. Introduction
As a
consumer, you have instant access to millions of pieces of data. With a few
clicks of the mouse button, you can find anything from current stock prices and
video clips of current movies. You can get product descriptions, pictures, and
prices from thousands of companies across India and around the world. Trying to
sell services and products? You can purchase demographic, economic, consumer
buying pattern, and market-analysis data. Your firm will have internal
financial, marketing, production, and employee data for past years. This
tremendous amount of data provides opportunities to managers and consumers who
know how to obtain it and analyze it to make better decisions.
The speed with which Information Technology (IT) and
Information Systems (IS) are changing our lives is amazing. Only 50 years ago
communication was almost limited to the telephone, the first word processors
came out in the mid-sixties and the fax entered our offices in the 1970's.
Today information systems are everywhere; from supermarkets to airline
reservations, libraries and banking operations they have become part of our
daily lives.
The first
step in learning how to apply information technology to solve problems is to
get a broader picture of what is meant by the term information system.
You probably have some experience with using computers and various software
packages. Yet, computers are only one component of an information system. A computer
information system (CIS) consists of related components like hardware,
software, people, procedures, and collections of data. The term information
technology (IT) represents the various types of hardware and software used
in an information system, including computers and networking equipment. The
goal of Information System is to enable managers to make better decisions by
providing quality information.
The physical
equipment used in computing is called hardware. The set of instructions
that controls the hardware is known as software. In the early days of
computers, the people directly involved in are tended to be programmers,
design analysts, and a few external users. Today, almost everyone in the firm
is involved with the information system. Procedures are instructions
that help people use the systems. They include
items such as user manuals, documentation, and procedures to ensure that
backups are made regularly. Databases are collections of related data
that can be retrieved easily and processed by the computers. As you will see in
the cases throughout our book, all of these components are vital to creating an
effective information system. To create an effective information system, you
need to do more than simply purchase the various components. Quality is an
important issue in business today, particularly as it relates to information
systems. The quality of an information system is measured by its ability to
provide exactly the information needed by managers in a timely manner. The
information must be accurate and up-to-date. Users should be able to receive
the information in a variety of formats: tables of data, graphs, summary
statistics, or even pictures or sound: Users have different perspectives and
different requirements, and a good information system must have the flexibility
to present information in diverse forms for each user.
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.
3. Characteristics of Information
• Timeliness: Information
must reach the user in a timely manner, just when it is needed; not too early,
because by the time it is used it would be out-of-date; not too late because
the user will not be able to incorporate it into his/her decision-making.
• Appropriateness:
Information must be relevant to the person who is using it. It must be
within the sphere of his/her activities so that it can be used to reduce
uncertainty in his/her decision-making.
• Accuracy: Accuracy
costs. We don't always need 100% accurate information so long as we know the
degree of accuracy it represents (eg: + or - 5%). (Remember the value of
information).
• Conciseness:
Information should always contain the minimum amount of detail that is
appropriate for the user. Too much detail causes information overload.
• Frequency: Frequency
is related to timeliness. Too often the information presented is linked to the
calendar (end of the week, beginning of the month); its frequency should be
synchronized with the timing of the decision making of the user.
• Understandability:
The format and presentation of information are very
important. Some people prefer tabular information, whereas others may need it
in a graphical form. Also the use of colors enhances the understandability of
what is presented.
• Relevant: It
pertains to the particular problem. What data is relevant depends on the decision-making
model used. E.g. university admissions officials may choose to consider the
results of some high-school test irrelevant, if they believe that it does not
improve the chances of some applicant later becoming a successful student.
• Complete: All
the relevant parts are included. E.g. marketing data about household incomes
may lead to bad decisions, if not accompanied by consumption habits of the
target population.
• Current: Decisions
are often based on the latest information available
• Economical: The
costs of gathering information should be justified by the overall benefits
4. What is a System?
A system is a group of interrelated components working
together toward a common goal by accepting inputs and producing outputs in an
organized transformation process. System will have the following basic
interacting components (functions): 1. Input 2. Processing 3. Output 4.
Feedback 5. Control
Components of an IS
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 -
Computer itself and its peripheral equipment: input, output, storage devices;
includes data communication equipment
• Software -
Sets of instructions that tell the computer how to input, process, output and
store data
• Communication
networks - Hardware and software specializing in transmission and
reception of electronic data
• People -
IS professionals and users who design, construct, operate and maintain IS
• Procedures -
Rules to process data, e.g. priorities in running different applications,
security measures, routines for malfunctioning IS, etc.
6. 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
o
End users
o
IS specialists
•
Hardware Resources
o
Machines
o
Media
•
Software Resources
o
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: Excel
Example 2: email system. To use an email system (software), people buy
computers.
o
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:
o Data vs.
Information
1. 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."
2.
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:
o Communications
media
o
Communications processors
o Network
access & control software
7.
Why Information Systems?
Ask managers to describe
their most important resources and they'll list money, equipment, materials,
and people - not necessarily in that order. It's very unusual for managers to
consider information an important resource and yet it is. The following will
explain why you need to manage this resource as closely as any other in the
organization.
The Competitive Business Environment
In today’s world computers are all over
the organization - one on every desk. It's not enough for you to know how to
pound a keyboard or click a mouse. It is not even enough for you to know how to
surf the Web. Now every employee, including you, must know how to take advantage
of Information Systems to improve your organization and to leverage the
available information into a competitive advantage for your company.
Emergence of
the Global Economy
Next time you purchase a product, any
product, look at the fine print and see where it's made. It could be China, or
the Philippines, or India, or even in the USA. You can disagree with the many
manufacturing jobs that are being moved from the U.S. to foreign countries. But
look at the vast number of jobs that are being created in this country. Maybe
they aren't the traditional factory jobs we're used to. In fact, many of our
new jobs are in the information industry. Many of them service whole new
markets that didn't exist just a few years ago. There was no position called "Webmaster"
in 1991 because the Web didn't exist. But now, that particular job category is
one of the fastest growing in the overseas. The global economy is being made
possible by technology. And that's why it's so important that you understand
how to use Information Systems Technology instead of just computer technology.
Transformation
of Industrial Economies
"In a knowledge- and
information-based economy, knowledge and information are key ingredients in
creating wealth." Think back to the early 1900s when the horse and buggy
were the main form of transportation. Along came a guy named Ford who built a
whole new industry around the automobile. Many jobs, such as horse groomers,
horse shoers, and buggy manufacturers, were lost forever. Now think about all the
new jobs that were created - not just in the factories but all the other
businesses associated with the car. The people in the horse and buggy industry
adapted, retrained for the new jobs, and the whole country changed.
The same thing is happening now with the
information industry. Many of the new jobs that are being created have better
working conditions, better pay, and more advantages than the old jobs had. You
just have to be equipped to take advantage of the situation. You have to take
advantage of retraining opportunities. You have to gain the skills necessary
for the transformation of the industries that have been a mainstay of this
country. It's not that hard - it just takes a lot of hard work.
We often think of industries such as
manufacturing and financial institutions as information-based. But even farmers
and ranchers in this country are learning information-based skills so that they
can become more efficient and cut costs. They are taking advantage of the
technological explosion by using computers and Global Positioning Systems on
their farms and ranches to increase crop yields or reduce workloads. They're
catching on to the idea that Information Systems are a key to success.
Transformation of the Business Enterprise
You can't help but know about the entire
job cuts occurring in our country. It seems like every week we hear about
thousands and thousands of people losing their jobs. Back in the 80s most of
the job losses were in the blue-collar sector. In the 90s it seems many of the
cuts are being made in the white collar, management jobs. Why? Think about it.
Technology, to a large extent, has driven organizations to change the way they
operate and that includes the way they manage. We're going to take an in-depth
look at how organizations work and how they've been transformed by technology.
But it isn't always bad! You just have
to ask yourself this question: "With all the job losses in the last few
years, many driven by technological changes, why has the Indian unemployment
rate dropped to it's lowest in decades and remained so low?"
8. Managers
and Information Systems
Managers must take IS in the context of
business activities and purposes and use information as a resource, like money,
equipment or energy.
Managers must use IS to:
• access information
• interprete information
• incorporate information in
decision making
Managers must exploit IS because of:
• rapid changes in
technology
• intense international
competition
• faster product life cycles
• more complex and
specialised markets
Managers:
• are responsible for
investments in IS
• need to be proactive and
selective
• must understand how IS are
used in the functional areas of business.
9.
Business Trends
Changing business environment
- Specialization
- Management by Methodology and Franchises
- Object Orientation
- Decentralization and Small Business
- Temporary Workers
- Internationalization
- Service-Oriented Business
- Re-engineering
- Need for faster responses and
flexibility
Specialization
–Increased
demand for technical skills
–Specialized
MIS tools in demand
–Increased
communication
Methodology & Franchises
–Reduction
of middle management
–Increased
data sharing
–Increased
analysis by top management
–Re-engineering
is done for making business processes effective and efficient.
Decentralization & Small Business
–Communication
needs have increased
–Lower cost
of management tasks is needed
–Low
maintenance of technology is required
Temporary Workers
–Managing
through rules
–Finding and
evaluating workers
–Coordination
and control
–Personal
advancement through technology
–Security:
Importance of security has increased.
Internationalization has bought in
–Communication
improvement
–Product
design focus
–System
development and programming importance
–Sales and marketing.
Service Orientation
–Management
jobs are information jobs
–Customer
service requires better information
–Speed
10. Global
Perspective:
Many organizations are expanding their operations
beyond national borders. There is a need to have an integrated information
system. Organizations do not have to a “head office” located in any one
country. Information technology allows for communications and information
dissemination between these offices. Networks and communications allow
information to move around the globe unimpeded.
Business
Perspective:
Organizations: We must understand the nature, the
purpose, and the structure of the organizations that will use the IS.
People: We must understand how they use the
IS, why they use the IS, and it affects their jobs and daily activities
Technology: We must understand the capabilities,
limitations, and functionality of the technology that underlies the IS.
Summary:
Information Literacy is more than just clicking a mouse, pounding the
computer keyboard, or surfing the Web. It's about integrating various elements
of an organization, technical and non-technical, into a successful enterprise.
As a successful manager you must concentrate on all three parts of the
Information Systems triangle (hardware, software, and people) and integrate
them into a single, cohesive system that serves the needs of the organization,
the wants of the customer, and the desires of the employees. The more complex,
the harder to manage, but the greater the payoff.
Assignment 1:
Case 1 Each morning, you are
supposed to submit a daily report to the headquarters. In the report, you
should include the total sales made in Mumbai yesterday, and sub-total of each
category (encyclopedia, children's books, etc.). • At the end of each day, a
salesperson submits his sales record to the Mumbai regional office. • The
record is added to compute the total sales, and also summarized in terms of
book category.
• The total sales, and
sub-total sales in terms of book category, are presented in the daily report. •
Here, the daily record submission indicates "INPUT" in a system. •
Adding and summarizing indicates "PROCESSING" in a system. •
Reporting indicates "OUTPUT" in a system.
Case 2: • In order to
increase sales, you decided to implement a kind of performance evaluation
program, which is intended to motivate and discipline the salespersons under
your supervision. • According to the program, if a salesperson makes daily
sales greater than one million, he will be awarded a gift certificate of Ebony
Department Store. On the other hand, if a salesperson makes daily sales less
than one hundred thousand rupees, he will be given a warning. If he makes a
sales less than one hundred thousand rupees two days in a row, a more serious
warning letter will be sent to him. If he makes sales less than one hundred
thousand rupees three days in a row, he will be fired. • If you manually check
all the sales records to comply the new performance evaluation program, most of
your time will be occupied by processing the data and paperwork. • In other
words, you will have no time to do anything else: reading a new book, learning
new things, or playing golf, etc. • In contrast, if you develop an information
system that can carry out the performance evaluation program, your life will be
much easier. The program is now automated with a computer-based information
system.
* A major difference between
this new system in Case 2 and the previous system in Case 1 is that feedback
and control functions are added to the new information system.
System
Concept:
1.
Systems Concepts
Let us see the
very simple meaning of any system. A system is a set of inter-dependent
components (some of which may be systems in their own right), which
collectively accomplish certain objectives.
In other terms
we can say that a system is an integrated set of components, or entities, that
interact to achieve a particular function or goal. Systems have characteristics
such as boundaries, outputs and inputs, methods of converting inputs into outputs,
and system interfaces. Systems are composed of interrelated and interdependent
subsystems.
Examples of systems are all
around us-in fact; an excellent example is your class. The components of the
classroom situation, including an instructor, the students, textbooks, and
facilities, all interact to make the accomplishment of learning goals possible.
Example: A Classroom System
A business is also a system.
A business uses resources such as people, capital, ma-terials, and facilities
to achieve the goal of making a profit. Business procedures, such as order
handling, marketing research, financial planning, and manufacturing, are the
interactions that need to be managed to achieve this objective.
2. Components of a system which are common to all kinds
of system.
2.1 System Boundaries
Every system has a boundary
that defines its scope of activities. For example, the ac-tivities in your
class include lectures, discussion, continuous evaluation, grading, and
preparation of assigned course work. These activities may represent the
boundary of the system for which a teacher is responsible. Within the system of
the classroom, the teacher is responsible for organizing class time, assigning
homework to students, and evaluating student progress. The boundary, then,
delineates an area of responsibility. When defining a system, you must
establish a boundary.
2.2 Systems and Sub Systems
Systems may consist of
numerous subsystems, each of which has elements, interac-tions, 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.
2.3 Outputs and Inputs
The inner workings of a
system or subsystem are organized to produce outputs from inputs. In this
conversion process, some value or utility should be added to the inputs. For
example, a training program should produce trained employees with certain
skills, knowledge, or behavior from its inputs-untrained employees
The outputs of one subsystem
usually become inputs into the next. The outputs of a course in introductory
data processing concepts, for instance, become inputs into the next course in
Java programming.
As you would expect, the
outputs of a subsystem have to adhere to certain standards to be acceptable to
the next. If students coming out of the introductory data processing course
don't understand basic concepts of file organization and file processing, they
won't have the prerequisite skills needed for Java. If they were not permitted
to enter Java until they meet certain standards, though, the problem would be
alleviated. The more exactly standards are adhered to; the easier it will be to
interface the two courses, or subsystems.
2.4 Subsystem Interface
An interface is a connection
at system or subsystem boundaries. An interface serves as a medium to convey
the output from one system to the input of another system. An example will help
clarify this concept. Two typical business systems that interface with each
other are inventory control and purchasing. If inventory levels drop below a
certain level, then additional stock of these items should be purchased.
Purchasing will need to know what quantity of a particular item to obtain to
replenish the stock and information on sales and inventory turnover to learn
which items are in greatest demand so these items can be replenished on a
timely basis. An inventory control system will provide information on stock to
be reordered based on sales and inventory turnover trends.
However, if the inventory
control subsystem triggers erroneous information about the amount of stock to
be reordered, then inputs into purchasing will be wrong. This problem can be
partially overcome by establishing an economic order quantity, or the quantity
of an item that is most economical to buy, for each item in inventory. This
quantity, derived from order history and inventory turnover rate, can serve as
a standard and prevent reordering too much or too little stock.
2.6 System and its
Environment
The system's environment
consists of people, organizations, and other systems that supply data to or
that receive data from the system. Not surprisingly, different managers
perceive the environment differently. A sales manager, for example, may
envision the system environment to be the company's customers and vendors of
the products and services being marketed. On the other hand, the owner of the
business may perceive the environment to include the firm's competitors,
financial institutions that provide resources for expansion, and government
agencies with jurisdiction over company plans and products. Moreover, various
kinds of systems may interact with the environment in different ways.
2.7 System Feedback
A system needs feedback to
do its job. Feedback is an indicator of current perfor-mance rates when
compared to a set of standards. With effective feedback, continuing adjustments
in the activities of a system can be made to assure that the system achieves
its goals. Measuring performance against a standard is an effective control
mechanism. Employees need feedback to learn how well they are achieving job
goals. Students receive grades or other kinds of evaluations from instructors
that show whether the students are meeting course objectives.
The good thing about
feedback is that it usually increases effort. For example, tennis players often
perform better when they are keeping score. When salespeople receive positive
feedback, it increases their motivation to achieve a sales quota. Negative
feedback may also serve a useful purpose. Negative feedback is designed to
correct or guide activities that are not consistent with achieving the goals of
the system. If salespeople are not achieving quotas, they may want to rethink
current sales techniques or reorganize their time. Similarly, if students
receive low grades, they may need to improve study habits, obtain tutoring, or
enroll in courses that better match their abilities or backgrounds.
2.8 System Entropy
Systems can run down if they
are not maintained. Systems entropy corresponds roughly to chaos or disorder -
a state that occurs without maintenance. If employees do not have opportunities
to learn new concepts and techniques, the skills they apply to performing job
tasks will become out of date. The process of maintaining a system is a process
of decreasing entropy or increasing orderliness. Sending automobile mechanics
to training classes to learn new diagnostic techniques is an example of
decreasing entropy. Orderliness can be achieved through preventive maintenance
checks, such as a yearly physical examination for an employee or a routine
tune-up for an automobile, and then taking action as a result of these regular
checks. These checks provide valuable feedback to help detect faults or
problems when none have been anticipated. Diagnostic tools for equipment and
machinery help prevent downtime, which may cause delays in production and cost
thousands of dollars in lost business.
2.9 System Stress and Change
Systems change over time.
Some of these changes occur because of identified problems, new business
opportunities, and new management directives. Systems may also change as a
result of stresses. The achievement levels needed to meet existing goals may
change. For example, because of reduced profit margins on sales, a division
sales manager may insist on a sales increase of 10 percent instead of 7 percent
to achieve the same profits. The tendency is to localize the stress so that
only one subsystem, in this case the division sales force, feels most of the
pressure for adjusting to new demands.
It is easier to deal with
change within one subsystem than within the total system because stress may
require rethinking existing work methods and organization. In this case the
sales manager may have to develop more effective procedures to improve the
profitability of sales. The sales manager may recommend cutting down calls to
smaller customer accounts and substituting telemarketing to service their
needs. Salespeople might need to reallocate their time so they can pay special
attention to customers who purchase the most profitable product lines and
encourage customers who purchase less profitable lines to look at high-margin
products. All these procedures require a close analysis of the current system,
changes in work procedures, and effective time management.
3. Systems
concepts in Business
Now that you have a general picture of how a system works, it will be
helpful to look more closely at business systems. The systems approach is a way
of analyzing business problems. This approach views the business organization
as a system of interrelated parts designed to accomplish goals. Each subsystem
is both a self-contained unit and a part of a larger system. Managers must
understand the goals of the total system and design the function and subsystems
within the total system to accomplish the goals.
More specifically, management is the practice of organizing resources
including people, materials, procedures and machines to achieve objectives. In
other words, it entails organizing subsystems to accomplish specific tasks.
Using a system approach, a manager organizes various activities of the business
into separate organizational subsystems.
To consider an example, the market research subsystem of the business may
obtain information from the customers about modifications that about to be made
in the firm’s products and services. The market research subsystem can transmit
this information to the manufacturing subsystem that builds product design
changes into its processes. Finally, the marketing subsystem sells the finished
products to the customers. If technical problems occur, the service subsystem
may need to provide follow-up support. The interactions among these functional
subsystems are depicted in the following figure.
Systems concept in Business:
An
information system consists of components that interact to achieve the
objective of providing information about day-to-day activities that managers
can use to control business operations. Information systems can also provide
information to enable managers to allocate resources and establish long-range
business plans. An information system contains such elements as hardware,
software, personnel, databases, and procedures to accomplish its objectives.
The hardware consists of the computer and computer-related activities. Software
consists of the instructions that the hardware uses to process information.
Software includes both application software and system software. Application
software consists of the programs written to support specific business
functions, such as order entry, inventory control, and accounts receivable.
System software enables the hardware to run application software. System
software consists of the programs that handle such functions as sorting data,
converting programs into the machine language the computer can understand, and
retrieving data from storage areas.
Some basic
concepts & strategies in the study of systems
Abstraction:
We have developed an exceptionally powerful technique for dealing with
complexity. We abstract from it. Unable to master the entirety of a complex
object, we choose to ignore the inessential details, dealing instead with the
generalized, idealized model of the object.
Formality:
Rigor at each stage in the development of a system.
Divide
and conquer: Divide a complex problem into a set of simpler problems that
can be solved.
Hierarchical ordering: Order the simplification of the problem in ``divide &
conquer" in hierarchies.
Cohesion & coupling: Modularise the system such that interactions within
components (cohesion) is maximised and interactions between components
(coupling) is minimised. This way, the impact of errors, when they arise, is
localised and does not cascade through the system. Diagnosis of offending
components is also made easier.
Information hiding: Each module (or subsystem) must have available to it just the
information that is needed by it. Similarly only the person authorized to see
the information should be able to see it.
Conceptual integrity: Consistency in design, formation, reporting(Similar to
formality)
Completeness: Ensuring that the design meets all the specifications.
Logical independence: Emphasis on the statement of system objectives in terms of logical
functions independent of physical implementation.
Correctness & Efficiency:
Correct in the sense that the design meets all the user requirements. Efficient
is that the system accomplishes the objectives with minimum computing
resources.
6. Information System &
Organization:
Types of Information Systems
Information
systems can be classified in many ways, but for our purposes here, we will
consider their classifications based on the mode of processing, on the system
objectives, and on the nature of interaction of the system with its
environment.
7.1
Classification by mode of processing
• Batch processing systems: The
transactions are collected as they occur, but processed periodically, say, once
a day or week.
• On-line batch systems: The
transaction information is captured by on-line data-entry devices and logged on
the system, but it is processed periodically as in batch processing systems.
• On-line Real-time systems: The
transaction data capture as well as their processing in order to update records
(and generate reports) is carried out in real-time as the transaction is taking
place.
7.2
Classification by System Objectives
• Transaction Processing Systems:
Their objective is to process transactions in order to update records and
generate reports, i.e., to perform score-keeping functions.
• Decision Support Systems:
Their objective is to support the managerial decisions. Usually, these systems
are based on a model of the decision-making domain, and utilize techniques from
management science, finance or other functional areas of business in order to
build such models. These systems are also used often for attention-directing
purposes, i.e., for directing the attention of managers to a problematic aspect
of operations.
• Expert Systems: These systems
incorporate expertise in order to aid managers in diagnosing problems or in
problem solving.
7.3
Classification based on the nature of interaction with environment
• Transformational Systems:
These are systems that transform inputs received from the environment in order
to generate reports (output).
• Reactive Systems: These are
systems characterized by being, to a large extent, event-driven, continuously
having to react to external and internal stimuli.
The components
of accounting systems such as payroll, general ledger are, usually batch
processing systems, and also transaction processing systems that are
transformational systems. Systems for determination of sample sizes for audit
testing, on the other hand may be decision support systems. Systems aiding
provision for doubtful accounts (or loan loss reserves for financial
institutions) may be expert systems.
8. Components of specifications
Specification of an information system is given by their:
• Structure: How it is organised.
• Function: What it does.
• Behavior: How it responds to events and stimuli.
• Data: Its meaning and organization.
Most tools co-ordinate information systems projects through a project or
system dictionary. The function of the dictionary is to standardise the use of
terms throughout the organisation and to serve as a repository of all common
information in the project. It enforces consistency as well as (relative)
completeness of the specifications, and facilitates verification &
validation of such specifications. It also serves as a means of communication
between the different persons on the information systems building team.
9. Systems approach in problem solving.
The systems approach is a valuable method of
problem solving that takes into account the goals, environment, and internal
workings of the system. The systems approach to problem solving involves the
following steps:
Define the problem.
Gather data describing the
problem.
Identify alternative
solutions.
Evaluate these
alternatives.
Select and implement the
best alternative.
Follow up to determine
whether the solution is working.
We
can understand how the systems approach works by applying it to a problem that
the microcomputer dealer might experience.
Define
the Problem The first step in the systems approach to problem solving is to
define the problem. Defining the problem is one of the most important parts of
the system study, because if the wrong problem is identified, the entire effort
to change the system will be off track. At the outset, some of the problems
that are identified may be symptoms of the real problem. In order to
distinguish between symptoms and problems, it is necessary to gather data
describing the problem. Let's say that in this case the owner is concerned
about the fact that many of the salespeople are not meeting their quotas. She
decides to start a systems study by collecting more information about the
problem. Gather data describing the problem The owner may study the
environment, current standards, management, input re-sources, and internal
procedures to gain an understanding of the problem. The first place the owner
might look is the environment. The environment of the microcomputer dealer
includes its vendors, its customers, its competitors, and the local community.
From this investigation, the owner might learn that local competitors are
selling comparable microcomputers at prices 10 percent to 15 percent less the
firm can offer. Next, the owner might look at the dealership's standards to
determine if they are valid in the face of the competitive environment. It
might turn out that a goal of increasing gross sales by 10 percent for the year
is unrealistic when the competition is cutting prices. Another area the owner
can analyze is management. The owner needs to learn if the sales manager
is doing a good job. If the sales manager is not providing salespeople with
effective training and feedback regarding their performance, they may feel
frustrated. Input resources are another area that should be analyzed. The owner
needs to find out if new sales and technical representatives are being
recruited and if these employees are trained to demonstrate computer equipment
and software. If new recruits lack knowledge of the technical features of the
equipment, for example, they will fail to win new business. If sales materials
are not kept up-to-date, customers may not learn about new product features.
Work methods and procedures also need to be studied. If salespeople are not
trained to follow up on new prospects, the company could lose valuable
business. If technical support personnel cannot diagnose and solve service
problems on a timely basis, customers may hesitate to purchase more equipment.
One of the major problems identified in this case is that competitors are
charging lower prices for comparable products. Many of the difficulties the
dealer has identified are symptoms of this fundamental problem. To address it,
the owner has to identify and evaluate some alternatives.
Identify
Alternative Solutions Given the fact that competitors have dropped their prices
on comparable microcom-puters, the owner needs to identify some alternatives
responses. These alternatives might include the following:
Alternative 1: Investigate alternative manufacturers of microcomputers to obtain
products at a lower cost per unit.
Alternative 2: Decrease the cost of sales by introducing mail-order sales supported
by telemarketing. Use salespersons for large accounts only. Cutting the cost of
sales efforts would make it possible to reduce machine prices to a more
competitive level
Alternative 3: Differentiate the dealership's products by offering on-line diagnostic
support services for machine failure, service response time within 5 hours on a
24-hour basis, and annual service checks. Each alternative supports a slightly
different strategy. Finding lower-cost manu-factured goods represents a
cost-cutting strategy. The second alternative, using mail order sales and
telemarketing, also supports a low-cost strategy because the cost of mail-order
sales would be less than the cost of a large sales staff. Finally, introducing
on-line diagnostic support services provides a "value added" feature.
Upgraded technical support would justify slightly higher equipment costs.
Evaluate
the Alternatives The owner evaluates the extent to which each alternative
enables the organization to achieve its objectives. As we saw, the owner's
objective was to increase the overall performance of sales personnel.
Purchasing lower-cost products from suppliers would enable the owner to cut
prices, as suggested in the first alternative, but would create difficulty at
the service end if these microcomputer products were less reliable. This
strategy might make it more difficult for salespeople to meet their objectives.
Introducing a mail-order program would cut the cost of sales overhead. How
ever, the mail-order program would require creating a database of customer
prospects and developing specialized promotional materials. This strategy might
free sales representatives to concentrate on direct sales to high-potential
accounts while using a less costly strategy to maintain the business of smaller
accounts. The final alternative would offer customers additional levels of
service and technical support that add value to the firm's products. Because
service is one of the key criteria for microcomputer selection, this strategy
might work. However, it is costly and might not satisfy the needs of
economy-conscious small businesses that represent a large potential market
share.
Select
and Implement the Best Alternatives Let's say that the owner decides to develop
and implement a mail-order program to re-duce the cost of sales overhead to
smaller accounts and to enable sales personnel to focus on high potential
accounts. This new strategy would require the owner to recruit new customer
service representatives or train current employees for telemarketing. The owner
would also have to develop and establish customer prospect databases, as well
as a system for shipping merchandise, billing, and authorizing credit
transactions.
Follow
up to determine whether the solution is working The last step in the systems
approach to problem solving is follow-up. In the case of the mail-order sales
alternative, the owner needs to determine if the system is meeting its goals.
If not, she has to make changes in management, standards, resources, and
procedures to achieve the objectives. If either one of the other two
alternatives is selected, the owner also needs to follow up to determine if the
approach is improving sales. As you can see from this example, the systems
approach to problem solving is an important technique for the manager. Every
manager needs feedback to determine if the goals of the system are being
achieved. One of the most difficult tasks in a systems study is identifying
information that managers can use to determine how the system is working. This
problem is as true in an organization with a simple structure as it is in a
more complex organization. The next section discusses the characteristics of
organizations with various structures.
10
Summary
Systems
concepts provides a foundation for understanding information systems in general
and management information systems in particular. Managers have to understand
systems, their objectives, their components, and their activities. Information
about how a system is working provides tem with the feedback they need to
allocate resources to achieve their business objectives. Depending on the
objectives of a system, its components, standards, and interactions may differ.
We have seen that an information system provides feedback about the activities
of the business. Information Systems have the same characteristics as the other
systems, including inputs and outputs, processes hat transform inputs into
outputs and methods of system control. In designing an information system, the
outputs must be defined to provide feedback for the business system. Managers
use this feedback to reorganize, simplify, and improve activities in the
business system so that the system can achieve goals more effectively. In the
information-based organization, managers must define their information needs and
use information as feedback.
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