of structured,
operational systems. DSS designers must not only be technically competent but also be
able to observe, understand and identify with the decision makers' world.
5. The technology required DSS is based on the need for flexible access. Reliable
communication networks, availability of computer terminals, and even stand-alone
microcomputers are more important than large-scale data processing systems.
6. DSS are through evolutionary process- that requires extensive participation by the end
users. More emphasis is placed on prototyping and end-user system development rather
than using system development life cycle approach.
3.8 COMPONETS (OR) ARCHITECTURE OF DSS

There are three components of a typical DSS though a DSS cannot altogether be isolated
from other information systems of an organization because all of them use a common
database.

DSS has three major component:-database, model base, and DSS software.

1. Database: - Database is a pre-requisite for developing any type of information system.

Database is a collection of current and historical data from a number of groups or
application and these data are organized for easy access by a range of applications. A DSS
doesn‘t create or update data as this is not its function; rather it uses live organizational data
so that individuals and groups are able to make decisions based on actual conditions. While
controlling and processing data from the database the DSS protects the integrity of data.

Some large organizations do not provide direct access to a central database to DSS because
of two reasons. First organization wants to protect data from accidental or inappropriate
changes in database. Second it is a slow and expensive process for the DSS to search
through large database.

The process affects not only the performance of the DSS but also all the other systems using
the database. Therefore such organizations create separate DSS database extracting relevant
data from both internal and external sources.

2. Model Base: - A model base is a collection of mathematical and analytical models that
can be made made accessible to the DSS users. A model is an abstract representation that
illustrates the various components or relationships of a phenomenon.

Model may be of different types:-physical model (model of machine), mathematical model

(equation, formula), and verbal model (description of a procedure for doing a work. Each
DSS is built for a specific set of purposes.

Most common models available in a model base are optimization models, Forecasting
models and sensitivity analysis models.

i) Optimization models provide guidelines for action by generating optimal solution

consistent with a series of constraints. An optimal solution is one that optimizes returns to
the organization as whole either in the form of maximization of revenues or minimization of
cost or both.

ii) Forecasting models are used to forecast an organization‘s business prospects particularly
in terms of sales. Forecasting model use historical data and extrapolate the likely behavior of
these data in future. Organizations often use forecasting software to predict the likely actions
of competitors.

iii) Sensitivity analysis models study the impact of discrete changes in parameters of
optimal solution. a discrete change is one that happens on irregular basis .sensitivity
analysis, working forward from known or assumed conditions, allows the users to vary
certain values to test results in order to better predicts outcomes if changes occur in those
values.

3. DSS Software:- The third component of a DSS is DSS software system‘s software
system permits easy interaction between the users and database and model base. DSS
software system manages the creation, storage and retrieval of models from the model base
and integrates them with data in the database. DSS software system also provides
gkkhlo8y96yokjb graphic, easy to use flexible user interface that supports interaction
between the user and DSS. Since DSS are meant for higher level managers who are not
experts in computer handling, the. User-DSS interface must be easy so that relevant
information is extracted without much pain. Since each manager may have his own unique
working style, the DSS software system must offer this flexibility. Desktop spreadsheet
software, such as Lotus 1-2-3 or MS Excel provides such facilities.
 Architecture of DSS

3.9 Types of decisions

1. Programmed Decisions (Structured Decisions):- It involves situations that have occurred often
enough to enable decision rules to be developed and applied in the future. These decisions are
those that have been made persistently in the earlier period that managers have developed rules or
guideline to be applied when certain situations are expected to happen. Programmed decision
making is used when an inventory manager of mc Donald‘s decides to order beef patty stocks
because the stocks are three-quarters empty. Programmed decisions making are a routine that you
make every time so that the organization run smooth. Managers can develop rules and guidelines to
regulate all routine organizational activities. Most decisions are related to daily activities.

In programmed decision making there will be no error in the decisions because it is a routine and
managers usually have the information they need to create rules and guidelines to be followed by
others. But sometimes it can cause error but not of big kind. Programmed decision making are
always used in daily routine to keep the organization running smooth. That is why they have rules
and guidelines to make a decision.

2. Non Programmed Decisions (unstructured Decisions):-Non-programmed decisions are made

in response to situations that are unique, are poorly defined and largely unstructured. Non
programmed decision making is used when mc Donald‘s are deciding to invest in new deep fryers.
It is a non-routine decision making. This means it is made for big decisions that will affect an
organization for a long time. This type of decision making does not need rules or guidelines to be
followed because the situation is unexpected or uncertain. For example if mc Donald‘s plans to
launch a new line of menu, they will have to make decision base on their intuition and reasoned
judgments.

Non-programmed decision has more chance of errors and difficult for managers to handle as it is
inherently challenging. Managers must rely on their intuition to quickly respond to a urgent
concern. Also these errors are of dangerous kind, they affect organization badly. For example if mc
Donald‘s decided to invest in a new menu. Their customers did not like the new menu and they do
not consume mc Donald‘s anymore. This will affect mc Donald‘s revenue and profit. Non
programmed decision making are not always used but it will give impact to an organization‘s
effectiveness. This decision is made on reasonable judgment and the circumstances if we proceed
with the decision.

Difference between DSS & MIS

Some more differnces are as follow:

1. MIS functions to produce routine reports,DSS employ sophisticated data modelling &
analysis tools for the purpose of resolving structured problems.

2. MIS is used by a limited group (staff managers & professionals), DSS are used by
groups,individuals & managers at various levels.

3. DSS is charachterized by an adaptability which contrasted with the semi-inflexible nature of

MIS.
 4. DSS data sources are much more varied comprising inventory, accounting & production
sources & not just internal business ones & its analytical tools are more
sophisticated(simulation,atatistical analysis).

5. - MIS focus on operational efficiency ( comfort organization "do things right" ) -

DSS focus on making effective decision ( help collective "do the right thing" )

6. DSS: Focus on finding making, unstructured and available on request, immediate, friendly
MIS: Plan report on variety of subject, reports are standard, structured, routine, constraint by
organizational system.

7. The terms MIS and DSS stand for Management Information Systems and Decision Support
Systems respectively. There has been greatly of talk regarding these two, whether they are
actually impossible to tell apart thing or if there are any significant differences between the
two.

8. MIS is basically a compassionate of link to facilitate communcation between managers across

different areas in a business association. MIS plays a pivotal role in enabling
communications across the floor of an organization, between multiple entities therein.

DSS, many consider, is an advancement from the original MIS. However,this is not the sole
difference between the two. While there may not be too much separating the two, the
difference is still within,as is apparent when we say DSS is an advancement over MIS.

9. The essential difference between the two is in focus. DSS, as the permanent status indicates,
is about leadership and senior management surrounded by an organization providing good,
reliable judgment as ably as vision. MIS, on the other hand, is about focusing on the actual
flow of information itself.
Thus, MIS & DSS are differentiated in terms of components, dynamics , analytical tools & general
properties

3.10 Concept of Group Decision Support System (GDSS)

A GDSS can be defined as a computer based system that supports a group of decision makers
engaged in a common task and that provides interface to a shared environment.

―A group decision support system is an interactive computer-based system to facilitate the solution
of unstructured problems by a set of decision rankers working together as a group.‖
Features of GDSS

There are a number of features of a GDSS because of which it can be differentiate from a DSS.
These features are as follows:

1. There is high level of interaction among decision makers who work collectively on a
problem. In this attendees from various organizational levels free freedom to contribute
appositely to solve the problem.
2. Emphasis is put on creating an atmosphere where an idea will be evaluated on its merits
rather than on the basis of the source idea.
3. Priorities are set and decisions are made which require finding ways to encompass the
thinking of all the members in making these decisions.
4. Each member of the decision-making group has access to relevant internal and external
information which allows the members to emphasis their own views, appreciate the views of
others, and settle their differences in order to arrive at an acceptable decision with in given
 in frame of time.
5. Information about the problem on which a group is working is stored so that those who fail to
attend meeting can work on the problem.

COMPONENTS OF GDSS

Components of a GDSS consist of the following:

1. Decision maker
2. Database and model base
3. Groupware

3.11 Difference between GDSS and DSS

GDSS is a computer based information system that focuses on the group while DSS focuses on an
individual for instance, the manager or the supervisor. GDSS and DSS may have similar
components in terms of hardware and software structures however, GDSS has a networking
technology that is best suited for group discussions or communication. DSS on the other hand, have
technologies that are focused for a single user. GDSS maintenance involves a better system
reliability and incomprehensible multi-user access compared to DSS because system failures in
GDSS will involve a lot of individual.

Through these programs or computer based information system, company or individual decision
making capacities will be enhanced and hasten. This allows not only good communication system
but also a positive outcome within a department, group, or company.

Some decisions are very structured while others are very unstructured. You may wake up in the
morning and make the structured, routine decision to get out of bed. Then you have to make the
unstructured decision of what clothes to wear that day (for some of us this may be a very routine
decision!). Structured decisions involve definite procedures and are not necessarily very complex.
The more unstructured a decision becomes, the more complex it becomes.
3.12 Concept of Decision Making
Everybody makes decisions. It's a natural part of life, and most of the time we don't even
think about the process. In an organization, decisions are made at every level. The level at which the
decision is made can also determine the complexity of the decision in relation to the input of data
and output of information.

Decision Making and MIS

Decision-making means making a choice among the given choices by a manager or a decision
maker. The decision-making process lets a manager come to a conclusion about a given situation.
Therefore, decision-making may be defined as a process of selecting an optimum and best
alternative from a couple of given alternatives to accomplish a particular task. Decision-making
process is the core of managerial accomplish a particular task. Decision-making process is the core
of managerial functions in MIS. It is said that the decision-making process considers two or more
alternatives from which a final decision could be made. But if only one alternative is available, then
no decision could be made. A decision-making process involves the entire process of establishing
goals ,defining activities ,searching for alternatives and finally the development of plans. In
addition, the decision-making process includes all the activities of problem-solving, co-ordinating ,
information processing and evaluating of alternatives that usually precede a decision.
A decision is an end or the final product of the decision-making process that represents a behaviour
selected from a number of possible alternatives.

Levels of Decision Making in an Organization

In the previous units, we discussed the various types of Information Systems and how they
relate to the levels of an organization. We can also relate those Information Systems to the types of
decisions managers make.

• Strategic Decision Making. These decisions are usually concerned with the major objectives of
the organization, such as "Do we need to change the core business we are in?" They also concern
policies of the organization, such as "Do we want to support affirmative action?"

• Management Control. These decisions affect the use of resources, such as "Do we need to find a
different supplier of packaging materials?" Management-level decisions also determine the
performance of the operational units, such as "How much is the bottleneck in Production affecting
the overall profit and loss of the organization, and what can we do about it?"

• Knowledge-Level Decision Making. These decisions determine new ideas or improvements to

current products or services. A decision made at this level could be "Do we need to find a new
chocolate recipe that results in a radically different taste for our candy bar?"

• Operational control. These decisions determine specific tasks that support decisions made at the
strategic or managerial levels. An example is "How many candy bars do we produce today?"

Types of Decisions and Types of Systems

3.13 The role of the DSS in the process of decision making
Previously it was mentioned that the MIS is best suited in identifying problems and helping
managers understanding them to make suitable and correct decisions, but the main weakness of MIS
is that it is not aimed at the specific need of the individual and group decision makers. Very often
the MIS does not provide exactly the information that is needed to solve problems for individual
and group decision making. DSS is tailored to the specific need of the individual and group
managers. Therefore, the DSS can extend this support through the remaining steps (in objective and
criteria setting, alternative search, alternative evaluation, making the decision and decision review)
of the decision making. Finally DSS has more roles in decision-making and problem solving than
MIS (Raymond, 1998). The other researches such as the following confirm this idea: Uma (2009)
has stated that a Decision Support System is an integrated set of computer tools allowing a decision
maker to interact directly with computer to retrieve information useful in making semi structured
and unstructured decisions. Example of this decisions include such things as merger and acquisition
decisions, plant expansion, new product decisions portfolio management and marketing decisions.
Nokhbatolfoghahaayee et al (2010) have introduced a fuzzy decision support system (FDSS) with a
new decision making structure, which can be applied to manage the crisis conditions in any large
scale systems with many parameters. After receiving both functional variables of the system and
fault signals, the FDSS makes proper decisions to make up and repair the distorted situation and the
affected elements of the network according to its data base established through experience gathered
from expert managers and decision models properly developed. These decisions are expressed in
the form of some scenarios with different desirability degrees, which are determined by some
properly developed fuzzy multi-criteria decision making methods, helping the manager choose the
best one according to his discretion.
Alonso et al (2010) have presented an implemented web based consensus support system that is
able to help, or even replace, the moderator in a consensus process where experts are allowed to
provide their preferences using one of many types (fuzzy, linguistic and multi-granular linguistic) of
incomplete preference relations.

These studies show the important and role of MIS during managers' decision making

process. 3.14 Simon’s Model of Decision Making

In organisations, the decision-making process is considered as a rational process. It means the

decision-making process is based on the following three phases as given by Herbert A. Simon in his
model of decision making:

1. Intelligence phase

2. Design phase

3. Choice phase

1.)Intelligence phase :

A decision-making studies the environment and identifies the problem or opportunity. The scanning
of environment may be continuous or intermittent. For example,

Reviewing of daily scrap report by a production manager to check the problems related to
quality control. This is an example for continuous scanning.

Periodic visiting of a sales executive to the key customers to review possible problems and to
identify new customer needs. This s an example for intermittent scanning.

The intelligence phase of the decision-making process involves :

Problem searching refers to the differences between the expected and real result obtained
after making a decision, which is given by the following formula:

(Desired/Expected ) – (Actual/Reality) = Difference/Problem

For example, a sales manager sets a sales target of certain amount say five lakhs in a particular
month as his expected target, which is expected but he could achieve only four lakhs worth of sales
for that particular month, which is a reality. Therefore, the difference between the expected and
reality value of the target, that is , one lakh is the problem. This difference worries the sales
manager.

In actual practice, the reality or actual value is compared to some standard desired model. Then the
differences are measured and are evaluated to determine the problem or difference. Various types of
models that are used to compare reality are:

1.) Historical models based on estimated information

2.) Planning model

3.) Extra organisational models in which expectations are derived from customers, consultants and
competition

4.) Models used by employees in an organisation

Problem formulation refers to the proper identification of the problem to avoid the risk of
solving the wrong problem. To avoid such a risk, it is very important to understand the
problem well and state it clearly. Sometimes, the process of clearly defining the problem is
 sufficient ;but in other cases , we have to simplify the problem by determining its
boundaries. Boundaries are simplified by breaking the problem into smaller manageable
sub-problems. In problem formulation, establishing relations with some problems that are
solved earlier prove quite useful.

2.) Design phase includes inventing or developing various alternatives in order to get the best
possible alternative . Developing alternatives is a time-consuming and crucial activity, as the
decision-maker has to explore all the possible alternatives. Decision-maker should not take risk of
missing any given alternatives since the missed-out alternative might be the best one from the given
alternatives. Developing alternatives is a creative activity, which can be enhanced by various aids
such as brainstorming , checklists and analogies.

3.) Choice phase refers to the selection of an alternative developed in the design phase as the
decision-maker. A decision-maker makes a detailed analysis of each and every alternative for
performing this selection. After making a decision, the decision is implemented . However, at any
phase, the decision-maker may return to the previous phase. For example, the decision-maker in the
choice phase may reject all alternatives and return to the design phase for developing more
alternatives.

Information Systems help improve the decision-making process by

providing more information about the problem
presenting a greater variety of possible alternatives
showing consequences and effects of choices
measuring the outcome of different possible solutions
providing feedback on the decision that is made
Different types of decisions require different types of systems. All decisions follow the same
pattern although some may be more complex and require several iterations of the decision-making
stages.

Executive Information Systems (EIS) 3 .15 Introduction

to Executive Information Systems

Executive Information Systems (EIS) supplies the necessary tools to senior management. This
system provides relevant information to top management for strategic planning and control. The
decisions at this level of the company are usually never structured and could be described as
"educated guesses." Executives rely as much, if not more so, on external data than they do on data
internal to their organization. Decisions must be made in the context of the world outside the
organization. The problems and situations senior executives face are very fluid, always changing, so
the system must be flexible and easy to manipulate.

An EIS can supply the summarized information executives need and yet provide the
opportunity to drill down to more detail if necessary.

As technology advances, EIS are able to link data from various sources both internal and
external to provide the amount and kind of information executives find useful. As common software
programs include more options and executives gain experience using these programs, they're
turning to them as an easy way to manipulate information. Many executives are also turning to the
Web to provide the flexibility they need.

According to Laudon and Laudon

―An executive support system is an information system at the strategic level of an organization
designed to address unstructured decision making through advanced graphics and communication.‖

3.16. Features of Executive Information Systems

1. EIS are relevant for top management of an organization. The level at which strategic decisions
affecting the organization as a whole or its major parts are made.

2. These systems may derive data from different functional areas but the decisions that are made by
integrating these data are not meant for any specific functional area but for the organization as a
whole.

3. The information generated through EIS are in t he form of summary reports and graphics.
Through these reports executives draw conclusion quickly without waste in their time.
4. Executives are helped by EIS coaches and chauffeurs. An EIS coach is a member of the
executive's staff, information services, or an outside consultant who provides help in settil1g up the
EIS. An EIS chauffeur is a member of the executive's staff who operates the equipment for the
executive.

5. EIS combines both internal and external information for the top management.

3.17 Developing EIS

As with DSS, executive support systems are developed using the prototyping method. Prototyping
allows iterative, quick changes to the system. Executives are busy people who don't want to spend a
lot of time in the development process. They know what they want, they want it quickly, and they
want it to work the first time. That's a tough goal for developers.

EIS must support many of the executive's informational requirements or she will find other
ways to supplement her decision-making tasks. If the system doesn't provide the flexibility to scout
out problems, new opportunities, or keep an eye on the competition, executives will ignore the
system and seek other ways of getting the information they need--mainly other people.
An EIS is a computer-based system that serves the information needs to top executives. It
provides rapid access to timely information and direct access to management reports. EIS is very
user-friendly, supported by graphics, and provides exceptions reporting and" drill-down"
capabilities. It is easily connected with online information services and electronic mail.
 Some factors that contributed to the development of EIS are as follows. These are also the
factors that tell us why to use ESS for higher management.

3.18. COMPONENTS OF EXECUTIVE INFORMATION

SYSTEMS Major components of EIS are as follows:-
1. Executive's staff
2. Database
Data warehouse
Data mart
3. EIS software
Personal productivity software
Prewritten EIS software
Customized EIS software
4. EIS Output

1. Executive:-An executive is the end-user of output derived from EIS.Though executives may
retrieve desired information on their own specially when database contains tailored information,
most of the executives prefer to get this job done by their staff either because they are busy in their
work or they do not prefer to work on computers. Thus executive‘s staff personnel work as
intermediaries between executives and EIS.These personnel do the job of retrieving information,
making analysis, and interpreting results to the executives. Thus executives do not require to know
how their staff personnel use the EIS to get the desired information.

2. Database:-Database for EIS is both comprehensive as well as specific. It is comprehensive in the

sense that EIS require data about the functioning of the entire organization besides data about
environmental-factors-customers, suppliers, competitors, government polices towards business and
technological development. Database for EIS is specific because relevant data for EIS must be
stored in concise form for easy retrieval and them authorized access because a significant portion of
data may be sensitive and needs confidentiality. Database for EIS may be categorized as data
warehouse and data mart.

Data warehouse: - it is a collection of current and historical operational data stored for use in
EIS. The data in the data warehouse may be updated daily, weekly or monthly depending on
the need of data users.
Through data warehousing in large organizations, data are spread at various points in different
forms because of this it ids difficult to locate and retrieve data at a time when these are needed.
Growing demands of executives for easy and quick access to relevant data for planning and
control have generated the need for storing data in a manner that serves the needs of executives
and other decision makers.
 In most of the organizations information systems are developed as evolutionary process with
application-specific databases. With the result an organization may have a number of databases
consisting of files, hierarchical databases and relational databases. This system results into
difficulty in data location and retrieval. Data warehousing overcomes this difficulty.

Datamart:-It is usually a customized database as per the requirements of a specific type of

users. They are created from data warehouses .for creating a datamart relevant data are
extracted from data warehouses and are earmarked for specific users.
EIS datamarts contains those data which are relevant for executives for strategic management
that involves strategic planning and strategic control, Data are kept in precise form and
whenever details of any issue are required, these are mined from data warehouses. .

Data mining:-It is an activity which involves finding relevant data from data warehouse. It
discovers various patterns which are followed by available data automatically.

3. EIS software:-EIS software is in dedicated from that is used for data manipulation fro database.
Personal productivity software:-it is general purpose software that any one can use to
develop hi own application. EIS use them to provide status information about organizational
performance.
Prewritten EIS Software:- It is designed to meet the information needs of executives Some
prewritten EIS software contains external information in the form of industry trend,
competition analysis, proposed legislation changes etc.
Customized EIS Software: - If an organization does not want to use prewritten software, it
can develop EIS software on its own according to its specific requirements.

4. EIS output:-This may be in the form of report and graphics. These may be either through
hard copy or screen display. The report remains brief because executives require so many
reports in a single day and if these reports are not brief these ay not be handled effectively
by the executives. These reports are called summary reports.

3.19 Characteristics of EIS

An EIS has many distinct characteristics that differentiate it from other applications software. A list
of these features is presented in table below. A successful executive information system minimizes
hard copy reports while keeping high-level executives up dated. With an EIS, qualitative
information is obtained without producing volumes of paper.

Advanced internal control and communication are typical focuses of an ESS. The ability to
view exception reporting on the computer screen is an example of an EIS-facilitated management
control technique. Most Executive Support Systems highlight the areas of the business that are
going astray. Color codes are used to display data that are in an acceptable or unacceptable range as
defined by the executive. This technique allows the computer to track important project assignments
within a company using the executive information system. An EIS allows access to external as well
as company internal information.
Advantages

• Simple for high-level executives to use Operations do not require extensive computer
experience
• Provides timely delivery of company summary information
• Provides better understanding of information
• Filters data for better time management
• Provides system for improvement in information tracking

Disadvantages

• Computer skills required to obtain results

• Requires preparation and analysis time to get desired information
• Detail oriented Provides detailed analysis of a situation
• Difficult to quantify benefits of DSS How do you quantify a better decision?
• Difficult to maintain database integrity
• Provides only moderate support of external data and graphics capabilities

Examples of EIS
The examples of EIS provided in the lesson offer interesting contrasts of how each
organization uses its system to aid in the decision-making process.

The organization uses mostly external data, including information from the Internet, in its
EIS. It organizes the information in order to help executives make decisions based on trends in the
marketplace. The information includes data on competitors and information from market research.
Organization uses its system output to determine sales forecasts, marketing campaigns, and
investment plans.

Managers in an organization are able to choose their own criteria to drill down and navigate
data through easy-to-use interfaces. They don't have to accept data in formats chosen by someone
else who may not understand individual manager's needs. Data analysis is more timely because the
information is quicker to obtain and more convenient than before.

Expert Systems (ES)

3.20 Introduction to Expert Systems

Expert systems are a common form of artificial intelligence. They are used to assist humans
in the decision-making process, but they don't replace humans. Many of the decision we make are
based on past experience, but we have the added benefit of reasoning and intuition. Expert systems
ask questions, then give you advice and reasons why you should take a certain course of action
based on hard data, not on hunches. Again, they don't make the final decision.

Most of the problems an expert system helps resolve can in fact be solved by a human. But
since the computer is faster or safer, businesses choose to use them instead.

How Expert Systems Work

Expert systems rely on a knowledge base built by humans based on their experiences and
knowledge. The base requires rules and knowledge frames in which it can process data. When you
think about it, humans work the same way. You look out the window to see if it's raining. If it is,
then you grab your umbrella. If it's not raining, then you don't. There you have it: a rule base.

Knowledge frames "represent knowledge by organizing information into chunks of

interrelated characteristics." Your knowledge frame would be comprised of the fact that when it
rains, you get wet; therefore you need to prevent that from happening.

Yes, we used a very simplified example. Most expert systems require thousands of rules and
frames in which to operate. The knowledge must be specific. In the example above, you wouldn't
take any action if the only information you had was "It rains 350 days a year in the Amazon rain
forest." Neither would an expert system.

The AI shell (the programming environment of an expert system) uses rules, frames, and an
inference engine to accomplish its tasks. The inference engine uses forward chaining or backward
chaining to move through the rules and the frames.

In our example, using a forward chaining inference engine, you would start with the idea
that it's raining. You'd move through a series of decisions until you reached a conclusion and acted
on it. You would determine that it's raining, then you'd decide how much, then you'd decide how wet
you don't want to be, then you'd decide to take an umbrella. As long as the answer continues to be
yes, you keep moving forward.

In a backward chaining inference engine, you'd start with a hypothesis and work backward
until your hypothesis is proved or disproved. You got wet because it was raining; using an umbrella
would have prevented that from happening.

3.21 Building an Expert System

You build an expert system the same way as you build other Information Systems. However,
it's even more important to maintain and update an expert system: You never want to make
decisions based on outdated or incorrect information. A knowledge engineer is especially adept at
pulling information from various sources, including humans, and making sure it fits into the expert
system.

You measure the success of an expert system by:

• Reduced errors

• Reduced cost, reduced training time

• Improved decisions

• Improved quality and services

• Happy users and happy customers

Most problems solved by expert systems are mundane situations. "If it's raining then take an
umbrella." But what happens if it's cloudy and only looks like it will rain? That's the exception to
the rule about which the human being should make the final decision. The expert system might
advise taking the umbrella along or leaving it home based on the input. The human makes the final
decision to take or leave the umbrella.

Problems with Expert Systems

If you understand that expert systems can only do so much, you'll be just fine. If you
understand that they aren't people with the powers of reasoning and intuition and therefore they
can't make every decision, you'll know when to override the system and when to go with its output.
 Remember that everything in an Expert System is based on IF this, THEN that. But we know not
everything is black and white, and there are many gray areas.

Expert systems should not replace managers. They can aid managers in the decision-making process, but
managers have to make the final call. For instance, you suggest to your boss that you should receive a pay
raise. You have many subjective reasons why you should receive the raise; you arrive early and stay late,
your work is always (well almost always) turned in on time, you filled in for Sam while he was on vacation.
What happens if your boss feeds that into an expert system that uses only facts? You may or may not get the
raise. Your boss still needs to use intuition, reasoning, and gut reaction to make the final decision.

3.22 Relationships of Systems to One Another: Integration

The key element for all these systems is integration. The Cybernuts candy bar wouldn't be near the
success it is if all systems didn't work together and help each other. If the information from the
Transaction Processing System didn't feed into the Management Information System which
incorporated information from the Knowledge Work System which fed into the Office Automation
System which helped the Decision Support System which then worked with the Executive Support
System, then the Cybernuts candy bar would just be another junk food.

The main kinds of information systems in business are described briefly below:
Information System Decision
Support
Executive Support Systems
Systems

Knowledge Management Systems

Management Information Systems

Transaction Processing Systems - Billing systems to send invoices to customers
Description - Systems to calculate the weekly and monthly payroll and
tax payments - Production and purchasing systems to
calculate raw material requirements - Stock control systems
to process all movements into, within and out of the
An Executive Support System ("ESS") is designed to help
business
senior management make strategic decisions. It gathers,
Office
analyses and summarises the key internal and external
Automation Systems
information used in the business.
Office Automation Systems are systems that try to improve
A good way to think about an ESS is to imagine the senior the productivity of employees who need to process data and
management team in an aircraft cockpit - with the information. Perhaps the best example is the wide range of
instrument panel showing them the status of all the key software systems that exist to improve the productivity of
business activities. ESS typically involve lots of data employees working in an office (e.g. Microsoft Office XP)
analysis and modelling tools such as "what-if" analysis to or systems that allow employees to work from home or
help strategic decision-making. whilst on the move.

A management information system ("MIS") is mainly

concerned with internal sources of information. MIS
usually take data from the transaction processing systems
(see below) and summarise it into a series of management
reports.

MIS reports tend to be used by middle management and

operational supervisors.

Decision-support systems ("DSS") are specifically designed

to help management make decisions in situations where
there is uncertainty about the possible outcomes of those
decisions. DSS comprise tools and techniques to help gather
relevant information and analyse the options and
alternatives. DSS often involves use of complex
spreadsheet and databases to create "what-if" models.

Knowledge Management Systems ("KMS") exist to help

businesses create and share information. These are typically
used in a business where employees create new knowledge
and expertise - which can then be shared by other people in
the organisation to create further commercial opportunities.
Good examples include firms of lawyers, accountants and
management consultants.

KMS are built around systems which allow efficient

categorisation and distribution of knowledge. For example,
the knowledge itself might be contained in word processing
documents, spreadsheets, PowerPoint presentations. internet
pages or whatever. To share the knowledge, a KMS would
use group collaboration systems such as an intranet.

As the name implies, Transaction Processing Systems

("TPS") are designed to process routine transactions
efficiently and accurately. A business will have several
(sometimes many) TPS; for example: