Types of Information systems by hcj


									Types of Information systems
      Different Kinds of Systems

Four main types of IS serve four different
   organizational levels:
     1.   Operational-level systems
     2.   Knowledge-level systems
     3.   Management-level systems
     4.   Strategic-level systems
        Operational level systems
•   To answer routine questions and track the flow of
    transactions through the organization. Therefore,
    information generally must be easily available,
    current, and accurate.
•   Supporting operational managers by keeping track of
    the elementary activities and transactions of the
    organization, such as sales, receipts, cash deposits,
    payroll, credit decisions, and the flow of materials in a
•   Including a system to record bank deposits from
    automatic teller machines or one that tracks the
    number of hours worked each day by employees on a
    factory floor
     Management-level Systems
• To serve the monitoring, controlling,
  decision-making, and administrative
  activities of middle managers
• Typically providing periodic reports rather
  than instant information on operations
• Including control systems for annual
  budgeting and inventory, and management
  systems for sales and human resources
      Knowledge-level Systems
• To help the business firm integrate new
  knowledge into the business and to help the
  organization control the flow of paperwork
• Supporting the organization’s knowledge and
  data workers
• Including workstations and office systems,
  which are the fastest-growing applications in
  business today
        Strategic-level systems
• To match changes in the external
  environment with existing organizational
• Helping senior management deal with and
  address strategic issues and long-term
  trends, both in the firm and in the external
• Including a system to forecast sales trends
  over a five-year period or systems for profit
  planning and personnel planning
Types of information systems
       Major Types of systems
• Executive Support Systems (ESS)
• Decision Support Systems (DSS)
• Management Information Systems (MIS)
• Transaction Processing Systems (TPS)
     Transaction processing systems
• – Perform and record daily routine transactions
• necessary to conduct business

• E.g. sales order entry, payroll, shipping

•   – Allow managers to monitor status of operations
•   and relations with external environment
•   – Serve operational levels
•   – Serve predefined, structured goals and decision
•   making
    What is a transaction processing
• Definition: A Transaction Processing System
  (TPS) is a type of information system that
  collects, stores, modifies and retrieves the
  data transactions of an enterprise. The
  success of commercial enterprises depends on
  the reliable processing of transactions to
  ensure that customer orders are met on time.
  The field of transaction processing, therefore,
  has become a vital part of effective business
• 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
• For example 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.
• Transaction processing systems (TPS) are cross-functional
  information systems thatprocess data resulting from the occurrence
  of business transaction
               Types of transactions
• 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
• 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.
   Transaction processing systems
• Transaction processing systems were the first type of
  information system they allowed businesses to
  computerise manual processes used such as collecting,
  recording and reporting data.

• Punch cards and tape drives suited batch processing.
  Processing was carried out after hours mainly
  concerned with payrolls.

• Developments in technology providing greater speed
  and lower costs allowed Real Time processing to be
  developed alongside Batch Processing.
   Transaction processing systems
• TPS s were one of the earliest computerized systems that
  organizations used to capture valuable decision-making data
  and to conduct every day business.
• Almost all organizations have manual or automated TPS.
  Examples of TPS
   –   Coffee shop
   –   Bank
   –   Doctor
   –   Stock exchange
Transaction processing systems are the
     data lifeline of the company
• If a company fails to capture a transaction it
  may lead not only to customer dissatisfaction
  and lost profit but also to serious penalties
  and lawsuits.
• TPS s become the source of data for other
  systems in the organization. If analyzed and
  integrated it will give business key information
  about new company plans. A better plan how
  to meet customer needs and preferences.
• TPS is a link between the organization and
  external entities, such as suppliers, customers
  & distributors.
         Transaction processing
• Transaction processing is easily computerised as
  it is based on clear sets of rules followed by an
  operator in equivalent manual systems.

• Rules are set out and must be followed step by
  step to be considered as a successful transaction.

• A TPS needs therefore, to be based on detailed
  specifications, dealing with the collection of data,
  in which formats and matching the operation of the
             Batch processing
• Transactions are accumulated over time and
  processed identically.
• Batch processing may be done on a daily, weekly,
  or monthly basis or any other time period
  appropriate to the application.
• For example, a company may process the travel
  expenses of its employees on a monthly basis
• Batch processing usually involves gathering
  source documents originated by business
  transactions such as sales orders and invoices,
  into groups called batches.
             Batch Processing
• Advantages:
  • Control over time of processing;
  • Standardisation;
  • Reduced setup and processing costs
• Disadvantages:
  • Errors corrected after the processing of data;
  • Time delay in gathering data, storing and bulk
  • Only identical data is processed in one batch.
         Real time processing
• The immediate processing of data with the
  database updated as the transaction is
  being carried out.

• An example may be the Bank ATM and
  POS terminal, both of which have user
  input which requires immediate feedback.
           Real time processing
• Advantages
  • Transaction response time is quick if not immediate;
  • Data is processed as demanded;
  • Error correction can be immediate.
• Disadvantages
  • Standardisation may not exist or may be more
  • Processing needs make control difficult;
  • System hardware and software is expensive;
  • Backup is critical incase of system crashing;
  • Security is critical incase of crashing or data security;
  • The possibility of data corruption requires backup
     Steps in processing a transaction
1.    Data entry
2.    Validation
3.    Processing
4.    Storage
5.    Output generation
6.    query support
• Data entry: enter data by using input devices
  such as ATM it called data source document
• Validation: ensure the accuracy and reliability
  of data.
• Processing: once the company validate the
  accuracy & reliability of data the system
  processes and converts data into information.
• Data storage: to store the processed data in
  proper way. Otherwise data will be usefulness
  to decision makers.
• Output generation
   – Convert data into useful format
   – Different users need different formats at
       different times
• Query support the last step is to query or ask
  system questions.
                          Acid test
In order to qualify as a TPS, transactions made by the system must
pass the ACID test. The ACID tests refers to the following four
prerequisites: These four conditions ensure that TPS systems carry out
their transactions in a methodical, standardised and reliable manner.
• Atomicity means that a transaction is either
  completed in full or not at all. For example, if
  funds are transferred from one account to
  another, this only counts as a bone fide
  transaction if both the withdrawal and deposit
  take place. If one account is debited and the
  other is not credited, it does not qualify as a
  transaction. TPS systems ensure that
  transactions take place in their entirety
• TPS systems exist within a set of operating
  rules (or integrity constraints). If an integrity
  constraint states that all transactions in a
  database must have a positive value, any
  transaction with a negative value would be
• Transactions must appear to take place in
  isolation. For example, when a fund transfer is
  made between two accounts the debiting of
  one and the crediting of another must appear
  to take place simultaneously. The funds
  cannot be credited to an account before they
  are debited from another
• Once transactions are completed they cannot
  be undone. To ensure that this is the case
  even if the TPS suffers failure, a log will be
  created to document all completed
     Characteristics of a transaction
           processing system
• Records internal and external transactions that take
  place in a company
• Is used mostly by lower-level managers to make
  operational decisions
• Stores data that are frequently accessed by other
• Is ideal for routine, repetitive tasks
• Records transactions in batch mode or on-line
• Requires six steps to process a transaction—data
  entry, validation, data processing, storage, output
  generation, and query support
       Decision support systems
• A Decision Support System (DSS) is an interactive
  computer-based system or subsystem intended
  to help decision makers use communications
  technologies, data, documents, knowledge
  and/or models to identify and solve problems,
  complete decision process tasks, and make
• Decision Support System is a general term for any
  computer application that enhances a person or
  group’s ability to make decisions.
• Also, Decision Support Systems refers to an
  academic field of research that involves designing
  and studying Decision Support Systems in their
  context of use
Representation for a payroll TPS
TPS payroll system
Applications of TPS
Management Information Systems
 – Serve middle management
 – Provide reports on firm’s current performance,
   based on data from TPS
 – Provide answers to routine questions with
   predefined procedure for answering them
 – Typically have little analytic capability
Management Information Systems
 – An MIS provides managers with information and support
   for effective decision making, and provides feedback on
   daily operations.
 – MIS provides information to the users in the form of
 – Output, or reports, are usually generated through
   accumulation of transaction processing data.
 – MIS is an integrated collection of subsystems, which are
   typically organized along functional lines within an
Management Information Systems
Management level
• Inputs: High volume data
• Processing: Simple models
• Outputs: Summary reports
• Users: Middle managers

Example: Annual budgeting
Management Information Systems
• Structured and semi-structured decisions

• Report control oriented

• Past and present data

• Internal orientation

• Lengthy design process
   Management Information Systems
Transaction Processing    Management Information
   Systems (TPS)            Systems (MIS)
    – Support operation      – Provide decision-making
    – Management and           support for routine,
      control                  structured decisions
    – Routine, normal        – Closely linked to and fed
      operations               by TPS
Management Information Systems
• Terminology Confusion
   – MIS = the study of information technology
     in business settings
   – But, MIS is also term to refer to class of
     systems used to support operational and
     tactical decision making
     A model for problem solving
• Decision Making Phase
   – Intelligence gathering
   – Design
   – Choice
• Implementation
• Monitoring
              Decision Making
• A step in problem solving
• Intelligence gathering
  – Definition of problem
  – Data gathered on scope
  – Constraints identified
• Design phase
  – Alternatives identified and assessed
• Choice
  – Selection of an alternative
Structured vs. Unstructured Problems
• Structured problems lend themselves to
  programmed decisions
   – The implication is that a repeatable process
     can be employed and these can be
• Unstructured problems require
  unprogrammed decisions
        Unstructured problems
• Can be addressed (or partially addressed) with
  Decision Support Systems
          Structured Problems
• Can be addressed by an MIS
• Three decision models or techniques
   – Optimization
     • Find the best solution
  – Satisficing
     • Find a solution which meets certain criteria
  – Heuristics
     • Rule-based solution generation
            Goals of an MIS
• Provide managers with information
• Regular, routine operations
• Control, organize and plan better
      Typical inputs and outputs
• Inputs: Information from the TPS
• Outputs: hard and softcopy reports
   – Scheduled reports
   – On-demand reports
   – Key-indicator (business fundamentals)
   – Exception reports
   Functional Perspectives of MIS
• Financial MIS
   – Will integrate information from multiple
   – Functions
     • Costing
     • P&L reporting
     • Auditing
     • Funds management
   Functional Perspectives of MIS
• Manufacturing
  – Design and Engineering
  – Master Production Scheduling
  – Inventory Control
  – Materials Planning
  – Manufacturing and Process Control
  – Quality Control
   Functional Perspectives of MIS
• Marketing
  – Market research
     • Web-based market research
  – Pricing
MIS systems obtain data from TPS
MIS report
             MIS report types
•   Scheduled reports
•   Key-indicator reports
•   Exception reports
•   Ad hoc (demand) reports
•   Drill-down reports
Scheduled reports
         • Produced periodically,
           or on a schedule (daily,
           weekly, monthly
Key-Indicator report
          • Summarizes the
            previous day’s critical
            activities and typically
            available at the
            beginning of each day.
Demand and exception reports
                    • Gives certain
                      information at
                      a manager’s

                    • Automatically
                      produced when a
                      situation is
                      unusual or
Drill Down Reports
               • Provide
                 detailed data
                 about a
      A Hypothetical Decision Making
• A third world country is going to build a railway system to
  connect a potential inland industrial area and a good
  agricultural area with a port.
• An international development agency recommended that
  the iron in the area should be mined and refined locally and
  melt using industries which has to be established.
• The refined iron is possibly exported to Germany and Japan
  for car industry.
• For success of project it requires supply of skilled labor. To
  overcome this problem a training center has to be
  established to train workers by the time plant gets ready.
• The development agency also recommends the fertile land
  in the area should be prepared for intensive farming to
  provide food for the consumption of the people working in
  the industry.
• The railway should link the industrial area, farm and port
Essential steps in the process of
       making a decision
     Step 1     Concept of Project is Identified
                Decision To Proceed     Decision To Abandon

                Project assessment. Taking
     Step 2     account of all issues involved

              Decision To Proceed     Decision To Abandon

                Project Goes to Detail
     Step 3     Specification For Tender
               Decision To Proceed     Decision To Abandon

                Tender Accepted. Construction
     Step 4
               Decision To Proceed     Decision To Abandon

     Step 5     Operation Starts

               Decision To Proceed     Decision To Abandon
                        Step 1
• The conceptual need for a project arise mainly as a result
  of an basement of future requirements.
• It may be made by a team of experts.
• Typically a conceptual study will identify the technical
  solution required, the economic merits, and acceptability
  of project in socio political terms.
• It may require discussion with financial institutions
  wither or not they will provide necessary funds.
                               Step 2
• Assuming the decision has been made to develop the project further
  then a detailed assessment will have to be made of all technical,
  economic and socio-political factors.
• The details may be quantitative and based on subjective knowledge.
• A major decision making is about novelty of project.
    – A project may technically be novel ( making a new airplane ).
    – The project may employ an established technology in novel environment (
      using electrical train in third world country).
• In this step the degree of uncertainty associated with each factor will
  begin to emerge.
• An understanding of uncertainty associated with any proposal is
  essential for a feasible decision making.
                               Step 3
• If the outcome of step 2 is to proceed the project, then a tender
  specification has to be prepared.
• It should define, exactly what work the tender is required to do. Ideally
  it has to define every thing that has to be done.
• The magnitude of uncertainty associated with this stage is a reason for
  possible variations in cost and duration of projects.
• Before a tender specification is issued it is prudent to confirm that the
  project is acceptable to regulatory authorities and that the adequate
  finance is available.
• The financer need to be convinced that the project is viable, that the
  proposer is sound and has the experience and capability to derive the
  project to a successful conclusion.
                          Step 4 ,5
• Step 4
   – The first action is to decide if one of the tender should be
   – The tenderer should have the appropriate experience, capability
     and adequate financial resources.
• Step 5
   – Assuming all steps completed satisfactorily, a decision has to be
     taken to start the project.
   – Even if the project starts, it might have to be stopped if the
     environment it operates is changed.
• Management is decision making
• The manager is a decision maker
• Organizations are filled with decision makers at different level.
• Management is considered as art: a talent acquired over years by
• However decision making today is becoming more complicated:
   – Technology / Information/Computers : increasing More
      alternative to choose
   – Structural Complexity / Competition : increasing larger cost of
   – International markets / Consumerism : increasing more
      uncertainty about future
   – Changes, Fluctuations : increasing need for quick decision
               Management problems
•   Most management problems for which decisions are sought can be
    represented by three standard elements – objectives, decision variables, and
•   Objective
     – Maximize profit
     – Provide earliest entry into market
     – Minimize employee discomfort/turnover
•   Decision variables
     – Determine what price to use
     – Determine length of time tests should be run on a new product/service
     – Determine the responsibilities to assign to each worker
•   Constraints
     – Can’t charge below cost
     – Test enough to meet minimum safety regulations
     – Ensure responsibilities are at most shared by two workers
                      Types of Problems
•   Structured: situations where the procedures to follow when a decision is
    needed can be specified in advance
     – Repetitive
     – Standard solution methods exist
     – Complete automation may be feasible
•   Unstructured: decision situations where it is not possible to specify in advance
    most of the decision procedures to follow
     –   One-time
     –   No standard solutions
     –   Rely on judgment
     –   Automation is usually infeasible
•   Semi-structured: decision procedures that can be pre specified, but not
    enough to lead to a definite recommended decision
     – Some elements and/or phases of decision making process have repetitive elements

         DSS most useful for repetitive aspects of semi-structured problems
   Information Systems to support
              Management                   Decision Support
              Information                  Systems
Decision      Provide information about    Provide information and
support       the performance of the       techniques to analyze
provided      organization                 specific problems
Information   Periodic, exception,         Interactive inquiries and
form and      demand, and push reports     responses
frequency     and responses
Information   Prespecified, fixed format   Ad hoc, flexible, and
format                                     adaptable format

Information   Information produced by     Information produced by
processing    extraction and manipulation analytical modeling of
methodology   of business data            business data
• DBMS - System for storing and retrieving data and processing queries
• Data warehouse - Consolidated database, usually gathered from
  multiple primary sources, organized and optimized for reporting and
• MIS - System to provide managers with summaries of decision-relevant
• Expert system - computerized system that exhibits expert-like behavior
  in a given problem domain
• Decision aid - automated support to help users conform to some
  normative ideal of rational decision making
• DSS - provide automated support for any or all aspects of the decision
  making process
• EIS (Executive information system) - A kind of DSS specialized to the
  needs of top executives

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