MANAGEMENT INFORMATION SYSTEM

Unit-I:
Meaning-Evolution of MIS-Manager‘s view of Information System-Strategic
Planning-Management Control-Operational Control-Using Information Systems for
Competitive Advantage-Value Chain Model-Synergies-Core Competencies and
Network based Strategies-Information Technology and Business Process
Reengineering.

Unit-II:
Decision Making and Information Systems-Herbert Simon Model of Decision Making
Process-Criteria for Decision Making-Behavioural Model of Decision Making –
Optimisation Model-Decision Support Systems and Expert Systems-Relevance of
Decision Making Concepts for Information Systems.

Unit-III:
Strategic Planning of Information Systems-Techniques of Planning-Applications of
Information Systems-Financial Information Systems-Marketing Information Systems-
Production Information Systems-Human Resources Information Systems.

Unit-IV:
Systems Analysis and Design-Development Strategies-Structured Analysis-
Prototyping-System Development Life Cycle-Feasibility-Requirement Analysis-
Design of the System-Development of Software-Implementation and Evaluation-
Systems Project Management.

Unit-V:
Organisation of Information System-Centralised, Decentralised and Distributed
Processing-Role and Responsibilities of Information Systems Professionals-Security
and Ethical Issues in Information Systems-Risks, Controls and Threats.

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 CHAPTER – I
INTRODUCTION AND APPLICATIONS OF MIS

Contents of Chapter – I:
 Meaning and Evolution of MIS
 Manager‘s view of Information system (IS)
 Strategic planning –Management control – operational
control
 Using Information systems for competitive advantage
 Value chain model
 Synergies
 Core competencies and network based strategies
 Information Technology and BPR

1). MANAGEMENT INFORMATION SYSTEM

Management for the purpose of MIS comprises of the activities that describe
what managers do in the operation of their organization plan, organize, initiate and
control operations. They plan by setting strategies and goals and selecting the best
course of action to achieve the plan. They organize the tasks necessary for the
operational plan, set these tasks up into homogeneous groups, and assign authority
delegation. They control the performance of the work by setting performance
standards and avoiding deviations from the standard. Because decision making is a
major requirement for each of these management functions, the MIS becomes a
facilitating system for developing decisions in planning, organizing, controlling and
initiating.
Information is distinct from data and this distinction is very important for the
purpose of MIS. Data are facts and figures that are not currently being used in
decision process. Files, records, reports, statements etc. under consideration are
examples of data whereas information consists of data that has been retrieved,
processed, interpreted for management decision making.
A system is a set of elements joined together for a common objective. It is
composed of several of parts called its subsystems.
MIS is the system, which makes available the right information to the right person, at
the right place, at the right time, in the right form and at the right cost.

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A management information system (MIS) is a system that provides information
needed to manage organizations effectively. Management information systems are
regarded to be a subset of the overall internal controls procedures in a business, which
cover the application of people, documents, technologies, and procedures used
by managerial personnel to solve business problems such as costing a product, service
or a business-wide strategy.

MIS is the planned system of the collection, processing, storage and dissemination of
data in the form of information needed to carry out the management functions.

An MIS can be defined as a combination of people, computers and procedures for

collecting and organizing information to facilitate decision making. In any
organization a reasonable amount of time and effort is devoted to data collection,
documenting, processing and communication. Every individual looks for information
that is relevant to her duties. Thus, information is people oriented and varies with the
nature of people's work in the organization.

Judgement Skill External

Data inflow Intuition Experience Environment
Processing Logic Information
Computers
Intelligence Design choice
Human Beings Decisio
n
Database

Decision making
DecisionMIS
Implementation

Performance
Feed back

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Benefits of MIS:

An MIS provides the following advantages.

1. It facilitates planning:

MIS improves the quality of plants by providing relevant information for sound
decision – making. Due to increase in the size and complexity of organizations,
managers have lost personal contact with the scene of operations.

2. It minimizes information overload:

MIS change the larger amount of data in to summarize form and there by avoids the
confusion which may arise when managers are flooded with detailed facts.

3. MIS encourages Decentralization:

Decentralization of authority is possible when there is a system for monitoring

operations at lower levels. MIS is successfully used for measuring performance and
making necessary change in the organizational plans and procedures.

4. It brings Co- ordination:

MIS facilities integration of specialized activities by keeping each department aware

of the problem and requirements of other departments. It connects all decision centers
in the organization.

5. It makes control easier:

MIS serves as a link between managerial planning and control. It improves the ability
of management to evaluate and improve performance. The used computers has
increased the data processing and storage capabilities and reduced the cost.

Role of Information system in business:

Information systems relate to the following business objectives:
 Achieving operational excellence
 Developing new products and service.
 Attaining customer intimacy and service
 Improving decision making
 Promoting competitive advantage
 Ensuring survival

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Evolution of Management Information System

The management information system has passed several stages in the

last 50 years. It has crossed several advancements which include the following.

Stage 1: Transaction processing system:

The role of information system before 1960s were mainly limited to
electronic data processing (EDP), purposes such as transaction processing, record –
keeping and accounting. EDP or TPS is mainly focused on the use of computers in
recording, classifying, manipulating, and summarizing data. TPS was mainly used for
producing business documents such as sales and inventory processing and accounting
systems.

Stage 2: Management Information System

In the 1960s, another role was added to the use of computers, i.e, the
processing of data into useful informative reports. The concept of MIS was born.
The MIS provided the information in the form of pre specified reports and displays to
support business decision making. Examples: Sales analysis, production performance
and cost trend reporting systems. MIS focused on developing business applications
that provided managerial end users with predefined management reports that would
give managers the information they needed for decision –making purposes.

Stage 3: Decision Support System

By the 1970s, these pre-defined management reports were not
sufficient to meet many of the decision-making needs of management. In order to
satisfy such needs the concept of Decision support systems(DSS) was born. DSS was
aimed at provoding interactive ad hoc support for the decision – making processes of
managers and other business professionals. Eg: Product pricing, profitability
forecasting and risk analysis systems.

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Stage 4: Executive Information System
In the 1980s, the introduction of micro computers in to the workplace
has made rapid development of micro computer processing power(Eg: Intel‘s Pentium
Microprocessor), application software packages (e.g., Microsoft Office) and
telecommunication networks gave birth to the advance computing. The new concept
called as Executive Information System was developed. EIS provide critical
information from MIS, DSS and other sources, tailored to the information needs of
executives Eg: systems for easy access to analysis of business performance, actions
of all competitors, and economic developments to support strategic planning.

Stage 5: Knowledge Management Systems

The advancement of technology has made the entry of artificial
intelligence (AI) techniques to business information systems. With less human
intervention, knowledge workers could be freed up to handle more complex tasks.
The development of KMS has occurred. The Knowledge management systems
support the creation, organization and dissemination nof business knowledge with in
the enterprise. Eg: Intranet access to best business practices, sales proposal strategies
and customer problem resolution systems.

Stage 6 : Enterprise Resource Planning

The mid-to late 1990s saw the revolutionary emergence of enterprise
resource planning (ERP) systems. This system integrates all facets of a firm,
including its planning, manufacturing, sales resource management, customer relations,
inventory control, order tracking, financial management, human resources and
marketing – virtuall every business function. The primary advantage of ERP systems
lies in their common interface for all computer-based organizational functions and
their tight integration and data sharing needed for flexible strategic decision making.

Overall, the rapid growth of the internet, intranets, extranets and other
interconnected global networks in the 1990s dramatically changed the capabilities of
information systems in business. Internet-based and web-enabled enterprise and
global electronic business (E-business) and commerce systems are becoming common
place in the operations and management of today‘s business enterprises.

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 The following table shows the complete picture of evolution of
management information system and its development over the last 50 years.

Transaction processing system

Management Information system

Decision support system

Executive Information System

Knowledge management
information system

Enterprise resource planning

USERS OF MIS:
Every person in the organization is a user of the MIS. The people in the
organization operate at all levels in the hierarchy. A typical user is a clerk, an
assistant, an officer, an executive or a manager. Each of t hem has a specific task and
a role to play in the management of business. The MIS caters to the needs of all
persons.
The main task of a clerk is to search the data, make a statement and submit it
to the higher level. A clerk can use the MIS for a quick search and reporting the same
to higher level. An assistant has the task of collecting and organizing the data, and
conducting a rudimentary analysis of it. The MIS offers the user tools to perform
these tasks. An officer has a role of integrating the data from different systems and
disciplines to analyse it and make a critical comment if anything adverse is found.
The MIS provide information to manager in three levels:
1. Operational: these include day-to-day decisions such as ordering in more stock
2. Tactical – decisions that have a short to medium term effect, e.g., introducing
a new product to a particular retail outlet;

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 3. Strategic- long term decisions that will affect the future of the organization,
e.g., whether to open anew store, or take over a rival concern.

Strategic Planning:
Concept:
Strategic planning determines where an organization is going over the next
year or more and how it's going to get there. Typically, the process is organization-
wide, or focused on a major function such as a division, department or other major
function.

Strategic planning is a management tool for organizing the present on the basis
of the projections of the desired future.

Strategic planning is an organization's process of defining its strategy, or

direction, and making decisions on allocating its resources to pursue this strategy,
including its capital and people. Various business analysis techniques can be used in
strategic planning, including SWOT analysis (Strengths, Weaknesses, Opportunities,
and Threats ), PEST analysis (Political, Economic, Social, and Technological),STEER
analysis (Socio-cultural, Technological, Economic, Ecological, and Regulatory
factors), and EPISTEL (Environment, Political, Informatic, Social, Technological,
Economic and Legal).

Definition:
Strategic Planning is a continuous and systematic process where people make
decisions about intended future outcomes, how outcomes are to be accomplished, and
how success is measured and evaluated.

Strategic planning is the process of devising a plan of both offensive and

defensive actions intended to maintain and build competitive advantage over the
competition through strategic and organizational innovation.

Systematic process of envisioning a desired future, and translating this vision

into broadly defined goals or objectives and a sequence of steps to achieve them. In
contrast to long-term planning (which begins with the current status and lays down
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a path to meet estimated future needs), strategic planning begins with the desired-end
and works backward to the current status.

Management Control:
Management Control can be defined as the process oriented to verify:
The advancement status of the planned objectives; The efficacy and efficiency of the
organization through the analysis of the resources, costs and proceeds.

Management Control has not to be seen as an activity of the administration

area‘s exclusive competence, but rather as a process which involves, at the
appropriate levels of responsibilities, all the company‘s functions.

As with all processes, Management Control is constituted by different elements,

connected to each other:
1 The structure (personnel charged of the duty of control),
2 The tools (general accounting, analytical accounting, budgeting, reporting, income
statement analysis),
3 The procedures (coordination, optimisation).

The Management Control acts through the following phases in sequence:

1 Planning, where for any company‘s unit a set of objectives must be defined, that
is of specific expected results, which need to be: understandable, agreed, measurable
in extent and time, reachable, consistent with one another and with the available
resources,
2 Programming, where a programme is drawn up in order to get the planned
objectives, taking into account the internal and external restraints to the company,
3 Result checking, where it is measured whether each company‘s unit has achieved
or not the assigned objectives,
4 Shifting analysis, where the possible shifting between objectives and results is
analyzed,
5 Corrective action implementation, in order to optimise the units‘ behaviour
against the planned objectives.

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Operational Control
Operational control systems are designed to ensure that day-to-day actions are
consistent with established plans and objectives. It focuses on events in a recent
period. Operational control systems are derived from the requirements of the
management control system. Corrective action is taken where performance does not
meet standards. This action may involve training, motivation, leadership, discipline,
or termination.

Evaluation Techniques for Operational Control:

Value chain analysis:
Firms employ value chain analysis to identify and evaluate the
competitive potential of resources and capabilities. By studying their skills relative to
those associated with primary and support activities, firms are able to understand their
cost structure, and identify their activities through which they can create value.
Quantitative performance measurements:
Most firms prepare formal reports of quantitative performance
measurements (such as sales growth, profit growth, economic value added, ration
analysis etc.) that manager‘s review at regular intervals. These measurements are
generally linked to the standards set in the first step of the control process. For
example if sales growth is a target, the firm should have a means of gathering and
exporting sales data. If the firm has identified appropriate measurements, regular
review of these reports helps managers stay aware of whether the firm is doing what it
should do. In addition to there, certain qualitative bases based on intuition,
judgement, opinions, or surveys could be used to judge whether the firm‘s
performance is on the right track or not.
Benchmarking:
It is a process of learning how other firms do exceptionally high-
quality things. Some approaches to bench marking are simple and straightforward.
For example Xerox Corporation routinely buys copiers made by other firms and takes

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them apart to see how they work. This helps the firms to stay abreast of its
competitors‘ improvements and changes.
Key Factor Rating:
It is based on a close examination of key factors affecting performance
(financial, marketing, operations and human resource capabilities) and assessing
overall organizational capability based on the collected information.

The Value Chain

To better understand the activities through which a firm develops a

competitive advantage and creates shareholder value, it is useful to separate the
business system into a series of value-generating activities referred to as the value
chain. In his 1985 book Competitive Advantage, Michael Porter introduced a generic
value chain model that comprises a sequence of activities found to be common to a
wide range of firms. Porter identified primary and support activities as shown in the
following diagram:

Porter Generic value chain:

The goal of these activities is to offer the customer a level of value that exceeds the
cost of the activities, thereby resulting in a profit margin.

The primary value chain activities are:

M
A
Inbound Operations Outbound Marketing Service R
logistics logistics and sales G
I
N

Supporting activities:Firm infrastructure

HR management

Technology development

Procurement

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 Inbound Logistics: the receiving and warehousing of raw materials, and their
distribution to manufacturing as they are required.
 Operations: the processes of transforming inputs into finished products and
services.
 Outbound Logistics: the warehousing and distribution of finished goods.
 Marketing & Sales: the identification of customer needs and the generation of
sales.
 Service: the support of customers after the products and services are sold to
them.

These primary activities are supported by:

 The infrastructure of the firm: organizational structure, control systems,

company culture, etc.
 Human resource management: employee recruiting, hiring, training,
development, and compensation.
 Technology development: technologies to support value-creating activities.
 Procurement: purchasing inputs such as materials, supplies, and equipment.

The firm's margin or profit then depends on its effectiveness in performing

these activities efficiently, so that the amount that the customer is willing to pay for
the products exceeds the cost of the activities in the value chain. It is in these

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activities that a firm has the opportunity to generate superior value. A competitive
advantage may be achieved by reconfiguring the value chain to provide lower cost or
better differentiation.

The value chain model is a useful analysis tool for defining a firm's core
competencies and the activities in which it can pursue a competitive advantage as
follows:

 Cost advantage: by better understanding costs and squeezing them out of the
value-adding activities.
 Differentiation: by focusing on those activities associated with core
competencies and capabilities in order to perform them better than do
competitors.

Synergy:

Synergy, in general, may be defined as two or more agents working together to

produce a result not obtainable by any of the agents independently.
Synergy is the energy or force created by the working together of various parts or
processes.

Synergy in business is the benefit derived from combining two or more

elements (or businesses) so that the performance of the combination is higher than
that of the sum of the individual elements (or businesses).

A synergy is a combination that has a greater effect than the combined parts.
In an investment context, the word is most commonly used to justify acquisitions and
mergers.

These most common synergies are:

 Cost synergies — savings, generally through economies of scale.

 Sales synergies — better reach through a larger sales force or expanded
customer base, cross selling one product to buyers of another etc.

Core Competencies:

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 Core competency is a specific factor that a business sees as being central to the
way it, or its employees, works. It fulfills two key criteria:

1. It is not easy for competitors to imitate

2. It can be leveraged widely to many products and markets.

A core competency can take various forms, including technical/subject matter

know-how, a reliable process and/or close relationships with customers and suppliers.

Prahalad and Hamel suggest three factors to help identify core competencies
in any business. These include:

1. Provides potential access to a wide variety of markets

2. Makes a significant contribution to the perceived customer benefits of

the end product

3. Difficult for competitors to imitate

Network based strategies:

The availability of internet and networking technologies has inspired
strategies that take advantage of firms abilities to create networks or network with
each other. Network-based strategies include the use of network economics, a virtual
company model and business ecosystems.
The network economics perspective, information technology can be
strategically useful. Internet sites can be used by firms to build communities of users-
like minded customers who want to share their experiences. This builds customer
loyalty and enjoyment and builds unique ties to customers. (Eg: Social network
websites like Face book and Orkut can be used to create communities that can be
useful for the companies to target their products. The latest development has
benefited the companies to influence the people).
A virtual company strategy uses the models of a virtual company to
create a competitive business. It uses networks to link people, assets, and ideas,
enabling it to ally with other companies to create and distribute products and services
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without being limited by traditional organizational boundaries. (Eg: naaptol.com is a
company that delivers its products to the online customers, they do not have any
physical office, but based on the orders the company create strategies to deliver the
products and other ordered material to the customers in right time.)
Business ecosystem builds on the idea of the value web, the main
difference being that cooperation takes place across many industries rather than many
firms.

INFORMATION TECHNOLOGY AND BUSINESS PROCESS RE-

ENGINEERING

Business process reengineering or process reengineering or reengineering is

focused on break through improvement to dramatically improve the quality and speed
of work and reduce its cost by fundamentally changing the process by which work
gets done. For organizations which aims at radical change, the BPR will help them to
bring change in the existing performance.

IT is the key enable of BPR, which is considered a form of radical change.

These rules of work design are based on assumptions about technology, people and
organizational goals that no longer hold. Business activities should be viewed as
more than a collection of individual or even function tasks in a process view for
maximizing effectiveness. IT and BPR have recursive relationship. IT capabilities
should support business processes, and business process should be in terms of the
capabilities that IT can provide.
The key to the effective use of IT lies not in moving the information faster but
in doing right things with it. IT has to be used to make proactive decisions to improve
business performance rather than report on it after the fact. In the design phase of
implementation of reengineering, the capabilities of IT an be used to simulate a model
of the design and there by validate the new design. (eg: Wal-Mart uses strong IT
solution to its business activities to reduce labour and for tracking sales)

Capabilities of IT in reengineering:
1. IT can transform unstructured business process into standardized transactions.

2. IT can transfer information with rapidly and ease across large distances,
making business process independent of locations.

3. IT can reduce human labour in certain processes.

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 4. IT can bring vast volumes of detailed information into a business process.

5. IT can bring complex analytical methods to bear on a process.

6. IT enables changes in the sequence of task in a process, often allowing

multiple tasks to be worked on simultaneously.

7. IT allows detailed tracking of status, inputs, and outputs.

8. IT can be used to connect two parties with in a process that would otherwise
communicate through intermediaries.

Information technology (IT) has historically played an important role in the

reengineering concept. It is considered by some as a major enabler for new forms of
working and collaborating within an organization and across organizational borders.
BPR is a methodology that promotes change and introduces new processes and new
styles of working. IT promotes changes in organizations, mainly changes in the nature
of the work, the integration of business functions, and the transformation of
competitive forces.

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 CHAPTER – II
DECISION MAKING AND INFORMATION SYSTEMS

Contents of Chapter – I:
 Herbert Simon Model of Decision Making process
 Criteria for Decision Making
 Behavioural Model of Decision Making
 Optimization Model
 Decision Support Systems and Expert Systems
 Relevance of Decision Making Concepts for
Information Systems

1. Decision Making:
Decision making is the process of selecting the most desirable or optimum alternative
to solve a problem or achieve an objective. The quality and soundness of managerial
decisions is largely contingent upon the information available to the decision-maker.
MIS provide great help to the decision makers by converting the information
sources into useful output that can make the decision maker to analyze the problem
situation easily and thus make the decision maker to take right decision at right time.

Decisions that are based on a foundation of knowledge and sound reasoning can lead
the company into long-term prosperity; conversely, decisions that are made on the
basis of flawed logic, emotionalism, or incomplete information can quickly put a
small business out of comfort.

For an organizational point of view the Management Information

System(MIS) help the business organization in converting many types of data from
many sources into useful outputs.

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Eg: Relationship between decision –making and MIS

External Environment:
1. Government Data
2. Technology data
3. Social change data
4. Economic data …. Etc. MIS Decision
making

Internal Environment
1. Marketing data
2. Financial data
3. Production data
4. Personnel data… etc

Management information systems provide analytical models, specialized information,

real-time updates and hypothetical scenarios to assist managers with the decision-
making process.

2). Herbert Simon model of Decision making

Decision –making is a process which the decision maker uses to arrive at a decision.
The Simon Model provides a conceptual design of the MIS and decision making,
wherein the designer has to design the system in such a way that the problem
is identified in precise terms. That means the data gathered for data analysis should be
such that it provides diagnostics and also provides a path to bring the problem to
surface.

The core of this process is described by Herbert Simon in a model. He describes the
model in three phases as shown in the following figure.

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 INTELLIGENCE

DESIGN

CHOICE

Stage 1: Intelligence
This step includes raw data collected, processed and examined. Identifies
a problem calling for a decision.
The intelligence phase requires an extensive and comprehensive data base.
It therefore, involves searching or scanning of the environment – both internal as well
as external – for conditions, which indicate or suggest a problem or opportunity. The
activity of search for problem can be of risk, performance or demand for the product.
Where as the opportunity can be risk reduction, profit societal service
In the intelligence phase, the MIS collects the data. The data is scanned,
examined, checked and edited. Further, the data is sorted and merged with other data
and computations are made, summarized and presented. In this process, the attention
of the manager is drawn to all problem situations by highlighting the significant
differences between the actual and the expected, the budgeted or the targeted.
Stage 2: Design
This step includes inventing, developing and analyzing the different
decision alternatives and testing the feasibility of implementation. Assess the value of
the decision outcome.
In the design phase, the manager develops a model of the problem
situation on which he can generate and test the different decisions to facilitate its
implementation. If the model developed is useful in generating the decision
alternatives, he then further moves into phase of selection called as choice.

Stage 3: Choice

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 This step includes select on alternative as a decision, based on the selection
criteria.
In the phase of choice, the manger evolves a selection criterion such as
maximum profit, least cost, minimum waste, least time taken, and highest utility. The
criterion is applied to the various decision alternatives and the one which satisfied the
most is selected.
In the three phases, if the manager fails to reach a decision, he starts the
process all over again from the intelligence phase where additional data and
information is collected, the decision-making model is refined, the selection criteria is
changed and a decision is arrived at. The MIS achieves this in an efficient manner
without repeated use of the Simon Model again and again. An ideal MIS is supposed
to make a decision for the manager.

3). Criteria for Decision Making:

Levels or criteria of managerial decision-making
1. Strategic decisions
2. Tactical decisions
3. Operational decisions

a). Strategic Decisions

Strategic decision making criteria occurs for every organization when it thinks
about its vision and mission to achieve its ultimate objective. The general
characteristics including in strategic decisions are:

1. Monitor the strategic performance of the organization and its overall direction
in the political, economic, and competitive business environment
2. Strategic decisions are the decisions that are concerned with whole
environment in which the firm operates, the entire resources and the people
who form the company and the interface between the two.
3. Strategic decisions are future-oriented because of uncertainty. They are part of
the planning activity.
4. These decisions are taken in accordance with organization mission and vision.
5. These are related to overall counter planning of all organization

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 6. These deal with organization growth.
7. These are complex in nature.

b). Tactical Decisions

These are medium-term decisions about how to implement strategy eg what kind of
marketing to have, or how many extra staff to recruit etc.
 Tactical decision making combines planning activities with controlling. It is
for short-term activities and associated allocation of resources to them to
achieve the objectives.
 These are Semi structured Decisions
 Require information from both the operational level and the strategic level to
support their semi structured decision making responsibilities

C). Operational Decisions

These are short-term decisions (also called administrative decisions) about
how to implement the tactics eg which firm to use to make deliveries.
1) Operational decisions occur on a daily basis and are made considering the risk to
the business. Often these decisions are administrative in nature and can be
implemented quickly and tend to carry little risk.
2) These are Structured Decisions
a) The procedures to follow when a decision is needed can be specified in
advance
b) Involves a repetitive and routine-type decision where there is a definite
procedure to follow.

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 DECISION CRITERIAS

4). Behavioural Model of Decision Making

Behavioural models state that the actual behaviour of managers appears to be
less systematic, more informal and reflective.
The activities involved are:
1. High volume, high speed work
2. Variety, fragmentation, brevity
3. Issue preference current, specific
4. Complex web of interactions, contacts
5. Strong preference for verbal media
6. Control of the agenda

5). Optimization Decisions

1. Optimization decisions are primarily aimed at maximizing the returns of the
company such as profit maximization, wealth maximization etc.

2. Herbert Simon classified that optimizers take decisions to maximize the

benefits.

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3. Maximizers tend to take longer making decisions due to the need to maximize
performance across all variables and make tradeoffs carefully; they also tend to more
often regret their decisions.

6). Decision Support Technologies

The decision support technologies have evolved from late 1950s but the
achievement has made the business organizations to take decisions with little effort.
The following are the some of the important decision support technologies evolved
from late 1950s.
They are:
 Management Information Systems (MIS)
 Decision Support Systems (DSS)
 Enterprise (Executive) Information Systems (EIS)
 Enterprise Resource Planning (ERP) and Supply-Chain Management (SCM)
 Knowledge Management Systems
 Expert Systems (ES)
 Artificial Neural Networks (ANN)

7). Decision Support System(DSS)

Computer-based information systems that provide interactive information

support to managers during the decision-making process.

DSS use:
o Analytical models
o Specialized databases
o Decision makers‘ own insights and judgements
o Interactive, computer-based modeling processes to support the making
of semi structured and unstructured decisions by individual managers.

computer-based DSS are widely applied in both profit making and non-profit
organizations. In corporate functional management fields, production and operations
management contain the largest number of application articles, followed by

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management information systems, marketing, finance, strategic management and
multifunctional areas.

Characteristics of DSS
1. Ability to support the solution of complex problems and fast response to
unexpected situations that result in changed inputs
2. Allows the decision-maker to interact in a natural manner due to the careful
design of the interface.
3. it is designed to help support decisions that are formulated as semi-structured,
complex problems.
4. It generates fast response to unexpected situations that result in changed
inputs.
5. It is a way to organize information intended for use in decision-making.
6. Other characteristics include:
a) Cost savings
b) Improving managerial effectiveness
c) Extensive range of support to management and individuals
d) Designed and run by managers, incorporated data and models.

Benefits of DSS:
1. Improving Personal Efficiency
2. Expediting Problem Solving
3. Facilitating Interpersonal Communications
4. Promoting Learning or Training
5. Increasing Organizational Control

DIFFERENCE BETWEEN TPS, MIS & DSS:

The applicability and coverage of Transaction Processing System(TPS),

Management Information System (MIS) and Decision Support System(DSS) has
significant changes which are described below.

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Dimensions TPS MIS DSS

Type of users Clerical and Middle Management All levels including

supervisory top management and
professionals
Focus Data transactions Information Decision, flexibility
Applications Payroll, sales data, Sales forecasting, Strategic planning,
inventory production control integrated problems
Ease of use Low Moderate High
Processing interest Expediency Efficiency Effectiveness

Reason for Cost saving, Reporting basic Improved decision

development customer service information making

STRUCTURE OF DSS:

TPS
data MIS Data DSS Models

DSS Programme DSS User

External
data

Graphs Reports

DECISION SUPPORT SYSTEM STRUCTURE

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Expert System

Expert system is a computer based information system in which knowledge is

represented in data, in which the processing of the knowledge is directed, primarily by
computer programs. ES employs human knowledge captured in a computer to solve
problems that ordinarily require human expertise. These can be used by non-experts
to improve their problem solving abilities. Expert System becomes a knowledgeable
assistant to human experts. They are used to propagate search knowledge resources
for improved consistent results. It Provides direct application of Expertise.

1) Expert Systems Do Not Replace Experts, But They

a) Make their Knowledge and Experience More Widely Available
b) Permit Non-experts to Work Better

Benefits of Expert System:

 Increased Output and Productivity and decreased decision making time
 Increased Process(es) and Product Quality and reduced downtime
 Capture Scarce Expertise
 Flexibility
 Easier Equipment Operation
 Elimination of Expensive Equipment
 Operation in Hazardous Environments
 Accessibility to Knowledge and help desks
 Integration of Several Experts' Opinions
 Can Work with Incomplete or Uncertain Information
 Provide Training
 Enhancement of Problem Solving and Decision Making and improved
Decision Making Processes
 Improved Decision Quality
 Ability to Solve Complex Problems

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 KNOWLEDGE BASE

INFERENCE ENGINE Knowledge

Acquisition System

USER INTERFACE

User
Expert

Components of Expert System:

1.Knowledge acquisition subsystem
This program is used by an individual who has expertise in the problem to
create, and to, or change the knowledge base. Potential sources of knowledge include
human experts, textbooks, databases, special research reports and the users own
experience. Acquiring the knowledge from experts is a complex task that often is a
bottleneck in ES construction. The knowledge engineer helps the expert structure of
the problem area by interpreting and integrating human answers to questions, by
drawing analogies, posing counter examples, and bringing to light conceptual
difficulties.

2). Knowledge Base

Knowledge base is the collection of facts and rules which describe all the
knowledge about the problem domain. It contains rules, facts and describptions of
objects etc. the information in the knowledge base is everything that is necessary for
understanding and formulating the problem and then solving it. The information in
the knowledge base is incorporated in to a computer program by a process called
knowledge representation.

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3). Inference engine
The inference engine is the part of the system that chooses which facts and rules to
apply when trying to solve the user‘s query This applies knowledge in a systematic
way. It is the brain of ES. It applies rules and other forms of knowledge in an
attempt to make sequences of logical conclusions that will solve a user‘s problem.
This engine reads and analyzes the problem and matches the query with the
information source available in Knowledgebase. This component(blackboard) of
inference engine makes decisions about how to use the system‘s knowledge by
developing agenda that organises and controls the steps taken to solve problems when
consultation is required.

4). User Interface

The user interface is the part of the system which takes in the user‘s query in a
readable form and passes it to the inference engine. It then displays the results to the
user. It contains a language processor for friendly problem oriented communications
between the manager –user and the computer. This communication is best carried out
in a natural language, and in some cases, it is supplemented by graphics.

Finally, the solutions for the queries asked by the users will be solved through
the hierarchy of steps which ultimately takes the experts‘ opinion and ideas.

Relevance of Decision Making Concepts for Information Systems

The concepts of the organizational and behavioral aspects of decision making
provide an insight to the designer to handle the organizational culture and the
constraints in the MIS. The concepts of the rationality of a business decision, the risk
averseness of the managers and the tendency to avoid an uncertainty, makes the
designer conscious about the human limitations, and prompts him to provide a support
in the MIS to handle these limitations. The reliance on organizational learning makes
the designer aware of the strength of the MIS and makes him provide the channels in
the MIS to make the learning process more efficient.

The relevance of the decision making concepts is significant in the MIS

design. The significance arises out of the complexity of decision making, the human

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factors in the decision making, the organizational and behavior aspects, and the
uncertain environments. The MIS design addressing these significant factors turns out
to be the best design. The objective of an MIS (Management Information System) is
to provide information for decision making on planning, initiating, organizing, and
controlling the operations of the subsystems of the form and to provide a synergetic
organization in the process. Overall, with the advancement of MIS, the managers in
organizations are facilitated with decision support systems (DSS) which can help the
mangers in generating quality decisions. And also the advancement of knowledge
systems and Experts system provided greater help to not only to the business
organizations but also to the needy people in daily life like for Online medical
transcription, web conferences etc.

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 CHAPTER – III
STRATEGIC PLANNING OF INFORMATION SYSTEMS

Contents of Chapter – III:

 Strategic Planning of Information Systems

 Techniques of Planning
 Applications of Information Systems
 Financial Information Systems
 Marketing Information Systems
 Production Information Systems
 Human Resources Information Systems.

5.  PLANNING OF INFORMATION SYSTEM

STRATEGIC

Strategic planning is very important for achieving the organizational

objectives. A strategy is defined as an organizations‘ activities and plans designed to
match the organization‘s objectives with its mission and to match the organization‘s
mission to its environment in an efficient and effective manner. Strategic planning is
an organization's process of defining its strategy, or direction, and making decisions
on allocating its resources to pursue this strategy, including its capital and people.
Strategic planning is the formal consideration of an organization's future course.

Strategic planning information system

It involves study of how the information system function can contribute to the
achievement of the goals contained in the strategic plan of the organization. Strategic
planning information system or strategic information system (SIS) formulates
policies, objectives and strategies for delivering information services and allocating
information system resources.

This system can be used to improve the firm‘s performance, competitive

position, encouraging innovation and integration of old systems with new systems.

APPLICATIONS OF STRATEGIC INFORMATION SYSTEM

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 The important applications of strategic information system include:

• It pinpoints ways to achieve competitive advantage of using information

systems as a strategic weapon.
• It stimulates the creative use of information systems technology and
encourages innovation in applying to the needs of the organization.
• It redeploys financial and human resources to the most important strategic
information systems projects for the business.
• It encourages the integration of existing and future information systems
• It establishes priorities and time frame for the development of information
systems in the future.

2). TECHNIQUES OF STRATEGIC PLANNING

The purpose of strategic planning is to develop strategies by which an

organization will be able to achieve its objectives. The important components of
techniques strategic planning include:

There is a wide range of strategic planning tools available -- in essence mental

approaches and procedures to apply to develop effective strategic plans.

i. SWOT analysis:

SWOT is a strategic planning tool, usually used as part of doing an

environmental scan, that help identify external factors that need to be planned for, and
internal factors (i.e. strengths and weaknesses) that need to be planned for in
determining where a business should be going in the future.

More specifically, the process involves identifying Strengths, Weaknesses,

Opportunities, and Threats (which is what the letters SWOT stand for).

The SWOT analysis can be done as part of strategic planning, but it can also
be done independently of the larger process as a standalone.

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 By capitalizing on one's strengths, and minimizing or correcting one's
weaknesses, a company is better able to take advantage of opportunities as they
emerge, and cope with threats before they become dangerous.

ii. PEST Analysis:

The PEST Analysis or model is another tool, quite similar to the SWOT
model, but is more specialized and focused on the external environment and important
factors "out there" that can affect present and future business. The PEST acronym
stands for:

o Political
o Economic
o Social
o Technological

iii. Scenario Planning:

Scenario planning is often used in IT environments but applies to any

business. For example, the IT department might anticipate what would happen if a
major hurricane hit and destroyed their central computers. As a result they would
minimize their risk by using offsite data storage geographically separate from the
main installation, or move their central computers to a more resistant building.

iv. Competitive analysis:

A competitive analysis involves looking at those that compete in your market

place, and using information about your competitors to identify where your strengths
are relative to those competitors. One of the principles for becoming competitive is to
leverage your strengths with respect to competitors, and minimize your weaknesses
with respect to competitors.

A competitive analysis is really a subset of doing an environmental scan.

It may surprise you to know that a competitive analysis is useful, not only
where

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v. Goal grid:

A goals grid is a relatively simple technique to help you think more clearly
about organizational and company goals, particularly when you are doing strategic
planning.

Fred Nickols, in a well-written article on the topic, explains that the goals
grid is intended to help you answer the following questions:

1. What are we really up to here?

2. Do we have all the bases covered?
3. What are we overlooking?
4. Have we adequately thought this thing through?
5. How do our various goals and objectives relate to one another?
6. What do the patterns tell us about our willingness to risk, to change?
7. Are we in conflict with others?

3). MARKETING INFORMATION SYSTEM

Marketing system consists of people, equipment, and procedures to gather,

sort, analyze evaluate, and distribute needed, timely and accurate information to
marketing decision makers.

The Marketing Information System begins and ends with marketing managers.
First, it interacts with these managers to assess information needs. Next, it develops
needed information from internal company data, marketing intelligence activities,
marketing research and information analysis.

Finally, the marketing information system distributes information to manager

sin the right form at the right time to help them make better marketing decisions.

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Step1: Assessing Information Needs:

A good marketing information system balances the information mangers

would like to have against what they really need and what is feasible to offer.

The company begins by interviewing managers to find out what information

they would like. Some managers will ask for whatever information they can get
without thinking carefully about what they really need.

The Marketing Information system must watch the marketing environment in

order to provide decision makers with information they should have to make key
marketing decisions.

Finally, the costs of obtaining, processing, storing, and delivering information

can mount quickly. The company must decide whether the benefits of having
additional information are worth the costs providing it and both value and costs are
often hard to assess.

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Step2: Developing Information:

This step includes developing information. The information needed by

marketing managers can be obtained from internal data, marketing intelligence and
marketing research. The information analysis system then processes this information
to make it more useful for mangers.

1). Internal Data:

Many companies build extensive internal databases, computerized collections

of information obtained from data source within the company. Marketing managers
can readily access and work with information in the database to identify marketing
opportunities and problems, plan programs, and evaluate performance.

Information in the database can come from many sources. The accounting
department prepares financial statements and keeps detailed records of sales, costs,
and cash flows. Similarly the manufacturing, production, inventory information also
recorded and is made available in the internal company database.

2). Marketing Intelligence:

Marketing intelligence is the systematic collection and analysis of publicly

available information about competitors and development in the marketing
environment. A marketing intelligence system gathers, analyses, and distributes
information about the company‘s competitive, technological, customer, economic,
social and political and regulatory environments. Its goals to improve strategic
decision making, assess and track competitors‘ actions, and provide early warnings of
opportunities and threats.

3). Marketing Research:

In addition to information about competitors and environmental happenings,

marketers often needed formal studies of special situations. In such situations, the
marketing intelligence system will not provide the detailed information needed.
Managers will need marketing research.

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 Marketing research is the systematic design, collection, analysis and reporting
of data relevant to a specific marketing situation facing an organization.

Marketing researches engage in a wide variety of activities, ranging from market

potential and market share studies, to assessments of customer satisfaction and
purchase behaviour, to studies of pricing, product, distribution and promotion
activities.

4). Information Analysis:

Information gathered by the company‘s marketing intelligence and marketing

research system often requires more analysis, and sometimes managers may need
more help to apply the information to their marketing problems and decisions. This
help may include advanced statistical analysis to learn more about both the
relationships within a set of data and their statistical reliability.

Such analysis allows managers to go beyond means and standard deviations in

the data and to answer question about markets, marketing activities and outcomes.
Information analysis might also involve a collection of analysis models that will help
marketers make better decisions. Each model represents some real system process, or
outcome.

Step3: Distributing Information

Marketing information has no value until managers use it to make better

marketing decisions. The information gathered through marketing intelligence and
marketing research must be distributed to the right marketing managers at the right
time. Most companies have centralized marketing information systems that provide
managers with regular performance reports, intelligence updates, and reports on the
results of studies. Managers need these reports for making regular planning,
implementation and control decision.

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4). FINANCIAL INFORMATION SYSTEM
Financial Information system is a computer-based information system that
works in conjunction with other functional information systems to support the firm‘s
management in solving problems that relate to financial operations and status
• It provides information to persons both inside and outside of the firm.
• Provides financial information to all financial managers within an
organization.

Structure of Financial Information System:

Databases of Databases of Financial

internal data external data DSS

Business
transactions
Transaction Databases
processing of valid
Financial
systems transactions MIS Financial
for each applications
TPS databases

Business
transactions
Financial statements
Financial
Operational ES
Internet databases Uses and management
Internetor
or of funds
Extranet
Extranet

Business Customers,
transactions Suppliers

The process begins with the customers & suppliers. All the transactions made
by the customers and suppliers are recorded in the form of business transactions. The
business transactions are connected with the internet and extranet and move to the
transaction processing system. Transaction processing system gathers the additional
day to day financial performance in the form of operational databases. All the data
that is store in the Transaction processing system is filtered by eliminating
unnecessary data and information. Hence it reaches to the Financial Information
System. The Financial information system further gets the information from internal

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company database which include all internal financial transactions and as well as
external data. Finally the financial information system provides the financial
managers with updated and fully prepared financial statements. And these provide
various helps to the financial managers in management of funds. Further other
applications like Financial Decision Support System (FDSS) which helps the mangers
in decision making and financial expert system which is also helps the managers in
predicting the future financial scenario of the organization. Hence, the financial
information system is a vital component for the decision making adopted by the
financial managers. The detailed Input and output of the financial information system
is as follows:
i). Inputs of Financial Information System:
• Strategic plan or corporate policies
– Contains major financial objectives and often projects financial needs.
• Transaction processing system (TPS)
– Important financial information collected from almost every TPS -
payroll, inventory control, order processing, accounts payable,
accounts receivable, general ledger.
– External sources
– Annual reports and financial statements of competitors and general
news items.
i). Output of the Financial Information System or Applications of Financial
Information System:
The output of the financial information includes financial subsystems which are:
a. Profit/loss and cost systems
b. Auditing
c. Internal auditing
d. External auditing
e. Uses and management of funds

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5). PRODUCTION OF MANUFACTURING INFORMATION SYSTEM
Production or Manufacturing Information System provides information to
managers throughout the firm concerning the firm‘s manufacturing operations. The
industrial engineering subsystem consists of activity by industrial engineers(IEs) who
conduct studies of the manufacturing operation to ensure its efficiency.

Flow Diagram of Production Information System:

Databases of Databases of Manufacturing

internal data external data DSS

Business
transactions
Transaction Databases
processing of valid
Manufacturing
systems transactions MIS Manufacturing
for each applications
TPS databases

Business Quality control reports

transactions
Process control reports Manufacturing
Operational ES
JIT reports
Internet databases
Internetor
or MRP reports
Extranet
Extranet
Production schedule
CAD output

Business Customers,
transactions Suppliers

14

The Production Information system begins with the transactions made by the
customers and suppliers. All the suppliers who contributed input, i.e., raw materials
to the company are recorded in the form of business transactions. The business
transactions are connected to the Transaction processing system through internet and
extranet at various locations of the production process. All the day to day transactions
which are recorded in the operational databases are also passed to the Transaction
Processing System. The Transaction processing system further divided all the data
and information in the form of useful records and it sends systematically to the
Manufacturing Management information system. The Manufacturing Management
Information system or Production management information system further collects

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the information about the internal data and as well as the external data in the form of
databases. Finally the production information system provides the useful information
to the production managers in the form of reports. These include:

1.Quality control reports (these helps in making quality assessment of the

manufactured goods).
2. JIT reports (Just-in-time (JIT) is a production strategy that strives to improve a
business' return on investment by reducing in-process inventory and associated
carrying costs.
3. MRP Reports: these are Materials requirement planning reports are the master
production schedule of raw material purchases that will enable materials to be
procured on time, reducing the cost of raw materials inventory.
4. CAD: Computer aided designs are transformed by an information system into
instructions of machines and robots.
5. Production schedules: detailed reports of the man and machine work hours and
quantity of production needed for every day.

Detailed Input and output of the Production Information System is as follows:

I). Inputs for the Production Information System:

• Strategic plan or corporate policies.

• The Transaction Processing Information System which records all the
information include:
– Order processing
– Inventory data
– Receiving and inspecting data
– Personnel data
– Production process
• External sources

II). Output of the Production Information System:

These include detailed reports which are:
• Design and engineering
• Master production scheduling

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 • Inventory control
• Manufacturing resource planning
• Just-in-time inventory and manufacturing
• Process control
• Computer-integrated manufacturing (CIM)
• Quality control and testing
6). HUMAN RESOUCE INFORMATION SYSTEM
Human Resource Information System(HRIS) is concerned with all of the activities
related to employees and potential employees of the organization. HRIS provides
information to managers throughout the firm concerning the firm‘s human resources.
The transaction processing system provides input data, as does a human resources
research subsystem that conducts special studies and a human resources intelligence
subsystem that gathers environmental data that bear on HR issues.
Flow diagram of Human Resource Information System:

Databases
Databases of Human
Human resources
resources
Databases
internal of
internal data
data Databases
Databases of
of
internal data external
external data
data
DSS

Databases
Databases
Transaction of valid
Databases
Human
Human
Business processing transactions
transactions
of valid Resource
Resource Human
Human
transactions systems for
for each
each resource
resource
transactions MIS
TPS
for each applications
applications
TPS databases
databases

Benefit
Benefit reports
reports

Human
Human resources
resources
Operational
Operational Training test scores ES
databases
databases

Training test scores

Job applicant profiles

Needs and planning

reports

18

The Human Resource Information System begins with the business

transactions which include all day to day activities of the employee of the
organization. These are recording in the Transaction information system which also
takes the help of other day to day transactions from Operational databases. These are
arranged in systematic order and are delivered to Human resource Management
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information system. The HRIS also takes the help of internal and external data of the
organization and its activities. Finally, the HRIS assist the HR managers in the form
of reports which include:
1. Benefit reports ( the reports which specify the employee output to the
company)
2. Training test scores( helps the mangers to assess the employee capabilities)
3. Job applicant profiles (to process and block the already applied applicants and
filtering of applications based on the specifications required for the
organization).
4. needs and planning reports
Apart from the HRIS also provide the managers with Human resource decision
support system and also in the form of Human resource expert system for making
future predictions about the manpower required for the organization.
The Inputs and Output of the HRIS:
The inputs for the Human Resource Information system are as follows:
• Strategic plan or corporate policies
• The TPS:
– Payroll data
– Order processing data
– Personnel data
• External sources
II). Output of HRIS:
The output subsystems of the HRIS each address a particular aspect of HR
management:
• Human resource planning or workforce planning
• Personnel selection and recruiting
• Training and skills inventory
• Scheduling and job placement
• Wage and salary administration (compensation subsystem)
• Benefits subsystem
• Environmental reporting

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 CHAPTER – IV
SYSTEMS ANALYSIS AND DESIGN

Contents of Chapter – IV:

• Systems Analysis and Design

• Development Strategies
• Structured Analysis
• Prototyping
• System Development Life Cycle-Feasibility
• Requirement Analysis-Design of the System-
Development of Software
• Implementation and Evaluation
• Systems Project Management

1. SYSTEMS ANALYSIS AND DESIGN

System analysis and design are the very important concepts and applications
of information system. The term system is generally used for group of actions,
personnel and procedures, used for processing data. System is an organized set of
related components established to accomplish certain task. It can be natural or
planned and placed by people. It consists of elements which operate together to
accomplish an objective.

I). Concept of Systems Analysis:

System analysis is one of the very important steps in system development life
cycle. System analysis is an in-depth study of end-user information requirements that
is needed before the design of a new information system.
It is an approach towards viewing the processes, activities and complex problems
in their totality. It involves:
a. The information needs of the organization and its end-users.
b. The activities, resources, and products of any present information system
c. Greater understanding of the complex structures and helps in achieving inter
compatibility and unity of purpose of subsystems.

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II). Concept of System Design:
System analysis describes what a system should do to meet the information
needs of users. The strategy specifies how the system will accomplish the objectives.
It consists of both logical and physical design activities.
Systems design is the process of defining the architecture, components,
modules, interfaces, and data for a system to satisfy specified requirements.
It consists of:
1. Logical system design (developing general specifications for how input,
processing, output storage and control activities meet the system requirements
developed in the system analysis stage).
2. Physical system design ( develop detailed specifications for user interface
products and methods, database structures, and processing and control
procedures)
3. System specifications (document and communicate the detailed specifications
of the proposed system to end users).
2). Development strategies
The development strategies of system development life cycle are well defined
and have straightforward requirements for deliverables, feedbacks and sign off.
These strategies will help in achieving the development in:
i). Physical system design (detailed design of flows and processes, preparation of
program specifications).
ii). Physical database design (design of internal scheme for data in database of design
of files).
iii). Program development (coding and testing of computer programs).
iv). Procedure development (design of procedures and preparation of user
instructions).

3). STRUCTURED ANALYSIS

Structured analysis is a set of techniques and graphical tools used by the

analyst for applying a systematic approach to systems analysis. Structured analysis
uses graphical tools such as Data Flow diagram, data dictionary, structured English,

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Decision tree, and decision tables. The outcome of structured analysis is a new
document, called system specifications, which provides the basis for design and
implementation. It facilitates complete understanding of the system, its data
structures and its processes and thus reduces time and errors in later system
development phase.
It consists of:
Logical Data Modeling
– This is the process of identifying, modeling and documenting the data
requirements of the system being designed. The data are separated into
entities (things about which a business needs to record information)
and relationships (the associations between the entities).
Data Flow Modeling
– This is the process of identifying, modeling and documenting how data
moves around an information system. Data Flow Modeling examines
processes (activities that transform data from one form to another),
data stores (the holding areas for data), external entities (what sends
data into a system or receives data from a system), and data flows
(routes by which data can flow).
Entity Behavior Modeling
– This is the process of identifying, modeling and documenting the
events that affect each entity and the sequence in which these events
occur.

4). PROTOTYPING
Prototyping is the process of building a model of a system. In terms of an
information system, prototypes are employed to help system designers build an
information system that is intuitive (spontaneously derived) and easy to manipulate
for end users. Prototyping is an iterative process that is part of the analysis phase of
the systems development life cycle.

Advantages of Prototyping
• Reduces development time.
• Reduces development costs.

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 • Requires user involvement.
• Developers receive quantifiable user feedback.
• Facilitates system implementation since users know what to expect.
• Results in higher user satisfaction.
• Exposes developers to potential future system enhancements.

Disadvantages of Prototyping
• Can lead to insufficient analysis.
• Can cause systems to be left unfinished and/or implemented before they are
ready.
• Sometimes leads to incomplete documentation.
5). SYSTEM DEVELOPMENT LIFE CYCLE
―System Development‖ refers to the process of examining a business
situation, with the intent of improving it, through better procedures and methods.

System Development is having two major components in it

• System Analysis – Analysis of current system for Problems & Demerits in it
and Additional requirements in new system
• System Design – Process of planning new system which will replace the old
one

Systems Development Life Cycle (SDLC) is a process used by a systems

analyst to develop an information system, including requirements, validation, training,
and user (stakeholder) ownership. Any SDLC should result in a high quality system
that meets or exceeds customer expectations, reaches completion within time and cost
estimates, works effectively and efficiently in the current and planned
Information infrastructure, and is inexpensive to maintain and cost-effective to
enhance.
The steps in System development life cycle are:
1. Systems Investigation
– Identify problems or opportunities which includes feasible study and
feasibility report
2. Systems Analysis

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 – How can we solve the problem
3. Systems Design
a. Select and plan the best solution
4. Systems Implementation
a. Place solution into effect
5. Systems Maintenance and Review through system evaluation
a. Evaluate the results of the solution
Step1: System Investigation:
In this first step, the system development life cycle begins with system
investigation. System investigation is adopted to study the problems and
opportunities for the organization. These include study of feasibility and feasibility
reports.
Feasibility study is concerned with determining the cost effectiveness of
various alternatives in the designs of the information system and the priorities among
the various system components. The feasibility study is used to determine if the
project should get the go-ahead. If the project is to proceed, the feasibility study will
produce a project plan and budget estimates for the future stages of development.
Evaluation of alternative systems through cost and benefit analysis:
• Technical Feasibility: Hardware and software availability, Technical
Guarantee of Accuracy, Reliability, Easy to Access, Data security, technical
capacity to hold data and future expansion.
• Economical Feasibility: Evaluation of cost & Benefits expected.
• Operational Feasibility: Finding views of workers, employees, customers &
suppliers about the use of new system.
• Schedule Feasibility: Estimation of time to take new system to become
operational.
• Legal feasibility: Testing whether new system will comply financial reporting
requirements & Company‘s contractual obligations.

Step2: System Analysis

System analysis is an in-depth study of end-user information requirements that
is needed before the design of a new information system.

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 It is an approach towards viewing the processes, activities and complex problems
in their totality. It involves:
a). The information needs of the organization and its end-users.
b). The activities, resources, and products of any present information system
c). Greater understanding of the complex structures and helps in achieving inter
compatibility and unity of purpose of subsystems.

In this step, the following activities are made. They are:

• Data Collection
– Strengths/Weaknesses of existing system
• Data Analysis
– Turning data into information
• Requirements Analysis
– Identifying needs

Step3: System design

Systems design is the process of defining the architecture, components,
modules, interfaces, and data for a system to satisfy specified requirements.
It consists of:
 Logical system design (developing general specifications for how input,
processing, output storage and control activities meet the system requirements
developed in the system analysis stage).
 Physical system design ( develop detailed specifications for user interface
products and methods, database structures, and processing and control
procedures)
 System specifications or design alternatives (document and communicate the
detailed specifications of the proposed system to end users).
 Evaluating and Selecting a Design

Step4: Systems Implementation

In this step, the implementation process is adopted. Based on the last step, the
best design that can be used for the purpose of organizational needs is implemented.
The various considerations made in this particular step are:

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 1. Hardware/Software Acquisition
2. User Preparation
3. Hiring and Training Personnel
4. Site Preparation
5. Data Preparation
6. Installation
7. Testing
8. Startup
9. User Acceptance
Step5: System Evaluation
In this step, the maintenance and the performance review is measured by
checking the functioning of the system implementation. analysis of satisfaction of
users are performed to check whether system is operating properly or whether
objectives of system development is achieved or not, is the most important function in
whole system development process.
This is also important for development of new system in future since each
development gives some experiences and lists some things to be taken care off.
Post implementation evaluation includes following area:
 Development evaluation: check whether development was done within
schedule and budgets.
 Operation evaluation: check whether system is capable for handling
the duties and objective of development is achieved
 Information evaluation: check satisfaction of users etc.

Suggestions for successful system development

The following suggestions will benefit the successful system development.
They are:
• Clearly defined goals and objectives
• Top management support
• User involvement in all stages
• Change management
• Training Programs

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6). Systems project management
Information Systems Project Management operates from the assumption that
organizational project management is a complex team-based activity, and that various
types of technologies are an inherent part of the project management process.

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 CHAPTER – V
ORGANIZATION OF INFORMATION SYSTEM

Contents of Chapter – V:

• Organisation of Information System

• Centralized, Decentralized and Distributed Processing
• Role and Responsibilities of Information Systems
Professionals
• Security and Ethical Issues in Information Systems
• Risks, Controls and Threats

1. ORGANIZATION OF INFORMATION SYSTEM.

Organizations have grown in complexity to levels which are unprecedented
and information plays a vital role in holding together and coordinating organizations.
Information is the mortar that holds together the edifice of the modern multi-product,
multi-division, multi location organizations. The role of MIS very important to the
organization as information occupied and is very vital for every organizational
activity.
MIS helps the management of organization at various levels and it is a means
of communication where data are collected, processed, stored and retrieved later for
making decisions regarding planning, operation and control of an organization.
Decision-making is an important requirement in every organization, where in there
are different types of information obtained from different functional areas of
management like finance, marketing, production, personnel, planning and control etc.

Each of the levels of an organization needs information systems. The specific

needs vary from level to level. But the general functions served by information
systems remain same across all the three levels of organization. A well defined
organizational management information system integrates the operations of several
departments into a single organization.

The use of information systems to add value to the organization is strongly

influenced by organizational structure, culture, and change. And further the

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organizations need to identify the value added process in supply chain and describe
the role of information systems. And thus, this practice leads to good benefits to the
organization. Before using information systems, the organization should clearly
define its structure, organizational culture and changes need to be implemented. The
clarity of the input will result into a great benefit from the information systems.
Information systems are so important, hence, business organizations need to
be sure that improvements or completely new systems help lower costs, increase
profits, improve service, or achieve a competitive advantage. Further, the information
system can give competitive advantage to the organizations and at present,
organizations are relying upon the information systems. With out the proper
information systems, organizations cannot implement its strategies and finally the
information system can benefit the organizations with qualitative needed services.

2). CENTRALIZED, DECENTRALIZED AND DISTRIBUTED PROCESSING

Different types of system development methodologies are used in designing

information system. Depending upon the actual requirement of the system, different
approaches for data processing are adopted. However, some system groups
recommends the Centralised data processing system while others may go in for
distributed data processing system. In a Centralised data processing, one or more
centralized computers are used for processing and the retrieval of information is done
from them. The distributed processing systems involve number of computers located
remotely in the branches/departments of the organisation. The client/server
technologies are also gaining popularity these days.

i). Centralised information processing system

With the increasing use of computer based data processing, there has been a
growing tendency in the minds of management to centralize the data processing
activities. A separate department EDP (Electronic Data Processing) department is
established to carry out the data processing work of different department in the
organisation. Many a times the data processing is also done by hiring the services of
the out side agencies and with the passage of time and experience in-house set is
developed for data-processing.

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The centralised data processing system provides the following benefits:

 The emergence of data takes place only at one place.

 The loss of data is minimised.
 The methods and machines can be standardized.
 Services of more competent and technical personnel can be taken.
 It is also very cost-effective particularly in the case of large operations.
 Duplication of work can be avoided.

The disadvantages are:

 Lack of cooperation from managers, who do not like to be under control of

centralised Data Processing department.
 Resistance from managers for mechanising the data processing activities
relating to their various functions.
 It is difficult to provide equitable services to various departments.
 The data security is also questioned.

The centralised information system is useful in the following cases:

 Information is very complex, or highly structured.

 There are legal issues surrounding the release of the information.

 Information is commercially-sensitive.

 A very high writing standard is required.

 The information must be ‗distilled‘ from many different sources into a brief
format.

 Overall structure and consistency is required.

 Content is to be published externally.

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ii). Decentralised Data Processing System

In the decentralized data processing system, there is really a divisional

breakdown of computing services. Each division, unit or department handles its own
computer needs and does not like to interact with any other division, unit or
department. It is well suited to a decentralized management scheme in which
organizational autonomy is important. For example, research divisions of large
organisation may adopt the decentralized data processing approach to provide data
security of their work

Decentralized information data processing includes the following advantages:

 Familiarity with local problems.

 Rapid response to local processing needs
 Profit-and-loss responsibility can be easily fixed

The drawbacks of the decentralized data processing system are:

 There is duplication of activities and redundancy in the maintenance of files.

 It is difficult to maintain uniformity in the procedures throughout the
organisation.
 The overall cost of the data processing for the organisation is more.

iii). Distributed Information processing System

There are opinion that development of an integrated information system is embodied

with several practical problems and therefore, not feasible. This view has been
reinforce by the failure of integrated systems in various large organizations. The
concept of a distributed information system has emerged as an alternative to the
integrated information system. In the distributed information system, there are
information sub-systems that form islands of information systems. The distributed
information system aims at establishing relatively independent sub-systems, which
are, however, connected through communication interfaces.

Following are the advantages of the distributed information system:

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  The processing equipment as well as database are dispersed, bringing them
closer to the users.
 It does not involve huge initial investment as is required in an integrated
system.
 It is more flexible and changes can be easily taken care of as per user's
requirements.
 The problem of data security and control can be handled more easily than in
an integrated system.
 There is no need of standby facilities because equipment breakdowns are not
as calamitous as in an integrated system.

The drawbacks of the distributed system are:

 It does not eliminate duplication of activities and redundancy in maintaining

files.
 Coordination of activities becomes a problem.
 It needs more channels of communication than in an integrated system.

3). ROLE AND RESPONSIBILITIES OF INFORMATION SYSTEM

PROFESSIONALS

The traditional role of the IP working in an information center (IC) was to

identify, collect, organize, synthesize, repackage, and distribute information for both
internal and external consumption. The Web allowed the merger of business
management and information management, thereby integrating systems and providing
end-users with easy access to personal and shared information. The traditional
mission of an MIS department was to provide technology-oriented support to business
endeavors.

The role of information system professionals is vital in implementing the

information system in organizations. The success of the using information system is
strongly depend on the ability of the information system professionals. The
information system professionals may be the experts in the department who works in
co-ordination with the requirements of the managers or the information system

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professionals may be the professionals from IT back ground. Gathering information,
analyzing it and report it to the organizational members are the main jobs of
information system professionals. The information system professionals act as
mediators between management information system and the users of the MIS. The
information system professionals provide the following support to the organizations.

They are:
• Supporting the goals of the organization.
• Collecting and storing large structured data sets.
• Building and maintaining reliable and secure systems.
• Providing data reports for internal customers to support decision making.
• Providing selective access to information (easily anticipated, well-defined
reports).
• Providing information resources and services to meet the demands and needs
of stakeholders.
• Purchasing, acquiring, and providing access to materials and resources.
• Educating stakeholders, as needed, on the proper use of materials and
information systems.
• Collecting, preserving, storing, and cataloging materials.
• Working with the IT department to provide database services.
Apart from this, some of the other major roles of the business applications
provided by the information system professional include:
1. Support business processes – involves dealing with information systems that
support the business processes and operations in a business.
2. Support Decision Making – help decision makers to make better decisions and
attempt to gain a competitive advantage.
3. Support Competitive Advantage – help decision makers to gain a strategic
advantage over competitors requires innovative use of information technology.

4). SECURITY AND ETHICAL ISSUES IN INFORMATION SYSTEMS

• Security is the protection of both physical and conceptual resources from
natural and human hazards.

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 • Ethics: Principles of right and wrong that can be used by individuals acting as
free moral agents to make choices to guide their behavior

Information security means protecting information and information systems from

unauthorized access, use, disclosure, disruption, modification, perusal, inspection,
recording or destruction.

The terms information security, computer security and information

assurance are frequently incorrectly used interchangeably. These fields are
interrelated often and share the common goals of protecting
the confidentiality, integrity and availability of information; however, there are some
subtle differences between them.

Relationship between ethical, social and political issues:

1. Information rights
2. Property rights
3. Intellectual property rights (Trade secret, copy right, patent law)

4). SECURITY AND RISKS IN INFORMATION SYSTEMS

Some of the security risks which are faced by the organizations in maintaining
the information system include:

1. Security – (protection of computer resources)

2. Hardware – (failure of projection mechanisms)
3. Software – Failure of protection mechanisms, info. Leakage, logic bombs
4. People - Terminal user, fraudulent identification, software piracy, installing
insecure systems, disasting security mechanisms
5. Data – Terminal/workstation, unauthorized database access, theft, copying data,
6. External – natural disaster, computer censor, hackers, radiation, computer uses
from external networks etc.

THREATS TO INFORMATION SYSTEMS

The information systems are suffered with the following threats.
They are:
• Loss, theft or corruption of data
• Inappropriate use of data ( manipulating inputs)
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 • Theft of mainframe computer crime
• Theft of equipment and/or programs
• Errors in handling, entering, processing, transferring or programming of data
• Equipment malfunctions
• Accidental or malicious damage to computer resources
• Destruction from viruses and similar attacks.
– Identifying needs

THREATS

Environmental
Human errors Computer errors
errors

Earth quakes
Severe storms
Floods
During programming
Tornado
testing, Computer abuse
Power failures
data collection Computer crime
Fires
Data entry,
Water cooling system
Authorization
Smoke, heat etc.
instructions

5). ACTIONS AND CONTROL OF THREATS

The information system professionals and the organizations can implement actions
and control mechanism in order to overcome from the risk and threat factors. They
include:

• Information rights and obligations

• Keeping a special view on Property rights and obligations
• Ensuring and taking care about System quality

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 • Quality of work life maintained in each and every department and its
concerned information systems.
• Maintaining proper Accountability and control

Other actions include:

1. Hiring the information specialists and professionals carefully
2. Monitoring malcontents that arise because of threats and risks in the
information system
3. Separating employee functions and restricting the employees to work in their
specified locations and sections only.
4. Protecting resources with passwords or access cards
5. Monitoring system transactions
6. Conducting frequent audits
7. Educating people in security measures
8. Consideration of ethics and training companies
9. Disguising data or programs in coded form through encryption

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