Management Information Systems (MIS) Lecture … (4)

Lecture (4)
Classification and Evolution of Information Systems
Introduction
Information systems are made out of components that can be assembled in many
different configurations, resulting in a variety of information systems and applications,
much as construction materials can be assembled to build different homes types. The
size and cost of a home depend on the purpose of the building, the availability of
money, and constraints such as ecological and environmental legal requirements. Just
as there are many different types of houses, so there are many different types of
information systems. It is useful to classify information systems into groups that share
similar characteristics. Such a classification may help in identifying systems,
analyzing them, planning new systems, planning integration of systems, and making
decisions such as the possible outsourcing of systems. This classification can be done
in several alternative ways. Information systems are classified by organizational
levels, mode of data processing, system objectives, and by the type of support
provided.

1. Classification by Organizational Levels

Organizations are made up of components such as divisions, departments, and
work units, organized in hierarchical levels. For example, most organizations have
functional departments, such as production and accounting, which report to plant
management, which report to a division head. The divisions report to the corporate
headquarters. Although some organizations have restructured themselves in innovative
ways, such as those based on cross-functional teams, today the vast majority of
organizations still

1
Management Information Systems (MIS) Lecture … (4)

have a traditional hierarchical structure. Thus, we can find information systems built
for headquarters, for divisions, for the functional departments, for operating units, and
even for individual employees. Such systems can stand alone, but usually they are
interconnected.
Typical information systems that follow the organizational structure are
functional (departmental), enterprise, and inter-organizational. These systems are
organized in a hierarchy in which each higher-level system consists of several (even
many) systems from the level below it. At a higher level, the enterprise system
supports the entire company, and inter-
organizational systems connect different companies.

 Functional Information Systems

Functional organizations are hierarchical structures and center on a strong
concept of supervisors and subordinates. The controlling authority, often called top
management, coordinates with each management level and functional department to
keep the organization running smoothly. A functional organization analyzes the
strengths and weaknesses of each member, groups them into categories and assigns
them to tasks that best utilize their skills. Jobs that perform a similar function are
grouped in functional areas. Each functional area contains employees with varied
skills that are further grouped based on specialization and put in separate units or
departments. Information systems which served these functional departments are
called functional information systems.

2
Management Information Systems (MIS) Lecture … (4)

Evolution of Functional Organizations

Functional organizations work best when a single product or service is involved.
The chain of command is linear, so everyone knows his position in the organization.
By clustering specialists with similar skills, leadership, tutoring and guidance
concentrate on one area. Employees have an obvious path for growth and promotion,
either up or lateral.
As a company gets larger, some of the positives of functional organizations
become negatives. Since decisions travel through the chain of command, the process
becomes bureaucratic, and information and decisions move slowly. Functional
grouping can result in a narrowed overall perspective. Because of communication and
decision-making issues, the functional organization is slow to adapt to environmental
changes

 Enterprise Information Systems

While a departmental information system is usually related to a functional area,
other information systems serve several departments or the entire enterprise. These
information systems together with the departmental applications comprise the
enterprise information system (EIS). One of the most popular enterprise applications
is enterprise resources planning (ERP), which enables companies to plan and
manage the resources of an entire enterprise. ERP systems present a relatively new
model of enterprise computing now days.

3
Management Information Systems (MIS) Lecture … (4)

 Inter-organizational Information Systems

Some information systems connect two or more organizations. They are referred
to as inter-organizational information systems (IOS's). IOS's support many inter-
organizational operations, of which supply chain management is the best known. An
organization’s supply chain describes the flow of materials, information, money, and
services from raw material suppliers through factories and warehouses to the end
customers. Note that the supply chain includes both physical flows and information
flows. Information flows and digitizable products (e.g., music and software) go
through the Internet, whereas physical products are shipped. For example, when you
order a computer from www.dell.com, your information goes to Dell via the Internet.
When your transaction is complete (i.e., your credit card is approved and your order is
processed), Dell ships your computer to you. Figure below represents information
flows and digitizable products (soft products) with dotted lines and physical products
(hard products) as solid lines.

Figure 8: Information flows outside organization in inter-organizational information systems

4
Management Information Systems (MIS) Lecture … (4)

Another example is the worldwide airline reservation system, which is composed

of several systems belonging to different airlines. Thousands of travel agents and
hundreds of airlines are connected to it. Those that support international or global
operations may be especially complex. Inter- organizational information systems play
a major role in e-commerce and other web-based e-government information systems
applications.

2. Classification by Mode of Data Processing

 Batch Processing Systems: The transactions are collected as they occur, but
processed periodically, say, once a day or week.
 On-line Batch Systems: The transaction information is captured by on-line data-
entry devices and logged on the system, but it is processed periodically as in batch
processing systems.
 On-line Real-time Systems: The transaction data capture as well as their processing
in order to update records (and generate reports) is carried out in real-time as the
transaction is taking place.

3. Classification by System Objectives

 Transaction Processing Systems (TPS): Their objective is to process transactions in
order to update records and generate reports, i.e., to perform score-keeping
functions.
 Process Control System (PCS): These systems are designed to make routine
decision that control operational processes.
 Decision Support Systems (DSS): Their objective is to support the managerial
decisions. Usually, these systems are based on a model of the

5
Management Information Systems (MIS) Lecture … (4)

decision-making domain, and utilize techniques from management science, finance

or other functional areas of business in order to build such models. These systems
are also used often for attention-directing purposes, i.e., for directing the attention
of managers to a problematic aspect of operations.
 Expert Systems (ES): These systems incorporate expertise in order to aid
managers in diagnosing problems or in problem solving.
 Executive Information System (EIS): These are MIS tailored to the strategic
information needs of the top managers.
 Business Information Systems (BIS): As a future managerial end user, it is very
important to realize that information systems directly support both operations and
management activities in business functions of accounting, finance, human
resource management, marketing, and operations management. Such business
information systems are needed by all business functions.

Figure 9: Modes of data processing

6
Management Information Systems (MIS) Lecture … (4)

4. Classification by the Type of Support Provided

Another way to classify information systems is according to the type of support
they provide, regardless of the functional area. For example, an information system
can support office workers in almost any functional area. Likewise, managers working
from various geographical locations can be supported by a computerized decision-
making system.
Clerical workers, who support managers at all levels of the organization, include
bookkeepers, secretaries, electronic file clerks, and insurance claim processors.
Lower-level managers handle the day-to-day operations of the organization, making
routine decisions such as assigning tasks to employees and placing purchase orders.
Middle managers make tactical decisions, which deal with activities such as short-
term planning, organizing, and control.
Knowledge workers are professional employees such as financial and marketing
analysts, engineers, lawyers, and accountants. All knowledge workers are experts in a
particular subject area. They create information and knowledge, which they integrate
into the business. Knowledge workers act as advisors to middle managers and
executives.
Finally, executives make decisions that deal with situations that can significantly
change the manner in which business is done. Examples of executive decisions are
introducing a new product line, acquiring other businesses, and relocating operations
to a foreign country.
Office automation systems (OAS's) typically support the clerical staff, lower and
middle managers, and knowledge workers. These employees use OAS to develop
documents (word processing and desktop publishing

7
Management Information Systems (MIS) Lecture … (4)

software), schedule resources (electronic calendars), and communicate

(e-mail, voice mail, videoconferencing, and groupware).

Table 2: Types of Organizational Information Systems