CHAPTER ONE

INTRODUCTION OF SYSTEMS

✓ Systems Characteristics of a system, Components of system

✓ Information System-Definition, Trends in Information Systems Fundamental role of Information System
in business -Information System Resources - Information System Activitie
 1.1 Introduction

In business, System Analysis and Design refers to the process of examining a business situation with the intent of
improving it through better procedures and methods.

System analysis and design relates to shaping organizations, improving performance and achieving objectives for
profitability and growth. The emphasis is on systems in action, the relationships among subsystems and their
contribution to meeting a common goal.

Looking at a system and determining how adequately it functions, the changes to be made and the quality of the output
are parts of system analysis.

Organizations are complex systems that consist of interrelated and interlocking subsystems. Changes in one part of
the system have both anticipated and unanticipated consequences in other parts of the system. The systems approval
is a way of thinking about the analysis and design of computer based applications. It provides a framework for
visualizing the organizational and environmental factors that operate on a system. When a computer is introduced into
an organization, various functions’ and dysfunction’s operate on the user as well as on the organization. Among the
positive consequences are improved performance and a feeling of achievement with quality information.

Among the unanticipated consequences might be a possible threat to employees job, a decreased morale of personnel
due to back of involvement and a feeling of intimidation by users due to computer illiteracy. The analyst’s role is to
remove such fears and make the system a success.

System analysis and design focus on systems, processes and technology.

1.2 Over View of System Analysis and Design

Systems development can generally be thought of as having two major components:

1. System design is the process of planning a new business system or one to replace or complement an existing
system. But before this planning can be done, we must thoroughly understand the old system and determine how
computers can best be used to make its operation more effective.

2. System analysis, then, is the process of gathering and interpreting facts, diagnosing problems, and using the
information to recommend improvements to the system. This is the job of the systems analyst.
Consider, for example, the stockroom operation of a clothing store. To better control its inventory and gain access to
more up – to – date information about stock levels and reordering, the store asks a system analyst, to “computerize”
its stockroom operations. Before one can design a system to capture data, update files, and produce reports, one
needs to know more about the store operations: what forms are being used to store information manually, such as
requisitions, purchase orders, and invoices and what reports are being produced and how they are being used.

To proceed, you then seek out information about lists of reorder notices, outstanding purchase orders, records of
stock on hand, and other reports. You also need to find out where this information originates, whether in the
purchasing department, stockroom, or accounting department. In other words, you must understand how the existing
system works and, more specifically, what the flow of information through the system looks like.

Every businessman must know why the store wants to change its current operations. Does the business have
problems tracking orders, merchandise, or money? Does it seem to fall behind in handling inventory records? Does
it need a more efficient system before it can expand operations?

Only after you have collected these facts can you being to determine how and where a computer information system
can benefit all the users of the system. This accumulation of information, called a systems study, must precede all
other analysis activities.

Systems analysts do more than solve current problems. They are frequently called upon to help handle the planned
expansion of a business. In the case of the clothing store, the systems study is future oriented, since no system
currently exists. Analysts assess as carefully as possible what the future needs of the business will be and what
changes should be considered to meet these needs. In this instance and in most others, analysts may recommend
alternatives for improving the situation. Usually more than one strategy is possible.

Working with managers and employees in the organization, systems analysts recommend which alternative to adopt,
based on such concerns as the suitability of the solution to the particular organization and setting, as well as the
employee support the solution is likely to have. Sometimes the time required to develop one alternative, compared with
others, is the most critical issue. Costs and benefits are also important determinants. In the end, management, which
will pay for and use the result, actually decides which alternative to accept.

Once this decision is made, a plan is developed to implement the recommendation. The plan includes all systems design
features, such as new data capture needs, file specifications, operating procedures, equipment and personnel needs.
The systems design is like the blueprint for a building: it specifies all the features that are to be in the finished product.
Designs for the stockroom will provide ways to capture data about orders and sales to customers and specify the
way the data will be stored, whether on paper forms or on a computer – readable medium, such as magnetic tape or
disk. The designs will also designate work to be performed by people and by computers. Designs vary in their division
of human and computer tasks.

The stockroom personnel will also need information about the business. Each design describes output to be produced
by the system, such as inventory reports, sales analyses, purchasing summaries, and invoices. The systems analysts
will actually decide which outputs to use, as well as how to produce them.

Analysis specifies what the system should do. Design states how to accomplish the objective. Notice that each of the
processes mentioned involves people. Managers and employees have good ideas about what works and what does
not, about what flows smoothly and what causes problems, about where change is needed and where it is not, and
especially about where change will be accepted and where it will not. Despite technology, people are still the keys that
make the organizations work. Thus, communicating and dealing with people are very important parts of the systems
analyst’s job.

1.3 Business System Concepts

The word system is widely used. It has become fashionable to attach the word system to add a contemporary flair when
referring to things or processes. People speak of exercise system, investment system, delivery system, information
system, education system, computer system etc. System may be referred to any set of components, which function in
interrelated manner for a common cause or objective.

1.3.1 Definition:

The term system is derived form the Greek word systema, which means an organized relationship among functioning
units or components. A system exists because it is designed to achieve one or more objectives. We come into daily
contact with the transportation system, the telephone system, the accounting system, the production system, and, for
over two decades, the computer system. Similarly, we talk of the business system and of the organization as a system
consisting of interrelated departments (subsystems) such as production, sales, personnel, and an information system.
None of these subsystems is of much use as a single, independent unit. When they are properly coordinated, however,
the firm can function effectively and profitably.

There are more than a hundred definitions of the word system, but most seem to have a common thread that
suggests that a system is an orderly grouping of interdependent components linked together according to a
plan to achieve a specific objective.

The word component may refer to physical parts (engines, wings of aircraft, car), managerial steps (planning,
organizing and controlling), or a system in a multi-level structure. The component may be simple or complex, basic
or advanced. They may be single computer with a keyboard, memory, and printer or a series of intelligent terminals
linked to a mainframe. In either case, each component is part of the total system and has to do its share of work for
the system to achieve the intended goal.

This orientation requires an orderly grouping of the components for the design of a successful system.

The study of systems concepts, then, has three basic implications:

1. A system must be designed to achieve a predetermined objective.

2. Interrelationships and interdependence must exist among the components.

3. The objectives of the organization as a whole have a higher priority than the objectives of its
subsystems. For example, computerizing personnel applications must conform to the
organization’s policy on privacy, confidentiality and security, as well as making selected data (e.g.
payroll) available to the accounting division on request.

1.4 Characteristics of a System

The definition of a system suggests some characteristics that are present in all systems: organization (order),
interaction, interdependence, integration and a central objective .

1.4.1 Organization

Organization implies structure and order. It is the arrangement of components that helps to achieve objectives. In the
design of a business system, for example, the hierarchical relationships starting with the president on top and leading
downward to the blue – collar workers represent the organization structure. Such an arrangement portrays a system
– subsystem relationship, defines the authority structure, specifies the formal flow of communication and formalizes
the chain of command. Like – wise, a computer system is designed around an input device, a central processing unit, an
output device and one or more storage units. When linked together they work as a whole system for producing
information.

1.4.2 Interaction

Interaction refers to the manner in which each component functions with other components of the system. In an
organization, for example, purchasing must interact with production, advertising with sales and payroll with personnel.
In a computer system, the central processing unit must interact with the input device to solve a problem. In turn, the
main memory holds programs and data that the arithmetic unit uses for computation. The interrelationship between
these components enables the computer to perform.

1.4.3 Interdependence

Interdependence means that parts of the organization or computer system depend on one another. They are
coordinated and linked together according to a plan. One subsystem depends on the input of another subsystem for
proper functioning: that is, the output of one subsystem is the required input for another subsystem. This
interdependence is crucial in systems work.

An integrated information system is designed to serve the needs of authorized users (department heads, managers,
etc.) for quick access and retrieval via remote terminals. The interdependence between the personnel subsystem and
the organization’s users is obvious.

In summary, no subsystem can function in isolation because it is dependent on the data (inputs) it receives from other
subsystems to perform its required tasks. Interdependence is further illustrated by the activities and support of
systems analysts, programmers, and the operations staff in a computer centre. A decision to computerize an
application is initiated by the user, analyzed and designed by the analyst, programmed and tested by the
programmer, and run by the computer operator. None of these persons can perform property without the
required input from others in the computer center subsystem.

Figure 1-1: Organization Structure – An Example

 1.4.4 Integration

Integration refers to the holism of systems. Synthesis follows analysis to achieve the central objective of the
organization. Integration is concerned with how a system is tied together. It is more than sharing a physical part or
location. It means that parts of the system work together within the system even though each part performs a unique
function. Successful integration will typically produce a synergistic effect and greater total impact than if each
component works separately.
 1.4.5 Central objective

The last characteristic of a system is its central objective. Objectives may be real or stated. Although a stated
objective may be the real objective, it is not uncommon for an organization to state one objective and operate to
achieve another. The important point is that users must know the central objective of a computer application early in
the analysis for a successful design and conversion. Political as well as organizational considerations often cloud the
real objective. This means that the analyst must work around such obstacles to identify the real objective of the
proposed change.

1.5 Elements of a System

In most cases, systems analysts operate in a dynamic environment where change is a way of life. The environment
may be a business firm, a business application, or a computer system. To reconstruct a system, the following key
elements must be considered:

1. Outputs and inputs.

2. Processor(s).

3. Control.

4. Feedback.

5. Environment.

6. Boundaries and interface.

1.5.1 Outputs and Inputs

A major objective of a system is to produce an output that has value to its user. Whatever the nature of the output
(goods, services, or information), it must be in line with the expectations of the intended user. Inputs are the elements
(material, human resources, and information) that enter the system for processing. Output is the outcome of
processing. A system feeds on input to produce output in much the same way that a business brings in human,
financial, and material resources to produce goods and services. It is important to point out here that determining
the output is a first step in specifying the nature, amount, and regularity of the input needed to operate a system. For
example, in systems analysis, the first concern is to determine the user’s requirements of a proposed computer
system – that is, specification of the output that the computer is expected to provide for meeting user requirements.

1.5.2 Processor(s)

The processor is the element of a system that involves the actual transformation of input into output. It is the operational
component of a system. Processors may modify the input totally or partially, depending on the specifications of the
output. This means that as the output specifications change so does the processing. In some cases, input is also modified
to enable the processor to handle the transformation.

1.5.3 Control

The control element guides the system. It is the decision – making subsystem that controls the pattern of activities
governing input, processing, and output. In an organizational context, management as a decision – making body controls
the inflow, handling and outflow of activities that affect the welfare of the business. In a computer system, the operating
system and accompanying software influence the behaviour of the system. Output specifications determine what and
how much input is needed to keep the system in balance.

In systems analysis, knowing the attitudes of the individual who controls the area for which a computer is being
considered can make a difference between the success and failure of the installation. Management support is required
for securing control and supporting the objective of the proposed change.

1.5.4 Feedback

Control in a dynamic system is achieved by feedback. Feedback measures output against a standard in some form of
cybernetic procedure that includes communication and control. Output information is fed back to the input and / or to
management (Controller) for deliberation. After the output is compared against performance standards, changes can
result in the input or processing and consequently, the output.
Feedback may be positive or negative, routing or informational. Positive feedback reinforces the performance of the
system. It is routine in nature. Negative feedback generally provides the controller with information for action. In systems
analysis, feedback is important in different ways. During analysis, the user may be told that the problems in a given
application verify the initial concerns and justify the need for change. Another form of feedback comes after the system
is implemented. The user informs the analyst about the performance of the new installation. This feedback often results
in enhancements to meet the user’s requirements.

1.5.5 Environment

The environment is the “suprasystem” within which an organization operates. It is the source of external elements that
impinge on the system. In fact, it often determines how a system must function. For example, the organization’s
environment, consisting of vendors, competitors, and others, may provide constraints and, consequently, influence the
actual performance of the business.

1.5.6 Boundaries and interface

A system should be defined by its boundaries – the limits that identify its components, processes and interrelationship
when it interfaces with another system. For example, a teller system in a commercial bank is restricted to the deposits,
withdrawals and related activities of customers checking and savings accounts. It may exclude mortgage foreclosures,
trust activities, and the like.

Each system has boundaries that determine its sphere of influence and control. For example, in an integrated banking
– wide computer system design, a customer who has a mortgage and a checking account with the same bank may
write a check through the “teller system” to pay the premium that is later processed by the “mortgage loan system.”
Recently, system design has been successful in allowing the automatic transfer of funds form a bank account to pay
bills and other obligations to creditors, regardless of distance or location. This means that in systems analysis,
knowledge of the boundaries of a given system is crucial in determining the nature of its interface with other systems
for successful design.

1.6 Types of systems

The frame of reference within which one views a system is related to the use of the systems approach for analysis.
Systems have been classified in different ways. Common classifications are: (1) physical or abstract, (2) open or closed,
and (3) “man – made” information systems.
 1.6.1 Physical or abstract systems

Physical systems are tangible entities that may be static or dynamic in operation. For example, the physical parts of the
computer center are the officers, desks, and chairs that facilitate operation of the computer. They can be seen and
counted; they are static. In contrast, a programmed computer is a dynamic system. Data, programs, output, and
applications change as the user’s demands or the priority of the information requested changes.

Abstract systems are conceptual or non-physical entities. They may be as straightforward as formulas of
relationships among sets of variables or models – the abstract conceptualization of physical situations. A model is
a representation of a real or a planned system. The use of models makes it easier for the analyst to visualize
relationships in the system under study. The objective is to point out the significant elements and the key
interrelationships of a complex system.

1.6.2 Open or Closed Systems

Another classification of systems is based on their degree of independence.

✓ An open system has many interfaces with its environment.

✓ It permits interaction across its boundary;
✓ it receives inputs from and delivers outputs to the outside.

An information system falls into this category, since it must adapt to the changing demands of the user.

In contrast, a closed system is isolated from environmental influences. In reality, a completely closed system is rare. In
systems analysis, organizations, applications and computers are invariably open, dynamic systems influenced by their
environment.

A focus on the characteristics of an open system is particularly timely in the light of present – day business concerns
with computer fraud, invasion of privacy, security controls, and ethics in computing. Whereas the technical aspects of
systems analysis deal with internal routines within the user’s application area, systems analysis as an open system
tends to expand the scope of analysis to relationships between the user area and other users and to environmental
factor that must be considered before a new system is finally approved. Furthermore, being open to suggestions implies
that the analyst has to be flexible and the system being designed has to be responsive to the changing needs of the user
and the environment.
 Five important characteristics of open systems can be identified.

1. Input from outside: Open systems are self – adjusting and self-regulating. When functioning properly,
an open system reaches a steady state or equilibrium. In a retail firm, for example, a steady state exists
when goods are purchased and sold without being either out of stock or overstocked. An increase in
the cost of goods forces a comparable increase in prices or decrease in operating costs. This response
gives the firm its steady state.
2. Entropy: All dynamic systems tend to run down over time, resulting in entropy or loss of energy. Open
systems resist entropy by seeking new inputs or modifying the processes to return to a steady state.
In our example, no reaction to increase in cost of merchandise makes the business unprofitable which
could force it into insolvency – a state of disorganization.
3. Process, output and cycles: Open systems produce useful output and operate in cycles, following a
continuous flow path.
4. Differentiation: Open systems have a tendency toward an increasing specialization of
functions and a greater differentiation of their components. In business, the roles of people and
machines tend toward greater specialization and greater interaction. This characteristic offers a
compelling reason for the increasing value of the concept of systems in the systems analyst’s thinking.
5. Equifinality: The term implies that goals are achieved through differing courses of action and a variety
of paths. In most systems, there is more of a consensus on goals than on paths to reach the goals.

Understanding system characteristics helps analysts to identify their role and relate their activities to the attainment
of the firm’s objectives as they undertake a system project. Analysts are themselves part of the organization. They have
opportunities to adapt the organization to changes through computerized application so that the system does not “run
down.” A key to this process is information feedback from the prime user of the new system as well as from top
management.

The theme of the process of designing information systems borrows heavily from a general knowledge of systems
theory. The objective is to make a system more efficient by modifying its goals or changing the outputs.

1.6.3 Man – Made Information Systems

Ideally, information reduces uncertainty about a state or event. For example, information that the wind is calm reduces
the uncertainty that the boat trip will be pleasant. An information system is the basis for interaction between the user
and the analyst. It provides instruction, commands and feedback. It determines the nature of the relationships among
decision-makers. In fact, it may be viewed as a decision center for personnel at all levels. From this basis, an information
system may be defined as a set of devices, procedures and operating systems designed around user based criteria to
produce information and communicate it to the user for planning, control and performance. In systems analysis, it is
important to keep in mind that considering an alternative system means improving one or more of these criteria.

Many practitioners fail to recognize that a business has several information systems; each is designed
for a purpose and works to accommodate data flow, communications, decision making, control and effectiveness.
The major information systems are formal, informal and computer based.

Formal Information system

A formal information system is based on the organization represented by the organization chart. The chart is a map
of positions and their authority relationships, indicated by boxes and connected by straight lines. It is concerned with
the pattern of authority, communication and workflow. Information is formally disseminated in instructions, memos,
or reports from top management to the intended user in the organization. This structure also allows feedback up the
chain of command for follow – up. In Figure 1-1 input form the environment provides impetus for policy decision by top
management. Policies are generalizations that specify what an organization ought to do. Policies are translated into
directives, rules and regulations and transmitted to lower-level management for implementation. The output
represents employee performance.

1.7 Systems Models

In no field are models used more widely and with greater variety than in systems analysis. The analyst beings by creating
a model of the reality (facts, relationships, procedures, etc.) with which the system is concerned. Every computer system
deals with the real world, a problem area, or a reality outside itself. For examples, a telephone switching system is made
up of subscribers, telephone handsets, dialing, conference calls, and the like. The analyst beings by modeling this reality
before considering the functions that the system is to perform.

Various business system models are used to show the benefits of abstracting complex system to model form.
The major models are schematic, flow, static and dynamic system models.

1.7.1 Schematic Models.

A schematic model is a two – dimensional chart depicting system elements and their linkages. Different arrows are used
to depict information flow, material flow and information feedback. Various elements of the system are depicted in boxes.

1.7.2 Flow system Models.

A flow system model shows the flow of the material, energy and information that hold the system together. There is an
orderly flow of logic in such models. A widely known example is PERT (Program Evaluation and Review Technique). It is
used to abstract a real world system in model form, manipulate specific values to determine the critical path, interpret
the relationships and relay them back as a control.

1.7.3 Static system models.

This type of model exhibits one pair of relationships such as activity – time or cost – quantity. The Gantt chart, for
example, gives a static picture of an activity- time relationship. Planned activities (stamping, sanding etc.) are plotted in
relation to time are shown in figure 1.3. The date column has light lines that indicate the amount of time it takes to
complete a given activity. The heavy line represents the cumulative time schedule for each activity. The stamping
department, for example, is scheduled to start working on order number 25 Wednesday morning and complete the job
by the same evening. One day is also scheduled for order number 28, two days for order number 28, two days for order
number 22 and two days (May 10-11) for order number 29. The heavy line opposite the stamping department represents
the total of six days. The broken line indicates that the department is two days behind schedule. The arrowhead indicates
the date when the chart is to be in effect.

1.7.4 Dynamic System Models.

Business organizations are dynamic systems. A dynamic model approximates the type of organization or application
that analysts deal with. It depicts an ongoing, constantly changing system. It consists of (1) inputs that enter the system,
(2) the processor through which transformation takes place, (3) the program(s) required for processing and (4) the
output(s) that result from processing.

1.8 Categories of Information

There are three categories of information related to managerial levels and the decision managers make. The first level
is strategic information, which relates to long – range planning policies that are of direct interest to upper
management. Information such as population growth, trends in financial investment and human resources changes
would be of interest to top company officials who are responsible for developing policies and determining long-range
goals. This type of information is achieved with the aid of Decision Support System (DSS).

The second level of information is managerial information. It is of direct use to middle management and department
heads for implementation and control. Examples are sales analysis, cash flow projection and annual financial
statements. This information is of use in short – and intermediate -range planning – that is months rather than years.
It is maintained with the aid of management information systems (MIS).

The third information level is operational information, which is short-term, daily information used to operate
departments and enforce the day-to-day rules and regulations of the business. Examples are daily employee absent
sheets, overdue purchase orders and current stocks available. Operational information is established by data
processing systems (DPS). Figure 1.4 shows the same.

The nature of the information and managerial levels is also related to the major types of decision making: structured
and unstructured decision making. An organizational process that is closed, stable and mechanistic tends to be more
structured, computational and relies on routine decision making for planning and control. Such decision making is
related to lower-level management and is readily supported with computer systems. In contrast, open, adaptive,
dynamic processes increase the uncertainty associated with decision making and are generally evidenced by a lack
of structure in the decision – making process. Lack of structure as well as extraorganizational and incomplete
information makes it difficult to secure computer support. Table 1-2 summarizes the characteristics of decision
making and the information required at different managerial levels.

Figure 1-4: Management and Information Levels in a Typical Organization.

Therefore, in designing an information system, the analyst needs to determine the type of information needed, the
level of the information, how it is structured and in what format it is before deciding on the system needed to produce
it. This is another reason for having a background in systems theory and organizations.