CHAPTER-ONE

INTRODUCTION TO MIS
MIS CONCEPTS AND DEFINITIONS

Information is the basis for every decision taken in an organization. The efficiency of management depends
upon the availability of regular and relevant information. Thus it is essential that an effective and efficient
reporting system be developed as part of accounting system. The main object of management information is
to obtain the required about the operating results of an organization regularly in order to use them for future
planning and control.

The old techniques like intuition, rule of thumb, personal whim and prestige, etc. are now considered useless
in the process of decision taking. Modern management is constantly on lookout for such quantitative and
such information, which can help in analyzing the proposed alternative actions and choosing one as its
decision. Thus, modern management functions are information-oriented more popularly known as
―management by information‖. And the system through which information is communicated to the
management is known as ―management information system (MIS)”. The management needs full information
before taking any decision. Good decisions can minimize costs and optimize results. Management
information system can be helpful to the management in undertaking management decisions smoothly and
effectively.

DEFINITION OF MIS

It is combination of three words i.e. Management, Information and System. To better understand the concept
MIS, we will try to understand these three words.

MANAGEMENT

Management is the process of allocating an organization's inputs, including human and economic resources,
by planning, organizing, directing, and controlling for the purpose of producing goods or services desired by
customers so that organizational objectives are accomplished. If management has knowledge of the planning,
organizing, directing, and controlling of the business, its decisions can be made on the basis of facts, realities
and decisions are more accurate and timely as a result.

Management is art of getting things done through and with the people in formally organized groups. The
basic functions performed by a manager in an organization are: Planning, controlling, staffing, organizing,
and directing.

Information: Information is considered as valuable component of an organization. Information is data that is

processed and is presented in a form which assists decision maker.
 Data Processin Informatio
g n
Figure 1: Information Generation
System: A system is defined as a set of elements which are joined together to achieve a common objective.
The elements are interrelated and interdependent. Thus every system is said to be composed of subsystems.
A system has one or multiple inputs, these inputs are processed through a transformation process to convert
these input(s) to output.
These subsystems are interrelated through a process of a system:
Input - Throughout - Output

Input Transformatio Outpu

n Process t

Figure 2: A system
DEFINITION
MANAGEMENT INFORMATION SYSTEM (MIS)

After discussing the three components of MIS, now we shall try to understand its definition. While
discussing the components: Management, Information and System, it has been cleared that decision making
is an important part of managerial functions. For taking adequate decisions, Management Information (MI) is
necessary as it works as a vital input.
'MIS' is a planned system of collecting, storing and disseminating data in the form of information needed
to carry out the functions of management.”
A system which consists of people, machines, procedures, databases and data models as its components is
known as Management Information System. This system collects data from external and internal sources of
an organization, analyzes it and supplies management information to managers and helps them in making
decisions.
Management Information Systems (MIS), referred to as Information Management and Systems, is the
discipline covering the application of people, technologies, and procedures collectively called information
systems, to solving business problems.
Academically, the term is commonly used to refer to the group of information management methods tied to
the automation or support for human decision making, e.g. Decision Support Systems, Expert Systems, and
Executive Information Systems.
IT AND MIS /IS
Information Technology (IT) is sometimes called as a technological side of an information system/MIS,
which includes hardware, software, networks and other devices. In other words, IT is a sub-system of an
information system/MIS.

FUNCTIONS OF MIS

According to Milind Gandhi MIS is set up by an organization with the prime objective to obtain
management information to be used by its managers in decision making. Thus, MIS must perform the
following functions in order to meet its objectives.

i. Data Capturing: MIS captures data from various internal and external sources of an organization.
Data capturing may be manual or through computer terminals. End users typically, record data about
transactions on some physical medium, such as a paper form, or enter it directly into a computer
system.
ii. Processing of Data: The captured data is processed to convert it into the required management
information. Processing of data is done by such activities as calculating, comparing, sorting,
classifying and summarizing. These activities organize, analyze, and manipulate data using various
statistical, mathematical, operations research and other business models.
iii. Storage of Information: MIS stores processed or unprocessed data for future use. If any information
is not immediately required, it is saved as an organizational record. In this activity, data and
information are retained in an organized manner for later use. Stored data is commonly organized into
fields, records, files and databases.
iv. Retrieval of Information: MIS retrieves information from its stores as and when required by various
users. As per the requirements of management users, the retrieved information is either disseminated
as such or it is processed again to meet the exact MI demands.
v. Dissemination of MIS: Management Information, which is a finished product of MIS, is
disseminated to the users in the organization.

Source user

Data Data Disseminatio

capturin n
Processing
g
 Retriev
al

Storag
e of

Figure 3: Functions of MIS

CHARACTERISTICS OF MIS

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

USES OF MIS FOR A BUSINESS ORGANIZATION

Support the Business Process: Treats inputs as a request from the customer andoutputs as services to
customer. Supports current operations and use the systemto influence further way of working.
Support Operation of a Business Organization: MIS supports operations of abusiness organization by
giving timely information, maintenance andenhancement which provides flexibility in the operation of
organizations.
To Support Decision Making: MIS supports the decision making by employeein their daily operations. MIS
also supports managers in decision making tomeet the goals and objectives of the organization. Different
mathematical modelsand IT tools are used for the purpose evolving strategies to meet competitiveneeds.
Strategies for an Organization: Today each business is running in a competitivemarket. MIS supports the
organization to evolve appropriate strategies for thebusiness to assent in a competitive environment.

FACTORS RESPONSIBLE FOR THE DEVELOPMENT OF MIS

Factors Responsible for the development of MIS are numerous and have been prime concern for many
Researchers and Practitioners. Both Internal and external factors must be taken into account when trying to
understand and organization‘s criteria for deciding about technology. The following are the factors which are
responsible for development of MIS:
1. External
2. Internal
External Factors: External Factors are conditions that exist in organization‘s external environment. The
factors can be found at the industry level or in national policies.
i) Industry level: At the industry level, we are looking at characteristics as degree of diffusion of certain
technologies, the availability of external know-how, for example, technology suppliers, the degree of
innovativeness of the industry, the requirements imposed by major customers and external markets and
overall levels of competition and technology sophistication in the industry.
ii) National Policies: For the external factors the national policies also affect the organization that indirectly
affects the subsystems of the organization.
Internal Factors: Internal factors internal of the firm that may affect the development of MIS can be
grouped into three categories:
i) Past Experience with Technology: The organizations past experience about the technology in terms of
exposure and organizational learning ultimately affects its future in developing technology.
ii) Organizational Characteristics: An organization‘s characteristic like size, influence the adoption of MIS
application in organization. The adoption of certain technologies may appear more appropriate for the larger
firms because of the large capital investments and the skilled human resources involve in the implementation
and operation of such technologies. Smaller firms are less affected by organizational inertia and they show a
greater degree of involvement of organizational member‘s especially topmanagement during implementation.
Ready to use software and less expensive equipment‘s of MIS application are more attractive to smaller
firms.
iii) Organizational Pursued strategy: Internal factors deal with the organizations pursued strategy on both
orientation and technology policy.
An organization‘s strategy reflects its action with market and technology, which ultimately modify its
experience and consequently its overall characteristics and capabilities. The need for a strong technology has
beenadvocated by a number of authors and investments in MIS should therefore be closely aligned with
overall corporate strategy.
Other Factors:
i) Customer Satisfaction: Development of MIS is affected by customer satisfaction. Customer of the
services should be satisfied by the presented system.
ii) Effective: Development should be effective in terms of organizational benefit &user satisfaction.
iii) Efficient: Development should use small resources, organization valuesefficiently.

ESSENTIAL REQUIREMENT OF AN EFFECTIVE MIS

(i) Qualified System and Management Staff: The prerequisite of an effectiveMIS is that it should be
managed by qualified officers. These officersshould have a mutual understanding about the roles and
responsibilities ofeach other and be understand clearly the view of their fellow officers. Forthis, each
organization should have two categories of officers
(a) System and Computer Experts who in addition to their expertise intheir subject area , they should also
be capable of understandingmanagement concepts to facilitate the understanding of problems asked by
concern. They should also be clear about the process of decision making and information requirements for
planning.
(b) Management experts who should also understand quite-clearly the concepts and operations of a
computer. This basic knowledge ofcomputer will be useful will place them in a comfortable position,while
working with systems, technicians in designing or otherwise,of the information system.
(ii) Futuristic Perspective: An effective MIS should be capable of meeting thefuture requirements of its
executives as well. This capability can beachieved by regular monitoring and updating the MIS.
(iii) Support of Top Management: For a management information system tobe effective, it must receive the
full support of top management. TheReasons for this are:
(a) Subordinate managers are usually lethargic about activities whichdo not receive the support of their
superiors.
(b) The resources involved in computer based information system arelarger and are growing larger and larger
in view of importancegained by management information system.
(iv)Common Database:It is an integrated collection of data and informationwhich is utilized by several
information subsystems of an organization. Acommon database may be defined as a super file which
consolidates andintegrates data records formerly stored in a separate data file. Such adatabase can be
organized as an integrated collection of data records into asingle super file or it can be organized as an
integrated collection of severaldata file.
(v) Control and maintenance of MIS: Control of the MIS means the operationof the system as it was
designed to operate. Sometimes, users developtheir own procedures or short cut methods to use the system
whichreduces its effectiveness.
 CHAPTER-2
FOUNDATIONAL CONCEPTS OF MIS
2.1 The emerging roles of IS in Business Management early

Electronic Business and Commerce: 1990s-2000s

Internet based e-business and e- commerce systems
Web-enables enterprise and global e-business operations and electronic commerce on the
internet, intranets, extranets, and other networks
Strategic and End user Support: 1980s-1990s
End user computing systems
Direct computing support for end user productivity and work group collaboration
Executive Information Systems
Critical information for top management
Expert systems
Knowledge- based expert advice for end users
Strategic Information systems
Strategic products and services for competitive advantage
Decision Support: 1970s-1980s
Decision support systems
Interactive adhoc support of the managerial decision making process

Management Reporting: 1960s-1970s

Management Information Systems
Management reports of pre specified information to support decision making
Data Processing: 1950s-1960s
Electronic data processing systems
Transaction Processing , record keeping, and traditional accounting applications

Components of BIS

In an organization, information systems consist of the following components. These components will
formulate a system, which will help us to gather the required information for making decision in various
levels of management. We will now see these components in brief and discuss them in detail in the later
lectures.

Data - Input that the system takes to produce information

Hardware - Is a set of devices such as processor, monitor, keyboard and printers that accepts data and
information process then and display them. Computer itself and its peripheral equipment: input, output,
storage devices; includes data communication equipment

Software - is a set of programs that enable the hardware to process data. Sets of instructions that tell the
computer how to input, process, output and store data
Communication networks - is a connecting system that permits the sharing of resources by different
computer. Hardware and software specializing in transmission and reception of electronic data

People - are those individual who work with the system or use its output. IS professionals and users who
design, construct, operate and maintain IS

Procedures - are the set of instructions about how to combine the above components in order to process
information and generate the desired output. Rules to process data, e.g. priorities in running different
applications, security measures, and routines for malfunctioning IS, etc.

Database: is a collection of related files, table‘s relation, and so on, that stores data and the associations
among them.

Technology: that computer networks are systems of information processing components that use a variety of
hardware, software, data management, and telecommunications network technologies.
Input: involves capturing and assembling elements that enter the system to be process ex: raw material

Output: Involves transforming elements that have been produced by transformation process to their ultimate
destination. Ex: finished products

Processing: Involves transformation process that convert in to output ex: Manufacturing process.

Feedback: is data about the performance of a system ex: sales performance is feedback to a sales manager.

Control: Involves monitoring and evaluating feedback to determine whether a system is moving toward the
achievement of its goal. The control function then makes necessary adjustment to systems input and
processing components to ensure that it produces proper output.

Information System Model

This model provides a conceptual framework that emphasizes four major concepts that can be applied to all
types of information systems.

 People, hardware, software, and data are the four basic resources of information systems.
 People resources include end users and IS specialists, hardware resources include machines and
media, software resources include both programs and procedures, data resources include data,
model, and knowledge bases
 Data resources are transformed by information processing activities into a variety of information
products for end users.
 Information processing consists of input, processing, output, storage, and control activities.

The following diagram illustrates the information system model.

 Control of system performance

Input of Processin Output of

Data Of data Data
Resource resources Resource

Storage of Data

Information System Resources

Every Information System is equipped with the following resources. The goals of information systems can be
easily achieved by employing these resources to their optimum level by keeping in view that the purpose of
using IS in an organization.

• People Resources

 End users
 IS specialists

• Hardware Resources

 Machines
 Media

• Software Resources

Program
Operating Systems (OS)

Examples: Windows, Unix, etc.

Application Software

Examples: Excel, Access, MS-Word, etc.

Application software that makes people buy computers that can run the software.

Example 1: Lotus 1-2-3 (a spreadsheet program): In early 1980s, personal computer market was dominated
by Apple (about 90% Apple, about 10 % IBM and its compatibles); Lotus 1-2-3 was introduced and it could
be run on only IBM's MS-DOS operating system; Companies all over the world were impressed with Lotus
1-2-3, and wish to use the software. In order to run the software, they had to purchase IBM PC or IBM PC
compatibles that run on MS-DOS.

Example 2: email system. To use an email system (software), people buy computers.

Procedures:

Operating instructions for the people who will use an information system

Examples: Instructions for filling out a paper form or using a software package.

• Data Resources:

Data vs. Information

Data: Raw facts, observations, business transactions

Objective measurements of the attributes (characteristics) of entities (people, places, things, events, etc.)
Attributes can be last name, first name, gender, etc. for an entity of "people."

Information:

Data that have been converted into a meaningful and useful context for specific end users

Processed data placed in a context that gives it value for specific end users.

1. Its form is aggregated, manipulated, and organized.

2. Its content is analyzed and evaluated.

3. It is placed in a proper context for a human user.

• Network Resources:

 Communications media
 Communications processors
 Network access & control software
 Information system Resources and Products
People Resources Specialists--system analyst, software developers, system
operators.
End Users--Anyone else who uses information systems
Hardware Resources Machines—computers, video monitors, magnetic disk drivers,
printers, optical scanners
Media—floppy disks, magnetic tapes, optical disks, paper forms.
Software Resources Programs—operating system programs, spreadsheets programs,
word processing programs, payroll programs.
Procedures—data entry procedures, error correction procedures,
pay check distribution procedures
Data Resources Product descriptions, customer records, employee files, inventory
databases
Network Resources Communication media, communication processors, network
access and control software.
Information Products Management reports and business documents using text and
graphics displays, audio responses, and paper forms.

Data, Information, Knowledge, and Wisdom

Let us consider the case of a retail store that is trying to increase sales. Some of the data available includes
sales levels for the last 36 months, advertising expenses, and customer comments from surveys. By itself,
this data may be interesting, but it must be organized and analyzed to be useful in making a decision. For
example, a manager might use economic and marketing models to forecast patterns and determine
relationships among various advertising expenses and sales.
The resulting information (presented in equations, charts, and tables) would clarify relationships among the
data and would be used to decide how to proceed It requires knowledge to determine how to analyze data and
make decisions.
Education and experience create knowledge in humans. A manager learns which data to collect, the proper
models to apply, and ways to analyze results for making better decisions. In some cases, this knowledge can
be transferred to specialized computer programs (expert systems).
Wisdom is more difficult to define but represents the ability to learn from experience and adapt to changing
conditions. In this example, wisdom would enable a manager to spot trends, identify potential problems, and
develop new techniques to analyze the data.

These 3 terms especially data and information are often used interchangeably. Data, information, and
knowledge` can be inputs to an information sytem; they can also be outputs.

Contemporary Approaches to Information Systems

Although information systems are a collection of electrical and mechanical devices, they require the
organization, and the people that work within the organization for them to be successful.

1. Technical Approach

The technical approach uses mathematical models to test the capabilities of information systems.

These disciplines include:

• Computer Science - concerned with methods of computability, computation, and data storage and access.
• Management Science - emphasized the development of models for decision making, and management
practices.
 Operations Research - focuses on mathematical techniques for optimizing selected parameters of
organizations.(inventory control, transaction costs).
 Think of this analogy: A "techie" looks at most things associated with computing as a series of zeroes or
ones. After all, everything in a computer is ultimately reduced to a zero or a one. So using the technical
approach, you could say that 2 + 2 = 4.
2. Behavioural Approach

• Deals with behavioural issues that arise in the development, and long term maintenance of the information
system.

• Different disciplines, such as psychologists, sociologists, Economists, study information systems, and the
impacts they have in the organizational environment. Behavioural changes can occur within the organization
during, and after information system development. The key to this approach is to find the solution to the
behaviour, which is not a technical issue.

 The behavioural approach, takes into account the very nature of human beings. Nothing is totally black
and white. Therefore the behavioural approach to the same equation would be "2 + 2 = maybe 4 or perhaps
3.5 to 5.5, but we'll have to put it before the committee and see what the next quarter's figures say."
 3. Socio technical approach
 Neither approach is better than the other, depending on the situation. Neither approach is more right than
the other, depending on the situation.

 An organization can't afford to view its information resources as belonging to either the techies (technical
approach) or the non-techies (behavioural approach). Responsibility for information belongs to everyone
in the organization. This is the socio technical approach, that is, a combination of the two. Everyone has
to work together to ensure that Information Systems serve the entire organization.

 Information Systems and the use of technology belong to everyone in an organization. This concept is
best carried out through a socio technical approach, which allows both the technical and behavioural
approaches to be combined for the good of the organization.

Systems and Sub Systems

Systems may consist of numerous subsystems, each of which has elements, interactions, and objectives.
Subsystems perform specialized tasks related to the overall objectives of the total system. For example, an
educational system may consist of individual courses that are subsystems. Each course provides specific
knowledge that is a part of the overall educational system and contributes to its goals.

Two approaches to define subsystem

 Organisational Function Subsystem: Supports the various functions of an Organisation. Ex.

Marketing, Production, Personnel etc.
 Activity Subsystem: Supports the activity for which they are used. Ex. Transactions, Operations etc
1. Organisational Function Subsystems

Major Functional Subsystems are some Uses Marketing Information System --Sales forecasting, Sales
planning, Sales analysis Manufacturing Information System Production planning & scheduling, cost control
analysis Personnel Information System Salary Administration, Planning HR requirement, performance
analysis, Accounting Information System, Financial Analysis, cost analysis, Capital planning, etc. Logistics
Information System Planning & control of Purchasing, inventories, distribution Information Processing
System, Planning of Information System, cost – effectiveness analysis, Top Management System, Strategic
Planning, resource allocation.

2. Activities Subsystems
Activity Subsystems Some Uses Transaction Processing System-- Processing of orders, shipments, &
receipts Operational Control System Scheduling of activities and performance reports Management Control
System Formulation of Budgets & resource allocation Strategic Planning System Formulation of Objectives
& strategic plan

Types of Information Systems

I. Operations Support Systems

TRANSACTION PROCESSING SYSTEMS

 Transaction processing systems record and process data resulting for business transactions.
 Typically examples are information systems that process sales, purchases, and inventory changes.
 These can be processed and used by management information systems, decision support systems, and
executive information systems.

PROCESS CONTROL SYSTEMS

 Operation support systems also make routine decisions that control operational processes.
 Examples are automatic inventory reorder decisions and production control decisions.

ENTERPRISE COLLABORATION SYSTEMS

 Enterprise collaboration systems are information systems that use a variety of information
technologies to help people work together.
 Enterprise collaboration systems help us collaborate to communicate ides, share resources, and
coordinate our cooperative work efforts as members of the many formal and informal process and
project teams and other workgroups.

II. Management Support Systems

MANAGEMENT INFORMATION SYSTEMS:

 Management information systems (MIS) are the most common form of management support
systems.
 They provide managerial end users with information that support much of their day-to-day decision-
making needs.
 MIS provides a variety of reports and displays to management.
 DECISION SUPPORT SYSTEMS:

 A natural progression from information reporting systems and transaction processing systems.
 Decision support systems are interactive, computer-based information systems that use decision
models and specialized database to assist the decision making process of managerial end users.

EXECUTIVE INFORMATION SYSTEMS:

 EIS are management information systems tailored to the strategic information needs of top
management.

 Top executives get the information they need from many sources, including letters, memos,
periodicals, and reports produced manually as well as by computer systems.

III. Other category of Information Systems

1. Expert Systems
2. Knowledge Base Information Systems
3. Strategic Information Systems
4. Functional Business Systems
Frame work of Information System

The field of information system encompasses many complex technologies, abstracted behavioural concepts,
and specialized applications in countless business and non-business areas. It is better to know a useful
conceptual framework that organized the knowledge presented in this text and outlines what you need to
know about information system. It emphasises that you should concentrate your efforts in the five areas of IS
knowledge.

 Foundation Concepts:
o This Describes Fundamental behavioural, technical business and managerial concepts about the
components and roles of information systems. Examples include basic information system concepts
derived from general systems theory, or competitive strategy concepts used to develop business
applications of information technology for competitive advantage.
 Information Technology:
o Major concepts developments and management issues in information technology-that is, hardware,
software, networks, data management and many inter-based technologies
 Business applications:
o The major uses of information systems is for the operations, management, and competitive advantage of
a business, Thus applications of information technology in the functional areas of business like
marketing, manufacturing, and accounting. Cross functional enterprise resource planning, electronic
commerce application and use of information systems and technologies to support decision making in
business.
 Development processes:
o How business professional and information specialist plan, develop, and information system to meet
business opportunities, Several developmental methodologies are explored including the system
development life cycle and prototyping approaches to business application development.
 Management Challenges:

The challenges of effectively and ethically managing information technologies at the end user, enterprises,
and global levels of a business, thus security challenges and security management issues in the use of
information technology, and some of the key methods business managers can use to manage the information
system function in a company with global business operations.

The role of e-Business in Business

The internet and related technologies and applications have changed the way businesses are operated and
people work, and how information systems support business processes, decision making, and competitive
advantage. Thus, many businesses today are using Internet technologies to web-enabled business processes
and create innovative e-business applications.

E-Business: Use of internet technologies to work and empower business processes, electronic commerce,
and enterprise collaboration within a company and with its customers, suppliers, and other business
stakeholders.

In essence e-business can be more generally considered an online exchange of value. Any online exchange of
information, money, resources, services, or any combination thereof, falls under the e-business umbrella.
Most of the companies rely on e-business applications to;

1. Reengineer internal business processes.

2. Implement electronic commerce with their customers and suppliers, and
3. Promote enterprise collaboration among business teams and workgroups.

Enterprise Collaboration Systems involves the use of software tools to support communication,
collaboration, and collaboration among the members of networked teams and workgroups. A business may
use intranets, the internet and extranets, and other networks to implement such systems.
Electronic Commerce Systems is the buying and selling, and marketing and servicing of products, services,
and information over a variety of computer networks. Many businesses now use the internet, intranet,
extranet and other networks to support every step of the commercial process this might include everything
from advertising sales, and customer support on the World Wide Web, to internet security and payment
mechanisms that ensure completion of delivery and payment procedure.

CHAPTER 3

INFORMATION TECHNOLOGY

Introduction

All computers are systems of input, processing, output, storage and control components. Today‘s computer system
comes in variety of sizes, shapes, and computing capacities. Rapid hardware and software developments and changing
end user needs continue to drive the emerging of new models of computers, from the smallest hand held computers to
largest multiple CPU mainframes for the enterprise.

Definition: The concept of hardware resources includes all physical devices and material used in information
processing, nothing but combination of electronic devices which will execute an application. Specifically, it includes
not only machines, such as computer and other equipment, but also all data media that is tangible objects on which data
are recorded, from sheet of paper to magnetic or optical disks.

Hardware in computer based information systems are

1. Computer systems
2. Computer Peripherals
1. Computer Systems: are which consists of central processing units containing microprocessor, and a variety of
interconnected peripheral devices

Example: Handheld laptops, midrange computer systems

Based on access speed and storage capacity computers are divided into 3 groups

1. Micro Computers
2. Midrange computers
3. Mainframe computers
1. Micro computers---are the most important category of computers systems for business people and consumers.
Though usually called a personal computer, or pc, a micro computer is much more than a small computer for use
by an individual.

Micro computers come variety of sized and shapes for variety of purpose. For example PC‘s are available as handheld,
notebook, laptops, and desktops, professional and flat standing model. Mostly we have 3 types of micro computers
called

a. Computer terminals
b. Network computers
c. Information appliances
a. Computer Terminals- are undergoing a major conversion to networked computer devices. Dumb terminals,
which are keyboard/video monitor devices with limited processing capabilities, are being replaced by intelligent
terminals which are modified networked PC‘s or network computers.

Intelligent terminals take many forms and can perform data entry and some information processing tasks
independently. This includes widespread use of transaction terminals in bank, retail stores, factories and other work
sites. Ex: ATM

b. Network Computers---are a micro computer category designed primarily for use with the internet and corporate
internets by clerical workers, operational employees, and knowledge base workers with specialized or limited
computing applications. Users of NCs depend primarily on network servers for their operating system and web
browser, application software and data access and storage.
c. Information Appliances--- Hand held micro computer devices known as personal digital assistants are some of
the most popular devices in the information appliances category, web enabled PDA‘s use touch screens, pen based
handwriting recognition, or keypads so mobile workers can send and receive e-mail, access the web and exchange
information such as appointments, to-do lists, and sales contacts with their desktop PC‘s web servers

One of the latest entrants to PDA technology is the RIM Blackberry. A small pager sized device that can perform all of
the common PDA functions, plus act as a fully functional mobile telephone.

2. Midrange computers---are primarily high end network servers and other types of servers that can handle the
large-scale processing of many business applications. Midrange systems have become popular as powerful
network servers to help manage large internet websites, corporate internets and extranets and other networks
3. Mainframe Computers----are large, fast and powerful computer systems. For example mainframes can
process thousandth of million instructions per second (MIPS). Mainframe can also have large primary storage
capacities, their main memory capacity can range from hundreds of gigabytes to many terabytes of primary
storage.
 Thus mainframe computers continue to handle the information processing needs of major corporations and
government‘s agencies with high transaction processing volumes or complex computational problems

Computer systems concept

A computer is more than a high powered collection of electronic devices performing a variety of information
processing chores. A computer is a system, an inter related combination of components that performs the basic system
function of input, processing output, storage and control thus providing end users with a powerful information
processing tool.

Input Processing Output Storage Control

Keyboard CPU A. Video Control part will
Touch screens 1. ALU B. Audio Primary control the
Pens, mouse 2. CU C. Printing storage(ROM, software
Optical scanners 3. MU (Converting RAM) instruction by CU
(convert the data electronic Secondary part of the CPU.
into electronic information into storage(flash,
form) human intelligible CD, DVD,
data) Floppy)

2. Computer Peripherals

Peripherals--- is the generic name given to all input output, and secondary storage devices that are part of a computer
system, but are not part of the CPU. Peripheral depend on direct connection or telecommunication links to the central
processing Unit of a computer system, Thus all peripherals are online devices, that is they are separate ,but be
electronically connected to and controlled a CPU.

Input Technologies---are known as by which you can enter data and commands directly by easily into a computer
system through pointing devices like electronic mouse and touch pads and technologies like optical scanning,
handwriting recognition, and voice recognition.

Example: 1. pointing devices

a. Electronic Mouse
b. Track ball
c. Pointing stick
d. Touch pads
 e. Touch screens
4. Pen based computing
5. Speech recognition systems
6. Optical scanning

Output Technologies----Computer provide information to you in a variety of forms like

a. Video output
b. Audio output
c. Printing output
a. Inkjet printer
b. Laser Print

Database Management Systems

The key to establishing an effective, efficient database is to involve the entire organization as much as possible, even if
everyone seemingly will not be connected to it or be a user of it. Perhaps they won't be a part of it in the beginning, but
they very well could be later on.
You've heard the old saying, "Don't put all your eggs in one basket." When it comes to data, just the opposite is true.
You want to put all your corporate data in one system that will serve the organization as a whole. A Database
Management System (DBMS) is basically another software program like Word or Excel or Email. This type of
software is more complicated: it permits an organization to centralize data, manage them efficiently, and provide
access to the stored data by application programs.
A DBMS has 3 components, all of them important for the long-term success of the system.
• Data Definition Language (DDL). Marketing looks at customer addresses differently from Shipping. So you
must make sure that all users of the database are speaking the same language. Think of it this way: Marketing
is speaking French, Production is speaking German, and Human Resources is speaking Japanese. They are all
saying the same thing, but it's very difficult for them to understand each other. Defining the data definition
language itself sometimes gets shortchanged. The programmers who are creating the language sometimes say
"Hey, an address is an address, so what." That's when it becomes critical to involve users in the development
of the Data Definition Language.
• Data Manipulation Language (DML). This is a formal language used by programmers to manipulate the data in
the database and make sure they are formulated into useful information. The goal of this language should be to
make it easy for users. The basic idea is to establish a single data element that can serve multiple users in
different departments depending on the situation. Otherwise, you'll be tying up programmers to get information
from the database that users should be able to get on their own.
• Data Dictionary. Each data element or field should be carefully analyzed to determine what it will be used for,
who will be the primary user, and how it fits into the overall scheme of things. Then write it all down and
make it easily available to all users. This is one of the most important steps in creating a good database.
 Why is it so important to document the data dictionary? Let's say Suvidha, who was in on the initial design and
building of the database, moves on and Joe takes her place. It may not be so apparent to him what all the data elements
really mean, and he can easily make mistakes from not knowing or understanding the correct use of the data. He will
apply his own interpretation, which may or may not be correct. Once again, it ultimately comes down to a persware
problem.

Designing Databases
Every tool has its job. You wouldn't use a screwdriver to pound a nail in the wall (or maybe you would), nor would
you use a hammer to turn a bolt. Each type of database that we discuss in this section has its own advantages and
disadvantages, so you should choose the right type of database for the job you want to do.

1. Hierarchical Databases

The hierarchical data model presents data to users in a treelike structure.

Think of a mother and her children. A child only has one mother and inherits some of her characteristics, such as eye
color or hair color. A mother might have one or more children to which she passes some of her characteristics but
usually not exact ones. The child then goes on to develop its own characteristics separate from the mother.

A hierarchical database for a human resources system.

In a hierarchical database, characteristics from the parent are passed to the child by a pointer just as a human mother
will have a genetic connection to each human child. You can see how this database pointer works by looking at the
above figure..

2. Network Database

A network data model is a variation of the hierarchical model.

Take the same scenario with one parent and many children and add a father and perhaps a couple of stepparents. Now
the parents aren't restricted to only one (the mother) but to many parents. That is, a parent can have many children and
a child can have many parents. The parents pass on certain characteristics to the children, but the children also have
their own distinct characteristics.
 3. The network data model.

As with hierarchical structures, each relationship in a network database must have a pointer from all the parents to all
the children and back, as the above figure demonstrates.

These two types of databases, the hierarchical and the network, work well together since they can easily pass data back
and forth. But because these database structures use pointers, which are actually additional data elements, the size of
the database can grow very quickly and cause maintenance and operation problems.

4. Relational Data Model

A relational data model uses tables in which data are stored to extract and combine data in different combinations.
The tables are sometimes called files, although that is actually a misnomer, since you can have multiple tables in one
file.

In a relational database, each table contains a primary key, a unique identifier for each record. To make sure the tables
relate to each other, the primary key from one table is stored in a related table as a secondary key. For instance, in the
Customer table the primary key is the unique Customer ID. That primary key is then stored in the Order Table as the
secondary key so that the two tables have a direct relationship.

Customer Table Order Table

Order Number Primary Key
Customer Name Self Explanatory Order Item Self Explanatory
Customer Address Self Explanatory Number of Items Self Explanatory
Ordered
Customer ID Primary Key-----> Customer ID Secondary Key
Order Number Secondary Key

Use these three basic operations to develop relational databases:

• Select: create a subset of records meeting the stated criteria
• Join: combine related tables to provide more information than individual tables
 Project: create a new table from subsets of previous tables
The biggest problem with these databases is the misconception that every data element should be stored in the same
table. In fact, each data element should be analyzed in relation to other data elements with the goal of making the tables
as small in size as possible. The ideal relational database will have many small tables, not one big one. On the surface
that may seem like extra work and effort, but by keeping the tables small, they can serve a wider audience because they
are more flexible. This setup is especially helpful in reducing redundancy and increasing the usefulness of data.

Comparing of
Database Processing End-user Programming
Flexibility
Alternatives Type Efficiency friendliness Flexibility
of Decisions
Hierarchical High Low Low High
Network Medium-High Low-Medium Low-Medium High
Low but
Relational High High Low
Improving

Management Requirements

Key organizational elements in the database environment.

Nothing is ever as easy as it sounds. As the above figure shows, there is a lot more to a viable, useful database than just
its structure.
Data Administration

Ask any manager what his resources are and he's likely to list people, equipment, buildings, and money. Very few
managers will include information on the list, yet it can be more valuable than some of the others. A data
administration function, reporting to senior management, can help emphasize the importance of this resource. This
function can help define and structure the information requirements for the entire organization to ensure it receives the
attention it deserves

Data Administration is responsible for:

 Developing information policies

 Planning for data
 Overseeing logical database design
 Data dictionary development
 Monitoring the usage of information by techies and non-techies

No one part of the organization should feel it owns information to the exclusion of other departments or people in the
organization. A certain department may have the primary responsibility for updating and maintaining the information,
but that department still has to share it across the whole company. Well-written information policies can outline the
rules for using this important resource, including how it will be shared, maintained, distributed, and updated.

Data planning

At the beginning we said that as many users as possible should be brought together to plan the database. We believed it
so much then that we'll say it again here. By excluding groups of users in the planning stages, no matter how
insignificant that group may seem a company courts trouble.
Database Technology, Management and Users

Change isn't just something you experience by chance; in all likelihood, it will be required throughout the corporate
structure. You need to get the non-techies talking and working with the techies. Users will take on more responsibility
for accessing data on their own through query languages if they understand the structure of the database. Users need to
understand the role they play in treating information as an important corporate resource. Not only will they require a
user-friendly structure for the database, but they will also need lots of training and hand holding up front. It will pay off
in the long run.

Database administration functions can:

• Define and organize database structure and content.

• Develop security procedures to safeguard the database.

• Develop database documentation.

• Maintain the database management software.

As with any other resource, managers must administer data, plan their uses, and discover new opportunities for the data
to serve the organization through changing technologies.

Role of Information Technologies on the Emergence of New Organizational Forms or IT and

Organizational Design
An important and fast growing technological innovation during this century is computer-based information systems.
Computer-based information systems (CBIS or only IS) provide an opportunity for businesses to improve their
efficiency and effectiveness, and even to gain a competitive advantage. IT is also a catalyst of fundamental changes in
the structure, operations and management of organizations. Most businesses in the industrial world could not compete,
and many could not even survive without computers and software. Now IT is an integral part of the products and
services delivered to customers.

Competition leads to environmental uncertainty and increases both the need for and the rate of innovation adoption. By
adopting IS, businesses will be able to compete in three ways:
(1) IS can change the industry structure and, in doing so, alter the rules of competition;
(2) IS can also create competitive advantage by offering business new ways to outperform their rivals; and
(3) IS spawns new businesses, often from within existing operations of the business.

During the last years, a consensus is emerging that to survive in the competitive turbulence that is engulfing a growing
number of industries, firms will need to pinpoint innovative practices rapidly, to communicate them to their suppliers
and to stimulate further innovation. In order to be competitive, companies are forced to adopt less hierarchical and
more flexible structures, and to define strategies able to combine reduced costs, high quality, flexibility and a quick
answer to customer requirements. Nowadays, there are very few companies with enough resources to form its value
chain on their own.
Therefore, some changes are taking place within individual companies and in their relations with other organizations,
creating new structures in which relationships between customers and suppliers are suffering considerable changes.
One of these changes is concerned with the formation of networks in which there is a division of labour that allows
each company to exploit their distinctive advantages, and be more competitive globally.
In a network model, a set of juridically independent companies establish cooperative long term links in order to
achieve a higher level of competitiveness. The enterprises that belong to a network have not all the elements needed for
manufacturing a product or providing a service under their absolute control. Therefore, the success of this kind of
structures is conditioned by the coordination degree obtained along the realization of inter-organizational activities,
which requires an efficient communication system among the partners. The Information Technology (IT) represents a
supportive element that facilitates the transfer of information across organizational boundaries. In this section we
analyze the inclusion of the Inter organizational Information Systems (IOS) concept within the network model and
discuss the role IT plays in enabling organizational transformation towards emergent forms of organization.
In order to attain relatively low costs in the last two decades the enterprises followed strategies of backward-forward
integration, based on the improvement of the effects of the experience curve and the scale economies. We consider that
this internal growth may be inadequate to face the new situations appearing in the nineties and, no doubt, those that
will appear in the next century. The individual enterprise has less capability for foreseeing the consequences of the
different business decisions; however, the need for competing in a more and more complex context requires the
adoption of quick decisions, which facilitate the flexibility of the enterprise. New technologies, fast changing markets
and global competitiveness are revolutionizing relationships both within and between organizations. Thus, the new
environment requires from the enterprises a strategy able to agglutinate reduced costs, high quality, flexibility, and a
quick response to the needs of the customer.
Nowadays, the enterprises have to compete in a more and more turbulent scene, which obliges them to adopt less
hierarchical and more flexible structures. During the last years, a major transformation in the strategy of many
enterprises has been observed with a tendency to disintegration. This is accompanied by a need for increasing the
quality of the products or services offered, which requires more interdependency among the different corporate units.
As a consequence of it, several transformations both inside the enterprises and in the relationships between them are
taking place, which establishes new structures through which the relationships among competitors, customers and
suppliers are changing substantially. One of these changes is the cooperation established among different enterprises,
which allows them to develop their competitive capability. Companies are forming strategic alliances because there is
an increasing acknowledgement that organizations operate in a relational context of environmental connectedness and
that organizational survival and performance depend upon connections with other organizations.
The co-operation among enterprises allows their flexibility and their innovative capacity to be increased. Current
products are based on so many critical technologies that most of the enterprises cannot keep constantly updated in all
of them.
The Network Structure
The concept of the network‘s form of organization has been particularly popular with management writers for its
potential to build the flexible organization with the ability to meet the challenges of a changing and global
environment. Despite both the abundant available literature and the existence of a certain consensus on some aspects,
there is still too much ambiguity in the concepts used in this area. Taking into account the formation of networks,
which is an interesting field of recent development with strong repercussions on the inter-organizational relationships,
it is necessary to clear the existing terminological confusions in order to formulate its theory and to improve its
implementation.
Starting from the definition, a network is a specific kind of relationship joining a particular group of people, objects, or
events. Two factors needed for constituting a network can be obtained from this definition; first, a network is formed
by a group of elements; second, these elements establish specific relationships among them. We must show that the
establishment of a co-operative network is not a purpose itself but «it must be a dynamic structure that allows
consolidating the competitive position of its members».

By means of a network structure, the competitive position of the enterprises can be reinforced as these concentrate on
what they do best, and on what maintains their success in the market. In this way, other enterprises make the activities
left, in which they have distinctive competences too. The enterprises outsource those activities that are ballast and
bureaucratize them.
The enterprises that belong to a network have not all the elements needed for manufacturing a product or providing a
service under their absolute control. Within the networks, the involved elements belong to independent enterprises and
are placed along the value system of a product or service.
All this drives to an organizational structure in which the enterprises generate more value in those areas where they
have specific competencies. The success of these emergent organizational forms seems to be based, on a great extent,
on an effective co-ordination by means of the use of advanced information systems, which are based on the
Information Technologies (IT). There is an increasing interest in the relationship between the emerging organizational
ways and the function of the IT/IS insofar as the progresses in each field have influenced the others.
Information Technology on the Emergence of Networks
At the moment, the most spectacular and potentially powerful uses of the information systems technology go beyond
the individual borders of the enterprises. In fact, the most important function of IT in the nineties is the better
management of the interdependencies among the enterprises. Information Technology has to be the most powerful
instrument to reduce the co-ordination costs». While the traditional uses of IT tried to facilitate the internal processes
of the enterprises, the Inter organizational Information Systems (IOS) are addressed towards the efficiency of a group
of enterprises.
Most of the studies about IOS have focused on the incidence of IT on the flows of information among the
organizations, its capability of reducing the transaction costs, and its potential to achieve competitive advantages.
Many authors have verified that:
• IT influences the nature, punctuality and detail level of the information shared by enterprises
• IT reduces the transaction costs, while it provides a better management of the risks
• IT reduces the co-ordination costs
In order to benefit from the advantages of IT, the enterprises have to keep in mind that IT cannot be isolated from its
organizational context». We do not agree with the existence of causation between the implementation of IT and the
organizational changes in the enterprise driving to an increase in the competitiveness of the enterprises. On the
contrary the technological and organizational implementations are both sides of the same issue, since they depend on
and determine each other». We think that, although IT might have the above mentioned positive effects on the
organizations, the will and capabilities of the directors of the company are needed in order to make the most of those
advantages.
In order to make the most of the whole potential of the IOS, it will be required that the managing directors get involved
with the project, since they have a wider and more strategic view of the company. In this way, a system coherent with
the objectives of the company would be implemented. This system would allow taking even more profit from IT, what
would have positive repercussions on the enterprise and would facilitate the achievement of its objectives. The active
participation of the Management Board in the planning of the IOS brings a problem related to the fact that IT is a
relatively new resource that did not exist when most of the current managers were trained. Therefore, they usually do
not feel comfortable with these new technologies.
As a proof of this, we will consider an example. McKesson was a dealer company of chemical products. This company
knew that its success was linked to that of its customers, which were small stores, so it established a close relationship
with them. By means of an appropriate use of Information Technologies, it helped its customers to maximize their
profits, since it gave them useful information for competing with the big pharmaceutical chains, which were getting a
greater market share. The McKesson Corporation directors‘ idea was so successful that many other enterprises of the
sector tried to imitate it, but they made a terrible mistake. They thought that the network created by McKesson was just
a computerized system with terminals connected in other enterprises.

The secret of the success of this company were not the computer links; information technology did not create the
network. The network‘s success was due to the fact that the directors of McKesson were aware of both the
relationships along the added value chain and the need to strengthen as much as possible every link within the chain, so
cooperative behaviors could be established in order to provide the share of information and the quick response to the
changes of the demand.
Another example, widely mentioned in the literature on Information Systems, is the one of the American Hospital
Supply Company whose success has shown up the need to consider the network established not only as a mere system
of electronic data exchange, but also as a better implementation of the technology found within a context of changes in
the commercial relationships between the enterprise and its main customers.
They state that the implementation of this kind of technologies per se does not bring any competitive advantages; on
the contrary, they must be accompanied by some particular elements, generally intangible, which facilitate the
operation of the organization by means of a better distribution of the information and the experience. They also reflect
a collaborative attitude among the enterprises.
A positive consequence of the revolution of communication and Information Technologies is that there are more
available options for designing the labour now, because the technology can be used to increase the capacities of the
workforce, and the information can be transferred to those places were the labour is carried out. Workers do not need
to be located according to parameters of time and space to co-ordinate any more.
We consider that technology, although it is not the ground for the emergence of a new and innovative way of
organizing the enterprises, plays an important role in its operation. Technology allows doing things in a different way,
which provides the directors some organizational possibilities that would be unthinkable without its implementation.
Thus, using a mathematical expression, we can state that Information Technologies are necessary but they are not
enough to achieve greater business competitiveness.
The Role of IOS within the Network Structure
The enterprises involved in an alliance must decide whether to use the manual management of all the exchanged data,
or to complement that management with the interconnection of their respective computer applications. This
interconnection may bring, however, compatibility problems in the integration of the data from the different
enterprises, since those applications would have possibly been designed without taking into account any requirement of
integration among enterprises. The establishment of co-operation networks implies the need for wider communication
in the organizational field, as well as the requirement of capability to integrate the information systems from different
enterprises.
The enterprises inside a network cannot operate properly if they have not the possibility to communicate quickly,
accurately, and over long distances. Within a network, it does not make any sense to restrict the application of modern
computer technologies to the individual borders of each enterprise. The Management Board of the enterprises in the
network must, on the contrary, consider the possibilities of co-ordinating the processing of data outside the limits of
their own organizations by means of an IOS.
The application of the IT which provides the electronic integration among the shareholders of an industry may make
easier the outsourcing of activities, as well as be a basic part of the proper operation of the reticular structures. An IOS
may play an important role in the coordination of interdependent activities, which would be carried out by distant
organizational units. Thus, the enterprises can reduce their dependency on strategies of backward-forward integration
in order to ensure the control over the production process.

The concept of network emphasizes the interdependency among enterprises, which is provoked by the presence and the
sharing of the following key attributes: objectives, experience, labour, taking of decisions, responsibility, trust, and
acknowledgement or reward. The enterprises within a network will adopt a common objective, namely to provide a
quicker and better service to the final customer. With this aim in view, independent organizations will have to establish
close interrelationships, in which Information Technologies have a vital role to play. In this way, the aim of optimizing
the flow of profits along the supply chain could be achieved too. IOSs are, basically, new means to facilitate the
relationships among organizations; they are, therefore, a strategic instrument. However, an IOS allows to obtain
operative advantages too, such as
• Reducing paper-work and manual operations;
• Reducing the stock levels;
• Accelerating the product and material flow;
• Standardizing of procedures;
• Accelerating the flow of information about changes on the demand;
• Reducing telecommunication costs.
The IT is a basic support that facilitates the co-ordination of different enterprises through EDI systems, shared
databases, e-mail, videoconferences, which will allow them to work together. They will be able to share information on
the markets, on the needs for materials, on stock levels, production schedules, and delivery programs. A key factor in
an efficient exchange of information within a network is the computer connection of its members. The computer links
accelerate the transference of information, since it provides the automatic transmission of data between physically
distant computers. These links can be used as a strategic instrument to increase the competitiveness of the enterprise,
binding it electronically with its customers and suppliers through inter-organizational systems. The electronic
connection facilitates the approaching of the linked enterprises, which means that the companies may provide the
customers direct access to the internal databases, as well as just-in-time stock control.
IT-enabled Organizational Transformation
There is a growing body of conceptual papers and case studies on IT-enabled organizational transformation in the
information systems literature. Most of the studies suggest that the use of IT without concomitant organizational
changes is unlikely to yield significant gains in terms of organizational performance.
Four R’s of Business Transformation
Business Transformation can be defined as ―The orchestrated redesign of the genetic architecture of the corporation,
achieved simultaneously – although at different speed – along the four dimensions of reframing, restructuring,
revitalization and renewal.‖ By this definition a biological model has been developed that we call the Four R‘s of
transformation: Reframing, Restructuring, Revitalization, and Renewal.
The meaning of Four R‘s:
Reframing is the shifting of a company‘s conception of what it is and what it can achieve with new visions and a new
resolve.
Restructuring is a girding of corporate loins, getting it to achieve a competitive level of performance by dealing with
the body of corporation and competitiveness. The need to be lean and fit is the primary consideration.
Revitalization is about igniting growth by linking the corporate body to the environment.
Renewal deals with the people side of transformation, and with the spirit of the company. It is about investing
individuals with new skills and new purposes, thus allowing the company to regenerate itself.
Five Levels of IT-induced Reconfiguration
The schematic representation of these five levels along two basic dimensions – the degree of business transformation
and the range of potential benefits from IT. Organizations thereby proceed to higher levels of transformation as the
demands of competition and value creation for customer increases. The first two levels are evolutionary, requiring
relatively incremental changes in the existing organizational processes. In contrast, the other three levels are
conceptualized as revolutionary, requiring fundamental changes in the nature of business processes. These five levels
are explained as following
• Level 1: Localized Exploitation (Automation), which is concerned with the exploitation of IT within business
functions.
• Level 2: Internal Integration, a logical extension of the first in the sense that IT capabilities are exploited in all
the possible activities within the business process. Two types of integration are critical here: technical
 integration and the organizational integration by using common IT platform to integrate the organization‘s
business processes to enhance efficiency and effectiveness.
 Level 3: Business Process Redesign, involving the reconfiguration of the business using IT as a central lever.
• Level 4: Business Network Redesign concerned with the reconfiguration of the scope and tasks of the business
network involved in the creation and delivery of the products and services and
• Level 5: Business Scope Redefinition concerned with the underlying principle of a corporation, pertaining to
the possibilities of enlarging the business mission and scope (through related products and services) as well as
shifting the business (through substitution of traditional capabilities with IT-enabled skills).
Basic Strategies in the use of Information Technology
Lower Costs
 Use IT to substantial reduce the cost of business process
 Use IT to lower the costs of customers or suppliers
Differentiation
 Develop new IT software to differentiate products and services
 Use IT features to reduce the differentiation advantages of competitors
 Use IT features to focus products and services at selected market niches.

Innovative
 Create new products and services that include IT components
 Develop unique new products or market with the help of IT
 Make radical changes to business process with IT that dramatically cut costs, improve quality,
efficiency, or customer service, or shorten time to market.
Promote Growth
 Use IT to manage regional and global business expansion.
 Use IT to diversity and integrate into other products and services.
Develop Alliances
 Use IT to create virtual organizations of business partners
 Develop inter enterprises information system linked by the Internet extranet that support
strategies business relationship with customers, suppliers, subcontractors and other.

Example how companies have used information technology to implement five competitive strategies for
strategic advantage
Strategy Company Strategic use of Business benefits
Information
Technology
Cost Leadership Dell computer Online build to order Lower cost
 producer
Differentiation AVNET Customer/Supplier/E- Increase in market
commerce share
Innovation Amazon.com Online full service Market leadership
customer systems
Growth Wal–Mart Merchandising Market leadership
ordering by
global satellite
network
Alliance Protector& Gamble Automatic Inventory Reduce inventory
Replenishment cost/increased
by supplier sales.

Other strategic use of Information Technology

 Develop inter enterprise information systems whose convenience and efficiency create witching costs that look
in customer or suppliers.
 Make major investments in advance IT applications that build barriers to entry against competitors or
outsiders.
 Include IT components in products and services to make substitution of competing products or services more
difficult.
 Leverage investment in IS people, hardware, software, database, and networks from operational uses into
strategic application.
 CHAPTER 4
BUSINESS APPLICATIONS OF INFORMATION TECHNOLOGY

Cross-Functional Enterprise System: The applications are integrated cross-functional enterprise systems such as
Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), and Supply Chain Management
(SCM), enterprise collaboration system & executive support system (ESS).

These applications may be interconnected by enterprise application integration (EAI) system so that business
professional can more easily access the information resources they need to support the needs of customer, supplier, and
business partners.

 Enterprise resource planning (ERP) systems integrate all data and processes of an organization into a unified
system with the same database. For instance HR systems are not frequently integrated to this extent, although they
often link payroll administration with other HR functions. Integration of the HR system with IT systems in the
wider organization so that they can ‗talk to one another‘ will aid human capital reporting, comply with supply
chain partner requirements, improve profitability, reduce headcount and deliver against economic criteria.
However, many HR functions retain stand-alone systems, because they believe integration would compromise their
own system, potential lack of confidentiality and the cost and perceived risks involved.
 Enterprise Collaboration System: these are cross functional systems that support and enhance communication,
coordination, and collaboration among the teams and workgroups in an organization.
 Executive Support Systems (ESS): This Computer Based Information System (CBIS) is used by senior managers
for strategic decision making. The decisions at this level are non-routine and require judgment and evaluation.
They draw summarized information from internal MIS and Decision Support Systems. These systems deal with
external influences on an organization as well.
• New Tax laws
• Competitors
• Acquisitions, take-over‘s, spin offs etc.

They filter, compress and track critical data so as to reduce time and effort required to obtain information useful for
executives. They are not designed to solve specific problems. They are generalized to be capable of dealing with
changing problems. Since executives have little contact with all levels of the organization, ESS uses more graphical
interface for quick decision making

Functional Business Systems: Functional business information systems support the business functions of marketing,
production, accounting, finance, and human resource management through variety of e-business operational and
management information.

I. Marketing Information Systems (MKIS)

MKIS is a type of Information System that helps the firm to achieve following objectives:
 Identification of customers for firm‗s products and services.
 Development of those products and services to meet customers‘ needs
 Promotion of the products and services, and
 Provision of after sale customer support
Types of Marketing Information
Every information system is designed to capture some sort of information. Information requirements need to be defined
before the systems are made. While designing marketing information system, following types of information should be
designed.
• Marketing Intelligence – information flowing from environment into the environment
• Internal Information – gathered within the firm
• Marketing Communication – Info flowing from firm to external environment
MKIS help in proper management and dissemination of all three kinds of information.
Benefits of Marketing IS
MKIS helps organizations in efficient channel management. Following can be identified as some of the benefits of
MKIS.
1. Customer profiles need to be maintained focusing on their habits and spending patterns. MKIS helps in
maintaining these profiles.
 2. Information on what competitors have been up to is also critical marketing information. This should not be taken
as espionage on competitors.
3. A forecast of demand is also a critical part of marketing analysis. MKIS helps in achieving this as well.
4. Field sales can also be monitored where sales agents are used to market products.
5. Customers can be quickly updated based on their information kept in MKIS.
6. Dealers involved in sale of product can also be monitored to help enhance revenue‘s

Management Levels in MKIS

MKIS should cater for information requirements at each level, for instance
Strategic Level
1. Formulation of new sales products, and identifying new sales opportunities.
2. Planning support for new products and services
3. Monitoring competitors
Knowledge Level
Market analysis based on demographics and customer behavior
Management level
1. Sales performance analysis is required to monitor how to enhance sales and address related issues.
2. Sales staff analysis is important to see how much of the sales portion has been contributed by each of the
employees.
Operational Level
1. Taking comments from customers for measuring satisfaction is a responsibility of the managerial level.
2. Tracking sales, processing orders and customer support
New Dimensions in MKIS
Through extensive use of computers in marketing field, newer concepts are emerging in marketing field, which are
revolutionizing the way customers were dealt with;
 Customer Relationship management (CRM)
 Sales Force Automation (SFA)
 Call Centers
Marketing information systems support traditional and e-commerce process and management
of the marketing function. Major types of marketing information systems include interactive
marketing at e-commerce websites, sales force automation, customer relationship
management, sales management, product management, targeted marketing, advertising and
promotion, and market research. Thus, marketing information systems assist marketing
managers in electronic commerce product development and customer relationship decisions,
as well as in planning advertising and sales promotion strategies and develop products, and
new channels of distribution.
 II. Manufacturing Information Systems
It is an information system which deals with the
 Planning, development and maintenance of production facilities
 Establishment of Production goals
 Availability of production materials
 Scheduling
Management Levels in Manufacturing Information System
Strategic level
1. Locating new plant which can save cost
2. Investment in new manufacturing technology
Knowledge Level
1. Distribute knowledge to drive the production process
2. Innovating new forms of manufacturing processes
Management level
1. Monitoring production costs and resources
Operational Level
1. Status of production tasks

The information needs were and are always there. Information systems used to exist when computerized environments
were not available. Automation has enhanced the availability of information. Every industry has its own departmental
structure which gives rise to a different set of sub-systems as part of the information system. Here we would consider
the sub-systems of a manufacturing system only.

a. Raw Material Procurement Sub-System

This is the commencement of the manufacturing process. Some might think of procurement as a simple purchasing
process like any other commodity but the spirit of having an all-embracing raw material procurement sub-system is
simply more than that.
Various factors which can play critical role are
• Who to purchase from – supplier selection
• When to purchase – time of delivery or raw materials
• How much to purchase – Ideal stock levels

 Parameters of Raw-material Procurement

Like with every system, there has to be a list of minimum specifications which every system or sub system has to
cover. Purchasing logistics of an entity critically affect time to market and other quality related issues. Issues like
selection of suppliers, choice between local purchase and import and delivery time taken by the supplier. All these
concerns are met and dealt with in the purchase subsystem.
The complexity of the purchase subsystem should depend on types of raw materials required, number of suppliers to
deal with and complexity of the terms of purchase agreements for long term. With higher customer expectations, every
organization wants to efficiently manage its suppliers and other internal processes. Supply chain management spans all
movement and storage of raw materials, work-in process inventory, and finished goods from point-of-origin to point-
of-consumption. A procurement system should help in improving the supply chain of the organization.

b. Inventory Sub System

Inventory subsystem focuses on maintaining records and movements on inventory levels and usage. This control of
inventory is critical to the organization since money lock-in of raw materials purchase represents substantial
investment. Timely production of finished goods require availability of right quantity of material, maintenance of right
stock levels, determination of lead times and flex times and exchange of information with supplier at the right time. An
inventory subsystem helps us to address these issues. Inventory subsystems are critical where the organization is
following Just in Time approach – a philosophy which encourages zero tolerance for stock levels and placing orders
exactly when they are needed for manufacturing. Proper logistic management is important for the timely and quality
production.
An efficient inventory subsystem helps us to deal with these issues in a time saving manner.

c. Production Sub System

It can be seen as the most critical part of the entire manufacturing sub system. Basically it tracks the flow of the job
through the entire production process. It also records change in form of goods or transfer of goods from one place to
the other.

Example
Consider a manufacturing entity working with three processing departments and one assembly department. As raw
materials pass through the processes, the sub system records the relevant information at specific points or locations
until the finished goods are transferred to stock room.

d. Maintenance & Scheduling Sub System

For efficient production, the machines should be timely available. Many a times, the machine is under repair and is not
available to be used for production. Without this subsystem, there is a possibility of customer‘s orders not being met on
time. Certain issues that can be very important are
• Deciding delivery time in accordance with availability of machines.
• Any foreseen machine-down-time.
• Any major overhauling / tuning / replacement expected may result in unavailability of machine. An overhauling
schedule should be kept so that the production of finished goods is not halted.
• Avoiding duplication of jobs for the same machine.
e. Quality Sub system
This subsystem ensures the production made and end products being delivered to the customer are conforming the
quality standards set by the company. Quality covers aspects for the organization like better quality raw materials and
what is being purchased is according to organization‘s standards and improved finished goods in accordance with the
customer specification.

The question now arises is why do we need a quality sub-system? It is defined and demanded by customer, it has to be
achieved by management, it is a firm wide responsibility and these subsystems provide the firm‘s managers with
information that reveals the extent to which the firm‘s products are achieving the quality goals.

Computer-based manufacturing information systems help a company achieves computer integrated manufacturing
(CIM), and thus simplify automate, and integrate many of the activities needed to customer demands. For example,
computer aided design using collaborative manufacturing networks helps engineers collaborate on the design of
new products and processes. Then manufacturing resource planning system help plan the types of resources needed
in the production process. Finally, manufacturing execution systems factory floor through shop floor scheduling
and control machine tool (numerical control), or machines with some human links work capabilities (robotics)

III. Accounting & Financial Information Systems

Accounting and financial information systems cater for the needs of Accounts & Finance Department.
These are responsible for managing financial assets in order to maximize return, like
 Cash
 Stocks
 Bonds
 Other investments
 Financial liabilities
 Capitalization of the firm through acquisition of new financial assets
It also produces the periodic and annual financial statements.

Importance of Accounting & financial Information Systems

Every transaction that an organization undertakes has a financial impact, to be recorded and reported by the accounts &
finance department. Hence there is a share of interest for every department in reports and Information produced by this
system. Financial Information Systems like other information systems should cater for information requirements at
each level, for instance.
Strategic level
1. Investment goals
2. Long range forecasts for firm‘s financial performance
3. Acquisition of financial resources and goals
Knowledge Level
1. Analytical tools to design the right mix for investment
2. Portfolio updates
3. Market information analysis
Management level
1. Control over firm‘s financial resources
2. Investment management
3. Budget management
4. Tax management
5. Profitability & Performance Evaluation
Operational Level
1. Cash flow statements through various transactions
2. Inventory and debtor‘s management
3. Creditors Management

Accounting information systems record, report and analyze business transactions and events for the
management of the business enterprise. The six essential accounting systems including order
processing, inventory control, accounts receivable, account payable, payroll, and general ledger.
Information systems in finance support managers in decisions regarding the financing of a business
and the allocation of financial resources within a business. Financial information systems include
cash management, online investment management, capital budgeting, and financial forecasting and
planning.

IV. Human Resource Information Systems

An HR information system (HRIS) is a computer-based information system for managing the administration of HR
processes and procedures. Tannen baum (1990) defined an HRIS as any system that helps an organization to ‗acquire,
store, manipulate, analyze, retrieve and distribute information about an organization‘s human resources‘. Kettley and
Reilly (2003) defined an HRIS as ‗a fully integrated, organization-wide network of HR-related data, information,
services, tools and transactions‘.

It is an information system that combines many human resources functions, including benefits administration, salary
administration, recruiting and training, and performance analysis and review into one package. It helps in
 Building database of employees
 Keeping track for new positions or vacancies
  Keeping master records for each employees
 Performance evaluations and training assessments

Human resource information system support human resource management in organizations. They include
information systems for staffing the organization, training and development, and compensation
administration. HRM websites on the Internet or corporate intranets have become important tools for
providing HR services to present and prospective employees.
The term ‗e-HR‘ refers in more general terms to the use of computer technology within the HR function.

Reasons for introducing an HRIS

One survey established that the top 10 reasons for introducing an HRIS were:

1. To improve quality of information available.

2. To reduce administrative burden on the HR department.
3. To improve speed at which information is available.
4. To improve flexibility of information to support business planning.
5. To improve services to employees.
6. To produce HR metrics.
7. To aid human capital reporting.
8. To improve productivity.
9. To reduce operational costs.
10. To manage people‘s working time more effectively

The survey found that the 10 most popular uses to which respondents put their HRIS were:

1. Absence management.
2. Training and development.
3. Rewards.
4. Managing diversity.
5. Recruitment and selection.
6. Other (usually payroll).
7. Appraisal/performance management.
8. HR planning.
9. Knowledge management.
10. Expenses.

Features of an HRIS
The features of particular interest in an HRIS system are the use of software, integration with other IT systems in the
organization, use of the intranet and provisions for self-service.

Use of software

It is customary to buy software from an external supplier. There is a choice between buying a ‗vanilla system‘ (i.e. an
‗off-the-shelf‘ system without any upgrades) or customize the supplier‘s system to meet specified business
requirements. Extensive customization can make future upgrades problematic and expensive, so it is important to limit
it to what is absolutely necessary.

If an external supplier is used, the choice should be made as follows:

 Research HR software market through trade exhibitions and publications;

 Review HR processes and existing systems;
 Produce a specification of system requirements;
 Send an invitation to tender to several suppliers;
 Invite suppliers to demonstrate their products;
 Obtain references from existing customers, including site visits;
 Analyze and score the product against the specification.
 Integration

Intranet

An intranet system is one where computer terminals are linked so that they can share information within an
organization or within part of an organization. The scope of the information that can be shared across terminals can be
limited to preserve confidentiality and this security can be enhanced by using passwords. HR intranet systems can be
used for purposes such as updating personal details, applications for internal jobs online, requests for training, access to
e-learning, administration of queries and communication.

Self-service

A human resource self-service system (HRSS) allows managers and employees access to information and the facility
to interact with the system to input information or make choices of their own. This can operate through an HR portal (a
site that functions as a point of access to information on the intranet) that may be specially designed to produce a brand
image of the HR function. This is sometimes referred to as a business to employees (B2E) portal.

For managers, self-service means that they can access information immediately. This might be HR metrics (human
capital reporting measures) in such areas as absenteeism, personal details, performance management data, learning and
development progress, and pay (as a basis for pay reviews). They can also input data on their staff. This facilitates the
devolution of responsibility to line managers and reduces the administrative burden on HR.

Employees can also access information, input data about themselves, request training and apply for jobs online.
Role of IT Department
Information by itself is proving to be the most critical resource for organizations. Such is the criticality that other
resources of the organization cannot be managed without it. This has lead to the evolution of information systems to
efficiently manage the information resource of the organization. This system is usually employed by the
Information Services department which is the major functional area of the organization.

Evolution of the IT Department

IS department function has been evolving based on the needs of user departments
• Traditional Computing -- Initially User was not directly linked with using the computing facilities and the IT
workforce was involved in assisting user to achieve his computer related goals.

No information system can exist in an organization without being linked with other functional information systems.
This linkage is important for the overall smooth functionality of the information system since it allows easy
transformation and usage of information.

Conclusion

• Marketing IS
Production subsystem needs to be linked with the marketing system so as to produce right amount of product.
• Human resource IS
Most of the human resource is involved in the manufacturing process. Since factory premises have to be working
continuously, availability of relevant labor is critical.
• Accounts and Finance IS
Accounts should have a control over various recording points in the entire process from procurement to finished goods
store room. This would help both in recording transactions for financial statements and approving and arranging for
cash payments.
Accounting information system (AIS) is linked to all the information systems in an organization. This is important
because the data required for proper book keeping and generation of transactional reports is extracted from all over the
organization. For instance sales information can be sought only from marketing information system and stock
information is available in manufacturing information system. Here we would consider an example to see how AIS
records internal data describing manufacturing operations – this requires use of data collection terminals at the
manufacturing facility. It also records external data describing firm‘s transactions with its suppliers.Hooker
 Chapter 5
Knowledge management System (KMS)
Introduction

Many companies are build knowledge management systems (KMS) to manage organizational learning and business
know-how. The goal of such system is to help knowledge workers create, organize, and make available important
business knowledge, wherever and whenever it needs an organization.

To many companies today, lasting competitive advantage can only be theirs if they become Knowledge companies or
learning organizations. That means consistently creating new business knowledge, disseminating it widely throughout
the company, and quickly building the new knowledge into their products and services.

Definition: Before we proceed with defining these systems, first we should have clear concept of Knowledge
Management. The set of processes developed in an organization to create, gather, store, maintain and apply the firm‘s
knowledge is called Knowledge Management. Hence the systems that aid in the creation and integration of new
knowledge in the organization are called knowledge systems.

Knowledge Management (KM) comprises a range of strategies and practices used in an organization to identify, create,
represent, distribute, and enable adoption of insights and experiences. Such insights and experiences comprise
knowledge. Either embodied in individuals or embedded in organizational processes or practice.

Knowledge Management involves the acquisition, storage, retrieval, application, generation, and review of the
knowledge assets of an organization in controlled way.
Knowledge Management efforts typically focus on organizational objectives such as improved performance,
competitive advantage, innovation, the sharing of lesson learned, integration and continuous improvement of the
organization. KM effort overlap with organizational learning, and may be distinguished from that by a greater focus on
the management of knowledge as a strategic asset and a focus on encouraging the sharing of knowledge.

Dimensions of KM

Different frameworks of distinguishing between knowledge exist. One proposed framework for categorizing the
dimensions of knowledge distinguishes between tacit knowledge and explicit knowledge. Tacit knowledge represents
internalized knowledge that an individual may not be consciously aware of, such as how he or she accomplishes
particular tasks. At the opposite end of the spectrum, explicit k knowledge represents knowledge that the individual
holds consciously in mental focus, in a form that can easily be communicated to others.

There are major types of knowledge.

• Explicit knowledge – Structured internal knowledge e.g. product manuals, research reports, etc.
• External knowledge of competitors, products and markets
• Tacit knowledge – informal internal knowledge, which resides in the minds of the employees but has not been

documented in structured form. Knowledge systems promote organizational learning by identifying, capturing and
distributing these forms of knowledge

Knowledge Support Systems (KSS) / Intelligent Systems

These systems are used to automate the decision making process, due to its high-level-problem-solving support. KSS
also has the ability to explain the line of reasoning in reaching a particular solution, which DSS does not have.
Intelligent Systems- Knowledge systems are also called intelligent systems. The reason is that once knowledge system
is up and running, it can also enable non experts to perform tasks previously done by experts. This amounts to
automation of decision making process i.e. system runs independently of the person making decisions.
Artificial Intelligence
―Artificial intelligence is the ability of a machine to replicate the human thought processes. The way humans proceed
to analyze a problem and find appropriate solutions, similarly computers are geared up to follow human logic to solve
problems.‖ These knowledge-based applications of artificial intelligence have enhanced productivity in business,
science, engineering, and the military. With advances in the last decade, today's expert systems clients can choose from
dozens of commercial software packages with easy-to-use interfaces. The most popular type of intelligent systems is
the Expert System

Expert System
An expert system is a computer program that attempts to represent the knowledge of human experts in the form of
Heuristics. It simulates the judgment and behavior of a human or an organization that has expert knowledge and
experience in a particular field. Examples are:

• Medical diagnosis,
• Equipment repair,
• Investment analysis,
• Financial, estate and insurance planning,
• Vehicle routing,
• Contract bidding

Heuristics
Heuristic is the art and science of discovery and invention. The word comes from the same Greek root as "eureka",
which means "I have found it". A heuristic is a way of directing your attention fruitfully. It relates to using a problem-
solving technique, in which the most appropriate solution is found by alternative methods. This solution is selected at
successive stages of a program for use in the next step of the program.

Components of an Expert System

There are four main components of Expert systems

• User Interface: to enable the manager to enter instructions and information into an expert system to receive

information from it.

• Knowledge Base: it is the database of the expert system. It contains rules to express the logic of the problem.
• Inference engine: it is the database management system of the expert system. It performs reasoning by using the

contents of the knowledge base.

• Development engine – it is used to create an expert system.

Neural Network
Hardware or software that attempt to emulate the processing patterns of the biological brain, It is a device, modeled
after the human brain, in which several interconnected elements process information simultaneously, adapting and
learning from past patterns.

Neural Network vs. Expert System

Expert systems seek to model a human expert‘s way of solving problems. They are highly specific to seeking solutions.
Neural networks do not model human intelligence. They seek to put intelligence into the hardware in the form of
generalized capability to learn.

Fuzzy Logic
The word Fuzzy literally means vague, blurred, hazy, and not clear. Real life problems may not be solved by an
optimized solution. Hence allowance needs to be made for any imperfections which may be faced while finding a
solution to a problem. Fuzzy logic is a form of algebra employing a range of values from ―true‖ to ―false‖ that is used
in decision-making with imprecise data, as in artificial intelligence systems. It is a rule based technology that tolerates
imprecision by using non specific terms/ imprecise concepts like "slightly", "quite" and "very" to solve problems. It is
based on the Possibility theory, which is a mathematical theory for dealing with certain types of uncertainty and is an
alternative to probability theory.

The Knowledge Spiral/interaction

As it is described by Nonaka & Takeuchi; early research suggested that a successful KM effort needs to convert
internalized tacit knowledge into explicit knowledge in order to share it, but the same effort must also permit individual
to internalize and make personally meaningful any codified knowledge retrieved from the KM effort. Subsequent
research into KM suggested that a distinction between tacit knowledge an explicit knowledge represented an
oversimplification and that the notion of explicit knowledge is self-contradictory. Specifically, for knowledge to be
made explicit, it must be translated into information.

Later on Ikujiro Nonaka proposed a model SECI or Socialization, Externalization, Combination, Internalization which
considers a spiraling knowledge process interaction between explicit knowledge and tacit knowledge. In this model
knowledge follows a cycle in which implicit knowledge is ‗extracted‘ to become explicit knowledge, and explicit
knowledge is‗re-internalized‘ into implicit knowledge.
Socialization: Exchange of tacit knowledge among members that create common mental models and abilities.
Socialization transfers tacit knowledge most frequently though the medium of shared experience. Apprentices learn by
observation and imitation of the expert‘s behavior, as well as children, in ancient societies and, less frequently, now
days.

Externalization: The process of articulating tacit knowledge and transforming in to models, concepts, analogies,
stories and metaphors that can be communicated by language.

Externalization considered to be a key phase in the creation of new knowledge and is induced by dialogue, collective
reflection, writing. Writing about knowledge is a good example of the effort normally required by externalization
projects, as all humans have a whole life long knowledge experience.

Combination: Is the process of combining or reconfiguring bodies of existing explicit knowledge in order to generate
new explicit knowledge, by addition. It is the most common process in formal education, in organizations; it is
obtained by the exchange of explicit knowledge among members, as in formal reunions.

Internalization: is the process of adding to explicit knowledge (principles, procedures, methodologies) tacit new
knowledge (in the form of sensations, memories, images) through.

More recently, together with George von Krogh, Nonaka returned to his earlier work in an attempt to move the debate
about knowledge conversion forwards.

A second proposed framework for categorizing the dimensions of knowledge distinguishes between embedded
knowledge of a system outside of a human individual and embodied knowledge representing learned capability of a
human body‘s nervous and endocrine systems

A third framework for categorizing the dimensions of knowledge distinguishes between the exploratory creation of
―new knowledge‖ (i.e., innovation) vs. the transfer or exploration of ―established knowledge‖ within a group,
organization, or community.

Collaborative environments such as communities of practice or the use of social computing tools can be used for both
knowledge creation and transfer.
Strategies to KM

Knowledge may be accessed at different stages: Before or after KM- related to activities.

One strategy to KM involves actively managing knowledge. In such an instance individual strive to explicitly encode
their knowledge into a shared knowledge repository, such as a database, as well as retrieving knowledge they need that
other individual have provide to the repository. This is commonly known as the Codification approach to KM.

Another strategy to knowledge management involves individual making knowledge requests of experts associated with
a particular subject on an ad-hoc basis. In such an instance, expert individual can provide their insights to the particular
person or people needing this. This is also commonly known as the personalization approach to KM.

Other knowledge Management strategies and instruments for companies include:

 Rewards (as a means of motivating for  Communities of practice

knowledge sharing)  Knowledge fairs
 Story telling (as means of transferring the tacit  Comprehensive management
knowledge)  Proximity & architecture
 Cross project learning  Collaborative technologies
 After action review  Knowledge repositories.
 Knowledge mapping
 MANAGEMENT INFORMATION SYSTEM

Technologies to KM

One of the main objectives of information technology in knowledge management programs to accelerate the speed
of knowledge transfer and creation. The knowledge management tools intend to help the processes of collecting and
organizing the knowledge of groups of individual in order to make this knowledge available in shared bases. Due to
the largeness of the concept of knowledge, the software market for knowledge management seems to be quite
confusing. Technology vendors are developing different implementations of the knowledge management concepts
in their software products. Because of the variety and quantity of knowledge management tool available on the
market, a typology may be valuable aid to organizations that are looking for answers to specific needs.

Knowledge Managers

―Knowledge Managers ―is a role and designation that has gained popularity over the past decade. The role has
evolved drastically from that of one involving the creation and maintenance of knowledge repositories to one that
involves influencing the culture of an organization toward improved knowledge sharing, reuse, learning,
collaboration and innovation. Knowledge management function is associated with different departments in different
organizations. It may be combined by the KM motivation of that particular organization.

Knowledge managers have varied backgrounds ranging from Information Sciences to Business Management. An
effective knowledge manager is likely to be someone who has a versatile skills portfolio and is comfortable with the
concepts of organizational behavior/culture, processes, branding & marketing and collaborative technology.

Knowledge sharing

 Knowledge sharing is an activity through which knowledge (i.e. information, skills, or expertise) is exchanged
among people, friends, or members of a family, a community (e.g. Wikipedia) or an organization.

 Organizations have recognized that knowledge constitutes a valuable intangible asset for creating and sustaining
competitive advantages. Knowledge sharing activities are generally supported by knowledge management
systems. However, technology constitutes only one of the many factors that affect the sharing of knowledge in
organizations, such as organizational culture, trust, and incentives. The sharing of knowledge constitutes a
major challenge in the field of knowledge management because some employees tend to resist sharing their
knowledge with the rest of the organization.

 One prominent obstacle is the notion that knowledge is property and ownership thus very important. In order to
counteract this, individuals must be reassured that they will receive some type of incentive for what they
create. However, Dalkir (2005) identified the risk in knowledge sharing is that individuals are most commonly
rewarded for what they know, not what they share. If knowledge is not shared, negative consequences such as
isolation and resistance to ideas occur. Shared knowledge offers different viewpoints and possible solutions to

By:-Dep’t Of Business Management Page 51

 MANAGEMENT INFORMATION SYSTEM

problems. To promote knowledge sharing and remove knowledge sharing obstacles, the organizational culture
should encourage discovery and innovation. This will result in the creation of organizational culture.

The 3Cs of Knowledge Sharing: Culture, Co-opetition and Commitment

One of the challenges of knowledge management is that of getting people to share their knowledge. Why should
people give up their hard-won knowledge, when it is one of their key sources of personal advantage? In some
organizations, sharing is natural. In others the old dictum "knowledge is power" reigns. In this article we explore
some of the barriers and offer some pointers to overcoming them.

Why Don't People Share?

 "Knowledge is power" - but how true is this really? My own view is that citing this reason is often a cop out by
managers or change agents who are not adequately addressing the human factors or motivational aspects. In
today's enterprise, where so much depends on teamwork and collective knowledge, it is only a handful of
people who have knowledge for which they can hold their peers (and bosses) to ransom. It might be the owner-
manager of a small company not wanting to lose trade secrets; it may be a particular specialist who has been in
the organization many years and built up his or her own unique way of achieving success without perhaps even
understanding the deep tacit knowledge of how they do it. Don't get me wrong - knowledge IS power, but is
typically not the primary reason for lack of knowledge sharing.

 "Not invented here" syndrome - this is more common. People have pride in not having to seek advice from
others and in wanting to discover new ways for themselves.

 Not realizing how useful particular knowledge is to others - an individual may have knowledge used in one
situation but be unaware that other people at other times and places might face similar situations. Additionally,
knowledge derived for one need may be helpful in totally different contexts; or it may be a trigger for
innovation - many innovative developments come from making knowledge connections across different
disciplines and organizational boundaries.

 Lack of trust - if I share some of my knowledge, will you use it out of context, MIS-apply it (and then blame
me!), or pass it off as your own without giving any acknowledgement or recognition to me as the source?

 Lack of time - this, I suspect, is the major reason given in many organizations. There is pressure on
productivity, on deadlines, and it's a general rule that the more knowledgeable you are, the more there are
people waiting to collar you for the next task. How can you possibly find time to add your lessons learnt to the
knowledge database or have a knowledge sharing session with your colleagues?

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 MANAGEMENT INFORMATION SYSTEM

Other barriers cited by experts include functional silos, individualism, poor means of knowledge capture, inadequate
technology, internal competition and top-down decision making. Generally, a mix of structural and infrastructure
barriers is exacerbated by the predominance of human ones - social, behavioral and psychological.

How can we overcome such barriers? Certainly address the issues of organizational structure and inadequate
technology. But give your focus to the three Cs of Culture, Co-opetition (a blend of co-operation and
competition), and Commitment.

Changing Culture

Culture change is never easy and takes time. But cultures can be changed. Culture is defined in many ways, such as
"commonly held beliefs, attitudes and values" (Institute of Personnel Development), "the collective programming of
the mind that distinguished one group from another" (Geert Hofstede), and in many other ways that also embrace
rituals, artifacts and other trappings of the work environment. I like the simple but effective definition "the way we
do things around here". There is no one place to start, but most interventions are based on a simple layered model
that portrays how people's observable actions and behavior‘s are influenced by reportable attitudes and values based
on more deep-rooted beliefs. Therefore to change people's actions you have to address the more fundamental
underlying layers. This can be done as an organization-wide programme or in small groups or even individually.
Here are some activities that might be used to plan and induce change:

 A culture audit - conducting questionnaires, interviews and team sessions with a cross-section of the
organization. This is especially helpful in finding out the difference between what is articulated as the desired
culture and what is done (e.g. "we put quality first" but at the same time the organization ships out less than
perfect products at the end of a financial quarter to "make the numbers"). It is also common to find several sub-
cultures that conflict with overarching goals. Can you clearly identify which values and behaviors conflict with
better knowledge sharing and perhaps (more importantly) which people should be the target for change?

 Challenge 'improper' behavior - if you identify people hoarding knowledge unnecessarily: challenge them;
though avoid "knowledge rage".

 Involvement - some of the best knowledge sharing cultures are where everybody (even novices and
newcomers) believes that their knowledge is respected, valued and used to inform decisions.

 Use of role models - identify those people whose behaviors are an example to others. Celebrate and publicize
them. Involve them with other groups.

 Team-building / organization development sessions - at regular team meetings, allocate time to understand and
improve internal processes; too many meetings are task and output focused, but fail to address the means of
achieving successful outcomes.

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 Align rewards and recognition to support appropriate behaviors - too many schemes are based on seniority or
individual expertise, rather than team effectiveness.

 Change people - mover the knowledge sharers around; get industrial psychologists and behavioral experts on
board; perhaps fire some bosses (seriously!) - After all, it is quality of leadership that will enable all the other
culture change techniques to achieve their aims.

Finally, remember that culture goes hand in hand with structure (roles and responsibilities). At every level within
the organization, there must be congruence between objectives, structures, processes, people and supporting
infrastructure. A good example of changing culture alongside an evolving knowledge management programme is
that of Siemens (see reference 3 and Knowledge Digest).

Challenging Through Co-opetition

Human beings are at the same time social cooperative beings and have a competitive streak. We all like to do better
than our peers and excel in something. Yet, in today's complex world, we need help from them to achieve our aims.
In an organization, lack of competition - both for individuals and teams - leads to complacency. But competition
must be done in a healthy manner. Some things to consider:

 In early stages of product development, don't simply approve one line of approach. Have several "competing"
projects under way but make sure there are mechanisms to exchange knowledge and challenge / encourage
each "runner" e.g. through people sharing, peer reviews etc.

 Continually benchmark internal processes and functions with other organizations and potential suppliers.
Encourage them to strive for improvement through learning from each other.

 Introduce 'competitions', such as the "knowledge champion of the year", the "innovators team award", but
invite everybody to the award ceremonies.

 Compete, not against other people or teams, but set goals vs. challenging targets or external competitors.

Above all, let the apparent losers of such competitions share in success, celebrate what they have achieved, and
make them feel part of the winning team (the wider organization). In one organization I know, whenever a
competing development project was wound up, the best people were almost universally attracted to the winning
teams (since the healthy competition meant that each had good knowledge of the other).

Commitment

This builds on the other two Cs. Organizations need to create a commitment to culture, to change, to challenge, to
compete and cooperate. If, as is often the case, time pressure leads to poor knowledge sharing, then there must be a
commitment to allow time for it to happen. Budget 5 percent of a project's resources to distilling lessons and

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sharing. Include time to contribute to knowledge development and sharing in people's job goals (and in the
accompanying reward system). Build commitment into team processes.

Commitment to knowledge sharing must be demonstrated throughout the organization. It is apparent through what
the leaders of the organization say and do. It is shown by commitment in the organizations' processes, reward
systems, development programmes etc. It is, above all, shown by individual throughout the organization being
committed to share their knowledge with others even if it is not formally part of their 'day job'.

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CHAPTER 6
ETHICAL AND SECURITY ISSUES

Security, Ethical, and Societal Challenges of IT

The use of information technologies in business has had major impacts on society, and thus raises ethical
issues in the areas of crime,oprivacy, individuality, employment, health, and working conditions.

Ethical Responsibilities of Business professionals

As a business professional, you have a responsibility to promote ethical uses of information technology in
the workplace. That includes properly performing your role as a vital human resource in the business
systems you help develop and use in your organization. As a manager or business professional, it will be
your responsibility to make decisions about business activities and the use of information technologies

Business Ethics

Business ethics is concerned with the numerous ethical questions that managers must conform as part of
their daily business decision making. However, the social contract theory states that companies have ethical
responsibilities to all members of society, which allows corporations to exist based on social contract

Basic categories of basic ethical issues

Information technology has caused ethical controversy in the areas of intellectual property rights, customer
and employee privacy, security of company information, and workplace safety.

Equity Rights Honesty Exercise of Corporate

Power
Executive salaries Corporate due process Employee conflicts of Product Safety
comparable worth employee Health interest Environmental Issues
product pricing Screening Security of Company Disinvestment Corporate
Intellectual Property Customer Privacy Information contributions social
Rights Employee Privacy Inappropriate Gifts issues raised by
Noncompetitive Sexual Harassment Advertising Content Religious Organizations
Agreements Affirmative Action Equal Government contract Plant/Faculty Closures
Employment Issues and Downsizing
Opportunity Financial and Cash Political Action
Shareholder Interests Management Procedures Committees

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Employment at will Questionable Business Workplace Safety

whistle-Blowing Practices in Foreign
Countries

Technology Ethics

Another important ethical dimension deals specifically with the ethics of the use of any form of technology.
For example below figure outlines four principles of technology ethics. These principles can serve as basic
ethical requirements that companies should meet to help ensure the ethical implementation of information
technologies and information systems in business.

One common example of technology ethics involves some of the health risks of using computer workstation
for extended periods in high-volume data entry job positions.

Principles of Technology Ethics

Proportionality: The good achieved by the technology must outweigh the harm or risk. Moreover, there
must be no alternative that achieves the same or comparable benefits with less harm or risk.
Informed Consent: Those affected by the technology should understand and accept the risk.
Justice: The benefits and burdens of the technology should be distributed fairly. Those who benefit should
bear their fair share of the risks, and those who do not benefit should not suffer a significant increase in risk.

Minimized Risk: Even if judged acceptable by the other three guidelines, the technology must be
implemented so as to avoid all unnecessary risk.

Ethical Guidelines

Business and IS professionals would live up to their ethical responsibilities by voluntarily following such
guidelines. For Example, you can be a responsible professional by

1) Acting with integrity,

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2) Increasing your professional competence,

3) Setting high standards of personal performance,
4) Accepting responsibility for your work, and
5) Advancing the health, privacy, and general welfare of the public. Then you would be demonstrating
ethical conduct, avoiding computer crime, and increasing the security of any information system you
develop or use.

Computer Crime

Computer Crime is defined by the Association of Information Technology Professionals (AITP) as including
1) the unauthorized use, access, modification, and destruction of hardware, software, data , or network
resources; 2) the unauthorized release of information; 3) the unauthorized copying of software; 4) denying
an end user access to his or her own hardware, software, data, or network resources; and 5) Using or
conspiring to use computer or network resources to illegally obtain information or tangible property.

 Hacking
 Cyber Theft
 Unauthorized use at work
 Software Piracy
 Piracy of Intellectual Property
 Computer viruses and worms

Privacy Issues

Information technology makes it technical and economically feasible to collect, store, integrate, interchange,
and retrieve data and information quickly and easily. This characteristic has an important beneficial effect
on the efficiency and effectiveness of computer –based information systems. However the power of
information technology to store and retrieve information can have a negative effect on the right to privacy of
every individual.

 Accessing individual private e-mail conversations and computer records, and collecting and sharing
information about individual gained from their visits to internet websites and newsgroups (violation
of privacy).
 Always knowing where a person is , especially as mobile and paging services become more closely
associated with people rather that places(Computer monitoring)
 Using customer information gained from, many sources to market additional business services
(Computer Matching)

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 Collecting telephone numbers, e-mail addresses, credit card numbers, and other personal
information to build information to build individual customer profiles (Unauthorized personal files)
Privacy on the Internet
Computer Matching
Privacy Laws
Computer Libel and Censorship
 Other Challenges
Employment Challenges
Computer Monitoring
Challenges in Working Conditions
Challenges to Individuality

Health Issues

The use of information technology in the workplace raises a variety of health issues. Heavy use of computers
is reportedly causing health problem like job stress, damaged arm and neck muscles, eye strain, radiation
exposure, and even death by cause of computer –related job stress. Workers, union, and government official
criticize computer monitoring as putting so much stress o employees that It leads to health problems.

Ergonomics

Solutions to some of these health problems are based on the science of ergonomics, sometimes called human
factors engineering. The goal of ergonomics is to design healthy work environments that are safe,
comfortable, and pleasant for people to work in, thus increasing employee morale and productivity.

Societal Solutions

As we discussed in the beginning, the internet and other information technologies can have many beneficial
effects on society. We can use information technologies to solve human and social problems through societal
solutions such as medical diagnosis, computer-assisted instruction, and government program planning,
environmental quality control, and law enforcement. For example computer can help diagnose an illness,
prescribe necessary treatment, and monitor the progress of hospital patients.

Information technologies can be used for crime control through various law enforcement applications. For
example, computerized alarm systems allow police to identify and respond quickly to evidences of criminal
activity. It should be obvious to you that many of the detrimental effect of information technology are
caused by individuals or organizations that are not accepting the ethical responsibility for their actions. Like

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other powerful technologies information technology possesses the potential for great harm or great good for
all humankind.

Tools of Security Management

The goal of security management is the accuracy, integrity, and safety of an information system process and
resources. Thus, the effecting security management can minimize error, frauds, and losses in the
information systems that interconnect today’s companies and their customers, suppliers, and their stoke
holders

Internet worked security defenses

Vital network links and business flows need to be protected from external attack by cyber criminals or
subversion by criminal or irresponsible acts of insiders.

Some important security defenses

 Encryption
 Firewalls
 Denial of services defenses
 E-Mail monitoring
 Virus defenses
Encryption: Important way to protect data and other computer networks resources especially on, internet,
intranet, and extranet. Password, file, messages, and other data can be transmitted in scrambled form and
unscrambled by computer systems for authorized users only. Encryption involves using especial
mathematical algorithms or key to transform digital data into scramble form be for they are transmitted and
to decode the data they are received. The most widely use of encryption method uses a pair of public and
private key unique to achieve individuals.

Encryption programs are sold as separate products or built into other software =used for the encryption
process. There are several competing software encryption standards, but the top two are RSA and PGP a
popular encryption program available on the internet.

Firewalls: A network firewall can be a communications processor, typically a router, or dedicated server,
along with firewall software. It serves as goalkeeper system that protect a company intranets and other
computer networks form intrusion by providing a filter and sage transfer point for access to form the
internet and other networks

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It screens all networks traffic for proper passwords or other security codes and only allows authorized
transmissions in and out of the network. It also important for individual internet connection through cable
modems, because of their vulnerable “always on” connection status

Denial of Service Defenses: Internet is extremely vulnerable to a variety of assaults via the Internet
depend on three layers of networked computer systems 1) the victims website 2) the victims internet
service provider and 3) the sites of “zombie or slave computers that were commandeered by the cyber
criminal. For example in early 2000 hackers broke into hundreds of servers mostly poorly protected servers
at universities and planted Trojan Jorse.exe programs, which were then used to launch a barrage of service
requests In a concerted attack are e-commerce websites like yahoo and eBay.

E-Mail Monitoring: Internet and other online e-mail systems are one of the favorite avenues of attack by
hackers for spreading computer viruses or breaking into networked computer. E-mail is also the
battleground for attempts by companies to enforce policies against illegal, personal, or damaging messages
by employees and the demand of some employees and other who see such policies as violations of privacy
rights.

Virus Defenses: Thus many companies are building defenses against the spread of viruses by centralizing
the distribution and updating antivirus software as a responsibility of there is departments. The antivirus
companies are also marketing security suits of software that integrate virus protection with firewalls, web
security and content blocking features.

Other Security Measures

Other security measure which used to protect business system & networks from unauthorized uses, These
include both Hardware and software tools like Fault internet computers, Security Monitors, Security Policies
&Procedures, Passwords and backup files.

Security Codes: Passwords are unique identification code or users ID that end user’s logs on to the
computer system to protect stored data resources. End user is then asked to enter a password in order to
gain access to the system

Backup Files: Involves storing copies of file from previous period, I current files are destroyed new current
file can be constructed by using previous period files; Master file may be kept for backup purpose.

Security Monitors: are specialized system software packages that provide security of a network which
protect computer system & network from unauthorized use, fraud, and destruction. Provide security
measure needed to allow only authorized user to access the network.

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Biometric Security: Is a fast growing area if computer security these measure physical traits that make
each individual unique. This includes Voice verification, retina scanning, finger prints; hand geometry.
Biometric control devices use special purpose sensors.

Computer Failure control: Computer systems fail for several reasons

 Power failure
 Computer viruses
 Telecom Network Problems
 Hidden programming error
 Operator errors
Fault Tolerant Systems: These have processor, peripherals and software that provide a fail over capability
to back up components also it provide fail-safe & fail-soft capability when a system operate at a reduce but
acceptable level in the event of the major system failure

Disaster Recovery: Disaster both natural and human made like Hurricanes, Fires, Criminal & terrorist
Earthquakes, flood human error can affect company’s special e-commerce retailer and whole sales, airline,
banks internet service providers. It involves Arrangement with other company and offsite storage of an
original database for use of alternative facilities as a disaster recovery.

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