Business Information System..
Business Information System..
Business Information System..
Department of
Business Management &Entrepreneurship
BME
DISTANCE LEARNING MODULE
Business Information Systems
BME- 311
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TABLE OF CONTENTS
Course Introduction
Course Objectives
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3. UNIT THREE: APPLICATION OF BIS IN ORGANIZATION
Unit Introduction
Unit Objectives
Section Objectives
Section Overview
3.1 Levels of Management
3.2 Information requirements at different levels
3.3 Information requirement at different functional areas of management
3.3.1 Human Resource management Information Systems
3.3.2 Financial Information Systems
3.3.3 Manufacturing and Production Information Systems
3.3.4 Marketing Information Systems
3.4 Information, Management, and Decision Making
3.4.1 Introduction to Decision Making
3.4.2 Levels of decision making
3.4.3 Individual models of Decision Making
3.4.4 Organizational models of decision making
3.4.5 IT and Management
Unit Summary
Feedback to Activities
Answer Key for Self-Test Exercises
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BUSINESS INFORMATION SYSTEM
Course Introduction
Hello Dear Distant Learners!
How are you doing?
Nice to meet you through this teaching material!
This course material is designed, assuming that you have a basic knowledge of computers and
management and/or business concepts. It is intended to acquaint you with role of information
systems and technology strategies in the modern enterprise with a focus on helping users
apply technology to achieve and maintain competitive advantage. The course is useful to equip
you with the use of systems to support business decision making. The material provides a deep
understanding of computerized systems hardware and software, networks,
telecommunications and e-business basics. The course will also provide hands-on
introduction to basic database software applications using MS Access.
Generally speaking, this study material is intended to cater to the needs of the learners in
understanding the essential concepts and knowhow of applying the ever growing Information
and Communication Technology in businesses. The course is to be delivered in one module,
which is divided into five units and different sections under each unit. The first unit deals with
the information system revolution and explains the transformation of business and
management to the technology arena. Thesecond unit is about information technology and
organization. In the third unit we will learn about application of Business Information Systems in
organizations. Strategic advantage of information will be seen in the fourth unit. The final unit is
designed to teach you about management of information systems.
Within each unit, there are main sections designed in a chronological and logical order of
presentation. Each section within every unit consists of different subsections whenever
necessary. You will find activities and self-assessment questions those intended to evaluate the
understanding and rehearsing level of the learners. The answers and feedbacks to each activities
and self-assessment questions are provided at the end of the modules. I advise you to attempt all
questions by yourself before you resort to find the answers. The modules also contain
assignments for sub-missions. You have to allocate sufficient time for each part of the units.
Furthermore, I strongly recommend you to read the units and sections in their order of
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appearance as it eases up your understanding about the subject matter. Similarly it is wise to take
notes during your study of the module and always try to answer by yourself all the activities and
self-assessment questions before referring to the answer or feedback. Have a pleasant
comprehension!
Course Objectives
This distance teaching material is envisioned to enable the learners to understand the
meaning and significance of Business Information Systems. It helps to comprehend apply the
various advanced technologies that assist in automating business operations and perform
decisions. The course is designed to teach you computer based information systems that assist
you in modernizing your business and there by boost the productivity and competitiveness of
the organization or unit that your mange.
The main objective of this material is to acquaint you dear learners with the design,
development, implementation, operation and maintenance of modern computer based business
information systems. It also provides the basic knowledge on transforming business organization
to exploit the various opportunities offered by Information and Communication Technology.
Moreover, the purpose of this module is to train the distance learners how an organization
enhances its productivity by exploiting the advance in computing hardware and software.
Similarly, this material is designed to teach the various applications of technology in boosting
the productivity of organizations. It also acquaints you the need to achieve strategic alignment
between business objectives and technology objectives to assure technology fit and support the
businesses strategy. Further, it also aims to teach you dear learners on the various techniques
applied in the management of information systems to enhance company’s investment in
technology and to minimize technology related risks.
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• Describe how computers process data into useful information for problem solving and
decision making.
• Identify the functions of different types of information systems in business.
• List major hardware components of computers and explain their functions.
• Classify computers into major categories, and identify their strengths and weaknesses.
• Identify the major media and devices used in telecommunications.
• List networking technologies and trends that is likely to have an impact on businesses
and information management in the near future.
• Identify the Information system activities and resources
• Explain the need to learn use of information systems
• Discuss the value of information
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UNIT ONE
Unit Introduction
Dear learners, welcome to the first unit of this course! This part is designed to introduce you
to the basic concepts of Business Information System [BIS]. It is all about the preliminary
issues of the subject matter. The unit introduces the meaning of BIS and contemporary
approaches to design BIS. In addition, it will provide information on the new role of
Information System in organizations and on the need to learn on the use of Information
Technology [IT] to exploit the new opportunities presented by technology.
It is likely that you are carrying or using an information system. This is so if you have an
advanced mobile phone, a handheld electronic device, or a laptop computer.Information systems
pervade almost every aspect of our lives. Whether you are withdrawing money from a bank’s
automatic teller machine or surfing the Web on your cell phone, hardly a day goes by without
our feeding data into, or using information generated by, an information system. In business
especially, digital information systems generate most of the information we use. These systems
have become essential to successful business operations.
Accordingly the focus of this unit will be up on; meaning and definition of BIS and their sub-
systems, the contemporary approached to design and operate information systems and their new
role, learning to use information systems to exploit opportunities and to manage technology
posed threats, concepts of information system resources and the different schools of thought
view toward the value of information.
On the whole this unit will give you a basic conceptual foundation for understanding the unique
characteristics of Business Information Systems and their role in enhancing the productivity of
contemporary organizations. Each topic is followed by relevant activity to be solved before you
proceed to the next topic.
Unit Objectives
After studying this unit, you should be able to:
know meaning and definition of Business Information System
Explain why information technology matters.
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Define digital information and explain why digital systems are so powerful
anduseful.
Explain why information systems are essential to business.
Describe how computers process data into useful information for problem
solving and decision making.
Identify the functions of different types of information systems in business.
Describe careers in information technology.
Identify major ethical and societal concerns created by widespread use of
information technology.
Section Overview
Businesses use the conceptual resource i.e information to manage and control the physical
resources of their organizations using business information system. This is because it is difficult
for managers to control every activity of the organization by being physically present in the place
of work. Therefore, information resource is one of the main areas that need the attention of
management like that of human, financial and material resources. According to Raymond
(1995), in today’s information age, the manager’s interest for information is perceived from two
major perspectives. The first is business organizations have become more complexes, which
compelled managers of organizations to process large volume of external and internal
information to cope up with changes taking place in their environment. The second is the growth
of computers in processing speed and memory capacity have enabled managers to use and sort
large volume of data to make organizational decisions and to manage their organizations more
effectively and efficiently than the managers of the industrial age. As a result, management
devises information systems to collect, store and process data to produce information about their
business’s operation.
Business Information System refers to the system that collect, store and process data to
produce information about the business useful for making various business decisions.
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Business Information Systems can be manual or computerized Systems. The manual system is
made up of people that operate the system, procedures written to guide the people, the data
created by the businesses day to day operation, documents used to capture the data and physical
equipments used to perform data processing. Manual information systems are nowadays are not
able to cope up with the tremendous volumes of data created by the business. As a result,
companies are evolving their business information system towards computers. Computer based
business information systems are made of people, procedures, data and Information
Technologies.
It is important to distinguish between data and Information. Data is a raw fact or figure and can
take a form of a number or a date. Data is often meaningless or it does not provide knowledge to
make a specific decision. Information is a knowledge or meaning derived from data. It is a
processed or transformed data that empowers decision makers to make a particular decision.
Data: - is defined as "groups of non- random symbols which represent quantities, actions,
objects, etc". Data are symbols that will never be a complete representation of, or the same with,
reality, but they describe objects, events & their relationships incompletely. Data consists of
figures and facts that can take different forms such as images, text, or voice. Simple figures and
facts are meaningless to the user unless they serve a purpose. For processing purposes data items
are organized into data structures, file structures and databases.
In general, processing is changing the raw material i.e. data to finished product i.e. information.
Refer to Figure 1.1. It is a simplified information system model. Data is the input that can be
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processed either manually or using a machine, such as a computer, to obtain information for
decision purpose. Figure 1.1.also illustrates that data can be stored for future use. For example, a
personnel section stores the data of employees in personal files to use the data in the future for
promotion, termination or any other purpose. The data can also be stored in a diskette in a
computer system as a soft copy or in a filing cabinet as hard copy.
Data
Storag
e
Processing
Input (Data) (Information Processor) Output (Information)
Defining System
A System is a set of two or more interrelated components or sub-systems which interacts each
other to serve a common goal or purpose. A system is an array of components that work together
to achieve a common goal, or multiple goals, by accepting input, processing it, and producing
output in an organized manner. Often, a system consists of several subsystems— components of
a larger system—with subgoals, all contributing to meeting the main goal. Subsystems can
receive input from, and transfer output to, other systems or subsystems.
System is defined as” a group of interrelated components working together toward a common
goal by accepting inputs and producing outputs in an organized transformation process". The
general definition of a system is that it is a group of interrelated components performing different
functions in a coordinated way to serve the common purpose of the system. Therefore,
organizations as systems have different components such as administration, finance, production,
marketing etc. that are working together towards achieving the overall organizational objective.
Systems can exist in different forms. Some can be abstract systems, which can deal with ideas,
beliefs or ethical values of society. Some can be natural systems, which can deal with natural
relationship. Natural systems include living systems and non-living system. Some can be
artificial systems, which are man-made systems such as organizations, computer systems, factory
systems, etc.
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1.1.2. Closed vs. Open Systems
Systems are closed or open, depending on the nature of the information flow in the system. A
closed system stands alone, with no connection to another system: nothing flows in from another
system; nothing flows out to another system. An open system interfaces and interacts with other
systems. The systems that we discuss here are open systems. Interactions between open systems
take place through exchange of information, material, personnel, finance and energy. All
business organizations are open systems but all systems are not organization.
An open system is a system that interacts with other systems in its environment.
The application of the concept of system’s theory to business began around the year 1948 by
Norbert Wiener, and later got depth in 1966 by a biologist Ludwig von Bartalanffy. According to
the systems’ concept, all business and government organizations are open systems with the
following major characteristics discussed henceforth.
Environment: A system exists and functions in an environment. The environment in this context
is all the economic, political, social, and technological situations within which any open system
operates.
Subsystems and Supera System: A system has different components (parts) called subsystems.
A system can be a part of a larger system, which can be called a supera-system. The distinction
between system and sub-system is a matter of perspectives
Boundaries: Systems have Boundaries that allow us to differentiate one system from other
systems and allow us to separate from its environment to determine the scope of the system. The
boundaries of some systems can be clearly shown or defined. But for many systems, it is
difficult to draw clear lines to show the boundary of a system. Boundaries of systems are drawn
in abstract way based on their goals, objectives, functions and activities.
Interface: The other basic characteristic of an open system is that it interacts with other systems
in its environment. This is called interfaces. Interfaces occur at the boundary of a system
through the form of taking in inputs from, and giving out outputs to, the environment.
Inputs: A system has flows of information, material, personnel that enter the system from the
environment as inputs.
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Processing:- the inputs undergo transformational processes within the system. Any open system
has components (subsystems) that transform the input resources into the output resources.
Output: - the processing component of a system combines and transforms the varieties of inputs
that entered the system to produce a new type of output with the higher value than the values of
the combined inputs. This output should be transferred to the other systems.
Feedback and Control: A complete system should have a feedback and control mechanism.
Feedback means getting internal and external information on one’s performance. An open
system without a feedback and control mechanism is like a person whose nervous system does
not properly function. Such systems do not stay long. An open system with feedback mechanism
has sensors that capture information on its performance and behavior from internal and external
sources. The controlling mechanism of the system measures the direction, intensity and the
extent of the feedback and compares it with established standards. The result of the comparison
can be either negative feedback or positive feedback. If it is positive feedback, the system
maintains and further improves its performance. If it is negative feedback, the system control
takes corrective actions and sends the appropriate instruction to the concerned subsystem to
reverse the entropy.
Entropy is defined as the deterioration of the performance of a system through time. Based on
the instruction from the control subsystem, the subsystem adjusts its action in line with the
systems expectation.
With an understanding of the terms “information” and “system,” the definition of business
information system is almost intuitive: an information system (IS) consists of all the components
that work together to process data and produce information. Almost all business information
systems consist of many subsystems with sub-goals, all contributing to the organization’s main
goal.
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into information in a variety of ways to support operations, management, and
decision-making functions in a business organization” .
An information system (IS) can be any organized combination of people, hardware, software,
communications networks, data resources, and policies and procedures that stores, retrieves,
transforms, and disseminates information in an organization. People rely on modern information
systems to communicate with one another using a variety of physical devices (hardware) ,
information processing instructions and procedures (software) , communications channels
(networks) , and stored data (data resources). Information system can be defined as “a set of
people, procedure, and resources that collects, transforms and disseminates information in an
organization”. Organizations can depend on manual information systems such as using paper &
pencil or informal (word-of mouth) or computer based information systems such as using
computer hardware, software & people resources to transform data resources into information
products that can serve the need of the information user.
Activity 1
1 Mr. Alex produced 200 units of material X in ABC factory during May 2015. Does Mr. Alex’s
performance good or bad?
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2 Mr. Alex produced 200 units of material x in ABC factory during May. The budgeted units of output for
Mr. X is 250 units for May. Does Mr. Alex’s performance good or bad?
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3 Re-considering the first and the second questions and your answer. Which one do you think
represent data and which one represent information?
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Section Objectives
After studying this section you will be in a position to;
Know the approaches that contribute to the problems, issues, and solutions in the
study of information systems.
Distinguish the contemporary approaches used in the design of information
systems
Appreciate the contributions of each approaches towards the contemporary
information systems
Section Overview
This section attempts to introduce the contemporary approaches that contribute towards the
existing information systems.
In this section we will examine the defining attributes of approaches that shape the contemporary
information systems applied in organizations. The study of information systems is a
multidisciplinary field. No single theory or perspective dominates. Therefore, there is a need to
take wider perspectives of disciplines that contribute to the problems, issues and solution in the
study of information systems.
Information systems are socio-technical systems. Though they are composedof machines,
devices, and “hard” physical technology, they require substantialsocial, organizational, and
intellectual investments to make them workproperly. Therefore, this sections aims to introduce
the various approaches that shape modern day information systems.
In general, the contemporary approaches towards the study of information system can be divided
into technical and behavioral approaches.
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Computer science is concerned with establishing theories of computability,methods of
computation, and methods of efficient data storage and access.
For instance, sociologists study information systems with an eye toward how groups and
organizations shape the development of systems and also how systems affect individuals, groups,
and organizations. Psychologists study information systems with an interest in how human
decision makers perceive and use formal information. Economists study information systems
with an interest in understanding the production of digital goods, the dynamics of digital
markets, and how new information systems change the control and cost structures within the
firm.
The behavioral approach does not ignore technology. Indeed, information systems technology is
often the stimulus for a behavioral problem or issue. But the focus of this approach is generally
not on technical solutions. Instead, it concentrates on changes in attitudes, management and
organizational policy, and behavior.
Activity 2
1 What are the approaches toward the study of information systems?
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3 Does the behavioral approach ignore technology of business information systems?
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Section Overview
Until the 1960s, the role of most information systems was simple: transaction processing, record
keeping, accounting, and other electronic data processing (EDP) applications.Then another role
was added, namely, the processing of all these data into useful, informative reports. Thus, the
concept of management information systems (MIS) was born. This new role focused on
developing business applications that provided managerial end users with predefined
management reports that would give managers the information they needed for decision-making
purposes.By the 1970s, it was evident that the prespecified information products produced by
such management information systems were not adequately meeting the decisionmakingneeds of
management, so the concept of decision support systems (DSS) wasborn. The new role for
information systems was to provide managerial end users withad hoc, interactive support of their
decision-making processes. This support would betailored to the unique decisions and decision-
making styles of managers as they confrontedspecific types of problems in the real world.In the
1980s, several new roles for information systems appeared. First, the rapiddevelopment of
microcomputer processing power, application software packages, andtelecommunications
networks gave birth to the phenomenon of end-user computing. The development and the use of
Internets have brought a drastic change in the use of information systems for global strategy and
has revolutionised our information age from parochial thinking of organisations and nations to
global thinking of the “world as a small village”.
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Businesses have seen much to achieve the current level of sophisticated use in business
information system. This section will introduce the evolution of business information systems in
organizations and identify the new roles of information systems.
Computers began after the 2nd world war and they were largely used to solve complicated
mathematical and scientific problems. During the early 1950s, managers were using manually
processed information to make decisions. The then manual information processing was
characterised by producing reports or getting information using typewriting, handwriting, word-
of-mouth, etc. The manual data processing was changed to machine-assisted data processing
such as using adding machines, calculators, etc. However, after the first commercial computer
was developed in 1951, electronic data processing replaced the machine-assisted data processing.
The first generation of computers was largely used for accounting applications such as order
processing, inventory data and customer accounts. Accounting tasks are routine and repetitive.
Hence, it was the accounting function of business where Computer Based Information System
was first applied.
Business grew in their sizes and activities, and data processing systems were not much helpful to
convert large volumes of accounting data to information. The Accounting Information System
was not a system to provide management with information for analysis, planning and decision
making activities. During that time, managers were overwhelmed with too much data and were
wasting much of their time in searching several pages of lists and tables to find relevant
information they need for decision.
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specialists knew how to operate computers but they did not have the knowledge and the skill to
identify the information needs of managers.
Even if information specialists developed information systems believing their systems could
serve the purposes of management, managers could not accept the works of these information
specialists because the information systems were not designed based on the information needs of
managers. Later, managers started to explain their information needs to information specialists,
and the information specialists in turn started to learn “ the basics of management and how to
work with managers in designing information systems”. Eventually, Managers started to use
computer application for processing managerial information for decision-making. The new
system enabled managers to produce summary reports in a tabular form and to select data
relevant to the problem at hand. As the result, data processing, which is currently called
Transaction Processing System (TPS), grew to be the foundation of data preparation and
provision for MIS and other managerial information systems.
Today, the concept of BIS is a federation of subsystems developed and implemented as needed,
but conforming to the overall plan, standards, and procedures for the development of Information
Systems for organisational use.
In the mid 1960s, Database Management Systems (DBMS) software was developed to manage
large volume of data in an organisation. Later, around early 1970’s, Decision Support Systems
started and combined the reporting function of MIS, graphic displays & the problem solving
capabilities of management Science. In the 1980s, the introduction of personal computers
brought the realisation of Executive Information System (EIS), by which executives (Top level
Managers) can use computers to graphically display information needed for strategic decisions.
Around the mid 1980s, the Expert System (ES) started. Since then, Expert System has been used
to solve business problems. Expert system is the result of the rapidly growing field of computer
technology called artificial intelligence.
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The development and the use of Internets in the 1990s have brought a drastic change in the use of
information systems for global strategy and has revolutionised our information age from
parochial thinking of organisations and nations to global thinking of the “world as a small
village”. The following diagram summarises the correlation of the evolution of the development
of information systems with the trend of increase in the capacity and power of computers.
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Business applications of IS support an organization’s business processes and operations, business
decision making, and strategic competitive advantage. Major application categories of
information systems include operations support systems, such as transaction processing systems,
process control systems, and enterprise collaboration systems; and management support systems,
such as management information systems, decision support systems, and executive information
systems. Other major categories are expert systems, knowledge management systems, strategic
information systems, and functional business systems. However, in the real world, most
application categories are combined into cross-functional information systems that provide
information and support for decision making and also performing operational information
processing activities.
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E-business is a generic-term that refers to all uses of advances in information technologies such
as Internet technologies to work and empower business processes, e-commerce, and enterprise
collaboration within a companyand with its customers, suppliers, and other business
stakeholders. While e-commerce is a narrower term that refers to an electronic execution of a
business transaction.
In essence,e-business can be more generally considered an online exchange of value. Any online
exchangeof information, money, resources, services, or any combination thereof falls underthe e-
business umbrella. The Internet and Internet-like networks—those inside theenterprise (intranet)
and between an enterprise and its trading partners (extranet) —have become the primary
information technology infrastructure that supports thee-business applications of many
companies. These companies rely on e-business applications to (1) reengineer internal business
processes, (2) implement e-commerce systems with their customers and suppliers, and (3)
promote enterprise collaboration among business teams and workgroups.
Business Information System’s new roles include providing operational support, providing
strategy support and enabling e-business
Activity 3
1 What were the most common business uses of first generation computers?
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2 The World is now as a Small Village. What initiates the concept? How does it revolutionize our thinking
of organizations?
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UNIT ONE - SECTION FOUR
1.4. Learning to Use Information Systems: New Opportunities with Technology
Section Objectives
Once you successfully complete the study of this section, you can;
• Identify the opportunities of advances in Information Technology [IT]
• Explain the need to learn to use information systems.
Section Overview
Dear learners, nowadays the advance in information technology has presented an ever increasing
opportunity for those companies that moves early to exploit it. However, it is also presenting a
threat for those companies which lags behind in identifying the new opportunities of information
technology and exploit them. As a result, you as a business professional need to appreciate and
learn the use of Information Systems to exploit new opportunities. Accordingly, in this section
we will discuss the need to learn to use information systems.
IT is no longer the sole domain ofIT professionals. Business professionals can no longer count
solely on IT specialists to makedecisions on development, purchasing, and deployment of
information systems. Today’s businessprofessionals are expected to know how to develop and
use IT significantly more than justa few years ago. Regardless of their major field of expertise,
those who have the proper ITknowledge and skills stand a better chance of receiving more
lucrative job offers and fasterpromotions.
We are accustomed to using 10 digits to represent quantities. We call it the decimal
countingsystem. However, we could also use a system consisting of only two digits, zero and
one, torepresent quantities. This is the binary counting system. Because computers and related
devicesuse the binary system—a system that uses two digits—they are referred to as digital
systems.
However, digital systems are not used only to represent information that contains numbers,
orquantities. They can also represent any information as combinations of zeroes and ones, or,
moreaccurately, the two states that represent zeroes and ones.
Digital information consists of zeroes and ones representing two states. When you have
amechanism that can represent two states, such as electrically charged and uncharged
elements,magnetized and nonmagnetized areas, light and no light, you have a way to represent
the zeroesand ones. Based on such signals, information can be represented, stored,
communicated, andprocessed digitally.
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Inbusiness, people and organizations seek and use information mainly to make sounddecisions
and to solve problems—two closely related practices that form the foundation of everysuccessful
company.
What is a problem? A problem is any undesirable situation. When you are stuck in the middleof
nowhere with a flat tire, you have a problem. If you know that some customers do not paytheir
debts on time, but you don’t know who or how much they owe, you have a problem. Youcan
solve both problems with the aid of information. In the first case, you can call a towingcompany,
which might use a computerized tracking system to send the tow truck closest to yourlocation; in
the second case, simple accounting software can help.
An organization or individual that identifies more than one way to solve a problem or adilemma
must make a decision. The problem “2 + 2 = ?” does not require decision making becauseit has
only one solution. However, as a manager, you might face a dilemma such as “Which isthe best
way to promote the company’s new car?” There are many potential ways to promote thenew car
—television advertising, radio advertising, newspaper advertising, Web advertising, autoshows,
direct mail, or any combination of these methods. This dilemma calls for decisionmaking.
Both problem solving and decision making require information. Gathering the right
informationefficiently, storing it so that it can be used and manipulated as necessary, and using it
tohelp an organization achieve its business goals—all topics covered in this book—are the keys
tosuccess in business today. The purpose of information systems is to support these activities.
Inaddition to solving problems and making decisions, businesses use information systems
tosupport daily operations, such as electronic commerce, making airline reservations, and
manyother activities. As a professional, you need to understand and apply information
fundamentalsto succeed.
Activity 4
1 Why do we refer computers and related devices as digital systems?
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2 Business use information to make sound decisions and to solve problems. What is problem? What kind
of problems requires individuals to make decisions?
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Section Overview
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Dear learners, different types of information systems serve different functions—for particular
types of organizations, functions within organizations, business needs, and management levels of
anorganization. Business enterprises differ in their objectives, structure, interests, and
approaches.
However, ISs can be generally categorized based on the level of a system’s complexity and
thetype of functions it serves. ISs in business range from the basic transaction processing system
thatrecords events such as sales to sophisticated expert systems, which provide advice and reduce
theneed for the expensive services of a human expert. In recent years the capabilities of
manyapplications have been combined and merged. It is less likely that you will find any of
thefollowing applications as stand-alone systems with a single capability. Managers and
otherprofessionals plan, control, and make decisions. As long as a system supports one or more
ofthese activities, it may be referred to as a management information system (MIS) and the
individual systems performing a specific activity its subsystems. In this section we cover the
basic sub systems of business information systems.
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Often, such systems are called enterprise resource planning (ERP) systems, becausethe
information they provide supports the planning of shipping resources such as personnel,funds,
raw materials, and vehicles. However, ERP is a misnomer for the systems, because theymainly
serve managers in monitoring and modifying business processes as they occur, and notonly for
planning. The term “supply chain,” too, is somewhat misleading. Business processes donot
always take the form of a sequence; some processes take place in parallel. This is true
inmanufacturing, where two or three teams work on different parts of a product, and in
services,where two or three different people peruse a document online and add their input to it
withina certain period of time rather than sequentially. In the production of goods and services,
somemodules of SCM systems provide support to the major processes. These components
includehuman resources (HR) information systems and cost accounting systems.
ERP is an integrated enterprise application because the systems that support each business
process areconnected to each other to form one large IS. Technically, anyone with access to the
system canknow the status of every part of an order received by the business: whether the raw
materialshave been purchased, which subassemblies are ready, how many units of the finished
producthave been shipped, and how much money has been billed or collected for the order.
HRmanagers can tell which workers are involved in any of the processes of the order.
Accountantscan use their module of the system to know how much money has been spent on the
order andwhat the breakdown of the cost is in labor, materials, and overhead expenditures.
Decision support systems help find the optimal course of action and answer “What if?”questions.
“What if we purchase raw materials overseas? What if we merge our warehouses?What if we
double our shifts and cut our staff?” These questions seek answers like, “This is howthis action
will impact our revenue, or our market share, or our costs.” DSSs are programmed toprocess raw
data, make comparisons, and generate information to help professionals glean thebest
alternatives for financial investment, marketing strategy, credit approval, and the like.
However, it is important to understand that a DSS is only a decision aid, not an
absolutealternative to human decision making.
Using ESs preserves the knowledge of retiring experts and saves a company the high cost
ofemploying human experts. After gathering expertise from experts and building a program,
theprogram can be distributed and used repeatedly. The expertise resides in the program in the
formof a knowledge base consisting of facts and relationships among the facts.
Activity 5
1 Which sub-systems of business information systems deals with recording data collected at the
27
boundaries of organization?
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
2 Supply chain management systems are also called ERP Systems. What is an ERP system? Do you agree
the naming Supply Chain and ERPs express the potentials of such systems? ( Why? or Why not?)
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
Section Overview
Dear learners, information systems basically organizations to perform five activities and to
perform such activities they require four resources. The activities of information systems and the
resources needed to perform them are discussed here under.
28
4. Storage – Storage is retaining data & information in an organized manner for later use.
Stored data is commonly organized into fields, records, files & databases.
5. Control of system’s performance: inputs, processing output and storage activities an
information system are needed to be monitored & evaluated to determine the sequences of
operations or if the system meets established performance standards. Information security is
one aspect of the controlling activity that allows the organisation to control and protect its
database/information base. The Chief Information Officer (CIO) is responsible to decide the
access of information such as who should get what information.
1. Hardware resources – includes all physical devices and materials used in information
processing. It includes not only machines, such as computers and calculators, but also all data
media – that is, all tangible objects on which data is recorded- from sheets of paper to
magnetic disks, filing cabinets and paper trays are one form of hardware for manual data
storage.
2. Software resources – includes all sets of information processing instructions. Software
resources include Programs, which are the sets of operating instruction that direct,&
control computer hardware, and procedures which are the sets of information processing
instruction needed by people. This includes manuals that explain how to operate a computer
system or how to use an application software package. In manual information processing
there are instructions how to fill an application form or a material requisition form.
3. People resources – people resources refer to specialists & end users of information systems.
Specialists are people like system analysts, programmers and computer operators that
develop and operate information systems. End users are people like managers, accountants,
salespersons, engineers, clerks, customers that use the products of information systems.
4. Data Resources – managers & information systems professionals realise that data &
information constitute valuable organisational resources. For example, students name, region,
sex, entrance examination results, grades, etc are data resources that need to be stored in any
form for making different kinds of decisions on the performance of a student in his college
life.
Activity 6
1 Discuss the 5 major activities of a typical information system?
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
29
2 Among the different business functions constituted in a company, which business function is
responsible to decide access to information?
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
3 Information systems require different resources. Identify the typical resources required by
information systems to perform their basic activities.
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
Section Overview
Dear learners, the values of Information can be measured in terms of quality or in terms of
quantity. Quality measures the subjective assessment and interpretation of specific information
an individual uses. However, in most cases it is difficult to measure information quantitatively
because, in reality, managers make decisions by dealing with many uncertain events, which are
difficult for accurate prediction, in the environment. In general, qualitative measure of
information relies on the level of satisfaction that a decision maker has on the information. In
this part we discuss what factors improve the quality of information from the perspective of the
decision maker.
30
information becomes unimportant if it is outdated, inaccurate or difficult to understand. For a
manager, to attach a value of high quality, the information used should satisfy the following
qualities.
Timeliness: Information should be available for problem solving, before crisis situations get
out of hand or opportunities are lost. It is not enough to provide management with historical
or (backward looking) information and analysis. Though historical data are useful for
controlling purposes, forward information that indicates trends developing inside and outside
organisation must also be provided. To satisfy the quality of timeliness, information should
be up-to-date (current).
Accessibility: Information should be available at the time of need, and should be provided as
often as needed (frequency). Therefore, an information system can be designed to provide
information whenever a manager wants it (demand reporting), whenever specified conditions
occur (exception reporting) or at regular intervals (periodic reporting).
Security: Information of an organisation should be protected from unauthorised intruders,
from viruses designed to damage or distort the data resource of the organisation. Hence,
information systems should be designed with facilities, such as passwords, crucial to
maintain security of data and information resources of the organisation.
Accuracy: Ideally all information should be accurate or free of errors or bias. It is true
thatmost information obtained from the operational level of the organisation or information
obtained from activities involving money such as payroll, billing, and accounts receivable
can be 100% accurate. However, it is difficult to have 100% accurate information to make
strategic and tactical decisions. At the time of decision-making, managers allow a certain
margin of errors when they use long-range economic forecasts and statistical reports as
information.
Economical: the degree of accuracy of information increases as the organisation spends
more to obtain additional information. Therefore, managers need to balance between the cost
of obtaining information and the level of accuracy needed.
Relevancy- Information is relevant when it pertains to the problem at hand or to a specific
situation. The manager should obtain the needed information without searching a large
volume of information. One has to avoid unnecessary information, and the information
should be concise and to the point as much as possible.
Completeness: The manager should be able to obtain information that presents a complete
picture of a problem or a solution. Any information when presented should be clear and easy
to understand. Thus systems should not be designed that drown a manager in a sea of
information. The term information overload hints the problem created as a result of too much
information. The manager should be able to determine the amount of detail needed whenever
s/he deals with problems.
Activity 7
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1 There are different approaches towards measuring the value of information. How do managers
ascertain the value of information? Which measure is easy to apply? (Why?)
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
2 Identify the factors that improve the quality of information from the perspective of a decision maker.
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
UNIT SUMMARY
Businesses use the conceptual resource i.e information to manage and control the physical
resources of their organizations using business information system.
Business Information System refers to the system that collect, store and process data to
produce information about the business useful for making various business decisions.
Data is a raw fact or figure and can take a form of a number or a date. Data is often meaningless
or it does not provide knowledge to make a specific decision. Information is a knowledge or
meaning derived from data.
A System is a set of two or more interrelated components or sub-systems which interacts each
other to serve a common goal or purpose.
32
An open system is a system that interacts with other systems in its environment.
Business Information System’s new roles include providing operational support, providing
strategy support and enabling e-business
A typical Information System will enable organizations to perform the 5 major activities i.einput,
process, storage, output and control activities using the 4 resources i.e., Hardware, Software,
People and Data.
Checklist
Now that you have completed the first unit, you need to check whether you have grasped the
concepts discussed in this unit. If your answer to the questions below is No, then you have to go
back and read the relevant sub-section again.
Accomplishments Yes/No
Ca Know the meaning and definition of Business Information Systems
n Identify the features of manual and computerized Business Information Systems
Yo Differentiate between data and information
u Know the approaches that contribute to the problems, issues, and solution in the
study of information systems.
Distinguish contemporary approaches used in the design of information systems
Describe the evolution of information systems in organizations
Explain the new roles of information systems
33
Identify the opportunities of advances in IT
Explain the need to learn to use ISs
Identify the sub-system of an Information System
Explain the purpose of each of the sub-systems of information systems
Identify the different activities performed by an information system
Identify the Information system resources,
Identify the different vies in identifying the values of information
Explain the various dimensions used in measuring the value of information
Commandment!
So as to pass through this step, at least you have to accomplish or perform 90% of the above
requirements! If not, go back and get done the unfulfilled part!
1. Which one of the following best describes the system that collect, store, and process data
to produce information about the business useful for making various business
decisions?
A.
B. Transaction Processing D. organization,
System, E. Information System,
C. Business Information System, F. None of the above.
2. Identify the incorrect component of a modern business information system?
A. People, D. Document,
B. Procedure, E. None of the above.
C. Data,
3. A system that interacts with other systems in the environment is best described as,
A. Open system, D. Supera System,
B. Closed system, E. None of the above.
C. Subsystem,
4. Which one of the following approach in the study of information system emphasize
mathematical based models to study information systems?
A. Technical, D. Socio-technical,
B. Behavioral, E. None of the above.
C. Contemporary,
5. In evolution of BIS, which of the following identifies its latest stage?;
A. Transaction Processing System,
34
B. Expert System,
C. Decision Support System,
D. Strategic Management Information System,
E. None of the above.
6. Which one of the following is not BIS’s new role?
35
6 BIS role that support competitive advantage F BIS
7 The sequence of activities involved in producing and selling a G Supply Chain
product or service.
8 System helps manage an organization’s relationship with customers H Synergy
9 A manager responsible for information System I GIS
10 An information quality to protect information from hackers J Data
K E-Commerce
L System
M Security
N Computer
O None of the
forgoing
36
FEED BACK/ANSWER KEY
For Activities and
Self-Test Exercise (Self-Assessment Questions)
1. The approaches towards the study of information system are two. The first one is the
technical approach that emphasizes on mathematical based models where as the second
one is the behavioral approach that emphasizes on behavioral issues that arise in the
development and long-term maintenance of information systems.
2. The emphasis of the technical approach is on mathematical based models derived from
computer science, management science and operations research.
3. The behavioral approach does not ignore technology. Instead it takes technology as the
stimulus for behavioral problem. But the focus of this approach is generally not on
technical solutions.
37
Feed Back/Answer for Activity 3
1. The first generation computers were largely used for accounting applications.
2. The development of internet have brought a drastic change to the use of information
system for global strategy and has revolutionized our information age for parochial
thinking of organizations and nations to global thinking of the “world as a small village”
3. The new roles of business information systems are operational and decision support,
Strategy support, and e-business support.
Feed Back/Answer for Activity 4
1. Computers and related devices are referred as digital systems because they use the
binary system of counting that uses only two symbols. These are 0 and 1.
2. A problem is any undesirable situation. Problems that involve more than one way of
solving or dilemma among alternatives require decision.
3. Companies look for IT-Savvy professionals because nowadays information is the
lifeblood of any organization as it is essential to sound decision making. Besides,
there is a rapid change in technology. A professional who does not stay informed is of
diminishing value to the organization.
Feed Back/Answer for Activity 5
1. Transaction Processing Systems [TPSs] deals with recording data collected at the
boundaries of organization.
2. ERP stands for Enterprise resource planning and it refers to enterprise application
solution that integrates most of the business functions of a company in to a large
system. No the terms supply chain and ERP has limitations.
Supply chain refers to series of business activities. However, business process
does not always take a form of sequence. It could be parallel.
ERP is not only a planning system. It helps managers in monitoring and
modifying business processes.
3. Decision Support Systems [DSS] rely on models and formulas to produce concise
tables or a single number that determines a decision where as Enterprise Systems
[ES] rely on artificial intelligence techniques to support knowledge intensive decision
making.
Feed Back/Answer for Activity 6
1. Information systems perform the following 5 typical activities. They let us to capture
and enter data as an input. They let us to store the data captured as an input. They
assist us to retrieve and process the data into information. They let us to display the
information as an output. Finally they enable us to provide adequate control regarding
data and information of the business.
2. Nowadays, a new business function called information system headed by Chief
Information Officer [CIO] is surfacing in business structure to deal with system
administration, computer operations, program development and maintenance. This
38
function is responsible to decide who shall have access to the computer system, to do
what and on which resources.
3. The typical resources required by information systems to perform their basic
activities are hardware, software, people and data.
Feed Back/Answer for Activity 7
1. The value of information can be assessed using qualitative aspects and quantitative
aspects. Qualitative aspects measure some attributes of the information like its
accuracy, timeliness, predictive value, relevance, verifiability, objectivity and so on.
However, quantitative measures aim to assign quantitative figures or monetary values
to the information.
2. The factors that improve the quality of information from the perspective of decision
makers include timeliness, accessibility, security, accuracy, relevance, and
completeness.
3. Information overload is the situation that arises when a decision maker is provided
with too much information. Information overload is as detrimental as providing too
few information. This is because when the decision maker tries to absorb the
information it will be tied up and reduces quality of decision.
39
UNIT TWO
Unit Introduction
Dear learners, welcome to the second unit of this course! This part is designed to acquaint
you to the development of Information Technology [IT] and its use in organizations. This
unit is about the constituents of modern computer systems: Hardware, Software and
Information and Communication Technologies. Dear students, as a management major, you
may not need to know the detailed history of the development of computer technology. In this
unit, you are going to read how computers perform the basic information processing activities.
Information Technology and organizations influence one another. Informationsystems are built
by managers to serve the interests of the business firm.At the same time, the organization must
be aware of and open to theinfluences of information systems to benefit from new technologies.
The interaction between information technology and organizations iscomplex and is influenced
by many mediating factors, including the organization’s structure, business processes, politics,
culture, surrounding environment, and management decisions. You will need to understand
howinformation systems can change social and work life in your firm. You willnot be able to
design new systems successfully or understand existing systemswithout understanding your own
business organization.
Every computer system, either main frame computer or microcomputer' consists the hardware
and the software parts. Computer hardware is defined as “a system of interrelated components
that supports the basic system functions of input, processing, output storage & control" to
provide "end users with a powerful information processing tool”. Computer software is
sequences of instructions that direct the operations of the computer hardware to perform the
basic system functions. No computer system exists with having hardware but not software or
vice versa. An advanced computer system needs both computer and communication hardware
and software to effectively serve its purpose.
This chapter has five sections. Section one introduces the major trends in information
technology. Section two describes the major features of computer hardware, data representation,
classification and generations of computers. In addition, it discusses the major components of
computer hardware system in relation to the five major activities of information systems. Section
three discusses the two major types of software, which are the system software and the
40
application software. Section four introduces the management of data emphasizing on the file
based and database systems. Section five describes the communication network and discusses the
mechanisms of communication and the different types of topologies of computer networks.
Unit Objectives
After studying this unit, you should be able to:
41
Section Overview
In the Technology Revolution we have seen the rapid adoption of many innovations including
mainframe computers, minicomputers, personal computers, networks, the Internetand World
Wide Web, assembly language, higher level languages, fourth generationlanguages, spreadsheet
programs, word processors, packaged programs,and Web browsers. In the Technology
Revolution, companies use IT as a newsource of energy for processing and accessing
information. This technology helpsthe organization collect, store, retrieve, and apply knowledge
to solve problems;IT converts the raw material of information into useable knowledge. The
TechnologyRevolution, like the Industrial Revolution, has changed the economy, creatingnew
industries and ways of doing business.
The computer has been called "the machine that changed the world." We believethat information
technology has and will continue to revolutionize management.
Information Technology [IT], Information Systems [IS] and Information and Communication
Technology [ICT] are often used interchangeably in practice. Though their difference is subtle it
will be wise to distinguish among the three.
42
2.1.1.1. What is IT, ICT and IS?
Computers process data (input) intoinformation (output). Computers carry outprocesses using
instructions, which are the stepsthat tell the computer hardware how to perform a
particulartask.A computer contains many electric, electronic,and mechanical components known
as hardware.These components include input devices, outputdevices, a system unit, storage
devices, and communicationsdevices.
A computer often holds data, information,and instructions in storage for futureuse. Some people
refer to the series of input,process, output, and storage activities as theinformation processing
cycle.
ICT, in contrast is used to describe a group of computers that operate together via
communication hardware and software. Most computers today communicate withother
computers. As a result, communicationsalso has become an essential element of theinformation
processing cycle. IT and ICTs are now a day’s used interchangeably. Information System [IS]
often used to describe an IT or ICT that is particularly applied in the day to day operations of
businesses or other forms of organizations.
An organization is a stable, formal social structure that takes resourcesfrom the environment and
processes them to produce outputs. This technicaldefinition focuses on three elements of an
organization. Capital and laborare primary production factors provided by the environment. The
organization(the firm) transforms these inputs into products and services in a productionfunction.
The products and services are consumed by environments in return for supply inputs.
Organizations are formal legal entities with internal rules and proceduresthat must abide by laws.
Organizations are also social structures becausethey are a collection of social elements, much as
a machine has a structure—aparticular arrangement of valves, cams, shafts, and other parts.
This definition of organizations is powerful and simple, but it is not verydescriptive or even
predictive of real-world organizations. A more realisticbehavioral definition of an organization is
43
a collection of rights, privileges, obligations,and responsibilities delicately balanced over a
period of time throughconflict and conflict resolution.
In this behavioral view of the firm, people who work in organizations developcustomary ways of
working; they gain attachments to existing relationships;and they make arrangements with
subordinates and superiors about how workwill be done, the amount of work that will be done,
and under what conditionswork will be done. Most of these arrangements and feelings are not
discussedin any formal rulebook.
Changing these elements can take a long time, be very disruptive, andrequires more resources to
support training and learning. For instance,the length of time required to implement a new
information system effectivelyis much longer than usually anticipated simply because there is
alag between implementing a technical system and teaching employees andmanagers how to use
the system.
Technological change requires changes in who owns and controlsinformation, who has the right
to access and update that information, andwho makes decisions about whom, when, and how.
This more complex viewforces us to look at the way work is designed and the procedures used
toachieve outputs.
There are major trends that have drastically altered the way organizationsuse technology. These
trends make it imperative that a manager become familiarwith both the use of technology and
how to control it in the organization.These trends are summarized as follows:
44
The cumulative effectof what all the technology firms are installing is to transform the
organizationand allow new types of organizational structures.
In other cases the firm is totally different after the application of technology.This ability of
information technology to transform organizations is one ofthe most powerful tools available
to a manager today.
2. The use of information processing technology as a part of corporate strategy.
Firms are implementing information systems that give theman edge on the competition.
Firms that prosper in the coming years will be managedby individuals who are able to
develop creative, strategic applications of thetechnology.
3. Technology as a pervasive part of the work environment.
From the largestcorporations to the smallest business, we find technology is used to
reducelabor, improve quality, provide better customer service, or change the waythe firm
operates.
4. The use of technology to support knowledge workers.
The personal computerhas tremendous appeal. It is easy to use and has a variety of powerful
softwareprograms available that can dramatically increase the user's productivity.When
connected to a network within the organization and to the Internet, it isa tremendous tool for
knowledge workers.
5. The evolution of the computer from a computational device to a medium forcommunications.
Computers first replaced punched card equipment andwere used for purely computational
tasks. From the large centralized computers,the technology evolved into desktop, personal
computers. Whenusers wanted access to information stored in different locations,
companiesdeveloped networks to link terminals and computers to other computers.
6. The growth of the Internet and World Wide Web.
The Internet offers a tremendousamount of information on-line, information that you can
search fromyour computer. Networks link people and organizationstogether, greatly speeding
up the process of communications. The Internetmakes expertise available regardless of time
and distance, and provides accessto information at any location connected to the Internet.
Companies canexpand their geographic scope electronically without having to open
branchoffices. The Internet leads naturally to electronic commerce-creating newways to
market, contract for, and complete transactions.
Activity 1
1 What contribution does the machine that changed the world has for business organizations and their
management?
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
45
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
3 Identify and list the major trends of Information Technology that have drastically altered the
way organizations use technology.
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
Section Overview
At the core of any modern information system stands at least one computer. Few machines have
changed human life as radically as the computer, and few such complex machines have become
so affordable to so many businesses and individuals in such a short time. Because computers are
central to information systems and to business, to successfully implement ISs, you need to
understand them. Businesses have many hardware choices, ranging from types of computers and
memory devices to input and output devices. Understanding the capabilities of hardware and the
options available can save companies millions of dollars. This section provides you with the
knowledge to make intelligent decisions about computer hardware in your professional career.
46
2.2.1. General Overview
Dear students, do you know that computer hardware understand only electronic signals of binary
digits of 1 and 0 (“On” and “Off”)? Before you read the hardware parts, it is essential to grasp
some idea how data is represented in computer hardware.
In general, “Data is processed and stored in a computer system through the presence or absence
of electronic or magnetic signals in the computer circuitry or in the media it uses. The smallest
possible electronic data is a bit [binary digit] and it is represented by ‘on’ or ‘off’ in the
electronic system of the computer. This is called a binary or two-sate representation of data. The
‘on’ is symbolized by 1 and the ‘off’ is symbolized by 0. Each symbol in a binary number (one
or zero) is called a binary digit. The way to represent many different characters using only binary
digits is to take sets of 0s & 1s and establish a code such that a certain pattern of 0s & 1s
represent A, another pattern of 0s and 1s represent B, etc. In addition, a computer stores picture
by creating a grid overlay of the picture and it measures the light or colour in each box or cell
called pixel (picture element).
In this regard, we discuss two standard coding schemes that combine bits in definite patterns to
represent different characters.
American National Standard Institute (ANSI) developed this coding scheme. ASCII is a 7-
bit code allowing 27 or 128 different code combinations. Practically all computers use a set
of 8 bits to encode a character. ASCII itself, by adding an extra meaningless bit, fills the 7-
bits to an 8-bits space. ASCII coding scheme is used in almost all microcomputers and many
minicomputers.
IBM developed this coding system. EBCDIC is an 8- bit coding schemes used on many
minicomputers and almost all mainframe computers. Eight bits allows 28 or 256 possible
code combinations.
In both coding systems, we simply add a binary number one to the binary code of the previous
letter to get the code of the next letter or number. For example, to find the letter D in EBCDIC
binary code, simply add 1 to 11000011 (binary code of C) to find 11000100 (Binary code of D).
The following table shows the examples of the two coding systems to represent some of the
capital and small letters and some of the numbers.
Characters ASCII Coding EBCDIC coding
A 01000001 11000001
47
B 01000010 11000010
C 01000011 11000011
a 01100001 10000001
b 01100010 10000010
0 00110000 11110000
1 00110001 11110001
2 00110010 11110010
9 00111001 11111001
The memory capacity of a computer's primary storage and its secondary storage devices is
usually expressed in terms of bytes.
For example, if we read 1.44 MB on a floppy disk it is to mean that the floppy disk has a space
of one million and forty four thousand bytes or it can store one million forty four thousand
characters. In summary, 8 bits = 1 byte = 1 character. The relationship between bit, byte,
kilobyte, megabyte, gigabyte and terabyte is shown as follows.
8 bits = 1 Byte
Dear students, when we buy a computer,one of the spec (meaning specification) to look for is the
computers hard disk storage capacity and Random Access Memory (RAM) capacity. Both of
these crucial specs is measured in terms of bytes. For example, a Laptop with a good spec may
have a Hard disk capacity of 1TB and a RAM memory of 8 GB
1
The memory capacity measured in KBis approximated to 1000 Bytes, in MB is one million Bytes, GB is one
Billion bytes and TB is one Trillion bytes respectively.
48
2.2.1.3. Speed of a Computer
Speed of a computer is measured by its ability to read millions of instructions per second. The
hardware measures machine cycle times in milliseconds, microsecond, etc. Machine cycle is a
series of operations that a computer performs to process a single instruction. The machine cycle
times have the following relationships.
1 1
Milli sec ond Second Micro sec ond Second
1000 ; 10000000
1 1
Nano sec ond Second Pi cos econd Second
1billion 1Trillion
For example, if a computer reads 200 millions of instructions per second (200 MIPS), then this
1
Second
means that the computer takes some 200 millions or 15 nanoseconds to read one
instruction.
2.2.2. Computer Generation and Trend: Time and Size in the Computer
The computers that we use today have not reached this stage at once. Due to the incessant effort
of computer and information system specialists, the processing speed and memory capacity of
information technology have improved through time to pass three distinct stages of computer
development and to attain the present stage of fourth generation computers.
1st Late 1940s to Vacuum tube, To solve Very large class Very Small Very slow Very High,
early 1950s rotating magnetic, complex room size 2KB RAM (up to 100 expensive generates
punched cards mathematical instructions great deal
and per second of heat
engineering
problems
2nd 1957-1963 Transistors, Used for Smaller than 1st 32KB Ram between Expensiv Medium,
magnetic core scientific and generation 200,000 to e generated
memory used for 300,000 (cheaper less heat
business instructions than the
49
purposes per second first)
3rd 1964-1979 Large Integrated Equally used Smaller than 2nd 2MB RAM Affordabl Failure rate
Circuits, Magnetic for scientific Generation e for significantl
core and magnetic and business governme y
tape for memory purpose nt and decreased,
business have their
organisati own
ons ventilation
system
4th 1980- Very Large Equally used Smaller than 3rd Gigabytes Gigahertz Affordabl Failure rate
Integrated Circuits, for scientific generation e for once in a
Ultra large scale and business governme year, have
integration, purpose nt, their own
semiconductor business ventilation
memory. and system
individual
s
In general, the trends of computers show that computers have continued to become smaller in
size, faster in processing speed, more reliable, larger in their primary and secondary memory
capacity, cheaper in price and more users friendly.
50
Micro computers include all Personal Computers that serve a single user at a time.Micro
computers include desktops, laptops and palmtops. Workstations are computers
considered as desktop but they are a little bit larger in size and have larger memory
capacity and faster processing speed. They are designed to process scientific, engineering
and design work that require powerful graphic and computational capability.
c. Mainframe computers – They are larger and more powerful than minis and
microcomputers. They usually have one or more central processors with faster
processing units. Mainframe computers can handle many peripheral devices such as
terminals and printers at the same time. For this reason, they can handle large number of
users that need simultaneous access to the central databases or users that need to use the
libraries of applications programs in time-sharing network. The processing speed of
mainframe computer ranges has passed tens of Giga Hertz of instructions per second.
Their prices are very expensive. They are largely used by major corporations and
government organisations, which have enormous and complex data processing
assignments.
d. Supercomputer is the largest computer with an extra ordinary computing power, which
is designed for high-speed numeric computations. A supercomputer is the fastest, most
powerful computer and the most expensive. Applications requiring complex,
sophisticated mathematical calculations use supercomputers. Large-scale simulations and
applications in medicine, aerospace, automotive design, online banking, weather
forecasting, nuclear energy research, and petroleum exploration use a supercomputer.
51
Any computer hardware system has five major components that perform the five activities of
information system. A computer contains many electric, electronic, and mechanical components
known as hardware. These components include input devices, output devices, a system unit,
storage devices, and communications devices.
A computer keyboard contains keys you pressto enter data into the computer.
A mouse is a small handheld device. With themouse, you control movement of a small symbolon
the screen, called the pointer, and you makeselections from the screen.
A microphone allows you to speak into thecomputer. A scanner converts printed material(such as
text and pictures) into a form thecomputer can use.
A Web cam is a digital video camera thatallows you to create movies or take picturesand store
them on the computer instead of ontape or film.
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A computer keeps data, instructions, and informationon storage media. Examples of
storagemedia are USB flash drives, hard disks, opticaldiscs, and memory cards.
A storage device records(writes) and/or retrieves (reads) items to and fromstorage media.
Drives and readers/writers, whichare types of storage devices, accept a specific kind of
storagemedia. For example, a DVD drive (storage device)accepts a DVD (storage media).
Storage devicesoften function as a source of input because theytransfer items from storage to
memory.
A USB flash drive is a portable storagedevice that is small and lightweight enough tobe
transported on a keychain or in a pocket. The average USB flash drive canhold about 4 billion
characters. You plug a USBflash drive in a special, easily accessible openingon the computer.
A hard disk provides much greater storagecapacity than a USB flash drive. The averagehard disk
can hold more than 320 billion characters.Hard disks are enclosed in an airtight,sealed case.
Although some are portable, mostare housed inside the system unit.
Portable hard disks are either external orremovable. An external hard disk is a separate,
freestanding unit, whereas you insert and remove a removable hard disk from the computer or a
device connected to the computer.
An optical disc is a flat, round, portable metal disc with a plastic coating. CDs, DVDs, and Blu-
ray Discs are three types of optical discs. A CD can hold from 650 million to 1 billion characters.
Some DVDs can store two full-length movies or 17 billion characters (Figure 1-5). Blu-ray Discs
can store about 46 hours of standard video, or 100 billion characters.
Some mobile devices, such as digital cameras, use memory cards as the storage media. You
canuse a card reader/writer to transfer the stored items, such as digital photos, fromthe memory
card to a computer or printer.
There are two major types of storage devices in a computer system. The first type is the primary
storage usually called main memory, which is found near the central processing unit with
control unit and arithmetic and logic unit. The second type is the secondary storage, which
supplements the primary memory by storing end users' data or instructions permanently.
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2.2.5.3. The Primary Storage
Primary storage has dual purposes. First, it is a place where data or instructions (programs) are
stored temporarily between processing steps or after processing is completed. Second, it is the
place where permanent computer operational instructions, written during the manufacturing of
the computer, are stored. The primary storage, often called main memory, is made up of
semiconductor chips (Circuits). The storage capacities of integrated circuits are measured in
megabytes (MB) or million bits of data. There are two parts of primary storage.
Random Access Memory(RAM): In this part of primary storage each memory position can be
sensed (read) and changed (written). However, RAM is a volatile memory because the data that
we write on it is not stored permanently; and if electric power is interrupted while we enter data
to the computer all the contents will be lost. This is why computer users are advised to save their
works frequently when they work on their data using a computer. In short RAM is useful to
store data and instructions (programs) temporarily during processing.
Read only Memory(ROM): In this part of memory we can read instructions and data that have
been stored at the time of manufacturing the computer. We cannot change these instructions and
data by writing over them. ROM is non-volatile because it contains permanent instructions and
data that cannot be erasable when the power is turned off. These permanent instructions are
part of the operating system that help the user to create, edit & copy files and others more
specialised activities. In general, the capacity of primary storage is continually increasing from
generation to generation of computer. The RAM capacity of the first generation of mainframe
computer was measured in kilobytes, but the RAM capacities of today’s microcomputers are
measured in Gigabytes.
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In Direct Access Storage Devices data or instruction can be directly stored & retrieved by
selecting and using any of the location on the storage media. This is because each storage
position (1) has a unique address, and (2) can be individually accessed in approximately the same
time without having to search through other storage positions. For example, the primary storage,
RAM and ROM, is a direct access storage device. Other examples of secondary storage devices
are magnetic disk and optical disk storage. Magnetic disk storage is most common form of
secondary storage that can provide fast access and storage capacity at a reasonable cost.
Magnetic disk can be in the form of hard disk or floppy disk, or flash disk. Hard disks can be
removable or non-removable (fixed disks). Optical disk storage: –one of the example of optical
disk is CD ROM. CD-ROM (Compact Disk Read Only Memory) can store from 500 to 700
megabytes of data. The problem with optical disk storage devices is once data are recorded, it is
not possible for the end user to erase and alter the data. Another example is the DVDs (Digital
Video Disks), which have high capacity (minimum 4.7 GB) and useful to store high quality
motion pictures.
Sequential Access Storage Devices are devices in which data and instructions are stored or
retrieved sequentially or serially because they don’t have unique addresses. Hence they cannot be
individually accessed in approximately the same time like that of direct access storage devices.
An example of sequential access storage device is the magnetic tape. Magnetic tape storages are
large tape reels and cartridges used in mainframe & mini computers, and small cassettes or
cartridges used in microcomputers. The advantage of magnetic tapes is they can provide high
storage capacity, from 100 MB for microcomputers to billion of bytes for mainframe computers.
They are the cheapest storage devices of all magnetic disks. Though magnetic tapes are the
outdated storage devices due to the improvement made on other storage medias, they provide
back-up capabilities and they can be used to store data, which are not frequently used.
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2.2.7. Central Processing Unit (CPU)
The CPU is the most important unit of a computer system. There are three parts of the CPU- the
control unit, the arithmetic and logic unit and the register. The primary storage unit is located
near the CPU. The control unit and the arithmetic and logic unit of the CPU perform the
controlling function and the processing function respectively. The control unit obtains
instructions from those stored in the primary storage units, interprets them, and transmits
directions to other components of computer systems to perform the desired activities. Thus, the
control unit co-ordinates the works of all the components of the computer system and controls
the program and data flow in the computer system.
The arithmetic & logic unit, on the other hand, is the one, which performs the required
arithmetic and logical comparison of the system by using a register. A register is a special area
in the ALU or control unit where data is temporarily stored to be processed after the control unit
transfers data from primary storage. These two units of the CPU together are called processors
because they process the contents of the primary storage. For example, when one writes 2+3,
then the control unit directs the arithmetic and logic unit to make the additions and to write the
result five. The processing powers of computers depend on the speed and performance of their
microprocessors.
Dear learners, the CPU is one of the specs that must be critically evaluated when you buy a PC.
The CPU’s spec is its speed measured by Giga Hertz (GHz). A typical computer may have a
processing speed measured by 2.4 GHz and is Core i 3. This means the CPU can run 2.4 billion
circulation per second with three processors.
An output device is any hardware component that conveys information to one or more people.
Three commonly used output devices are a printer, a monitor, and speakers
A monitor displays text, graphics, and videos on a screen. A monitor is also a spec. So when you
buy a computer you need to inspect whether it has an LCD or CRT monitor and what inch. An
LCD monitor is a one with flat screen where as a CRT monitor is a one with box feature.
Speakers allow you to hear music, voice, and other audio (sounds).
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Activity 2
1 Define hardware and identify the components of a computer hardware?
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
Section Overview
Hardware, as powerful as it might be, is useless without software. Software consists of
instructions that tell the computer and its peripheral devices what to do and how to do it. These
instructions are called programs or applications. Many IT professionals refer to computer
programs as “systems” because they are composed of components working to achieve a common
goal. As a professional, you must be able to make educated decisions regarding software
selection. To do so, you need to understand the factors involved in developing, selecting, and
using software. This section introduces to you what a software is, and distinguishes the
difference between application and system software. Further it describes the functions of the
operating system. Finally it elaborates approaches to manage software assets.
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Software is a series of instructions to a computer to execute any and all processes, such
as displaying text, mathematically manipulating numbers, or copying or deleting
documents.
Like computers hardware systems, software systems have passed four generations of
developments. The improvement in the memory and speed of computers has enabled information
system specialists to modify and add new features of software. The development of software has
made computers to become more users’ friendly. Hence, the subsequent generations of languages
are the results of adding new instructions and features to immediately preceding generations of
languages with the purpose of making computers comfortable, fast, cheap and simple to use. The
two major categories of software are application software and system software.
1. Operating system: Operating system manages the operation of the CPU, controls the
input/output and storage devices of a computer system. In this it performs three activities.
The first is allocation and assignment of resources to the jobs in the queue, the second is
scheduling tasks based on their arrival and users’ priorities and the third is monitoring the
jobs, the individuals using the system (what program is run by whom) and protecting the
information system from being accessed by any unauthorised person.
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2. Utility programs – Utility programs are programs that perform certain routine tasks
needed by the user. Utilities enable the user to copy, create, sort or delete files. For example,
sort program performs sorting operation; load programs loads programs, save program
records the contents of primary storage on the secondary memory devices.
3 Language Software: There are two types of languages software. The first is Language
translators – translate programs written in the high level languages into machine languages.
Program written by the programmer is called source program and the machine language is
called the object program. Therefore, the system software that translates the source program
to machine program is called translator. Compilers translate high level programmes to
machine languages. Interpreters translate Basic Languages to machine language.
The second type of language software is called program language. There are different
programming languages that help to develop application software. These are C++, Visual
Basic, Java, etc.
The application software is the software, which is the interface between the system software and
the end user. The application software makes the end user to use the computer. General purpose
and application specific Software. Application software is a program that assists the
application of computers to meet the information processing needs of the end user. Application
software can be acquired in two ways. The first is through custom programming and the second
through the purchase of prewritten programs.
In custom programming firms use their own information specialists to design computer-based
systems that can meet the unique needs of the firm. Prewritten packages are programs that are
produced by software producing firms and available in the market to be purchased and used by
end-user organisations. Examples of such types of packages are like Microsoft word, Microsoft
Excel, Access etc. Prewritten packages can be classified into general-purpose programmes and
application specific programmes.
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General-purpose programs – These are programs that perform common information processing
tasks for end users. Some of the programs under this category are word processing programs,
electronic spread sheet programs like Lotus 1,2,3 and excel, and graphic packages that convert
numeric data into graphic displays.
Access is used for Database Management application such as electronic record keeping,
inquiry and report generation.
Application specific programs – These are packages that are created to satisfy specific
information processing need of a particular end user. Business application programs are
programs used to process business related information such as accounting, sales analysis, cash
budgeting, materials requirement planning, etc. These programs assist business decision-making.
The scientific application programs are useful for information processing tasks of physical,
mathematical, engineering, social and other activities.
The operating system (OS) is the single most important program that runs on a computer andthe
most important type of system software. The operating systems performs basic tasks, such as
recognizing input from the keyboard and mouse, sending output to thecomputer display, keeping
track of files and directories (groups of files) on disks, and sendingdocuments to the printer.
Without an operating system, no application can run on a computer.
The OS is sometimes called the “traffic cop” or the “boss” of computer resources. Indeed, itis
charged with control functions such as optimally allocating memory locations for anapplication
program, copying the application from an external storage medium into memory,passing control
to the CPU for execution of program instructions, and sending processing resultsto output
devices. Operating systems are also often referred to as “platforms,” because they arethe
platform on which all other applications “ride” when interacting with the hardware.
2. User Interface
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An important part of the OS is the user interface. A graphical user interface (GUI)makes
the use of the computer intuitive and easier to learn. The interface takes the form ofeasy-
to-understand frames, icons, and menus. Users find it helpful to have most of the
interfacefeatures identical regardless of the application they use, unless the application
requires aninterface element for a unique feature.
3. Memory Allocation One of the most important functions of an operating system is
memory management, especially RAM—the memory where data and program code must
reside before being executed. Ideally, an entire application and all the data it processes
reside in RAM until processing ends. However, when many applications are open
concurrently, or when applications and data pools exceed the computer’s RAM capacity,
the operating system may use virtual memory. Virtual memory lets the user proceed as if
significantly more RAM were available than really exists. Virtual memory uses the hard
disk as an extension of RAM.
4. Plug and Play
A good operating system should also facilitate fairly simple changes to hardware
configuration. When a new device, such as an external hard disk, DVD burner, external
communication device, or joystick, is attached to a computer, the operating system’s job
is to recognize the new attachment and its function. If the OS can do so (without your
intervention) immediately after you attach the device, it is a plug-and-play (PnP) OS, and
the device, too, is referred to as a plug-and-play device. To do so, the operating system
must have access to the attached device’s driver.
A driver is the software that enables the OS to control a device, either one installed inside
the computer box (such as a second video card) or an external device such as a flash
memory drive.
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cases youdo not actually own the copies of applications that you purchase; you only purchase
licenses touse those applications.
Anyone who can contribute features or fix bugs is invited to do so. Anyone who wishes
todownload the latest version can do so free of charge. An open source program can be
developedby a random group of programmers, rather than by a single company. Programmers
share anapplication’s basic code, find its weaknesses, debug it, and contribute new pieces.
Open source software includes hundreds of useful applications, suchas the popular Web browser
Mozilla Firefox, the relational database management system MySQL.Linux is the best known
open source operating system. Forty-two percent of Argentine companies useLinux. The
governments of Brazil, Peru, and Chile mandated that all public administrationagencies use only
open source software when available. The Brazilian government switched morethan 300,000 of
its computers from Windows to Linux
Dear students, do you know that when you “purchase” software, you do not own the software
you have just obtained. As noted earlier,most of the software that organizations and individuals
obtain is not purchased; it is licensed. You receive a software license, limited permission to use
the software, either indefinitelyor for a set time. When the use is time-limited, the client pays
annual license fees.
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Reduce software and support costs by negotiating volume contract agreements and
eliminating or reallocating underutilized software licenses
Enforce compliance with corporate security policies and desktop/server standards
Improve worker productivity by deploying the right kinds of technology more quickly
and reliably
Limit overhead associated with managing and supporting software by streamlining and/or
automating IT processes (such as inventory tracking, software deployment, issue
tracking, patch management)
Establish ongoing policies and procedures surrounding the acquisition, documentation,
deployment, usage and retirement of software in an effort to recognize long-term benefits
of SAM
2.3.4.1.3.1. New SAM software tools and Approaches
A number of technologies are available to support key SAM processes:
Software inventory tools intelligently “discover” software installed across computer
networks, and collect software file information such as title, Product ID, Size, date, Path,
and version.
License Manager solution provide an intelligent repository for license entitlements which
can then be reconciled against data provided by software inventory tools to provide the
organization with an ‘Effective License Position’ or view of where the organization is
under-licensed (at risk of a compliance audit) or over-licensed (wasting money on
unnecessary software purchases)
Software metering tools monitor the utilization of software applications across network.
They can also provide real-time enforcement of compliance for applications licenses
based on usage.
Application control tools restrict what and by whom particular software can be run on a
computer as a means of avoiding security and other risks.
Software deployment tools automate and regulate the deployment of new software.
Activity 3
1 What is software? Discuss the major types of computer software.
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
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______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
Section Overview
As a professional, you will use databases and likely help design them. Understandinghow to
organize and use data is a way to gain responsibility and authority in a workenvironment. Data is
usually collected in a way that does not make it immediately usefulto professionals. Imagine
building a model palace from a pile of building blocks. Youhave a good idea of what you want to
build, but first you have to organize the blocks so it is easy for you to find and select only the
blocks you need. Then you can combinethem into substructures that eventually are integrated
into your model. Similarly, datacollected by organizations must be organized and stored so that
useful information canbe extracted from it in a flexible manner.
You use your Web browser to go to your favorite online electronics store to search forhigh-
definition flat screen television sets. You enter a price range and screen size. Within a
fewseconds, the screen is filled with details on available models complete with product photos
andspecifications. Where did this rich, well-organized information come from? It came from
adatabase. A database management system responded almost instantly to your request.
The manner in which data is organized and arranged in a computer system from the
smallest bit to the largest database is termed data hierarchy: The smallest possible
electronic data is called a bit. A bit is a binary digit of either a 0 (off) or 1 (on). A bit
cannot represent a human letter. When related bits come together they form a byte. A
byte is made of 8 bits. A byte represents a human letter. For example, Abebe is made of
approximately 5 bytes and 40 bits.A collection of related bytes is called a field or
attribute. An attribute is a characteristic of interest regarding the entity. Entity is anything
about which we would like to capture and store data. For example, Abebe is an attribute,
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which is made of 5 bytes and it could represent name of a customer. The set of related
attributes will form a record. A record captures data from particular occurrence of an
entity. For example, when Abebe buys goods from our business, we capture his name,
items sold, sales person and the cash received from him. These attributes make a record.
When records come together they form file. The records of all customers like Abebe
make a file. A set of interrelated and centrally coordinated files is called a database.
Businesses collect and dissect data for a multitude of purposes. Digital data can be stored ina
variety of ways on different types of media. They can be stored inwhat can be called the
traditional file format, in which the different pieces of information are notlabeled and
categorized, but are stored as continuous strings of bytes. The chief advantage ofthis format is
the efficient use of space, but the data is nonetheless difficult to locate andmanipulate. By
contrast, the database format, in which each piece of data is labeled orcategorized, provides a
much more powerful information management tool. Data in this formatcan be easily accessed
and manipulated in almost any way desired to create useful informationfor decision making.
The impact of database technology on business cannot be overstated. Not only has it changedthe
way almost every industry conducts business, but it has also created an information industrywith
far-reaching effects on both our business and personal lives. Databases are behind thesuccessful
use of automatic teller machines, increased efficiency in retail stores, almost everymarketing
effort, and the numerous online search engines and Web-based businesses. Combinedwith
interactive Web pages on the Internet, databases have made an immense contribution
tocommerce.
Without them, there would be no online banking, consumer catalogs, search engines,stock
brokerages, or chat rooms.
In virtually every type of business today, you must understand the power of databases.
Theapproaches to organizing and manipulating data presented in this section will help you gain
thisimportant knowledge.
Data can be maintained in one of two ways: the traditional file approach—which has
nomechanism for tagging, retrieving, and manipulating data—and the database approach,which
does have this mechanism. To appreciate the benefits of the database approach, you mustkeep in
mind the inconvenience involved in accessing and manipulating data in the traditionalfile
approach: program-data dependency, high data redundancy, and low data integrity.
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in older file systems files were built, and are still maintained, for the use ofspecific
organizational units. If your last and first name, as well as address and other details,appear in the
files of the department where you work as well as in the payroll file of the HumanResource
department, data can be duplicated. This data redundancy wastes storage space
(and,consequently, money) and is inefficient. When corrections or modifications need to be
performed,every change has to be made as many times as the number of locations where the
dataappears, which takes time and might introduce errors. If the same data was entered correctly
inone place but incorrectly in another, your record is not only inaccurate, but might appear
torepresent a different person in each place. Inaccuracies hurt data integrity—the
characteristicthat the data represents what it is supposed to represent and that it is complete and
correct.
Often, the traditional file approach to storing data leads to low data integrity. It is difficult
toensure that data is correct in all locations when there are myriads of places to insert data in
files,as in the traditional approach.
To begin with, the development of automating information activities can be divided in to pre-
database and database periods. The pre-database was the time when the traditional file
processing system was the only system used for data collection, storage, processing and
producing reports. As the traditional filing system was having many problems, it gave way to the
advanced computerised data processing system, which is called the database system. This
doesn’t mean that filing system is no more useful in computerised data processing; rather, the
database system has integrated many separate filing systems that increased the flexibility and
efficiency of processing data. This section discusses on the structure of data, the difference
between the traditional filing system and database system.
Some of the functions of Information system management are choosing the type of data to be
collected, designing the formats for capturing data from internal and external business activities,
deciding the way these data are stored and processed within the system and designing the
formats for producing ad hoc and periodic reports for managerial decision making. An
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information system specialist needs to consider the following five main criteria in his effort of
designing workable system.
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2.4.2.1.1. Structures of Data
Data structure: The smallest data is a bit. A bit is an electronic signal either ‘on’ or ‘off’. 0 and
1 are the binary digits representing the electronic signals of ‘off’ and ‘on’ respectively. The next
higher data element is a byte. A byte is a group of 8 bits, which can be represented with a
combination of ones and zeros. Then a group of bytes are combined together to give data items.
We discuss the higher levels starting from the level of data items.
Fields: They are sometimes referred as data items. Data items can represent one of the many
attributes, and are usually grouped together to describe a specific entity. For example, Almaz
could be a data item to represent the attribute student name in the occurrence of an entity student.
Records- Records are formed when related data items (fields) are grouped together. A record
represents a collection of data items that describe each instance of an entity. For example, if
Alemu is a student then the data items that contain his name, student ID, sex, date of birth,
major, address, etc, together form a record of Alemu. See the table below for the difference
between field, record and file.
Employee File
1 Almaz Kebede 5/06/1980 Accounting BA
2 Ayele Alemu 25/09/1978 Engineering BSc
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a) Master files are used to store permanent data and information about entities. It contains
historical and statistical data, which is used as a source of reference data. Master file holds
accumulated data based on transaction data.
b) Transaction file contains records of all transactions occurring during a period & is developed
as a result of transaction processing and preparing transaction documents. Transaction
processing occurs at the time of sales order, purchase order, work order and hiring of
employees. These files are also used to update the master file, such as adding new record or
deleting records in the master file
c) Report file is created when a report is produced by extracting data from the master file. For
example, a registrar office may be required to prepare reports of students by region, GPA,
sex, etc. every semester. There is report generator software that provides easy handling of
special management requests.
Duplications of data (data redundancy): Since each unit maintains its own data the same
data can be repeatedly recorded and stored in different files in different departments of the
same organisation. This is costly in terms of money required to collect, process and update
the data for computer storage. In addition, duplicated data occupies much of computer
memory and increases inefficiency in updating and retrieving data from files.
Lack of data integrity. When the same information is stored in multiple files throughout the
organisation, any change in one file must follow changes in all other files. However, this is
difficult to do. For example, once the Accounting Department updates its own data, it may
forget to pass the new information to other departments. As a result, incorrect data in only
one file could cause severe problem for the user of this data. In filing system. there is no any
standard how to use and process data within the organisation (Raymond, 1995). As a result, it
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was difficult for systems with such weaknesses were having problems in delivering
consistent and reliable information to users.
Lack of data compatibility. There was program and data dependency in traditional filing
systems. This results when different departments in an organisation collect process and store
information using different software. When one department’s files are incompatible with
another department’s files, combining the information from the two files becomes extremely
difficult.
Lack of Data security: Since each unit of an organisation controls its own data, the
organisation doesn’t have the power to control the access and dissemination of information.
a) Database creation-in database creation the DBMS defines and organizes the content
relationships, and structure of the data needed to build a database.
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b) Database Interrogation – this involves the access of data in a database to support various
information processing assignments. This typically involves information retrieval & report
generation.
c) Database Maintenance- the DBMS is used to add new records, delete old records, change
any data in the record, and protect the data in a database.
d) Customised micro processing development- DBMS can be used to develop prototypes of
data entry screens, queries, forms, reports, labels for a proposed system. An organization can
create its own customised mini software using the micro facilities available in Access,
Pardox or Dbase IV that can serve specific purpose of the organisation.
A data model is an abstract representation of the contents of a database. For example: the
relational database represents as if everything in the database being stored in a form of
table (relation)
Data modeling should first be done to decide whichdata should be collected and how it should be
organized. Thus, data modeling should beproactive. Creating data models periodically is a good
practice; it provides decision makers a clearpicture of what data is available for reports, and what
data the organization might need to startcollecting for improved decision making. Managers can
then ask experts to change the relationshipsand design new reports or applications that generate
desired reports with a few keystrokes.
Effective data modeling and design of each database involves the creation of a
conceptualblueprint of the database. Such a blueprint is called an entity relationship diagram
(ERD).
An ERD is a graphical representation of all entity relationshipsand they are often consulted to
determine a problem with a query or to implementchanges. ERDs are a main tool for
communication not only among professional DB designers,but also among users and between
users and designers. Therefore it is important that professionalsin all of these fields know how to
create and read them.
In an ERD, boxes are used to identify entities. Lines are used to indicate a relationshipbetween
entities. When lines shaped like crow’s-feet are pointing to an object, there might bemany
instances of that object. When a link with a crow’s-foot also includes a crossbar, then
allinstances of the object on the side of the crow’s-foot are linked with a single instance of
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theobject on the side of the crossbar. A second crossbar would denote “mandatory,” which
meansthat the relationship must occur, such as between a book title and author: a book title must
havean author with which it is associated. A circle close to the box denotes “optional.”
A diagram such as the above figure provides an initial ERD. The designers must also detail the
fieldsof each object, which determines the fields for each record of that object. The attributes are
listed in each object box, and the primary key attribute is underlined. Usually, the primary key
fieldappears at the top of the field list in the box.
The table below summarizes an example of possible attributes ofa Professor entity. Database
designers can use different notations; therefore, before you review anER diagram, be sure you
understand what each symbol means.
Activity 4
1 What is data hierarchy? Discuss each stages in the data hierarchy.
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
2 Distinguish between the traditional file based system and database system of data storage. What are
the major components of database management [DBMS] system?
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
3 What is a relational database? In such databases what is the purpose of primary key, foreign
key and non-key attributes.
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
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UNIT TWO - SECTION FIVE
2.5. Telecommunication and Networks
Section Objectives
At the end of this section you should be able to:
• Describe business and home applications of digital telecommunications.
• Identify the major media and devices used in telecommunications.
• Explain the concept of network protocols.
• Compare and contrast various networking and Internet services.
• List networking technologies and trends that is likely to have an impact on
businesses and information management in the near future.
• Discuss the pros and cons of telecommuting.
Section Overview
Hardware, as powerful as it might be, is useless without software. Software consists of
instructions that tell the computer and its peripheral devices what to do and how to do it. These
instructions are called programs or applications. Many IT professionals refer to computer
programs as “systems” because they are composed of components working to achieve a common
goal. As a professional, you must be able
Telecommunications is the transmittal of data and information from one point to another. The
Greek word tele,which means “distance,” is part of such words as “telephone,” “teleconference,”
and otherwords referring to technologies that allow communications over a distance. Thus,
telecommunicationsis communications over a distance. Telephone, e-mail, the World Wide Web
—none ofthese essential business services would be available without fast, reliable
telecommunications.
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2.5.2. Communications Networks
Computer Network is the connection of two or more computers to enable users to share data,
information, software and computer hardware resources. Understanding the telecommunication
technology is very important because it has changed the nature of making business by enabling
computers to communicate with each other. Therefore, telecommunication is sending
information in any form (voice, text, image, data) from one place to another using electronic or
light emitting media.
The other important terminology in computer network is data communication, which is the
transmitting and receiving of data over communication links between two or more computer
systems and a variety of inputs & output terminal. "Teleprocessing refers to the accessing of
computer power &computerized data files from a distance, generally using terminals &
telecommunication facilities."
Three conditions should be satisfied to have an effective communication. The first is, at least
two people - one sender and one receiver - must be involved. The second is there must be
information or message to be sent to the receiver, and the third is there must be a channel or
media to transmit the information.
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Telecommunication (communication) channels- are the means by which data and other forms
of communication are transmitted between the sending and receiving devices in a
telecommunication network. A telecommunication channel makes use of a variety of
Telecommunication Media. The following are some of the examples of telecommunication
media.
a) Twisted- Pair Wire - ordinary telephone wires consisting of copper wire twisted together into
pairs to form a cable. This is the oldest mode of media used for data transmission. The
media is low cost and very low speed in transmitting data up to a speed of 100 Millions of
bits per second. Twisted wire is largely used for local networks and telephone systems.
b) Coaxial Cable, which is copper or aluminium wire wrapped with insulators to minimise
interference from outside or distortion. It is more expensive, transmits data faster and less
outside interference than twisted wires. The speed of data transmission for Coaxial Cable is
up to 200Mbps (Megabits per second)
c) Fiber-optic cables: conduct light pulses generated by lasers at transmission rates as high as 2
billion bits per second. It is the fastest, lighter and more durable than twisted wires and
coaxial cables.
1.A star network: In a star network dependent computers are connected to a central host
computer, which controls all the data resources and data communication between computers.
Any communication between two dependent computers in the system takes place through the
host computer. If the host computer fails then all computers connected to the host computer will
not perform any kind of work.
2.A ring network is a circle of connection between computers. Communication between two
computers goes around the ring. If one computer in the ring goes down, the system will not fail
and other computers continue their work. The ring network has the advantages of being less
expensive than the star network because of the possibility of pooling the powers of small
computers to allow the users to share data, software and hardware resources. The major
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disadvantage of the ring network is it is more complicated because ring connection must involve
the linking of each computer on the ring.
3. Bus network - All the computers are connected to the same communication channel or bus.
Usually the same wire or fibber optic cable is used as a medium of transmission. In Bus network
there is no any central computer on which the other computers are dependent. Any computer can
communicate with any other computer in the system if it has the software that can signal the
right computer to receive the message. The main advantage of bus network is that there is no
need of relaying message because the message can be sent directly to the destined computer
without affecting the works of other connected computers to the same channel.
5. Hybrid Network Topology: A network in practice mixes the topologies discussed above and is
called a hybrid network topology
LANs connect information-processing devices within a limited physical area, such as an office
building, manufacturing plant, within a compound of a university. LAN has become a major
type of telecommunication network since the time microcomputers were introduced into offices,
departments,
WAN communication network covers a large geographical area. They are used by
manufacturing firms, banks, government agencies, Universities, etc. to transmit & receive
information across cities, regions, countries or the world. As the connection of computers in a
compound creates LAN, the connections of LAN Creates the WAN.
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The Internet is simply an international network of networks by which organizations/individuals
share external and internal information. The Internet technology started in the US Department of
Defense with the intention of allowing professionals, academicians and scientists throughout the
world to share information, to analyze problems and to share research results.
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transactions. It often involves a very large monetary value. Hence it is risky. The risk will add
up as it involves credit. As a result the following e-business success factors must be achieved.
1) The manner in which e-business fit and support a company’s business strategy
2) The degree to which e-business assures the achievement of the three key characteristics
of any business transaction. These are:
a. Validity refers to the authenticity of the legality of the transacting parties at the
two ends of the data communication system. In manual systems, signatures and
stamps used to ensure validity. In e-business, digital signatures and digital
certificates must be present to secure validity.
b. Integrity refers to the un-alteredness of any message exchanged among
transacting parties while transferred. In manual systems to ensure integrity we
sign across sealed envelopes or use courier delivery. In e-business we use
message digest to check whether the message was tampered during transmission
or not.
c. Privacy refers to the confidentiality of any information exchanges while
transacting. In manual systems, privacy is attained through signing across sealed
envelopes and personal delivery. In e-business, we use encryption to secure the
privacy of the message. Encryption is the process of converting a message in a
plain text to a secret code, which is done using either Single Key System or
public key infrastructure.
Activity 5
1 List and Discuss the improvements in business processes offered by telecommunications technology.
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
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______________________________________________________________________________________
_______________________________________________________________________________
UNIT SUMMARY
Information Technology and organizations influence one another. Information systems are built
by managers to serve the interests of the business firm.At the same time, the organization must
be aware of and open to theinfluences of information systems to benefit from new technologies.
Every computer system, either main frame computer or microcomputer' consists the hardware and the
software parts. Computer hardware is defined as “a system of interrelated components that supports the
basic system functions of input, processing, output storage & control" to provide "end users with a
powerful information processing tool”. Computer software is sequences of instructions that direct the
operations of the computer hardware to perform the basic system functions. Data is a raw fact or figure
and can take a form of a number or a date. Data is often meaningless or it does not provide
knowledge to make a specific decision. Information is a knowledge or meaning derived from
data.
The computer has been called "the machine that changed the world." We believe that
information technology has and will continue to revolutionize management.
An organization is a stable, formal social structure that takes resourcesfrom the environment and
processes them to produce outputs. Organizations are formal legal entities with internal rules and
proceduresthat must abide by laws.An organization is a collection of rights, privileges,
obligations,and responsibilities delicately balanced over a period of time throughconflict and
conflict resolution. The later definition suggest that an organization suggests that building
newinformation systems, or rebuilding old ones, involves much more than atechnical
rearrangement of machines or workers—that some informationsystems change the organizational
balance of rights, privileges, obligations,responsibilities, and feelings that have been established
over a long periodof time
There are major trends that have drastically altered the way organizationsuse technology. These
trends make it imperative that a manager become familiarwith both the use of technology and
how to control it in the organization.
At the core of any modern information system stands at least one computer. Few machines have changed
human life as radically as the computer.
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Businesses have many hardware choices, ranging from types of computers and memory devices to input
and output devices. Understanding the capabilities of hardware and the options available can save
companies millions of dollars.
In general, “Data is processed and stored in a computer system through the presence or absence of
electronic or magnetic signals in the computer circuitry or in the media it uses.
The memory capacity of a computer's primary storage and its secondary storage devices is
usually expressed in terms of bytes.
Speed of a computer is measured by its ability to read millions of instructions per second.
Software Asset Management (SAM) is a business practice that involves managing and
optimizing the purchase, deployment, maintenance, utilization and disposal of software
applications within an organization.
Checklist
Now that you have completed the second unit, you need to check whether you have grasped the
concepts discussed in this unit. If your answer to the questions below is No, then you have to go
back and read the relevant sub-section again.
Accomplishments Yes/No
Ca Understand the basics of computer system
n Know how data is represented in a computer system
Yo Describe the subsystems of a computer hardware system
u Describe the generations and classification of computes.
Describe the types of computers Software
Identify the file storage and management approaches
Describe database designing procedures
Describe terminologies of computer networks and internet
Explain how telecommunication technology is used in data transmission between
computers
Distinguish between local area and wide area networks
Distinguish between IT, ICT and IS
Understand the different views of organizations
Relate organizations and information technologies
Describe the trends in IT
Identify and evaluate key criteria or spec (specification) for deciding what
computer or related devices to purchase.
Commandment!
So as to pass through this step, at least you have to accomplish or perform 90% of the above
requirements! If not, go back and get done the unfulfilled part!
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SELF-TEST EXERCISE (SELF-ASSESSMENT QUESTIONS)
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2. The memory capacity of a computer’s primary and secondary storage is expressed in
terms of?
A. Bit, D. Record,
B. Byte, E. None of the above.
C. Field,
3. The smallest possible type of computer is best described by:
A. Micro, D. Super,
B. Mini, E. None of the above.
C. Mainframe,
4. A computer hardware that allows you to enter data and instructions into a computer:
A. Hard disk, D. Mouse,
B. CPU, E. None of the above
C. RAM,
5. A volatile memory that losses data when eclectic power is interrupted?;
A. Hard Disk, D. Magnetic Tape,
B. Compact Disk, E. None of the above
C. RAM,
6. Which software manages the operation of the CPU, controls the input/output and
storage devices of a computer system?
A. Language Software, D. Application Software,
B. Utility programs, E. None of the above
C. System Software,
7. The manner in which data is organized and arranged in a computer system from the
smallest bit to the largest database is termed
A. Bit, D. Data hierarchy,
B. File based system, E. None of the above.
C. Database system,
8. A data storage mechanism in which there is no mechanism for tagging, retrieving and
manipulating data is best described by:
A. Bit, D. Data hierarchy,
B. File based system, E. None of the above
C. Database system,
9. Anything about which we would like to collect and store data;
A. Attributes D. Database
B. Relationship E. All of the above.
C. Entity
10. A data base management system langue used to create the data base is:
A. DML D. DDL,
B. DQL E. None of the above.
C. Data dictionary
Part II: Matching
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Answer Key for UNIT TWO
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1. Software is an instruction that directs the computer hardware to perform a certain
sequences of tasks. The two major categories of software are application software and
system software. The system software – This software manages the fundamental tasks of
the hardware. The application software is the software, which is the interface between the
system software and the end user
2. If the OS can do so (without your intervention) immediately after you attach the device, it
is a plug-and-play (PnP) OS, and the device, too, is referred to as a plug-and-play device.
3. When developers of software do not make the source code of their software public it is
called proprietary software. Whereas when the developers of software provide the source
code free of charge, usually on the Web it is called open source software.
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which is a primary key in another table. Its used to relate the table in which it exists with
the table in which it is a primary key. It is used to implement one to one and one to many
relationships. Non-key attribute is an attribute which is neither primary nor foreign key.
A non-key attribute is used to interrelate its table with the other table.
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UNIT THREE
Application of Business Information System in Organizations
Unit Introduction
Dear learners, welcome to the third unit of this course! This part aims to acquaint you with
applications of Business Information System in organizations. The unit begins by identifying
the levels of management and the associated information requirements by levels of
management. Then it examines Information, Management and Decision making to
distinguish the different decision rules. Finally, it elaborates the individual and organization
decision models.
To succeed in business today, companies need information systems that can support the diverse
information and decision-making needs of their managers and businessprofessionals. In this unit,
we will explore in more detail how this is accomplishedby several types of management
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information, decision support, and other informationsystems. We concentrate our attention on
how the Internet, intranets, and otherWeb-enabled information technologies have significantly
strengthened the role thatinformation systems play in supporting the decision-making activities
of every managerand knowledge worker in business.
Unit Objectives
After studying this unit, you should be able to:
Identify the levels of decision making and their information requirements
Discuss the various applications of BIS in organizations
Explain the interaction between information, decision making and management
Identify the levels of management
Discuss the nature of decision made under each level based on their scope,
structure and time horizon
Identify the information requirements at different levels of management
Discuss features of information need at each of these managerial levels
Identify the various business functions and the role of ISs in these functions
Distinguish the information requirements of the different managerial functions
Explain how ISs in the basic business functions relate to each other
Explain what decision making is and what it involves.
Distinguish among decision making models
Relate IT and Management
Section Overview
The type of information required by decision makers in a company is directly related to the level
of management decision making and the amount of structure in the decision situations they face.
Decision making involves making decisions now about what will happen in the future.
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Obviously, decisions can turn out badly, or actual results can prove to be very different from the
estimates on which the original decision was made.
Ideally the decision maker would know with certainty what the futureconsequences will be for
each choice facing him. However, not all decision makers enjoy knowing their decisions
expected consequences and the real world is notnormally so helpful.
It is important to understand that the framework of the classic managerial pyramid applies even
in today’s downsized organizations and flattened or nonhierarchical organizational structures.
Levels of management decision making still exist, but their size, shape, and participants continue
to change as today’s fluid organizational structures evolve. Thus, the levels of managerial
decision making that must be supported by information technology in a successful organization
are:
The top management makes strategic planning decisions that are too unstructured and
that have wider scope and covers longer time horizon. BIS provides information to
reduce the uncertainty of top management
Middle level management engages in managerial control level decisions that are semi-
structured, and that have medium scope and covers medium time horizon. BIS assist
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middle level management by providing information and in making structured
decisions.
Management control is the process by which managers assure that resources are
obtained and used effectively and efficiently in the accomplishment of the
organization’s objectives. It is sometimes called tactics or tactical planning.
Lower or supervisory levels management makes too structured decisions, and that have
short-term effect and covers shorter time horizon. BIS can make automated structured
decisions beyond provision of information to support decisions.
Operational control (or operational planning) is the process of assuring that specific
tasks are carried out effectively and efficiently.
Activity 1
1 List and Discuss the levels of management.
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
2 Which managerial levels are associated with making too structured decisions?
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
3 Which managerial level makes decisions that cover longer time horizon
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
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UNIT THREE - SECTION TWO
3.2. Information requirements at different levels
Section Objectives
At the end of this section you should be able to:
• Identify the information requirements at different levels of management
• Discuss features of information need at each of these managerial levels
Section Overview
Within, and at all levels of the organization, information is continually flowing back and forth,
being usedby people to formulate plans and take decisions, and to draw attention to the need for
control action,when the plans and decisions don't work as intended. In this section, we will look
at the information needs at all levels of theorganisation.
The features of BIS the functional subsystems that we discussed in unit one and the later
developments of managerial application of computers for managerial activities had led to the
chronological identification of information requirements and the development of the following
information systems to serve the different levels of managerial activities, which are operational,
middle and top management
As it is obvious from the above table, different level of management face different decision
structure and that requires different information with the identified characteristics.
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The information used at different management levels for planning, control anddecision making
are classified into three tiers: strategic planning, management control and operational control.
The important fact, which distinguishes strategic management information from other
management information, is its external orientation, towards customers and
competitors, suppliers andperhaps other stakeholders.
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(f) Often quantitative (labor hours, volumes of sales and production)
(g) Collected in a standard manner
(h) Commonly expressed in money terms
Operational control is concerned with assuring that specific tasks are carried out effectively and
efficiently. Just as 'management control' plans are set within the guidelines of strategic plans, so
too are 'operational control' plans set within the guidelines of both strategic planning and
management control.Operational control decisions are therefore much more narrowly focused
and have a shorter time framethan tactical or strategic decisions.
The following are features of management control information
(a) Operational information is information which is needed for the conduct of day-to-
dayimplementation of plans.
(b) It will include much 'transaction data' such as data about customer orders, purchase orders,
cashreceipts and payments and is likely to have an endogenous source.
(c) Operating information must usually be consolidated into totals in management reports before
itcan be used to prepare management control information.
(d) The amount of detail provided in information is likely to vary with the purpose for which it
isneeded, and operational information is likely to go into much more detail than tactical
information,which in turn will be more detailed than strategic information.
(e) Whereas tactical information for management control is often expressed in money
terms,operational information, although quantitative, is more often expressed in terms of units,
hours,quantities of material and so on.
Activity 2
1 Differentiate between goal congruence and goal conflict.
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
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UNIT THREE - SECTION THREE
3.3. Information requirements at different functional areas of management
Section Objectives
At the end of this section you should be able to:
• Identify the various businessfunctions and the role of ISs in these functions
• Distinguish the information requirements of the different managerial functions
• Explain how ISs in the basic business functions relate to each other.
Section Overview
In an economy that produces and consumes so much information, professionalsmust know how
to use information systems in virtually every business activity.Managers must have an overall
understanding of all elements of a system, so thatthey know what options are available to control
quality, costs, and resources.Modern information systems encompass entire business cycles,
often called supplychains.
Dear learner, you as today’s professional is expected to be knowledgeable not only in your
specific line of work but also in other areas.And since practically every business process
involves information technology, you are expected to know, orquickly learn, how to use the
proper ISs in your respective position. Many employers look for generalists rather thanspecialists
and focus on the techno-manager, a manager well-versed in information technology.
Because many ISs serve multiple functions and interface with other systems, it is extremely
important for a professionalto be familiar with the way ISs facilitate work in areas outside his or
her expertise. If you work for a commercialorganization, you are bound to be part of a supply
chain or work for a unit that supports a supply chain.
Knowledge of systems in different business areas helps you cooperate with your peers and
coordinate efforts thatcross departmental boundaries. Because professionals often have
opportunities to be promoted to positions in otherdisciplines, the more you know, the better your
chances of being “cross-promoted.”
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Any functional manager performs the managerial activities of strategic planning, tactical control
and operational control depending on the level of management he is in the hierarchy of the
organisation.
The following diagram shows how activities of management are intertwined with different
managerial functions
Activities of Management
Finance
Manufacturing
Marketing
Human
Resource
Functions of Management
Information system for each business function will constitute sub-system of business information
system.
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work force planning subsystem, training and development subsystem and the compensation
subsystem.
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The financial management subsystem gathers data and information from internal sources and
external sources that are relevant to make financial decisions. The major internal sources of data
for financial decision making are income statements and the balance sheets. Production plans
from the manufacturing information system, and sales forecast from marketing information
system. Financial intelligence subsystem gathers external data and information; such as
inflation, interest rates, economic growth, etc.; from the environment that influences the financial
flow of the organisation. The major sources of external information are the financial community,
shareholders (owners) and government organisations.
The financial management information subsystem produces financial forecasts- forecasts that
cover the coming five to ten years to provide a basis for strategic financial planning.
Major financial management information systems categories are cash and securities
management, capital budgeting systems and financial planning and budgeting systems.
Software like CAD (Computer Aided Design) assist in product design, and computers with the
software CAM (Computer Aided Manufacturing) assists in assembling parts. Therefore, the MIS
is related to the conceptual system that is the manufacturing information system. The
manufacturing Information System is a subsystem of MIS that provides information on the
manufacturing process of an organisation; and it does not include the physical application of
computers such as CAD or CAM. Computers can facilitate the management of production at all
levels of manufacturing management.
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where bottlenecks occur in a specific production process. There are inventory control systems
that support the proper management of raw material, work in process and finished goods
inventories, and materials requirement planning software that assist production managers in
planning and scheduling of inputs for the production process. At managerial (tactical) Control
level, computers assist middle level production managers to prepare summary reports, to
compare overall planned and standard performance of production to actual performance in terms
of material and labour applied. At Strategic level, modern computers are so powerful to assist
strategic production managers in providing external information on current model of productions
and technologies. In addition, computers can assist production managers when they make
strategic decisions regarding plant location and facility layout. The development in information
technology has assisted managers to browse the Internet to obtain information on technological
changes and new developments in the method of production from around the world. This assists
top managers to consider alternative manufacturing and automation approaches for
manufacturing specific products in their organisations.
Much of the input information for operational marketing decision-making is obtained from the
transaction processing systems, specifically accounting information system and manufacturing
information systems.The marketing information subsystems produce sales analysis reports,
sales forecasts, customer analysis and other managerial reports related to products, prices,
distributions and market conditions.The operational control activity of marketing management
produces the day to day scheduling of sales and promotion efforts, and periodic reports of sales
volumes by region, product, customer, etc. The marketing tactical management group is
responsible to make comparison of marketing overall performance against the marketing plan of
the organisation and produce sales analysis reports. The Strategic Planning & Control activity
is mainly considering how to establish new markets, and new marketing strategies. Information
requirement for this group of marketing management includes customer analyses, competitor’s
analyses, consumer survey information, income projection, and demographic projection and
technology projections.
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Activity 3
1 Identify typical business function of an organization.
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
2 What is the information provided by human resource management information sub system of a BIS?
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
Section Overview
Managers often are referred to as decision makers, and every organization grows, prospers,or
fails as a result of decisions by its managers. Many manager decisions arestrategic, such as
whether to build a new factory, move into a new line of business,or sell off a division. Yet
managers also make decisions about every other aspectof an organization, including structure,
control systems, responses to the environment,and human resources. Managers scout for
problems, make decisions for solvingthem, and monitor the consequences to see whether
additional decisions arerequired. Good decision making is a vital part of good management
because decisionsdetermine how the organization solves its problems, allocates resources,
andaccomplishes its goals.
A choice made from available alternatives is decision while the process of identifying
problems and opportunities and then resolving them is decision making
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3.4.1. Introduction to Decision Making
A decision is a choice made from available alternatives. Many people assume that making a
choice is the major part of decision making, but it is only a part.Decision making is the process
of identifying problems and opportunities and then resolving them. Decision making involves
effort both before and after the actual choice.
There are Six Steps in the ManagerialDecision-Making Process summarized in the diagram
below:
Individual managers facing identical scenario may not reach into a same decision. This may be
due to individual differences of managers. Some managers tend to be risk averse, some are
neutral and some could be risk takers, with big appetite to risk. This concept can be elaborated
by identifying the three types of decision rules used by managers with in organizations.
The 'play it safe' basis for decision making is referred to as the maximin basis. This is
short for 'maximise the minimum achievable profit'. A basis for making decisions by
looking for the best outcome is known as the maximax basis, short for 'maximise the
maximum achievable profit'.The ‘opportunity loss’ basis for decision making is known
as minimax regret.
There are otherrules such as the expected value (EV) rule that basis decision on probability
estimates and that a decision-maker may prefer to use.
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The maximin decision rule is that a decision maker should select the alternative that offers the
leastunattractive worst outcome. This would mean choosing the alternative that maximisesthe
minimumprofits.
Suppose a businessman is trying to decide which of three mutually exclusive projects to
undertake. Sincethey are mutually exclusive, only one of the projects can be selected. Each of the
projects could lead tovarying net profit under three possible scenarios or outcomes.
The maximin decision rule is to select the option that offers the best minimum profit – the best
‘worstpossible result' that could happen.In this example, the worst possible is a loss of $20,000
with Project D, a profit of $10,000 with Project Eand a profit of $60,000 with Project F. The best
worst outcome is 60,000 and project F would therefore beselected (because this is a better 'worst
possible' than either D or E).
Using the above example, the maximum profit for Project D is $100,000; for Project E it
is$120,000; and for Project F it is $85,000.
Project E would be chosen if the maximax rule is followed, because it offers the prospect of the
biggestprofit.
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3.4.1.1.3. Minimax regret rule
The minimax regret rule aims to minimise the regret from making the wrong decision.
For each outcome situation, we measure the amount of the ‘regret’ for each decision option.
This may seem complicated, but an example should help to clarify the rule.
Using the above example in, a table of regrets can be compiled as follows.
The regret for each decision option in each outcome situation is shown in the Regret table below.
Senario/ Project and Profit
Outcome
D E F
Situation
1 0*($100,000-100,000) 20,000 (100,000-$80,000) 40,000 (100,000-$60,000)
2 30,000 (120,000-90,000) **0(120,000-120,000) 35,000(120,000-85,000)
3 105,000 (85,000-(20,000)) 75,000 (85,000-10,000) ***0(85,000-85,000)
* With outcome situation 1, the best possible result is obtained from Project D, so the regret with
Project Dis $0. The result with Option E would be 20,000 worse and the result from Option F
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would be 40,000 worse. So 20,000and 40,000 are the amounts of the regret for Options D and F
respectively.
** With outcome situation 2, the best possible result is obtained from Project E, so the regret
with ProjectE is $0. The result with Option D would be 30,000 worse and the result from Option
F would be 35,000 worse. So30,000 and 35,000 are the amounts of the regret for Options D and
F respectively.
*** With outcome situation 3, the best possible result is obtained from Project F, so the regret
withProject F is $0. The result with Option D would be 105,000 worse and the result from
Option E would be 75,000worse. So 105,000 and 75,000 are the amounts of the regret for
Options D and E respectively.
As a result under each project the Maximum regret will be 105,000, 75,000 and 40,000
The lowest of maximum regrets is 40,000 with project Option F so Option F would be selected,
if the minimaxregret rule is used as the basis for making the decision.
Programmed decisions involve situations that have occurred often enough to enable decision
rules to be developed and applied in the future.Programmed decisions are made in response to
recurring organizational problems.The decision to reorder paper and other office supplies when
inventories drop toa certain level is a programmed decision. Other programmed decisions
concernthe types of skills required to fill certain jobs, the reorder point for
manufacturinginventory, exception reporting for expenditures ten percent or more over
budget,and selection of freight routes for product deliveries. Once managers formulatedecision
rules, subordinates and others can make the decision, freeing managersfor other tasks.
Nonprogrammed decisions are made in response to situations that are unique, are poorly defined
and largely unstructured, and have important consequences. Many nonprogrammed
decisionsinvolve strategic planning because uncertainty isgreat and decisions are complex.
Decisions to build anew factory, develop a new product or service, entera new geographical
market, or relocate headquartersto another city are all nonprogrammed decisions.
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One primary difference between programmed and nonprogrammeddecisions relates to the degree
of certaintyor uncertainty that managers deal with in making thedecision. In a perfect world,
managers would have all theinformation necessary for making decisions. In reality,however,
some things are unknowable; thus, some decisionswill fail to solve the problem or attain the
desiredoutcome. Managers try to obtain information aboutdecision alternatives that will reduce
decision uncertainty.
Every decision situation can be organized on ascale according to the availability of information
and thepossibility of failure. The four positions on the scale arecertainty, risk, uncertainty, and
ambiguity
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The classical model is most useful when applied to programmed decisions and todecisions
characterized by certainty or risk because relevant information is availableand probabilities can
be calculated. For example, new analytical software programsautomate many programmed
decisions, such as freezing the account of a customerwho has failed to make payments,
determining the cell phone service plan that is mostappropriate for a particular customer, or
sorting insurance claims so that cases arehandled most efficiently.
Airlines use automated systems to optimize seat pricing,flight scheduling, and crew assignment
decisions. Retailers use software programs to analyze sales data and decide when, where,
andhow much to mark down prices. Many companies use systems that capture informationabout
customers to help managers evaluate risks and make credit decisions.
The growth of quantitative decision techniques that use computers has expandedthe use of the
classical approach. Quantitative techniques include such things as decisiontrees, payoff matrices,
break-even analysis, linear programming, forecasting,and operations research models.
The organization is incredibly complex, and managershave the time and ability to process only a
limited amount of information with which to make decisions. Because managers do not have the
time or cognitiveability to process complete information about complex decisions, they must
satisfice.
Satisficing means that decision makers choose the first solution alternativethat
satisfies minimal decision criteria.
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Rather than pursuing all alternativesto identify the single solution that will maximize economic
returns, managers will opt for the first solution that appears to solve the problem, even if better
solutionsare presumed to exist. The decision maker cannot justify the time and expense
ofobtaining complete information
Managers sometimes generate alternatives for complex problems only until theyfind one they
believe will work. The administrative model relies on assumptions different from those of the
classicalmodel and focuses on organizational factors that influence individual decisions.
According to the administrative model:
1. Decision goals often are vague, conflicting, and lack consensus among managers.
Managers often are unaware of problems or opportunities that exist in theorganization.
2. Rational procedures are not always used, and, when they are, they are confinedto a simplistic
view of the problem that does not capture the complexity of realorganizational events.
3. Managers’ searches for alternatives are limited because of human, information,and resource
constraints.
4. Most managers settle for a satisficing rather than a maximizing solution, partlybecause they
have limited information and partly because they have only vaguecriteria for what constitutes a
maximizing solution.
When people have a depth of experienceand knowledge in a particular area, theright decision
often comes quickly andeffortlessly as recognition of informationthat has been largely forgotten
by the decision maker.
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reach an agreement. Managers often engagein coalition building for making complex
organizational decisions.
Coalition building is the processof forming alliances among managers. In other words, a
manager who supports a specificalternative, such as increasing the corporation’s growth by
acquiring another company,talks informally to other executives and tries to persuade them to
support the decision.
The political model closely resembles the real environment in which most managersand decision
makers operate. Decisions are complex and involve many people, information is
oftenambiguous, and disagreement and conflictict over problems and solutions are normal.
The political model begins with four basic assumptions:
1. Organizations are made up of groups with diverse interests, goals, and values.
Managers disagree about problem priorities and may not understand or share thegoals and
interests of other managers.
2. Information is ambiguous and incomplete. The attempt to be rational is limitedby the
complexity of many problems as well as personal and organizationalconstraints.
3. Managers do not have the time, resources, or mental capacity to identify all dimensionsof the
problem and process all relevant information. Managers talk to eachother and exchange
viewpoints to gather information and reduce ambiguity.
4. Managers engage in the push and pull of debate to decide goals and discuss alternatives.
Decisions are the result of bargaining and discussion among coalitionmembers.
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However, not all managers go about making decisions in the same way. In fact, significant
differences distinguish the ways in which individual managers mayapproach problems and make
decisions concerning them. These differences can beexplained by the concept of individual
decision styles.
Personal decision style refers todistinctions among people with respect to how they
evaluate problems, generatealternatives, and make choices.
Research has identified four major decision styles:directive, analytical, conceptual, and
behavioral.
1. The directive style is used by people who prefer simple, clear-cut solutions to problems.
Managers who use this style often make decisions quickly because they donot like to deal with a
lot of information and may consider only one or two alternatives.
People who prefer the directive style generally are efficient and rationaland prefer to rely on
existing rules or procedures for making decisions.
2. Managers with an analytical style like to consider complex solutions based on asmuch data as
they can gather. These individuals carefully consider alternativesand often base their decisions
on objective, rational data from management controlsystems and other sources. They search for
the best possible decision based onthe information available.
3. People who tend toward a conceptual style also like to consider a broad amount ofinformation.
However, they are more socially oriented than those with an analyticalstyle and like to talk to
others about the problem and possible alternatives forsolving it. Managers using a conceptual
style consider many broad alternatives,rely on information from both people and systems, and
like to solve problemscreatively.
4. The behavioral style is often the style adopted by managers having a deep concernfor others as
individuals.
Managers using this style like to talk to people one-on-oneand understand their feelings about the
problem and the effect of decision on them. People with a behavioral style usually are concerned
with thepersonal development of others and may make decisions that help others achievetheir
goals.
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Radio-frequency identification (RFID) uses electronic tags that can identify and trackindividual
items such as books, jugs of laundry detergent, automobiles, or even people. RFID tags emit
radio signals that can be read remotelyby electronic readers and provideprecise, real-time
informationabout the location of specific items.
3. Lean Manufacturing
Lean manufacturing, sometimes called lean production, combinesadvanced technology with
innovative managementmethods, using highly trained employees who take a
painstakingapproach to problem solving at every stage of theproduction process to cut waste and
improve quality andproductivity.
Knowledge goes a step further from information and two steps from data; it is a
conclusion drawn from the information after it is linked to other information and
compared to what is already known. Knowledge, as opposed to information and data,
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always has a human factor. Books can contain information, but the information
becomes knowledge only when a person absorbs it and puts it to use
3.4.7.3. Groupware
Groupware is software that workson a computer network or via the Internet to link people
orworkgroups across a room or around the globe. The softwareenables managers or team
members to communicate, shareinformation, and work simultaneously on the same
document,chart, or diagram and see changes and comments asthey are made by others.
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Sometimes called collaborative worksystems, groupware systems allow people to interact
withone another in an electronic meeting space and at the sametime take advantage of computer-
based support data.
Activity 4
1 What is a decision and what is decision making.
______________________________________________________________________________________
______________________________________________________________________________________
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UNIT SUMMARY
To succeed in business today, companies need information systems that can support the diverse
information and decision-making needs
The type of information required by decision makers in a company is directly related to the level of
management decision making and the amount of structure in the decision situations they face.
Decision making involves making decisions now about what will happen in the future.
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The top management makes strategic planning decisions that are too unstructured and that have wider
scope and covers longer time horizon. BIS provides information to reduce the uncertainty of top
management
Strategic planning is the process of deciding on objectives for the organization, on changes in these
objectives, on the resources to attain these objectives, and on the policies that are to govern the
acquisition, use and disposition of these resources.
Middle level management engages in managerial control level decisions that are semi-structured, and that
have medium scope and covers medium time horizon. BIS assist middle level management by providing
information and in making structured decisions.
Management control is the process by which managers assure that resources are obtained and used
effectively and efficiently in the accomplishment of the organization’s objectives. It is sometimes called
tactics or tactical planning.
Lower or supervisory levels management makes too structured decisions, and that have short-term effect
and covers shorter time horizon. BIS can make automated structured decisions beyond provision of
information to support decisions.
Operational control (or operational planning) is the process of assuring that specific tasks are carried out
effectively and efficiently.
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The 'play it safe' basis for decision making is referred to as the maximin basis. This is short for 'maximise
the minimum achievable profit'. A basis for making decisions by looking for the best outcome is known
as the maximax basis, short for 'maximise the maximum achievable profit'.The ‘opportunity loss’ basis
for decision making is known as minimax regret.
The classical model of decision making is based on rationaleconomic assumptions and manager
beliefs about whatideal decision making should be.
Satisficing means that decision makers choose the first solution alternative that satisfies
minimal decision criteria.
The political model of decision making is useful for making nonprogrammed decisionswhen
conditions are uncertain, information is limited, and there are manager conflictsabout what goals
to pursue or what course of action to take.
Checklist
Now that you have completed the third unit, you need to check whether you have grasped the
concepts discussed in this unit. If your answer to the questions below is No, then you have to go
back and read the relevant sub-section again.
Accomplishments Yes/No
Ca Understand levels of decision making
n Know the information requirements of various decision making
Yo Explain the interaction between information, decision making and management
u Identify the levels of management
Discuss the nature of decision made under each level based on their scope,
structure and time horizon
Identify the information requirements at different levels of management
Discuss the features of information need at each managerial levels
Identify the various business functions and the role of ISs in these functions
Distinguish the information requirements of the different managerial functions
Explain how ISs in the basic business functions relate to each other
Explain what decision making is and what it involves
Distinguish among decision making rules
Distinguish among decision making models
Describe the personal traits of decision makers
Relate IT and Management
Commandment!
So as to pass through this step, at least you have to accomplish or perform 90% of the above
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requirements! If not, go back and get done the unfulfilled part!
1. A decision made by top management that are unstructured and that have wider scope
and covers longer time horizon are best described:
A. Tactical planning, D. Operational control,
B. Strategic Planning, E. None of the above.
C. Management controls,
2. The process of assuring that specific tasks are being carried out effectively and
efficiently is ?
A. Tactical planning, D. Operational control,
B. Strategic Planning, E. None of the above.
C. Management controls,
3. Which one of the following is not a characteristic of strategic management information?
A. Ad-hoc, D. External,
B. Infrequent, E. None of the above
C. Detailed,
4. Which business function involve product engineering, production planning and
operation of production facilities?
A. Marketing, D. Manufacturing,
B. Human Resource, E. None of the above.
C. Financial Management,
5. Which one of the following is not one of the steps in decision making?
A. Evaluation and Feedback, D. Selection of desired
B. Recognition of decision alternative,
requirement, E. None of the above
C. Development of alternatives,
6. The play it safe basis for decision making is best described by:
A. maximin, D. Expected value,
B. maximax, E. None of the above
C. minimax regret,
7. Decisions that involve situations that have occurred often enough to enable decision
rules to be developed and applied in the future are best described by:
A. Strategic, D. nonprogrammed,
B. Tactical, E. None of the above
C. programmed,
8. Which one of the following refers to distinctions among people with respect to how they
evaluate problems, generate alternatives and make choice?
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A. Analytical style, D. Conceptual Style,
B. Directive style, E. None of the above.
C. Personal decision style,
9. Which one of the following decision model is referred to as the classical model of
decision making?
A. Ideal-Rational Model D. Programmed Model
B. Administrative Model E. None of the above.
C. Political Model
10. A production that combines advanced technology with innovative management methods
through highly trained employees to cut waste and improve quality and productivity is
best described by
A. RFID D. Decision support systems,
B. Lean Manufacturing E. None of the above.
C. Knowledge Management
Part II: Matching
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Part III: True or False
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1. The levels of management are top, middle and lower levels associated with strategic
management, tactical management and operational management. The top management
makes strategic planning decisions that are too unstructured and that have wider scope
and covers longer time horizon. Middle level management engages in managerial control
level decisions that are semi-structured, and that have medium scope and covers medium
time horizon. Lower or supervisory levels management makes too structured decisions,
and that have short-term effect and covers shorter time horizon.
2. The managerial level associated with too structured decisions is lower level management.
3. The managerial level associated with decisions of longer horizon is top level management
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6. Programmed decision is a decision made in response to a situation that has occurred often
enough to enable decision rules to be developed and applied in the future.
nonprogrammed decision is a decision made in response to a situation that is unique, is
poorly defined and largely unstructured, and has important consequences for the
organization. One primary difference between programmed and nonprogrammed
decisions relates to the degree of certainty or uncertainty that managers deal with in
making the decision.
UNIT FOUR
Strategic Advantage of Information
Unit Introduction
Dear learners, welcome to the fourth unit of this course! This unit enables you to perceive
technology as the actual cause and driver of business strategy than an afterthought. The unit
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begins by explaining strategic role of information systems, and it proceeds by relating
information systems and business strategy. It will discuss how systems must be used to attain
competitive advantage. Finally, it will explain how you as business managers can maintain
the competitive advantage secured through technology.
This unit will show you that it is important to view information systems asmore than a set of
technologies that support efficient business operations, workgroupand enterprise collaboration,
or effective business decision making.
You should also view informationsystems strategically, that is, as vital competitive networks, as
a means of organizationalrenewal, and as a necessary investment in technologies; such
technologies helpa company adopt strategies and business processes that enable it to reengineer
or reinventitself to survive and succeed in today’s dynamic business environment.
Accordingly in this unit, you will be introduced with fundamental competitive strategy concepts
thatunderlie the strategic use of information systems and with the several majorstrategic
applications of information technology used by many companies today.
Unit Objectives
After studying this unit, you should be able to:
Identify several basic competitive strategies
Explain how they competitive strategies use information technologies to
confront the competitive forces faced by a business.
Identify several strategic uses of information technologies
Explain how technologies can help a business gain competitive advantages.
Identify the business value of using Information technologies to become an
agile competitor or form a virtual company.
Explain how knowledge management systems can help a business gain strategic
advantages.
Discuss the basic concepts that define the role of competitive strategy as it
applies to information systems.
Identify the strategic roles of Information systems
Explain how companies develop competitive strategies using information
systems
Discuss how information systems help businesses use synergies, core
competencies, and network-based strategies to achieve competitive advantage.
Explain how companies use information systems for competitive advantage
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Discuss how information systems help businesses to sustain their competitive
advantage.
Section Overview
A major role of information systems applications in business is to provide effective support of a
company’s strategies for gaining competitive advantage. This strategic role of information
systems involves using information technology to develop products, services, and capabilities
that give a company majoradvantages over the competitive forces it faces in the global
marketplace.
This role is accomplished through strategic information architecture: the collectionof strategic
information systems that supports or shapes the competitive positionand strategies of a business
enterprise.
A strategic information system can be any kind of information system (e.g., TPS, MIS,
and DSS) that uses information technology to help an organization gain a competitive
advantage, reduce a competitive disadvantage, or meet other strategic enterprise
objectives.
The figure below illustrates the various competitive forces a business might encounter, aswell as
the competitive strategies that can be adopted to counteract such forces. It isimportant to note
that the figure suggests that any of the major strategies may bedeemed useful against any of the
common competitive forces. Although it is rare andunlikely that a single firm would use all
strategies simultaneously, each has value incertain circumstances. For now, it is only important
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that you become familiar with theavailable strategic approaches. Let us look at several basic
concepts that define the roleof competitive strategy as it applies to information systems.
Businesses can developcompetitive strategies tocounter the actions ofthe competitive forces
theyconfront in the marketplace.
The figure above illustratesan important conceptual framework for understanding forces of
competition and thevarious competitive strategies employed to balance them.
A company can survive and succeed in the long run only if it successfully developsstrategies to
confront five competitive forces that shape the structure of competitionin its industry. In Michael
Porter’s classic model of competition, any businessthat wants to survive and succeed must
effectively develop and implement strategiesto counter (1) the rivalry of competitors within its
industry, (2) the threat of new entrantsinto an industry and its markets, (3) the threat posed by
substitute products that mightcapture market share, (4) the bargaining power of customers, and
(5) the bargaining powerof suppliers.
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This ever-present competitiveforce requires significant resources on the part of a firm.Guarding
against the threat of new entrants also requires the expenditure of significantorganizational
resources. Not only do firms need to compete with other firms in themarketplace, but they must
also work to create significant barriers to the entry of newcompetition. This competitive force
has always been difficult to manage, but it is evenmore so today. The Internet has created many
ways to enter the marketplace quickly andwith relatively low cost.
In the Internet world, a firm’s biggest potential competitor may be one that is not yet in
the marketplace but could emerge almost overnight.
The threat of substitutes is another competitive force that confronts a business.The effect of this
force is apparent almost daily in a wide variety of industries, often atits strongest during periods
of rising costs or inflation.
For example, when airline prices get toohigh, people substitute car travel. When the cost of
mutton gets toohigh, people eat more beef or chicken. Most products or services have some
sortof substitute available to the consumer.
Finally, a business must guard against the often opposing forces of customer andsupplier
bargaining powers. If customers’ bargaining power gets too strong, they candrive prices to
unmanageably low levels or just refuse to buy the product or service. Ifa key supplier’s
bargaining power gets too strong, it can force the price of goods andservices to unmanageably
high levels or just starve a business by controlling the flowof parts or raw materials essential to
the manufacture of a product.
Businesses can counter the threats of competitive forcesthat they face by implementing one or
more of the five basic competitive strategies.
1. Cost Leadership Strategy.
Cost leadership strategy involve becoming a low-cost producer of products and services
in the industry or finding ways to help suppliers or customers reduce their costs or
increase the costs of competitors.
2. Differentiation Strategy.
Differentiation strategy involves developing ways to differentiate a firm’s products
andservices from those of its competitors or reduce the differentiation advantages
ofcompetitors. This strategy may allow a firm to focus its products or services togive it an
advantage in particular segments or niches of a market.
3. Innovation Strategy.
Innovation strategy involves finding new ways of doing business. This strategy mayinvolve
developing unique products and services or entering unique markets ormarket niches. It may
also involve making radical changes to the business processesfor producing or distributing
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products and services that are so differentfrom the way a business has been conducted that
they alter the fundamentalstructure of an industry.
4. Growth Strategies.
Growth strategies involve significantly expanding a company’s capacity to producegoods and
services, expanding into global markets, diversifying into new productsand services, or
integrating into related products and services.
5. Alliance Strategies.
Alliance strategies involve establishing new business linkages and alliances with
customers,suppliers, competitors, consultants, and other companies. These linkagesmay
include mergers, acquisitions, joint ventures, formation of virtual companies,or other
marketing, manufacturing, or distribution agreements between a businessand its trading
partners.
One additional point regarding these strategies is that they are not mutually exclusive. The role
of Information Systemsin implementing the five basic competitive strategies is summarized
below:
Basic Strategies in the Business Use of Information Technology
1. Lower Costs
•.Use IT to substantially reduce the cost of business processes
• Use IT to lower the costs of customers or suppliers.
2. Differentiate
• Develop new IT features to differentiate products and services.
• Use IT features to reduce the differentiation advantages of competitors.
• Use IT features to focus products and services at selected market niches.
3. Innovate
• Create new products and services that include IT components.
• Develop unique new markets or market niches with the help of IT.
• Make radical changes to business processes with IT that dramatically cut costs; improve
quality, efficiency, or customer service; or shorten time to market.
4. Promote Growth
• Use IT to manage regional and global business expansion.
• Use IT to diversify and integrate into other products and services.
5. Develop Alliances
• Use IT to create virtual organizations of business partners.
• Develop internet enterprise information systems linked by the Internet and extranets that
support strategic business relationships with customers, suppliers, subcontractors, and others.
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At the end of this section you should be able to:
• Explain how companies develop competitive strategies using information systems
• How do information systems help businesses use synergies, core competencies,
and network-based strategies to achieve competitive advantage?
Section Overview
How can business managers use investments in information technology to support afirm’s
competitive strategies? There are many ways that information technology can help a business
implement the five basiccompetitive strategies, which were already discussed in the previous
section. However, there are many strategic initiatives available to a firm in addition to the five
basicstrategies of cost leadership, differentiation, innovation, growth, and alliance. In this section
we will have a look at several key strategies that can also be implemented with information
technology.
These key strategies include locking in customers or suppliers, building switching costs,
raisingbarriers to entry, and leveraging investment in information technology.
Investments in information technology can allow a business to lock in customersand suppliers
(and lock out competitors) by building valuable new relationships withthem. These business
relationships can become so valuable to customers or suppliersthat they deter them from
abandoning a company for its competitors or intimidatethem into accepting less profitable
business arrangements. Early attempts to use informationsystems technology in these
relationships focused on significantly improvingthe quality of service to customers and suppliers
in a firm’s distribution, marketing,sales, and service activities. More recent projects characterize
a move toward moreinnovative uses of information technology.
A major emphasis in strategic information systems has been to find ways to createswitching
costs in the relationships between a firm and its customers or suppliers. Inother words,
investments in information systems technology can make customers or suppliers dependent on
the continueduse of innovative, mutually beneficial inter-enterprise information systems. They
thenbecome reluctant to pay the costs in time, money, effort, and inconvenience that itwould take
to switch to a company’s competitors.
Investing in information technology enables a firm to build strategic IT capabilitiesso that they
can take advantage of opportunities when they arise. In many cases,this happens when a
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company invests in advanced computer-based information systemsto improve the efficiency of
its own business processes. Then, armed with thisstrategic technology platform, the firm can
leverage investment in IT by developingnew products and services that would not be possible
without a strong IT capability.
An important current example is the development of corporate intranets and extranetsby many
companies, which enables them to leverage their previous investments inInternet browsers, PCs,
servers, and client/server networks.
Let’s look at another important concept that can help you identify opportunities forstrategic
information systems. The value chain concept, developed by Michael Porter,views a firm as a
series, chain, or network of basic activitiesthat add value to its products and services and thus
add a margin of value to boththe firm and its customers. In the value chain conceptual
framework, some businessactivities are primary processes; others are support processes. Primary
processes arethose business activities that are directly related to the manufacture of products or
thedelivery of services to the customer. In contrast, support processes are those businessactivities
that help support the day-to-day operation of the business and that indirectlycontribute to the
products or services of the organization.
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This framework can highlightwhere competitive strategies can best be applied in a business. So
managers andbusiness professionals should try to develop a variety of strategic uses of the
Internetand other technologies for those basic processes that add the most value to a
company’sproducts or services and thus to the overall business value of the company.
The above figure provides examples of how and where information technologies can be
appliedto basic business processes using the value chain framework. Thus, the value chain
concept can help you identify where and how to apply thestrategic capabilities of information
technology. It shows how various types of informationtechnologies might be applied to specific
business processes to help firm gain competitive advantages in the marketplace.
Activity 1
1 Information system has to be viewed strategically. Explain.
______________________________________________________________________________________
______________________________________________________________________________________
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3 What are the five competitive forces that shape the structure of competition in the industry?
Identify the strategies that could be used to counter the competitive forces.
______________________________________________________________________________________
______________________________________________________________________________________
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Section Overview
Strategic information systems often change the organization as well as itsproducts, services, and
operating procedures, driving the organization intonew behavioral patterns. Successfully using
information systems to achievea competitive advantage is challenging and requires precise
coordination oftechnology, organizations, and management. In this section, we will have a look
at how businesses can use information systems to achieve competitive advantage and how to
sustain it.
Organizations may view and use information technology in many ways. For example,companies
may choose to use information systems strategically, or they may becontent to use IT to support
efficient everyday operations. If a company emphasizedstrategic business uses of information
technology, its management would viewIT as a major competitive differentiator. They would
then devise business strategiesthat use IT to develop products, services, and capabilities that give
the companymajor advantages in the markets in which it competes.
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promotingbusiness innovation with a strategy of making major improvements to
businessprocesses so that a company can become a much stronger and more successful
competitorin the marketplace.
Information technology plays a major role in reengineering most business processes.The speed,
information-processing capabilities, and connectivity of computers andInternet technologies can
substantially increase the efficiency of business processes, aswell as communications and
collaboration among the people responsible for their operationand management.
An agile company is a company that able to move quickly and with suppleness, skill,
and control.
To be an agile company, a business must use four basic strategies. First, thebusiness must ensure
that customers perceive the products or services of an agile companyas solutions to their
individual problems. Thus, it can price products on the basisof their value as solutions, rather
than their cost to produce. Second, an agile companycooperates with customers, suppliers, other
companies, and even with its competitors.
Third, an agile company organizes so that it thrives on change and uncertainty. It usesflexible
organizational structures keyed to the requirements of different and constantlychanging customer
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opportunities. Fourth, an agile company leverages the impact ofits people and the knowledge
they possess. By nurturing an entrepreneurial spirit, anagile company provides powerful
incentives for employee responsibility, adaptability,and innovation.
Information technologies enable a companyto partner with its suppliers, distributors, contract
manufacturers, and others via collaborativeportals and other Web-based supply chain systems
that significantly improveits agility in exploiting innovative business opportunities.
Virtual companies typically form virtual workgroupsand alliances with business partners that are
interlinked by the Internet, intranets, andextranets. Notice that this company has organized
internally into clusters of processand cross-functional teams linked by intranets. It has also
developed alliances andextranet links that form inter-enterprise information systems with
suppliers, customers,subcontractors, and competitors. Thus, virtual companies create flexible
andadaptable virtual workgroups and alliances keyed to exploit fast-changing
businessopportunities.
You may ask why do people form virtual companies? This is because virtual companies are one
of the best ways to implement key businessstrategies and alliances that promise to ensure success
in today’s turbulent businessclimate. Several major reasons for virtual companies stand out.
For example, a business may not have the time or resources to develop the
necessarymanufacturing and distribution infrastructure, personnel competencies, and
informationtechnologies to take full advantage of a new market opportunity in a timelymanner. It
can assemble the components it needs to provide a world-class solution forcustomers and capture
the market opportunity only by quickly forming a virtual companythrough a strategic alliance of
all-star partners. Today, of course, the Internet,intranets, extranets, and a variety of other Internet
technologies are vital componentsin creating such successful solutions.
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thosethat consistently create new knowledge, disseminate it widely throughout the
organization,and quickly embody it in new technologies and products. These activities define
the“knowledge-creating” company, whose sole business is continuous innovation.
Many companies today can only realize lasting competitive advantage if theybecome
knowledge-creating companies or learning organizations. That means consistentlycreating new
business knowledge, disseminating it widely throughout thecompany, and quickly building the
new knowledge into their products and services.
Knowledge-creating companies exploit two kinds of knowledge. One is explicitknowledge,
which is the data, documents, and things written down or stored on computers.The other kind is
tacit knowledge, or the “how-tos” of knowledge, which residesin workers.
Explicit knowledge is a one captured as data on documents, and things written down
or stored on computers where as tacit knowledge is a one that resides in workers. For
example, a chef may prepare a guide to make a burger. This guide is an explicit
knowledge. However, the burger prepared by him and someone else based on the guide
may not have same taste. The variant is tacit knowledge which is difficult if not
impossible to codify and transfer it like the explicit knowledge.
Tacit knowledge can often represent some of the most important informationwithin an
organization. Long-time employees of a company often “know” manythings about how to
manufacture a product, deliver the service, deal with a particularvendor, or operate an essential
piece of equipment. This tacit knowledge is not recordedor codified anywhere because it has
evolved in the employee’s mind throughyears of experience. Furthermore, much of this tacit
knowledge is never shared withanyone who might be in a position to record it in a more formal
way because there isoften little incentive to do so or simply, “Nobody ever asked.”
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wherever and whenever it’s needed in an organization. Thisinformation includes processes,
procedures, patents, reference works, formulas, bestKnowledge managementcan be viewed as
three levelsof techniques, technologies,and systems that promotethe collection,
organization,access, sharing, and use ofworkplace and enterpriseknowledge as summarized in
the figure below:
Internet and intranet Websites, groupware, data mining, knowledge bases, and online discussion
groups aresome of the key technologies that may be used by a KMS.
Knowledge management systems also facilitate organizational learning andknowledge creation.
They are designed to provide rapid feedback to knowledgeworkers, encourage behavior changes
by employees, and significantly improve businessperformance. As the organizational learning
process continues and its knowledgebase expands, the knowledge-creating company works to
integrate its knowledge intoits business processes, products, and services. This integration helps
the companybecome a more innovative and agile provider of high-quality products and
customerservices, as well as a formidable competitor in the marketplace.
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At the end of this section you should be able to:
• Explain how information systems help businesses to sustain their competitive
advantage
Section Overview
The competitive advantages that strategic systems confer do not necessarily lastlong enough to
ensure long-term profitability. Because competitors can retaliateand copy strategic systems,
competitive advantage is not always sustainable. In this section we will look at how business use
information systems to sustain their competitive advantage.
Markets, customer expectations, and technology change; globalization hasmade these changes
even more rapid and unpredictable. The Internet can makecompetitive advantage disappear very
quickly because virtually all companiescan use this technology. Classic strategic systems, such
as Airlines’ computerized reservation system, bank’s ATM system, and post offices package
tracking system, benefited by being the first in their industries. Thenrival systems emerged.
Information systems alone cannotprovide an enduring business advantage. Systems originally
intended to bestrategic frequently become tools for survival, required by every firm to stay
inbusiness, or they may inhibit organizations from making the strategic changesessential for
future success.
In order to sustain the competitive advantage firms consciously engage in such activities as
strategic alignment and managing their strategic transitions. Each of which are discussed below
as follows:
Most businesses get it wrong: Information technology takes on a life of its ownand does not
serve management and shareholder interests very well. Instead ofbusiness people taking an
active role in shaping IT to the enterprise, they ignoreit, claim not to understand IT, and tolerate
failure in the IT area as just a nuisanceto work around. Such firms pay a hefty price in poor
performance. Successfulfirms and managers understand what IT can do and how it works, take
an activerole in shaping its use, and measure its impact on revenues and profits.
Activity 2
1 What is Business Process Re-engineering?
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
2 Information System can be used to create an agile company. What is an agile company?
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
UNIT SUMMARY
A major role of information systems applications in business is to provide effective support of a
company’s strategies for gaining competitive advantage.
A strategic information system can be any kind of information system (e.g., TPS, MIS,
and DSS) that uses information technology to help an organization gain a competitive
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advantage, reduce a competitive disadvantage, or meet other strategic enterprise
objectives.
Competition is a positive characteristic in business, and competitors share a natural, and often
healthy, rivalry. This rivalry encourages and sometimes requires a constant effort to gain
competitive advantage in the marketplace.
There are 5 competitive forces (1) the rivalry of competitors within its industry, (2) the threat of
new entrants into an industry and its markets, (3) the threat posed by substitute products that
might capture market share, (4) the bargaining power of customers, and (5) the bargaining power
of suppliers.
They can be countered though 5 strategies (1) Cost Leadership Strategy, (2) Differentiation
Strategy, (3) Innovation Strategy, (4) Growth Strategies and (5) Alliance Strategies.
There are many ways that information technology can help a business implement the five
basiccompetitive strategies
Strategic information systems often change the organization as well as its products, services, and
operating procedures, driving the organization into new behavioral patterns.
An agile company is a company that able to move quickly and with suppleness, skill,
and control.
A virtual company (also called a virtual corporation or virtual organization) is an organization that uses
information technology to link people, organizations, assets, and ideas.
Explicit knowledge is a one captured as data on documents, and things written down or stored on
computers where as tacit knowledge is a one that resides in workers. For example, a chef may prepare a
guide to make a burger. This guide is an explicit knowledge. However, the burger prepared by him and
someone else based on the guide may not have same taste. The variant is tacit knowledge which is
difficult if not impossible to codify and transfer it like the explicit knowledge.
The competitive advantages that strategic systems confer do not necessarily lastlong enough to
ensure long-term profitability. Because competitors can retaliateand copy strategic systems,
competitive advantage is not always sustainable
Checklist
Now that you have completed the fourth unit, you need to check whether you have grasped the
concepts discussed in this unit. If your answer to the questions below is No, then you have to go
back and read the relevant sub-section again.
Accomplishments Yes/No
136
Ca Understand the competitive forces of market place
n Know the several basic competitive strategies
Yo Explain how they competitive strategies use information technologies to confront
u the competitive forces faced by a business.
Identify several strategic uses of information technologies
Explain how technologies can help a business gain competitive advantages
Identify the business value of using Information technologies to become an agile
competitor or form a virtual company.
Explain how knowledge management systems can help a business gain strategic
advantages
Discuss the basic concepts that define the role of competitive strategy as it
applies to information systems
Identify the strategic roles of Information systems
Explain how companies develop competitive strategies using information
systems
Discuss how information systems help businesses use synergies, core
competencies, and network-based strategies to achieve competitive advantage.
Explain how companies use information systems for competitive advantage
Discuss how information systems help businesses to sustain their competitive
advantage.
Commandment!
So as to pass through this step, at least you have to accomplish or perform 90% of the above
requirements! If not, go back and get done the unfulfilled part!
1. The collection of strategic information systems that support the competitive position of
a business is best described by:
A. Transaction Processing System, D. Strategic Information
B. Management Information Architecture,
System, E. None of the above.
C. Decision Support System,
2. Which one of the following competitive forces explain the arrival of new internet based
business that offer similar services?
A. Rivalry of competitors , D. Customers power,
B. Entrant threat, E. None of the above.
C. Substitute threat,
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3. A strategy that involves developing ways to make a firm’s products unique from
competitors:
A. Cost leadership, D. Growth,
B. Innovation, E. None of the above.
C. Differentiation,
4. Which competitive strategy is supported by information systems if a business uses IT to
create virtual organizations of business partners?
A. Alliance, D. Differentiation,
B. Growth, E. None of the above.
C. Innovation,
5. The concept that views the firm as a series, chain, or network of basic activities that add
value to its products and thus add a margin of value is best described by:
A. Strategy Architecture, D. Virtuality,
B. Value Chain, E. None of the above.
C. Agility,
6. Activities performed a business to manufacture, promote and sell its products is best
described by:
A. Value chain activities, D. Inbound logistics,
B. Primary activities, E. None of the above.
C. Support activities,
7. A fundamental rethinking and radical redesign of business processes to achieve
dramatic improvements in cost, quality, speed and service is best described by:
A. Agile Company, D. Virtual company,
B. Business Strategy, E. None of the above.
C. BPR,
8. Which one of the following refers to knowledge captured as data on documents and
things written down or stored on computers?
A. Knowledge creation, D. Explicit knowledge,
B. Tacit knowledge, E. None of the above.
C. Knowledge management,
9. The techniques, technologies, and systems that promote the collection, organization,
access, sharing, and use of workplace and enterprise knowledgeis best described by:
A. Knowledge creation, D. Explicit knowledge,
B. Tacit knowledge, E. None of the above.
C. Knowledge management,
10. An attempt to make IT not take a life of its own and does not fail to serve management
interests is best described by:
A. Strategy Sustainability D. Strategic alignment,
B. Strategic Transitions E. None of the above.
C. ERP
Part II: Matching
1. Growth strategies involve establishing new business linkages and alliances with
customers,suppliers, competitors, consultants, and other companies..
2. Innovation strategy involves finding new ways of doing business.
3. If customers’ bargaining power gets too strong, they candrive prices to unmanageably
low levels or just refuse to buy the product or service is a threat.
4. In the Internet world, a firm’s biggest potential competitor may be one that is not yet in
the marketplace but could emerge almost overnight.
5. Use of IT features to focus products and services at selected market niches are a low cost
strategy application.
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6. Use of IT to manage regional and global business expansion is a growth strategy
application
7. Key strategies that could be implemented using IT include locking in customers or
suppliers, building switching costs, raisingbarriers to entry, and leveraging investment in
information technology
8. Primary value chain processes are those businessactivities that help support the day-to-
day operation of the business and that indirectlycontribute to the products or services of
the organization.
9. Reengineering is a fundamentalrethinking and radical redesign of business processes to
achieve dramaticimprovements in cost, quality, speed, and service
10. An agile company is a company that able to move quickly and with suppleness, skill, and
control.
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the bargaining power of suppliers. They can be countered though (1) Cost Leadership
Strategy, (2) Differentiation Strategy, (3) Innovation Strategy, (4) Growth Strategies and
(5) Alliance Strategies.
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UNIT FIVE
Management of Information Systems
Unit Introduction
Dear learners, welcome to the last unit of this course! This part focuses on building and
managing systems in organizations. This partanswers questions such as: What activities are
required to build a new informationsystem? What alternative approaches are available for
building system solutions?How should information systems projects be managed to ensure
that new systemsprovide genuine business benefits and work successfully in the organization?
Whatissues must be addressed when building and managing global systems?
Unit Objectives
After studying this unit, you should be able to:
Explain how building new systems produce organizational change.
Identify the core activities in the systems development process.
Discuss the principal methodologies for modeling and designing systems.
Elaborate the alternative methods for building information systems.
Understand the concept of system resource management
Section Overview
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Information technology can promote various degrees of organizational change,ranging from
incremental to far-reaching. There are four kinds ofstructural organizational change that are
enabled by information technology:(1) automation, (2) rationalization, (3) business process
redesign, and (4)paradigm shifts. Each carries different risks and rewards.
The most common form of IT-enabled organizational change is automation.The first applications
of information technology involved assisting employeeswith performing their tasks more
efficiently and effectively. Calculatingpaychecks and payroll registers, giving bank tellers instant
access to customerdeposit records, and developing a nationwide reservation network for
airlineticket agents are all examples of early automation.
The most common forms of organizational change are automation and rationalization.
These relatively slow-moving and slow-changing strategies present modest returns but
little risk. Faster and more comprehensive change—such as redesign and paradigm
shifts—carries high rewards but offers substantial chances of failure.
Six sigma is a specific measureof quality, representing 3.4 defects per million opportunities.
Most companiescannot achieve this level of quality, but use six sigma as a goal for
drivingongoing quality improvement programs.
Business process redesign reorganizes workflows, combining steps to cut wasteand eliminate
repetitive, paper-intensive tasks. (Sometimes the new designeliminates jobs as well.) It is much
more ambitious than rationalization ofprocedures, requiring a new vision of how the process is to
be organized.
Rationalizing procedures and redesigning business processes are limited tospecific parts of a
business. New information systems can ultimately affect thedesign of the entire organization by
transforming how the organization carriesout its business or even the nature of the business. This
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more radical form of businesschange is called a paradigm shift. A paradigm shift involves
rethinking thenature of the business and the nature of the organization.
Many businesses todayare trying to use information technology to improve their business
processes.Some of these systems entail incremental process change, but others requiremore far-
reaching redesign of business processes. To deal with these changes,organizations are turning to
business process management. Business processmanagement provides a variety of tools and
methodologies to analyze existingprocesses, design new processes, and optimize those processes.
BPM is neverconcluded because process improvement requires continual change.
Companiespracticing business process management go through the following steps:
1. Identify processes for change: One of the most important strategicdecisions that a firm can
make is not deciding how to use computers toimprove business processes, but understanding
what business processesneed improvement. When systems are used to strengthen the
wrongbusiness model or business processes, the business can become moreefficient at doing
what it should not do. As a result, the firm becomesvulnerable to competitors who may have
discovered the right businessmodel. Considerable time and cost may also be spent improving
businessprocesses that have little impact on overall firm performance and revenue.
Managers need to determine what business processes are the most importantand how improving
these processes will help business performance.
2. Analyze existing processes: Existing business processes should bemodeled and documented,
noting inputs, outputs, resources, and thesequence of activities. The process design team
identifies redundant steps,paper-intensive tasks, bottlenecks, and other inefficiencies.
3. Design the new process: Once the existing process is mapped andmeasured in terms of time
and cost, the process design team will try toimprove the process by designing a new one. A new
streamlined “to-be” processwill be documented and modeled for comparison with the old
process.
4. Implement the new process: Once the new process has been thoroughlymodeled and analyzed,
it must be translated into a new set of proceduresand work rules. New information systems or
enhancements to existingsystems may have to be implemented to support the redesigned process.
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The new process and supporting systems are rolled out into the businessorganization. As the
business starts using this process, problems are uncoveredand addressed. Employees working
with the process may recommendimprovements.
Although many business process improvements are incremental andongoing, there are occasions
when more radical change must take place.
BPM poses challenges. Executives report that the largest single barrier tosuccessful business
process change is organizational culture. Employees do notlike unfamiliar routines and often try
to resist change. This is especially true ofprojects where organizational changes are very
ambitious and far-reaching.
Managing change is neither simple nor intuitive, and companies committed toextensive process
improvement need a good change management strategy
The activities that go into producing an information system solution toan organizational problem
or opportunity are called systems development.Systems development is a structured kind of
problem solved with distinctactivities.
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5.1.2.2. Structured Methodologies
Structured methodologies have been used to document, analyze, and designinformation systems
since the 1970s. Structured refers to the fact thatthe techniques are step by step, with each step
building on the previousone. Structured methodologies are top-down, progressing from the
highest,most abstract level to the lowest level of detail—from the general to the specific.
The primary tool for representing a system’s component processes and theflow of data between
them is the data flow diagram (DFD). The data flow diagramoffers a logical graphic model of
information flow, partitioning a systeminto modules that show manageable levels of detail. It
rigorously specifies theprocesses or transformations that occur within each module and the
interfacesthat exist between them.
DFD uses 4 symbols each representing the data elements represented by DFD.
1. Data sources and destinations
– Appear as squares
– Represent organizations or individuals that send or receive data used or
produced by the system
– An item can be both a source and a destination
2. Data flows
– Appear as arrows
– Represent the flow of data between sources and destinations, processes, and data
stores
3. Processes
– Appear as circles
– Represent the transformation of data
4. Data stores
– Appear as two horizontal lines
– Represent a temporary or permanent repository of data
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The Figure below illustrates a data flow diagram prepared for payment process.
The diagrams can be used to depict higher-level processes as well as lowerleveldetails. Through
leveled data flow diagrams, a complex process can bebroken down into successive levels of
detail. An entire system can be dividedinto subsystems with a high-level data flow diagram. Each
subsystem, in turn,can be divided into additional subsystems with second-level data flow
diagrams,and the lower-level subsystems can be broken down again until the lowest levelof
detail has been reached.
Another tool for structured analysis is a data dictionary, which containsinformation about
individual pieces of data and data groupings within a system. The data dictionary defines the
contents of data flows and datastores so that systems builders understand exactly what pieces of
data they contain.
Process specifications describe the transformation occurring within thelowest level of the data
flow diagrams. They express the logic for each process.
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Structured methods are useful for modeling processes, but do not handle themodeling of data
well. They also treat data and processes as logically separateentities, whereas in the real world
such separation seems unnatural. Differentmodeling conventions are used for analysis (the data
flow diagram) and fordesign (the structure chart).
Object-oriented development addresses these issues. Object-orienteddevelopment uses the object
as the basic unit of systems analysis and design.
An object combines data and the specific processes that operate on those data.
Data encapsulated in an object can be accessed and modified only by theoperations, or methods,
associated with that object. Instead of passing data toprocedures, programs send a message for an
object to perform an operation thatis already embedded in it. The system is modeled as a
collection of objects andthe relationships among them. Because processing logic resides within
objectsrather than in separate software programs, objects must collaborate with eachother to
make the system work.
Object-oriented modeling is based on the concepts of class and inheritance.Objects belonging to
a certain class, or general categories of similar objects,have the features of that class. Classes of
objects in turn can inherit all thestructure and behaviors of a more general class and then add
variables andbehaviors unique to each object.
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thesystems-building stages, but they roughly correspond to the stages of systemsdevelopment we
have just described.
The systems life cycle methodology maintains a formal division of laborbetween end users and
information systems specialists. Technical specialists,such as systems analysts and programmers,
are responsible for much of thesystems analysis, design, and implementation work; end users are
limited toproviding information requirements and reviewing the technical staff’s work.The life
cycle also emphasizes formal specifications and paperwork; so manydocuments are generated
during the course of a systems project.
The systems life cycle is still used for building large complex systems that require a rigorous and
formal requirements analysis, predefined specifications, and tight controls over the system
building process. However, the systems life cycle approach can be costly, time-consuming, and
inflexible. Although systems builders can go back and forth among stages in thelife cycle, the
systems life cycle is predominantly a “waterfall” approachin which tasks in one stage are
completed before work for the next stagebegins.
The figure below shows the Traditional System Development Life Cycle (The waterfall
approach)
5.1.3.2. Prototyping
Prototyping consists of building an experimental system rapidly and inexpensivelyfor end users
to evaluate. By interacting with the prototype, users can geta better idea of their information
requirements. The prototype endorsed by theusers can be used as a template to create the final
system.
The prototype is a working version of an information system or part of thesystem, but it is meant
to be only a preliminary model. Once operational, theprototype will be further refined until it
conforms precisely to users’ requirements.
Once the design has been finalized, the prototype can be converted to apolished production
system.
The process of building a preliminary design, trying it out, refining it, andtrying again has been
called an iterative process of systems developmentbecause the steps required to build a system
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can be repeated over and overagain. Prototyping is more explicitly iterative than the conventional
life cycle,and it actively promotes system design changes. It has been said that
prototypingreplaces unplanned rework with planned iteration, with each version moreaccurately
reflecting users’ requirements.
The series of activities to develop a new system is called system development life cycle (SDLC).
These activities consist of systems analysis, systems design, programming,testing, conversion,
and production and maintenance.
Systems analysis is the analysis of a problem that a firm tries to solve with aninformation
system. It consists of defining the problem, identifying its causes,specifying the solution, and
identifying the information requirements thatmust be met by a system solution.
The systems analyst creates a road map of the existing organization andsystems, identifying the
primary owners and users of data along with existinghardware and software. The systems analyst
then details the problems ofexisting systems. By examining documents, work papers, and
procedures,observing system operations, and interviewing key users of the systems, theanalyst
can identify the problem areas and objectives a solution would achieve.
Often, the solution requires building a new information system or improvingan existing one.
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The systems analysis also includes a feasibility study to determine whetherthat solution is
feasible, or achievable, from a financial, technical, and organizationalstandpoint. The feasibility
study determines whether the proposedsystem is expected to be a good investment, whether the
technology needed forthe system is available and can be handled by the firm’s information
systems specialists, and whether the organization can handle the changes introduced bythe
system.
Normally, the systems analysis process identifies several alternativesolutions that the
organization can pursue and assess the feasibility of each.
A written systems proposal report describes the costs and benefits, and theadvantages and
disadvantages, of each alternative. It is up to management todetermine which mix of costs,
benefits, technical features, and organizationalimpacts represents the most desirable alternative.
The systems designer details the system specifications that will deliverthe functions identified
during systems analysis. These specifications shouldaddress all of the managerial,
organizational, and technological components ofthe system solution.
Like houses or buildings, information systems may have many possibledesigns. Each design
represents a unique blend of all technical and organizationalcomponents. What makes one design
superior to others is the easeand efficiency with which it fulfills user requirements within a
specific set oftechnical, organizational, financial, and time constraints.
5.1.4.3. Programming
During the programming stage, system specifications that were preparedduring the design stage
are translated into software program code. Today, manyorganizations no longer do their own
programming for new systems. Instead,they purchase the software that meets the requirements
for a new system fromexternal sources such as software packages from a commercial software
vendor,software services from an application service provider, or outsourcing firmsthat develop
custom application software for their clients.
5.1.4.4. Testing
Exhaustive and thorough testing must be conducted to ascertain whether thesystem produces the
right results. Testing answers the question, “Will the systemproduce the desired results under
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known conditions?” The amount of time needed to answer this question has been
traditionallyunderrated in systems project planning. Testing is time-consuming:
Testing an information system can be broken down into three types of activities:unit testing,
system testing, and acceptance testing. Unit testing, or programtesting, consists of testing each
program separately in the system. It is widelybelieved that the purpose of such testing is to
guarantee that programs are errorfree,but this goal is realistically impossible. Testing should be
viewed instead as ameans of locating errors in programs, focusing on finding all the ways to
make aprogram fail. Once they are pinpointed, problems can be corrected.
System testing tests the functioning of the information system as a whole. Ittries to determine
whether discrete modules will function together as plannedand whether discrepancies exist
between the way the system actually worksand the way it was conceived. Among the areas
examined are performancetime, capacity for file storage and handling peak loads, recovery and
restartcapabilities, and manual procedures.
Acceptance testing provides the final certification that the system is readyto be used in a
production setting. Systems tests are evaluated by users andreviewed by management. When all
parties are satisfied that the new systemmeets their standards, the system is formally accepted for
installation.
The systems development team works with users to devise a systematic testplan. The test plan
includes all of the preparations for the series of tests wehave just described.
Conversion is the process of changing from the old system to the newsystem. Four main
conversion strategies can be employed: the parallel strategy, the direct cutover strategy, the pilot
study strategy, and the phased approach strategy.
In a parallel strategy, both the old system and its potential replacement are run together for a time
until everyone is assured that the new one functions correctly. This is the safest conversion
approach because, in the event of errors or processing disruptions, the old system can still be
used as a backup.
The pilot study strategy introduces the new system to only a limited area of the organization,
such as a single department or operating unit. When this pilot version is complete and working
smoothly, it is installed throughout the rest of the organization, either simultaneously or in
stages.
The phased approach strategy introduces the new system in stages, eitherby functions or by
organizational units. If, for example, the system is introducedby function, a new payroll system
might begin with hourly workers who arepaid weekly, followed six months later by adding
salaried employees (who arepaid monthly) to the system. If the system is introduced by
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organizational unit,corporate headquarters might be converted first, followed by outlying
operatingunits four months later.
Moving from an old system to a new one requires that end users be trained touse the new system.
Detailed documentation showing how the system worksfrom both a technical and end-user
standpoint is finalized during conversiontime for use in training and everyday operations. Lack
of proper training anddocumentation contributes to system failure, so this portion of the
systemsdevelopment process is very important.
After the new system is installed and conversion is complete, the system issaid to be in
production. During this stage, the system will be reviewed byboth users and technical specialists
to determine how well it has met its originalobjectives and to decide whether any revisions or
modifications are inorder. In some instances, a formal post-implementation audit document
isprepared. After the system has been fine-tuned, it must be maintained whileit is in production
to correct errors, meet requirements, or improve processingefficiency. Changes in hardware,
software, documentation, or proceduresto a production system to correct errors, meet new
requirements, or improveprocessing efficiency are termed maintenance.
Section Overview
Today, it is widely accepted that managing the information resource is very often equally
important.
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The Information Systems resource management focuses on the fusion of information systems,
technology, and business management for two purposes: the use of information systems to solve
business problems and the management of technology, which includes new product development
and enterprise management.
The vast majority of information systems are developed for and used by people in functional
areas (e.g., manufacturing, human resources, accounting, finance and marketing). To develop
information systems that address the needs of the organization, resource managers must possess
a solid mix of business and technical knowledge. They must understand organizational
structures, objectives, operations (including processes and the flows of data between processes)
and the financial implications related to these factors. Only by understanding these factors can a
resource manager communicate effectively with users and then design systems that support their
needs.
System resource managers must stay up-to-date with evolving information technologies and have
a solid foundation of technical skills to select appropriate technologies and to implement
computer-based information systems. Thus, information system managers must be well versed in
topics such as systems development tools and techniques, information architecture, network
configurations, databases, and systems integration.
All the previous chapters believed to boost your know how on system resources other system
development processes. In this section a primer is provided on system resource management.
The major categories of information resources are hardware, software, databases, networks,
procedures, security facilities and physical buildings.
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one.Director of ISD has changed from a technical manager to a senior executive called the chief
information officer (CIO).
5.2.3. IS Functions
The major IS functions include: Managing systems development and systems project
management &computer operations, including the computer center, Staffing, training and
developing IS skills; provide technical services and Infrastructure planning, development and
control, Initiating and designing specific strategic IS, Incorporating the Internet and e-commerce
into the business, managing system integration including the Internet, intranets and extranets,
Educating the non-IS managers about IT, Educating the IS staff about the business, Supporting
end user computing, partnering with the executives, managing outsourcing, Proactively using
business and technical knowledge to “seed” innovative ideas about IT, creating business
alliances with vendors and IS departments in other organizations and so forth.
Activity 1
1 List and discuss the four kinds of structural organizational change that are enabled by information
technology
______________________________________________________________________________________
______________________________________________________________________________________
_____________________________________________________________________________________
2 What are the alternative methodologies for modeling and designing systems?
______________________________________________________________________________________
______________________________________________________________________________________
_______________________________________________________________________________
UNIT SUMMARY
Building a new information system is one kind of planned organizational change.
Information technology can promote various degrees of organizational change,ranging from incremental
to far-reaching.
155
The most common forms of organizational change are automation and rationalization.
These relatively slow-moving and slow-changing strategies present modest returns but
little risk. Faster and more comprehensive change—such as redesign and paradigm
shifts—carries high rewards but offers substantial chances of failure.
Many businesses todayare trying to use information technology to improve their business processes.
The primary tool for representing a system’s component processes and theflow of data between them is
the data flow diagram (DFD).
Another tool for structured analysis is a data dictionary, which containsinformation about individual
pieces of data and data groupings within a system.
Systems differ in terms of their size and technological complexity and in termsof the
organizational problems they are meant to solve. A number of systemsbuildingapproaches have
been developed to deal with these differences. These include: the traditional systems lifecycle,
prototyping, application software packages, end-user development, andoutsourcing.
The series of activities to develop a new system is called system development life cycle. These
activities consist of systems analysis, systems design, programming,testing, conversion, and
production and maintenance.
The Information Systems resource management focuses on the fusion of information systems,
technology, and business management for two purposes: the use of information systems to solve
business problems and the management of technology, which includes new product development
and enterprise management
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Checklist
Now that you have completed the last unit, you need to check whether you have grasped the
concepts discussed in this unit. If your answer to the questions below is No, then you have to go
back and read the relevant sub-section again.
Accomplishments Yes/No
Ca Explain how building new systems produce organizational change.
n Identify the core activities in the systems development process.
Yo Discuss the principal methodologies for modeling and designing systems.
u Elaborate the alternative methods for building information systems.
Understand the concept of system resource management
Commandment!
So as to pass through this step, at least you have to accomplish or perform 90% of the above
requirements! If not, go back and get done the unfulfilled part!
1. Which IT enabled organizational change is relatively slow moving and slow changing
strategies with modest return but little risk:
A. BPR, D. Paradigm Shift,
B. Rationalization, E. None of the above.
C. Redesign,
2. Which one of the following IT enabled change is found in programs for making a series
of continues improvement such as TQM and six-sigma?
A. Rationalization, D. Paradigm Shift,
B. Redesign, E. None of the above.
C. BPR,
3. A more powerful type of organizational change is business process redesign, in which
business processes are analyzed, simplified, and redesigned:
A. Rationalization, D. Paradigm Shift,
B. Redesign, E. None of the above
C. BPR,
4. Which concept provides a variety of tools and methodologies to analyze existing
processes, design new processes, and optimize those processes.
A. BPR, D. Rationalization,
B. BPM, E. None of the above.
C. Paradigm shift,
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5. A logical graphical documentation technique that is used to represent the logical flow of
data is:
A. DFD, D. Document flow chart,
B. ERD, E. None of the above.
C. Program flow chart,
6. Which system development methodology is iterative and incremental?
A. Peripheral, D. Structured,
B. Hap-hazard, E. None of the above.
C. Object-oriented,
7. In a data flow diagram processes are represented as:
A. Arrow, D. Circle,
B. Parallel lines, E. None of the above.
C. Square,
8. A system development approach that involves sequential stages called waterfall is best
described by:
A. Continuous, D. Life cycle,
B. Agile, E. None of the above.
C. Prototyping,
9. Which system development approach is used for building an experimental system
rapidly and inexpensively for end users to evaluate?
A. Continuous, D. Life cycle,
B. Agile, E. None of the above.
C. Prototyping,
10. The stage in which initial investigation is done to analyze problem that a firm tries to
solve with an information system:
A. System Analysis D. Testing,
B. System Design E. None of the above.
C. Programming
158
5 System testing that consists of testing each program separately in the E Prototype
system
6 System testing provides the final certification that the system is readyto be F Acceptance
used in a production setting Testing
7 The process of changing from an old system to a new system G Conceptual
design
8 A system development stage in which system specifications that were H Parallel
preparedduring the design stage are translated into software program code
9 The series of activities performed to develop a system I SDLC
10 A working version of an information system that serve as a J Resource
preliminary model Management
K Phased
L DFD
M ERD
N Data Input
O None of the above
1. The prototype is a working version of an information system or part of the system, but it
is meant to be only a preliminary model
2. Technical specialists, such as systems analysts and programmers, are responsible for
much of the systems analysis, design, and implementation work
3. The design of an information system is the overall plan or model for that system.
4. Process or circle represent a temporary or permanent repository of data
5. Data sources and destination represent organizations or individuals that send or receive
data used or produced by the system and depicted as circle.
6. New information systems are an outgrowth of a process of organizationalproblem solving.
7. Employees do notlike unfamiliar routines and often try to resist change.
8. Paradigm shifts and reengineering often fail because extensive organizationalchange is so
difficult to orchestrate
9. Business process redesign reorganizes workflows, combining steps to cut wasteand eliminate
repetitive, paper-intensive tasks
10. A deeper form of organizational change—one that follows quickly fromearly automation—is
rationalization of procedures.
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FEED BACK/ANSWER KEY
For Activities and
Self-Test Exercise (Self-Assessment Questions)
160
Answer for Self-Test Exercise (Self-Assessment Questions
Part I: Multiple Choices
1 B 3 B 5 A 7 D 9 C
2 A 4 B 6 C 8 D 10 C
Part II: Matching
1 H 3 K 5 A 7 B 9 I
2 D 4 J 6 F 8 C 10 E
Part III: True or False
1 T 3 T 5 F 7 T 9 T
2 T 4 F 6 T 8 T 10 T
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