MANAGEMENT INFORMATION SYSTEM

Topic 1: Introduction to MIS

Background

Before the industrial revolution, organizations were essentially very small in size-mainly artisan, shops or
small, retail shops. Organization types at that time were mainly one-man ownership or sole
proprietorship. The sole proprietor is the owner and as well as manager. He makes all decision and
operation plans and because the environment is every simply and static, he has no problem because
making decision he had all the information he needed to make decision.

Today, our economy is characterized mainly by large scale organizations. These organizations are in
mostcases owned by hundreds/thousands of people (shareholders) in the case of public corporations, the
entire publics made up of millions of people are the owners. Characteristically, in this large organization
the owner and / or creditors are not involved in the management of the organization. Also, in these
organizations, thousands of people are employed at various levels to perform the necessary task needed to
achieve the goals of the organizations. Among these workers are the management team consisting all
those charged with the responsibility of running the organization profitably. These managers plan,
organize, direct and control the activities of the organization and in all these processes, decision making is
involved.

Once every year, in annual general meeting, the owners meet purposely to put their zeal of authority on
the decision already taken by the management. It is obvious that the evolution of large scale
organizations gave birth to new problems such as; specialization, division of labour, communication and
co-ordination. Some of such organizations may have their functions/departments or market spread all
over the country, or even beyond the national boundaries. Its employees also perform different functions
which may be scattered in different locations. These create more problems in areas of co-ordination and
decision making.

The need to integrate all the sub system of the organization into a unitary whole with a unity of objective
call for Management Information System.The Management Information System (MIS) performs in
integrating role in the organization. In this regard, the management information system can be likened to
the nervous system in the human body.

Management information system has evolved primarily as a result of computer and communications
technology development. It is a field of study that occupies the space where management and technology
overlaps. Advancement in computer and communications technology over the past years as well as the
increase needs of business information has bought information communication, technology (ICT) and
management information system out of the shadow of corporate life. Hence, MIS is the study of the
known aspect of management, organization and computer study.

Definition: Management Information System is any subject that provides people with either data or
information relating to an organization’s operation using the computer as the processing media.
Management Information System support the activities of the employers, owners, customers and other
key people in the organization environment either by efficient processing of data to assist with the
transaction work load or by effectively supplying information to authorized people in a timely manner

1
e.g. the processing of pay roll to get an adequate salary result. In any organization, the management
information system is the network of communication channels and information processing center that
collects data from sources of origin, stores, update, collates, process them and supplies the processed
information for management use.

Unfortunately, no universally accepted definition of the concept exist. In other words, there are many
definitions of management information system but each definition may reflect the background knowledge
or prejudices of the writer. What appears common these days is to equate MIS to computer, system
analysis and design.

Other information

i. Management Information System is a system of reports designed to help management plan,

execute and control.

ii. Management information system is a system for providing information to management.

iii. Management information system is any specially designed method to provide management with
needed information on regular basis. It may be manual or computerized.

iv. It is a system that provide the right information for the right people at the right time.

v. Management information system is a computer system or any related group of systems, which
collects and presents management information to a business in order to facilitate its control.

vi. Management information system is a combination of human and computer based resources that
results in the collection, storage, retrieval, communication and use of data for the purpose of
efficient management of information and for business planning

Objectives of Management Information System

The main objective of management information system is to use formalized procedures to provide
management with appropriate information from all relevant sources, which will enable the manager make
timely and effective decision. It must be at acceptable level of accuracy and economical cost

Elements ofManagement Information System

There are four fundamental elements of management information system namely:

i. Transaction processing: This comprises day-to-day accounting operation of an organization

using computer processing techniques e.g on line, off line etc.

ii. Information Reporting System: It provides the required report for management and utilization
of such report. The reports are routine, summary and exceptionally required by management for
decision making. It can also be called informationmanagement support (IMS).

iii. Decision Support System (DSS): Which provides a set to use modeling, retrieving and reporting
capabilities so that management can generate information they feel will be useful to them in
making appropriate decision.

2
iv. Office Automation: It involves tools that aid information processing and distribution. It is used
to process and also in desktop publishing.

Benefits ofMIS to anorganisation

1. Operating Efficiency: The routine tasks of office are faster and cheaper. It also reduces clerical
activities.

2. Functional Effectiveness: Management Information System makes transaction faster by helping

management make better decision through the type of information available

3. Better Services: Management Information System provides better services to the end users

4. Product Creation and Improvements: In industry characterized by information intensive

product i.e Bank. It is quite possible to create new product or improve the old one with
management information system. It can be used to alter the basis of competition with accurate
information. Management can achieve better control of marketing base, spotting and taking
opportunities in the market place.

CharacteristicsofMIS

Taking all out definitions together we can see that MIS has the following characteristics:

i. Management information System as system as used in the definition implies order, arrangement
and purpose. In order words, the entire element in management are arranged in a particular order.
Each element performs a definite task and all the elements work together.

ii. Information and data are input in management information system such managerial activities as
performance of routine operations, planning organizing, directing and controlling, involve
decision making and as such rely heavily on sound information and consequently on a sound
management information system.

iii. Management information system is an integral part of organization activities, thus it is much
more than a computer. It is a collection of interrelated and inter dependent sub systems.

iv. Management information system is dependent n data base. It uses data for personnel, finance,
production, marketing, purchasing of material, legal etc which are responsive to the organization
changing needs.

v. Management information system is pervasive: Management Information System feeds the entire
organization with relevant information. It is therefore the arteries through which file stream of
every business flows.

vi. Management information system is purposeful: Its roles is to convert all relevant data into
relevant information and to communicate the information to managers at all levels and in all
functions to enable them to make effective decision.

The focus of management information system is therefore on decision-making

3
The scopeof MIS

The scope of management information system can be inferred from its purpose in the organization. This is
simply to satisfy all the information needs of management at all levels. In essence a good MIS would
definitely provide information to those who need it.From this view point, it can be said that the scope of
MIS covers the following areas:

1. Initiating transactions
2. Record transactions as they occur
3. Processing data
4. Producing report
5. Responding techniques
6. Providing regular formal information for all normal commercial data
7. Responding to all inquiries and formal provision of regular information for all normal
commercial data

Input Recording Processing Output Report

Advantagesofcomputerisation of MIS
a. Response time is fast
b. Very large amount of data can be processed, stored and retrieved when needed
c. The accuracy of the information is considerably improved and the accuracy of decision-making is
also improved.
d. More secrecy can be observed relative to use of manual files
e. Chances of leakages of classified information are reduced
f. paper work is reduced appreciably
g. Lots of information can be stored for future references
h. Retrieval of information is very fast and as such decision making is also fast.

MIS and level of Management

It have been pointed out that the essence of MIS s to provide information to aid management at all levels
in decision making. The types of decision made varies with the level of management and so do the
information needs. It is possible to distinguish three levels of management in most organization.

Strategic Management Level: Comprises chief executive officers, directors, assistant director and
general managers

Tactical Management level: functional managers, departmental managers and all categories of middle
managers.

Operational Management Level: Comprises foreman, supervisors, chief clerk, chief typist and
superidents.

At the Strategic management level: Functions performed includes formulation of objectives and
policies, long term planning, investment decision, management appointment etc. Also, the types of
decision make at this level are mostly unstructured. At this level the information system is formal in the

4
sense that it is not always possible to quantify or programme strategic information because judgment is
used more often than summary data from transaction processing.

At the Tactical management level: The common functions include development of operational
objectives and policies, development of budget, forecasting, deployment of resources, and efficient
allocation of scarce resources. In most cases, the planning horizon is long and decision may be
unstructured or semi-structure. The MIS at this level interacts with the same system as that of operational
level

At the operational management level: The common function includes the effective use of facilities and
existing resources. In the light of the present objectives and budget constraints and day-to-day decision
making. In effect, the planning horizon at this level is short and most decisions are structured. The SIM
at this level; may include transaction for data and the output may include simple report that has been
sorted and listed in the input data and document such as records of transaction.

ASEYE MANUFACTURING LIMITED

Purchasing Receipt of Inventory

Goods (GRN)

Computer
(Data Base) Production

MGT

Finance Sales & Marketing

Management Information System (MIS) AND Information Management System (IMS)

While MIS generate information for management use, IMS is designed to manage the information
generated in a computer-based system. IMS is concerned with distribution of data through the system of
data communication activities, access to data base and user information needs.

Computer as a tool which is essential for MIS

Computers are essential for MIS but can be very useful for MIS. The study of MIS is not about the use of
computer but about the provision and use of information relevant to be users. It should be further noted
that MIS support decision-making, while, non-computer processing also is involved. This usually
involves manual processing, hence computers are not as much as essential but very useful for MIS.

5
CONFIGURATION

This is the totality of computer system opted for by an organization (i.e the full multimedia system) in
computer installation.

Typesof Configuration

Duplicated Configuration: This is when the processor of other parts of the computer are duplicated. The
failure of one unit entails immediately switching to the other, the critical part of the computer will be
duplicated.

Satellite Configuration: One processor initially handles all processes from the terminal and passes on to
other processors on those it cannot fully deals with (i.e one ;processor could be handling straight forward
enquire and reservation message of real time system and the second processor will be dealing with
messaging, requesting and management reports). It is used mostly in banking and airline industry.

Tandem/Front end Configuration: This is similar to satellite arrangement except that both processors
are needed to deal with each message and data. It does a certain amount of processing and then passes the
partially processed data into main or host processor. It is common in banking sector.

Load Sharing Configuration: Two processors are employed and when necessary to handle data on
50/50 basis. If the message and data decrease sufficiently, it is then taken over by one processor only. It
is efficacious for real time system as it gives high reliability combined with the need of handling variable
message traffic.

Shared File Configuration: Two/more processors are connected to the same storage media and database.
One processor updates the database while the other merely takes information from it.

Polymorphic Configuration: The concept of polymorphism is that, a particular configuration is made up

from a set of units such as processor and peripherals according to the needs of the moment. There is a
high degree of flexibility in the way the unit can be configured

6
 MANAGEMENT INFORMATION SYSTEM
Topic 2: General System Theory

What is a system?
A system is defined as the collection of interrelated sub-systems which work together so that the system
can achieve a predetermined goal or objective. There are different types of system. These include,
business system, computer system, labour system, automobile system, information system, defence
system, etc.
A system can be seen to bea set of related elements that collectively forms a unified whole. A
management information system (MIS) therefore, is a collection of people, hardware, software, data,
procedures, finance, etc.

System element
This is the part that forms the totality of the system. It can be a tangible object, or an abstract, or an
intangible object.

System environment
The environment is a place where the system derives its input and gives out its output. The environment
like the system is a collection of element. This element surrounds the system and often interacts with it.
Systems are surrounded by boundaries; anything within the boundary is the system and anything outside
the boundary is the environment.

System environment and boundary

A system boundary is the extent of the system in social organisations. Boundaries are not too easily
defined as the case with physical system. The area of contact between one system boundary and others is
called interface. Interface is a link through which computer and the user interact. In social organisations,
boundaries are permeable. This is because ideas, money, people, materials and information move from
one system boundary to another.
A system environment can also be defined as those external elements whose changing in attitude,
behavioursand properties will affect the state of the system and those external elements which are
changed by the system behaviour. This means that the relevant environment of any system comprises the
element with which it has some meaningful connection relationships.

Features/characteristics of a system
(i) System transforms input to output: For instance a manufacturing firm can be regarded as a
system that transforms raw materials (input) to finished goods (output).
(ii) Systems are inter-dependent: This means systems depend on each other for one thing or the
other.In a manufacturing concern, the production of goods depends on the purchases of raw
materials.
(iii) Systems are holistic: Though a system is made up of sub-systems, the different sub-systems work
together as one. A system is therefore seen as one unit or a holism.

7
(iv) Systems are differentiated: A system consists of a number of different parts which are inter-
related. For example, the transport system is made up of rail, road, air and sea.
(v) Systems are hierarchical: The objective of a system is more important than the objective of the
sub-systems. For instance, the various parts of the communication system like telephone, cables,
and switches are of immense value when they are connected together in a specific manner.
(vi) Systems are synergistic: Systems are made up of sub-systems, which may be small systems that
combine to form the larger system. The large system is known as supra system and above the
supra system is the environment.
(vii) Systems are goal-oriented: Systems are designed to achieve some specified goals or objectives.

Classification of system
A system can be classified as follows:
(i) Open system: This is a system that interacts with its environment. It takes input from its
environment and gives output to its environment. A business system is a typical example of open
system.
(ii) Closed system: This is a system that does not interact with its environment. It does not take input
or give output to the environment. Closed systems are isolated from their environment and
independent of it, so that environment influence cannot affect the behaviour of the system. Such
systems are self-contained as they are cut off from their environment.
(iii) Deterministic system: This is also known as mechanistic system. It is a system that operates
according to a pre-determined set of rules. This makes its output to be predicted easily from the
input. Examples include, computer programmes, working machines, etc.
(iv) Probabilistic system: It is also known as stochastic system. It is a system controlled by chance, so
it is not easy to predict its output precisely from its input. Examples include human being,
business, nature, etc.
(v) Adaptive system: It is also known as cybernetic system. It is a self-regulated system, which
maintains equilibrium. It responds to changing circumstances in its environment and adjusts to
the changes. Adaptive system includes, inventory (stock) control, payroll and human being.

System model
A model is a representation of the real world element. It can be an object, concept or an event. The
following are the models used in representing system:
(i) Narrative model: These are models that describe an object even without abstracting the meaning
in any significant work as graphical and mathematical models do. Example is summary of a
notebook.
(ii) Graphical model: These are flowchart or any other graphic illustration (decision tree, decision
table, etc).
(iii) Physical model: This is generally the true dimensional representation of the real objects.
(iv) Mathematical model: This is used in decision making environment and can be classified as
follows:

8
  Descriptive model: This is a model that desires to use mathematical functions to describe
phenomenon. It may also use mathematical formula to explain/describe the real world
situation. Examples include simulation, queuing, Project Evaluation and Review Technique
(PERT). PERT for instance can be used in executing contract by contractors.
 Predictive model: This is the mathematic model that tries to predict a future event or
phenomenon. Examples include probabilistic distribution, simulation, transportation/
assignment.
 Prescriptive model: These are models that try to answer such questions as: how many units
should be manufactured in a production to minimise cost? What level of inventory should be
held? This model suggests a suitable course of action in a decision making situation.
Examples include linear programming techniques, assignment, transportation, inventory
control technique, etc.
 Deterministic model: These are models that assume all the relationships in the system
areexact and not subject to change. For example, assuming a fixed level of consumer
demand, demand function, break-even analysis, etc.
 Stochastic model: These are models that do not place any restriction rather probabilities are
used to determine models’ uncertainty. For example, Markov chain is used to determine the
demand for a product which might follow a probability distribution method.
 Empirical model:This depends on variables whose value must be obtained from the real
world. For instance, different value of quantity and prices may have to be obtained overtime
to illustrate how they are related in the economy. Uses of correlation, regression, chi-square,
analysis of variance, etc are tools used for empirical research/model.
 Theoretical model: They are supported by basic underline theory which then gives specific
values to its usefulness in a given situation. Examples are the Keynesian classical and
monetary theory in economics and Maslow and Herzberg motivation theory in management.

Limitations of system model

(i) The number of variables it includes/leaves out.
(ii) The way in which the variables are specified.
(iii) The assumption that a model builder may have to make in order to make the model practicable.
(iv) Some practical problems may be unquantifiable and any attempt to mathematize them may
distort their actual meaning. Example is social problems.
(v) Some mathematical problems may be formulated but become very difficult to find any known
mathematical technique for solving them.

Practice Question
A model is a real world element or a group of elements and the relationship among them. A system study
becomes manageable/traceable when model representation is applied.
Required:
(a) Explain FOUR features of a system you are familiar with.
(b) Describe FIVE classification of a mathematical model.
(c) State FOUR limitations of a system model.

9
 Term Paper (Maximum of 6 pages)

Group 1 (Project Feasibility Study) Topic 3

 Definition of feasibility study

 Areas to cover during feasibility study
 Factors to be considered in economic feasibility
 Feasibility study report format
 Uses of feasibility report

Group 2 (System analysis) Topic 4

 Definition of system analysis

 Procedures of system analysis
 The role of Organisation and Method (O & M) officers in system design
 Stages of system analysis
 The fact finding techniques used by the analyst

Group 3 (System design) Topic 5

 Purpose and objectives of system design

 Attributes of a system analyst
 Design stages and sequences
 System specification consideration
 Contents of system specification
 Purpose of system specification

Group 4 (System implementation) Topic 6

 Definition of System implementation

 System implementation phase (Test data; file conversion; change-over processes; and staff
training/users education)

10
 Topic 3: SYSTEM DEVELOPMENT (Project Feasibility Study)

Definition of feasibility
The purpose of the feasibility studies is to enable management/users department to take decision on
whether to remain conventional or go computerised. Computers are very expensive equipment even if
they are micro. Therefore, a decision to purchase or lease cannot be over looked or taken lightly. So,
management will at this stage require more information to enable them take appropriate and correct
decision.

Areas to cover duringFeasibility Study

a. Technical Feasibility: Here will be interested in asking a pertinent question: Can it be done? Is
ittechnically feasible?
b. Operational Feasibility: At this point we take a look at the existing managerial and the organisation
framework. The questions to be asked is: Is the proposed solution within existing framework?
c. Social/Political Feasibility: The question here is: Can we do it? What are the social/political
implications?
d. Economic Feasibility: The question to be asked is: “Is the system worth acquiring?

Factors to be consideredin Economic Feasibility

Cost/benefit analysis: Does the cost equate, outweigh or is it below the benefit to be achieved? There are
no standard as to weighing a project cost/benefit. Every project team/analyst adopts their own procedure
if the information forms part of the feasibility study reports. Generally, three aspects are examined they
are:

(a) Projectcost
i. The equipment cost
ii. System staff cost: i.e salary, special material needed, office space, and visit to other installations
feasibility study cost, and computer trial run.
iii. Users staff cost: i.e time to supply data, time to implement possible solution, writing of new
programmes, maintenance work.
iv. Additional cost: i.e insurance premium, consumables, air conditioning, back-ups, (disasters
recovery strategy) and staff training.

(b) Systembenefits
i. Direct Savings
 Reduction in clerical personnel
 Elimination of definite cost e.g office machinery cost, postage
ii. Measurable Benefit
Due to special characteristics of the new system e.g greater amount of working capital will be
reduced through greater control over inventory levels.

11
iii. Intangible Benefit
 Good result which cannot be monetarily quantified e.g quality of service, meeting users request
on time.
iv. Tangible Benefit
System benefit like system cost may be discussed in terms of tangible and intangible. However,
the problem is somewhat complicated by the fact that many important system benefits are not
tangible.
v. Direct cost/indirect cost/benefits
* Direct cost: Are those directly related to the expenses of operating the sub- system in
question.
* Indirect cost:Comes from operating other sub- systems which support the one in
question.
* Recurring cost
It is important for the Analyst to differentiate between continuing/recurring cost and those which are one
time or non-recurring costs e.g cost of developing a new system in a one time or non-recurring cost.
Maintaining and operating a new system will be a recurring or continuous cost.
Similar difference exists between equipment that is purchased versus operating cost. In most instances,
there is a considerable difference between first year and subsequent years cost and this is largely due to
the development and implementation of a new system because a system is designed to deal with
continuous and ongoing problems, the beneficial results of that system are likely to be of a recurring
nature.

(c) System Savings

Savings from anew system
i. Tangible Savings include:
* Equipment savings-replacement savings, accounting machines, typewriters
* Cabinet and racks
* Personnel saving i.e salaries and allowances of redundant staff
* Operating saving – i.e consumable materials and maintenance of existing machines
* Capital allowances andtaxes.
ii. Intangible savings include:
* Sales statistics and analysis
* Material requirement
* Production scheduling
* Cash flow statement
* Investment appraisal
* Planning information
* Control information
iii. Personnel savings
* Less dependence on unreliable staff
* Avoidance of complex training procedures

12
 * Minimal staff administration costs.

Reasons why Management Prefer a Particular Format of Report

Management sometimes recommends a report format for the following reasons:
i. A format makes report writing easier to do in the long run
ii. Appropriate headings are automatically supplied
iii. The report is a lot much easier to read and interpret
iv. Exception areas can easily be identified
v. Reports summary can easily be pin pointed
vi. Decision making based on such report becomes a lot easier.

The Feasibility Study Report Format

1. Statement of the assignment brief, terms of reference and objective
2. Main characteristic required of the old system
3. Characteristics required in the new system
4. Output requirement of the new system
5. Analysis of the organisation chart and personnel requirements of the new system
6. Data capture peculiarities of new system
7. Gross estimates of all costs
8. Gross estimate of probable overall direct and indirect benefit
9. Matching all costs against all benefits for each possible alternative method of generating the next
output
10. Summary

FEASIBILITY REPORT
What is feasibility report?
A feasibility report sometimes called a system proposal is an extensive presentation for the consideration
of the management, operational personnel and users of the system. It proposes to change things andis
always included ina summary of the reasons and objectives of the system analysis itself.
Feasibility report It can also be said to be a document that gives the description of the current system and
explanation of why the system does not succeed in meeting objective and in determination of how those
objectives should change.

Uses of feasibility report

i. It provides the basic information for effective decision making with respect to the proposed
investment.
ii. It assists the entrepreneur in developing future plans for the organisation.
iii. It serves as the basis for measuring the performance of the proposed business.

CAPITAL BUDGETING MODEL

After assessing the cost/benefit of the project, the organisation determines whether the benefit will net off
the cost so as to know the worthiness of the project.

13
Methods used in appraising project life include:
i. Traditional method
* Pay Back Period (PBP)
* Accounting Rate of Return (ARR)
ii. Discounting Method
* Internal Rate of Return (IRR)
* Net Present Value (NPV)
* Profitability Index (PI)
* Cost Benefits Analysis (CBA)

SOURCES OF FUNDING THE ACQUISITION OF THE EQUIPMENT

i. Outright purchase
Factors to be considered include:
* Credit facilities available
* Previous commitment
* Cash availability
* Can we borrow? i.e loan
* If we can pay cash, do we still have enough working capital
* Do we have capital allowances to claim on the asset?
* Increase in the value of asset
* Consider technological obsolescence

ii. Hire purchase

Factors to be considered include:
* Availability of finance houses
* Terms and conditions of hire purchase contract
* Required installments
* Period of liquidating the debt
* Is cash available in footing the monthly bill?
* Any previous commitment that will reduce working capital

iii. Equipment leasing

Factors to be considered include:
* Is cash available?
* Sources of such cash
* Is it through loan?
* Mortgaging
* Effect on trading
* Obsolescence
* Maintenance

iv. Equipment rental

Factors to be considered include:
* Ability to pay monthly rental fee/charges

14
 * Commitment effect on trading
* Maintenance
* Obsolescence

TEAM/USERS SECOND AND FINAL DECISION

i. Stop the project
ii. Supply more information
iii. Go on with the project

If the decision ( iii), that is, to go on with the project, is taken, an in-depth study (system analysis) is
carried out.

FEASIBILITY STUDY REPORT

On successfully completion of the feasibility study, if the recommendation is to install a new computer
system, a feasibility study report has to be written to the management. The report will contain the
following details:

i. The recommended equipment

* Configuration
* Installation plans and standby arrangement
* Delivery period
* Operating characteristics

ii. Maintenance Facilities

* Preventive maintenance agreement
* Standby/repair arrangement
* Availability of spare parts (this is the reason for opting for lease agreement at times)

iii. Softwaresupportagreement
* Upgrading software with new releases/innovation
* Application programme support

iv. Cost/Benefit Analysisreport

* See previous note (page 11) on this

v. Workplanoftheequipmentusage
* Main files required
* System input and output
* Programmes
* Leases of other installations with similar equipment/configurations

vi. Manufacturerstradingservices
* Training services offered by the manufacturers for computer and user department.

15
vii. Trainingforcomputerusers
* Computer staff training
* In-house/external training programmes

viii. Specialinstallationrequirements
* Air conditioning
* Safety conditions
* Temperature/humidity recorder

CONTENTS OF A FEASIBILITY STUDY REPORT

a. Title of the report
b. Date of the report
c. Authors
d. Terms of services
e. List of illustrations
f. Detailed report/summary of the report
g. System analysis
h. Problem definition system
i. System specification/management decision
j. Equipment specification
k. Labour specification
l. Implementations
m. Conversion plans
n. List of amendment
o. Post implementation review
p. Appendices.

Practice Question
Q1 (a) (i). What is feasibility report?
(ii). List any SIX items of importance that may be included in feasibility report.
(b) Some of the major reasons for undertaking a feasibility study are to highlight both the
Economic Cost and Economic Benefits of the proposed system.
(i) Give any SIX types of economic costs that may be considered.
(ii) Give any FOUR types of economic benefits for the acceptance of the proposed system.
(c) Who is referred to as an “end user?”

16
 Topic 7: Principles of Database Management Systems

Files and databases

In a “traditional” transaction processing system, separate systems were developed for major
processing applications. For example, a sales order system would be developed to process sales
orders, a sales ledger system would be developed to prepare invoices and record receipts from
customers, a separate inventory control system would be developed to manage inventory and
record inventory levels, and so on.
Each separate system had its own master files and master file records. For example, a payroll
system would have its own master file for employees on the payroll, and the separate human
relations personnel records system would have its own master file with employee details. If a
new employee joined the company, a separate record for the employee would have to be added
to each master file in each system, as two separate processes.
Similarly, a sales order system would have master files containing customer records, and the
sales ledger system would have a separate master file containing records for credit customers.
There would be extensive duplication of data on the two master files, but each would be operated
and updated independently.

Weaknesses of traditional transaction processing systems

The traditional transaction processing systems, each with their separate master files have some
obvious weaknesses, such as:
(i) The mater files of different systems often contained the same or similar data. However,
each master file had to be updated separately. This is inefficient because it involves a
duplication of work;
(ii) When the master files of two different systems ought to contain duplicate data, there is a
probability that there will be some differences. There are several reasons why master file
data might differ between two systems, even when they should be exactly the same.
Examples include:
 There might be input errors in one system but not the other.
 There might be differences in the address or contact details of customers or suppliers
between two different systems.
 One system might be updated more quickly than the other.
(iii) Separate transaction processing systems cannot “talk” to each other (unless special
arrangements exist for electronic data interchange). This means that output from one
system cannot be fed automatically into another system for further processing.
(iv) It is difficult to obtain information that is held in different computer systems, on separate
master files. Information would be much easier to access if it were all held in the same
files.

17
Databases were designed to overcome these problems.

What database is all about?

There are many different definitions of a database. Most definitions assume that a database is
computerised, but the term can also be applied to “paper-based” files. Some of the definitions of
a database are listed below:
(i) A database is “a collection of information that has been systematically organised for easy
access and analysis”. Put in another way, “ a collection of data that is organised so that
its contents can easily be accessed, managed and updated”.
(ii) A database is “a collection of data organised so that varios programs can access the
information”.
(iii) A database is “a collection of data stored in one or more computerised files in a manner
that can be accessed by users or computer programs via a database management system”.
Put in another way, “a collection of electronic records having a standardised format using
specific software for computer access”.
There are several points to note about these definitions.
(i) A database improves access to data and provides a common set of data files for all users
of the system.
(ii) The data in a database can be accessed for use by many different users and programs.
(iii) The data in a database has to be organised in a standard format.
(iv) A computerised database is accessed and controlled by special software, a database
management system.
(v) A database may be held on the same computer file, but a database may also be distributed
between several computers in a network.

Database management systems (DBMS)

A database management system (DBMS) is the software that manages a database, dealing with
all aspects of access to data, file maintenance and data security. An organisation may employ a
database administrator, with responsibility for administering and managing the database and the
DBMS.
The facilities provided by a DBMS include:
(i) The ability to add new records and amend or delete existing data on the database;
(ii) The ability to retrieve data for processing of information necessary for decision-making;
(iii) The ability to update the database without requiring modification to any applications
programs;

18
(iv) The ability to present data on the database in different combinations and in different
forms; and
(v) The ability to control access to parts of the database through the use of passwords.

A database management system provides for the:

* Integrity
* Independence and
* Integration of data

Integrity of data
The integrity of data refers to the way in which the data is kept and these include:
(i) The security of the data against unauthorised access;
(ii) Making sure that there is an effective system for restricting access to some parts of the
database to authorised individuals;
(iii) Making sure that the data is accurate and up-to-date (for example by means of extensive
data validation checks in the software on insertions and amendments to data);
(iv) Procedures for updating the data or maintenance of the data (insertions, amendments,
deletions); and
(v) Restricting the authority to insert, amend or delete data to approved individuals.
The database administrator is responsible for making sure that data is accurate and for
monitoring access rights to the system and the database.

Independence of data
A key feature of database systems is that the data on the database is independent of the
applications programs that use the data.
(i) A change to the data in the database does not mean that there must be amendments to the
application programs that use the data.
(ii) Similarly, if a change is made to an application program that uses a database, there is no
requirement to amend the database.

The independence of data in a database from the application programs is achieved by using
“schemas”. An application program makes a request to the DBMS (in a “sub-schema”) for data
that it needs. The DBMS maps this data requirement on to a physical data record, which the
application program then uses.

19
Integration of data
A key objective of database systems is data integration. The aim of data integration is that data
should be stored and maintained in a single file location within the organisation.
(i) If six different IT applications need the same or similar data, they should all use the same
data record. Each IT application system should not have its own, separate data files.
(ii) When data is held in a single location, for use by all IT applications, there is no risk that
the data used by each application may be different (due to discrepancies between data
files of the different systems).
(iii) Integration also avoids the duplication of data on different system files. Data has to be
entered into the system once only. In contrast, if six systems each have their own data
files, holding the same or similar data items, new data would have to be entered six times,
once into each of the separate systems.
Data in a database is referred to as “shared data” or “corporate data”.

Advantages of database systems

(i) Independence of data: The data is available for all users in the organisation and is
available for different uses. Data is not just for individual departments or applications.
(ii) Integration of data: Data only needs to be input once. There is no duplication of data in
different systems. There is consistency of data and information throughout the
organisation.
(iii) A database is available for new uses and applications. The database is therefore a
valuable resource for the organisation.
(iv) A relational database can be very flexible, allowing data to be accessed and extracted in
many different ways and forms.

Disadvantages of database systems

(i) Integrity of data: It is extremely important that the data in a database should be reliable
and sufficiently accurate. Ensuring the integrity of the data may be a difficult task.
(ii) The initial development costs for a database may be high. However, standard software is
available for creating simple databases.

Practice Question

A database management system provides for the integrity, independence and integration of data.
Discuss.

20
 Topic 8: Aligning information systems/technology and business strategy

Business strategy
Every organisation should have an overall objective and should develop business strategies to
achieve this objective. In a commercial environment, the objective of businesses is often
assumed to be to increase the wealth of their owners, the shareholders.
Business strategies are often aimed at growing the business and these could be:
(i) Increase annual profits
(ii) Increase annual sales
(iii) Increase the entity’s share of the market.

Supporting strategies
Having established business objectives, an entity should develop strategies for achieving these
objectives. There should be strategies for all the key areas and operations and there will usually
be supporting strategies (and strategic objectives) for:
(i) Financing the business
(ii) Product innovation and market development
(iii) Marketing
(iv) Human resources
(v) Information systems (IS) and information technology (IT)

Nature of information systems (IS) and information technology (IT) strategy

Computer systems and information systems are used to support business operations and for many
organisations, they are strategically important. The purpose of IS/IT strategy should be to
develop information systems and information technology in ways that will help the entity to
achieve its overall business objectives.

Information system (IS)

This is a system within an organisation that captures and processes data from inside or outside
the organisation and makes the information available to users. An IS is usually associated with a
computer system, but an IS does not have to be computer-based.

Information technology (IT)

This is the equipment and software that is used to provide an information system. IT refers to
computer hardware and software, and communication networks.

The elements or aspects of an IS/IT strategy will usually include the following:
(i) A strategy for IT staffing, including (where appropriate) a strategy on outsourcing;

21
(ii) A strategy for the purchase and use of computer equipment;
(iii) A software strategy, for example, a small company might adopt a strategy of using
Microsoft software products throughout the organisation;
(iv) A strategy on developing new IS/IT systems “in-house” or purchasing them from an
external software supplier; and
(v) Where the entity has an in-house IT department, a strategy (or policy) on whether the
department should operate as a cost centre or as a profit centre.

How does IS/IT strategy help an entity to achieve its business objectives?
An IS/IT strategy can help an entity to achieve its business objectives in some ways, such as:
(i) Improvements in IS and IT systems can improve operational efficiency and reduce
operating costs per unit of output (units of product or units of service) for the operations
that use the systems. Lower costs result in higher profits;
(ii) Using IS/IT systems can improve the quality of service provision. For example, a
company might be able to provide an improved “shopping” service for customers by
allowing them to buy its products on-line. Providing a better service should result in
higher sales and higher profits;
(iii) A company might be able to improve its marketing and sales strategies by using IS/IT
systems. For example, a company might be able to target customers more effectively
using a customer database; and
(iv) IS/IT systems can be used to support innovation, such as the design of new products and
services. Business entities need to innovate in order to compete and survive in their
markets.

The strategic importance of IT

(i) There is a high cost for developing and operating IT systems. This means that IT systems
are of financial significance to every business entity.
(ii) IT systems are an essential part of operations in many organisations. Computer system
might direct and control operations (for example, in a transport and shipping companies).
They are an essential part of product design in other companies (for example, electronic
equipment and engineering projects). They are also used to process transactions (for
example, in retail orgnisations).
(iii) IT systems can give an organisation a competitive advantage over rivals. For example,
major publishers of scientific and technical books and journals are making their products
available in electronic form and accessible on-line. Smaller publishers do not have the IT
systems to compete in this area, and produce most of their output in paper form only.

22
(iv) Businesses can improve their strategic relationships by creating IT links between their
computer systems or allowing each other access to their intranet systems.

The pace of development in IT is rapid. Strategic managers must keep themselves up-to-date
with these changes and consider how these changes might be significant- as threat to the business
of the entity or as an opportunity for achieving its business objectives more successfully.
Corporate business strategy and IT strategy will be affected constantly by changes in the IT
environment. Consequently, IT strategies must be reviewed regularly.

The strategic importance of information

In an advanced economy, most business entities rely on information and communication systems
and computer technology. Managers need information to make high quality decisions. A general
principle is that managers will make better decisions if they are provided with better information.
Well-developed information systems can be used to:
(i) Capture data from many different sources;
(ii) Store large quantities of data, which can be retrieved easily and quickly when it is
needed;
(iii) Process data in many different ways to provide valuable information;
(iv) Communicate information to managers and other individuals who need it; and
(v) Improve communications within an organisation and world-wide.

Changes in information technology create both opportunities and threats, and business entities
need to develop an IS/IT strategy to support their business strategy. The need for high-quality
information must be recognised by senior management, and business strategy should drive the
demand for new and better information systems.

Getting it wrong
If there is a mismatch between IS/IT strategy and the organisation’s overall business strategy,
then the organisation will be less effective in achieving its business strategy.

23