Information Systems in the Enterprise

Major types of systems in Organizations:

Operational level systems:

Support operational managers by keeping track of the elementary/root level activities and transactions of
the organization, such as sales, receipts, cash deposits, payroll, credit decisions, and the flow of materials
in a factory.

Knowledge level systems:

Support the organization’s knowledge and data workers. The purpose of knowledge level systems is to
help the business firm integrate new knowledge into the business and to help the organization control the
flow of paperwork.

Management level systems:

Serve the monitoring, controlling, decision making, and administrative activities of middle managers.
Management level systems typically provide periodic reports rather than instant information on operation.

Relocation control system that reports on the total moving, house-hunting, and home financing costs for
employees in all company divisions, noting wherever actual costs exceed budgets.

Some management level systems support non routine decision making. They tend to focus on less-
structured decisions for which information requirements are not always clear.

These systems often answer “what-if” questions. What would be the impact on production schedules if
we were to double sales in the next month?

Strategic level systems:

Help senior management tackle and address strategic issues and long-tern trends, both in the firm and in
the external environment. Their principal concern is matching changes in the external environment with
existing organizational capability.

What will be employment levels in next 5years? What products should be making in next 5 years?
 Kind of IS Groups
Served
Information System
Strategic Senior
Level Managers

Management Middle
Level Managers
Knowledge Knowledge and
Level Data Workers

Operational Operational
Level Managers

Functional Human
Sales & Finance Accounting Manufacturing
Areas: Resources
Marketing

Figure: Types of Information Systems in Organizations

Six major types or components of IS:

Transaction Processing Systems (TPS):

Transaction processing systems are the basic business systems that serve the operational level of the
organization. A transaction processing system is a computerized system that performs and records the
daily routine transactions necessary to conduct business.

 Sales order entry, hotel reservation systems, payroll, employee record keeping, and shipping.
 At the operational level tasks, resources, and goals are predefined and highly structured.
 The decision to grant credit to a customer is made by a lower level supervisor according to
predefined criteria.
 Transaction processing systems are often so central to a business that TPS failure for a few hours
can spell a firm’s demise and perhaps other firms linked to it.
 Managers need TPS to monitor the status of the internal operations and the firm’s relations with
the external environment.
 TPS are also major producers of information for the other types of systems.

Knowledge Work Systems (KWS):

Knowledge work systems aid knowledge workers in the creation and integration of new knowledge in the
organization. Knowledge work systems serve the information needs at the knowledge level of the
organization.

Knowledge workers are people who hold formal university degrees and who are often members of
recognized professions such as doctors, lawyers, engineers and scientists. Their jobs consist primarily of
creating new information and knowledge. KWS, such as scientific or engineering design workstations,
promote the creation of new knowledge and ensure that new knowledge and technical expertise are
properly integrated into the business.

Data workers typically have less formal advance educational degrees and tend to process rather than
create information. They consist primarily of secretaries, bookkeepers, filing clerks, or managers whose
jobs are primarily to use, manipulate, or disseminate information.

Office Systems:

Office systems are computer systems such as word processing, electronic mail systems, and scheduling
systems, which are design to increase the productivity of data workers in the office. The systems
communicate with customers, suppliers, and other organizations outside the firm and serve as
clearinghouse for information and knowledge flows.
Management Information Systems (MIS):

Management information systems are the study of information systems in business and management. The
term management information systems also designate specific information systems serving management
level functions.

Management information systems serve the management level of the organization, providing managers
with reports and, in some cases, with online access to the organization’s current performance and
historical records.

 Typically, they are oriented almost exclusively to internal, not environmental or external events.
 MIS primarily serve the functions of planning, controlling, and decision making at the
management level. Generally, they depend on underlying transaction processing systems for
their data.
 MIS summarize and report on the company’s basic operations. The basic transaction data from
TPS are compressed and are usually presented in long reports that are produced on a regular
schedule.
 MIS usually serve managers interested in weekly, monthly, and yearly results not day-to-day
activities.
 MIS have a predefined procedure for answering questions.
 MIS are generally not flexible and have little analytical capability.

Decision Support Systems (DSS):

Decision support systems are the information systems at the organization’s management level that
combine data and sophisticated analytical models or data analysis tools to support semi structured and
unstructured decision making.

 Decision support systems serve the management level of the organization.

 DSS help managers make decisions that are unique, rapidly changing, and not easily specified in
advance.
 They address the problems where the procedure for arriving at a solution may not be fully
predefined in advance.
 Although DSS use internal information from TPS and MIS, they often bring in information from
external sources, such as current stock prices or product prices of competitors.
 By design, DSS have more analytical power than other systems.
  These systems explicitly include user friendly software.
 DSS are interactive; the users can change assumptions, ask new questions, and include new data.

Executive Support Systems (ESS):

Executive support systems are the information systems at the organization’s strategic level, designed to
address unstructured decision making through graphics and communications.

 Senior managers use ESS to make decisions. ESS serves the strategic level of the organization.
 They address non routine decisions requiring judgment, evaluation, and insight because there is
no agreed-on procedure for arriving at a solution.
 ESS creates a generalized computing and communicating environment rather than providing any
fixed application or specific capability.
 ESS are designed to incorporate data about external events such as new tax laws or competitors,
but they also draw summarize information from internal MIS and DSS.
 ESS employs the most advanced graphics software and can deliver graphs and data from many
sources immediately to senior executive’s office or to a boardroom.
 ESS provides a generalized computing and telecommunications capacity that can be applied to a
changing array of problems.
 ESS tends to be less analytical.

5.3 Relationship of Systems to one another:

The various types of systems in the organization have interdependencies. TPS are typically a major
source of data for other systems, whereas ESS is primarily a recipient of data from lower-level systems.
The other types of systems may exchange data with each other as well. Data may also be exchanged
among systems serving different functional areas.

It is definitely advantageous to have some measure of integration among these systems so that
information can flow easily between different parts of the organization.
 ESS

MIS DSS

KWS,
OS TPS

Figure: Interrelationships among systems

Types of Decisions:

Structured Decisions:
Structured decisions are that where there are predefined and highly structured criteria for solving
a particular problem.
Example: The decision to grant credit to a customer of bank.

Semi Structured Decisions:

Decisions in the middle between structured and unstructured decisions, requiring some human
judgment and at the same time with some predefined procedure on the solution method.
Example: Setting marketing budgets for consumer products

Unstructured Decisions:
Unstructured decisions are those in which the decision makes must provide judgment, evaluation
and insight into the problem definition and there is no predefined procedure to solve the problem.
Example:  In a company is what types of new product should be created and what market should
be targeted.