Information System

Chapter 1

Difference between data and information

Data

- Data is the raw material of information systems.

- Description of things, people, events, places, ideas, opinions, etc., they are
numerical, alphabetical, or graphical form. They may be facts, predictions,
assumptions, and unevaluated messages.
- They are not organized to be directly usable for decision-making.
- Data are the facts, which describe events and entities.

Information

- Data that has been converted into a meaningful and useful for decision-making.
- Relevant knowledge produced as output of processing operations and acquired to
achieve specific purpose or enhance understanding.
- Useful data that must be accurate, precise, concise, and timely.
- A collection of meaningful and relevant data that describe events and entities.

System

- A system is a group of interrelated components working together toward a

common goal by accepting inputs and producing outputs in an organized
transformation process. (e.g. – human beings, organizations)

- any components of a system can itself be seen as a system, which has components
of its own. (e.g. – the circulatory system is a component of a body)

Information System

- An information system is the process of transforming raw data into useful

information for a decision maker.
- An information system is a component of a business system.
- It is a network with the entire organization and serves all the other components.
- Its purpose is to gather information from within and outside an organization,
make it available to all other components and present information to those outside
the organization.

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Characteristics of a system

The characteristics of a system are:

1. Goal - the fundamental purpose for the existence of each system.

2. Components - the pieces of the system, which functions together to
achieve the goals.
3. Structure - the relationships that exist among the components and that
define the boundary between a system and its environment.
4. Behavior - the way a system reacts to its environment, behavior is
determined by instructions or procedures designed to
achieve its goals.
5. Life cycle - a process observable in virtually all systems. Depending
on what kind of a system it is, the life cycle includes
evolution, wear, obsolescence, aging, replacement, repair,
and ultimately an end to the system existence.

Procedures are the rules or instructions by which components are supposed to follow
when they are given work to do or information to act on.

The difference between a procedure and behavior is that a procedure describes what
ought to be done. It is an instruction. Behavior describes what is actually done.

Objectives

Input Processing Output

(Data) (Data Transformation) (Information)

Feedback

Figure – Information System

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Characteristics of Information System

1. Goals of Information System

Information systems have raised in making decisions at 3 different levels: operational,

tactical, and strategic.

Information must be available

- in usable and understandable form (e.g. – graphs or type written reports).

- in time to the person needing it to help with decisions.
- at reasonable cost.
- in keeping for future use.

2. Components of Information System

3 major types of components : inputs, data processing systems, and outputs.

Inputs - involves capturing and assembling elements that

enter the system to be processed acquired from its
environment and are referred to as inputs.
(e.g. – raw materials, data).

Data processing system - involves transformation processes that convert input

Into meaningful and relevant output.
(e.g. – manufacturing process, mathematical
calculations).

Output - involves transferring elements that have been

produced by a transformation process to their
ultimate destination. (e.g. – finished products,
management reports)

2 additional components : feedback, control.

Feedback - is data about the performance of a system. Data

that result from the activities of a system and which
are entered back into the system are called
feedback. (e.g. – student grade reports)

Control - involves monitoring and evaluating feedback to

determine whether a system is moving toward the
achievement of its goal. The control functions
make necessary adjustments to a system’s input and
processing components to ensure that it produces
proper output. (e.g.- sales analysis)

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3. Structure of Information System

The way in which the different data processing systems are related to one another and to
the users of the information system.

4. Behavior of Information System

The behavior of an information system is that it will achieve its goals or storing
information and providing information to the organization in a form, at a time, and within
a cost that is appropriate. To accomplish such behavior requires procedures.

5. Life cycle of Information System

As an organization changes, so do its needs for information. When an organization’s

management realizes that the needs for information no longer exist, then an information
system may cease to exist.

Types of Information System

There are 2 types of information systems (IS). They are:

1. Operation Information Systems (OIS)

2. Management Information Systems (MIS)

Operation Information Systems

Operation information systems support the information processing requirements of the

day-to-day operations of a business (as well as) some lower-level operations management
functions.

(1) Transaction Processing Systems (TPS)

- TPS record and process data resulting from business transactions in 2 basic ways.
- In batch processing, transactions data is accumulated over a period of time and
processed periodically.
- In real time (on-line) processing, data is processed immediately after a transaction
occurs, e.g. – Point-of-Sale (POS) system.

(2) Process Control Systems (PCS)

- PCS monitor and control physical processes,

- e.g. – petroleum refinery process.

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(3) Office Automation Systems (OAS)

- OAS enhance office communications and productivity,

- e.g. – word processing, electronic mail, teleconferencing.

Management Information Systems

Management information systems support the decision-making needs of strategic (top)

management, tactical (middle) management, and operating (supervisory) management.

(1) Information Reporting Systems (IRS)

- IRS provide information in the form of pre-specific reports to manager,

- e.g. – sales analysis reports.

(2) Decision Support Systems (DSS)

- DSS provides interactive ad hoc support to managers during the decision-making

process,
- e.g.- using electronic S/W package in advertising new products.

(3) Executive Information Systems (EIS)

- EIS provide critical information tailored to the information in easy-to-use displays

needs of top management,
- e.g. – touch screen terminals.

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 Chapter 2

Data Processing Concepts

Data Processing

- Data processing is the conversion of data in information.

- DP is a basic requirement of people and organization.
- It is the process through which facts and figures are collected, assigned, meaning,
communicated to others and retained for later use.
- The basic data processing functions are: Record, Classify, Sort, Calculate,
Summarize, Compare, Communicate, Store, and Retrieve.

Data Processing Information

Data Processing Activities

Data Processing involves one or more of those activities to transform data into
information.

- Record
- Classify
- Sort
- Calculate
- Summarize
- Compare
- Communicate
- Store
- Retrieve

Record

- To bring facts into a processing system in usable form that are ready for
transforming into information.
- Similar term: data capture

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Classify

- To categorize, i.e., data with similar characteristics are placed in the same group.
- E.g. college students: fresher men, sophomores, juniors, and seniors

Sort

- The arrangement of data items in a desired sequence, i.e., alphabetical or numeric

(ascending or descending) sequence.
- Sorting may be performed before applying one of the other processing techniques.
- This makes easily locate, retrieve, and update the files.
- E.g. telephone directory

Calculate

- To apply arithmetic forms to data, i.e., add, subtract, divide, and multiply.
- Calculation is an Integral part of Data Processing.
- E.g. Sale Voucher

Summarize

- To condense, i.e., write verbal information in briefer form.

- E.g. total number of sales items by day, week and so on.

Compare

- To perform an evaluation in relation to some known measures.

- E.g. business managers compare current sales figures with last week, last month
or last year.

Communicate

- A process of sharing information.

- i.e., reports and documents are delivered to person with information needs
through displays on terminals linked to the computers.

Store

- To hold for later use in files or electronic devices.

- Storage is essential for processing and reusing data.

Retrieve

- To recover or to find again by using data storage devices.

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 Output
- Communicate
(Decode) Data and Information

Processing
- Classify
Data and Information - Sort
Storage - Calculate
- Store - Summarize
- Retrieve - Compare

Input Data
- Record
(Encode)

Figure – The Data Processing

The Data Processing Cycle

The data processing activities can be classified into 4 separate functional categories.

Input Processing Output Storage

Record Classify Communicate Store

Sort Retrieve
Calculate
Summarize
Compare

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Input

- The activities required to record data and to make them available for processing.
- Initiates necessary steps: check, verify, validate, and coding, i.e., conversion of
hand written data into machine-readable formats.

Processing

- The actual data manipulation techniques required to transform data into

information.

Output

- The communication function that includes a decoding step, i.e., information is

electronically converted into human readable form.

Storage

- Storage involves the filing of data and information for later use.

The Data Processing System

A data processing system is a collection of resources applied to produce specific,

predictable results through the delivery of information. The resources are used to
implement the Data Processing Cycle and to perform the Data Processing functions.

Computer Information System (CIS)

Computer system produces information by processing data utilizes Hardware, Software,

Data, People, and Support resources. A computer information system is a system used to
collect, store, process, and present information to support an organization’s information
needs.

What are the benefits and costs?

The range of benefits is wide, generally including one or more of the following
categories:

- Higher efficiency
- Tighter control over operations
- Lower costs
- Fewer errors
- Improved customer service
- Better planning and organization of operational and distribution activities
- Better informed decisions
- Less reliance on labor-intensive clerical processes.

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Information System Resources

Information system consists of 4 major resources : people, hardware, software, and data.

1. People Resources

- people are customers of Data Processing Systems and are also users of
information.
- people resources include end users and IS specialists.

End users (users or clients)

- people who use an information system or the information it produces.

- E.g. – salespersons, managers, accountants, engineers, etc.

IS specialists

- people who develop and operate information systems.

- E.g. – systems analysts, programmers, computer operators, etc.
- Basically, system analysts design information systems based on the information
requirements of end users; programmers prepare computer programs based on the
specifications of systems analysts; and computer operators operate computer
systems.

2. Hardware Resources

- H/W resources include all physical devices and materials used in information
processing.
- It includes not only machines, such as computers and calculators, but also all data
media, such as sheets of paper, magnetic disks.

Computer systems

- which consists of central processing units (CPUs) and a variety of interconnected

peripheral devices.
- e.g. – mainframe computer systems, minicomputers, and microcomputers, etc.

Computer peripherals

- which are devices for input of data and commands, and output of information.
- e.g. – keyboard, mouse, monitor, printer, floppy, CDs, etc.

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Telecommunication networks

- which consists of devices interconnected by a variety of telecommunications

media.
- e.g. – modem, processors, etc.

3. Software Resources

- S/W resources include not only the sets of operating instructions called programs,
which direct and control computer H/W, but also the sets of information
processing instructions needed by people, called procedures.

System software

- which controls and supports the operations of computer system.

- e.g. – DOS, Windows 95, 98, 2000, NT, ME, XP, UNIX, LINUX, etc.

Application software

- which is the program that directs processing for a particular use of computer by
end users.
- e.g. – word processing S/W, spreadsheet S/W, graphics S/W, etc.

Procedures

- which are operating instructions for the people who will use an information
systems.
- e.g. – office assistance, using a software package, etc.

4. Data Resources

- Data is more than the raw material of information systems.

- Data constitute a valuable organizational resources broadened by managers and
information systems professionals.

 Databases which hold processed and organized data.

 Modelbases which hold conceptual, mathematical, and logical models that

express business relationships, computational routines, and analytical techniques.

 Knowledgebases which hold knowledge in a variety of forms such as facts and

rules of inference about various subjects.

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 Chapter 3

Basic Data Processing Model

A data processing system consists of 4 major subsystems:

1. Input
2. Process
3. Storage
4. Output

Data Storage

Data Input Processing Output User

Input

- Most data processing application require the preparation and input of substantial
amounts of data, resulting from the daily transactions of the organization.
- To develop a good data processing system, it is very important to have an
efficient input subsystem.
- The major steps in the input of data into a computerized system are :

(1) Identifying data sources

(2) Converting data to machine processible form
(3) Input of data into the computer
(4) Data collection and input devices

(1) Identifying Data Sources

The data to be processed by a computer system may originate from a number of different
sources, depending on the nature of the application.

Data input to a data processing system may be categorized into 2 groups:

1. Transaction data
2. Status data

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Transaction data

- Transaction data may originate from activities within or without the organization.
- E.g. – external Transaction data – customer orders, payments on accounts, etc.
- E.g. - internal Transaction data – employees hours worked, usage of machines,
materials and supplies, etc.
- Transaction data may be input into the system as soon as an activity occurs or
they may be entered as a batch.

Function Transaction Source Document

Marketing 1. Sales Sales Invoice
2. Customer Order Customer Order

Type of data elements in a source document

Source Document Type of data elements

1. Sale Invoice 1. Sales Invoice No.

2. Sales Invoice Date
3. Customer Name
4. Customer Address
5. For each item sold
(a) Description of item
(b) Quantity
(c) Price
(d) Value
6. Total Value

Status data

- Status data are those which describe the existing conditions of people, things, etc.
- They may also be internal or external.
- E.g. - internal status data - employee status, machine conditions, inventory level
- E.g. - external status data – market condition, population
- Status data are to be input to the system just once at the initialization of the
system.
- These initial status data have to be regularly updated by transaction data to keep
the status data up-to-date.

Function Transaction Source Document

Marketing Market condition Market survey
Questionnaire

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(2) Converting to Machine processable form

Before data can be processed by a computer, it must be in machine readable form by

accomplishing in one of 3 basic ways:

1. Data may be converted from manual form to machine readable form.

E.g. – Punched cards

2. Data may be prerecorded in machine-readable form.

E.g.- OCR, MICR

3. Data may be directly entered into the computer system.

E.g. – Terminal, keyboard

(3) Input of Data into the computer

Data are entered into the computer system in 2 forms:

1. Uncoded form – entering data as it is

e.g. – Name, Address

2. Coded form – data are classified into categories, each category is given a code, and
only the code is entered.

It is economical and more easily retrievable if data are in coded form and hence it is
preferable to use coded form whenever possible.

Group Code

Numeric Alphabetic

Rector 1 R
Professor 2 P
Lecturer 3 L
Tutor 4 T

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(4) Data collection and Input devices

A large number of devices and media are used for input of data.

1. Paper media – punched cards, punched paper tapes.

These devices are used when input volume is low.

2. Direct data entry media – keyboard and video display terminals.

These devices are used when on-line data entry is required.

3. Magnetic media – magnetic tape, disk and diskette.

These devices are used when input volume is high.

4. Optical media – bar code reader

These devices are used when input data is required to read directly without transaction.

File Organization

Data stored in a data processing system can be classified into following categories:

1. Master data
2. Historical data
3. Status data
4. Transaction data
5. Indexing data
6. Backup data

The choice of storage media and retention period (time limit for storing data) depend on
the type of data and it is called file organization.

1. Master file

- It contains data records for basic identification as well as accumulation of certain

statistical and latest status of the object.

Subject File Contents

Customer Customer File Customer no., Name, Address

Credit limit, total.

Product Product File Product no., description type,

Weight, Price.

- If the master file contains the latest status, it is updated with the changes occurs a
specific time period of each object.

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2. Historical File

- It contains the history of a subject of interest. The subject be a person, a physical

item or logically classified item.

Subject File Contents

Person Personnel history - Personnel

- Family History
- Service History
- Education Training

- The file grows as new records are added to reflect the changes which occur over a
period of time.
- The set of records for each subject may be arranged in chronological order.
- It is important to have a good disposal policy.

3. Status File

- It describes the latest status of each subject of interest as of a particular data.

Subject File Contents

Person Current job status Current job information

Income earned (year to date)

- one subject can be represented by one summary/status record and the values in
that records are updated as changes occur over a period of time.

4. Transaction File
- It contains the changes occurrence of each subject of interest over a period of
time.
- The records in this file are usually created from source documents, such as ,
invoices, orders, etc.
- The transaction files are necessary if the updating is made in batches.
Subject File Contents

Marketing Sales Sales invoice no.

Sales invoice date
Customer name
Customer address
For each item sold
(a) Description of item
(b) Quantity
(c) Price
(d) Value

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5. Index File

- These files are used to indicate, via an index key or address where specific records
are located in other files.
- E.g. – Library card catalog

6. Backup File

- These files are simply non current files of any type which are stored in file library
and are used as a link in a file creation process if a current file is destroyed.

Data Storage Media

Data storage media can be classified in many different ways, in terms of accessibility,
that can be divided into 2 groups:

(1) Sequential access storage

(2) Random access storage

(1) Sequential access storage

- One dimensional medium where the only record that is immediately accessible for
reading or writing, is the next one in the direction of travel of the medium.
- E.g. – magnetic tape, cassette tape.

(2) Random access storage

- Access to any record in the storage takes the same time regardless of when and
where the last record was selected.
- E.g. – optical disk, CD.

Output

There are 3 types of output: Impact printers

Printers
(1) Printed or hard copy output Non-impact printers
Plotters
Line Graph
Graphic Bar Graph
Pie Chart

(2) Display or soft copy output screen or monitor

(3) Voice output e.g. - ATM

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(1) Printed output

- Printers are devices for producing permanent output on paper.

- E.g. – hard copy output - reports, tickets, maps, etc.
- Printers can be classified according to the speed, quality and method.
- The printing speed varies widely, a serial printer can print only one character at a
time and line printers can print all the characters of a line as a unit.
- The quality of the printers can be produced as draft quality or letter quality.
- Printers use several methods for printing.
- Impact printers type element into contact with paper, e.g. – dot matrix,
line printers.

- Non-impact printers work without any physical contact between the

printer and the paper, e.g. – thermal, ink-jet, laser printers.

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 Chapter 4

Transaction Processing and Business Information System

Transaction Processing Systems

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

- Transactions are events that occur as part of doing business, such as sales,
purchases, deposits, withdrawals, refunds, and payments.

- Transaction processing systems play a vital role in supporting the operations of an

organization.

Sales
Purchasing Accounting Transactions
Processing

Materials Work in Inventory

Planning Progress Control

Figure –Transaction Processing Systems

Transaction Processing Cycle

Transaction processing systems

- Capture and process data describing business transactions,

- Update organizational files and databases, and
- Produce a variety of information products for internal and external use

by going through a 5 stage cycle of

I. Data Entry Activities

II. Transaction Processing Activities
III. File and Database Processing Activities
IV. Document and Report Generation Activities
V. Inquiry Processing Activities

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I. Data Entry II IV. Document & Report Generation
Transaction
Processing

- Batch
- Online /
Real-time

III V. Inquiry Processing

Database 
Maintenance

Figure – The Transaction Processing Cycle

I. Data Entry Activities

Source Data Automation

The use of automated methods of data entry is known as source data automation. Several
methods have been developed to accomplish this automation based on trying to reduce or
eliminate many of the activities, people, and data media required by traditional data entry
methods.

This sales transaction processing system:

- Captures data as early as possible after a transaction or other event occurs by

using POS terminals.
- Captures transaction data as close as possible to the sources that generates the
data. E.g. salespersons at POS terminals capture and edit data right on the sales
floor.
- Captures data by using machine-readable media initially (bar coded tags and
magnetic stripe credit cards), instead of preparing written source documents.
- Captures data that rarely changes by prerecording it on machine-readable media,
or by storing it in the computer system.
- Captures data directly without the use of data media by optical scanning or bar
code packaging.

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 Electronic Data Interchange (EDI)

- Data representing a variety of business transaction documents (such as purchase

orders, invoices, requests of quotations, and shipping notices) are formatted and
electronically transmitted using standard document message formats over
telecommunication links directly between the computers of trading partners
(organizations and their customers and suppliers) without paper documents or
human intervention.

- Besides direct network links between the computers of trading partners, third-
party services are widely used.

- Value-added telecommunication carriers like GE Information Services, IBM

offer EDI services, including electronic mailbox for EDI documents.

- If necessary, EDI software is used to convert a company’s own document formats

into standardized EDI formats as specified by various industry and international
protocols.

Customer Supplier

Purchase order
Invoice
Payment

Shipping notice

Computer Computer

Figure – Electronic Data Interchange

Benefits of EDI

EDI eliminates the printing, mailing, checking, and handling by employees of numerous
multiple-copy forms of business documents.

- Reductions in paper, postage, and labor costs

- Faster row of transactions
- Reductions in errors
- Increases in productivity
- Support just-in-time (JIT) policies
- Reductions in inventory levels
- Better customer services

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II. Transaction Processing

Transaction processing systems process data in 2 basic ways:

(1) Batch processing

(2) Real-time processing (Online processing)

(1) Batch processing

Transaction data are accumulated over a period of time and processed periodically
involving:

- Gathering source documents originated by business transactions (sales orders and

invoices)
- Recording transaction data on some type of input medium (magnetic disks or
magnetic tape)
- Sorting the transactions in a transaction file in the same sequence as the records in
a sequential master file.
- Processing transaction data and creating an updated master file and a variety of
documents (customer paychecks)
- Capturing and storing batches of transaction data at remote sites, and then
transmitting it periodically to a central computer for processing. This is known as
remote job entry (RJE).

Advantages

- Batch processing is an economical method for large volume of transactions.

- It is suited for many applications where it is not necessary to update databases as

transactions occur, and where documents and reports are required only at
scheduled intervals

- e.g. monthly customer statements, weekly payroll

Disadvantages

- Master files are frequently out-of-date between scheduled processing for periodic
reports.

- Immediate updated responses to inquiries cannot be made.

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 Keyboard

input

Transactions
grouped into batches

Sorted Old Master File

Transaction file

Validate &
Update

Error
Report
New Master File

Reports

Figure – Batch Processing

Transactions

Process/ Master
Enter Update File
directly Master File

Immediate Input Immediate Processing Immediate File Update

Figure – Online Processing

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(2) Real-time processing

Transaction data are processed immediately after they are generated or recorded without
waiting to accumulate batches of data and can provide immediate output to end users,
also called online transaction processing (OLTP) systems.

It involves:

- Data are fed directly into the computer system from online terminals, without
being sorted, and they are always stored online in direct access files.

- Files and databases are always up-to-date since they are updated whenever data
are originated, regardless of their frequency.

- Responses to end user’s inquiries are immediate since information stored on

direct access devices can be retrieved almost instantaneously.

- Real-time processing depends on wide area and local area networks to provide
telecommunication links between transaction terminals, workstations, and other
computers.

Advantages

- Real-time processing provides immediate updating of files and immediate

responses to user inquiries.

- Real-time processing is important for applications where a high frequency of

changes must be made to a file during a short time to keep it updated. (e.g. air
ticket reservation, banking).

- Only the specific records affected by transactions or inquiries need to be

processed, and several files can be processed or updated concurrently.

Disadvantages

- Because of the online, direct access nature of real-time processing, special

precautions must be taken to protect the contents of databases, by using magnetic
tape files as control logs (to record all transactions made) or as backup files (to
make a copy of file periodically).

- More controls have to be built into the software and processing procedures to
protect against unauthorized access or the accidental destruction or data.

- OLTP applications have to pay a high cost premium for the security of fault
tolerant computer systems.

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III. Database Maintenance

- Database maintenance is a major activity of transaction processing systems.

- An organization’s databases must be maintained by its TPS (Transaction
Processing System), so that they are always correct and up-to-date.
- Therefore, transaction processing systems update the corporate databases of an
organization to reflect changes resulting from day-to-day business transactions.
- E.g. – Credit sales will cause customer account balance to be increased and the
amount of inventory on hand to be decreased.
- These databases provide the data resources that can be processed and used by
information reporting systems (IRS), decision support systems (DSS), and
executive information systems (EIS).

IV. Document and Report Generation

- The final stage in the transaction processing cycle.

- Documents produced by TPS are called transaction documents.
- There are several major types of documents.

Action documents

- These are documents that initiate actions or transactions on the part of their
recipient.
- E.g. – purchase order, paycheck, etc.

Information documents

- These documents relate, confirm, or prove to their recipients that transactions

have occurred.
- E.g. – sales receipts, customer statements, etc.
- Information documents can be used as control documents, since they document
the fact that a transaction has occurred.

Turnaround documents

- Some types of transaction documents are designed to be read by magnetic or

optical scanning equipment.
- They are known as turnaround documents because of their design to be returned
to the sender.
- E.g. – many computer printed invoices or bills consists of a turnaround potion
which is returned by a customer along with his or her payment.
- The turnaround document can then be automatically processed by optical
scanning devices.
- Thus, turnaround documents combining the functions of an action document (the
turnaround potion) and an information document (the receipt potion).

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Control listings
- These are detailed reports that describe each transaction occurring during a
period.
- They are also called transactions logs.
- E.g. – payroll register lists.

Edit reports
- These are reports that describe errors detected during processing.
- E.g. – invalid account numbers, missing data.

Accounting statements
- These are reports that legally document the financial performance or status of a
business.
- E.g. - balance sheets, income statements.

V. Inquiry Processing

- Transaction processing and information reporting systems support the real-time

interrogation of online files and databases by end users.
- This inquiry processing capability can be provided by either batch or real-time
processing.
- End users at workstations in wide area and local area networks can use database
management query languages to make inquiries and receive responses concerning
the results of transaction activity.
- Responses are displayed in a variety of prespecified formats or screens.
- E.g. – employees can check on the status of a sales order, the balance in an
account, or the amount of stock in inventory and receive immediate responses at
their workstations, or managers can receive responses and reports concerning the
performance of their employees.

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