KCES’s College of Engineering and Management, Jalgaon

DEPARTMENT OF MANAGEMENT
Study Material
SUB: 302 Management Information System
Unit I Fundamentals of Management Information System

Information System
information system, an integrated set of components for collecting, storing, and
processing data and for providing information, knowledge, and digital products.
Business firms and other organizations rely on information systems to carry out and
manage their operations, interact with their customers and suppliers, and compete in
the marketplace.
Information systems are used to run interorganizational supply chains and electronic
markets. For instance, corporations use information systems to process financial
accounts, to manage their human resources, and to reach their potential customers
with online promotions.
Many major companies are built entirely around information systems. These include
eBay, a largely auction marketplace; Amazon, an expanding electronic mall and
provider of cloud computing services; Alibaba, a business-to-business e-
marketplace; and Google, a search engine company that derives most of its revenue
from keyword advertising on Internet searches.
Governments deploy information systems to provide services cost-effectively to
citizens. Digital goods—such as electronic books, video products, and software—
and online services, such as gaming and social networking, are delivered with
information systems.
Individuals rely on information systems, generally Internet-based, for conducting
much of their personal lives: for socializing, study, shopping, banking, and
entertainment.
 Types of Information Systems

Operational-support systems
Support operational managers by monitoring the day-to-day’s elementary activities
and transactions of the organization. e.g. TPS and OAS
1. Transaction processing systems (TPS)

Transaction processing systems, or TPS, are used “…for the collection, storage,
retrieval and modification of transactions made by an organization. An example of
a transaction processing system, commonly used in businesses, are the systems
employed by major credit card companies found in almost every retail store.”
(Business Dictionary, 2018).
2. Process control systems

Process control systems make sure industrial processes are carried out efficiently,
consistently and with as little variation as possible. They're installed in industrial
settings to: help maintain throughput, quality, yield and energy efficiency. make sure
working practices are carried out safely and profitably.
3. Office Automation Systems (OAS)

OAS are systems which aim to improve the efficiency with which employees process
information, and data. The most recognizable example of these systems within the
workplace office, is Microsoft Office XP, or any other similar system which allows
people to work from home, or other locations. It improves productivity of employees
working in an office environment.
Management-support systems
Support the monitoring, controlling, decision-making, and administrative activities
of middle managers. e.g. MIS, DSS
1. Management information systems (MIS)

Management information systems are created from the data stipulated by the TPS.
The role of MIS, according to Chirs-Kimble (2018), are as follows;
• Based on internal information flows
• Support relatively structured decisions
• Used by lower and middle managerial levels
• Efficiency oriented

MIS looks at inputs, processing and outputs. Inputs refers to internal transactions,
files and structured data, processing deals with sorting, merging and summarizing
data, and outputs refers to summary, action and detailed reports. For example,
inventory control systems.
2. Decision Support Systems (DSS)

Decision support systems are systems which help users reach a decision, during the
decision-making process. DSS “…improve operational efficiency and business
performance by enhancing the ability of stakeholders to make faster, smarter
decisions based on information, rather than gut instinct alone. They aid gathering
useful information from raw data, for example, documents and business models.

3. Executive support systems (ESS)

Executive support systems are intended to be used by the senior managers directly
to provide support to non-programmed decisions in strategic management.
This information is often external, unstructured and even uncertain. Exact scope and
context of such information is often not known beforehand.
This information is intelligence based −
• Market intelligence
• Investment intelligence
• Technology intelligence

The Components of Information Systems

Information systems can be viewed as having five major components: hardware,
software, data, people, and procedures

Data: Data are facts that are used by programs to give valuable information. Data
are normally stored in machine- readable form on disk or tape until the computer
needs them. A database is an organized collection of facts and information which
comprises of two or more related data files. An organization's database can contain
facts and information on customers, personnel, inventory, competitors' sales, online
purchases, and much more.
Hardware: In information system, hardware is the machinery and often referred to
as the central processing unit (CPU), and all of its support equipment. Among the
support equipment are input and output devices, storage devices and
communications devices, and it consists of the physical components of a computer
that perform the input, processing, storage, and output activities of the computer.
Input devices include keyboards, mice, and other pointing devices, automatic
scanning devices, and equipment that can read magnetic ink characters. Processing
devices include computer chips that contain the central processing unit and main
memory. Advances in chip design allow faster speeds, less power consumption, and
larger storage capacity.
Software: It is Computer programs and the manuals that support them. Computer
programs are machine-readable instructions. Software includes the computer
programs that govern the operation of the computer. These programs permit a
computer to process payroll, send bills to customers, and provide managers with
information to increase profits, reduce costs, and provide better customer service.
Software is required for computers of all sizes, from small handheld computers to
large supercomputers. For example, The Android operating system by Google and
Microsoft's Mobile 6.5 are operating systems for cell phones and small portable
devices.
People: People are the most vital element in most computer-based information
systems. They are responsible for success and failure for most organizations.
Information systems people include all the people who manage, run, program, and
maintain the system. Users are people who work with information systems to get
results. Users include employees like financial executives, marketing
representatives, manufacturing operators, customers, system administrators etc.
Procedures: These are the policies that run the operation of a computer system.
Procedures can be in the form of guidelines in the user manuals. Procedures include
the strategies, policies, methods, and rules for using the information system
including the operation, maintenance, and security of the computer. For example,
procedure to login to the system, procedure for registration, procedure for ordering,
billing etc.
Management Information System
MIS is an organized integration of hardware and software technologies, data,
processes, and human elements. It is a software system that focuses on the
management of information technology to provide efficient and effective strategic
decision making.
A Management Information System is
• An integrated user-machine system
• For providing information
• To support the operations, management, analysis, and decision-making
functions
• In an organization
The system utilizes
• Computer hardware & software
• Manual procedures
• Models for analysis, planning, control, and decision making, and
• A database

MIS Definition
Management Information System (MIS) is an integrated man/machine system for
providing information to hold up the operations, management and decision-making
functions in an organization. - G.B. Davis
A formal method of collecting timely information in a presentable form in order to
facilitate effective decision making and implementation, in order to carry out
organisational operations for the purpose of achieving the organisational goals. -
Walter I. Kennevan
A Management Information System is an organized portfolio of formal systems for
obtaining, processing, and delivering information in support of the business
operations and management of an organization. - Zwass (1992)
Objectives of MIS
MIS has five major objectives which include:
• Data Capturing
• Processing of Data
• Storage
• Retrieval
• Dissemination
Data Capturing
MIS capture data from various internal and external sources of the organization.
Data capturing may be manual or through computer terminals.
Processing of Data
The captured data is processed to convert into the required information. Processing
of data is done by such activities as calculating, sorting, classifying, and
summarizing.
Storage of Information
MIS stores the processed or unprocessed data for future use. If any information is
not immediately required, it is saved as an organization record, for later use.
Retrieval of Information
MIS retrieves information from its stores as and when required by various users.
Dissemination of Information
Information, which is a finished product of MIS, is disseminated to the users in the
organization. It is periodic or online through a computer terminal.
 Characteristics of MIS
Following are the characteristics of MIS:

System Approach
The information system follows a System’s approach. The system’s approach
implies a holistic approach to the study of system and its performance in the light
for the objective for which it has been constituted.
Management Oriented
The top-down approach must be followed while designing the MIS. The top-down
approach suggests that the system development starts from the determination of
management needs and overall business objectives.
The MIS development plan should be derived from the overall business plan.
Management oriented characteristic of MIS also implies that the management
actively directs the system development efforts.
Need-Based
MIS design and development should be as per the information needs of managers at
different levels, strategic planning level, management control level and operational
control level. In other words, MIS should cater to the specific needs of managers in
an organization’s hierarchy.
Exception Based
MIS should be developed on the exception-based reporting principle, which means
an abnormal situation, i.e. the maximum; minimum or expected values vary beyond
tolerance limits. In such situations, there should BE exception reporting to the
decision-maker at the required level.
Future Oriented
Besides exception-based reporting, MIS should also look at the future. In other
words, MIS should not merely provide past or historical information; rather it should
provide information, on the basis of projections based on which actions may be
initiated.
Integrated
Integration is a necessary characteristic of a management information system.
Integration is significant because of its ability to produce more meaningful
information.
Long Term Planning
MIS is developed over relatively long periods. Such a system does not develop
overnight. A heavy element of planning is involved. The MIS designer must have
the future objectives and needs of the company in mind.
Sub-System Concept
The process of MIS development is quite complex and one is likely to lose insight
frequently. Thus, the system, though viewed as a single entity, must be broken down
into digestible sub-systems which are more meaningful at the planning stage.
Central Database
A central database is a mortar that holds the functional systems together. Each
system requires access to the master file of data covering inventory, personnel,
vendors, customers, etc. It seems logical to gather data once, validate it properly and
place it on a central storage medium, which can be accessed by any other subsystem.

Role of MIS
Decision making
Management Information System (MIS) plays a significant role in the decision-
making process of any organization. In any organization, a decision is made on the
basis of relevant information which can be retrieved from the MIS.
Coordination among the department
Management Information System satisfy multiple need of an organization across the
different functional department.
Finding out Problems
As we know that MIS provides relevant information about every aspect of activities.
Hence, if any mistake is made by the management then MIS, information will help
in finding out the solution to that problem.
Comparison of Business Performance
MIS store all past data and information in its Database. That why the management
information system is very useful to compare business organization performance.
Strategies for an Organization
Today each business is running in a competitive market. An MIS supports the
organization to evolve appropriate strategies for the business to assent in a
competitive environment.
For example, in order to develop an effective production scheduling system, it is
necessary to balance such factors as setup costs, Workforce, Overtime rates,
Production capacity, Inventory level, Capital requirements and Customer services.
Benefits of MIS
• Increased customer satisfaction
• Improved quantity and quality of information
• Improved quality and quantity management decisions
• Improved responsiveness number of the competitor’s condition
• Improved operational efficiency and flexibility
• Improved quality of internal and external communications
• Improved quality of planning
• Improved quality control and supervision
 Limitations of MIS
• High Cost

Development of new computerized based information system is a problem for the

organization due to the cost factor and it creates problems because with the change
of time there is need of up-to-date of the information system.
• Training of Employee

Employees should have the capacity of learning of the information system with the
changing competitive and business environment; otherwise, it will be difficult for
the organization to stay in the market.
• It cannot meet the special demands of each person.
• The MIS is not good if the basic data is obsolete and outdated.
• Mostly information provided by the MIS is in quantitative form. Hence,
it ignores the qualitative information like the attitude of an employee.

Types of MIS
Transaction Processing System
A TBS is a software that ensures the completion of a business transaction and also
keeps track of transactions. An online transaction processing system (OTPS) is an
equivalent system that online merchants use for e-commerce.
The TPS ensures that each transaction is successful by storing, sending and receiving
information via a database. It supplements the business point of sale system (POS),
which is the unit that reads credit cards, prints receipts and accepts and stores cash.
For example, if a customer purchases a book from a shop, they might pay with a
credit card. A TPS takes the customer's card information, communicates with their
bank and approves or declines the purchase based on their account balance.
Types of transaction processing systems
There are two types of transaction processing systems:
Batch processing
Through batch processing, a TPS interprets sets, or batches, of data by grouping
items based on similarities. Batch processing can create a time delay because it
reviews several sets of data simultaneously, requiring more computing power.
Example: A customer pays for a subscription service at the end of the month, The
TPS system processes the transactions as a batch because they occur at the same
time. In this case, a delay in processing transactions is acceptable because the system
only interprets batches once per month.
Real-time processing
Real-time processing is a method to process transactions as they appear. This helps
prevent delays in processing and can provide a more accurate result.
Example: An e-commerce website might use a TPS to process credit card
transactions in real-time to ensure payment before the company starts its fulfillment
process. Processing transactions in real-time also helps the company identify and
address errors quickly, as well as increase its overall response times.
Transaction processing system components
Each TPS has four major components that help it function:
1. Inputs
An input is an original request for a product or payment that an outside party sends
to a company's TPS. If your company uses batch processing, its TPS stores groups
of inputs and then processes them at a later time. In comparison, if your company
uses a real-time system, it processes each input as it arrives.
Inputs typically include:
• Invoices
• Bills
• Coupons
• Custom orders

2. Processing system
The processing system reads each input and creates a useful output, such as a receipt.
This element can help you define the input data and what the output should be. Based
on the kind of TPS your company is using, processing times can vary.
3. Storage
The storage component of TPS refers to where a company keeps its input and output
data. Some companies store these documents in a database. The storage component
ensures the organization, security and accessibility of every document for later use.
For example, if a vendor would like to confirm that your company has paid an
invoice, you can check your system's storage to find the invoice and determine if
you delivered a payment.
4. Outputs
TPS outputs are documents the system generates once it completes processing all
inputs, such as receipts the company stores in its records. These documents can help
validate a sale or transaction and provide important reference information for tax
and other official purposes.
For example, if a vendor sends your company an invoice, you can pay the invoice
and send the vendor confirmation of your payment. Then, you can amend the original
invoice and mark it as "paid" in the company's TPS.
TPS benefits
Here are some common benefits of using a TPS:
Increased transaction speeds
With a TPS in place, businesses can effectively increase the speed of each
transaction to minimize wait times for customers. Some systems process transactions
in real-time, while others collect transaction information during a set period and then
process it at a later time, often after business hours.
Improved cost efficiency
A TPS can potentially conduct and organize thousands of transactions throughout
the day. This can save a company money by reducing the need to upgrade the system
or use more than one system to meet demand.
Improved reliability
Using a TPS can ensure that you process customer transactions quickly and
accurately. A reliable TPS can also help your organization save money on potential
troubleshooting or coding costs for malfunctioning systems.
Automated management
ATPS automates much of a company’s internal resource and revenue management.
By increasing automation, employees can spend less time reviewing transactions.
Automation is an important part of increasing the profitability of a business because
it offers employees more time to focus on engaging tasks that require critical
thinking.

Decision Support Systems (DSS)

Decision Support Systems (DSS) are a specific class of computerized information
system that supports business and organizational decision-making activities.
Objective of DSS
• The objective of Decision Support System (DSS) is to support managers in
their work, especially decision making.
• Decision support system (DSS) tends to be used in planning, modelling,
analysing alternatives, and decision making.
• The emphasis is on small, simple models which can easily be understood and
used by the manager rather than complex integrated systems which need
information specialist to operate them.
Examples
Typical information that a decision support application might gather and present
would be:
• Accessing all of your current information assets, including legacy and
relational data sources, cubes, data warehouses, and data marts
• Comparative sales figures between one week and the next
• Projected revenue figures based on new product sales assumptions

Executive support systems (ESS)

Executive support systems are intended to be used by the senior managers directly
to provide support to non-programmed decisions in strategic management.
These information are often external, unstructured and even uncertain. Exact scope
and context of such information is often not known beforehand.
This information is intelligence based −
• Market intelligence
• Investment intelligence
• Technology intelligence

Examples of Intelligent Information

Following are some examples of intelligent information, which is often the source
of an ESS −
• External databases
• Technology reports like patent records etc.
• Technical reports from consultants
• Market reports
• Confidential information about competitors
• Speculative information like market conditions
• Government policies
• Financial reports and information
Advantages of ESS
• Easy for upper level executive to use
• Ability to analyze trends
• Augmentation of managers' leadership capabilities
• Enhance personal thinking and decision-making
• Contribution to strategic control flexibility
• Enhance organizational competitiveness in the market place
• Instruments of change
• Increased executive time horizons.
• Better reporting system
• Improved mental model of business executive
• Help improve consensus building and communication
• Improve office automation
• Reduce time for finding information
• Early identification of company performance
• Detail examination of critical success factor
• Better understanding
• Time management
• Increased communication capacity and quality

Disadvantage of ESS
• Functions are limited
• Hard to quantify benefits
• Executive may encounter information overload
• System may become slow
• Difficult to keep current data
• May lead to less reliable and insecure data
• Excessive cost for small company

Supply Chain Management System (SCM)

A supply chain consists of a network of organizations and facilities that work in
tandem to transform raw materials into finished, customer-ready products. A supply
chain management (SCM) system is an inter-organizational solution that manages
these activities from beginning to end.
While there are many different types of supply chain management software that each
focus on certain functions, there are also comprehensive supply chain management
systems. These SCM systems help companies manage a variety of supply chain
processes, such as:
• Procurement
• Planning
• Product or service creation
• Order fulfillment
• Order tracking
• Order management

These functions shouldn’t be isolated to in-house teams. Rather, the SCM platform
must be accessible across the supply chain, encompassing every stakeholder,
including:
• Suppliers
• Manufacturers
• Wholesalers
• Transportation providers
• Logistics managers
• Retailers

This ensures that everyone has visibility into the product or service as it moves along
the production chain. By gaining better oversight into these processes, companies
can expedite delivery, improve the customer experience and achieve supply chain
cost reduction.
Advantages of using supply chain management software
• A good supply chain management software can:
• help control and reduce costs
• alleviate risks, such as late shipments and logistical errors
• improve customer service and communication
• help with forecasting and decision-making
Supply chain software can also help:

• automate major processes, such as order processing, invoicing and shipment

tracking, and therefore save time and reduce administrative costs
• identify excess materials or processes and possible cost savings in logistics,
warehousing and manufacturing
• improve inventory management and lead to more effective demand planning
• improve on-time delivery by coordinating all activities across your supply
chain
• improve responsiveness to unforeseen events, eg machine failures, staff
absences, missing goods, urgent customer orders and human error
• provide management reporting and analysis to your fingertips
• provide visibility across the network (between suppliers, production plants,
storage and distribution centres) to give you a better understanding of your
processes
• support collaboration and communication between partners, suppliers,
distributors

Customer Relationship Management (CRM)

CRM is an enterprise application module that manages a company's interactions with
current and future customers by organizing and coordinating, sales and marketing,
and providing better customer services along with technical support.
Why CRM?
• To keep track of all present and future customers.
• To identify and target the best customers.
• To let the customers, know about the existing as well as the new products and
services.
• To provide real-time and personalized services based on the needs and habits
of the existing customers.
• To provide superior service and consistent customer experience.
• To implement a feedback system.
Scope of CRM

Advantages of CRM
• Provides better customer service and increases customer revenues.
• Discovers new customers.
• Cross-sells and up-sells products more effectively.
• Helps sales staff to close deals faster.
• Makes call centers more efficient.
• Simplifies marketing and sales processes.

Disadvantages of CRM
• Sometimes record loss is a major problem.
• Overhead costs.
• Giving training to employees is an issue in small organizations.
Knowledge Management System (KMS)
A knowledge management system is any kind of IT system that stores and retrieves
knowledge to improve understanding, collaboration, and process alignment.
Knowledge management systems can exist within organizations or teams, but they
can also be used to center your knowledge base for your users or customers.
The meaning of knowledge management system, while broad in use, can be
narrowed to the following purpose: to help people utilize knowledge to better
achieve tasks.
There are many types of knowledge management systems, but they all share some
common characteristics. These include:
• FAQ content
• Forum or community feature
• How-to articles and tutorials
• Education, academies, and training programs
• Certificates
• Case studies
• Webinars

Knowledge management system examples.

• Optimizely, whose knowledge base offers an array feature: an academy,
community forum, certifications, developer documentation, and more.
• SurveyMonkey, whose knowledge base allows users to search by keyword or
by topic
• Microsoft, whose knowledge base is organized into helpful videos, trainings,
and even talks with product managers
• Canva, whose knowledge base is incredibly easy to navigate and search
• Evernote, whose knowledge base includes not only helpful resources but also
clear-cut directions on how to contact the company
• Google Analytics, whose knowledge base offers its own predictive search
engine
 Factors contributing to success of MIS
If MIS is to be success, then it should have all the features listed below:
1) MIS is integrated into the management function. It sets clear objectives to ensure
that MIS focuses on the major issues of the business. Also adequate development
resources are provided and human & organizational barriers to progress are
removed.

2) An appropriate information processing technology required to meet the data

processing and analysis needs of the users of MIS is selected.

3) MIS is oriented, defined and designed in terms of the user's requirements and its
operational viability is ensured.

4) MIS is kept under continuous surveillance, sot that its open system is modified
according to the changing information needs

5) MIS focuses on results and goals, and highlights the factors and reasons for non
achievements.

6) MIS is not allowed to end up into and information generation mill avoiding the
noise in the information and the communication system.

7) MIS recognizes that a manager is a human being and therefore, the systems must
consider all the human behavioral aspects in the process of management.

8) MIS is easy to operate and therefore, the design of MIS has such good features
which make up a user friendly design.

9) MIS recognizes that the information needs become obsolete and new needs
emerge. The MIS design, therefore, has a potential capability to quickly meet newer
and newer needs of information.
10) MIS concentrates on developing the information support to manage critical
success factors. It concentrates on the mission critical applications serving the needs
of the top management.
Factors contributing to failures
1) MIS is conceived as a data processing and not as an information system.
2) MIS does not provide that information which in needed by managers but it tends
to provide the information generally the function calls for. MIS then becomes an
impersonal function.
3) Understanding the complexity in the business systems and not recognizing it in
the MIS design leads to problems in the successful implementation.
4) Adequate attention is not given to the quality control aspects of the inputs, the
process and the outputs leading to insufficient checks and controls in MIS.
5) MIS is developed without streamlining the transaction processing systems in the
organizations.
6) Lack of training and appreciation that the users of the information and the
generators of the data are different, and they have to play an important role in the
MIS.
7) MIS does not meet certain critical and key factors of its users, such as a response
to the query on the database, an inability to get the processing done in a particular
manner, lack of user-friendly system and the dependence on the system personnel.
8) A belief that the computerized MIS can solve all the management problems of
planning and control of the business.
9) Lack of administrative discipline in following the standardized systems and
procedures, wrong coding and deviating from the system specifications result in
incomplete and incorrect information.
10) MIS does not give perfect information to all users in the organization. Any
attempt toward such a goal will be unsuccessful because every user has a human
ingenuity, bias and certain assumptions not known to the designer. MIS cannot make
up these by providing perfect information.
 KCES’s College of Engineering and Management, Jalgaon
DEPARTMENT OF MANAGEMENT
Study Material
SUB: 302 Management Information System
Unit – II Development Process of Management Information System

Unit – II Development Process of Management Information System (08)

1) Introduction & Need for System analysis
The software is one of the major components of a management information system. Some of the software
used in a MIS system is off the shelf. These include packages such as spreadsheet programs, database
applications, etc.

However, they are times when off the shelf, software does not meet the business requirements. The
solution to this problem is custom made software.

MIS in System Analysis and Design

Systems analysis and design refers to two closely related disciplines system analysis and system design.

 System analysis is concerned with understanding the business objectives, goals and developing
business processes. The end product of systems analysis is systems specifications.
 System design uses the output from system analysis as its input. The main objective of system
design is to interpret the system requirements into architectural, logical and physical designs of
how the information system to be implemented.

Benefits of system analysis and design

 Enabling comprehension of complicated structures

 Allowing for better management of any business changes
 Aligning the organization with its environment and strategic priorities
 Minimizing IT issues and reducing the workload of IT employees
 Reducing costs in certain areas, saving the organization money and resources for use in other
departments
 Identifying potential risks and threats to the processes before they arise
 Improving the overall quality of the system
 Improving the usability of the system by employees
 Increasing productivity and customer satisfaction

Object Oriented Analysis and Design in MIS

Object-oriented analysis and design (OOAD) is closely related to systems analysis and design. The main
difference between object-oriented analysis and design (OOAD) and systems analysis and design is that
OOAD uses objects to represent real-world entities.

Object oriented analysis and design uses visual modeling to improve communication among all
stakeholders and produce high-quality products.
An object is a representation of a real-world entity such as a customer, a product, an employee, etc.
Unified Modeling Language (UML) is a general-purpose language used to create visual designs for a
system.

The following image shows a sample UML diagram that shows users interacting with a point of sale
system

2) The System Development Life Cycle (SDLC)

SDLC stands for “Software Development Life Cycle.” As the name suggests, it is a process for
developing software. In other words, SDLC is a structured way to create and develop high-quality
software. The process starts from planning but not finishes after the delivery of the product.

As you may understand from the name (software development life cycle), SDLC is not a linear project
management framework. Instead, it becomes a cycle where feedback is made, problems are solved
through repetitions, or new features are acquired. SDLC process consists of phases like planning,
designing, implementing, testing, deploying, and maintenance. The stages of the software development
life cycle are which describe how to develop and maintain particular software. Each phase has different
processes and activities.
The system development life cycle refers to the processing of planning, creating, testing, and deploying
an information system. The main objective of system development life cycle is to produce high-quality
information systems that meet or exceed the expectations of the users within the stipulated budget and
time frame.

SDLC uses a number of development methodologies to achieve this objective. The next sections will
discuss some of the most popular development methodologies.

Why is SDLC Important?

SDLC consists of a plan that describes how the software will be developed, maintained, and improved.
The software is actually a product, and that there is a life process in that product. The purpose of SDLC
is to produce software with high quality that meets customer needs. Software development life
cycle reduces the hassle of developing a new product. It’s important to have an SDLC in place as it helps
to transform a product from a design state into a complete product. This production process consists of
phases that follow each other. As the requirements for software functions are constantly changing and
expanding, these phases are handled in a continuous loop. At any stage in the cycle, it is possible to go
back and forward again. This helps the development team to produce high-quality software.

What are the SDLC Phases?

SDLC consists of time-based and content-divided phases. Every phase needs to be deliverable from the
previous step. For example, design gets its inputs from the requirement phase. In the build phase,
developers use the designated product template to develop the software. The SDLC process consists
essentially of the following phases:

 Requirement Phase
 Design Phase
 Build/Development Phase
 Testing Phase
 Deployment/Deliver Phase
 Maintenance
The requirement phase is the first and the most critical stage of SDLC for both the developing team and
the project manager. In this phase, the client or stakeholders specify all the information about the product
they want. The product features, specifications, expectations, and all other requirements related to the
product or software. The business manager or project manager gathers all of this information and also
prerequisites. Here are some examples:

 What customer wants

 Who is the end-user
 Product’s target group
 Opportunities and risks
The design phase is the second step of the SDLC process. As mentioned before, the outputs of the
requirement phase will be used as the inputs in this step. The main output of the requirement phase was
the SRS document, so that it will be used as a base document in the design phase. It would not be wrong
to call this stage the highest priority stage because this is the stage where the system is transformed from
logical design to physical design. This design also reveals the tools with which the software will be
developed.

The build/development phase is also known as the coding phase. Developers start coding in this stage.
In this phase, the smallest piece of software is called a unit. Units make up modules. Therefore,
developers develop units and modules step by step in a weekly or monthly work plan. Additionally, the
coding phase is the longest phase of the SDLC process, and it requires a focused approach for the
developers.

Once the software is complete, it is time for the testing phase. This phase is where you focus on
investigation and discovery. Then, the testing team starts testing the functionality of the entire system.
This is done to verify whether the software works and gives the result as per the requirements addressed
in the requirement phase. The development team makes a test plan. This test plan includes;

 Integration testing
 System testing
 Acceptance test
If there is a bug/defect detected in the software, it is not working as expected. The testing team gives
detailed information to the development team about the issue. If the defect is valid or worth fixing, it
will be fixed, and the development team will replace it with the new one.

Deployment/Deliver Phase: After completing all tests successfully, the product will be delivered to the
customer. Now, customers should do beta testing for the product after the delivery. Beta, or beta version,
refers to the system testing and vulnerability testing of the software’s initial release. This release aims
to run the software smoothly under different hardware. After the customer starts testing the software, the
necessary checks are made to correct it if any problem is encountered.

Maintenance Phase : The last phase of the process SDLC is the maintenance phase, where the process
continues until the software’s life cycle ends. The product alone is not sufficient as a delivery output.
Also, user manual and version difference documents should be created for end-users. Additionally, the
maintenance phase begins with the delivery. There are different maintenance activities such as
debugging, preventing, improving the infrastructure, adding new features to the product.

3) Principals of System Development

Principle for System Development is the process of defining, designing, testing, and implementing a
new software application or program. It can include the internal development of customized systems,
the creation of database systems, or the acquisition of third-party-developed software. The most effective
way to protect information and information systems is to integrate security into every step of the systems
development process, from the initiation of a project to develop a system to its disposition.

Some of the important principles of Software development are:

1. Get the system users involved.

2. Use a problem-solving approach.
3. Establish phases and activities.
4. Document throughout the development.
5. Establish standards.
6. Manage the process and projects.
7. Justify systems as capital investments.
8. Don’t be afraid to cancel or revise the scope.
9. Divide and conquer.
10. Design systems for growth and change.
Get the system users involved:

 User involvement in the field of information system development is usually considered as

a vital mechanism to enhance system quality and ensure successful system
implementation. User involvement is an important aspect of system development. Many
methodologies concern with users in the development phases. It embodies the view of
users, not systems analysts, programmers, or the data services organization

Use a problem-solving approach:

 The systems approach to problem-solving used a systems orientation to define problems

and opportunities and develop solutions. Problems and opportunities are identified in the
first step of the systems approach. A problem can be defined as a basic condition that is
causing undesirable results. An opportunity is a basic condition that presents the potential
for desirable results.

Establish phases and activities:

 The Establishment Phase is the first phase of the employment cycle. It deals in the process
of understanding the kind of human resource required for the organization to achieve its
goals. The development stage refers to a phase that a company goes through during the
preliminary stage of its corporate life. Companies that are in this stage are characterized
by their focus on early-stage business activities. Development stage companies are
generally underfunded and likely to be on the lookout for sources of capital.

Document through development:

 System documentation provides an overview of the system and helps engineers and
stakeholders understand the underlying technology. It usually consists of the requirements
document, architecture design, source code, validation docs, verification and testing info,
and a maintenance or help guide.

Establish standards:

 The System Management Standards provide practical guidance for organizations to

establish strategic IT plans based on management strategies, to design and implement
appropriate control to improve the effectiveness of IT investment, and to reduce the risks
based on the IT strategic plan over the system life cycle.

Manage the process and projects:

 Projects big and small have a lot of moving parts. There’s so much to coordinate and track
to get from Point A to Point B and execute a successful project. That’s why projects are
broken down into smaller, more digestible pieces, also known as project phases. Project
phases allow you to take your unwieldy project and organize it so that you can wrap your
mind around it and make progress.

Justify systems as capital investments:

 A capital investment appraisal usually involves a statement of the initial investment cost,
the on-going costs, and the anticipated benefits, as well as the calculation of a number of
suitable investment performance indicators or statistics.
Divide and conquer:

 As computing technology has improved, we have tried to construct software systems that
can deal with larger and more complex problems. In order to provide such solutions, the
software systems themselves have become larger and more complex. Unfortunately, there
is a limit to how much we can take in and understand at any one time. The Romans had a
strategy called divide and rule. However, this covered the idea that it was easier to rule
over groups in conflict with each other.

Design systems for growth and change:

 Design systems are becoming more important for businesses to drive value through their
brand. As Customer Experience expectations become a key differentiation for brands,
Design, and brand consistency across an organization becomes crucial. Companies are
seeing the benefits that design systems can offer in helping to scale their brands and
understanding the return on investment.

4) System Requirement Specification (SRS)

A System Requirements Specification (SRS) (also known as a Software Requirements Specification) is
a document or set of documentation that describes the features and behavior of a system or software
application. It includes a variety of elements (see below) that attempts to define the intended
functionality required by the customer to satisfy their different users.
In addition to specifying how the system should behave, the specification also defines at a high-level the
main business processes that will be supported, what simplifying assumptions have been made and
what key performance parameters will need to be met by the system.

Main Elements

Depending on the methodology employed (agile vs waterfall) the level of formality and detail in the SRS
will vary, but in general an SRS should include a description of the functional requirements, system
requirements, technical requirements, constraints, assumptions and acceptance criteria. Each of these is
described in more detail below:

 Business Drivers

 Business Model

 Functional and System Requirements

 Business and System Use Cases

 Technical Requirements

 System Qualities

 Constraints and Assumptions

 Acceptance Criteria

Business Drivers
This section describes the reasons why the customer is looking to build the system. The rationale for the
new system is important as it will guide the decisions made by the business analysts, system architects
and developers. Another compelling reason for documenting the business rationale behind the system is
that the customer may change personnel during the project. Documentation which clearly identifies the
business reasons for the system will help sustain support for a project if the original sponsor moves on.

The drivers may include both problems (reasons why the current systems/processes are not sufficient)
and opportunities (new business models that the system will make available). Usually a combination of
problems and opportunities are needed to provide motivation for a new system.

Business Model

This section describes the underlying business model of the customer that the system will need to
support. This includes such items as the organizational context, current-state and future-state diagrams,
business context, key business functions and process flow diagrams. This section is usually created
during the functional analysis phase.

Functional and System Requirements

This section usually consists of a hierarchical organization of requirements, with the business/functional
requirements at the highest-level and the detailed system requirements listed as their child items.

Generally, the requirements are written as statements such as "System needs the ability to do x" with
supporting detail and information included as necessary.
Business and System Use Cases

This section usually consists of a UML use case diagram that illustrates the main external entities that
will be interacting with the system together with the different use cases (objectives) that they will need
to carry out. For each use-case there will be formal definition of the steps that need to be carried out to
perform the business objective, together with any necessary pre-conditions and post-conditions.

5) Structure of SRS

In order to form a good SRS, here you will see some points which can be used and should be
considered to form a structure of good SRS. These are as follows :
1. Introduction
 (i) Purpose of this document
 (ii) Scope of this document
 (iii) Overview
2. General description
3. Functional Requirements
4. Interface Requirements
5. Performance Requirements
6. Design Constraints
7. Non-Functional Attributes
8. Preliminary Schedule and Budget
9. Appendices
Software Requirement Specification (SRS) Format as name suggests, is complete specification and
description of requirements of software that needs to be fulfilled for successful development of
software system. These requirements can be functional as well as non-functional depending upon type
of requirement. The interaction between different customers and contractor is done because its
necessary to fully understand needs of customers.
Depending upon information gathered after interaction, SRS is developed which describes
requirements of software that may include changes and modifications that is needed to be done to
increase quality of product and to satisfy customer’s demand.
1. Introduction :
  (i) Purpose of this Document –
At first, main aim of why this document is necessary and what’s purpose of
document is explained and described.
 (ii) Scope of this document –
In this, overall working and main objective of document and what value it will
provide to customer is described and explained. It also includes a description of
development cost and time required.
 (iii) Overview –
In this, description of product is explained. It’s simply summary or overall
review of product.
2. General description :
In this, general functions of product which includes objective of user, a user characteristic,
features, benefits, about why its importance is mentioned. It also describes features of user
community.

3. Functional Requirements :
In this, possible outcome of software system which includes effects due to operation of
program is fully explained. All functional requirements which may include calculations, data
processing, etc. are placed in a ranked order.

4. Interface Requirements :
In this, software interfaces which mean how software program communicates with each other
or users either in form of any language, code, or message are fully described and explained.
Examples can be shared memory, data streams, etc.

5. Performance Requirements :
In this, how a software system performs desired functions under specific condition is
explained. It also explains required time, required memory, maximum error rate, etc.

6. Design Constraints :
In this, constraints which simply means limitation or restriction are specified and explained
for design team. Examples may include use of a particular algorithm, hardware and software
limitations, etc.

7. Non-Functional Attributes :
In this, non-functional attributes are explained that are required by software system for better
performance. An example may include Security, Portability, Reliability, Reusability,
Application compatibility, Data integrity, Scalability capacity, etc.

8. Preliminary Schedule and Budget :

In this, initial version and budget of project plan are explained which include overall time
duration required and overall cost required for development of project.

9. Appendices :
In this, additional information like references from where information is gathered, definitions
of some specific terms, acronyms, abbreviations, etc. are given and explained.

6) Management of Quality in the MIS

Management of Quality in the MIS

Information is a corporate resource, as important as the capital, labor, know-how, etc. and is being used
for decision making. Its quality, therefore, is required to be very high. Low quality information would
adversely affect the organizational performance as it affects decision making. The quality of
information is the result of the quality of the input data, processing design, system design, system
procedure which generate such a data, and the management of the data processing function. Quality,
unlike any other product, is not an absolute concept. Its level is determined with reference to the context
and its use, and the user. Perfect quality just as perfect information is non-achievable and has cost
benefit implications.

However, it is possible to measure the quality of information on certain parameters. All these parameters
need not have a very high value in terms of the unit of measure. Some parameters may have lesser
importance in the total value on account of their relevance in the information and its use.

The quality of the parameters is assured if the following steps are taken:

 All the input is processed and controlled.

 All updating and corrections are completed before the data processing begins.
 Inputs (transactions, documents, fields and records) are subjected to validity checks.
 The access to the data files is protected and secured through an authorization scheme.
 Intermediate processing checks are introduced to ensure that the complete data is processed
right through, I.e., run to run controls.
 Due attention is given to the proper file selection in terms of data, periods and so on.
 Back-up of the data and files are taken to safeguard corruption or loss of data.
 The system audit is conducted from time to time to ensure that the computer system
specification is not violated.
 The system modifications are approved by following a set procedure which begins with
authorization of a change to its implementation followed by an audit.
 Systems are developed with a standard specification of design and development.
 Computer system processing is controlled through programme control, process control and
access control.

Proper people organization is basic to the management of any activity or function. The same thing is
true for the development of the MIS. The principle of the organization and structuring the organization
to the specific needs of the function is a prime necessity. When we talk with reference to the MIS a
number of issues come up and they are not the same in all the organizations. Hence, the organization
structure of the MIS would differ from one organization to the other.

The type, the size and the structure of corporate organization becomes the basis for the MIS organization
for handling the MIS function and management alternatives. The major issues involved are:

 Whether the function should be handled as a centralized or decentralized activity.

 The allocation of the hardware and software resources.
 The maintenance of the service level at an appropriate level.
 Fitting the organization of the MIS in the corporate organization, its culture and the
management philosophy.
The question of centralization versus decentralization is resolved by assessing the status of information
resource in the organization, i.e., whether the status is the information system management or the
information resource management.

In a centralized set, the responsibility of acquisition of the data, of providing the information to the users,
becomes the centralized function. The centralized organization is also recommenced when the
information needs are more or less static.

Depending upon the situation, hardware and software solutions are available. In a decentralized set-up
the allocation the hardware is a centralized decision but the collection of data and its processing becomes
the user's responsibility. Training, problem solving and system development, however, is a centralized
function. In all such situations, the information processing is based on the database management system.
Therefore, the management of the database becomes the centralized responsibility and its use becomes
the responsibility of users.
7) Barriers to successful Development of MIS

The difficulties and issues of the management data systems, if all the current barriers are separated into
humanistic, organizational and ecological factors, the significant downsides and the reasons of failure
and using MIS in public organizations are as following:

Organizational factors
• The lack of good conditions for investment and coordinated effort of the managers, customers and
management
• The lack of consistency and multifaceted nature of the current manual frameworks.
• The lack of existing frameworks and techniques examination before the framework plan
• The lack of assessment of the current power
• Bad state of teaching the particular powers
• The lack of HR with the board and PC fields and other required specializations (the issues of engrossing
HR)
• Inadequate training of the customers
• Inadequate and fragmented documentation
• Unsuitable implementation of the framework

Humanistic factors
• The lack of data of the managers and customers as they don't know precisely what they need and what
their data needs are.
• The lack of comprehension of the requirements of the customers by planners (the lack of right meaning
of the necessities and their investigation)
• The lack of data of the administrators and customers about the joint effort technique with the planner
group.
• The lack of interest of the chiefs and customers in framework structure.
• The lack of comprehension of the administrators of programming and data frameworks.
• The lack of data of the majority of the examiners and developers (planners) with new framework
workplace.
• The lack of acknowledgment of the framework executers and opposition against the change.
• The lack of exactness in the information gathered
Ecological factors
• The lack of value paradigm of the current data frameworks
• The lack of reasonable advisors for structuring the framework and programming
• The lack of strategies and technique and phases of making the framework
• The lack of assessment of ecological perspectives in the board data frameworks
• The lack of appropriate utilization of broad communications to build up the way of life of utilizing PC
and data frameworks.
• The lack of holding appropriate instructional classes in the colleges and the lack of reasonable training
of HR in such manner.
• The lack of genuine thought and satisfactory interest in such manner.
 KCES’s College of Engineering and Management, Jalgaon
DEPARTMENT OF MANAGEMENT
Study Material
SUB: 302 Management Information System
Unit III Applications of Management Information System

1) Accounting Information System

An accounting information system (AIS) is a structure that a business uses to collect, store, manage,
process, retrieve, and report its financial data so it can be used by accountants, consultants, business
analysts, managers, chief financial officers (CFOs), auditors, regulators, and tax agencies.

Specially trained accountants work in-depth with AIS to ensure the highest level of accuracy in a
company's financial transactions and record-keeping, as well as make financial data easily available to
those who legitimately need access to it—all while keeping data intact and secure.

• An accounting information system (AIS) is used by companies to collect, store, manage, process,
retrieve, and report financial data.
• AIS can be used by accountants, consultants, business analysts, managers, chief financial officers,
auditors, and regulators.
• An AIS helps the different departments within a company work together.
• An effective AIS uses hardware and software to effectively store and retrieve data.
• The internal and external controls of an AIS are critical to protecting a company's sensitive data
An accounting information system is a way of tracking all accounting and business activity for a
company. Accounting information systems generally consist of six primary components: people,
procedures and instructions, data, software, information technology infrastructure, and internal controls.
Below is a breakdown of each component in detail.

1. AIS People
The people in an AIS are the system users. An AIS helps the different departments within a company
work together. Professionals who may need to use an organization's AIS include:

• Accountants
• Consultants
• Business analysts
• Managers
• Chief financial officers
• Auditors

For example, management can establish sales goals for which staff can then order the appropriate amount
of inventory. The inventory order notifies the accounting department of a new payable. When sales are
made in a business, the people and departments involved in the sales process could include the following:

1. Salespeople enter the customer orders into the AIS.

2. Accounting bills or sends an invoice to the customer.
3. The warehouse assembles the order.
4. The shipping department sends the order out to the customer.
 5. The accounting department gets notified of a new accounts receivable, which is an IOU from the
customer that's typically paid within 30, 60, or 90 days.
6. The customer service department tracks the order and customer shipments.
7. Management uses AIS to create sales reports and perform cost analysis, which can include
inventory, shipping, and manufacturing costs.

With a well-designed AIS, everyone within an organization can access the same system and retrieve the
same information. An AIS also simplifies the process of reporting information to people outside of the
organization, when necessary.

2. Procedures and Instructions

The procedure and instructions of an AIS are the methods it uses for collecting, storing, retrieving, and
processing data. These methods are both manual and automated. The data can come from both internal
sources (e.g., employees) and external sources (e.g., customers' online orders). Procedures and instructions
will be coded into the AIS software. However, the procedures and instructions should also be "coded" into
employees through documentation and training. The procedures and instructions must be followed
consistently in order to be effective.

3. AIS Data
An AIS must have a database structure to store information, such as structured query language (SQL),
which is a computer language commonly used for databases. SQL allows the data that's in the AIS to be
manipulated and retrieved for reporting purposes. The AIS will also need various input screens for the
different types of system users and data entry, as well as different output formats to meet the needs of
different users and various types of information.

The data contained in an AIS is all of the financial information pertinent to the organization's business
practices. Any business data that impacts the company's finances should go into an AIS.

The type of data included in an AIS depends on the nature of the business, but it may consist of the
following:

• Sales orders
• Customer billing statements
• Sales analysis reports
• Purchase requisitions
• Vendor invoices
• Check registers
• General ledger
• Inventory data
• Payroll information
• Timekeeping
• Tax information

4. AIS Software
The software component of an AIS is the computer programs used to store, retrieve, process, and analyze
the company's financial data. Before there were computers, an AIS was a manual, paper-based system, but
today, most companies are using computer software as the basis of the AIS. Small businesses might use
Intuit's Quickbooks or Sage's Sage 50 Accounting, but there are others. Small to mid-sized businesses
might use SAP's Business One. Mid-sized and large businesses might use Microsoft's Dynamics GP, Sage
Group's MAS 90, or MAS 200, Oracle's PeopleSoft, or Epicor Financial Management.
Quality, reliability, and security are key components of effective AIS software. Managers rely on the
information it outputs to make decisions for the company, and they need high-quality information to
make sound decisions.

AIS software programs can be customized to meet the unique needs of different types of businesses. If
an existing program does not meet a company's needs, the software can also be developed in-house with
substantial input from end-users or can be developed by a third-party company specifically for the
organization. The system could even be outsourced to a specialized company.

For publicly-traded companies, no matter what software program and customization options the business
chooses, Sarbanes-Oxley regulations will dictate the structure of the AIS to some extent. This is because
SOX regulations establish internal controls and auditing procedures with which public companies must
comply.

5. IT Infrastructure
Information technology infrastructure is just a fancy name for the hardware used to operate the
accounting information system. Most of these hardware items a business would need to have anyway and
can include the following:

• Computers
• Mobile devices
• Servers
• Printers
• Surge protectors
• Routers
• Storage media
• A back-up power supply

In addition to cost, factors to consider in selecting hardware include speed, storage capability, and
whether it can be expanded and upgraded.

Perhaps most importantly, the hardware selected for an AIS must be compatible with the intended
software. Ideally, it would be not just compatible, but optimal—a clunky system will be much less helpful
than a speedy one. One way businesses can easily meet hardware and software compatibility requirements
is by purchasing a turnkey system that includes both the hardware and the software that the business needs.
Purchasing a turnkey system means, theoretically, that the business will get an optimal combination of
hardware and software for its AIS.

A good AIS should also include a plan for maintaining, servicing, replacing, and upgrading components
of the hardware system, as well as a plan for the disposal of broken and outdated hardware, so that sensitive
data is destroyed.

6. Internal Controls
The internal controls of an AIS are the security measures it contains to protect sensitive data. These can
be as simple as passwords or as complex as biometric identification. Biometric security protocols might
include storing human characteristics that don't change over time, such as fingerprints, voice, and facial
recognition.

An AIS must have internal controls to protect against unauthorized computer access and to limit access
to authorized users, which includes some users inside the company. It must also prevent unauthorized
file access by individuals who are allowed to access only select parts of the system.
An AIS contains confidential information belonging not just to the company but also to its employees
and customers. This data may include:

• Social Security numbers

• Salary and personnel information
• Credit card numbers
• Customer information
• Company financial data
• Financial information of suppliers and vendors

All of the data in an AIS should be encrypted, and access to the system should be logged and surveilled.
System activity should be traceable as well.

An AIS also needs internal controls that protect it from computer viruses, hackers, and other internal and
external threats to network security. It must also be protected from natural disasters and power surges
that can cause data loss.

2) Human Resource Information System

A Human Resources Information System (HRIS) is the most used software in HR. In this article, we will
give an overview of what an HRIS is, its main functionalities, and everything you need to know to have a
basic understanding of the HRIS.
HRIS stands for Human Resources Information System. The HRIS is a system that is used to collect and
store data on an organization’s employees.

In most cases, an HRIS encompasses the basic functionalities needed for end-to-end Human Resources
Management (HRM). It is a system for recruitment, performance management, learning & development,
and more.

An HRIS is also known as HRIS software. This is a bit confusing as it implies that different systems can
have different software running on them. However, this is not the case. The HRIS is, in essence, an HR
software package.

The HRIS can either run on the company’s own technical infrastructure, or, more common nowadays, be
cloud-based. This means that the HR software is running outside of the company’s premises, making it
much easier to update.

Other commonly used names are HRIS system and HRMS, or Human Resources Management system.
These are all different words for the same thing. Collectively, these systems are also called Human Capital
Management systems, or HCM.

Benefits of an HRIS
Centrally, the HRIS holds employee information. A wide range of employee data is then easily accessible,
in one system.

• Record-keeping. An HRIS is a record-keeping system that keeps track of changes to anything

related to employees. The HRIS can be seen as the single source of truth when it comes to
personnel data.
• Compliance. Some data is collected and stored for compliance reasons. This includes material
for the identification of employees in case of theft, fraud, or other misbehaviors, first contact
 information in case of accidents, citizens identification information for the tax office, and
expiration dates for mandatory certification. All this information can be stored in the HRIS.
• Efficiency. Having all this information stored in one place not only benefits accuracy but also
saves time. Some companies still keep a lot of data about employees as physical paperwork.
Finding the right folder, and locating the right sheet, can take up a lot of staff time.
• HR strategy. The HRIS permits the tracking of data required to advance the HR and business
strategy. Depending on the priorities of the organization, different data will be essential to track.
This is where the HRIS shines.
• Self-Service HR. A final benefit is the ability to offer self-service HR to employees and
managers. This enables employees to manage their own affairs. When done right, the HRIS can
offer a good employee experience. Keep in mind that not all HRIS systems offer this in a user-
friendly manner!

HRIS functions
There are different kinds of HRIS systems and software. Because an HRIS encompasses all the
functionalities for HR, all separate functionalities are part of the system. These functionalities include:

• Applicant Tracking System (ATS). This software handles all the company’s recruiting needs.
It tracks candidate information and resumes, enables recruiters to match job openings to suitable
candidates from the company’s application pool, and helps in guiding the hiring process.
• Payroll. Payroll automates the pay process of employees. Contractual data and information on
new hires is often entered into this system – sometimes combined with time & attendance data –
and at the end of the month, payments orders are created.
• Benefits administration. Another functionality of the HRIS is benefits management. Employee
benefits are an important aspect of compensation and are also managed in this system. More
advanced systems offer an employee self-service model for employee benefits. In this case,
employees can select the benefits they are looking for themselves. One may want more paternity
leave, the other one a more expensive company car. This self-service approach to benefits is also
called a cafeteria model.

3) Inventory Information System

Inventory management is a set of activities aimed at tracking stock and maintaining optimal stock
amounts. It encompasses control over the entire flow of goods, from purchase to sale, with the purpose of
having the right amount of the right stock at the right place at the right time.

Note that inventory management is different from inventory control, even though these two notions sound
alike and are often used interchangeably. Inventory control handles stock that you already have in your
warehouse or storage facility while inventory management is a broader term that includes activities of
strategic planning, forecasting demand, and replenishing stock amounts.

Inventory management is important for different participants of the supply chain including

• manufacturers,
• warehouses,
• wholesalers,
 • retailers, and
• eCommerce businesses.
Main types of inventory
There are many different types of inventory, but typically they are grouped into 4 categories.

1. Raw materials (including components) are any items that are needed to produce finished products.
For example, if you manufacture clothes, then fabric, threads, and sewing accessories would be the
raw materials that you purchase and use in the production process.
2. Work-in-progress (WIP) inventory includes items that are partly finished and not ready for sale
yet. In clothing manufacturing, shirts that are finished except for the buttons being sewn on would
be considered WIP.
3. Maintenance, repair, and operations (MRO) goods are items that support the manufacturing
process and are not a part of the finished product. Continuing the garment industry example, it can
be needles, patterns, scissors, and so on.
4. Finished goods are products that are manufactured and ready to be sold.

Stages of inventory management

As we said, inventory management involves tracking of goods through manufacturing, storing, and sales.
So, we can break this process into five stages.

1. Purchasing (reordering) is buying raw materials needed for manufacturing or finished goods that
are intended to be sold.
2. Production is the process of turning raw materials into finished goods or preparing items for sale.
3. Storage is holding stock, e.g., raw materials before they are used or finished goods before they are
sold.
4. Sales is transferring goods to the customers.
5. Reporting is monitoring how much a business is selling and how much profit it makes.

Inventory management challenges

Managing inventory is a complex process involving many aspects. So, handling it manually or with the
help of disconnected legacy systems easily causes errors and financial losses. Here are some of the main
pitfalls.

Erroneous inventory planning. Calculating the right amount of stock for multiple product types is a
challenging task, whether it concerns ordering raw materials necessary for manufacturing or predicting
the ever-changing customer demand for retail sales. If done wrong, it can lead to one of the two equally
frustrating problems.

• Overstocking is having too many goods. Ordering and keeping extra goods “just in case” is a bad
idea because you have to pay for additional storage space, you have your invested cash tied up, and
besides, you risk being left with unsold items that you’ll have to discard (for example, perishable or
seasonal products).
• Out-of-stocks means not having enough goods. In this case, either the production process stops
causing delays and possible non-fulfillments, or you lose revenue and have unhappy customers that
want to buy the product that you ran out of. In 2020, the value of stockouts in the retail sector
was stimated as $1.14 trillion — that sounds like a problem, doesn’t it?
 • Disparate data. The disconnected structure of different systems in the supply chain can be a cause
of mistakes and uninformed decisions. It can also happen in case you have multiple warehouses,
points of sale, manufacturing facilities, etc. Lousy data sharing leads to poor planning and lack of
understanding of what’s going on with your business.

• Wrong purchase time or amount. The Future of Supply Chain report by BCI states that in 2020,
73 percent of their respondents encountered a detrimental effect on the supply side. The process of
replenishment involves accurate prediction of the amount of items you need and also calculating the
time needed for them to be delivered as lead times vary across different vendors. Any supply
disruptions can result in the problems we described above.

• Inaccurate inventory counts. Inventory count is a process of monitoring what you have in store to
ensure there are no discrepancies. Many businesses still perform their inventory counts manually,
which takes too much time and is prone to errors. Such a lack of visibility can result in either lost
items or overselling (that’s when you sell something you actually don’t have, oops).

• Disorganized warehouse. A lack of order in a warehouse is, unfortunately, a very frequent problem.
Unoptimized inventory allocation, poorly labeled areas, incorrect storage conditions — all this leads
to wasted time, lost or damaged goods, and possible theft.

Inventory management software

An inventory management system (IMS) is software for tracking inventory, controlling stock levels,
handling orders, sales, returns, reports, and more. It helps automate the previously manual processes and
increases efficiency, accuracy, and speed of operations.

There are two main types of IMSs:

1. perpetual system that manages inventory in real-time, and

2. periodic system that conducts occasional counts of stock and provides periodic updates.

Well, the pros and cons are obvious. Periodic systems are cheaper, simpler, and offer more limited
capabilities, while perpetual ones require more investments and are more advanced, providing real-time
visibility and control. However, different businesses require different solutions and approaches so the
choice depends on your specific needs.

An IMS can be a standalone solution or you can have similar functionality in your warehouse management
system (WMS), supply chain management platform, enterprise resource planning (ERP), or other business
management platforms.

4) Manufacturing Information System

What is a Manufacturing Information System?
Manufacturing information systems are integral to the modern manufacturing facility. They are computer
software platforms used to track to and document the transformation of raw materials to finished goods.
With the implementation of a manufacturing and production information system, facility managers and
decision makers can understand how conditions in the production process can be optimized and improved
for increased output. The manufacturing information system operates in real-time, covering the full range
of production elements in the process, including machines, inputs, personnel, and more.
With comprehensive manufacturing information system software, facility managers have a complete view
into the entire production process, providing them with real data, instead of guesswork and wasting time
trying to pinpoint a problem. In addition, the manufacturing execution system can also play a key role in
automation and ensuring the proper sequencing of both manufacturing and business processes.

Why implement Manufacturing Information Systems?

Many plant operators are familiar with the ‘old way’ of doing business. When the manufacturing process
is running smoothly, everything is on track. However, as soon as something goes wrong, it can throw off
the entire production system, with potential negative impacts on the entire supply chain – from raw
materials to the finished product, as well as taking a tremendous amount of time and resources to
remediate the problem.

Advantages of a Manufacturing Information System

With a production information system model in place, plant operators have an entirely different view of
their facilities. The system can operate across multiple areas, including product definitions across the
product life cycle, resource scheduling, order execution, and production analysis. The system creates a
real-time record, capturing relevant data throughout the manufacturing process. This enables optimization
of the process, increasing efficiency and potentially reducing errors and downtime. In today’s competitive
landscape, this is a key advantage of a smart manufacturing system. In addition, the documentation and
record keeping that the system provides is especially useful in heavily regulated sectors, such as
pharmaceuticals or food and beverage.

Benefits for Business

Companies that deploy a manufacturing information system realize real benefits to their business process,
including reduced waste and quicker set up times, more accurate data for key costs such as labor, scrap,
tooling, etc., increased uptime, and a paperless workflow. In addition, many facilities use their
manufacturing information system for real-time feedback and comprehensive information at a single
source, to optimize their production process.

Whether facilities are looking to improve their production data collection, manage their resources better,
or execute their production orders quicker, a manufacturing information system can provide the best
solution to fit their business needs.

5) Marketing Information System

The Marketing Information System refers to the systematic collection, analysis, interpretation, storage
and dissemination of the market information, from both the internal and external sources, to the marketers
on a regular, continuous basis.

The marketing information system distributes the relevant information to the marketers who can make the
efficient decisions related to the marketing operations viz. Pricing, packaging, new product development,
distribution, media, promotion, etc.

Every marketing operation works in unison with the conditions prevailing both inside and outside the
organization, and, therefore, there are several sources ( viz. Internal, Marketing Intelligence, Marketing
Research) through which the relevant information about the market can be obtained.
 Components of Marketing Information System

1. Internal Records: The Company can collect information through its internal records comprising
of sales data, customer database, product database, financial data, operations data, etc. The
detailed explanation of the internal sources of data is given below:

• The information can be collected from the documents such as invoices, transmit copies, billing
documents prepared by the firms once they receive the order for the goods and services from the
customers, dealers or the sales representatives.
• The current sales data should be maintained on a regular basis that serves as an aide to a the
Marketing Information System. The reports on current sales and the inventory levels help the
management to decide on its objectives, and the marketers can make use of this information to
design their future sales strategy.
• The Companies maintain several databases such as*Customer Database- wherein the complete
information about the customer’s name, address, phone number, the frequency of purchase,
financial position, etc. is saved.
*Product Database- wherein the complete information about the product’s price, features, variants,
is stored.

*Salesperson database, wherein the complete information about the salesperson, his name,
address, phone number, sales target, etc. is saved.

• The companies store their data in the data warehouse from where the data can be retrieved
anytime the need arises. Once the data is stored, the statistical experts mine it by applying several
computer software and techniques to convert it into meaningful information that gives facts and
figures.

2. Marketing Intelligence System: The marketing intelligence system provides the data about the
happenings in the market, i.e. data related to the marketing environment which is external to the
organization. It includes the information about the changing market trends, competitor’s pricing
strategy, change in the customer’s tastes and preferences, new products launched in the market,
promotion strategy of the competitor, etc.
 In order to have an efficient marketing Information System, the companies should work
aggressively to improve the marketing intelligence system by taking the following steps:

• Providing the proper training and motivating the sales force to keep a check on the market trends,
i.e. the change in the tastes and preferences of customers and give suggestions on the
improvements, if any.
• Motivating the channel partners viz. Dealer, distributors, retailers who are in the actual market to
provide the relevant and necessary information about the customers and the competitors.
• The companies can also improve their marketing intelligence system by getting more and more
information about the competitors. This can be done either by purchasing the competitor’s
product, attending the trade shows, reading the competitor’s published articles in magazines,
journals, financial reports.
• The companies can have an efficient marketing information system by involving the loyal
customers in the customer advisory panel who can share their experiences and give advice to the
new potential customers.
• The companies can make use of the government data to improve its marketing Information
system. The data can be related to the population trends, demographic characteristics, agricultural
production, etc. that help an organization to plan its marketing operations accordingly.
• Also, the companies can purchase the information about the marketing environment from the
research companies who carry out the researches on all the players in the market.
• The Marketing Intelligence system can be further improved by asking the customers directly about
their experience with the product or service via feedback forms that can be filled online.

3. Marketing Research: The Marketing Research is the systematic collection, organization, analysis
and interpretation of the primary or the secondary data to find out the solutions to the marketing
problems.Several Companies conduct marketing research to analyze the marketing environment
comprising of changes in the customer’s tastes and preferences, competitor’s strategies, the scope
of new product launch, etc. by applying several statistical tools. In order to conduct the market
research, the data is to be collected that can be either primary data (the first-hand data) or the
secondary data (second-hand data, available in books, magazines, research reports, journals, etc.)
The secondary data are publicly available, but the primary data is to be collected by the researcher
through certain methods such as questionnaires, personal interviews, surveys, seminars, etc.

A marketing research contributes a lot in the marketing information system as it provides the
factual data that has been tested several times by the researchers.

4. Marketing Decision Support System: It includes several software programs that can be used by
the marketers to analyze the data, collected so far, to take better marketing decisions.With the use of
computers, the marking managers can save the huge data in a tabular form and can apply statistical
programs to analyze the data and make the decisions in line with the findings.

6) Knowledge Based Expert System

A knowledge-based system (KBS) is a form of artificial intelligence (AI) that aims to capture the
knowledge of human experts to support decision-making. Examples of knowledge-based systems
include expert systems, which are so called because of their reliance on human expertise.
Here are some types of knowledge-based systems:
• Case-based systems. Case-based systems use case-based reasoning. ...
• Expert systems. ...
• Hypertext manipulation systems. ...
• Intelligent tutoring systems. ...
• Rule-based systems. ...
• Blackboard systems. ...
• Eligibility analysis systems. ...
• Benefits of knowledge-based systems.

What is the importance of knowledge-based system?

A KBS helps improve decision making and enables users to work at greater levels of expertise,
productivity, and consistency. In addition, a KBS is useful when expertise is not available, or when
information must be stored effectively for future use.

What are the features of knowledge base?

7 Essential Features to Look for in a Knowledge Base Software
• Knowledge Base Software Features allow for Self Service. ...
• A Super Fast Knowledge Base.
• A Killer Search Engine.
• User Feedback and Analytics.
• Clean User Experience.
• Uncompromised Authoring.
• Enterprise Grade Backup.
• Search Engine Optimization.
 KCES’s College of Engineering and Management, Jalgaon
DEPARTMENT OF MANAGEMENT
Study Material
SUB: 302 Management Information System
Unit IV Trends in MIS

1) ERP – Introduction, features, advantages, Implementing ERP System

ERP stands for Enterprise Resource Planning.

ERP systems are the kind of software tools which are used to manage the data of an enterprise. ERP
system helps different organizations to deal with different departments of an enterprise. Different
departments like receiving, inventory management, customer order management, production planning,
shipping, accounting, human resource management, and other business functions.

Basically, it is the practice of consolidating an enterprise’s planning, its manufacturing, its sales and
marketing efforts into one management system. It combines all databases across different departments
into a single database which can be easily accessible to all employees of that enterprise. It helps in
automation of the tasks involved in performing a business process.

Before an ERP system, there are different databases of different departments which they managed
by their own. The employees of one department does not know about anything about other
department.
After ERP

After ERP system, databases of different departments are managed by one system called ERP
system. It keep tracks of all the database within system. In this scenario, employee of one
department have information regarding the other departments.

Vendors of ERP :
1. Baan
2. JD Edwards
3. Oracle
4. PeopleSoft
5. SAP

Benefits of ERP:
1. This system helps in improving integration.
2. It is the flexible system.
3. There are fewer errors in this system.
4. This system improved speed and efficiency.
5. There is a complete access to information.
6. Lower total costs in complete supply chain.
7. This system helps in Shortening the throughput times.
8. There is sustained involvement and commitment of the top management.

Limitations of ERP:

ERP system has 3 significant limitations:

1. Managers generate custom reports or queries only with the help from a programmer and
this will create a problem that they did not receive information quickly, which is essential
for making a competitive advantage.
 2. There is no proper decision-making scenario i.e. this systems provide only the current
status, such as open orders. Whenever there is need to look for past status to find trends
and patterns it become difficult. That aid better decision-making.
3. No doubt that data is integrated within the system, but there is no integration of data with
other enterprise or division systems and it does not include external intelligence.

ERP Implementation

Enterprise Resource Planning (ERP) is made to automate any task. With ERP, it is easy to manage
every department under one single database. This consumes not much time and is easy and fast way
to do work with. Developed in 1990s, Enterprise Resource Planning is foundation system for
domestic and global operations, supporting most or all functional areas in their daily operations. Is
one of the more common categories of business software, especially with large-scale businesses.
It is business strategy and set of industry-domain-specific applications that build customer and
shareholder communities value network system by enabling and optimizing enterprise and inter-
enterprise collaborative operational and financial processes. ERP at its core is an effective way of
centralizing information and workflow processes through data management. Because ERP keeps all
of your workflow data in one place.

Example:
Any enterprise’s planning, manufacturing, sales and marketing efforts are put under one management
system and then it combines to one single database system.

Different phases of ERP Implementation :

1. Pre-evaluation screening :
This phase starts when company decides to go for ERP system. For this, search for package
starts. It is time-consuming process because every package has to analyze first before
reaching to any decision. As all packages are not same and each has its own strengths and
weakness. This process should eliminate those packages that are not suitable for company’s
business processes.
2. Package Evaluation :
It is the most important phase in implementation. This phase depends on success and failure
of entire project with package selection. Most important factor while selecting any package
is that not every package can be totally perfect for project but at-least it should be good fit
for project.
3. Project Planning Phase :
This phase plans and designs implementation process.
4. Gap Analysis :
It is the most crucial phase in this implementation. Here, gaps are analyzed between
company’s practices and that practices which are supported by ERP package. It has been
estimated that even best ERP package only meets 80-85% of company’s functional
requirements.
5. Re-engineering :
It is the fundamental rethinking and radical redesign of business processes to achieve
improvements.
6. Customization :
It is the main functional area of ERP Implementation. Arrived solution must match with
overall goals of company. Prototype should allow for thorough testing and attempts to solve
logistical problem.
7. Implementation Team Training :
Now after above processes, implementation team knows how to implement system. This is
phase where company trains its employees to implement and later run system.
8. Testing :
This is the phase where team break system. Sometimes, system overloads or multiple users
trying to login at same time etc. Test cases are designed specifically to find weak links in
system. Different types of testing are: Unit testing, integration testing, acceptance testing,
security testing, performance and stress testing.
9. Going Live :
Once technical and functional side is properly working and testing is done. There comes next
phase i.e, “Going Live”. Once system is ‘live’, old system is removed & new system is used
for doing business.
10. End-User Training :
This is the phase where user of system is given training on how to use system. Employees
and their skills are identified and training is given to them in groups based on their current
skills. Every employee is provided with training of job which he is going to perform.
 11. Post-Implementation :
It is the most important and critical factor. Post Implementation is based on two words-
Operation and Maintenance of system. Duration of this phase depends on training efficiency.
Necessary enhancements & upgrades are made in this phase.

2) Data Mining – Meaning, Types, Advantages, Applications, Challenges

Data mining is a process used by companies to turn raw data into useful information. By using
software to look for patterns in large batches of data, businesses can learn more about their customers
to develop more effective marketing strategies, increase sales and decrease costs. Data mining depends
on effective data collection, warehousing, and computer processing.

• Data mining is the process of analyzing a large batch of information to discern trends and patterns.
• Data mining can be used by corporations for everything from learning about what customers are
interested in or want to buy to fraud detection and spam filtering.
• Data mining programs break down patterns and connections in data based on what information
users request or provide.
• Social media companies use data mining techniques to commodify their users in order to generate
profit.
• This use of data mining has come under criticism lately as users are often unaware of the data
mining happening with their personal information, especially when it is used to influence preferences.

Data Warehousing and Mining Software

Data mining programs analyze relationships and patterns in data based on what users request. For
example, a company can use data mining software to create classes of information. To illustrate,
imagine a restaurant wants to use data mining to determine when it should offer certain specials. It
looks at the information it has collected and creates classes based on when customers visit and what
they order.

In other cases, data miners find clusters of information based on logical relationships or look at
associations and sequential patterns to draw conclusions about trends in consumer behavior.

Warehousing is an important aspect of data mining. Warehousing is when companies centralize their
data into one database or program. With a data warehouse, an organization may spin off segments of
the data for specific users to analyze and use. However, in other cases, analysts may start with the data
they want and create a data warehouse based on those specs.

Data Mining Techniques

Data mining uses algorithms and various techniques to convert large collections of data into useful
output. The most popular types of data mining techniques include:

• Association rules, also referred to as market basket analysis, searches for relationships between
variables. This relationship in itself creates additional value within the data set as it strives to link
pieces of data. For example, association rules would search a company's sales history to see which
products are most commonly purchased together; with this information, stores can plan, promote, and
forecast accordingly.
• Classification uses predefined classes to assign to objects. These classes describe characteristics
of items or represent what the data points have in common with each. This data mining technique
allows the underlying data to be more neatly categorized and summarized across similar features or
product lines.
• Clustering is similar to classification. However, clustering identified similarities between objects,
then groups those items based on what makes them different from other items. While classification
may result in groups such as "shampoo", "conditioner", "soap", and "toothpaste", clustering may
identify groups such as "hair care" and "dental health".
• Decision trees are used to classify or predict an outcome based on a set list of criteria or decisions.
A decision tree is used to ask for input of a series of cascading questions that sort the dataset based on
responses given. Sometimes depicted as a tree-like visual, a decision tree allows for specific direction
and user input when drilling deeper into the data.
• K-Nearest Neighbor (KNN) is an algorithm that classifies data based on its proximity to other
data. The basis for KNN is rooted in the assumption that data points that are close to each are more
similar to each other than other bits of data. This non-parametric, supervised technique is used to
predict features of a group based on individual data points.
• Neural networks process data through the use of nodes. These nodes is comprised of inputs,
weights, and an output. Data is mapped through supervised learning (similar to how the human brain
is interconnected). This model can be fit to give threshold values to determine a model's accuracy.
• Predictive analysis strives to leverage historical information to build graphical or mathematical
models to forecast future outcomes. Overlapping with regression analysis, this data mining technique
aims at supporting an unknown figure in the future based on current data on hand.

Applications of Data Mining

In today's age of information, it seems like almost every department, industry, sector, and company
can make use of data mining. Data mining is a vague process that has many different applications as
long as there is a body of data to analyze.
Sales
The ultimate goal of a company is to make money, and data mining encourages smarter, more efficient
use of capital to drive revenue growth. Consider the point-of-sale register at your favorite local coffee
shop. For every sale, that coffeehouse collects the time a purchase was made, what products were sold
together, and what baked goods are most popular. Using this information, the shop can strategically
craft its product line.

Marketing
Once the coffeehouse above knows its ideal line-up, it's time to implement the changes. However, to
make its marketing efforts more effective, the store can use data mining to understand where its clients
see ads, what demographics to target, where to place digital ads, and what marketing strategies most
resonate with customers. This includes aligning marketing campaigns, promotional offers, cross-sell
offers, and programs to findings of data mining.

Manufacturing
For companies that produce their own goods, data mining plays an integral part in analyzing how
much each raw material costs, what materials are being used most efficiently, how time is spent along
the manufacturing process, and what bottlenecks negatively impact the process. Data mining helps
ensure the flow of goods is uninterrupted and least costly.

Fraud Detection
The heart of data mining is finding patterns, trends, and correlations that link data points together.
Therefore, a company can use data mining to identify outliers or correlations that should not exist. For
example, a company may analyze its cash flow and find a reoccurring transaction to an unknown
account. If this is unexpected, the company may wish to investigate should funds be potentially
mismanaged.

Human Resources
Human resources often has a wide range of data available for processing including data on retention,
promotions, salary ranges, company benefits and utilization of those benefits, and employee
satisfaction surveys. Data mining can correlate this data to get a better understanding of why
employees leave and what entices recruits to join.

Customer Service
Customer satisfaction may be caused (or destroyed) for a variety of reasons. Imagine a company that
ships goods. A customer may become unhappy with ship time, shipping quality, or communication
on shipment expectations. That same customer may become frustrated with long telephone wait times
or slow e-mail responses. Data mining gathers operational information about customer interactions
and summarizes findings to determine weak points as well as highlights of what the company is doing
right.

Benefits of Data Mining

Data mining ensures a company is collecting and analyzing reliable data. It is often a more rigid,
structured process that formally identifies a problem, gathers data related to the problem, and strives
to formulate a solution. Therefore, data mining helps a business become more profitable, efficient, or
operationally stronger.

Data mining can look very different across applications, but the overall process can be used with
almost any new or legacy application. Essentially any type of data can be gathered and analyzed, and
almost every business problem that relies on qualifiable evidence can be tackled using data mining.

The end goal of data mining is to take raw bits of information and determine if there is cohesion or
correlation among the data. This benefit of data mining allows a company to create value with the
information they have on hand that would otherwise not be overly apparent. Though data models can
be complex, they can also yield fascinating results, unearth hidden trends, and suggest unique
strategies.

Limitations of Data Mining

This complexity of data mining is one of the largest disadvantages to the process. Data analytics often
requires technical skillsets and certain software tools. Some smaller companies may find this to be a
barrier of entry too difficult to overcome.

Data mining doesn't always guarantee results. A company may perform statistical analysis, make
conclusions based on strong data, implement changes, and not reap any benefits. Through inaccurate
findings, market changes, model errors, or inappropriate data populations, data mining can only guide
decisions and not ensure outcomes.

There is also a cost component to data mining. Data tools may require ongoing costly subscriptions,
and some bits of data may be expensive to obtain. Security and privacy concerns can be pacified,
though additional IT infrastructure may be costly as well. Data mining may also be most effective
when using huge data sets; however, these data sets must be stored and require heavy computational
power to analyze.
 3) Cloud Computing - Meaning, characteristics, Types, Advantages, Cloud Computing models

Cloud Computing?

According to ZDNet, “cloud computing is the delivery of on-demand computing services — from
applications to storage and processing power — typically over the internet and on a pay-as-you-go
basis.”

In simplest terms, the cloud refers to the internet. When organizations store data in virtual data centers
or access programs using an internet connection instead of relying on their device’s hard drive or on-
premises IT infrastructure, it means they are operating in the cloud.

Cloud computing can be as simple as “servers in a third-party data center” or entire serverless
workloads that are infinitely scalable and geo-redundant. Cloud servers and services are scalable and
elastic.

How does cloud computing work?

Cloud computing is the delivery of computing resources, such as IT infrastructure or data center over
the internet. This model allows businesses to rent storage space or access software programs from a
cloud service provider, instead of building and maintaining their own IT infrastructure or data center.
One major benefit of using cloud computing services is that companies pay only for the resources they
use.

To better understand its technical aspects, cloud computing processes can be divided into frontend and
backend. The frontend component allows users to access data and programs stored in the cloud through
an internet browser or by using a cloud computing application. The backend consists of servers,
computers and databases that store the data.

History of cloud computing

According to Technology Review, the phrase “cloud computing” was first mentioned in 1996 in a
Compaq internal document.

The year 1999 was a milestone for cloud computing when Salesforce became the first company to
deliver enterprise applications over the internet. This was also the beginning of Software-as-a-Service
(SaaS).
In 2002, Amazon launched Amazon Web Services (AWS), which was another significant development
in cloud computing. Its suite of cloud-based services included storage, computation and even human
intelligence. In 2006, Amazon launched Elastic Compute Cloud (EC2), allowing businesses as well as
individuals to rent virtual computers and run their own computer applications.

The year 2009 saw yet another giant milestone in cloud computing as Google Workspace (now Google
Workspace) started to provide browser-based enterprise applications. In the same year, Microsoft
entered the cloud computing arena with Microsoft Azure, and soon companies
like Oracle and HP followed suit.

Examples of Cloud Computing:

Cloud computing includes everything from virtual machines to databases to entire serverless
applications. Some examples of cloud computing include:

Salesforce: Salesforce.com is a SaaS provider that specializes in customer relationship management

(CRM). The company provides enterprise applications to help align marketing, sales, customer
services, etc., and allows users to work from anywhere.

DigitalOcean: This company is a New York-based Infrastructure-as-a-Service (IaaS) provider for

software developers. Businesses use DigitalOcean to deploy and scale applications that run
simultaneously across multiple cloud servers.

Microsoft Azure: Microsoft Azure is a fine example of a Platform-as-a-Service (PaaS) that supports
the entire application development lifecycle, right from development to deployment and beyond. Azure
provides a plethora of tools, languages and frameworks to developers.

Dropbox: Dropbox is a cloud-based file hosting service that allows users to store and sync files to their
devices so they can access them from anywhere. It also allows users to share large files, including
images and videos via the internet, facilitating effective collaboration.

Importance of Cloud Computing

Before cloud computing came into existence, companies were required to download applications or
programs on their physical PCs or on-premises servers to be able to use them. For any organization,
building and managing its own IT infrastructure or data centers is a huge challenge. Even for those who
own their own data centers, allocating a large number of IT administrators and resources is a struggle.
 The introduction of cloud computing and virtualization was a paradigm shift in the history of the
technology industry. Rather than creating and managing their own IT infrastructure and paying for
servers, power and real estate, etc., cloud computing allows businesses to rent computing resources
from cloud service providers. This helps businesses avoid paying heavy upfront costs and the
complexity of managing their own data centers. By renting cloud services, companies pay only for
what they use such as computing resources and disk space. This allows companies to anticipate costs
with greater accuracy.

Since cloud service providers do the heavy lifting of managing and maintaining the IT infrastructure,
it saves a lot of time, effort and money for businesses. The cloud also gives organizations the ability to
seamlessly upscale or downscale their computing infrastructure as and when needed. Compared to the
traditional on-premises data center model, the cloud offers easy access to data from anywhere and on
any device with internet connectivity, thereby enabling effective collaboration and enhanced
productivity.

Uses of Cloud Computing

From startups to large corporations and government agencies, every organization uses the cloud to
access technology services to streamline workflows, improve communication, productivity, service
delivery and more. Listed below are some of the most common uses of cloud computing.

• Storage: One of the most common uses of cloud computing is file storage. While there are several
options to store and access data, such as hard drives on PCs, external hard drives, USB drives, etc.,
cloud storage enables businesses to seamlessly access data from anywhere and on any device with an
internet connection. Cloud storage services like Amazon S3, DropBox or OneDrive provide secure
access to data and also allows businesses to upscale and downscale storage space based on their
requirements.
• Database: Cloud database is another popular business use case. IBM defines cloud database as “a
database service built and accessed through a cloud platform.” A cloud database delivers most of the
same functionalities as a traditional database, but with additional benefits such as flexibility, cost
savings, failover support, specialized expertise and more.
• Web applications: Web applications are a must-have tool for businesses today. Powered by cloud
technology, anyone can access web-based apps using a web browser, providing instant remote access
to information. This allows business professionals to communicate with customers and provide them
with required information while they’re on the go, and helps them collaborate with colleagues from
anywhere.
• Collaboration: Due to its easy accessibility, integration, flexibility, security and ease of use, cloud-
based tools, such as Microsoft 365 and Google Workspace, have become the obvious choice for
businesses looking to collaborate both internally across departments and externally with clients. Gmail,
Google docs, Microsoft Outlook, Microsoft Word, Teams, etc., are powerful business tools designed
to enhance collaboration and productivity.
• SaaS applications: Software-as-a-Service (SaaS) applications, such as Salesforce, allow businesses to
store, organize and maintain data, as well as automate marketing and manage clients efficiently. SaaS
solutions are highly functional and do not require software and/or hardware management.

Types of Cloud Computing.

There are four main types of cloud computing: public, private, hybrid and multicloud.

Public cloud

VMware defines public cloud as “an IT model where on-demand computing services and infrastructure
are managed by a third-party provider and shared with multiple organizations using the public internet.”
Cloud service providers offer various services like Infrastructure-as-a-Service (IaaS), Platform-as-a-
Service (PaaS) and SaaS to individuals and businesses who rent these services on a monthly or pay-
per-use basis. Amazon Web Services (AWS), Microsoft Azure, Google Cloud, Alibaba
Cloud and IBM Cloud are the top five cloud providers.

Private cloud

A private cloud or an internal cloud is where the IT infrastructure (hardware and software resources)
is solely dedicated to a single organization, unlike a public cloud where the computing resources are
shared among multiple tenants. A private cloud environment is ideal for businesses for whom meeting
regulatory requirements, security and control are a priority. Traditionally, a private cloud is hosted at a
company’s data center and uses its own hardware. However, an organization may outsource hosting to
a third-party provider who remotely manages the computing resources.

Hybrid cloud

A hybrid cloud is a combination of both public cloud and private cloud environments. Businesses use
this model to supplement their compute capacity. When the capacity of a private cloud reaches its peak,
businesses can leverage public cloud to enhance the capabilities of the private cloud. Hybrid cloud
enables businesses to scale compute capacity up or down depending on the traffic or service demands.
This eliminates the need to purchase and maintain new servers, allowing businesses to save cost, time
and effort.

Multicloud

Multicloud is the practice of using a combination of clouds — two or more public or private clouds, or
a combination of both, from several cloud providers. A multicloud approach allows businesses to select
the best services from different cloud vendors based on their budgets, technical requirements,
geographic locations and so on. This model enables businesses to use different clouds for different
purposes. For instance, an organization can use one cloud for software development and testing, another
cloud for data backup and disaster recovery, and other for data analytics.

Types of Cloud Computing Services

The three types of cloud computing services are Infrastructure-as-a-Service (IaaS), Platform-as-a-
Service (PaaS) and Software-as-a-Service (SaaS).

Infrastructure-as-a-Service (IaaS)

IaaS is a cloud computing service where cloud providers deliver and manage virtualized computing
infrastructure over the internet. Instead of creating an in-house IT infrastructure, businesses can access
essential resources, such as operating systems, networking, storage space, development tools, etc., on
demand. This saves hardware and software costs as well as minimizes the burden of IT staff.

Platform-as-a-Service (PaaS)

PaaS allows businesses to concentrate on the development, deployment and management of software
applications and services without having to worry about the underlying infrastructure since cloud
providers do the heavy lifting. With PaaS, developers and programmers gain access to not only IT
infrastructure but also application/software platform and solution stack. Some of the examples of PaaS
include AWS Elastic Beanstalk, Google App Engine and Microsoft Azure.

Software-as-a-Service (SaaS)

SaaS provides businesses with ready-to-use software that is delivered to users over the internet. All of
the underlying infrastructure, including hardware, software, data storage, patch management and
hardware/software updates, are managed by SaaS providers. SaaS is a subscription-based model, which
requires businesses to subscribe to the services they want to use. Users can access SaaS applications
directly through web browsers, which eliminates the need to download or install them. SaaS allows
 users to access web-based solutions from anywhere and at any time with an active internet connection.
Some popular SaaS solutions include Microsoft 365, Google Workspace and Salesforce.

Benefits of Cloud Computing.

Cloud computing enables businesses to operate from virtually anywhere and with more efficiency.
Some benefits of cloud computing include:

• Cost savings: One of the greatest benefits of cloud computing is reduced costs. Since businesses do
not need to build their own IT infrastructure or purchase hardware or equipment, it helps companies
reduce capital expenses significantly.
• Flexibility/scalability: Cloud computing offers greater flexibility to businesses of all sizes. Whether
they require extra bandwidth, computing power or storage space, they can seamlessly scale up or down
computing resources depending on their needs and budget.
• Security: Data security is a major concern for businesses today. Cloud vendors provide advanced
security features like authentication, access management, data encryption, etc., to ensure sensitive data
in the cloud is securely handled and stored.
• Mobility: Cloud computing allows users to access corporate data from any device, anywhere and at
any time, using the internet. With information conveniently available, employees can remain
productive even on the go.
• Increased collaboration: Cloud applications allow businesses to seamlessly communicate and
securely access and share information, making collaboration simple and hassle-free. Cloud computing
empowers multiple users to edit documents or work on files simultaneously and in a transparent
manner.
• Disaster recovery: Data loss and downtime can cause irreparable damage to businesses of any size.
Major cloud vendors are well-equipped to withstand unforeseen disruptive events, such as
hardware/software failure, natural disasters and power outages, to ensure high application availability
and business continuity.
• Automatic updates: Performing manual organization-wide software updates can take up a lot of
valuable IT staff time. However, with cloud computing, service providers regularly refresh and update
systems with the latest technology to provide businesses with up-to-date software versions, latest
servers and upgraded processing power.
 Disadvantages of Cloud Computing

The advantages of operating in the cloud are immense. However, there are certain disadvantages that
companies should be aware of before deciding to transition to the cloud. Listed below are the top five
disadvantages of cloud computing.

1. Downtime: Since cloud computing systems are completely reliant on the internet, without an active
internet connection, businesses cannot access the data or applications hosted in the cloud. Google
suffered three severe outages in 2020 that affected the majority of its services and users across the
globe.
2. Vendor lock-in: Migrating a company’s workloads and services from one cloud provider to another is
a major challenge in cloud computing. Differences between cloud environments may cause
compatibility or integration issues. If the transition isn’t handled properly, it could expose an
organization’s data to unnecessary security vulnerabilities.
3. Limited control: Since the cloud infrastructure is wholly owned and managed by the cloud vendor,
businesses using cloud computing services have limited control over their data, applications and
services. Therefore, it’s important to have a proper end-user license agreement (EULA) in place to
understand what a business can do and can’t do within a cloud infrastructure.
4. Security: One of the major concerns of storing a company’s sensitive data in the cloud is security.
Although cloud service providers implement advanced security measures, storing confidential files on
remote servers that are entirely owned and operated by a third party always opens up security risks.
When an organization adopts a cloud computing model, the IT security responsibility is shared between
the cloud vendor and the user. As such, each party is responsible for the assets, processes and functions
they control.
5. Data loss or theft: Storing crucial data in virtual data centers can open the doors to a variety of risks
that could lead to data loss, such as cloud misconfiguration, information theft, security breach, stolen
credentials, etc. Moreover, cloud service providers, such as Microsoft and Google, follow a shared
responsibility model, where the vendor assumes responsibility for application availability and
everything that entails, while the customer retains responsibility for application data, administration
and user management.
 4) AI – Introduction, Application, types

The definition of Artificial Intelligence says: “Description In computer science, artificial intelligence,
sometimes called machine intelligence, is intelligence demonstrated by machines. In contrast to the natural
intelligence displayed by humans.” Artificial Intelligence (AI) refers to the induction of human intelligence
in computers. Which are experts to think like humans and imitate their behavior. Additionally, the word
may also refer to any computer that displays human mind-like characteristics. Such as learning and
problem-solving based on that learning.

Above all, AI is the technology that makes machines “think”. Also, it enables them to do tasks like humans
do. It is not remembering data and process it as common programs do. It is enabling machines to think on
their own and make logical decisions about things like humans do. The common technologies or algorithms
that make AI possible are listed below. Anything that doesn’t use these high-level algorithms can’t be
regarded as AI.

• Machine Learning
• Deep Learning
• Neural Networks
• Bayesian networks
• Evolutionary algorithms

Artificial Intelligence Background

Before we move on to discover the various types and applications of artificial intelligence, we need to visit
the world of Alan Turing and more specifically the Turing Test; a method of inquiry.

Long before AI was a commonly used term in the world. Alan Turing had made a proposition that
highlighted that the criteria for a computer to qualify as having artificial
intelligence would simply be whether or not it could mimic human responses under specific conditions.

The test places a human observer or judge at the center of it all and asks it to decide the “human” out of the
two candidates (one of which is a computer). If the judge points to the computer as the human candidate. It
means that the computer did indeed have artificial intelligence. Since it was able to present
itself convincingly as a human to a blind judge.
While this test has its own set of problems with validity and even with the method of performance. It does
not do away with the fact that with the right training and programming. Computers can gain accurate
knowledge and data. This can be useful to assist humans across a variety of forms/arenas.
Types of Artificial Intelligence

The following can also be thought of as stages of AI through which AI is evolving and finally reach the
stage like human intelligence. We discuss the three most common types of Artificial Intelligence below.

1. Artificial Narrow Intelligence (ANI)

Artificial Narrow Intelligence (ANI), also known as Narrow AI or Weak AI. It is a form of Artificial
Intelligence that performs one narrow range or a single task. It has a limited spectrum of capabilities. For
now, this is the AI that exists largely today. A machine that possesses ANI doesn’t mean it is dumb. Instead,
it means it can work with a small amount of data than humans do.

2. Artificial General Intelligence (AGI)

When the term AI comes to mind, it generally refers to AGI. If an Artificial Intelligence system is
designed to completely emulate human intelligence and behavior. We call it Artificial General Intelligence.
Moreover, some scientists also like to call it Strong AI and Full AI. Simply put, it is the Artificial
Intelligence System that can function and make similar decisions to humans.

3. Artificial Super Intelligence (ASI)

Artificial Super Intelligence (ASI) is the conceptual AI, often termed as Super AI, that not only imitates
human intelligence and behavior. It is the stage where computers are self-conscious and exceed human
intelligence and ability. Also, replicating human beings’ multifaceted intellect. ASI would be far stronger
at everything we do like maths, science, art, sports, medicine. Moreover, entertainment, interpersonal
relationships, everything. Ultimately, super-intelligent beings’ decision-making and problem-solving
capacities would be far superior to human beings.

Types Of AI Applications

The following are some of the major applications of artificial intelligence that are currently in use.

1. Knowledge reasoning

Knowledge representation and reasoning in the field of artificial intelligence are dedicated to representing
information about the world. In a form that a computer system can use to solve complex tasks. Accordingly,
the application allows a computer to collect raw data from different companies, institutions, and centers.
Likewise, it then represents it in graphical forms. To extract relations and patterns in the data. A machine
then finally uses this data form to take further actions just like humans would do. The most common
examples of knowledge reasoning are medical diagnose, human-like speech, or theorem provers.

2. AI Planning

Automated planning, commonly referred to as AI planning, is the application of AI. It deals with producing
concrete steps or courses of action for a specified task that optimize performance measures. AI planning
describes steps for a described system. These algorithms make use of the way humans perform a task. So,
they write code for machines to do the same. Common examples include robots and autonomous systems,
cognitive assistants, and service composition.

3. Machine learning (ML)

Instead of using explicit instructions, relying on patterns and inference. ML is the subset of AI that uses
training data to make predictions about a specific field. It is also referred to as predictive analytics. As it
trains on historical data available about a domain. Also, learns the factors that contribute to the output. ML
algorithms are available in a wide range of applications. Such as email filtering, weather prediction, and
computer vision. Where the creation of a traditional algorithm to perform the task is difficult or unfeasible.

4. Natural language processing (NLP)

NLP is like a subfield of linguistics, computer science, information engineering, and artificial intelligence.
It deals with the interaction between machines and humans. As humans use natural languages to
communicate. This field enables machines to understand these languages. Also, respond in the same
manner. You can see the most common example in digital personal assistants(DPA).

Applications Of Natural Language Processing (NLP)

5. Computer vision (CV)

Unlike NLP which uses text to extract information. CV uses digital images or videos to help computers
gain a high-level understanding of the world. A CV is described as a field of study aimed at developing
techniques to help computers “see” and comprehend digital media. Such as photographs or
videos. However, this remains an unresolved problem based on both the limited knowledge of biological
vision and the nature of visual perception in a physical world that is dynamic and almost variable. It
is commonly used in image processing/editing applications.
What is Computer Vision and How is it Transforming Our World?

6. Biometrics

Biometrics uses methods for unique recognition of humans based upon one or more intrinsic physical or
behavioral traits. Computer science, in particular, uses this as a form of identity access management and
control. Whereby it can create personalized identity checks to prevent any mismatch or sharing of identities.
Furthermore, It is available in a wide array of industries. Many of them choose it as their method of keeping
track of employees and their workings within the organization.

7. Virtual Agent

Probably one of the most sought-after AI applications. A virtual agent is a computer-generated,

animated, artificially intelligent character that is posed as the online customer service representative for the
business. It has the ability to not only conduct a conversation with humans. But also direct it towards
particular topics on individual concerns.

Moreover, outside the world of commerce. These agents are also able to perform non-verbal
behavior. Listen to humans to hold conversations with them regarding everyday topics if need be.
8. Deep learning Platforms

Used in pattern recognition and classification (for large sets). This is a special type f machine learning that
consists of artificial neural networks with many abstraction layers.

What this helps to do is break down the data sets and arrange them in particular manners. To aid the
understanding and to help figure out any patterns/classifications/groupings that might be possible within
that one set. All this also helps to gain insight on data repetition, data formation, and the crossover of data
on many ends.
Deep Learning Frameworks: Choose The Best Fit For You
Major AI Companies in the World

Below is a brief introduction of major companies (hand-picked from Forbes AI 50 list around the world
that are using AI to solve real-world problems.

Nuro

An AI company that builds autonomous vehicles to transfer goods. The range is from retail centers and
shops to homes or storage to shopping centers.
Uptake

A five-year-old company that leverages artificial intelligence to analyze how its customers’ machines can
run better and avoid common failures.

Lemonade

They sell renters and homeowners insurance through the use of a chatbot to collect customer information
and work through claims.

Dataminr

The company ingests public internet data. Like social media posts and uses deep learning, natural language
processing, and advanced statistical modeling to send users tailored alerts.

Icertis

Earlier this year, the company celebrated its tenth anniversary. They use a cloud-based platform to help
companies analyze past contract negotiations. Moreover, automate administrative tasks.

5) Big Data – Meaning , uses, issues with big data, benefits, Operational & analytical big data,
challenges

Definition: As Gartner defines it – “Big Data are high volume, high velocity, or high-variety information
assets that require new forms of processing to enable enhanced decision making, insight discovery, and
process optimization.”Let's dig deeper and understand this in simpler terms.

The term ‘big data’ is self-explanatory − a collection of huge data sets that normal computing techniques
cannot process. The term not only refers to the data, but also to the various frameworks, tools, and
techniques involved. Technological advancement and the advent of new channels of communication (like
social networking) and new, stronger devices have presented a challenge to industry players in the sense
that they have to find other ways to handle the data.

From the beginning of time until 2003, the entire world only had five billion gigabytes of data. The same
amount of data was generated over only two days in 2011. By 2013, this volume was generated every ten
minutes. It is, therefore, not surprising that a generation of 90% of all the data in the world has been in the
past few years.
All this data is useful when processed, but it had been in gross neglect before the concept of big data came
along.

With the development and increase of apps and social media and people and businesses moving online,
there’s been a huge increase in data. If we look at only social media platforms, they interest and attract
over a million users daily, scaling up data more than ever before. The next question is how exactly is this
huge amount of data handled and how is it processed and stored. This is where Big Data comes into play.

And Big Data analytics has revolutionized the field of IT, enhancing and adding added advantage to
organizations. It involves the use of analytics, new age tech like machine learning, mining, statistics and
more. Big data can help organizations and teams to perform multiple operations on a single platform,
store Tbs of data, pre-process it, analyze all the data, irrespective of the size and type, and visualize it too.

The Sources of Big Data

1. Black Box Data

This is the data generated by airplanes, including jets and helicopters. Black box data includes
flight crew voices, microphone recordings, and aircraft performance information.

2. Social Media Data

This is data developed by such social media sites as Twitter, Facebook, Instagram, Pinterest,
and Google+.

3. Stock Exchange Data

This is data from stock exchanges about the share selling and buying decisions made by
customers.

4. Power Grid Data

This is data from power grids. It holds information on particular nodes, such as usage
information.
 5. Transport Data

This includes possible capacity, vehicle model, availability, and distance covered by a vehicle.

6. Search Engine Data

This is one of the most significant sources of big data. Search engines have vast databases
where they get their data.

Additionally, Bernard Marr, a Big Data and Analytics expert, has come up with his brilliant list of 20
Big Data sources that are freely available to everybody on the web. Some of them are briefed about
here.

• Data.gov – where all of the US Government’s data is freely accessible, and information ranging from
climate to crime is available.

• Analogous to this is the UK Government’s portal, Data.gov.uk, where metadata on all of UK books
and publications since 1950 can be gathered.

• There is also the US Census Bureau – which covers valuable information like population, geography,
and other data. Identical to this is the European Union Open Data Portal, comprising the census data
from European Union institutions.

• And something closer to our interests – the Facebook Graph, provides the application program interface
information (Graph API), after gathering info from all the data that is shared publicly by its users.

• In the healthcare sector, there is the Healthdata.gov and NHS Health and Social Care Information
Centre, from the US and the UK, respectively.

Google Trends, Google Finance, Amazon Web Services public datasets, are all similar examples. From
these examples, it is clear that big data is not about volumes alone. It also includes a wide variety and
high velocity of data. In 2001, Doug Laney - an industry analyst-articulated the 3 Vs of big data as
velocity, volume, and variety.

The speed at which data is streamed, nowadays, is unprecedented, making it difficult to deal with it in
a timely fashion. Smart metering, sensors, and RFID tags make it necessary to deal with data torrents
in almost real-time. Most organizations are finding it difficult to react to data quickly.
 Not many years ago, having too much data was simply a storage issue. However, with increased storage
capacities and reduced storage costs, industry players like Remote DBA Support are now focusing on
how relevant data can create value.

There is a greater variety of data today than there was a few years ago. Data is broadly classified as
structured data (relational data), semi-structured data (data in the form of XML sheets), and
unstructured data (media logs and data in the form of PDF, Word, and Text files). Many companies
have to grapple with governing, managing, and merging the different data varieties.

Veracity (the quality of the data), variability (the inconsistency which data sometimes displays), and
complexity (when dealing with large volumes of data from different sources) are other essential
characteristics of data.

Advantages of Big Data

1. Today’s consumer is very demanding. He talks to pass customers on social media and looks at different
options before buying. A customer wants to be treated as an individual and to be thanked after buying
a product. With big data, you will get actionable data that you can use to engage with your customers
one-on-one in real-time. One way big data allows you to do this is that you will be able to check a
complaining customer’s profile in real-time and get info on the product/s he/she is complaining about.
You will then be able to perform reputation management.

2. Big data allows you to re-develop the products/services you are selling. Information on what others
think about your products -such as through unstructured social networking site text- helps you in
product development.

3. Big data allows you to test different variations of CAD (computer-aided design) images to determine
how minor changes affect your process or product. This makes big data invaluable in the manufacturing
process.

4. Predictive analysis will keep you ahead of your competitors. Big data can facilitate this by, as an
example, scanning and analyzing social media feeds and newspaper reports. Big data also helps you do
health-tests on your customers, suppliers, and other stakeholders to help you reduce risks such as
default.

5. Big data is helpful in keeping data safe. Big data tools help you map the data landscape of your
company, which helps in the analysis of internal threats. As an example, you will know if your sensitive
 information has protection or not. A more specific example is that you will be able to flag the emailing
or storage of 16 digit numbers (which could, potentially, be credit card numbers).

6. Big data allows you to diversify your revenue streams. Analyzing big data can give you trend-data that
could help you come up with a completely new revenue stream.

7. Your website needs to be dynamic if it is to compete favorably in the crowded online space. Analysis
of big data helps you personalize the look/content and feel of your site to suit every visitor based on,
for example, nationality and sex. An example of this is Amazon’s IBCF (item-based collaborative
filtering) that drives its “People you may know” and “Frequently bought together” features.

8. If you are running a factory, big data is important because you will not have to replace pieces of
technology based on the number of months or years they have been in use. This is costly and impractical
since different parts wear at different rates. Big data allows you to spot failing devices and will predict
when you should replace them.

9. Big data is important in the healthcare industry, which is one of the last few industries still stuck with
a generalized, conventional approach. As an example, if you have cancer, you will go through one
therapy, and if it does not work, your doctor will recommend another therapy. Big data allows a cancer
patient to get medication that is developed based on his/her genes.

Challenges of Big Data

1. One of the issues with Big data is the exponential growth of raw data. The data centres and databases
store huge amounts of data, which is still rapidly growing. With the exponential growth of data,
organizations often find it difficult to rightly store this data.

2. The next challenge is choosing the right Big Data tool. There are various Big Data tools, however
choosing the wrong one can result in wasted effort, time and money too.

3. Next challenge of Big Data is securing it. Often organizations are too busy understanding and analyzing
the data, that they leave the data security for a later stage, and unprotect data ultimately becomes the
breeding ground for the hackers.
 KCES’s College of Engineering and Management, Jalgaon
DEPARTMENT OF MANAGEMENT
Study Material
SUB: 302 Management Information System
Unit V E-Commerce

1) E-commerce and its Technological Aspects - Defining E-Commerce, Electronic Market,

Benefits and limitations of E-Commerce, EDI

Definition: Electronic commerce, commonly known as E-commerce or e-commerce, is trading in products

or services conducted via computer networks such as the Internet. Electronic commerce draws on
technologies such as mobile commerce, electronic funds transfer, supply chain management, Internet
marketing, online transaction processing, electronic data interchange (EDI), inventory management
systems, and automated data collection systems. Modern electronic commerce typically uses the World
Wide Web at least at one point in the transaction's life-cycle, although it may encompass a wider range of
technologies such as e-mail, mobile devices, social media, and telephones as well.

Electronic commerce is generally considered to be the sales aspect of e-business. It also consists of the
exchange of data to facilitate the financing and payment aspects of business transactions. This is an effective
and efficient way of communicating within an organization and one of the most effective and useful ways
of conducting business. It is a Market entry strategy where the company may or may not have a physical
presence.

Everything you need to know about the E- Commerce. The term electronic commerce or e-commerce refers
to any sort of business transaction that involves the transfer of information through the internet.
By definition it covers a variety of business activities which use internet as a platform for either information
exchange or monetary transaction or both at times.
E-commerce means using the Internet and the web for business transactions and/or commercial transactions,
which typically involve the exchange of value (e.g., money) across organizational or individual boundaries
in return for products and services.

The terms ‘e-commerce’ and ‘e-business’ are often used interchangeably but what do these words really
mean?

E-commerce refers to online transactions - buying and selling of goods and/or services over the Internet.
E-business covers online transactions, but also extends to all Internet based interactions with business
partners, suppliers and customers such as: selling direct to consumers, manufacturers and suppliers;
monitoring and exchanging information; auctioning surplus inventory; and collaborative product design.
These online interactions are aimed at improving or transforming business processes and efficiency.

Architectural Framework of E-Commerce: Architectural framework of e-commerce means the

synthesizing of various existing resources like DBMS, data repository, computer languages, software agent-
based transactions, monitors or communication protocols to facilitate the integration of data and software
for better applications.

The architectural framework for e-commerce consists of six layers of functionality or services as follows:

1. Application services.
2. Brokerage services, data or transaction management.
3. Interface and support layers.
4. Secure messaging, security and electronic document interchange.
5. Middleware and structured document interchange, and
6. Network infrastructure and the basic communication services.

Application services
In the application layer services of e-commerce, it is decided that what type of e- commerce application is
going to be implemented. There are three types of distinguished e-commerce applications i.e., consumer to
business application, business to-business application and intra-organizational application.

Information Brokerage and Management Layer

This layer is rapidly becoming necessary in dealing with the voluminous amounts of information on the
networks. This layer works as an intermediary who provides service integration between customers and
information providers, given some constraint such as low price, fast services or profit maximization for a
client. For example, a person wants to go to USA from Bangladesh. The person checks the sites of various
airlines for the low-price ticket with the best available service. For this he must know the URLs of all the
sites. Secondly, to search the services and the best prices, he also has to feed the details of the journey again
and again on different sites. If there is a site that can work as information broker and can arrange the ticket
as per the need of the person, it will save the lot of time and efforts of the person. This is just one example
of how information brokerages can add value.
Another aspect of the brokerage function is the support for data management and traditional transaction
services. Brokerages may provide tools to accomplish more sophisticated, time-delayed updates or future-
compensating transactions.

Interface and Support Services

The third layer of the architectural framework is interface layer. This layer provides interface for e-
commerce applications. Interactive catalogs and directory support services are the examples of this layer.

Interactive catalogs are the customized interface to customer applications such as home shopping.
Interactive catalogs are very similar to the paper-based catalog. The only difference between the interactive
catalog and paper-based catalog is that the first one has the additional features such as use of graphics and
video to make the advertising more attractive.

Directory services have the functions necessary for information search and access. The directories attempt
to organize the enormous amount of information and transactions generated to facilitate e-commerce.

The main difference between the interactive catalogs and directory services is that the interactive catalogs
deal with people while directory support services interact directly with software applications.

Secure Messaging Layer

In any business, electronic messaging is an important issue. The commonly used messaging systems like
phone, fax and courier services have certain problems like in the case of phone if the phone line is dead or
somehow the number is wrong, you are not able to deliver the urgent messages. In the case of courier
service, if you want to deliver the messages instantly, it is not possible as it will take some time depending
on the distance between the source and destination places. The solution for such type of problems is
electronic messaging services like e-mail, enhanced fax and EDI.

The electronic messaging has changed the way the business operates. The major advantage of the electronic
messaging is the ability to access the right information at the right time across diverse work groups.

The main constraints of the electronic messaging are security, privacy, and confidentiality through data
encryption and authentication techniques.
Middleware services

The enormous growth of networks, client server technology and all other forms of communicating
between/among unlike platforms is the reason for the invention of middleware services. The middleware
services are used to integrate the diversified software programs and make them talk to one another.

Network Infrastructure

We know that the effective and efficient linkage between the customer and the supplier is a precondition
for e-commerce. For this a network infrastructure is required. The early models for networked computers
were the local and long distance telephone companies. The telephone company lines were used for the
connection among the computers. As soon as the computer connection was established, the data traveled
along that single path. Telephone company switching equipment (both mechanical and computerized)
selected specific telephone lines, or circuits, that were connected to create the single path between the caller
and the receiver. This centrally-controlled, single-connection model is known as circuit switching.

Classification of E-Commerce Applications:

The classification of e-commerce applications is given below:

Electronic Market

Electronic Market: is a place where online shoppers and buyers meet. E-market handles business transaction
including bank-to-bank money transfer also. In e-market, the business center is not a physical building. But
it is a network-based location where business activities occur. In e-market, the participants like buyers,
sellers and transaction handler are not only one different locations but even they do not know each other.

Inter Organizational Information System (IOS)

An IOS is a unified system with several business partners. A typical IOS will include a company and its
supplier and customers. Through IOS buyers and sellers arrange routine business transactions. Information
is exchanged over communication network using specific formats. So, there is no need for telephone calls,
papers, documents or correspondence.

Types of IOS is given below:

- EDI (Electronic Data Interchange): It provide secure B2B connection over value added network(Van’s)
- Extranet: which provide secure B2B connection over internet.
- EFT (Electronic Fund Transfer): Electronic Fund Transfer from one account to another.
- Electronic Forms: Online (web-pages) forms on internet.
- Shared Data Base: information stored in repositories (collection of data) shared by trading partners
- Supply Chain Management: Co-operation between company and its suppliers and customers regarding
demand forecasting, inventory management and order fulfillment.

Types of E-Commerce.

E-commerce conducted between businesses differs from that carried out between a business and its
consumers. There are five generally accepted types of e-commerce:

- Business to Business (B2B)

- Business to Consumer (B2C)
- Consumer to Business (C2B)
- Consumer to Consumer (C2C)
- Business to Government (B2G)

Business to Business (B2B)

Business to Business or B2B refers to e-commerce activities between businesses. An e-commerce company
can be dealing with suppliers or distributors or agents. These transactions are usually carried out through
Electronic Data Interchange or EDI. In general, B2Bs require higher security needs than B2Cs. For example,
manufacturers and wholesalers are B2B companies.

With the help of B2B e-commerce, companies are able to improve the efficiency of several common
business functions, including supplier management, inventory management and payment management.

Using e-commerce enabled business applications, companies are able to better control their supplier costs
by reducing PO (purchase order) processing costs and cycle times. This has the added benefit of being able
to process more POs at a lesser cost in the same amount of time. E-commerce technology can also serve to
shorten the order-ship- bill cycle of inventory management by linking business partners together with the
company to provide faster data access. Businesses can improve their inventory auditing capabilities by
tracking order shipments electronically, which results in reduced inventory levels and improves upon the
ability of the company to provide “just-in- time” service.

This e-commerce technology is also being used to improve the efficiency of managing payments between
a business and its partners and distributors. By processing payments electronically, companies are able to
lower the number of clerical errors and increase the speed of processing invoices, which results in lowered
transaction fees.
Business to Customer (B2C)

Business to Customer or B2C refers to e-commerce activities that are focused on consumers rather than on
businesses. For instance, a book retailer would be a B2C company such as Amazon.com and other
companies that follow a merchant model or brokerage business models. Other examples could also be
purchasing services from an insurance company, conducting online banking and employing travel services.

Customer to Business (C2B)

Customer to Business or C2B refers to e-commerce activities, which use reverse pricing models where the
customer determines the prices of the product or services. In this case, the focus shifts from selling to
buying. There is an increased emphasis on customer empowerment.

In this type of e-commerce, consumers get a choice of a wide variety of commodities and services, along
with the opportunity to specify the range of prices they can afford or are willing to pay for a particular item,
service or commodity. As a result, it reduces the bargaining time, increases the flexibility and creates ease
at the point of sale for both the merchant and the consumer.

Customer to Customer (C2C)

Customer to Customer or C2C refers to e-commerce activities, which use an auction style model. This
model consists of a person-to-person transaction that completely excludes businesses from the equation.
Customers are also a part of the business and C2C enables customers to directly deal with each other. An
example of this is peer auction giant, Ebay.

Business to Government (B2G)

It is a new trend in e-commerce. This type of e-commerce is used by the government departments to directly
reach to the citizens by setting-up the websites. These websites have government policies, rules and
regulations related to the respective departments. Any citizen may interact with these websites to know the
various details. This helps the people to know the facts without going to the respective departments. This
also saves time of the employees as well as the citizens. The concept of Smart City has been evolved from
B2G e-commerce.
Benefits of E-Commerce

Few innovations in human history encompass as many potential benefits as E- Commerce does. The global
nature of the technology, low cost, opportunity to reach hundreds of millions of people, interactive nature,
variety of possibilities, and resourcefulness and growth of the supporting infrastructure (especially the web)
result in many potential benefits to organizations, individuals, and society. These benefits are just starting
to materialize, but they will increase significantly as E-Commerce expands. It is not surprising that some
maintain that the E-Commerce revolution is just 'as pro- found as the change that came with the industrial
revolution.

Benefits to Organizations

- The benefits to organizations are as follows:

- Electronic commerce expands the market place to national and international market with minimal capital
outlay, a company can easily and quickly locate more customers, the best suppliers, and the most suitable
business partners worldwide.
- Electronic commerce decreases the cost of creating, processing, distributing, storing, and retrieving
paper-based information. For example, by introducing an electronic procurement system, companies can
cut the purchasing administrative costs by as much as 85 percent.
- Ability for creating highly specialized businesses. For example, dog toys which can be purchased only
in pet shops or department and discounts stores in the physical world are sold now in a specialized
www.dogtoys.com (also see www.cattoys.com).
- Electronic commerce allows reduced inventories and overhead by facilitating “pull” type supply chain
management. In a pull-type system the process starts from customer orders and uses just-in-time
manufacturing.
- The pull-type processing enables expensive customization of products and services which provides
competitive advantage to its implementers.
- Electronic commerce reduces the time between the outlay of capital and the receipt of products and
services.
- Electronic commerce initiates business processes reengineering projects By changing processes,
productivity of salespeople, knowledge workers, and administrators can increase by 100 percent or more.
- Electronic commerce lowers telecommunication cost the internet is much cheaper than value added
networks.
- Other benefits include improved image, improved customer service, new found business partners,
simplified processes, compressed cycle and delivery time, increased productivity, eliminating paper,
expediting access to information, reduced transportation costs, and increased flexibility.
Benefits to Consumers

- The benefits of E-Commerce to consumers are as follows:

- Electronic commerce enables customers to shop or do other transactions 24 hours a day, all year round,
from almost any location.
- Electronic commerce provides customer with more choices; they can select from many vendors and
from many more products.
- Electronic commerce frequently provides customers with less expensive products and services by
allowing them to shop in many places and conduct quick comparisons.
- In some cases, especially with digitized products, E-Commerce allows quick delivery.
- Customers can receive relevant and detailed information in seconds, rather than days or weeks.
- Electronic commerce makes it possible to participate ate in virtual auctions.
- Electronic commerce allow customers to interact with other customers in electronic communities and
exchange ideas as well as compare experiences.
- E-commerce facilitates competition, which results in substantial discounts.

Benefits to Society

The benefits of E-Commerce to society are as follows:

- Electronic commerce enables more individuals to work at home and to do less traveling for shopping,
resulting in less traffic on the roads and lower air pollution.
- Electronic commerce allows some merchandise to be sold at lowest prices, so less affluent people can
buy more and increase their standard of living.
- Electronic commerce enables people in third world countries and rural areas to enjoy products and
services that otherwise are not available to them.
- Electronic commerce facilitates delivery of public services, such as health care, education, and
distribution of government social services at a reduced cost and/or improved quality. Health care services,
e.g., can reach patients in rural areas.

The limitations of E-Commerce

The limitations of E-Commerce can be grouped into two categories which are:

- Technical limitations and

- Non-technical limitations
Technical Limitations of E-Commerce

The technical limitations of E-Commerce are as follows:

- There is a lack of s stem security, reliability, standards and communication protocols.

- There is insufficient telecommunication bandwidth.
- The software e development tools are still evolving and changing rapidly.
- It is difficult to integrate the Internet and E-Commerce software with some existing applications and
databases.
- Vendors may need special Web servers and other infrastructures in addition to the network servers.
- Some E-Commerce software might not fit with some hardware or may be incompatible with some
operating systems or other components.
- As time passes, these limitations will lessen or be overcome; appropriate planning can minimize their
impact.

Non-technical Limitations

Of the many non-technical limitations that slow the spread of E-Commerce, the following are the major
ones:

Lack of Awareness: Lack of awareness of the technology and its potential benefits are also equally
responsible for the poor growth of e-commerce. Lack of interest and willingness to make a paradigm shift
has become a crucial issue. Many companies are not willing to accept that their businesses need a
revolutionary change to subsist in the potentially digital world. The single most important challenge today
pertains to increasing awareness of the benefits of e-commerce to potential customers, educate the market
and the customers will themselves opt for these services.

Lack of Infrastructure: E-commerce infrastructure development is at its infancy stage in Bangladesh. This
unsatisfactory development is yet another major bottleneck for successful net business in Bangladesh.
This high cost of infrastructure development for e-business is also including the cost of leased lines.

Lack of Confidence: The people in Bangladesh still show hesitancy in buying through the Net. Lack of
quality products, timely delivery of products as some of them tend to go out of stock, lack of solutions
security are the potential reasons for not developing e-commerce. People do not understand this new way
of buying and selling products, i.e. the services in a digital environment which are available online.

Skeptic Attitude: Though the Internet is continuing to grow at a rapid rate, along with e- commerce
transactions, the shoppers are still skeptical about safety and have not been quick to trust sending personal
information such as credit card numbers or address over the Net. Lack of adequate imagination and
understanding of what web- based technologies can do to markets and competition only adds to the delay
in economic development. The old business habits are demanding and controlling the business. The risk
adverse attitude of the people is conspicuous and waiting for others to lead is also another attitude.

Credit Cards Frauds: In Bangladesh, distribution channels are just one part of the problem related to e-
payments. The bigger problem is that of security. All credit cards related transactions are approved offline
and given the high incidence of frauds, the banks are extremely wary of approving them. In-fact, there are
some unconfirmed reports of a multi-national bank refusing to approve credit card transactions carried out
by a large Bangladesh portal.

Absence of Tax Laws: E-commerce over the Net has effectively eliminated national borders. This has
posed an important question as to tax on the transactions over the internet. Net business posed many
peculiar technological and legal problems making it difficult to impose tax and formulate a sound taxation
policy.

Cyber Laws: Another important problem is lack of comprehensive cyber laws so as to ensure safety and
protection. There should not be any legal regulations, or barriers to faster and increased development of e-
commerce. The crying need of the hour is urgent action to be taken by the Government to enact cyber
laws including electronic fund transfer, and amendments of official Secrets Act.

Stock Dilemma: Many people are not too happy with e-commerce trends. Though online shopping may be
growing but so is frustration with it. A key source of dissatisfaction is the out of stock dilemma. In most
cases, advertised products or services are not available. The options of feedback and not receiving
suggestions are also reasons for annoyance. Many online consumers want more detailed information on
their purchases but are not available. The Net is becoming more mainstream and the expectations are also
becoming more mainstream.

Lack of Skills and Expertise: Lack of skilled and trained personnel impedes the growth of implementation
of IT related e-commerce. The use of the Net for trade requires a complex introduction of servers, browser
software and knowledge of web design, hosting, promotion and many more skills. It requires understanding
many new things. Many Bangladeshi businesses are not prepared to approach electronic commerce. For
many business houses for which commerce over internet may not work, would take a lot of efforts for every
little return.
Internet Outrage: Failures in networks and the Net itself can play havoc. We read of frequent press reports
of internet outrages. The IT industry is notyet attempting to improve network reliability to prevent these
outrages. Reliability is a major issue in net business that needs to be attended.

Absence of Cyber Brand Image: Another problem is that advertising and the Net tends to focus on e-
commerce rather than on brands found in the real world. This would prove to be a deterrent in ensuring
consumer loyalty. The biggest thing going for it is a brand image and power. Though the already existing
name is known and trusted, the issue is how to extend it into the new cyber reality. A concern should be to
preserve the old values of trust and dependability of the brand, and at the same time, keep it upon on the
Net. At the same time, the whole business structure will have to undergo a change re-engineered.

Inadequate Government Role: The government is not taking a serious view of e- commerce related
information technology in terms of its promotion. Spreading awareness, imparting education, of the benefits
of e-commerce, enacting new cyber laws, amendments to existing commercial laws, developing strong,
communication infrastructure are the key domestic roles for the government to play.

No Encouragement from Business Community: The business community is extremely an important sector
to be targeted for the introduction of any technological innovations in business. It means it is the business
community that sustains e-commerce and greatly influences the thinking and adoption process of various
segments of the society to move forward in the field of information technology. It motivates the people who
share the courage and conviction to move the new business paradigm.

Preferring Foreign Sites: Online shoppers in Bangladesh do not prefer Bangladeshi websites to a large
extent and prefer US and other foreign websites. There are many reasons for this as they provide better
selection, prices, stock, quality products, shipping, payment process security, customer service and wide
variety of sites among other things.

Difficulty of Reengineering: The web business structure will have to undergo a drastic change and be
reengineered. It is not just about having a website or about sticking a web address on conventional
advertising or transferring a few people to a new division and designation. It is about breaking free and
creating new web services to satisfy the existing customers.

Internet for Small Business: Another problem is that for major project, a large consumer product company
needs profiling of customers who undertake transaction through e-commerce. E-commerce is still being
dominated by large corporations. Small and medium sized business houses have to take advantage of
everything on the Net. Online shopping is clearly catching on with consumers and retailers need to keep
pace with growing demands.
 Infant Stages: Electronic commerce is still in its infant stage. Bangladeshi commerce is establishing itself
in the area of internet business. The concept of e-commerce is still in evolutionary stage, it is a job that still
needs to be defined. The IT function has not grown beyond the marketing department and credit cards,
merchant accounts, digital signatures and prompt payment and one has to realize that the e-commerce role
is more about harnessing technological resources to deliver profits to the Net users. Only a few Bangladeshi
big houses have gone online to explore the potentials of e-commerce.

E-commerce has yet to take off in Bangladesh, because Bangladeshi consumers are wary of leaving their
re credit card numbers on the Net. They eye the neighborhood shopkeeper with suspicion and drive a hard
bargain. So, e-commerce websites are losing thousands of customers.

EDI

EDI stands for Electronic Data Interchange. EDI is an electronic way of transferring business documents in
an organization internally, between its various departments or externally with suppliers, customers, or any
subsidiaries. In EDI, paper documents are replaced with electronic documents such as word documents,
spreadsheets, etc.

EDI Documents
Following are the few important documents used in EDI −

• Invoices
• Purchase orders
• Shipping Requests
• Acknowledgement
• Business Correspondence letters
• Financial information letters
Steps in an EDI System
Following are the steps in an EDI System.

• A program generates a file that contains the processed document.

• The document is converted into an agreed standard format.
• The file containing the document is sent electronically on the network.
• The trading partner receives the file.
• An acknowledgement document is generated and sent to the originating organization.

Advantages of an EDI System

Following are the advantages of having an EDI system.

• Reduction in data entry errors. − Chances of errors are much less while using a computer for data entry.
• Shorter processing life cycle − Orders can be processed as soon as they are entered into the system. It
reduces the processing time of the transfer documents.
• Electronic form of data − It is quite easy to transfer or share the data, as it is present in electronic format.
• Reduction in paperwork − As a lot of paper documents are replaced with electronic documents, there is
a huge reduction in paperwork.
• Cost Effective − As time is saved and orders are processed very effectively, EDI proves to be highly cost
effective.
• Standard Means of communication − EDI enforces standards on the content of data and its format which
leads to clearer communication.
E-Commerce Overview

E-Commerce or Electronics Commerce is a methodology of modern business, which addresses the need of
business organizations, vendors and customers to reduce cost and improve the quality of goods and services
while increasing the speed of delivery. Ecommerce refers to the paperless exchange of business information
using the following ways −

• Electronic Data Interchange (EDI)

• Electronic Mail (e-mail)
• Electronic Bulletin Boards
• Electronic Fund Transfer (EFT)
• Other Network-based technologies
E-Commerce provides the following features −

• Non-Cash Payment − E-Commerce enables the use of credit cards, debit cards, smart cards,
electronic fund transfer via bank's website, and other modes of electronics payment.
• 24x7 Service availability − E-commerce automates the business of enterprises and the way
they provide services to their customers. It is available anytime, anywhere.
• Advertising / Marketing − E-commerce increases the reach of advertising of products and
services of businesses. It helps in better marketing management of products/services.
• Improved Sales − Using e-commerce, orders for the products can be generated anytime,
anywhere without any human intervention. It gives a big boost to existing sales volumes.
• Support − E-commerce provides various ways to provide pre-sales and post-sales assistance
to provide better services to customers.
• Inventory Management − E-commerce automates inventory management. Reports get
generated instantly when required. Product inventory management becomes very efficient
and easy to maintain.
• Communication improvement − E-commerce provides ways for faster, efficient, reliable
communication with customers and partners.

E-Commerce – Managerial Issues: Formulate Ecommerce Strategy, Re-Engineering for ecommerce,

Managing Ethical, Cultural and Legal Issues and a Few Others
Nowadays companies are transforming themselves into e-commerce enabled organizations. To assure
successful implementation of e- commerce, management of the organization has to deal with certain type
of issues.
Some of the important issues before the organizational management are explained as follows:
i. Formulate E-Commerce Strategy:
Management has to develop e-commerce strategy based on the analysis of industry and competition. Many
companies like IBM created independent division for formation .and implementation of e-commerce in the
organization. The e-commerce division, formulates strategy in the light of corporate strengthens and
weaknesses.
Then e-commerce division communicates the vision of top management throughout the organization and
annual objectives are identified. Essential education and training is given to those who are to implement the
e-commerce plans. Efforts are made to change the behaviour and attitude of executives, managers, and
trading partners.
The management needs to view electronic commerce potential in the light of the competition and not just
as technological advancement. E-commerce needs to be used as a strategic tool to gain and sustain
competitive advantage in the industry.
ii. Re-Engineering for E-Commerce:
Organizations are to be restructured and re-engineered in to a network based organization. Therefore,
building and integrating infrastructure is a big challenge faced by company managements. Integrating
information technology with existing business processes is a big task. In fact network of computers,
complex transmission lines and dozens of pieces of software must all work together to make E-commerce
happen.
The business process re-engineering team has to ensure that they do not miss anything significant while
building and implementing E- commerce system Manufacturers have to decide whether the whole
manufacturing and distribution system is to be restructured to become committed to direct Internet based
supply chain and marketing or to use e-commerce website as a simple channel of distribution.
Company management has to make decision regarding in sourcing or outsourcing. Big companies go for
in-house development of website. It means company’s own staff build e-commerce enabled website.
Company management can also outsource this task to some third party, normally an experienced web
development firm.
iii. Managing Ethical, Cultural and Legal Issues:
There exist big ethical and cultural differences between countries. Something may be ethical in our country
but unethical in another country. So MNCs have to study culture of each country and develop corporate
ethical code.
For example, France has certain language and cultural laws that must be obeyed. Therefore, it is necessary
that advocates, accountants and executives of the companies must understand legal, trade, cultural and
monetary issues of the countries with which their company has to deal.
iv. Making Cost Benefit Analysis:
Company management has to make cost benefit analysis of implementing e-commerce venture. Costs
associated with e-commerce includes costs of hardware like PC clients, web servers, transaction servers
routers and other networking devices, leased line and software like operating system, firewall, application
software, web server software and transaction processing software, cost of recruiting and training staff for
e-commerce etc.
Benefits can be measured through economic indicators like return on investment or through indicators like
numbers of online customers, customer satisfaction and business partner satisfaction.
Organization of developed countries that have implemented e-commerce solutions have gained by way of
realizing lower cost per transaction and taking advantage of economies of scale. In developing countries
cost may exceed benefits in initial years of e-commerce initiatives.
v. Promoting E-Commerce Venture:
Company management has to take steps to promote the website.
Broadly, promotional activities can be classified into two categories:
a. Online Promotional Activities:
Online promotion is concerned with submitting your site to search engine. The objective is to get your site
registered with the search engine so that the site appears as a link in search results of certain keywords-
typed by internet user at the search engine like Google. This requires use of appropriate keywords in META
tag.
Moreover, web team needs to search related sites and contact them so that their pages provide link to their
web pages. So seeking reciprocal link is an effective way of promoting your e-commerce web site.
Moreover, e-mails can be made of customers. Company that have advertising budget can promote the site
by placing banner ads at popular websites and portals.
b. Offline Promotional Activities:
As far as offline promotion is concerned, company can advertise the web address through visiting cards,
letter pads, bill books etc. Moreover, URL can also be advertised at various trade fairs, exhibitions and
business related events like seminars, conferences etc. Therefore, company management has to set up
advertising budget and decide the tools that it shall use to promote the e-commerce website.
vi. To Deal with Security & Privacy Issues:
Websites collect information about visitors through filled in order forms, questionnaires and by recording
browser information thought programs like cookies. But the personal information so collected must be used
for stated business purposes. But many surveys have shown that online consumers have little privacy
protection.
Therefore, it is necessary that company management must form privacy practice and must assure consumers
and partners that information so collected shall be kept confidential.
In addition management needs to form security policy. Data security and network security are major issues.
There have been cases when vital information like credit card numbers are stolen by hackers. Similarly e-
mails can be and are often intercepted as they travel through the network.
This type of data and message security needs security measures like encryption, password protection etc.
Similarly network security measures like firewall needs to be installed so that intruders are not able to make
authorized access to corporate network. The firewall prohibits hackers from entering corporate network via
internet. Therefore management needs to set up some kind of intrusion detection system an establish
security policy.
vii. Handling Human Resource Management Related Issues:
Electronic commerce is changing the manner in which staff is recruited, motivated, trained and educated.
Two way interactions are now possible in video conferencing used for employee training and education.
So, management needs to incorporate the impact of e-commerce on its human resource management
practices.
viii. Adopting Electronic Fund Transfer System:
Company management has to make agreement with acquiring bank, Credit Card Company and payment
gateway to ensure that it is able to receive and make payments electronically through modes like credit
cards, smart cards, e-cash etc. The management has to devise ways and means of integrating Internet based
payment system with offline system.

E-Commerce – Impact of E-Commerce: Impact on Direct Marketing, Organisation, Manufacturing,

Finance and Supply Chain Management
E-commerce has made a profound impact on society. People can now shop online in the privacy of their
own homes without ever having to leave. This can force larger brick and mortar retailers to open an online
division. In some cases, it can also force smaller businesses to shut their doors, or change to being
completely online.
It also changes the way people look at making purchases and spending money. E-commerce has changed
the face of retail, services, and other things that make our economy work. Undoubtedly, it will continue to
influence how companies sell and market their products, as well as how people choose to make purchases
for many years to come.
The following are the impacts of e-commerce on the global economy:
1. Impacts on Direct Marketing:
i. Product Promotion – E-commerce enhances promotion of products and services through direct,
information-rich, and interactive contact with customers.
ii. New Sales Channel – E-commerce creates a new distribution channel for existing products. It facilitates
direct reach of customers and the bi-directional nature of communication.
iii. Direct Savings – The cost of delivering information to customers over the internet results in substantial
savings to senders when compared with non-electronic delivery. Major savings are also realized in
delivering digitized products versus physical delivery.
iv. Reduced Cycle Time – The delivery of digitized products and services can be reduced to seconds. Also,
the administrative work related to physical delivery, especially across international borders, can be reduced
significantly, cutting the cycle time by more than 100 percent.
v. Customer Service – Customer service can be greatly enhanced by enabling customers to find detailed
information online. Also, intelligent agents can answer standard e-mail questions in seconds and human
experts’ services can be expedited using help-desk software.
vi. Corporate Image – On the web, newcomers can establish corporate images very quickly. Corporate
image means trust, which is necessary for direct sales. Traditional companies such as Intel, Disney, Dell,
and Cisco use their web activities to affirm their corporate identity and brand image.
vii. Customization – E-commerce provides for customization of products and services, in contrast to buying
in a store or ordering from a television, which is usually limited to standard products. Dell Computers Inc.
is a success story of customization.
Today, we can configure not only computers but also cars, jewellery, gifts, and hundreds of other products
and services. If properly done, one can achieve mass customization. It provides a competitive advantage as
well as increases the overall demand for certain products and services.
viii. Advertisements- With direct marketing and customization comes as one-to-one or direct advertisement,
which is much more effective than mass advertisement. This creates a fundamental change in the manner
in which advertisement is conducted not only for online trades but also for products and services that are
ordered in traditional ways.
ix. Ordering Systems- Taking orders from customers can drastically be improved if it is done online. When
taken electronically, orders can be quickly routed to the appropriate order-processing site. This saves time
and reduces expenses, so sales people have more time to sell. Also, customers can compute the cost of their
orders, saving time for all parties involved.
x. Markets- The physical market disappears as does the need to deliver the goods to the marketplace. In a
market space, which is an electronic market, goods are delivered directly to buyers when purchasing is
completed making markets much more efficient.
Already, small but powerful software packages are delivered over the internet. This fundamentally affects
packaging and greatly reduces the need for historical distribution.
New selling models such as shareware, freeware are emerging to maximize the potential of the internet.
New forms of marketing will also emerge, such as web-based advertising, linked advertising, direct e-mail,
and an increased emphasis on relationship marketing. Customer’s convenience is greatly enhanced,
availability of products and services is much greater, and cheaper products are offered.
2. Impacts on Organisation:
i. Technology and Organizational Learning:
Rapid progress in e-commerce will force companies to adapt quickly to the new technology and offer them
an opportunity to experiment with new products, services, and processes. New technologies require new
organizational approaches.
For instance, the structure of the organizational unit dealing with E- commerce might have to be different
from the conventional sales and marketing departments. To be more flexible and responsive to the market,
new processes must be put in place. This type of corporate change must be planned and managed.
ii. Changing Nature of Work:
The nature of work and employment will be transformed in the digital age; it is already happening before
our eyes. Driven by increased competition in the global marketplace, firms are reducing the number of
employees down to a core of essential staff and outsourcing whatever work they can to countries where
wages are significantly less expensive.
The upheaval brought on by these changes is creating new opportunities and new risks and forcing us into
new ways of thinking about jobs, careers, and salaries.
The digital age workers will have to become very flexible. Few of them will have truly secure jobs in the
traditional sense, and all of them will have to be willing and able to constantly learn, adapt, make decisions,
and stand by them.
iii. New Product Capabilities:
E-commerce allows for new products to be created and existing products to be customized in innovative
ways. Such changes may redefine organizations’ missions and the manner in which they operate.
E-Commerce also allows suppliers to gather personalized data on customers. Building customer profiles as
well as collecting data on certain groups of customers, can be used as a source of information for improving
products or designing new ones.
Mass customization enables manufacturers to create specific products for each customer, based on his or
her exact needs. For example, Motorola gathers customer needs for a pager or a cellular phone, transmits
them electronically to the manufacturing plant where they are manufactured, along with the customer’s
specifications and then sends the product to the customer within a day.
3. Impacts on Manufacturing:
The production systems are integrated with finance, marketing, and other functional systems, as well as
with business partners and customers. Using web-based ERP systems, orders that are taken from customers
can be directed to designers and to the production floor, within seconds.
Production cycle time is cut by 50 percent or more in many cases, especially when production is done in a
different country from where the designers and engineers are located.
4. Impacts on Finance:
E-commerce requires special finance and accounting systems. Traditional payment systems are ineffective
or inefficient for electronic trade. The use of the new payment systems such as electronic cash is
complicated because it involves legal issues and agreements on international standards.
Nevertheless, electronic cash is certain to come soon and it will change the manner in which payments are
being made. In many ways, electronic cash, which can be backed by currency or other assets, represents the
biggest revolution in currency since gold replaced cowry shells.
Its diversity and pluralism is perfectly suited to the internet. It could change consumers’ financial lives and
shake the foundations of financial systems and even governments.
5. Impact on Supply Chain Management:
Electronic commerce and the internet are fundamentally changing the nature of supply chains, and
redefining how consumers learn about, select, purchase, and use products and services.
The result has been the emergence of new business-to business supply chains that are consumer- focused
rather than product-focused. They also provide customized products and services. E-commerce impacts
supply chain management in a variety of keyways.
These include:
i. Cost Efficiency:
E-commerce allows transportation companies of all sizes to exchange cargo documents electronically over
the internet. E-commerce enables shippers, freight forwarders and trucking firms to streamline document
handling without the monetary and time investment required by the traditional document delivery systems.
By using e-commerce, companies can reduce costs, improve data accuracy, streamline business processes,
accelerate business cycles, and enhance customer service. Ocean carriers and their trading partners can
exchange bill of lading instructions, freight invoices, container status messages, motor carrier shipment
instructions, and other documents with increased accuracy and efficiency by eliminating the need to re-key
or reformat documents.
The only tools needed to take advantage of this solution are a personal computer and an internet browser.
ii. Changes in Distribution System:
E-commerce will give businesses more flexibility in managing the increasingly complex movement of
products and information between businesses, their suppliers and customers. E-commerce will close the
link between customers and distribution centres. Customers can manage the increasingly Complex
movement of products and information through the supply chain.
iii. Customer Orientation:
E-commerce is a vital link in the support of logistics and transportation services for both internal and
external customers. E-commerce will help companies deliver better services to their customers, accelerate
the growth of the e-commerce initiatives that are critical to their business, and lower their operating costs.
Using the Internet for e-commerce will allow customers to access rate information, place delivery orders,
track shipments and pay freight bills.
E-commerce makes it easier for customers to do business with companies: Anything that simplifies the
process of arranging transportation services will help build companies’ business and enhance shareholder
value.
By making more information available about the commercial side of companies, businesses will make their
web site a place where customers will not only get detailed information about the services the company
offers, but also where they can actually conduct business with the company.
Ultimately, web sites can provide a universal, self-service system for customers. Shippers can order any
service and access the information they need to conduct business with transportation companies exclusively
online. E-commerce functions are taking companies a substantial step forward by providing customers with
a faster and easier way to do business with them.
iv. Shipment Tracking:
E-commerce will allow users to establish an account and obtain real-time information about cargo
shipments. They may also create and submit bills of lading, place a cargo order, analyse charges, submit a
freight claim, and carry out many other functions.
In addition, e-commerce allows customers to track shipments down to the individual product and perform
other supply chain management and decision support functions. The application uses encryption technology
to secure business transactions.
v. Shipping Notice:
E-commerce can help automate the receiving process by electronically transmitting a packing list ahead of
the shipment. It also allows companies to record the relevant details of each pallet, parcel, and item being
shipped.
vi. Freight Auditing:
This will ensure that each freight bill is efficiently reviewed for accuracy. The result is a greatly reduced
risk of overpayment, and the elimination of countless hours of paperwork, or the need for a third-party
auditing firm. By intercepting duplicate billings and incorrect charges, a significant percent of shipping
costs will be recovered.
In addition, carrier comparison and assignment allows for instant access to a database containing the latest
rates, discounts, and allowances for most of major carriers, thus eliminating the need for unwieldy charts
and tables.
vii. Shipping Documentation and Labelling:
There will be less need for manual intervention because standard bills of lading, shipping labels, and carrier
manifests will be automatically produced; this includes even the specialized export documentation required
for overseas shipments. Paperwork is significantly reduced and the shipping department will therefore be
more efficient.
viii. Online Shipping Enquiry:
This gives instant shipping information access to anyone in the company, from any location. Parcel
shipments can be tracked and proof of delivery quickly confirmed. A customer’s transportation costs and
performance can be analysed, thus helping the customer negotiate rates and improve service.

E-Commerce – Advantages: Convenience, Information, Fewer Hassels, Lower Cost, Relatively

Building, Audience Sizing, On-Line Marketing and a Few Others
E-commerce provides the following main advantages:
(i) Convenience – Customers can order products or services 24 hours a day wherever they are.
(ii) Information – Customers can find reams of comparative information about companies, products,
competitors and prices without leaving their office or home.
(iii) Fewer Hassels – Customers don’t have to face sales people or open themselves upto persuasion and
emotional factors, they also don’t have to wait in line.
(iv) Quick Adjustment to Market Conditions by Marketers – Companies can quickly add products to their
offering and change prices and descriptions.
(v) Lower Cost – On-line Marketers avoid the expense of maintaining a store and the costs of rent, insurance
and utilities.
They can produce digital catalogues for much less cost than the cost of printing and mailing paper
catalogues.
(vi) Relatively Building – On-line marketers can dialogue with consumers and learn from them. Marketers
can download useful reports or a free demo of their softwares.
(vii) Audience Sizing – On-line Marketers can learn how many people visited their web site and how many
of them shopped at particular places on the site. This information can help them improve offers and
advertisements.
(viii) On-line Marketing – It is easy affordable by small firms, who otherwise would not have been able to
advertise in the print or broad cost media.
(ix) E-Commerce – E-commerce through Internet and web site can access and retrieve information very
fast, compared to overnight mail and even fax.
(x) Large and Medium – These companies have designed their own websites to automate corporate
purchasing. The high cost on invoices and purchase order copies including time are saved a great deal due
to E-commerce and Internet phase.
(xi) Internet newsgroups set up for commercial purposes help companies place on-line advertisements and
thus save cost and time.
(xii) New groups, Bulletins board systems (BBSs) and Web committees help also buyers, sellers and people
in general to have access to valuable information on diverse topics including information of cultivation for
farmers.

E-Commerce – Disadvantages: Security, System and Data Integrity, System Scalability, ecommerce is Not
Free, Customer Relationship Problems and a Few Others
1. Security:
Security continues to be a problem for online businesses. Customers have to feel confident about the
integrity of the payment process before they commit to the purchase. Banks such as ICICI Bank, HDFC
Bank, State Bank of India have added secure payment gateways to process online banking transactions
quickly and safely.
2. System and Data Integrity:
Data protection and the integrity of the system that handles the data are serious concerns. Computer viruses
are rampant, with new viruses discovered every day. Viruses cause unnecessary delays, file backups,
storage problems, and other similar difficulties. The danger of hackers accessing files and corrupting
accounts adds more stress to an already complex operation.
3. System Scalability:
A business develops an interactive interface with customers via a website. After a while, statistical analysis
determines whether visitors to the site are one-time or recurring customers. If the company expects 2 million
customers and 6 million show up, website performance is bound to experience degradation, slowdown, and
eventually loss of customers. To stop this problem from happening, a website must be scalable, or
upgradable on a regular basis.
4. E-Commerce is Not Free:
So far, success stories in e-commerce have forced large business with deep pockets and good funding to
invest in creating on-line websites. According to a report, small retailers that go head-to-head with e-
commerce giants are fighting losing battle. As in the brick-and-mortar environment, they simply cannot
compete on price or product offering. Brand loyalty is related to this issue, which is supposed to be less
important for online firms. Brands are expected to lower search costs, build trust, and communicate quality.
A search engine can come up with the best music deals, for example, yet consumers continue to flock to
trusted entities such as HMV.
5. Consumer Search is not Efficient or Cost-Effective:
On the surface, the electronic marketplace seems to be a perfect market, where worldwide sellers and buyers
share and trade without intermediaries. However, a closer look indicates that new types of intermediaries
are essential to e-commerce. They include electronic malls that guarantee legitimacy of transactions. All
these intermediaries add to transaction costs.
6. Customer Relations Problems:
Not many businesses realise that even e-business cannot survive over the long term without loyal customers.
Building customer loyalty to a specific site is not an easy task. Customers are notoriously fickle-minded,
and do not minding visiting a competing website just to avail even one-time benefits or discounts.
7. Products-People Won’t Buy Online:
Imagine a website called furniture, com or living.com, where venture capitalists are investing millions in
selling home furnishings online. In the case of a sofa, you would want to sit on it, feel the texture of the
fabric etc. Beside the sofa test, online furniture stores face costly returns which makes the product harder
to sell online.
8. Corporate Vulnerability:
The availability of product details, catalogues, and other information about a business through its website
makes it vulnerable to access by the competition. The idea of extracting business intelligence from the
website is called web framing. And such threats are increasing day by day in this digital, networked world.
9. High Risk of Internet Start-Up:
Many stories unfolded in 1999 about successful executives in established firms leaving for Internet start-
ups, only to find out that their get-rich dream with a dot.com was just that – a dream.

E-Commerce – Threats to Present Day E-Commerce and Its Solution

Major threats to present day e-commerce may be listed thus:
i. Money Thefts E-commerce services are about transactions, and transactions are very largely driven by
money. This attracts hackers, crackers and everyone with the knowledge of exploiting loopholes in a
system. Once a kink in the armor is discovered, they feed the system (and users) with numerous bits of
dubious information to extract confidential data (phishing).
This is particularly dangerous as the data extracted may be that of credit card numbers, security passwords,
transaction details etc. Also, Payment gateways are vulnerable to interception by unethical users. Cleverly
crafted strategies can sift a part or the entire amount being transferred from the user to the online vendor.
ii. Identity thefts Hackers often gain access to sensitive information like user accounts, user details,
addresses, confidential personal information etc. It is a significant threat in view of the privileges one can
avail with a false identity. For instance, one can effortlessly login to an online shopping mart under a stolen
identity and make purchases worth thousands of dollars.
He/she can then have the order delivered to an address other than the one listed on the records. One can
easily see how those orders could be received by the impostor without arousing suspicion. While the
fraudsters gains, the original account holder continues to pay the price until the offender is nabbed.
iii. Threats to the system Viruses, worms, Trojans are very deceptive methods of stealing information.
Unless a sound virus-protection strategy is used by the ecommerce Solutions firm, these malicious agents
can compromise the credibility of all ecommerce web solution services. Often planted by individuals for
reasons known best to them alone, viruses breed within the systems and multiply at astonishing speeds.
Unchecked, they can potentially cripple the entire system.
Solutions:
The following precautionary steps might prove to be helpful:
i. Authentication:
Most notable are the advances in identification and elimination of non-genuine users. E-commerce service
designers now use multi-level identification protocols like security questions, encrypted passwords
(Encryption), biometrics and others to confirm the identity of their customers. These steps have found wide
favour all around due to their effectiveness in weeding out unwelcome access.
ii. Intrusion Check:
The issue of tackling viruses and their like has also seen rapid development with anti-virus vendors releasing
strong anti-viruses. These are developed by expert programmers who are a notch above the hackers and
crackers themselves. Firewalls are another common way of implementing security measures. These
programmes restrict access to and from the system to pre-checked users/access points.
iii. Educating Users:
E-commerce is run primarily by users. Thus, E-commerce service providers have also turned to educating
users about safe practices that make the entire operation trouble free. Recent issues like phishing have been
tackled to a good extent by informing genuine users of the perils of publishing their confidential information
to unauthorized information seekers.

Electronic Payment System

In India’s journey towards E-payments, digitization, merchants, as well as customers, are getting
comfortable adopting new digital technologies.

With customers are getting comfortable with online shopping, nowadays, an eCommerce site and online
payment acceptance is a must to have for any business.

Customers are happy with browsing and shopping at any time from anywhere with just a few clicks and
along with this rise of online shopping and eCommerce, E-payments are gaining widespread popularity.

COVID and the limitation it has imposed on people who made online payments the need of time. Many
businesses are now offering their products and services online.
However, if you are a business and want to accept e payments, you have to work on your electronic
payment system to provide better and secure service for your customers.

And to know the e-payment system here is everything you need to know.

What is an e-payment system?

An e-payment or Electronic Payment system allows customers to pay for the services via electronic
methods.

They are also known as online payment systems. Normally e-payment is done via debit, credit cards,
direct bank deposits, and e-checks, other alternative e-payment methods like e-wallets, bitcoin,
cryptocurrencies, bank transfers are also gaining popularity.

Types of e-payment system

E-payments can be done in the following ways,

Internet banking – In this case, the payment is done by digitally transferring the funds over the internet
from one bank account to another.

Some popular modes of net banking are, NEFT, RTGS, IMPS.

Card payments – Card payments are done via cards e.g. credit cards, debit cards, smart cards, stored
valued cards, etc. In this mode, an electronic payment accepting device initiates the online payment
transfer via card
Credit/ Debit card – An e payment method where the card is required for making payments through an
electronic device.

Smart card – Also known as a chip card, a smart card, a card with a microprocessor chip is needed to
transfer payments.

Stored value card – These types of cards have some amount of money stored beforehand and are needed
to make funds transfer. These are prepaid cards like gift cards, etc.

Direct debit – Direct debit transfers funds from a customer’s account with the help of a third party

E-cash – It is a form where the money is stored in the customer’s device which is used for making
transfers.
E-check – This is a digital version of a paper check used to transfer funds within accounts.

Alternate payment methods – As technology is evolving, e-payment methods kept evolving with it (are
still evolving..) These innovative alternate e-payment methods became widely popular very quickly
thanks to their convenience.

E-wallet – Very popular among customers, an E-wallet is a form of prepaid account, where customer’s
account information like credit/ debit card information is stored allowing quick, seamless, and smooth
flow of the transaction.

Mobile wallet – An evolved form of e-wallet, mobile wallet is extensively used by lots of customers.

It is a virtual wallet, in the form of an app that sits on a mobile device. Mobile wallet stores card
information on a mobile device.

The user-friendly nature of mobile wallets makes them easier to use. It offers a seamless payment
experience making customers less dependent on cash.

QR payments – QR code-enabled payments have become immensely popular. QR code stands for ‘Quick
Response’ code, a code that contains a pixel pattern of barcodes or squares arranged in a square grid.

Each part of the code contains information. This information can be merchant’s details, transaction
details, etc. To make payments, one has to scan the QR code with a mobile device.

Contactless payments – Contactless payments are becoming popular for quite some time. These
payments are done using RFID and NFC technology.

The customer needs to tap or hover the payment device or a card near the payment terminal, earning it a
name, ‘tap and go’.

UPI payments – NPCI (National Payment Corporation of India) has developed an instant real-time
payment system to facilitate interbank transactions.

This payment system is titled UPI(Unified Payment Interface). Payments via UPI can be made via an app
on a mobile device.
Biometric payments – Biometric payments are done via using/scanning various parts of the body, e.g.
fingerprint scanning, eye scanning, facial recognition, etc.

These payments are replacing the need to enter the PIN for making transactions making these payments
more accessible and easy to use.

Payments are done via Wearable devices – Wearable devices are rapidly becoming popular among
customers.

These devices are connected to the customer’s bank account and are used to make online payments.

An example of a wearable used for making an online payment is a smartwatch.

AI-based payments – As machine learning and Artificial Intelligence is creating a revolution all around
the world, AI-based solutions are becoming more popular.

Payments based on AI such as speakers, chatbots, ML tools, deep learning tools, etc are making it easier
for businesses to maintain transparency.

How e-payment system works?

Entities involved in an online payment system

The merchant
The customer / the cardholder
The issuing bank
The acquirer
Payment Processor
Payment Gateway

Working of e-payments can be explained in the following three steps,

Payment initiation – Customer finalizes the product/service and chooses the payment method to initiate
the transaction.

Depending on the payment method, the customer enters the required information like card number, CVV,
personal details, expiration date, PIN, etc.
The chosen payment method either redirects the customer to an external payment page or a bank’s
payment page to continue the payment process.

Payment authentication – The information submitted by the customer along with other details like
payment information, customer’s account information is authenticated by the operator.

The operator can be a payment gateway or any other solution involved. If everything gets authenticated
positively, the operator reports a successful transaction.

On the contrary, if there is any problem with any of the authentication checks, the transaction fails.

After the successful transaction, the customer gets a payment confirmation.

Payment settlement – After the successful authentication process, payment from the customer’s bank
gets transferred into the merchant’s account by the online payment service provider.

Benefits of e-payment systems

People are almost comfortable with online shopping and e-payments. With this trend, accepting online
payment is a must for any business.

E-payments are making shopping and banking more convenient. They are helping customers to reach
more clients locally and globally.

E-payments are faster making the transactions efficient.

With e-payments, customers can pay online at any time from anywhere, making them easily accessible
and convenient for customers.

It’s easy to integrate online payment solutions with businesses as many payment processing solution
providers offering different types of solutions.
Online payment solutions come with security and risk and anti-fraud tools making them reliable and
secure not only for customers but also for merchants.

E-payments are proved to be highly effective for international transactions, as they are cheaper, easier,
faster, and generally are real-time.
 KCES’s College of Engineering and Management-Jalgaon
Department of Management
MBA-II (Sem-III)
STUDY MATERIAL

Subject: 302 Management Information System

Unit VI: Case Studies

CASE 1

A waiter takes an order at a table, and then enters it online via one of the six
terminals located in the restaurant dining room. The order is routed to a printer
in the appropriate preparation area: the cold item printer if it is a salad, the hot-
item printer if it is a hot sandwich or the bar printer if it is a drink. A customer’s
meal check-listing (bill) the items ordered and the respective prices are
automatically generated. This ordering system eliminates the old three-carbon-
copy guest check system as well as any problems caused by a waiter’s
handwriting. When the kitchen runs out of a food item, the cooks send out an
‘out of stock’ message, which will be displayed on the dining room terminals
when waiters try to order that item. This gives the waiters faster feedback,
enabling them to give better service to the customers. Other system features aid
management in the planning and control of their restaurant business. The system
provides up-to-the-minute information on the food items ordered and breaks out
percentages showing sales of each item versus total sales. This helps
management plan menus according to customers’ tastes. The system also
compares the weekly sales totals versus food costs, allowing planning for tighter
cost controls. In addition, whenever an order is voided, the reasons for the void
are keyed in. This may help later in management decisions, especially if the
voids consistently related to food or service. Acceptance of the system by the
users is exceptionally high since the waiters and waitresses were involved in the
selection and design process. All potential users were asked to give their
impressions and ideas about the various systems available before one was
chosen.

Questions:

1. In the light of the system, describe the decisions to be made in the area of
strategic planning, managerial control and operational control? What
information would you require to make such decisions?
2. What would make the system a more complete MIS rather than just doing
transaction processing?
3. Explain the probable effects that making the system more formal would have on
the customers and the management.

Page | 1 Prepared by Harsha S. Deshmukh

 KCES’s College of Engineering and Management-Jalgaon
Department of Management
MBA-II (Sem-III)
STUDY MATERIAL

Subject: 302 Management Information System

Unit VI: Case Studies

Solution of Management Information System in Restaurant Case Study:

1. In the light of the system, describe the decisions to be made in the area of
strategic planning, managerial control and operational control? What
information would you require to make such decisions?
Answer: A management information system (MIS) is an organized combination
of people, hardware, communication networks and data sources that collects,
transforms and distributes information in an organization. An MIS helps
decision making by providing timely, relevant and accurate information to
managers. The physical components of an MIS include hardware, software,
database, personnel and procedures.

Management information is an important input for efficient performance of

various managerial functions at different organization levels. The information
system facilitates decision making. Management functions include
planning, controlling and decision making. Decision making is the core of
management and aims at selecting the best alternative to achieve an objective.
The decisions may be strategic, tactical or technical. Strategic decisions are
characterized by uncertainty. They are future oriented and relate directly to
planning activity. Tactical decisions cover both planning and controlling.
Technical decisions pertain to implementation of specific tasks through
appropriate technology. Sales region analysis, cost analysis, annual budgeting,
and relocation analysis are examples of decision-support systems and
management information systems.

There are 3 areas in the organization. They are strategic, managerial and
operational control.

Strategic decisions are characterized by uncertainty. The decisions to be made

in the area of strategic planning are future oriented and relate directly to
planning activity. Here basically planning for future that is budgets, target
markets, policies, objectives etc. is done. This is basically a top level where up-
to-the minute information on the food items ordered and breaks out percentages
showing sales of each item versus total sales is provided. The top level
where strategic planning is done compares the weekly sales totals versus food
costs, allowing planning for tighter cost controls. Executive support systems
function at the strategic level, support unstructured decision making, and use
advanced graphics and communications. Examples of executive support

Page | 2 Prepared by Harsha S. Deshmukh

 KCES’s College of Engineering and Management-Jalgaon
Department of Management
MBA-II (Sem-III)
STUDY MATERIAL

Subject: 302 Management Information System

Unit VI: Case Studies

systems include sales trend forecasting, operating plan development, budget

forecasting, profit planning, and manpower planning.

The decisions to be made in the area of managerial control are largely

dependent upon the information available to the decision makers. It is basically
a middle level where planning of menus is done and whenever an order is
voided, the reasons for the void are keyed in which later helps in management
decisions, especially if the voids are related to food or service. The managerial
control that is middle level also gets customer feedback and is responsible for
customer satisfaction.

The decisions to be made in the area of operational control pertain to

implementation of specific tasks through appropriate technology. This is
basically a lower level where the waiter takes the order and enters it online via
one of the six terminals located in the restaurant dining room and the order is
routed to a printer in the appropriate preparation area. The item’s ordered list
and the respective prices are automatically generated. The cooks send ‘out of
stock’ message when the kitchen runs out of a food item, which is basically
displayed on the dining room terminals when waiter tries to order that item.
This basically gives the waiters faster feedback, enabling them to give better
service to the customers. Transaction processing systems function at the
operational level of the organization. Examples of transaction processing
systems include order tracking, order processing, machine control, plant
scheduling, compensation, and securities trading.

The information required to make such decision must be such that it highlights
the trouble spots and shows the interconnections with the other functions. It
must summarize all information relating to the span of control of the manager.
The information required to make these decisions can be strategic, tactical or
operational information.

Advantages of an online computer system:

• Eliminates carbon copies

• Waiters’ handwriting issues
• Out-of-stock message
• Faster feedback, helps waiters to service the customers

Page | 3 Prepared by Harsha S. Deshmukh

 KCES’s College of Engineering and Management-Jalgaon
Department of Management
MBA-II (Sem-III)
STUDY MATERIAL

Subject: 302 Management Information System

Unit VI: Case Studies

Advantages to management:

• Sales figures and percentages item-wise

• Helps in planning the menu
• Cost accounting details

2. What would make the system a more complete MIS rather than just doing
transaction processing?

Answer: If the management provides sufficient incentive for efficiency and

results to their customers, it would make the system a more complete MIS and
so the MIS should support this culture by providing such information which will
aid the promotion of efficiency in the management services and operational
system. It is also necessary to study the keys to successful Executive
Information System (EIS) development and operation. Decision support
systems would also make the system a complete MIS as it constitutes a class of
computer-based information systems including knowledge-based systems that
support decision-making activities. DSSs serve the management level of the
organization and help to take decisions, which may be rapidly changing and not
easily specified in advance.

Improving personal efficiency, expediting problem solving (speed up the

progress of problems solving in an organization), facilitating interpersonal
communication, promoting learning and training, increasing organizational
control, generating new evidence in support of a decision, creating a
competitive advantage over competition, encouraging exploration and discovery
on the part of the decision maker, revealing new approaches to thinking about
the problem space and helping automate the managerial processes would make
the system a complete MIS rather than just doing transaction processing.

3. Explain the probable effects that making the system more formal would have on
the customers and the management.

Answer: The management system should be an open system and MIS should be
so designed that it highlights the critical business, operational, technological and
environmental changes to the concerned level in the management, so that the
action can be taken to correct the situation. To make the system a success,
knowledge will have to be formalized so that machines worldwide have a
shared and common understanding of the information provided. The systems

Page | 4 Prepared by Harsha S. Deshmukh

 KCES’s College of Engineering and Management-Jalgaon
Department of Management
MBA-II (Sem-III)
STUDY MATERIAL

Subject: 302 Management Information System

Unit VI: Case Studies

developed will have to be able to handle enormous amounts of information very

fast.

An organization operates in an ever-increasing competitive, global environment.

Operating in a global environment requires an organization to focus on the
efficient execution of its processes, customer service, and speed to market. To
accomplish these goals, the organization must exchange valuable information
across different functions, levels, and business units. By making the system
more formal, the organization can more efficiently exchange information among
its functional areas, business units, suppliers, and customers.

As the transactions are taking place every day, the system stores all the data
which can be used later on when the hotel is in need of some financial help from
financial institutes or banks. As the inventory is always entered into the system,
any frauds can be easily taken care of and if anything goes missing then it can
be detected through the system.

CASE 2

Management information system involves the information system and the

organization. MIS begins where computer science ends. Computer scientists
deserve accolades for developing and delivering even more advanced forms of
information technology: hardware technology; software technology; and
network technology. Yet because no technology implements itself, there is more
to MIS than just information technology. MIS has dimensions. The four
interrelated dimensions of MIS are as follows: First, MIS involves not just
information technology, but also its instantiation; second, MIS involves, as
reactive and inextricable elements, both an information system and its
organizational context; third, MIS involves information technology as a form of
intellectual technology; and fourth, MIS involves the activities of a profession
or corporate function which are integral to the essence of what MIS is (Currie &
Galliers, 1999).

Dell Computer Corporation: Company Background

Page | 5 Prepared by Harsha S. Deshmukh

 KCES’s College of Engineering and Management-Jalgaon
Department of Management
MBA-II (Sem-III)
STUDY MATERIAL

Subject: 302 Management Information System

Unit VI: Case Studies

Dell Computer Corporation is a major manufacturer of personal computers,

computer peripherals, and software. Among the leading producers of computers
in the world, Dell sells its products directly to customers through the Internet
and mail-order catalogs rather than through retail outlets. The company is based
in Round Rock, Texas. At Dell Computers, customers are brought into the
product planning and manufacturing processes, with all employees encouraged
having contact with customers. Through effective collaboration across
boundaries, ideas can be shared about product designs and value propositions.
The result is faster and more customer-focused product and service innovation.
To produce the capacity for this, considerable attention must be placed on
organizational structures, processes, skills and culture. Such elements may
need a radical overhaul in established companies (Dennis & Harris, 2002). Dell
was founded in 1984 by Michael Dell. In 1983, during his freshman year at the
University of Texas, he bought excess inventory of RAM chips and disk drives
for IBM personal computers from local dealers. He resold the components
through newspaper advertisements at prices far below retail cost. By 1984, his
sales totaled about $80,000 a month. In April 1984, Dell dropped out of school
to launch his company (Ford, Honeycutt, & Simintiras, 2003).

The new company soon began manufacturing its own IBM-compatible

computers under the name PCs Limited. Because Dell sold computers directly
to users through advertisements in magazines and catalogs, the company could
price its machines lower than those sold through retail stores. Sales reached
nearly $6 million during the company’s first year, climbing to $34 million the
following year. By 1987, Dell was the leading mail-order computer company in
the United States. In that year, it created a sales force to target large
corporations and began adding international offices to capture the direct-mail
market outside the United States (Ford, Honeycutt, & Simintiras, 2003). While
the company continued to grow rapidly; Dell experienced a series of setbacks
that hurt profits. In 1990, the company began selling computers through retail
stores, an effort it abandoned in 1994. In 1991, Dell launched a line of notebook
computers, but quality problems and inadequate production planning forced the
company to stop selling for a year. In 1994, Dell launched a new line of
notebook computers and expanded efforts to increase overseas sales. Dell also
began focusing on the market for servers, which used the computers to run
local area networks. By the late 1990s, Dell was firmly in place as the world’s
number one direct seller of computers. More than 50 percent of the company’s
computer sales transactions took place via its website, which generated

Page | 6 Prepared by Harsha S. Deshmukh

 KCES’s College of Engineering and Management-Jalgaon
Department of Management
MBA-II (Sem-III)
STUDY MATERIAL

Subject: 302 Management Information System

Unit VI: Case Studies

worldwide sales in excess of $40 million a day (Ford, Honeycutt, & Simintiras,
2003).

Information Processing Tools

Information processing or Data processing is the analysis and organization of

data. It is used extensively in business, engineering, and science and an
increasing extent in nearly all areas in which computers are used. Businesses
use data processing for such tasks as payroll preparation, accounting, record
keeping, inventory control, sales analysis, and the processing of bank and credit
card account statements. Engineers and scientists use data processing for a wide
variety of applications, including the processing of seismic data for oil and
mineral exploration, the analysis of new product designs, the processing of
satellite imagery, and the analysis of data from scientific experiments (Thierauf,
1978).

Data processing is used extensively in business, engineering, and science and to

an increasing extent in nearly all areas in which computers are used. Data
processing is divided into two kinds of processing: database processing and
transaction processing. A database is a collection of common records that can
be searched, accessed, and modified, such as bank account records, school
transcripts, and income tax data. In database processing, a computerized
database is used as the central source of reference data for the computations.
Transaction processing refers to interaction between two computers in which
one computer initiates a transaction and another computer provides the first
with the data or computation required for that function. Most modern data
processing uses one or more databases at one or more central sites (Thierauf,
1978).

Transaction processing is used to access and update the databases when users
need to immediately view or add information; other data processing programs
are used at regular intervals to provide summary reports of activity and database
status. Examples of systems that involve all of these functions are automated
teller machines, credit sales terminals, and airline reservation systems (Thierauf,
1978).

The information processing tools that Dell uses include computers, the internet,
maps, spreadsheets, models, and databases. For the operational level of Dell, the
most appropriate tool for information processing is maps. Through the said

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 KCES’s College of Engineering and Management-Jalgaon
Department of Management
MBA-II (Sem-III)
STUDY MATERIAL

Subject: 302 Management Information System

Unit VI: Case Studies

information processing tool, decisions on how to operate the organization can

be initialized and made. Maps can be used to determine which country/place
information will be acquired from, it can also assist in determining the
demographic level of people and information will be gathered. Maps can be in
the form of charts that can also provide necessary information. The information
gathered in turn can assist in helping to decide how an organization will be
operated. For the tactical level of Dell, the most appropriate tool for
information processing is databases. Through the said information processing
tool, the records that can assist in finding out the strength and weakness of the
company can be used to determine the tactic that will be used by the
organization. For the strategic level of Dell, the most appropriate information
processing tool is the internet or World Wide Web. Through the internet, trends
and strategies by other companies can be known. After analyzing the trends and
strategies used by other companies, an appropriate strategy can be formulated to
use by the organization.

Inventory control systems

Individual businesses need, first and foremost, an efficient inventory control

system. This implies the minimum amount of inventory that will provide the
consumers with what they need whenever and wherever they need it.
Effectiveness of the inventory system means basically having an inventory mix
that is most likely successful in satisfying consumer needs (Samli & Sirgy,
1995). The inventory control systems used by Dell is up to date and reliable to
prevent problems to arise. The inventory system of Dell makes sure that
anything the consumer need will be available to them at any given time. It is
also what the company uses to know if certain products are still available or
misuse of the inventory system may cost problems to the company.

Conclusion

Management information system involves the information system and the

organization. Dell benefits a lot from the management information system. The
system helps the company create strategies that will help the company conquer
any problems and threats from competitors. The system also assists the
company in processing the needed information. Management Information
Systems also helps a company to create or update its inventory control system.

Recommendations

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 KCES’s College of Engineering and Management-Jalgaon
Department of Management
MBA-II (Sem-III)
STUDY MATERIAL

Subject: 302 Management Information System

Unit VI: Case Studies

Since the MIS of a company is a vital part of its operations and its survival in
the modern world, it must be well updated and it must compete well with MIS’s
competitors. The MIS of a company should be created from high standards so
that it can be of stiff competition against its counterparts. The MIS system
should help the company to achieve its goals and assist the company in reaching
its potential.

Questions:

1. Comment on the MIS in Dell and suggest the positives and negatives of MIS
in Dell?

2. The dell directly sells its computers to the customer whether it will give them
good and reliable information or they are lacking in information system due to
this move?

3. Develop the information flow diagram for dell and suggest some
improvement in the same.

4. MIS is a combination of Management, Information and System otr of the

three parts of the information system in which area does the Dell lacking?

CASE 3

XO Hospital Management System

XO Infotech Ltd. has developed a core package — Hospital Management

System that addresses all major functional areas of Hospital. The development
environment ensures that XO HMS has the portability and connectivity to run
on virtually all standard hardware platforms, with stringent data security and
easy recovery in case of a system failure. XO HMS provides the benefits of
streamlined operations, enhanced administration and control, improved
response to patient care, cost control, and increased profitability.

Some of the Subsystem Modules in XO HMS:

Reception: The reception module handles various enquiries about the patient’s
admission and discharge details, bed census, and the patient’s movements
within the hospital. The system can also handle fixed-cost package deals for

Page | 9 Prepared by Harsha S. Deshmukh

 KCES’s College of Engineering and Management-Jalgaon
Department of Management
MBA-II (Sem-III)
STUDY MATERIAL

Subject: 302 Management Information System

Unit VI: Case Studies

patients as well as Doctor Consultation and Scheduling, Doctor Consultancy

Fees and Time Allocation.

OPD, IPD Registration and Admission: This module helps in registering

information about patients and handling both IPD and OPD patient’s query. A
unique ID is generated for each patient after registration. This helps in
implementing customer relationship management and also maintains medical
history of the patient.

Administration: This module handles all the master entry details for the
hospital requirement such as consultation detail such as doctor specialization,
consultancy fee, and service charges.

Security: This module handles multi-level security of XO HMS so that every

admission and transaction can be traced with the help of user ID.

Pharmacy Store: This module deals with all medical items. This module helps
in maintaining Item Master Maintenance, Receipt of Drugs/consumables, issue
handling of material return, generating retail bills, stock maintenance. It also
helps in fulfilling the requirements of both IPD and OPD Pharmacy.

Purchase: This module helps in raising purchase orders, maintaining purchase

details and other purchase related details.

Phlebotomy: This specific module caters in maintaining test requisitions,

sample collection status and various procedures for collection of samples for the
tests prescribed.

Laboratory: This module enables the maintenance of investigation requests by

the patient and generation of test results for the various available services, such
as clinical pathology, X-ray and ultrasound tests. Requests can be made from
various points, including wards, billing, sample collection and the laboratory
receiving point. The laboratory module is integrated with the in-patient/
outpatient registration, wards and billing modules.

Emergency: The development of this module keeps in mind the criticality of

this department. Every care has been taken to ensure that minimum of time is
taken to register the patient, so as to reduce the tension of the already stressed-
out relatives. Neither any detailed contact information of the patient is required
nor any information about the payment type is solicited.

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 KCES’s College of Engineering and Management-Jalgaon
Department of Management
MBA-II (Sem-III)
STUDY MATERIAL

Subject: 302 Management Information System

Unit VI: Case Studies

OT Management: This module deals with operation theatre activities such as

equipment used detail, resource ordering, drug order, gynaecology detail
recording, laboratory order and reports transfer requisition, patient monitoring,
blood request, new born baby detail and details of delivery.

Minor Surgery: This module is same in features as in OT management though

the function is different. This module deals with the surgeries minor in nature,
which does not require complete anaesthesia.

Blood Bank: The blood bank module provides information on the collection
and storage of blood, results of blood tests, cross-matching identifications, and
transfusion reactions. It also enables the maintenance of donor mailing lists and
donation ledgers. It would also provide online stock of blood available in three
blood banks (GTB, LNJP and DDU

Ward Management: The ward management module takes care of medical

equipment, doctor visit, vitals recording, patient case sheet, diet ordering, blood
requisition, transfer intimation and discharge intimation etc. It also deals with
the maintenance of the wards, inter- and intra-ward transfers.

OPD and IPD Billing: The billing module facilitates cashier and billing
operations for different categories of patients and automatic posting of charges
for different services such as lab tests, medicines supplied, consulting fees, food
and beverage charges, etc. It enables credit party billing through integration
with the financial accounting module.

Intensive Care Unit (ICU): This module caters to scheduling, maintaining ICU
Record, drug orders, consultant details, specific blood requests etc.

Food and Beverages: This module facilitates collection of information

regarding various diet routines of patients and identifies the resources required
to satisfy diet orders. Depending on the diet orders and other requests from
canteen, the kitchen order plan can be prepared to decide the menu for the day.
Analysis of the consumption patterns helps in better and efficient management
of the kitchen.

Discharge Summary: The module helps in generating patient’s discharge

summary, which includes patient’s health at the time of discharge, medical
history, various diagnosis and drug prescriptions, history of present illness and
course in hospital.

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 KCES’s College of Engineering and Management-Jalgaon
Department of Management
MBA-II (Sem-III)
STUDY MATERIAL

Subject: 302 Management Information System

Unit VI: Case Studies

Financial Accounting: This module deals with cash/bank, receipts/payments,

journal vouchers, etc. Various books of accounts, such as cashbook, bankbook
and ledgers, can be generated and maintained using this module. It can also
generate trial balance, balance sheet, and profit and loss statements.

Marketing Module: This module ensures that the hospital gets maximum
exposure to the general public and vice versa. This module keeps track of the
enquiries made at the reception and follows the lead.

Doctor’s Module: This module helps the doctors to keep a track of the entire
medical history of a particular patient. Details such as the medicines prescribed,
general medical records, previous consultations are all available to the doctor.

HR Management: Various MIS Reports are generated on the above modules

for the smooth functioning of the hospital management so that checks can be
made on any irregularity done in the hospital.

Questions:

1. Using tools of System Analysis elaborate any one of the subsystems of HMS
in detail.

2. Draw any Patient registration form and any one sample MIS report.

3. Prepare the Data dictionary for the Doctors Master file.

4. Elucidate the conceptual plan for implementation of the Hospital

Management System.

5. You are hired as a System Analyst, advice on the following:

(a) Networking requirements

(b) Database model requirements

Page | 12 Prepared by Harsha S. Deshmukh