DATA ANALYSIS AND INFORMATION SYSTEM

Course description
Introduction to Information Systems,Organizational role and impact of Informa- tion
System,strategic role of information Systems,Computers,information process- ing and
Technology,Managing Data resources,Telecommunication and Networks
.Internet,Electronic Commerce and electronic Business,Redefining the organization
with information System,Business application and the Internet.Enhancing manage-
ment Decision Making,Global Information Systems.

Prerequisite: None

Course aims
This course examines the fundamental principles associated with the strategic adop-
tion,implementation,use and evaluation of information systems in Organizations.

Learning outcomes
Upon completion of this course you should be able to;

1. Analyze the business issues, processes and techniques associated with

organizational information systems.

2. Assess and explain global issues surrounding the adoption of information

technology.

3. Explain the basic concept about information systems development,

implementation and review

4. Identify critical issued faced by the MIS profession.

Instruction methodology
Lectures and tutorials, Case studies, individual and Group Assignments and Journal
articles

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Contents
1 Introduction to Management Information System 1
1.1 Introduction ............................................................................................ 2
1.2 What is an Information System? ........................................................... 3
1.2.1 A Business Perspective on Information System. ........................6
1.3 Contemporary Approaches to Information Systems. ............................. 8
1.4 The New Role of Information Systems in Organization. ........................9
1.5 New options for Organizational Design: The networked Enterprise. ... 10
1.6 Summary ............................................................................................. 11

2 The Strategic Role of Information Systems 13

2.1 Introduction .......................................................................................... 13
2.2 Different kinds of System? .................................................................. 13
2.2.1 Six Major Types of System ...................................................... 15
2.3 The Strategic Role of Information Systems .......................................... 15
2.3.1 What is a Strategic Information System? ................................. 15
2.3.2 Countering Competitive Forces(Competitive Forces Model). 17
2.4 Leveraging Technology in the Value Chain (Value Chain Model) ...... 19
2.4.1 Difficulties in building and sustain strategic information sys-
tem include .............................................................................. 20
2.5 How Information Systems Promote Quality ........................................ 20
2.5.1 How Information Systems Contribute to Total Quality Man-
agement. .................................................................................... 21
2.6 Summary ............................................................................................. 21

3 Major types of information systems 24

3.1 Operational Level of Information System.............................................. 25
3.2 Knowledge Level Information Systems ................................................ 28
iv
3.3 Management Level Information Systems. .......................................... 30
3.4 Strategic Level Information Systems ................................................... 33
3.5 Relationship of Systems to One Another: Integration ........................ 34
3.6 Summary ............................................................................................. 34

4 INFORMATION SYSTEMS, ORGANIZATIONS AND MANAGE-

MENT36
 4.1 Organization and Information Systems ................................................ 36
4.2 What is an Organization ........................................................................38
4.2.1 Why organizations are so much alike and why organizations
are so different ........................................................................ 39
4.3 The Changing Role of Information Systems ....................................... 41
4.4 Why Organizations Build Information Systems ................................. 42
4.5 The Role of Managers in the Organization .......................................... 43
4.6 Managers and Decision Making ......................................................... 44
4.6.1 The Process of Decision Making..............................................44
4.7 Summary ............................................................................................. 46

5 Technical foundations of information systems48

5.1 What is a computer system? .................................................................. 48
5.2 Information Systems Software.............................................................50
5.3 Managing data resources ..................................................................... 50
5.3.1 Problems with traditional file environment .............................. 50
5.3.2 Database environment ............................................................ 51
5.4 Three major types of database models ................................................ 51
5.5 Telecommunications and Networks ................................................... 52
5.5.1 Components and functions of a telecommunication system. 52
5.5.2 Communication Networks.......................................................53
5.6 Summary ............................................................................................. 54

6 Redesigning the organization with information systems56

6.1 Systems as Planned Organizational Change ....................................... 57
6.1.1 Establishing Organizational Information Requirements. ......... 57
6.1.2 Systems Development and Organizational Change. ...............59
6.1.3 The Spectrum of Organizational Change ................................. 59

6.2 System Development Process ............................................................... 61

6.3 Building successful systems .................................................................. 61
6.4 Approaches to Systems-Building ..........................................................63
6.5 Summary ............................................................................................. 63

7 Managing knowledge and resources.65

7.1 Knowledge Management in the Organization........................................ 65
7.2 Information and Knowledge Work Systems ....................................... 67
7.2.1 Distributing Knowledge: Office and Document Manage-
 ment Systems ............................................................................67
7.2.2 Creating Knowledge: Knowledge Work Systems .................. 68
7.2.3 7.2.3 Sharing Knowledge: Group Collaboration Systems
and Intranet Knowledge Environments .................................... 69
7.3 Artificial Intelligence ........................................................................... 70
7.3.1 What is Artificial Intelligence?.............................................. 70
7.4 Summary ............................................................................................. 75

8 Enhancing management decision making 77

8.1 Decision Support System ..................................................................... 77
8.1.1 Decision Support System and Management Information Sys-
tem .......................................................................................... 77
8.1.2 Types of Decision-Support Systems ........................................78
8.1.3 Components of DSS ............................................................... 78
8.1.4 Web-based DSS ........................................................................ 79
8.2 Group Decision-Support System ......................................................... 79
8.2.1 What is Group Decision-Support System (GDSS)? ............... 79
8.2.2 Characteristics of GDSS ..........................................................80
8.2.3 Executive Support Systems (ESS) ...........................................81
8.3 Summary ............................................................................................. 82

9 Information systems security and control. 84

9.1 System Vulnerability and Abuse ......................................................... 84
9.1.1 Why Systems are vulnerable? ................................................ 85
9.1.2 Concerns for System Builders and Users ................................. 86
9.2 Creating a Control Environment ......................................................... 87

9.2.1 General controls: ..................................................................... 87

9.2.2 Application Controls ............................................................... 88
9.3 Summary ............................................................................................. 90

10 Business Applications in the internet and

E-Commerce 92
10.1 Electronic Business, Electronic Commerce, and the Emerging Dig-
ital Firm.................................................................................................92
10.1.1 Internet Technology and the Digital Firm .............................. 92
10.2 New Business Models and Value Propositions. .................................... 93
10.2.1 The Changing Economics of Information: .............................. 93
 10.2.2 Internet Business Models ......................................................... 94
10.3 Electronic Commerce ........................................................................... 94
10.3.1 Categories of Electronic Commerce ..........................................96
10.3.2 Business-to-Business Electronic Commerce: New Efficien-
cies and Relationships ............................................................ 99
10.4 Electronic Commerce Payment Systems. ........................................... 100
10.5 How Intranets Support Electronic Business ......................................... 102
10.5.1 Intranet Applications for Electronic Business. ...................... 102
10.5.2 Business Process Integration ................................................. 103
10.5.3 Challenges of E-Commerce and Online Business transaction.103
10.5.4 How to safe guard E-Commerce Processes ............................ 105
10.6 Summary ........................................................................................... 110
Solutions to Exercises ......................................................................... 112
AGEC 360- Data Analysis and Information System

LESSON 1
Introduction to Management Information System
Learning outcomes
Management of Information systems skills are passed to the student. At the end of
this unit of study, the student should be able to:

• Recognize the various Information Systems (IS) strategies and IS manage-

ment models.

• Distinguish the various types of Information Systems.

1.1. Introduction

1.2. What is an Information System?

Information system consists of physical and nonphysical components working to-
gether. A computer alone is not an information system. A computer combines with
a software program may constitute an information system, but only if the program
is designed to produce information that helps an organization or person to achieve
a specific goal. Information system can be further defined as a set of interrelated
components that collect or retrieve, process, store and distribute information to sup-
port decision making and control in an organization. Information systems can also
help managers and workers to analyze problems, visualize complex subjects and
create new subjects. It may contain information about significant people, places
and things within the organization or in the environment surrounding it.
All information systems (IS) operate in the same basic fashion whether they include
a computer or not. However, the computer provides a convenient means to execute
the four main operations of an information system. The four main activities are
entering data into the IS (input), changing and manipulating the data in the IS (data
processing), getting information out of the IS (output) and storing data and informa-
tion (storage). Besides the four main operations, feedback is also needed to return
the output to the appropriate people or activities in the organization to evaluate and
refine the input.
The first step in producing information is collecting and introducing data into the
IS, which known as input. Input captures or collect raw data from within the organi-
zation or from its external environment. Data are streams of raw facts representing
events occurring in organizations or the physical environment before they have been
organized and arranged into a form that people can understand and use. An input
device is the tools used to enter data into an IS. Input devices include the keyboard,
infrared devices that sense bar codes, and voice recognition systems.
The second step in producing information is processing. This is the step where
computer contributes to the efficiency of the data processing, which is essential
to a robust IS. In this step, computer helps in converting the raw input into a more
meaningful form through various methods like conversion, manipulation and analy-
sis. The computer’s speed and accuracy let organizations process millions of pieces
of data in several seconds. Output is the information an IS produces and displays
on an output device in the format most useful to an organization. Information is
data that have been shaped into a form that is meaningful and useful to human be-
ings. A good IS must be able to produce information that carries the following
characteristics:

• Relevant – information must pertain to the problem at hand.

• Complete – partial information is often worst than no information.

• Accurate – erroneous information may lead to disastrous decisions.

• Current – decisions are often based upon the latest information available.

• Economical – in a business setting, the cost of obtaining information must be

considered as one cost element involved in any decision.

The information needs to be transferred to the people or activities where it will be

used. The most widely used output device is the video display, or video monitor,
which displays output visually.
One of the greatest benefits of using computers is their ability to store vast amount
of data and information. Computer stores information on both devices that are
internal to the machine and those that are external. Feedback is output returned to
appropriate people or activities in the organization to evaluate and refine the input.

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The four basic components of the computer system within an IS:

• Input device that introduces data into the IS.

• The computer processes data through the IS.

• Output device that displays the information produces by the IS.

• Storage device to store data and information.

In addition to the above components, communication also occurs between com-

puters. Communications technology enables users not only access multiple input,
output and storage devices with a single computer, but access data and resources of
more than one computer as well.

1.2.1. A Business Perspective on Information System.

From a business perspective, an information system is an organizational and man-
agement solution, based on information technology, to a challenge posed by the
environment. It emphasizes the organizational and management nature of informa-
tion system: To understand information system
• to be information system literate as opposed to computer literate

• a manager must understand the broader organization, management and infor-

mation technology dimensions of systems and their power to provide solu-
tions to challenges and problems in the business environment .

The key elements of an organization are its people, structure and operating proce-
dures, politics and culture. An organization coordinates work through a structured
hierarchy and formal standard operating procedures (SOPs). SOPs are formal rules
for accomplishing tasks that have been developed over a long time. These rules
guide employees in variety of procedures. Most of the procedures are formalized
and written down, but many others are informal work practices. Major organiza-
tional functions are like sales and marketing, manufacturing, finance, accounting
and human resources
Management’s job is to make sense out of many situations faced by organization
and formulate action plans to solve organizational problems. Information tech-
nology can play a powerful role in redirecting and redesigning the organization.
Managerial roles and decisions vary at different levels of the organization.

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 Figure 1.2: Information System Environment.

• Senior managers – make long-range strategic decisions about products and

services to produce.

• Middle managers – carry out the programs and plans senior management.

• Operational managers – responsible for monitoring the firm’s daily activities.

Information technology is one of many tools available to managers for coping with
change which consists of computer hardware, computer software, storage
technology and communication technology. Computer hardware is physical
equipments used for input, processing and output activities in an information
system. Computer software is detailed, preprogrammed instructions that control
and coordinate the work of computer hardware components in an IS. Storage
technology is physical media and software governing the storage and organization
of data for use in an IS. Lastly, communication technology is physical devices and
software that link various computer hardware components and transfer data for use
in an IS. A network links two or more computers to share data or resources such as
printer.

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 Figure 1.3: Multidisciplinary fields of Information Systems.

1.3. Contemporary Approaches to Information Systems.

Multiple perspectives on IS shows that the study of information systems is a mul-

tidisciplinary field, where no single theory or perspective dominates. Figure 1.3
shows the major disciplines that contribute problem, issues and solutions. In gen-
eral, the field can be divided into technical, behavioral and socio-technical ap-
proaches.
Technical approach emphasizes mathematically based, normative models to study
information systems as well as the physical technology and formal capabilities of
these systems. Three disciplines that contribute to this approach are Management
Science, Computer Science and Operation Research.
Behavioral approach is more concern with development and long-term maintenance
of information systems, which emphasizes on issues like strategic business integra-
tion, design, implementation and utilization. Three disciplines that contribute to
this approach are Psychology, Economics and Sociology.

Socio-technical approach avoids a purely technological approach to information

systems. This approach stress the need to optimize the performance of the system
as a whole where both the technical and behavioral components needs attention,
which means that the technology must be changed and designed in such a way as to
fit organizational and individual needs meanwhile organization and individual must

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 Figure 1.4: Relationship between organization and Information System

also be changed through training, learning and planned organizational change in

order to allow the technology to operate and prosper.
1.4. The New Role of Information Systems in Organization.
The new relationship (as illustrated in Figure 1.4) between organization and IS
shows that there is a growing interdependence between organizational business
strategy, rules and procedures on the one hand and information system software,
hardware, databases and telecommunications on the other. The changes in strat-
egy, rules and procedures require changes in hardware, software, databases and
telecommunications. This relationship becomes critical when management plans
for the future.
A second change in the relationship of IS and organizations results from the grow-
ing complexity and scope of system projects and applications. Over time, informa-
tion systems have come to play a larger role in the life of the organization. Early
information systems brought about largely technical changes that were relatively
easy to achieve and accomplish and affects few people. Later systems affected
managerial control and behavior (who has what information about whom, when
and how often); ultimately systems influenced “core” institutional activities (what
products and services are produced, under what conditions and by whom) concern-
ing products, markets, suppliers and customers.

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1.5. New options for Organizational Design :The networked Enterprise.
The explosive growth in computing power and networks is turning organizations
into networked enterprises, allowing information to be instantly distributed within
and beyond the organization. This capability can be used to redesign and reshape
organizations, transforming their structure, scope of operations, reporting and con-
trol mechanisms, work practices, work flows, products and services. The following
describes the new ways of conducting business electronically.
Flattening organizations will results in fewer levels of management, with lower-
level employees being given greater decision-making authority. Those employ-
ees are empowered to make more decisions than in the past are no longer work
standard 8 hours and no longer necessary work in an office and they can be scat-
tered geographically. Contemporary information technology makes more informa-
tion available to line workers so they can make decisions that previously had been
made by managers. Networked computers have made it possible for employees to
work together as a team. Team members can collaborate closely even from dis-
tant locations. These changes mean that the management span of control has also
been broadened, allowing high-level managers to manage and control more workers
spread over greater distances.
Separating work from location is possible as organizing globally while working lo-
cally is made possible through technologies like e-mail, the Internet, video confer-
encing. Communication technology eliminates distance as a factor for many types
of work in many situations. Collaborative teamwork across thousands of miles has
become a reality designer’s work on the design of a new product together even if
they are located on different continents. Companies are not limited to physical lo-
cations or their own organizational boundaries for providing products and services.
Virtual organization becomes reality where organization using network linking peo-
ple, assets and ideas to create and distribute products and services without being
limited by traditional organizational boundaries or physical location.
Reorganizing work flows as IS have been progressively replacing manual work pro-
cedures with automated work procedures, work flows and work processes. Im-
proved work flow management enabled many organizations not only to cut cost
significantly but also to improve customer service at the same time.
Increases flexibility of organization as companies uses communication technology
to organize in more flexible way, increases their ability to respond to changes in the

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marketplace and to take advantage of new opportunities. Large organization can use
information technology to achieve some of the agility and responsiveness of small
organizations like mass customization, the use of software and computer networks
to finely control production so that products can be easily customized with no added
cost for small production runs. The result is a dynamically responsive environment
in which products can be turned out in a greater variety.
Information technology is recasting the process of management, providing powerful
new capabilities to help managers plan, organize, lead and control. For example the
use of Enterprise Resource Planning (ERP) is a business management that integrates
all facets of the business, including planning, manufacturing, sales and finance so
that they can become closely coordinated by sharing information with each other.
Reducing organizational boundaries as networked information system enables trans-
actions to be exchanged electronically among different companies, hence reduc-
ing the cost of obtaining products and services from outside the firm. An inter-
organizational system is a system that automates the flow of information across
organizational boundaries and links a company to its customers, distributors or sup-
pliers.

1.6. Summary
Information system can be further defined as a set of interrelated components that
collect or retrieve, process, store and distribute information to support decision
making and control in an organization.The characters of information systems in-
clude:Relevant,Complete,Accurate,Current, Economical and the components of In-
formation systems include :Input device,computer processes data, Output device,Storage
device.

Revision Questions

Example . Name three components of computer system within an Information

System
Solution:
Input device that introduces data into the IS.

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The computer processes data through the IS.
Output device that displays the information produces by the IS.
Storage device to store data and information. Q

EXERCISE 1. What is information System?

EXERCISE 2. Name three factors that has contributed to the recognition of in-
formation by the organizations?
EXERCISE 3. What are the four main operations of an information system.
EXERCISE 4. Exercise 5. Discuss the characteristics of Information.

Problem. Briefly discuss the problems which may be faced when using database
systems as part of the information system.

References and Additional Reading Materials

• Turban ,E.,McLean, and Wetherbe,J.(2007).Information Technology for Man-
agement:ISBN :978-0-470-91680-3.

• Transforming Organization in the Digital Economy.New York:John Wiley &

Sons.ISBN:0471705225

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LESSON 2
The Strategic Role of Information Systems
Learning outcomes:
Understanding of the need of Information System at different levels of the
organization.
At the end of this unit of study, the student should be able to:

• Recognize the various levels of information system in the organization.

• Understand the strategic role of information system in the organization.

2.1. Introduction

Due to different interests, specialties and levels in an organization, there are

different kinds of systems. No single system can provide all the information an
organization needs. Organization and information systems can be divided into
strategic, management, knowledge and operational level. All the above mentioned
levels of an organization can be further divided into five functional areas: sales and
marketing, manufacturing, accounting, finance and human resources. Figure 2.1
below shows the one way to depict the kinds of systems found in an organization.

2.2. Different kinds of System?

Strategic level systems help senior manager with long-term planning. The principle
concern at this level is matching changes in the external environment with existing
organizational capabilities. It supports the long-range planning activities of senior
management. It also helps the senior management to tackle and address strategic
issues both in the firm and in the external environment. Management level systems
help middle managers monitor and control. It typically provides periodic reports

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 Figure 2.1: Organization levels and information System.

rather than instant information on operations. It supports the monitoring, control-

ling, decision-making and administrative activities of middle managers. Some of
the management level systems support non-routine decision making where they
tend to focus on less-structured decisions for which information requirements are
not always clear.
Knowledge level systems help knowledge and data workers design product, dis-
tribute information and cope with paperwork. The main purpose is to help integrate
new knowledge into the business and to help the organization control the flow of
paperwork. Knowledge level systems, especially in the form of workstations and
office systems are the fastest-growing applications in business today.
Operational level systems help operational manager keep track of the firm’s day-
today activities. The principle purpose is of operational level system is to answer
routine questions and to track the flow of transactions through the organization.

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2.2.1. Six Major Types of System

Information systems are built to serve each of the four levels of an organization
based on the five main functional area of business.

• Transaction Processing Systems (TPS) serve the operational level of an orga-

nization.

• Knowledge Work Systems (KWS) and Office Automation Systems (OAS)

serve the knowledge level of an organization.

• Decision-support Systems (DSS) and Management Information Systems (MIS)

serve the management level of an organization.

• Executive Support Systems (ESS) serves the strategic level of an organiza-

tion.

2.3. The Strategic Role of Information Systems

2.3.1. What is a Strategic Information System?

Strategic Information Systems can be defined as computer systems at any level of
the organization that change goals, operations, products, services or environmental
relationships to help the organization gain a competitive advantage or edge. The
following describes the eight basic ways to gain competitive advantage.
Strategic information systems should be distinguish from strategic level systems for
senior managers that focus on long-term, decision making systems where strategic
information systems can be used at all levels of an organization and are far-reaching
and deep-rooted than the other kinds of systems. Strategic information systems fun-
damentally change a firm’s goals, products, services or internal and external rela-
tionships. In order to use the strategic information systems as competitive weapons,
we must understand where strategic opportunities for businesses are likely to be

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16
 Figure 2.3: Competitive Forces Models

found based on two models of a firm and its environment: the Competitive Forces
Models and the Value Chain Model

2.3.2. Countering Competitive Forces(Competitive Forces Model)

In the competitive forces model (a model used to describe the interaction of ex-
ternal influences, specially threats and opportunities, that effects an organization’s
strategy and ability to compete; as shown in the Figure 2.2), a firm faces a number
of external threats and opportunities:

• The threat of new entrants into its market.

• The pressure from substitute products or services.

• The bargaining power of customers.

• The bargaining power of suppliers.

• The positioning of traditional industry competitors

Competitive advantage can be achieved by enhancing the firm’s ability to deal with
customers, suppliers, substitute products and services, and new entrants to its mar-
ket, which in turn may change the balance of power between a firm and other com-
petitors in the industry in the firm’s favor.
Organization can use four basic competitive strategies to deal with these competi-
tive forces:

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• Product differentiation Firms can develop brand loyalty by product differ-
entiation – creating unique new products and services that can be easily be
distinguished from those of competitors, and that existing competitors or po-
tential new competitors can’t duplicate. Manufacturers are starting to use
information systems to create products and services that are custom-tailored
to fit the precise of individual customers.

• Focused differentiation Businesses can create new market niche by focused

differentiation – identifying a specific target for a product or service that it
can serve in the superior manner. A firm can provide a specialized product
or service that serves this narrow target market better than existing competi-
tors and that discourages new competitors. An information system can give
companies advantage by producing data to improve their sales and marketing
techniques. Sophisticated data-mining software tools find patterns in large
pools of data and infer rules from them that can be used to guide decision
making. Data-mining is both a powerful and profitable tool, but it poses
challenges to the protection of individual privacy. Data-mining technology
combines information from many diverse sources to create a detailed “data
image” about individuals, such as the income, hobbies, driving habit, and the
question here is whether companies should be allowed to collect such detailed
information about individuals.

• Developing tight linkages to customers and suppliers-Firms can create

ties to customers and suppliers that “lick” customers into the firm’s prod-
ucts and that tie suppliers into a delivery timetable and price structure shaped
by the purchasing firm. This raises switching costs (the cost for customers
to switch to competitors’ product and services) and reduces customers’ bar-
gaining power and the bargaining power of suppliers. This is similar to the
just-in-time delivery or inventory systems which reduce the cost of inventory,
the space required for warehousing and construction time.

• Becoming the low-cost producer-To prevent new competitors from enter-

ing their markets, business can produce goods and services at a lower price
than competitors. Strategically oriented information systems help firms sig-
nificantly lower their internal costs, allowing them to deliver products and
services at a lower price (and sometimes with higher quality) then what the

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 Figure 2.4: Strategies used over internet.

competitors can provide. For example, organizations can use supply chain
management to integrate supplier, distributor and customer’s logistics re-
quirements into one cohesive process. Information systems make supply
chain management more efficient by integrating demand planning, forecast-
ing, materials requisition, order processing, inventory allocation, order ful-
fillment, transportation services, receiving, invoicing and payment. Supply
chain management can not only lower inventory costs but also can create ef-
ficient customer response systems that deliver the product or service more
rapidly to the customer.

The following show how the above mentioned strategic can be use over the Internet.

2.4. Leveraging Technology in the Value Chain (Value Chain Model)

The value chain model highlights the primary or support activities that add a mar-
gin of value to a firm’s products or services where information systems can best be
applied to achieve a competitive advantage. The value chain model can supplement
the competitive forces models by identifying specific, critical leverage points where
a firm can use information technology most effectively to enhance its competitive
position. This model views the firm as a series or chain or basic activities that add a
margin of value to a firm’s products or services. These activities can be categorized
as either primary activities or support activities. Primary activities are most directly
related to the production and distribution of the firm’s product and services that
create value for customer which includes inbound logistics, operations, outbound

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logistics, sales and marketing, and services. Support activities make the delivery of
the primary activities possible and consist of organization infrastructure (adminis-
tration and management), human resources (employee recruiting, hiring and train-
ing), technology (improving products and the production process) and procurement
(purchasing input). Organizations have a competitive advantage when they can pro-
vide more value to the customers or when they provide the same value to customers
at a lower price. Information systems could have strategic impacts if it helped the
firm provide products or services at a lower cost than competitors or if it provides
the products or services same cost as competitors but with greater value.

2.4.1. Difficulties in building and sustain strategic information system include

• Not all strategic information systems make profit.

• They can be expensive and risky to build.

• Many strategic information systems are easily copied by other firms, so that
strategic advantage is not always sustainable.

• Implementing strategic systems often requires extensive organizational change

and a transition from one socio-technical level to another. Such changes are
called strategic transitions and are often difficult and painful to achieve.

2.5. How Information Systems Promote Quality.

What is Quality? Quality can be defined from both producer and customer perspec-
tives. From the perspective of producer, quality signifies conformance to specifi-
cations or absence of variation form those specification. From the perspective of
customer, quality means:

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 • Concerned with the quality of physical product – its durability, safety, ease of
use and installation.

• Concerned with the quality of service – the accuracy and truthfulness of ad-
vertising, responsiveness to warranties and ongoing product support.

• Concerned with psychological aspects – the company’s knowledge of its

product, the courtesy and sensitivity of sales and support staff, and the repu-
tation of the product.

Total Quality Management (TQM) is a concept that makes quality control a respon-
sibility to be shared by all people in an organization. TQM holds that the achieve-
ment of quality controls is an end in itself. Everyone is expected to contribute to
the overall improvement of quality. TQM encompasses all of the functions within
an organization.

2.5.1. How Information Systems Contribute to Total Quality Management.

Information systems can help firms to achieve their goals by:

• Simplifying the product, the production process or both.

• Benchmark.

• Use customer demands as a guide to improving products and services.

• Reduce cycle time.

• Improve the quality and precision of the design.

• Increase the precision of production.

2.6. Summary

Organization and information systems can be divided into strategic, management,

knowledge and operational level.

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Strategic Information Systems can be defined as computer systems at any level of
the organization that change goals, operations, products, services or environmental
relationships to help the organization gain a competitive advantage or edge
Total Quality Management (TQM) is a concept that makes quality control a respon-
sibility to be shared by all people in an organization.

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Revision Questions

Example . Name two main models that would be used by an businesses so as to

explore strategic opportunities
Solution:
We must understand where strategic opportunities for businesses are likely to be
found based on two models of a firm and its environment: the Competitive Forces
Models and the Value Chain Model Q

E XERCISE 5. Organization can use four basic competitive strategies to deal with
competitive forces: name and explain three of strategies.
E XERCISE 6. Explain some of the difficulties experienced in building and sus-
tain strategic information system.
EXERCISE 7. What is TQM and how is it important to a firm?.
EXERCISE 8. Discuss the contributions of information System towards Total
Quality Management.

Problem. Briefly discuss the problems which may be faced when using database
systems as part of the information system.

References and Additional Reading Materials

• Turban ,E.,McLean, and Wetherbe,J.(2007).Information Technology for Man-
agement:ISBN :978-0-470-91680-3.

• Transforming Organization in the Digital Economy.New York:John Wiley &

Sons.ISBN:0471705225

23
LESSON 3
Major types of information systems
Learning outcomes Knowledge about the major types of Information
Systems in an Organization.
By the end of this chapter, you will be able to:

• Describe the specific categories of systems serving each organizational level

• Describe the value of different type of information systems to organization

• Describe the feature and characteristics of different information systems

24
3.1. Operational Level of Information System

The information system that involved at operational level of an organization is

Transaction Processing Systems. Transaction processing systems (TPS) are the
basic business systems that serve the operational level of the system. A transaction
processing system is a computerized system that performs and records the daily
routine transactions necessary to the conduct of the business. A TPS is any system
that records transaction (a business event: a sale, a purchase, the hiring of a new
employee). TPS is the entry point where data are entered at its source at the time of
transactions take place. TPSs are interfaced with applications that provide clerical
workers and operational managers with up-to-date information. At the operational
level, tasks, resources and goals are predefined and highly structured. The decision
to grant credit to customer, for instance, is made by a lower-level supervisor ac-
cording to predefined criteria. All that must be determined is whether the customer
meets the criteria.

The following table shows the specific types of application information systems that
correspond to operation level:

The following description and diagram shows a payroll TPS, which is a typical
accounting transaction processing system found in most firms.

25
Information System

26
 Table 3.1: Types of TPS and their applications

A payroll system keeps track of the money paid to employees. The master file is
composed of discrete pieces of information (such as a name, address or employee
number) called data elements. Data are keyed into the system, updating the data
elements. The elements on the master file are combined in different ways to make
up reports of interest to management and government agencies and paychecks sent
to employees. These TPS can generate other report combinations of existing data
elements.
Other typical TPS applications are identified in the following table:
The table above shows that there are five functional categories of TPS: sales/marketing,
manufacturing/production, finance/accounting, human resources and other types of
TPS that are unique to a particular industry. All organizations have these five kinds
of TPS (even if the system is manual). TPS are often so central to a business that
TPS failure for a few hours can spell the demise of a firm and perhaps other firms
linked to it. Manager needs TPS to monitor the status of internal operations and
the firm’s relations with the external environment. TPS are also major producers
of information for the other types of systems. For example, the payroll system il-
lustrated before will supplies data to the company’s general ledger system, which
is responsible for maintaining records of the firm’s income and expenses and for
producing reports such as income statements and balance statements. Information

27
inputs for TPS are normally transactions and events. The processing process for
TPS is to sort, list, merge or update the data based on the transactions or events.
Information output from TPS is detailed reports, lists or summaries.

3.2. Knowledge Level Information Systems

Two types of information systems are categorized under the knowledge level of an
organization, which are Knowledge Work Systems (KWS) and Office Automation
Systems (OAS). These two types of systems serve the information needs at the
knowledge level of the organization. KWS is a system that aid knowledge workers
in the creation and integration of new knowledge in the organization. OAS can be
computer systems such as word processing, e-mail systems and scheduling systems,
which are designed to increase the productivity of data workers on the office. KWS
aid knowledge workers whereas OAS primarily aid data workers (although they are
also used extensively by knowledge workers).
In general, knowledge workers are people who hold formal universities degrees and
who are often members of a recognized profession, like engineers, doctors, lawyers
and scientists. The job for knowledge workers consists creating new information
and knowledge, promote the creation of new knowledge and ensure that new knowl-
edge and technical expertise are properly integrated into the business. Meanwhile,
data workers typically have less formal, advanced educational degrees and tend to
process rather than create information. The job for data workers are principally
to use, manipulate and disseminate information, which consists primarily of sec-
retaries, accountants or filing clerks. OAS is information technology applications
designed to increase the productivity of data workers by supporting the coordinat-
ing and communicating activities of the typical office. OAS coordinates diverse
information workers, geographic units and functional area. The system communi-
cates with customers, suppliers and other organization outside the firm and serves
as a clearinghouse for information and knowledge flows.
The following table shows the specific types of application information systems that
correspond to knowledge level:

28
Examples of KWS are like computer aided design (CAD) and robotics systems.
CAD systems eliminate many manual steps in design and production by perform-
ing much of the design work on the computer. Examples of OAS are like word
processing systems, desktop publishing systems and document imaging systems.
Word processing systems are an office automation technology that facilitates the
creation of documents through computerized text editing, formatting, storing and
printing. Desktop publishing systems is a technology that produces professional
quality documents combining output from word processors with design, graphics
and special layouts features. Document imaging systems is the systems that convert
documents and images into digital form so that they can be stored and accessed by
the computer. Information inputs for OAS are like documents and schedules mean
while for KWS are like design specification and knowledge based. The processing
process for OAS normally involves document management, scheduling and com-
munication whereas for KWS, it involves modeling and simulations. Information
output for OASs are normally documents, schedules and mails meanwhile for KWS
are models and graphics.
The following figure 3.2 shows an example of an imaging system (a system that
converts documents and images into digital form so that they can be stored and ac-
cessed by the computer). Document imaging systems are widely used knowledge
applications. It converts documents and images into digital form so that they can
be stored and accessed by the computer. The system is made up of a network con-
sisting image scanner, optical storage units, a mainframe computer and a local area
network to link representatives’ workstations and the scanner workstations located
in the firm. Files and documents can be viewed on-line from desktop computers.
This system is believed to reduce the amount of time it would take with a paper-
based system, save paper and save cost and customer’s services can be improved as
the electronic documents can be assessed more rapidly.

29
3.3. Management Level Information Systems.

For management level of an organization, two types of information systems in-

volved, which is Management Information System (MIS) and Decision Support
System (DSS). Management Information Systems (MIS, information system at the
management level of an organization that serve the functions of planning, control-
ling and decision making by providing routine summary and exception reports)
serves the management level of the organization, provides managers with reports
and in some cases with on-line access to organization’s current performance and
historical records. Most of the systems oriented almost exclusively to internal, not
environmental or external events. MIS primarily serve the functions of planning,
controlling and decision making at the management level. Generally, they are de-
pendant on underlying TPS for their data. MIS summarize and report on the basic
operations of the company. The basic data from TPS are compressed and are usu-
ally presented in long reports that are produced on a regular schedule. Figure 3.3
shows how a typical MIS transforms transactions level data from inventory, produc-
tion and accounting into MIS files that are used to provide managers with reports.
MIS usually serve managers interested in weekly, monthly or yearly results – not
day-today activities. MIS generally address structured questions that are known
well in advance but the systems are not flexible and have little analytical capability.
Most MIS uses simple routines such as summaries and comparisons as opposed to
sophisticated mathematical models or statistical techniques.

30
Some of the characteristics of MIS are as follows:

• MIS support structured decisions at operational and management control lev-

els. However, they are useful for planning purpose of senior management
staff.

• MIS are generally reporting and control oriented. They are designed to report
on existing operations and therefore to help provide day-to-day control of
operations.

• MIS rely on existing corporate data and data flows.

• MIS have little analytical capability.

• MIS generally aid in decision making using past and present data.

• MIS are relatively inflexible.

• MIS have an internal rather than an external orientation.

Decision Support Systems (DSS, information system at the management level of

an organization that combine data and sophisticated analytical models or data anal-
ysis tools to support semi-structured and unstructured decision making) also serve
the management level of the organization. DSS helps manager make decisions that
are semi-structured, unique or rapidly changing and not easily specified in advance.
Besides using internal information from TPS and MIS, they often bring in informa-
tion from external sources like current stock prices or product prices of competitors.
DSS have more analytical power than other systems. They built explicitly with a va-
riety of models to analyze data, or they condense large amounts of data into a form

31
where they can be analyzed by decision makers. DSS are normally designed in a
way where the user can work with them directly, which means the system explic-
itly include user-friendly software. DSS are interactive where the user can change
assumptions, ask new questions and include new data.
Some of the characteristics of DSS:

• DSS offers users flexibility, adaptability and quick response.

• DSS operate with little or no assistance from professional programmers.

• DSS provide support for decisions and problems whose solutions cannot be
specified in advance.

• DSS use sophisticated data analysis and modeling tools.

The following figure 3.4 show an example of DSS that operates on a powerful PC
and is used daily by managers who must develop bids on shipping contracts:

The following table shows the specific types of application information systems that
correspond to management level:

Information input for MIS are summary transaction data, high-volume data and
simple models. For DSS, the information input are low-volume data or massive
databases optimized for data analysis, analytic models and data analysis tools. Pro-
cessing for MIS are routine reports, simple models and low-level analysis, mean-
while for DSS are interactive, simulations and analysis. Information outputs for
MIS are summary and exception reports. For DSS, the information outputs are
special reports, decision analysis or responses to queries.

32
3.4. Strategic Level Information Systems

Senior managers use Executive Support System (ESS) to make decisions. ESS
serve the strategic level of an organization and address unstructured decisions and
create a generalized computing and communications environment rather than pro-
viding any fixed application or specific capability. ESSs are designed to incorporate
data about external events but they also draw summarized information from MIS
and DSS. They filter, compress and track critical data, emphasizing the reduction
of time and effort required to obtain information useful to executives. ESSs employ
the most advanced graphics software and can deliver graphs and data from many
sources immediately to a senior executive’s office or to a boardroom. Unlike other
types of information systems, ESSs are not designed primarily to solve specific
problems. Instead, ESSs provide a generalized computing and telecommunications
capacity that can be applied to a changing array of problems. While many DSS are
designed to be highly analytical, ESS comes with less analytical capabilities.
Since ESSs are designed to be used by senior managers who often have little, is
any, direct contact or experience with computer-based information systems, they
incorporate easy-to-use graphic interfaces.
Figure 3.5 below shows an example of an ESS which consists of workstations with
menus, interactive graphics and communication capabilities that can access histor-
ical and competitive data from internal corporate systems and external databases:

Information input for ESSs are aggregate data from external and internal sources.
Processing for ESSs are graphics, simulations and interactive between user and the
system. Information outputs for ESSs are projections, responses to queries.

33
3.5. Relationship of Systems to One Another: Integration
The various types of systems in the organization exchange data with one another.
TPS are a major source of data for other systems, especially for MIS and DSS.
ESS is primarily a recipient of data from lower-level systems. The other types of
systems may exchange data with each other as well. Data may also be exchanged
among systems serving different functional areas. However, the different systems
in an organization are only loosely integrated. The information needs of the various
functional areas and organizational levels are too specialized to be served by a single
system. Figure 3.6 below shows the relationship between the different systems:

3.6. Summary
Information Systems are involved in different levels of the organization these in-
clude :Transaction processing systems (TPS) are the basic business systems that
serve the operational level of the system, Knowledge Work Systems (KWS) and
Office Automation Systems (OAS) that are concerned with management of knowl-
edge.Management Information System (MIS) and Decision Support System (DSS)
for planning and control and decision making respectively.Senior managers use Ex-
ecutive Support System (ESS) to make decisions.

Revision Questions

Example . What is TPS.

Solution:
A transaction processing system is a computerized system that performs and records
the daily routine transactions necessary to the conduct of the business. Q

34
EXERCISE 9. Name two main types of in an organization, their major functions and
major application systems.
EXERCISE 10. Differentiate between knowledge worker and data worker.
EXERCISE 11. What is Decision Support System,name it two characteristics.
EXERCISE 12. Explain the characteristics of strategic level information system.

Problem 1. Briefly discuss the information system affect strategic planning in an

organization.

References and Additional Reading Materials

• Turban ,E.,McLean, and Wetherbe,J.(2007).Information Technology for Man-
agement:ISBN :978-0-470-91680-3.

• Transforming Organization in the Digital Economy.New York:John Wiley &

Sons.ISBN:0471705225

35
LESSON 4
INFORMATION SYSTEMS, ORGANIZATIONS AND MANAGEMENT

Learning outcomes:
Knowledge about the use of information system and organization structure.

By the end of this chapter, you will be able to:

• Identify the salient characteristics of organizations.

• Analyze the relationship between information systems and organizations.

• Contrasts the classical and contemporary models of managerial activities and

roles.

• Describe how managers make decisions in organizations.

• Assess the implications of the relationship between information systems, or-

ganizations and management decision making for the design and implemen-
tation of information systems.

4.1. Organization and Information Systems

Information systems and organizations have a mutual influence on each other. In-
formation systems must be aligned with the organization to provide information
needed by important groups within the organization. Meanwhile, organization must
be aware of and open itself to the influences of information systems in order to ben-
efit from new technologies. The interaction between information technology and
organizations is very complex and is influenced by a great many mediating fac-
tors, including the organization’s structure, standard operating procedures, politics,
culture, surrounding environment and management decisions.

Figure 4.1 below illustrates the two-way relationship between organization and in-
formation technology.

36
37
4.2. What is an Organization
Organization is a stable, formal social structure that takes resources from the envi-
ronment and processes them to produce outputs (technical definition). This techni-
cal definition focuses on three elements of an organization:

• Capital and labor are primarily production factors provided by the environ-
ment.

• The organization (the firm) transforms these inputs into products and services
in a production function.

• The products and services are consumed by environments in return for supply
inputs.

Figure 4.2 will shows the relation between these three elements. In the technical
microeconomics definition of the organization, capital and labor (the primary pro-
duction factor provided by the environment) are transformed by the firm through
the production process into products and services (output to the environment). The
products and services are consumed by the environment, which supplies additional
capital and labor as inputs in the feedback loop.

An organization is more stable than an informal group in terms of longevity and

routine-ness. Organizations are formal legal entities, with internal rules and proce-
dures, that must be abide by laws. Organizations are also social structure because
they are a collection of rights, privileges, obligations and responsibilities that are
delicately balanced over a period of time through conflict and conflict resolution
(behavioral definition). Figure 4.3 below shows the behavioral view of an organi-
zation that emphasizes group relationships, values and structures.

38
From the technical view of organization, it encourages organization to focus upon
the way inputs are combined into outputs when technology changes are introduced
into the company. The firm is seen as infinitely malleable, with capital and labor
substituting for each other quite easily. Meanwhile, from the behavioral view of
organization, it suggests that building new information systems or rebuilding old
ones involves much more than a technical rearrangement of machines or workers.
The technical and behavioral definitions of organizations are not contradictory but
they complement each other. The technical definition tells us how many thousands
of firms in competitive market combine capital, labor and information technology
whereas the behavioral models takes us inside the individual firm to see how that
technology affects the inner workings of the organization.

4.2.1. Why organizations are so much alike and why organizations are so different

According to Weber, all modern organizations (bureaucracies):

• Have a clear-cut division of labor and specialization;

• Arrange specialists in a hierarchy of authority;

• Limit authority and action by abstract rules or procedures ( standard operat-

39
 ing procedures, or SOPS);

• Create a system of impartial and universalistic decision making;

• Are devoted to the principle of efficiency: maximizing output using limited

inputs.

Some supplements to Weber, identifies some additional features for organization as

following:

• Have Standard Operating Procedures – a set of precise rules, procedures and

practices developed by organization to cope with virtually all expected situa-
tions.

• Have Organizational Politics.

• Has Organizational Culture – the set fundamental assumptions about what

products the organization produces, how and where it should produce them
and for whom they should be produced.

Although all organizations do have common characteristics, no two organizations

are identical.
The differences of organizations are like:

• Structures.

• Goals.

• Constituencies.

• Leadership styles.

• Tasks

• Surrounding environments.

40
 • Power.

• Function.

• Technology.

• Business processes.

• Levels

4.3. The Changing Role of Information Systems

The development of information architecture of organizations has change from:

• Electronic accounting machines (EAM) in 1950s with isolated “electronic

accounting machines” with limited functions.

• Data processing departments in 1960s with large, centralized mainframe com-

puters that served corporate headquarters and a few remote sites.

• Information systems in 1970s with midsized minicomputers located in indi-

vidual departments or divisions of the organization that were networked to
large, centralized computers.

• Information systems and services in 1980s with desktop PCs used depen-
dently and linked to minicomputers and large computers.

• Enterprise-wide information utility from 1990 until recently with computers

coordinated information flowing among desktops, between desktops, among
minicomputers and mainframes and perhaps among hundreds of smaller local
networks. These networks can be connected into a network linking the entire
enterprise or linking to external networks, including Internet.

41
The position and role of information system specialists also have evolved over time.
The formal organizational unit or function that has emerged is called information
systems department. In the early years, the information systems group was com-
posed mostly of programmers, highly trained technical specialists who wrote the
software instructions for the computer. Today a growing proportion of staff mem-
bers are system analysts, who constitute the principal liaison between the informa-
tion systems group and the rest of the organization and the main job function of a
system analyst is to translate business problem and requirements into information
requirements and systems.
Information systems managers are leaders of teams of programmers and analysts,
projects managers, physical facility managers, telecommunication managers and
heads of office automation groups. They are also managers of computer operations
and data entry staffs. End users are representatives of departments outside of the
information systems group for whom applications are developed. In most organiza-
tions, the information systems department is headed by a chief information officer
(CIO).

4.4. Why Organizations Build Information Systems

Some of the general benefits why organizations adopt information systems are as
follow:

• More efficient.

• Save money.

• Reduce work force.

• Become vitally important simply to stay in business.

• A source of competitive advantage.

• More innovative than others.

• Satisfy the ambitious of various groups within an organization.

42
Figure 4.4 below shows the system development process that includes many con-
siderations other than economic. The model divides the explanation for why orga-
nization adopts systems into two groups:

• External environment factors (constraints and opportunities) that influence

the adoption and design of information systems. Examples of external con-
straints would be the rising costs of labor or other resources, the competitive
actions of other organizations and changes in government regulations. Ex-
amples of external opportunities include new technologies, new sources of
capital, the demise of a competitors or a new government program.

• Institutional factors are factors internal to the organization that influence

the adoption and design of information systems. They may include values,
norms and vital interests that govern matters of strategic importance to the
organization.

4.5. The Role of Managers in the Organization

Managerial roles are expectations of the activities that managers should perform
in an organization. Their responsibilities range from making decisions to writing
reports, to attend meetings. Behavioral model is used to describe the management
based on behavioral scientists’ observations of what managers actually do in their
jobs. According to Mintzberg, these managerial roles fell into three categories:

• Interpersonal roles

43
Managers act as figureheads for the organization when they represent their compa-
nies to the outside world and perform symbolic duties. Managers act as leaders,
attempting to motivate, counsel and support subordinates. Managers also act as a
liaison between various levels of the organization; within each of these levels, they
serve as a liaison among the members of the management team. Managers provide
time and favors, which they expect to be returned.

• Informational roles

Managers act as the nerve centers of their organization, receiving the most con-
crete, up-to-date information and redistributing it to those who need to be aware
of it. Managers are therefore information disseminators and spokesperson for their
organization.

• Decision roles

Managers act as entrepreneurs by initiating new kinds of activities. They handle

disturbances arising in the organization. They allocate resources to staff members
who need them. They negotiate conflicts and mediate between conflicting groups
in the organization.

4.6. Managers and Decision Making

4.6.1. The Process of Decision Making

Decision making remains one of the more challenging roles of a manager. Informa-
tion systems have helped managers communicate and distribute information. How-
ever, they have provided only limited assistance for management decision making.

44
Decision making can be classified by organization level, corresponding to the strate-
gic, management, knowledge and operational levels of the organization. Strategic
decision making determines the objectives, resources and policies of the organiza-
tion. Management level decision making mainly controls how efficient or effective
resources are utilized and how well operational units are performing. Knowledge
level decision making mainly evaluates new ideas for products, services, ways to
communicate new knowledge and ways to distribute information throughout the or-
ganization. Operational level decision making will decide how to carry out specific
tasks specified by upper and middle management and establish criteria for comple-
tion and allocate resources.
Within each of these levels of decision making, decisions can be classified as un-
structured decisions and structured decisions. Unstructured decisions are non-routine
decisions in which the decision maker must provide judgment, evaluation and in-
sights into the problem definition and there is no agreed-upon procedure for making
such decisions. Structured decisions are decisions that are repetitive, routine and
have a definite procedure for handling them. Combining these two views of deci-
sion making produces the grid shown in Figure 4.5 which shows the different kinds
of information systems at the various organizational level support different types of
decisions.

4.4.2 Stages of Decision Making

Making decisions consist several activities. Simon (1960) described four different
stages in decision making: intelligence, design, choice and implementation.

45
 • Intelligence. The first of Simon’s four stages of decision making. Individ-
ual collect information to identify and understand problems occurring in the
organization.

• Design. Simon’s second stage of decision making. Individual conceives of

possible alternative solutions.

• Choice.Simon’s third stage of decision making. Individual selects among the

various solution alternatives.

• Implementation. Simon’s final stage of decision making. Individual puts

the decision into effect and reports on the progress of the solution.

In general, the stages of decision making do not necessarily follow a linear path. At
any point in the decision making process, a loop back can be done to go back to a
previous stage.

4.7. Summary
Remark. Organization and Information Systems have mutual influence to each other
and that they have a two-way relationship,Information system influences the deci-
sion making thus it has also transform the organization structure from hierarchical
to a flat structure.

46
Revision Questions

Example . Explain the term Standard Operating Procedures.

Solution:
a set of precise rules, procedures and practices developed by organization to cope
with virtually all expected situations. Q

EXERCISE 13. Differentiate between technical and behavioral definitions of an

organization..

EXERCISE 14. Name two functions of Chief Information officer in an Organi-

zation.

E XERCISE 15. List three any three steps involved in problem solving in decision
making process.
EXERCISE 16. Discuss the role of a manager in an organization.

Problem. Briefly discuss the effects of information system to the organization in-
terms of decision making and organizational structure.

References and Additional Reading Materials

• Turban ,E.,McLean, and Wetherbe,J.(2007).Information Technology for Man-
agement:ISBN :978-0-470-91680-3.

• Transforming Organization in the Digital Economy.New York:John Wiley &

Sons.ISBN:0471705225

47
LESSON 5
Technical foundations of information systems

Learning outcomes :
Gain knowledge about Technical aspects of information system in organiza-
tion.
At the end of this chapter, you will be able to:

• Describe computers and information processing.

• Describe information systems software.

• Understands the concept of managing data resources.

• Describe the technology of communication, networks.

5.1. What is a computer system?

Regardless of size, age, function or capability, all computers have the same basic
components and operate according to the same basic principles. A computer must
handle fours basic operations: accept data, store data and instructions, process data
and lastly output data. In recent years, almost every computer has also been ex-
pected to support data communications. Computers conduct these operations with
the same basic equipment.
In general, every computer has these components:

• Central processing unit (CPU) is the most important part of any computer.
It manipulates raw data into a more useful form and controls the other parts of
the computer systems. Two main unit of CPU is arithmetic logic unit (ALU)
that performs the principles logic and arithmetic operations of the computer
and control unit that controls and coordinates the other parts of the computer
system.

• Primary storage that stores all or part of the program that is being executed,
stores the operating system programs that manage the operation of the com-
puter and holds data that are being used by the program. Internal primary

48
 storage of a computer is often called RAM (Random Access Memory) and
can directly access any randomly chosen location in the same amount of time.
Besides RAM, ROM (Read Only Memory) is also used to store important
or frequently used programs and it comes with manufacturer when a com-
puter is purchased. ROM can be further divided into two subclasses: Pro-
grammable read-only memory (PROM) which is used in control devices
because it can be reprogrammed once.Erasable programmable read-only
memory (EPROM) that can be erased and reprogrammed many times.

• Secondary storage is a relatively long-term, nonvolatile storage of data out-

side the CPU and primary storage. It can be divided into three different cate-
gories:

1. Magnetic disk which can be divided further into two main type, floppy disks
and hard disks. Floppy disk is a removable magnetic disks storage primarily
used with PCs. Hard disk is a magnetic tape resembling a thin steel platter
with an iron oxide coating and is used in large computer systems and in many
PCs.

2. Optical disk is also called compact disks or laser optical disks. It stores data
at densities many times greater than those of magnetic disks. Compact disks
read-only memory (CD-ROM) is a read-only optical disks storage used for
imaging, reference a database applications with massive amounts of unchang-
ing data and for multimedia. Write once/read many (WROM) or Compact
disk-recordable (CD-R) is an optical disk system that allows users to record
data only once and data cannot be erased but can be read indefinitely. Mag-
netic Tape in an inexpensive, older secondary storage medium in which large
volumes of information are stores sequentially by means of magnetized and
non-magnetized spots on tape.

• Input and output devices/peripheral devices. Input devices converts data

and instructions into electronic from for input into the computer. Examples
of input devices are like keyboard, computer mouse, touch screens and etc.
Output devices convert electronic data produces by the computer system and

49
 display them in a form that people can understand. Examples of output de-
vices are like printer, video display and etc.

5.2. Information Systems Software

Software is a detailed instruction that control the operation of a computer system.
Without software, computer hardware could not perform the tasks we associate with
computers. The main functions of software are managing the computer resources
of the organization, provide tools for human beings to take advantage of these re-
sources and act as an intermediary between organizations and stored information.
Software program is a series of statements or instructions to the computer. A stored
program concept means that a program must be stored in the computer’s primary
storage along with the required data in order to execute, or have its instructions
performed by the computer. Software can be divided into two major types:

• System software is a generalized program that manages the resources of the

computer. Operating system is the system software that manages and controls
computer’s activities. An operating system performs three main functions:
allocation and assignment, scheduling and the lastly monitoring.

• Application software is programs written for a specific application to per-

form functions specific by end users. Application software works through
system software, which access to computer hardware.

5.3. Managing data resources

5.3.1. Problems with traditional file environment
Traditional file environment (flat file organization/data file organization) is a way of
collecting and maintaining data in an organization that leads to each functional area
or division creating and maintaining its own data files and programs. Traditional
file environment will results the following problems:

• Data redundancy and confusion.

50
 • Program-data independence.

• Lack of flexibility.

• Poor security.

• Lack of data sharing and availability.

The above mentioned problems can be solved by using a database.

5.3.2. Database environment

Database is a collection of data organized to service many application at the same
time by storing and managing data so that they appear to be in one location. A
database management system (DBMS) is special software to create and maintain a
database and enable individual business applications to extract the data they need
without having to create separate files or data definitions in their computer pro-
grams.
A DBMS has three components:

• A data definition language.

• A data manipulation language.

• A data dictionary.

5.4. Three major types of database models

The earliest DBMS were hierarchical which organizes data in a treelike structure.
A record is subdivided into segments that are connected to each other in one-to-
many parent-child relationship. The most common hierarchical DBMS is IBM’s
IMS (Information Management System).
The network data model is a variation of the hierarchical data model. This model
is useful for depicting many-to-many relationships.

51
 Figure 5.1: Comparative Summary for Major database models

Relational data model is a type of logical database model that treats data as if
they were stored in two-dimensional tables. It can relate data stored in one table
to data in another as long as the two tables share a common data element. Object
relational data model is a model used mostly for Internet databases. The following
table shows the comparison of database alternatives.
5.5. Telecommunications and Networks
5.5.1. Components and functions of a telecommunication system
A telecommunication is a collection of compatible hardware and software arranged
to communicate information from one location to another. The following are essen-
tial components of telecommunication systems:

• Computers to process information.

• Terminals or any input/output devices that send or receive data.

• Communication channels, the links by which data or voice are transmitted

between sending and receiving devices in a network. Communication chan-
nels use various communication media, such as telephone lines, fiber-optics
cables, coaxial cables and wireless transmission.

• Communication processors, such as modems, multiplexers, controllers and

front-end processors, which provide support functions for data transmission
and reception.

• Communication software, which controls input and output activities and man-
ages other functions of the communication network.

Functions of telecommunication system:

52
 • Establishes the interface between the sender and the receiver.

• Routes messages along the most efficient paths.

• Performs elementary processing of the information to ensure that the right

message gets to the right receiver.

• Performs editorial tasks on the data.

• Converts messages from one speed into the speed of a communications line
or from one format to another format. • Controls the flow of information.

5.5.2. Communication Networks

Networks can be classified by their shape (topology) or by their geographic scope
and type of services provided. Networks classified by their topology:
• Star network is a network in which all computers and other devices are con-
nected to a central host computer. All communications between networks
devices must pass through the host computer.

• Bus network is a topology that links a number of computers by a single

circuit with all messages broadcast to the entire network.

• Ring network is a network in which all computers are linked by a closed loop
in a manner that passes data in one direction from one computer to another.
Networks classified by their geographic scope:
• Private branch exchanges (PBX) is a central switching system that handles
a firm’s voice and digital communication.

• Local area networks (LAN) is a telecommunication network that requires

its own dedicated channels and that encompasses a limited distance, usually
one building or several buildings in close proximity.

• • Wide area networks (WAN) is a network that spans a large geographical

distance. May consist of a variety of cables, satellite and microwave technol-
ogy.

• Value-added network (VAN) is a private, multi-path, data-only, third-party

managed network that is used by multiple organizations on a subscription
basis.

53
5.6. Summary

Remark. Technical information about information System concerns about the in-
frastructure and systems that facilitate the dissemination of information within and
outside the organization
infrastructure involves information about the hardware components,network com-
ponents of the information system whereas systems include the software application
i.e.application systems,databases and internet services.

54
Revision Questions

Example . Name three main components of a computer system.

Solution:
CPU,Storage i.e. primary and secondary storage,input and output peripherals
Q

E XERCISE 17. Differentiate between Application software and system soft-

ware.

EXERCISE 18. Discuss database management system model.

EXERCISE 19. Discuss three telecommunication components and explain two

functions of telecommunication system.

EXERCISE 20. Discuss network topology and cite three examples.

Problem. As a Chief Information Officer of a given organization,The organization

wish to acquire a Financial Management system,you are tasked to provide a report
summary as a specification to aid and fast track procurement process.

55
LESSON 6
Redesigning the organization with information systems

Learning outcomes :
Knowledge on how information systems influence organizational change.
At the end of this chapter you will be able to:

•Demonstrate how building new systems can produce organizational change.

•Explain how the organization can develop information systems that fit its
businesses plan.

•Identify the core activities in the systems development process.

•Analyze the organizational change requirements for building successful sys-

tems.

•Describe models for determining the business value of information systems.

•Describe the different approaches to systems-building.

56
6.1. Systems as Planned Organizational Change
The introduction of new information system involves much more than new hard-
ware and software. It also includes changes in jobs, skills, management and organi-
zation. In the concept of socio-technical, one cannot install new technology without
considering the people who must work with it. When we design a new information
system, we are redesigning the organization.
One of the most important things to know about building a new information system
is that this process is one kind of planned organizational change. Systems builders
must understand how a system will affect the organization as whole, focusing par-
ticularly on organizational conflict and changes in the locus of decision making.
Builders must also consider how the nature of work groups will change under the
impact of the new system. Systems can be technical successes but organizational
failures because of a failure in the social and political process of building the sys-
tems. Analysts and designers are responsible for ensuring that key members of
the organization participate in the design process and are permitted to influence the
ultimate shape of the system.
6.1.1. Establishing Organizational Information Requirements.
In order to develop an effective information systems plan, the organization must
have a clear understanding of both its long- and short-term information require-
ments. Two principal methodologies for establishing the essentials information
requirements of the organization as a whole are Enterprise Analysis (Business Sys-
tems Planning) and critical success factors.

EnterpriseAnalysis Enterprise

Analysis (Business Systems Planning) is an analysis of organization-wide informa-

tion requirements by looking at the entire organization in terms of organizational
units, functions, processes and data elements. It helps to identify the key entities
in the organization’s data. This method starts with the notion that the informa-
tion requirements of a firm or a division can be specified only with a thorough
understanding of the entire organization. The central method used in the enter-
prise analysis approach is to take a large sample of managers and ask them how
they use information, where they get the information, what environments are like,
what their objectives are, how they make decisions and what their data needs are.

57
 Table 6.1: .Stage of Information System Plan.

The results of this large survey of managers are aggregated into subunits, functions,
processes and data metrics. Data elements are organized into logical application
groups and these results will be display out in the form of chart for easier interpre-
tation and decision making based on the survey. The weakness for this method is
that it produces an enormous amount of data that is expensive to collect and difficult
to analyze. Most of the interviews are conducted with senior or middle managers
with little effort to collect information from clerical workers and supervisory man-
agers. Moreover, the questions frequently focus not on the critical objectives of
management and where information is needed, but rather on what existing infor-
mation is used. The following table shows the topics that should be included in an
information system plan.

CriticalSuccess Factor (CSF)

Strategic Analysis or Critical Success Factor (CSF) approach argue that the infor-
mation requirements of an organization are determined by a small number of easily
identified operational goals shaped by the industry, the firm, the manager and the
broader environment that are believed to assure the success of an organization. An
important premise of the strategic analysis approach is that there are a small number
of objectives that managers can easily identify and information systems can focus

58
on. The principal method used in CFS analysis is personal interviews- three to
four –with a number of top managers to identify their goals and the resulting CSFs.
The strength of CSF method is that it produces a smaller data set to analyze than
does enterprise analysis and will produce systems that are more custom-tailored
to an organization. Another strength of CSF method is that it takes into account
the changing environment with which organizations and managers must deal. Un-
like enterprise analysis, the CSF method focuses organizational attention on how
information should be handled. The primary weakness of this method is that the
aggregation process and the analysis of the data are art forms where there is no
particular rigorous way in which individual CSFs can be aggregated into a clear
company pattern. Another weakness of this method is that this method is clearly
biased toward top managers as their will be the ones being interviewed. Lastly, this
method does not necessarily overcome the impact of a changing environment or
changed in managers.

6.1.2. Systems Development and Organizational Change.

New information systems can promote various degree of organizational change, en-
abling organizations to redesign their structure, scope, power relations, workflows,
products and services. The following table describes how information technology
is being used to transform organizations.

6.1.3. The Spectrum of Organizational Change

Information technology can promote various degrees of organizational change, rang-

ing from incremental to far-reaching. There are four kinds of structural organiza-
tional change that are enabled by information technology:

• Automation involves assisting employees to perform their tasks more effi-

ciently and effectively or in another word, using the computer to speed up the
performance of existing tasks.

• Rationalization of procedures is a deeper form of organizational change that

59
 Table 6.2: Information System and Organizational change summary.

streamlines the standard operation procedures, eliminating obvious bottle-

necks, so that automation makes operating procedures more efficient.

• Business process reengineering (BPR) is the radical redesign of business

processes, combining steps to cut waste and eliminating repetitive, paper-
intensive tasks in order to improve cost, quality and service, and to maximize
the benefits of information technology. The process of streamlining business
procedures so that documents can be moved easily and efficiently is called
work-flow management.

• Paradigm shift is a radical re-conceptualization of the nature of the business

and the nature of the organization.

The most common forms of organizational change are automation and rationaliza-
tion. These relatively slow-moving and slow-changing strategies present modest
return but little risk. Faster and more comprehensive change like reengineering and
paradigm shift carry high rewards but offers a substantial chance of failure. BPR
and paradigm shift often fail because extensive organizational change is so difficult
to orchestrate.

60
6.2. System Development Process
System development refers to all the activities that go into producing an information
systems solution to an organizational problem or opportunity. System development
is a structured kind of problem solving with distinct activities. The core activities
in system development will be described briefly in the following table.

Each of the core system development activities entails interaction with the organi-

zation.

6.3. Building successful systems

From an organizational and behavior point of view, the major causes of information
systems failure are:

• Insufficient or improper user participation in the systems development pro-

cess.

• Lack of management support.

• Poor management of the implementation process.

• High level of complexity and risk in the systems development projects.

61
Implementation is the entire process of organizational change surrounding the new
information system. Different patterns of the implementation should be analyzed in
order to understand system’s success or failure. Relationship between participants
(system designers and end users) is practically important in the whole process of
implementation. Besides that, the support and control from management of the
implementation process are an essential part as it acts as the mechanisms for dealing
with the level of risks (determined by project size, structure and experience with
technology) in each new system.
The business value of information systems can be determined using the following
models:

• Capital budgeting like cost/benefit ratio, net present value and return on in-
vestments (ROI).

• Portfolio analysis and scoring analysis includes non-financial considerations

and can be used to evaluate alternative information systems projects.

Figure 6.2 below shows a system portfolio where companies should examine their
portfolio of projects in terms of potential benefits and likely risks. Certain kinds
of projects should be avoided altogether and others developed rapidly. There is no
ideal mix and companies in different industries have different profiles.

62
6.4. Approaches to Systems-Building

Different approaches are being used in building a system. The advantages and
disadvantages of these approached will be as follow:
6.5. Summary
Technical information about information System concerns about the infrastructure
and systems that facilitate the dissemination of information within and outside
the organization infrastructure involves information about the hardware compo-
nents,network components of the information system whereas systems include the
software application i.e.application systems,databases and internet services.
Revision Questions

Example . Differentiate between Enterprise analysis(Business System Plan-

ning) and critical success factors.
Solution:
Business System Analysis-is an analysis of organization-wide information require-
ments by looking at the entire organization in terms of organizational units, func-
tions, processes and data elements Critical Success factors- the information require-
ments of an organization are determined by a small number of easily identified
operational goals shaped by the industry, the firm, the manager and the broader
environment that are believed to assure the success of an organization. Q

63
E XERCISE 21. Having been recruited as the systems’ analyst/designer,advise
your employer(current organization) on the issues involved in building a new sys-
tem and the effects it has on the organization as whole.

EXERCISE 22. Define System development.

EXERCISE 23. Discuss the components of Information System plan..

EXERCISE 24. Discuss the phases of system development.

Problem. As a ICT manager of a given learning institution,you are requested to

advise the institution on the best way forward to carryout an automation project of
some of its processes.required provide a brief document on the areas that needs to
be considered for successful Information systems implementation.

References and Additional Reading Materials

• Laudon, K.C.and Laudon J.P.(2010) Management Information System:Managing

the Digital firm.11th Edition,NJ:Pearson Education Inc.ISBN 10,:013609368x.

• Turban ,E.,McLean, and Wetherbe,J.(2007).Information Technology for Man-

agement:ISBN :978-0-470-91680-3.

64
LESSON 7
Managing knowledge and resources.

Learning outcomes: Gain an insight to knowledge management within the organization

After completing this chapter, you will be able to:

• Explain the importance of knowledge management

• Describes the applications useful for distributing, creating and sharing knowl-
edge

• Evaluate the role of artificial intelligence in knowledge management

• Describe how organizations can used expert systems and case-based reason-
ing to capture knowledge

• Describe how organizations can use neural networks and other intelligent
techniques to improve their knowledge base

7.1. Knowledge Management in the Organization

Knowledge has becomes a central productive and strategic asset, the success of the
organization increasingly depends on its ability to gather, produce, maintain and
disseminate knowledge. Hence, the process of developing procedures and routines
to optimize the creation, flow, learning and sharing knowledge and information in
the firm becomes a central management responsibility which brings to a term known
as knowledge management.
Knowledge management is the process of systematically and actively managing and
leveraging the stores of knowledge in an organization. Knowledge management is
the combination of activities involved in gathering, organizing, sharing, analyzing
and disseminating knowledge to improve an organization’s performance.
Knowledge is usually perceived as “know-how”, which is usually accumulated
through experience combined with knowing certain information or, at least knowing
where information can be found.
Knowledge management is the attempt by organizations to put procedures and tech-
nologies in place that do the following:

65
 • Transfer individual knowledge into databases.

• Filter and separate the most relevant knowledge.

• Organize that knowledge in databases that either:

-Allow other employees to easily access the knowledge.

-“Push” specific knowledge to employees based on their pre-specified needs.

All the major types of information systems mentioned before facilitate the flow of
information and have organizational knowledge embed in them. However, office
automation system (OAS), knowledge work systems (KWS), group collaboration
and artificial intelligence applications are especially useful for knowledge manage-
ment. OAS, KWS, artificial intelligence applications and group collaboration fo-
cuses on supporting information and knowledge work and on defining and capturing
the organization’s knowledge base.
The knowledge base may include:

• Structured internal knowledge

• External knowledge

• Informal knowledge (tacit knowledge)

Figure 7.1 below shows the array of information systems specifically designed to
support knowledge management.

66
OAS helps disseminate and coordinate the flow of information in the organization.
KWS supports the activities of highly skilled knowledge workers and professionals,
as they create new knowledge and try to integrate it into the organization. Group
collaboration and support systems support the creation and sharing of knowledge
among people working in groups. Artificial intelligence systems provide organi-
zations and managers with codified knowledge that can be reused by others in the
organization.

7.2. Information and Knowledge Work Systems

Information work is work that consists primarily of creating or processing informa-
tion. It is carried out normally by:

• Data workers who primarily process and disseminate the organization’s in-
formation and paperwork such as secretaries or bookkeepers.

• Knowledge workers who design products or services or create knowledge

for the organization such as engineers, scientist or architects. Main function
is to generate information based on their knowledge.

7.2.1. Distributing Knowledge: Office and Document Management Systems

Most data work and a great deal of knowledge work take place in offices, so the of-
fice plays a major role in coordinating the flow of information throughout the entire
organization. The office has three basic functions, which is managing and coordi-
nating the work of data and knowledge workers, connecting the work of the local
information workers with all levels and functions of the organization and connect-
ing the organization to the external world.
The major activities carried out by the workers:
• Managing documents.

• Scheduling for individuals and groups.

• Managing data.

67
These activities can be supported by OAS, which can be defined as any applica-
tion of information technology that intends to increase productivity of information
workers in the office. OAS can be a word processing system, desktop publishing
system and document imaging system. Although word processing and desktop pub-
lishing address the creation and presentation of documents, they only exacerbate the
existing paper avalanche problem. Locating and updating information in that for-
mat is a great source of organizational inefficiency. One way to reduce problems
stemming from paper work-flow is to employ document imaging system.
Document imaging system is a:

• System that converts documents and images into digital form so that they can
be stored and accessed by the computer.

• The systems store, retrieve and manipulate a digitized image of a document,

allowing the document itself to be discarded.

• The system must contain a scanner that converts the document image into a
bit-mapped image, storing that image as a graphic.

• If the document is not in active use, it usually is stored on an optical disk

system.

• The optical disk kept on-line in a jukebox (a device for storing and retrieving
many optical disks), require a certain amount of time to retrieve the document
automatically.

• The system also requires an index server to contain the indexes that will allow
users to identify and retrieve document when needed.

• Index data are entered so that a document can be retrieved in a variety of

ways, depending upon application.

7.2.2. Creating Knowledge: Knowledge Work Systems

Knowledge workers perform three key roles that are critical to the organization
and to managers who work within the organization. The first key role is keeping

68
the organization up-to-date in knowledge as it develops in the external world – in
technology, science, social thought and the arts. Secondly, knowledge workers also
serve as internal consultants regarding the areas of their knowledge, the changes
taking places and the opportunities. Lastly, this group of workers also acts as change
agents evaluating, initiating and promoting change projects.
Some basic requirements of KWS:

• Requires great computing power in order to handle rapidly sophisticated graph-

ics or complex calculations.

• Quick and easy access to external databases.

• User-friendly interfaces to save time by allowing user to perform needed tasks

and get to required information without having to spend a lot of time learning
how to use the computer.

Examples of KWS:

• CAD/CAM, which stands for computer-aided design and computer-aided man-

ufacturing, provides engineers, designers and factory managers with precise
control over industrial design and manufacturing.

• Virtual reality systems, which provides drug designers, architects, engineers

and medical workers with precise photo-realistic simulations of objects.

• Investment workstations, which consists of high-end PCs used in financial

sector to analyze trading situations instantaneously and facilitate portfolio
management.

7.2.3. 7.2.3 Sharing Knowledge: Group Collaboration Systems and Intranet

Knowledge Environments
In group coordination and collaboration, they key technologies involved are like e-
mail, teleconferencing, data-conferencing, videoconferencing, groupware and in-
tranets. Out of so many different technologies, groupware and intranets are the
most valuable in sharing knowledge. Groupware is software that recognizes the
significance of groups in offices by providing functions and services that support
collaborative activities of work groups, was the primary tool for creating collabora-
tive work environments.

69
It is built around three key principles – communication, collaboration and coordi-
nation (the 3 C’s). Groupware is capable to perform the following tasks:

• Publishing – posting documents as well as simultaneous work on the same

document by multiple users along with a mechanism to track changes to these
documents.

• Replication – maintaining and updating identical data on multiple PCs and

servers.

• Discussion tracking – organizing discussions by many users on different

topics.

• Document management – storing information from various types of soft-

ware in a database.

• Work-flow management – moving and tracking documents created by groups.

• Portability – availability of software for mobile use to access the corporate

network from the road.

• Security – preventing unauthorized access to data.

• Application development – developing custom software applications with

the software.

7.3. Artificial Intelligence

7.3.1. What is Artificial Intelligence?
A narrow definition of the term “intelligence” is the “ability to learn”. The better
equipped a person is with mental tools to learn and apply new ideas, the higher
his or her intelligence. But intelligence actually includes many things; making
associations between a previous experience and a new situation, drawing conclusion
in a systematic manner, quickly adopting new ways to solve problems, being able
to separate what is important from what is not important in solving a problem and
determining what tools can or cannot help in handling complex situations.

70
In short, intelligence is the ability to learn and also to think. Artificial intelligence
(AI) can be defined as the effort to develop computer-based systems that can be-
have like human, with the ability to learn languages, accomplish physical tasks, use
perceptual apparatus and emulate human expertise and decision making.
The family of AI includes:

• Natural language processing-Natural language processors (NLPs) are pro-

grams that are designed to take human language as input and translate it
into standard set of statements that a computer can execute. The purpose
of these sophisticated programs is to alow human beings to use their own nat-
ural language when interacting with programs such as databases management
systems (DBMSs) or decision making systems (DSSs). The goal of natural
language processors is eventually eliminate the need for people to learn pro-
gramming languages or customized commands for computers to understand
them. Their great advantage is in the way they can be used in combination
with voice-recognition devices to allow the user to command computers to
perform tasks, without touching a keyboard or any other input device. One of
the greatest challenges in natural language processing is the fact that the same
combination of words may take on completely different meanings depending
upon the context in which it is used. The challenge is to teach the machine to
interpret the words correctly, according to their context.

• Robotics-Robotics engineer build machines designed to perform useful work.

Many are designed to do what human beings have long done, only more effi-
ciently and effectively. Besides that, robots are also extremely useful in envi-
ronments where people can be easily and seriously injured such as defusing a
bomb. In general, robots need to sense their position and their surroundings,
execute the functions they are programmed to perform and provide feedback
as needed. With the advancement of voice recognition, some robots are pro-
grammed to recognize and execute vocal commands.

• Expert systems:-Expert systems (ESs) are the efforts that were directed to-
ward the design of programs to solve problems in specific areas by utilizing
experts’ knowledge and reasoning. The purpose of ESs it to replicate the un-

71
 structured and undocumented knowledge of the few (the experts) and put it
at the disposal of others.

Because of the way ESs are formulated (based on experience of experts) ESs can-
not help users deal with events that are not taken into consideration by the experts
during development. To build an ES, a specialist called a knowledge engineer
questions expert and translates their knowledge into code. In most systems, the
knowledge is represented in one of several forms. The most popular form is IF-
THEN rules. Two other methods used to represent knowledge in a computer pro-
gram are semantic frames, which are tables of list entities and their attributes and
semantic networks, which are maps of entities and their related attributes. ES shells
– programs designed to facilitate development of ESs with minimal programming –
have facilitated the building of ESs. Although the cost of developing some systems
can reach seven figures or more, the benefits can outweigh the expenses.
The benefits or reasons for using expert system are as follows:

• Contributes to productivity by conducting tasks that free employees to focus

on work only human beings can do.

• To enhance product/service quality.

• To enforce consistent reasoning.

• To gain more insight into decision-making process.

• To better control complex systems.

• To distribute scarce expertise.

• To preserve expertise.

• To train less-experienced employees.

• To reduce costs.

• To monitor vast amount of information.

72
While the use of ESs can save resources, the systems have their limitations.
Time and research efforts will be needed to overcome the limitations that ESs still
have, including the following:

• ESs can handle only narrow domains.

• ESs do not posses common sense.

• Ess have limited ability to learn.

• Require large, lengthy and expensive development efforts.

• High cost involved in hiring or training expertise in this field.

• Knowledge base of expert system is fragile and brittle.

• Can only represent limited forms of knowledge.

Other techniques of Artificial Intelligence

• Intelligent machine/agents-Intelligence agents is the latest development in

AI, where computer programs that automatically wade through massive amounts
of data and select and deliver the most suitable information for the user, ac-
cording to contextual or specific requirements. The major application of in-
telligent agents is on the Web. The main purpose of intelligent agents is to
carry out their assignments significantly faster, more frequently and more ef-
fectively than human beings.

• Artificial vision-Artificial vision is the ability of a machine to “see” its en-

vironment, to make choices about its actions based on what it sees and to
recognize visual input according to general patterns.

• Neural networks -Neural networks are design to mimic the way the human
brain operates – the way it links facts, draws conclusion and uses experience
to learn and to understand how new facts relate to each other. Neural networks
enable machine learning, the ability of a system to update its knowledge dy-
namically from its own experiences and apply them to future sessions.

73
 • Fuzzy Logic-Fuzzy logic is based on rules that do not have discrete bound-
aries, but lie along a continuum, enabling a system to better deal with ambi-
guity. Fuzzy logic allows computer applications to solve in a manner that is
more human like.

• Genetic algorithms Genetic algorithms are mathematical functions that use

Darwinian principles to improve an application. The functions are designed
to simulate in the software environment, in minutes or seconds, what happens
in natural environments over millions of years. The process starts with a large
collection of functions, relatively small and well-defined computer program
designed to solve part of an overall problem. The programs are run, and the
results are tested to determine which programs give the best results in solving
a problem. The best programs are kept, the others are mutated and the new
generation of programs is tested. The process is repeated until a clear best
program emerges.

7.3.2 Why Business is interested in AI?

Although AI applications are much more limited than human intelligence, they are
of great interest to business for the following reasons:

• To preserve expertise that might be lost through the retirement, resignation or

death of an acknowledged expert.

• To store information in an active form – to create knowledge base.

• To create a mechanism that is not subject to human feelings.

• To eliminate routine and unsatisfying jobs held by people.

• To enhance the organization’s knowledge base by suggesting solutions to spe-

cific problems that are too massive and complex to be analyzed by human
being in a short period of time.

74
7.4. Summary
Knowledge management and data resources revolves around all the components
and stakeholders of information systems which are concerned with information or
data management,use and dissemination.

Revision Questions

Example . Discuss why most of the businesses are interested in Artificial Intel-
ligence..
Solution: for revision Q

EXERCISE 25. Explain the concept of Groupware application.

EXERCISE 26. Differentiate between Fuzzy logic and semantic networks..

EXERCISE 27. Name and explain two main experts concerned with knowledge
management and distribution.

Problem. This is an application question:-Discuss the relevance of Group Collab-

oration softwares in Higher Learning institutions.

References and Additional Reading Materials

• Turban ,E.,McLean, and Wetherbe,J.(2007).Information Technology for Man-

agement:ISBN :978-0-470-91680-3.

• Transforming Organization in the Digital Economy.New York:John Wiley &

Sons.ISBN:0471705225

75
LESSON 8
Enhancing management decision making
Learning outcomes: Gain insight on how decision making can be enhance at different
level of the organization

After completing this chapter, you will be able to:

• Differentiate and describe a decision-support system and a group decision-

support system

• Describe how decision-support systems and group decision-support system

can enhance decision making

• Describe the capabilities of executive support system

• Assess the benefits of executive support system.

8.1. Decision Support System

Decision Support System (DSS) is a computer system at the management level of
an organization that combines data, analytical tools and models to support semi-
structured and unstructured decision making. A DSS provides users with a flexible
set of tools and capabilities for analyzing important blocks of data.
8.1.1. Decision Support System and Management Information System
DSS are more targeted than MIS systems. An MIS provides managers with reports
based on routine flows of data and assists in the general control of the organization.
Meanwhile, DSS is tightly focused on a specific decision or classes of decisions
such as routing, queuing, evaluating and so forth. A DSS promises end-user con-
trol of data, tools and sessions. An MIS focused on structured information flows
whereas DSS emphasizes on change, flexibility and a quick response. With a DSS
there is less of an effort to link users to structured information flows and a corre-
spondingly greater emphasis on models, assumptions, ad hoc queries and display
graphics. Both the DSS and MIS rely on professional analysis and design. How-
ever, MIS usually follows a traditional system development methodology where
information requirements are frozen before design and throughout the life cycle but
DSS is consciously iterative and never rigid.

76
8.1.2. Types of Decision-Support Systems
There are two basic types of decision-support systems, model-driven and data driven.
Model-driven DSS were primarily stand-alone system that uses some type of model
to perform “what-if” and other kinds of analyses. Such systems were often devel-
oped by end-user divisions or groups not under central IS control. Their analysis
capabilities were based on a strong theory or model combined with a good user
interface that made the model easy to use. The second type is a data-driven DSS.
These systems support decision making by allowing users to extract and analyze
useful information that was previously buried in large database. Data from TPS are
collected in data warehouse for this purpose. On-line analytical processing (OLAP)
and data-mining (technology used to find hidden patterns and relationships in large
databases and inferring rules from them to predict future behavior) can then be used
to analyze data. The types of information can be yield from data-mining includes
associations, sequences, classifications, clusters and forecasts.
8.1.3. Components of DSS
Figure 8.1 below illustrates the components of a typical DSS. They include:

• DSS database – a collection of current or historical data from a number of

applications or groups. Can be a small PC database or a massive data ware-
house.

• DSS software system – collection of software tools that are used for data
analysis, such as OLAP or data-mining tools, or a collection of mathematical
and analytical models.

• User interface – permits easy interaction between users of the system and the
DSS software tools.

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8.1.4. Web-based DSS
DSS based on the web and the Internet are being developed to:
• Support decision-making

• Providing on-line access to various databases and information pools along

with data analysis software.
Customer decision-support system (CDSS) is a system to support the decision-
making process of an existing or potential customer.

8.2. Group Decision-Support System

Early DSS focused largely on supporting individual decision making. However
because so much work is accomplished in groups within organization, system de-
velopers and scholars began to focus on how computers can support group and
organizational decision making. And result from this, a new category of systems
developed, known as group decision-support systems (GDSS).

8.2.1. What is Group Decision-Support System (GDSS)?

GDSS is an interactive computer-based system to facilitate the solution for unstruc-
tured problems by a set of decision makers working together as a group. GDSS was
developed in response to a growing concern over the quality and effectiveness of
meetings. The purposes of having GDSS are as follows:

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 • Improve pre-planning to make meetings more effective and efficient.

• Create open, collaborative meeting atmosphere.

• Increase participation.

• Enables attendees to contribute criticism-free idea.

• Enables ideas being evaluated on its merits rather than on the basis of the
source of the idea.

• Idea organization and evaluation.

• Sets priorities and making decisions.

• Access to external information.

• Preservation of “organizational memory”.

One response to the problems of group decision making has been the adoption of
new methods of organizing and running meetings. Techniques such as facilitated
meetings, brainstorming and criticism-free idea generation have become popular
and are now accepted as standard. Another response has been the application of
technology to the problems resulting in the emergence of group decision-support
systems.

8.2.2. Characteristics of GDSS

Three basic elements of a GDSS had been identified:

• Hardware – physical hardware and also electronic hardware.

• Software tools – like e-questionnaires, e-brainstorming and so forth.

• People – refers not only to the participants but also to a trained facilitator and
often to a staff that supports the hardware and software.

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An electronic meeting system (EMS) is a type of collaborative GDSS that uses
information technology to make group meetings more productive by facilitating
communication as well as decision making. It supports meetings at the same place
and time or different places and times. The workstations are networked and are con-
nected to the facilitator’s console, which serves as both the facilitator’s workstation
and control panel and the meeting’s file server. All data that the attendees forward
from their workstations to the group are collected and saved on the file server. The
facilitator is able to project computer images onto projection screen at the front cen-
ter of the room. The facilitator controls the use of tools during the meeting, often
selecting from a large tool box that is part of the organization’s GDSS. Attendees
have full control over their own desktop computers and able to view the agenda, use
desktop PC ordinary tools, tap into production data that have been made available
or work on the screen associated with the current meeting step and tool. However,
no one can view anyone else’s screens so participant’s work is confidential until
they release it to the file server for integration with the work of others.

8.2.3. Executive Support Systems (ESS)

ESS is an information system at the strategic level of an organization designed to
address unstructured decision making through advanced graphics and communica-
tions. ESS combines data from internal and external sources and creates generalized
computing and communications environment that can be focused and applied to a
changing array of problems. ESS helps senior executives monitor organizational
performance, track activities of competitors, spot problems, identify opportunities
and forecast trends. ESS has the ability to drill down, moving down from a piece
of summary data to lower and lower levels of detail.
Benefits of using an ESS are as follows:

• Flexible.

• Ability to analyze, compare and highlight trends.

• Monitor performance more successfully in their areas of responsibility.

• Decentralization of decision making.

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8.3. Summary
In an Organization decision making is essential and organization require decision
support systems so has to realize its objectives effective.The decision support sys-
tems include:
Two basic types of decision-support systems are: model-driven and data driven.
other types of decision system include:executive support system,Web-based support
system and group decision support system.
Revision Questions

Example . Differentiate between Decision support system and Management In-

formation System
Solution:
An MIS provides managers with reports based on routine flows of data and assists
in the general control of the organization. Meanwhile, DSS is tightly focused on a
specific decision or classes of decisions such as routing, queuing, evaluating and so
forth Q

EXERCISE 28. Discuss decision-support system

EXERCISE 29. Discuss the capabilities of executive decision support.

E XERCISE 30. Discuss the elements of GDSS.

E XERCISE 31. Name two components of DSS.

Problem. Assess the benefits of executive support system in Higher Learning in-
stitutions.

References and Additional Reading Materials

• Turban ,E.,McLean, and Wetherbe,J.(2007).Information Technology for Man-

agement:ISBN :978-0-470-91680-3.

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• Transforming Organization in the Digital Economy.New York:John Wiley &
Sons.ISBN:0471705225

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